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FM AMCONSUL MUMBAI
TO RUEHC/SECSTATE WASHDC 7273
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 8517
RUEHBI/AMCONSUL MUMBAI 2494
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 06 MUMBAI 000265 
 
SENSITIVE 
SIPDIS 
 
USTR FOR AADLER/CLILIENFELD 
 
E.O. 12958: N/A 
TAGS: EINV ECON PGOV ASEC ELAB IN
SUBJECT: TWENTY-FIVE YEARS LATER, BHOPAL DISASTER NOW HAUNTS DOW 
CHEMICAL 
 
REF: A. MUMBAI 600 
     ¶B. MUMBAI 481 
     ¶C. MUMBAI 459 
 
MUMBAI 00000265  001.2 OF 006 
 
 
¶1. (U) Summary.  In December 1984, a massive chemical leak at 
the Union Carbide Corporation (UCC) plant in Bhopal, Madhya 
Pradesh killed thousands, leaving a legacy of suffering, 
continued health and environmental concerns, and political 
controversy.  As the twenty-fifth anniversary of this tragedy 
approaches, NGOs and other activists hope to refocus attention 
on issues of culpability, damages, and the environmental 
remediation of the accident site, which still stands unaddressed 
in the middle of Bhopal.  These lingering issues have cast a 
shadow over the Dow Chemical Company (Dow), which acquired 
certain assets of Union Carbide in 2001, long after a series of 
political settlements and Supreme Court of India rulings that 
purportedly ended all civil liability for UCC in India.  In 
recent years, Dow launched two sizeable projects in western 
India: a USD 100 million R&D facility outside of Pune in 
Maharashtra and a chemical manufacturing plant in Gujarat.  For 
years, these and Dow's other facilities have been plagued by 
protests, political intimidation, and ongoing and indefinite 
litigation owing to the UCC purchase.  Victims' groups and NGOs 
assert that Dow, as the purchaser  of Union Carbide, should be 
held liable as a successor-company for UCC's Bhopal legacy and 
the environmental rehabilitation of the accident site. 
 
 
 
¶2.  (U) Summary, Cont.  The controversy and the political 
fallout from the protests have forced Dow to halt the 
construction of the Pune R&D facility and consider shifting the 
facility to another state.  Protests have also stalled the 
further planned development of the JV plant in Gujarat.  Dow has 
been embroiled in drawn out litigation in the High Court of 
Madhya Pradesh (MP) to determine legal responsibility for the 
environmental clean-up of the disaster site.  While the MP High 
Court has determined that the MP state government and the GOI 
bear legal responsibility for cleaning up the site, Mission 
India believes that NGOs and activist groups will continue to 
focus attention on Dow, in a public relations and legal fight 
that could continue unresolved for years, hampering Dows plans 
to invest large amounts in a promising market.  End Summary. 
 
 
 
A TRADEGY. A SETTLEMENT? 
 
--------------------------- 
 
 
 
¶3.  (U) On December 3, 1984, a methyl isocyanate poison gas leak 
from the Union Carbide India Limited (UCIL) pesticide plant in 
Bhopal, Madhya Pradesh, immediately claimed the lives of 
approximately 3,800 people, and left almost 100,000 injured, 
many seriously and permanently.  In the years that followed, the 
number of casualties swelled nearly five-fold, with over 15,000 
deaths and 500,000 injuries attributed to the disaster, 
according to claims settled since 1984, making it the largest 
industrial disaster in history.  In the immediate aftermath of 
the disaster, questions of culpability quickly and inevitably 
emerged.  Lawsuits were filed both in India and in the U.S. 
against UCC and its 51 percent-owned subsidiary, UCIL.  The U.S. 
litigation ended when the U.S. District Court of New York ruled 
that it had no jurisdiction over the cases, stating that the 
appropriate venue was the Indian court system, a ruling that 
stood when the U.S. Supreme Court declined to hear the case. 
Thus, all criminal and civil litigation against the two 
companies returned to the jurisdiction of the Indian legal 
system. 
 
