Dow and the Bhopal Tragedy

The 1984 gas release from the plant in Bhopal, India was a terrible tragedy. It is important to note that The Dow Chemical Company (TDCC) never owned or operated the Bhopal plant. Additionally, when Union Carbide Corporation (UCC) became a subsidiary of TDCC in 2001, TDCC did not assume UCC’s liabilities. Despite these facts, questions often arise because there are those who misrepresent that TDCC assumed liability regarding the Bhopal tragedy. The below information provides clarity concerning TDCC and the Bhopal tragedy. Further information on Union Carbide (UCC) and the Bhopal tragedy can be found here www.unioncarbide.com/bhopal.

Relationship between The Dow Chemical Company (TDCC) and Union Carbide Corporation (UCC)

What is the relationship between The Dow Chemical Company (TDCC) and Union Carbide (UCC)?
In February 2001, TDCC acquired all of the shares of UCC stock, and UCC became a wholly owned subsidiary of TDCC. To accomplish this structure, UCC was merged into a subsidiary of TDCC and then became the surviving subsidiary. TDCC and UCC did not merge. Since the 2001 transaction, UCC has operated as a wholly-owned subsidiary of TDCC, with its own assets and liabilities distinct from those of TDCC.

The vast majority of U.S. acquisitions are done this way, and this type of transaction does not result in the acquiring company taking on the liabilities of its subsidiary.

Did The Dow Chemical Company (TDCC) inherit any liability for Bhopal when it purchased the shares of Union Carbide (UCC) in 2001?
No. While UCC's stock is owned by TDCC, UCC remains a separate company as a TDCC subsidiary. Under well-established principles of corporate law, both in India and the United States, TDCC did not assume UCC's liabilities as part of the 2001 transaction.

Indeed, according to the formal legal opinions of two respected Indian jurists, Senior Counsel, Dr. Abhishek Manu Singhvi and Mr. Arun Jaitely, TDCC cannot be found liable under the laws of India. (See the full opinions in the following documents: > Dr. Abhishek Manu Singhvi and Arun Jaitely).

TDCC did not own UCC’s stock during the time the Bhopal plant was operating or at the time of the December 1984 gas release. By the time TDCC purchased UCC’s stock in 2001, over 16 years after the gas release, UCC had sold its interest in Union Carbide India Limited (UCIL), the entity which operated the plant at Bhopal. Most important, UCC and UCIL settled all liability claims related to the gas release under a legally-binding settlement with the Union of India approved by the Supreme Court of India in 1989, some 12 years before UCC’s transaction with Dow. The Court has reviewed the adequacy of the agreement and has upheld the validity of the agreement twice since 1989, in 1991 and again in 2007. In the settlement, UCC preserved its defense that it is not responsible for the gas release, and no court has ever ruled on UCC’s liability for the gas release. In June 2013 in a case addressing the corporate liability of UCC for acts of UCIL, the U.S. Court of Appeals for the Second Circuit ruled that UCC is not liable for any environmental remediation or related site environmental consequences at the Bhopal plant site in India. The Court stated: “[M]any others living near the Bhopal [India] plant may well have suffered terrible and lasting injuries from a wholly preventable disaster for which someone is responsible. After nine years of contentious litigation and discovery, however, all that the evidence in this case demonstrates is that UCC is not that entity.” TDCC, was not sued in that case.

Why doesn't The Dow Chemical Company (TDCC) force Union Carbide (UCC) to appear in the Indian criminal proceedings?
Some have wondered why TDCC, as a shareholder of UCC, doesn't simply force UCC to appear in Indian criminal proceedings. UCC manages its own legal proceedings, obligations and rights and has appropriately addressed this issue. It is important remember that whatever liabilities UCC has, they are UCC’s to manage, because the company has retained its own liabilities.

UCC has a separate Board of Directors which addresses the company’s issues in the best interest of UCC and its employees, retirees, customers and creditors. UCC has exercised its legal right not to appear in Indian criminal proceedings. This is a complex issue involving the appropriate jurisdiction of courts. The appropriate legal parties -- Union Carbide India Limited (UCIL) and its managers -- were tried and were convicted in 2010. Their conviction is on appeal.

Has The Dow Chemical Company (TDCC) accepted liability for other claims that were filed against Union Carbide (UCC), such as asbestos?
No. Although some have made such an assertion, it is categorically false.

