Dow Chemical investments in India at risk, PMO files reveal

Bhopal Gas Peedit Mahila Stationary Karamchari Sangh
Bhopal Gas Peedit Mahila Purush Sangarsh Morcha
Bhopal Group for Information and Action

May 12 2008, New Delhi: “Irrespective of the manner in which [Union Carbide Corporation] has merged or has been acquired by Dow Chemicals, if there is any legal liability, it would have to be borne by Dow Chemicals,” according to an internal document dated 7.2.2008 from the PMO that attributes this opinion to the Ministry of Law. This document contradicts Dow’s stated position to its shareholders, and clearly outlines the risks faced by Dow Chemical’s investments in India. The document was unearthed on 8 May, 2008, through Right to Information from the Prime Minister’s Office by survivors organizations of 1984 Union Carbide disaster in Bhopal. Around 50 Bhopal victims who arrived in Delhi on foot from Bhopal are currently on the 46th day of sit-in strike in New Delhi. More than 400 other Bhopalis joined them today. Bhopal activists said they will bring the Law Ministry’s opinion to the notice of Dow shareholders at the company’s Annual General Meeting at Midland, Michigan, on 15 May, 2008.
Two key ministries – the Ministry of Chemicals, which is the nodal agency on Bhopal, and the Ministry of Law, the final word in the Government on all legal matters – agree that Dow should be made to pay for Union Carbide’s liabilities. However, Bhopal activists say they will not let their guard down. “There is always the threat that legal and moral issues will be set aside for financial considerations such as investments,” said Satinath Sarangi of Bhopal Group for Information and Action. “The Industry and Finance ministers and Planning Commission’s Montek Singh Ahluwalia are the ones to watch out because they endorsed Dow’s demand for immunity in 2006,” he said.
In 2005, Dow began intense lobbying for legal immunity against Carbide’s liabilities prompted by a May 2005 application by the Ministry of Chemicals in a case relating to toxic waste clean-up in the Madhya Pradesh High Court. The application sought Rs.100 crores ($25 million) from Dow towards clean-up costs. Dow claims that its 100 percent subsidiary, Union Carbide, is a separate legal entity with its own system of liability management, and that Dow has inherited only assets and not Carbide’s liabilities.
Responding to requests from Dow and its allies, the Prime Minister instructed the Chemicals Ministry to prepare a note on Dow’s legal liabilities in consultation with the Law Ministry. While the actual note prepared by Chemical and Law Ministries is not available, the internal briefing note prepared by PMO director Shaleen Kabra dismisses any possibility for immunity: “[The Law Ministry] has categorically stated that in view of the pendency of Writ Petition in the Madhya Pradesh High Court and the legal position stated above, it cannot also be said that the investment proposed to be made by the Dow Chemicals will be immune from the orders of the Court,” the note observes.
In a margin note dated 15.2.08 to the internal letter, the Prime Minister has written, “While we may not send any comments on the draft note, Finance Ministry, Commerce and Industry Ministry & Planning Commission should be asked for their comments.”
These revelations could have ramifications on the joint venture agreement between Dow Chemical and Gujarat Alkalies and Chemicals Ltd last April to set up a 200,000 tonnes per annum chloromethanes factory in Dahej, Gujarat. This is Dow’s first major investment announcement since its acquisition of Carbide. Dow has shied away from large investments in India, both because of its perceived risks and the hostile reaction to its entry from various quarters.
In January this year, Dow Chemical’s attempts to construct a Rs. 300 crore R&D facility in Chakan, Pune was stalled after villagers dug up approach roads to the construction site. The villagers have forced the Government to rethink the permission given for Dow’s proposal. Its attempts to forge alliances with the Indian Institutes of Technology have also run into rough weather. Citing Dow’s mishandling of the Bhopal legacy issues as reason, students and teachers at six prestigious engineering institutes around the country have joined hands to bar the company from any truck with IIT.
Separately, a case involving bribes paid by Dow officials to Indian agriculture ministry staff to register three toxic pesticides is also under investigation. Last year Dow Chemical was charged with violations under the Foreign Corrupt Practices Act (FCPA) by the US Securities and Exchange Commission (SEC). As per the Indian Penal Code “bribe” is a criminal offence punishable by up to one year of rigorous imprisonment. As part of its investigation in to this crime the Central Bureau of Investigation has recently sent a Letter Rogatory seeking judicial assistance from the US Justice Department.
Copy of the internal document by Shaleen Kabra of the Prime Minister’s Office that confirms the Law Minstry’s opinion that Dow is liable for Union Carbide’s Bhopal legacy.
Rashida Bee, Champa Devi Shukla
Bhopal Gas Peedit Mahila Stationery Karmchari Sangh

Syed M Irfan
Bhopal Gas Peedit Mahila Purush Sangharsh Morcha

Rachna Dhingra, Satinath Sarangi
Bhopal Group for Information and Action

For more information contact:
Rachna Dhingra: 97175 16005

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