 
 
¶4.  (U) With so many people killed and injured and no regular 
procedures available under Indian law to allow for effective 
representation of such an enormous class of plaintiffs, the 
Government of India enacted a special statute entitled the 
"Bhopal Gas Leak Disaster Act, 1985."  The essence of the law 
was to enable the Central Government to conduct litigation on 
behalf of all the victims.  In February, 1989, the Indian 
Supreme Court approved a settlement between the Central 
 
MUMBAI 00000265  002.2 OF 006 
 
 
Government, in its capacity as representative of the victims, 
and UCC and UCIL.  In the settlement, UCC, as the parent company 
of UCIL, agreed to pay out nearly USD 500 million in damages. 
This money was placed into a trust, to be administered and 
distributed to the victims by the Government of Madhya Pradesh 
as it saw fit.  In consideration for the payment, UCC and UCIL 
(and their officers, directors and employees) were relieved of 
all further liability for monetary damages, and were to be free 
from future criminal charges.  (Note:  Because of widespread 
protests against the settlement, the Indian Supreme Court just 
two months later decided to reconsider its approval; eventually, 
the Court confirmed the resolution of the civil settlement, but 
held that the companies and their responsible officers remained 
subject to criminal prosecution.  The criminal cases against UCC 
and its former CEO Warren Anderson have continued in the Indian 
courts ever since.  End Note.) 
 
 
 
¶5.  (U) Despite the UCC and GOI settlement, victims groups and 
NGOs have remained unsatisfied.  They assert that the trust 
money has been inadequately distributed, mismanaged, and 
misappropriated by the state and central government.  The groups 
have also continued to express outrage that the accident site 
has to this day not been cleaned up.  The site remains a highly 
toxic area and a place of enormous concern to local residents. 
At the time of the accident, India had not yet passed its 
Environmental Protection Act, and there was thus no regulatory 
plan or legal mechanism for the site's remediation.  Neither the 
courts, nor the GOI, ever ruled on the thorny but fundamental 
questions of who would actually do the cleanup work or bear the 
costs. 
 
 
 
Dow's Purchase of UCC Sparks New Rounds of Litigation 
 
---------------------------------------- 
 
 
 
¶6.  (U) Nine years after the disaster, in September of 1994, UCC 
sold its entire stake in UCIL to Eveready Industries India Ltd., 
a Kolkata-based battery manufacturer. (Note:  A substantial 
portion of the proceeds of the sale was attached by the 
Government of India, to be used to establish the Bhopal Memorial 
Hospital and Research Center for the victims; it appears that 
this attachment was part of the settlement reached by UCC with 
the GOI. End Note.) The sale of UCIL's assets ended UCC's 
business presence in India.  Eveready became the lessor of the 
disaster site and its surrounding property.  Four years later, 
Eveready's supervision of the property ended and the State 
Government of Madhya Pradesh assumed full control. 
 
 
 
¶7.  (U) With the UCC Bhopal debacle ostensibly settled, at least 
in respect to civil claims, the Dow Chemical Company (Dow), one 
of the largest chemical manufacturers in the U.S., began to 
consider an acquisition of UCC in the late 1990's.  Dow 
officials and legal counsel determined that because UCC had sold 
all of its India interests to Eveready, and because it had 
settled all outstanding civil litigation, no successor liability 
from the Bhopal disaster would attach to Dow in its purchase of 
UCC.  Nevertheless, many of Dow's shareholders opposed the 
proposed acquisition, and in suits intended to block the 
transaction, cited fears that UCC's Bhopal-baggage would subject 
Dow to residual liability from the disaster itself, as well as 
jeopardize future business prospects in India.  At the same 
time, protests by Bhopal victims groups and environmental 
activists erupted in Bhopal, Mumbai (home of Dow's existing 
India headquarters), and in the U.S. upon hearing word of Dow's 
intentions.  Ultimately, the shareholder suits were dismissed, 
and the Federal Trade Commission allowed Dow to acquire UCC in 
February 2001. 
 
