Column : What we havent fixed after Bhopal

Written by Bibek Debroy | Updated: Jun 16 2010, 00:41am hrs
Lawrence Summers has several introductions. Right now, he is the director of President Obamas National Economic Council. He created controversy in Harvard. But an earlier controversy from 1991 is almost forgotten. That was when he was at the World Bank and signed a memo that was probably written by Lant Pritchett. The memo said, The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable. Environmental costs, wage costs and valuations of human life are lower in developing countries like India.

While Bhopal gas disaster and the consequent human tragedy is understandably an emotive issue, one cant get away from some facts. First, one cant compare compensation in India with compensation in the US, even if one adjusts for PPP. It is one thing to say that average final compensation for personal injury at Rs 25,000 is low. But benchmarking this against disaster compensation in the US, as media has been wont to do, is unwarranted. Second, tort law is relatively underdeveloped in India, despite social justice constituting a recurrent theme in the Constitution. In many instances, tort law isnt even codified, not uncommon in common law jurisdictions. Lets not forget the Environment Protection Act of 1986 was triggered by Bhopal.

Third, related to the second point, why have damages For the wrong committed, there is an element of compensation. This is static aspect of law. To prevent such injuries in future, there can be a punitive element. This is dynamic aspect of law. Punitive damages are rare (almost non-existent) in India and again, there is not much point making comparisons with the US. Fourth, our law is still hazy on liability of a parent company (UCC) vis--vis liability of its subsidiary (UCIL). We are on even weaker ground if UCC is subsequently bought over by Dow Chemical Company and lets not forget that Dow didnt purchase UCIL.

Fifth, contrary to popular perception, courts dont create law. They interpret it. At best, there can be deviation from this principle on constitutional issues. Therefore, if a Bhopal Gas Leak Disaster (Processing of Claims) Act is passed in 1985, making the government sole representative of victims (inside and outside India), courts are bound by that legislation. Questioning this legislation is legitimate, as is the questioning of the out-of-court settlement figure of $470 million, compared to the original ask of $3 billion. Did government underestimate the number of people entitled to compensation Was there a quid pro quo with UCC in 1989

Sixth, we now know safety norms were violated and there were early warnings. But beyond the culpability of UCIL, enforcement of norms is responsibility of the Centre and the state government concerned. There have been other instances where legislation (interpreted as rules and regulations, in addition to statutes) has been flouted and this is a broader governance problem. If norms are below par, and such norms as exist are not enforced, it is unlikely there will be islands of exception for MNCs, though it is probably true that MNCs are generally more careful about standards and public perception. If those safety norms were indeed violated, why hasnt action been taken against central and state government bureaucracy It is easy to point fingers and find scapegoats in MNCs. However, there is much that is endogenous.

Seventh, there is an endogenous problem with the justice delivery system, typified in the current instance by a criminal case that drags on for more than 25 years, with one of the accused dying while awaiting trial, not to forget possible appeals against sentencing. There seems to be shock at quantum of imprisonment and monetary fine. However, to repeat the point made earlier, judges have little leeway (usually) in determining this.

Under law, a minimum and maximum is prescribed, and judicial discretion is limited to choosing something within this range. In this instance, the maximum permitted is what has been imposed. While on this, how culpable should a non-executive chairman be While on the criminal case, warranted questions are being raised about the circumstances under which Warren Anderson was allowed to leave and charges were diluted. Once he was allowed to leave, it is by no means obvious that there was a case for extradition, meaning we might ask for extradition, but it wasnt necessarily the case that we would be able to satisfy US requirements for extradition. Labelling Anderson a criminal has been common in media after the criminal case judgment, but such appellations are contingent on definition of crime.

Clearly, implicitly, we have question marks over the quality of the Indian judicial system, including over the quantum of punishment. Why else would we try to take both civil and criminal cases to the US This hasnt worked, though some class action is still pending. In the entire reportage, the blame game has generally been on UCC. But most problems are internal and these havent changed significantly since 1984.

The author is a noted economist