TDCC has never assumed liability for asbestos claims on behalf of its wholly-owned subsidiary, UCC. Various individuals and groups have made this claim in a misguided attempt to establish that there has been a precedent of TDCC accepting liability for UCC, and it has appeared in news reports. But such precedent does not exist, because TDCC has never paid asbestos claims nor accepted liability of any kind on behalf of UCC.

Asbestos liabilities appear in TDCC filings with the U.S. Securities and Exchange Commission because U.S. regulations require TDCC to file with the SEC consolidated balance sheets that reflect balance sheet information for themselves and their subsidiaries [under 17 C.F.R. §210.3-01(a)] and consolidated statements of cash flow and income [under 17 C.F.R. §210.3-02(a)].

UCC remains a separate company and entity today with its own board of directors, assets and employees. UCC manages its own liabilities, including those related to asbestos claims. UCC has separately reported to the U.S. Securities and Exchange Commission its estimated asbestos liability and the financial accrual it has recorded against this estimated liability.

Please see the link: http://www.unioncarbide.com/financial/

Bhopal Site Remediation

Criminal Proceedings

What does it mean for The Dow Chemical Company (TDCC) now that the Bhopal court has issued the company a notice to show cause in the criminal case?
The Court’s notice to TDCC is a procedural step – merely a request for TDCC to appear to show cause why an NGO application should not be granted -- and is not a determination that TDCC is liable or responsible for the gas tragedy. The application seeks to force TDCC to produce UCC for a criminal trial. It was filed by NGOs and not the prosecutorial authority, which is the government. It is not a summons nor does it make TDCC a party to the proceeding.

Any efforts to directly involve TDCC in legal proceedings in India concerning the 1984 Bhopal tragedy are without merit. The Indian criminal court has no jurisdiction over TDCC, and therefore cannot compel TDCC to take any action. Moreover, TDCC and UCC are separate companies. Under well-established principles of corporate law, the 2001 stock transaction resulted in TDCC’s becoming the owner of UCC’s shares, but UCC is, and remains today, a separate corporate entity responsible for its own debts and obligations. TDCC has no liability for Bhopal and any attempts to attach the company to the criminal matter are highly inappropriate, as criminal liability cannot be transferred from one entity to another. In addition, UCC is not subject to the jurisdiction of the criminal court in India.

What does the Bhopal issue and related litigation mean for Dow businesses in the region and does this change our position regarding growth in the region?
Dow’s affiliated companies continue to experience double-digit growth in India and employ approximately 900 employees in India. Dow’s presence in India began with the Polychem Limited joint venture in 1957. Dow India continues to thrive fifty years later with a strong manufacturing and operations presence in ten locations across the country, supporting key applications for Dow products in industries as diverse as paints & coatings, water, pharmaceuticals, automotive, alternative energies, construction and agriculture. (Further information on Dow’s business in India can be found at www.dow.in.) These recent proceedings have not changed the facts, our view on the applicable law or our position regarding Bhopal. For the reasons discussed above, we do not believe that Bhopal or the 2010 request for a Curative Petition will have any financial, operational or reputational impact on Dow’s business opportunities in India or elsewhere in the world, and Dow will continue to oppose efforts to implicate Dow in the Bhopal matter.

Why does The Dow Chemical Company (TDCC) claim that the Indian courts do not have personal jurisdiction over the company?
The lack of jurisdiction over TDCC in India means that the Indian courts cannot compel TDCC to appear in court, take any action or pay any judgment. TDCC's corporate relationship to UCC does not give the Indian courts jurisdiction over TDCC in Bhopal-related matters because UCC did not become a TDCC subsidiary until some 16 years after the Bhopal gas leak; UCC remains a separate corporation with its own assets and liabilities and does not conduct business in India; and TDCC itself does not conduct business in India. The fact that other TDCC indirect subsidiaries may conduct business in India does not give rise to jurisdiction over TDCC itself. TDCC and its subsidiary companies, including UCC, are separate corporations with their own assets and liabilities. These corporate structures are not mere technicalities, but are everyday occurrences in corporate transactions; both US and Indian law respect entity separateness and the corporate form. Exercising jurisdiction to embroil Dow in Bhopal-related legal proceedings where Dow had no connection whatever to the gas leak and the Court has no jurisdiction over it would violate Dow’s due process rights.

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