 
 
Dow Inherits Troubled Legacy 
 
--------------------- 
 
MUMBAI 00000265  003.2 OF 006 
 
 
 
 
 
¶8. (SBU)  Activist groups in India and elsewhere quickly honed 
in on Dow, and insisted that Dow had inherited the legal and 
moral legacies of the Bhopal disaster.  The scores of NGOs and 
activist groups fighting against Dow coalesced into a single 
organization called the International Campaign for Justice in 
Bhopal (ICJB), spearheaded by Amnesty International and 
Greenpeace. (Note: Representatives from the ICJB traveled to 
Washington in May 2009 and met with State Department officials 
and members of Congress to present an update on the many civil 
and criminal cases pending in India and the U.S. End Note.)  The 
ICJB, after a series of failed attempts at criminal prosecution 
of Dow employees, successfully initiated a Public Interest 
Litigation (PIL) suit in the Madhya Pradesh High Court.  The 
suit charged the Central Government, the State of Madhya 
Pradesh, Eveready Industries and Dow with failure to address the 
enduring medical and ecological effects of the disaster.  The 
High Court ruled that it would permit the PIL to proceed, but 
would limit its focus exclusively on the site remediation and 
its costs, and not permit claims for the injuries to persons or 
other damages.  After hearing argument and testimony on the 
environmental issues, the High Court issued two orders in March 
and May of 2005, charging the Central and State governments' 
with responsibility to clean up the site and to dispose of the 
toxic waste.  Moreover, the Court ruled, the process must begin 
immediately for the safety of the citizens.  The Central and 
State governments would share the cost of the clean up, until 
the Court made its final ruling in the PIL determining who would 
ultimately have to pay. 
 
 
 
¶9. (U) Some Central government officials looked to Dow to 
ultimately pay for a portion of the remediation costs.  Fearing 
that Dow might divest itself of its India operations before the 
ruling on the PIL (Dow had two smaller facilities in India at 
the time), the Union Ministry of Chemicals and Fertilizers filed 
an application with the High Court requesting an order that Dow 
deposit approximately USD 25 million against environmental 
remediation costs that might arise later out of the PIL.  The 
Court to date has not made a decision on the matter. 
 
 
 
NGOs Demand a Political End to the Legal Standoff 
 
----------------------------------- 
 
 
 
¶10.  (SBU) On June 11, CongenOffs met with Satinath Sarangi of 
the ICJB and Vinuta Gopal, the Greenpeace liaison to the ICJB in 
Mumbai.  They listed three demands that the ICJB wanted Dow to 
meet. First, ICJB wants Dow to remediate the site of the gas 
disaster and to clean up and remove all waste and hazardous 
material.  Second, Dow should pay for the costs of medical 
monitoring to assess health damages caused by the soil and 
ground water contamination both before and subsequent to the gas 
leak.  And last, ICJB wants Dow to present representatives of 
UCC to Indian courts to stand trial for criminal liabilities. 
According to Sarangi, UCC is an "absconder from justice" since 
1992, and its owner, Dow, is "shielding the company" from 
criminal prosecution in India.  He alleged that Dow was also 
selling UCC's processes and technology in India under its own 
name.  According to Sarangi, Indian Oil Corporation cancelled a 
contract to purchase a technology from Dow after it learnt that 
Dow planned to sell UCC's technology under the Dow brand name. 
ICJB is not seeking additional monetary compensation for 
survivors or descendants of victims, as they noted that the 
Indian Government had already settled civil liabilities arising 
out of the gas leak. 
 
 
 
¶11.  (U)  Relying on Common Law doctrines of successor 
liability, Dow counters that it acquired UCC nearly twenty years 
after the disaster, fifteen years after a settlement was agreed 
upon between the Government of India (GOI) and UCC, and nearly 
ten years after UCC had sold off its stake in Union Carbide 
 
MUMBAI 00000265  004.2 OF 006 
 
 
India Ltd. (UCIL), UCC's Indian subsidiary that actually owned 
and operated the Bhopal facility at the time of the disaster. 
Thus, according to Dow officials and attorneys, there is no 
legal basis for a claim that it ought to be held liable for any 
outstanding Bhopal liabilities.  (Note:  Dow's leadership has 
shown enthusiasm for a proposal made by Ratan Tata, Chairman of 
the Tata Group, which calls for the creation of a pan-industry 
trust to pay for the remediation.  Tata hopes that a clean up 
through a collaborative trust, made up of donations from 
corporations with an interest in seeing the Dow matter resolved, 
would not only serve to clean up the site, but would serve as an 
assurance to overseas companies that India remains a desirable 
destination for foreign investment.  The ICJB objects to this 
proposal because it would, to their minds, absolve Dow of 
further liabilities.  End Note.)  For their part, senior Madhya 
Pradesh state officials have told Congenoffs that while there is 
money for the clean-up, several technical hurdles related to the 
disposal of the waste have prevented action; in addition, they 
acknowledged, the issue is highly political, and they did not 
expect the remediation to move forward in the near term. 
 
