In 1984, leaking gas from a chemical plant in Bhopal killed over 2,000 Indian citizens and injured over 200,000 more. In the aftermath of the disaster, numerous actions were filed against the owners of the facility. The plant was one of 14 facilities operated by Union Carbide of India Limited (UCIL). Union Carbide Corporation (UCC), an American firm, owned 51 percent of UCIL. The Indian government owned 22 percent of the company and the remainder was owned by individual Indian shareholders. (Though the stock was traded on the Bombay exchange it could, apparently, only be held by Indian citizens.) Because UCC and UCIL only came under the jurisdiction of the courts in their respective countries, the question of who could be sued, and by whom, became very tangled.
The problem that faced UCC and UCIL was the source of ultimate responsibility for such an incident when the various international laws and rules of ownership affect the parties' involvement in management and regulate the percentage of shares they could own. This is a basic problem for multinationals. The degree to which countries differ and agree on the rules governing such business arrangements is key to successful international operations. The Indian government claimed that UCC was negligent in its original designs for the plant and in allowing for excessive storage of the deadly gas (methyl isocyanate) at the facility. UCC claimed that its participation in construction, design, management, and oversight of the plant was so severely limited, that it could not be held responsible for what was an operations error.
JUSTIFICATION FOR PROBLEM DEFINITION
The problem arises from the basic arrangement between UCC and the Indian government regarding ownership of an Indian factory. UCIL had been incorporated under Indian law. Ownership percentages and operations specifications were regulated, it seems, by law. Thus, on the one hand, UCC was the majority owner of...