$470-Million Settlement for Bhopal OKd : Union Carbide to Pay 500,000 Claimants in India Gas Leak

Union Carbide Corp. agreed Tuesday to pay $470 million in compensation to victims of the 1984 pesticide leak from its plant in Bhopal, India, that killed 3,330 people and ranks as history’s worst industrial disaster.

The chemical company will pay the sum to the Indian government in a settlement directed by the Indian Supreme Court and ending four years of legal wrangling in the United States and India. A special Indian tribunal will divide the payment among about 500,000 claimants, a task that is expected to take years.

The settlement, hailed as equitable both by the company and the Indian government, ends all civil and criminal charges against Union Carbide and its executives.

‘Eminently Fit’

Indian Supreme Court Chief Justice R. S. Pathak, who had pressed Union Carbide and the Indian government to come to terms, said the lump-sum payment proposal is “eminently fit for an overall settlement in view of the acute suffering of the victims.”

The agreement was announced as oral arguments were about to resume before the five-judge Indian Supreme Court on pretrial issues.

A spokesman for an American advocacy group, the Bhopal Action Resource Center, said the settlement was “ludicrously low,” recalling that the Indian government had originally sued for $3.3 billion. David Dembo, a spokesman for the group, said that the lack of a trial also means that it may never be determined whether the leak was caused by employee sabotage, as Union Carbide claimed, or as a result of poor plant design, as the Indian government has insisted.

On Dec. 3, 1984, shortly after midnight, a chemical reaction produced a cloud of poisonous methyl isocyanate gas that suffocated hundreds of people in a nearby shantytown, then drifted over other sections of the populous central Indian city. More than 2,000 of the victims died almost immediately.

The accident had widespread and lasting consequences.

Deaths Every Day

Thousands of victims remain disabled in hospitals and clinics near the closed plant, many blind and others with badly scarred lungs. Hundreds have died in the years since the disaster. Victims continue to die at a rate of about one a day, according to the Indian government.

Other victims and sympathizers have held angry demonstrations over the past four years to protest what they saw as the slow progress toward a settlement.

In the United States, the disaster sparked a debate over chemical plant safety and prompted passage of a federal law that directs chemical firms to keep their neighboring communities better informed of the risks they pose. Since the Bhopal plant was operated by the company’s Indian subsidiary, the disaster also set off arguments about the responsibilities that American multinational firms have for their foreign subsidiaries.

“This outcome sends a message to the world that these companies are responsible,” said Bruce A. Finzen, a Minneapolis lawyer who was retained by the Indian government to oversee its interests in the United States.

Settlement Denounced

But, according to the Associated Press, activists in Bhopal denounced the settlement as a betrayal of the 20,000 victims who still suffer from exposure to the deadly gas.

“This is a betrayal of the gas victims,” the AP quoted Babulal Gaur, a state legislator from the opposition Bharatiya Janata Party, as saying. He called the settlement “negligible.”

Union Carbide owned 50.9% of the Indian subsidiary, while Indian interests, including the Indian government, held the remaining 49.1%.

Despite the cost of the settlement, Union Carbide will emerge in sound financial condition. About $200 million of the settlement will be covered by the company’s insurance, and another $200 million by loans that it will obtain to meet the March 31 due date for payment, Wall Street analysts said. The remaining $70 million will come from the company’s cash resources.

“From here on out, they’re in pretty good shape,” said James Wilbur, an analyst with the Smith, Barney, Harris Upham & Co. securities firm in New York. He said the settlement was “within the range” that many on Wall Street had expected.

Reflecting the stock market’s satisfaction at the outcome, Union Carbide’s stock shot up $2 to $31.125 in Tuesday’s New York Stock Exchange trading. The Moody’s Investors Service Inc. bond-rating agency also upgraded its ratings of some of the company’s bonds.

Union Carbide’s international reputation may need more time to recuperate. World opinion largely accepted the Indian government’s contention that the company was negligent, many observers say, and Indian politicians have denounced the company’s actions as showing little concern for the victims of Bhopal as well as the country’s residents in general.

In December, 1987, the Indian government filed culpable homicide charges against former Union Carbide Chairman Warren M. Anderson, holding him and eight other company executives responsible for the leak. The company denounced those charges as politically motivated.

The tangled litigation in India has been difficult for the company. Union Carbide appealed when a lower court judge there found in 1987 that the company should pay $270 million in “interim” damages that were to be distributed among the victims while the trial was in progress.

An appeals court lowered the sum to $192 million but ruled that Union Carbide was responsible for the disaster--even though the company had not yet had a chance to make its case before the lower court.

On various occasions in 1985 and 1986, when it was thought that U.S. courts might have jurisdiction in the case, Union Carbide offered between $300 million and $350 million to settle the case with the American lawyers who then represented the plaintiffs. Under those proposals, the company would have been allowed to spread the payments over periods up to 30 years, analysts noted.

The U.S. settlement efforts were abandoned in May, 1986, when U.S. District Judge John F. Keenan in New York ruled that Indian courts had sole jurisdiction. Later, the Indian Parliament passed a law providing that the Indian government would represent all victims, a blow to the American personal injury lawyers who had flocked to Bhopal looking for clients.

A Union Carbide spokesman said the company has spent $6 million on relief efforts and had made another $14 million in offers to the Indian government that were not accepted. The company’s legal bills in connection with the case have reportedly exceeded $25 million.

The company has since sold off most of its assets in India as part of a corporate restructuring that began in 1985 after another chemical firm, GAF Corp., mounted a takeover bid for Union Carbide.

The Bhopal plant was taken over by the Indian government immediately after the disaster, and has been idle ever since.

Related stories in Business.