An Indian Tragedy Many Times Over

Government meddling has deprived victims of the deadly Bhopal gas leak of fair compensation.

On Tuesday, a district court in Bhopal, India, found seven former Union Carbide India Ltd. (UCIL) officials guilty of “causing death by negligence” for a gas leak at a pesticide factory in that city over 25 years ago. The officials were sentenced to two years in prison and fined 100,000 rupees ($2,130) each for failing to prevent the tragedy. The victims of the gas leak, activists in Bhopal and the Indian media in general, have rightfully labeled the court’s verdict as too little too late. Often referred to as the Bhopal Gas Tragedy, the incident should instead be dubbed the Bhopal Gas Tragedies; the first caused by UCIL and the second by the Indian government.

The Bhopal disaster was the worst industrial accident ever to hit India. Just after midnight on December 3, 1984, tens of thousands of pounds of methyl isocyanate, a highly toxic gas used in chemical manufacturing, were released into the air over the area. Estimates of the death toll vary widely—from just under 4,000 to around 15,000—but it’s undisputed that thousands of people died in the hours after they inhaled the gas, and thousands more from health problems they developed later as a result of their exposure.

The leak was the direct result of negligence of the UCIL workers and inspection officials and bureaucrats. They neither followed established safety measures to prevent the gas leak, nor warned the thousands of people living near the factory of how to protect themselves in such an event. Simply covering one’s face with a wet cloth in the event of the gas leak could have saved thousands of lives, had people been educated to do that.

By not imposing adequate regulatory oversight on the factory before the disaster, government officials missed ample opportunities to create incentives for safety. The criminal courts have now compounded this problem with their light sentences of the executives last week, so long after the event. But perhaps the far greater tragedy lies in the chance the Indian government spurned to compensate victims while sanctioning the company via civil tort suits.

Opportunistic trial lawyers have a bad reputation in places like America, often deservedly so, but they serve an important role in helping victims secure compensation. In the aftermath of the gas leak, the citizens of Bhopal experienced what jurist Marc Galanter called “the great ambulance chase” as a number of American tort lawyers descended on the area. They spotted an opportunity for a big pay-out from a big corporation, and the big fees to match (American tort lawyers typically claim one-third of any judgment in their clients’ favor as a contingency fee).

But Indian lawmakers worried about those high fees and feared the tragedy would become an exploitative and lucrative exercise for foreign legal firms. To “protect” the victims, the Indian Parliament passed the Bhopal Gas Tragedy Act in March 1985. The law handed the Indian government the exclusive right to represent all the claimants.

Almost immediately the government ran into trouble acting on behalf of the victims. It lost its first battle in a New York courtroom when a federal district court judge ruled New York was not an appropriate venue for the case even though the defendant in the suit was based in the United States. The Indian government had argued that its own courts weren’t sophisticated enough to handle such a complex case. But UCIL pointed directly at the Bhopal Gas Tragedy Act to argue the Indian government could more easily settle the matter at home.

Once the proceeding had moved back to Bhopal in 1986, it almost immediately bogged down in Indian bureaucracy. The first problem was establishing a headcount of the victims. Bureaucrats eventually settled on an estimate of approximately 3,000 fatalities, 30,000 permanent injuries and 20,000 partial injuries. Partly through incompetence and partly because bureaucrats simply didn’t have the right incentives to do the hard work of reaching an accurate number, these estimates were grossly undercounted.

Yet by the time questions about the numbers came to light, the government had already reached a settlement with UCIL and its parent company based on the initial low casualty estimates. In February 1989, the government accepted $470 million in return for absolving UCIL and its parent of all past, present and future liability arising from the leak. A consequence of the undercount was that by the time the true number of victims emerged, they were stuck accepting smaller individual portions of the settlement pie the government had already negotiated on their behalf. Worse, the government relieved UCIL of any further liability before any additional health or environmental consequences could come to light.

Victims are left suspecting that private-sector tort lawyers would have done better on their behalf, even after lawyers’ fees were factored in. Certainly the lawyers would have had much stronger incentives to ascertain an accurate victim count before accepting a settlement. They probably also would not have been able to unilaterally absolve UCIL of any future liabilities. New Delhi’s paternalism, far from protecting the interests of Bhopal victims from sharks, cut those victims off from one of the most promising avenues for seeking compensation in a free-market system.

In this context, the weak criminal sentences against a few employees at the plant are simply the latest in a long string of failures. The people of Bhopal were first betrayed by the employees of UCIL and regulators who allowed this disaster to happen. Then they were victimized by their own government, which has failed to deliver either criminal or civil justice.

Ms. Rajagopalan is a doctoral student in economics at George Mason University.

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