 
 
¶12.  (SBU) Congenoff met with the Director of Corporate Affairs 
at Dow Chemicals India, Rakesh Chitkara, and Dow India's chief 
legal advisor, Ramolla Karnani.  When asked why Dow had become 
the primary target of the NGO groups while Eveready, the parent 
of UCIL, had been left virtually untouched by criticism, 
Chitkara postulated that "the NGOs have to pick their battles. 
They don't have the resources to go after both companies, so 
they chose to go after us because we are a larger, international 
group.  A campaign against us will simply be more visible.  It's 
more publicity.  Plus, since we're a larger company so they 
figure they'll get a bigger payout."  Chitkara also speculated 
that Eveready had paid off the protesters.  He had no concrete 
information that other competitor companies might be funding the 
protests, but acknowledged that even if a competitor-culprit 
were uncovered, there was no reasonable legal remedy.  While the 
Bhopal remediation costs are relatively small, compared to Dow's 
disruption of business and legal costs, Dow has consistently 
refused to pay on principle.  Chitkara said that should Dow pay 
these costs, it will appear as an admission of guilt, and have 
the potential to provoke additional litigation.  Chitkara has 
noted previously that Dow has a robust corporate social 
responsibility program in India, focused on the provision of 
safe drinking water and artificial limbs. 
 
 
 
¶13.  (SBU)  When posed the same question, Sarangi and Gopal 
explained that the legal and moral cases against Eveready are 
far less compelling.  The ICJB asserts that their investigation 
has proven that UCIL was not a wholly independent subsidiary of 
UCC, as Dow has maintained.  Since UCC made virtually all the 
critical decisions at the UCIL facility, there was no legal 
separation between parent and subsidiary.  Sarangi maintains 
that the UCIL facility in Bhopal (including the waste disposal 
facility) was completely designed by its parent company, UCC. 
UCC maintained complete "control" of the Indian subsidiary. 
Greenpeace India's Gopal concurred, and added that documents 
attesting to UCC's control of UCIL had been presented in a U.S. 
court during the disclosure process.  The gas leakage at the 
Bhopal facility is therefore a direct consequence of decisions 
and actions taken by UCC and not UCIL, she argued.  Sarangi 
pointed out that Dow had even paid around $2 billion for 
liabilities arising out of exposure of UCC workers to asbestos 
in the U.S. even though it did not own UCC at the time the 
asbestos exposure occurred.  If Dow accepted liability for UCC's 
past actions in the U.S., it should bear similar responsibility 
for damages in India, Sarangi argued. 
 
 
 
PUNE FACILITY TARGETED 
 
-------------- 
 
 
 
¶14.  (SBU)  What was once simply a legal matter regarding 
potential monetary damages has now become a larger vexation for 
 
MUMBAI 00000265  005.2 OF 006 
 
 
Dow, as the company attempts to expand its presence in India. In 
October of 2007, Dow commenced the construction of a Research 
and Development facility at the Shinde-Vasuli village near 
Chakan, 35 kms from Pune (see reftel A).  The land was acquired 
from the Maharashtra Industrial Development Corporation (MIDC). 
According to Chitkara, this investment was encouraged by the 
then-Union Minister for Science & Technology, Kapil Sibal, and 
approved by the former Maharashtra Chief Minister Vilasrao 
Deshmukh.  All clearances were in place before construction 
commenced at the site, he added. 
 
 
 
¶15.  (U)  Three months after construction began, on January 16, 
2008, local villagers blocked access to the road leading to the 
Pune site.  Chitkara believes that anti-Dow NGOs in Bhopal 
incited the villagers to protest against the Dow R&D facility by 
conjuring up memories of Bhopal, but he offered no direct 
evidence to back this allegation.  (Note: Sarangi and Gopal 
confirmed that the ICJB had played some part in the protests. 
End Note) As a result, the state government imposed a stay on 
construction at the site and appointed a committee headed by the 
Environment Secretary to investigate the complaints.  In March 
2008, the committee found that the grievances of the villagers 
were unfounded and that the R&D center was a zero-discharge 
facility that would have no adverse impact on the environment. 
It therefore recommended that construction resume, and the 
Maharashtra state government re-opened the site in July 2008. 
 
