UNION CARBIDE CORPORATION

Re UNION CARBIDE CORPORATION

BACKGROUND AND FACTS

Union Carbide Corporation (UCC) had been one of the largest chemicals and industrial companies in the world, operating in dozens of countries. UCC’s subsidiary in India, UCIL, had grown to fourteen plants, employing more than 9000 Indian citizens manufacturing a variety of products, including chemicals, plastics, batteries, fertilizers and pesticides. UCIL was incorporated under the laws of India. Fifty one percent of UCIL stock was owned by UCC, 24 percent by the government of India, and the balance by approx. 23,500 Indian citizens. The stock was publicly traded in India. In the 1970’s, India issued a license to UCIL to produce pesticides at a plan to be built in Bhopal. UCC provided the basic design for the plant, but India insisted that its own engineering firms and contractors build it. Form 1972 – 1980, the construction was supervised by Indian engineers and many changes were made to the design. Labor and employment policies were set by the Indian government and the construction was managed and operated entirely by Indian citizens. The operations of the plant were regulated by more than two dozen Indian governmental agencies; however enforcement of environmental, health, and safety standards were weak and ineffective. Maintenance procedures and record keeping at the plant were inadequate. In 1984, poisonous methyl isocyanate gas was released from the plant and blew into densely occupied parts of the city of Bhopal, resulting in the deaths of several thousand Indian citizens (estimates range from 2000 to 10,000) and severe injuries to several hundred thousand others.

In April 1985, the Indian government filed a complaint in the federal courts in New York on behalf of the victims. UCC contended that the action should properly be heard in the courts of India. 

Questions:

1. What are relevant factors that the courts would consider when consider the question of jurisdiction and the proper forum. What do you predict would be the outcome? What should be the applicable law in determining the rights and obligations of the parties?

2. Given the fact that there was laxity in the way the plant was constructed, maintained and managed, what are factors that contribute to differing standards and laws in different jurisdictions. How do you think such disparities are resolved when it comes to foreign firms and multinationals operating in foreign jurisdictions?

3. Given the facts of the case, who, in your view, should be held legally liable for the deaths and injuries caused to the local residents. Also considering the fact that this is a corporation, can and should the directors and management of the corporation be allowed the protection of the corporate veil? Should the liability be civil or criminal as well?

2. The plaintiff, AT Inc. purchased electronic parts from the defendant PMC, whose office and factory were in Canada. AT Inc. placed its orders through defendant’s authorized distributor, U Technologies, located in California. AT’s order stated that the contract “shall be governed by the laws of the state shown on buyer’s address on this order”. PMC’s confirmation stated that the contract “shall be construed according to the laws of Canada”. Invoices were sent from U technologies, and payment re mitted to UT, either in California or Nevada. AT claimed that the goods did not meet its specifications and filed suit in California state court to have its claim decided under California law. When the case was transferred to a U.S federal court, AT requested that the case be remanded back to state court.

Ques.

a. How would the courts decide on the question of jurisdiction and applicable law?

b. Analyze the situation where both parties have indicated different choices on the applicable law. Which party’s choice would prevail under Canadian laws? Do you project for a different outcome if the international conventions on the sale of goods (CISG) were applicable?

c. What are the main differences between common law and civil law jurisdictions when it comes to mutual rights and obligations of buyers and sellers, and the formation of contracts and its enforcement?

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