 
 
¶16.  (SBU)  On July 25, the same day that the site was 
re-opened, a group of Hindu religious devotees of a shrine 50 
kms from the site, known as Warkaris, vandalized and set fire to 
nearly $500,000 worth of equipment at the facility.  The 
Warkaris claimed that the Dow facility would pollute the ground 
water and otherwise defile the environment of the shrine, which 
marks the birth-place of their saint.  With added police 
protection, construction resumed immediately despite the damage 
caused by the vandalism, but the government once again stopped 
construction at the site in September 2008.  According to 
Chitkara, the explanation for the state government's actions is 
simple politics:  there are 2.5 million Warkaris in Maharashtra 
who are affiliated with Sharad Pawar, the leader of the 
Nationalist Congress Party; that party, in coalition with the 
Congress Party, controlled Maharashtra at the time.  Even though 
Pawar publicly denounced the actions of the Warkaris, Chitkara 
believes that the Warkaris pressured Pawar to stop construction, 
and that Pawar, with the upcoming state and national elections 
in mind, appealed to Chief Minister Deshmukh. 
 
 
 
¶17.  (SBU)  Thus, yet another committee was appointed in 
September 2008 to investigate this second round of allegations 
of ground water pollution by the R&D center.  The committee has 
not yet made any recommendations, but the new Chief Minister of 
Maharashtra, Ashok Chavan, has asked Dow voluntarily to withdraw 
from the Pune site, which Dow has refused to do unless ordered 
by the state government.  Chavan has also suggested that Dow 
relocate from the current site in Pune to an alternative site in 
Maharashtra.  Dow is considering this suggestion, as well as 
exploring options to relocate to Gujarat or Karnataka, but has 
not yet decided on its course of action.  If Dow pursues its 
option of constructing a facility in the new locations, it will 
likely contract the construction to an independent contractor, 
and take over the facility only upon completion.  Dow has not 
communicated its plans to the Maharashtra government for fear 
that it may taint the findings of the committee's report.  The 
committee may render an unfavorable opinion against Dow to 
portray Maharashtra investment climate in a good light if they 
realize that Dow is deciding to leave Maharashtra, Chitkara 
explained.  The committee was expected to render a 
recommendation within a month, but to date has not made any 
decision.  Any decision will come out only after the Maharashtra 
state assembly election in October 2009, Chitkara opined. 
 
 
 
¶18.  (SBU)  Chitkara explained that the situation in Pune has 
undoubtedly discouraged further Dow investment in India, 
 
MUMBAI 00000265  006.2 OF 006 
 
 
especially in Maharashtra or Madhya Pradesh. Dow has already 
invested $20 million in the construction of the R&D facility in 
Pune.  The company had planned to increase its investment in 
India from $750 million today to $5 billion by 2015, but given 
the difficulties Dow has recently experienced, that level of 
investment looks extremely unlikely now, he added. Chitkara 
pointed out that the company has four manufacturing facilities 
in Maharashtra which were constructed and are operating without 
any problems.  Dow also has an operational laboratory in Pune 
that it planned to shift to the R&D facility once it was 
constructed.  However, the only facility that met with 
objections and opposition was the non-manufacturing R&D site in 
Pune, he noted. 
 
 
 
¶19.  (SBU)  Comment:  As the 25th anniversary of the Bhopal 
disaster approaches this December, both Dow and the Bhopal NGO 
groups seem unwilling to compromise.  The NGOs are reluctant to 
permit the Government of Madhya Pradesh or the Central 
Government to remediate the site, citing past instances of 
government incompetence with hazardous waste disposal.  They are 
also averse to the idea of a pan-industry fund if Dow is not 
included in the contributors.  For them, Dow must be held 
responsible. Dow, on the other hand, worries that contributing 
to the clean-up project, voluntarily or by court order, will 
inspire an even more virulent string of lawsuits and protests 
that would plague the company indefinitely.  With the state 
government, activists, and Dow all refusing to move, this 
problem could likely continue for years, hindering Dow's 
presence in India.  The collateral damage to Dow's Pune research 
facility highlights the strength of the feelings in India about 
the Bhopal tragedy, and provides another example of the 
declining business environment in Maharashtra.  End Comment. 
FOLMSBEE