An essay on international law: Does it adequately sanction corporations?

 Introduction 

In this essay, I will be exploring the appropriation of sanctions enforced onto corporations for crimes committed by such organisations. I have conducted research in order to help me come to a conclusion in regard to whether or not the implemented consequences adequately punish the organisation for the devastation caused by their crimes. A corporation refers to an organisation which exists independent of its members. While many associate corporate crime with the likes of embezzlement, tax evasion, and bankruptcy fraud, corporate crimes can be far more impactful on human life than it appears to be. This conception can illude the public of the grave consequences that crimes of corporations can impose on both the natural world and human life. However, while the inhumanity of these effects is apparent, many corporations evade the law and subsequently also evade sufficient repercussions for their actions.

 As a means to help me gain a wider perspective on this issue, I have conducted research into the Bhopal disaster of 1984, an industrial disaster accounting for the deaths of 15’000 - 20’000 civilians. Many claim that the chemical leak was caused by the American corporation, Union Carbide, neglecting the factory conditions in their Indian subsidiary - therefore, making Union Carbide liable for the deaths and devastation reaped by such a tragedy. While this is a common conviction, the corporation did not receive sanctions for such crime. Moreover, I will use the Bhopal disaster as a case study in my essay as it is reflective of the way in which both human life and nature can fall victim to corporate crime, yet never receive justice for the horrors they endure. While this topic is of great importance to the capitalist, profit driven world we live in today, it is a topic that often goes unnoticed by the common person.

In addition to this, I have conducted research into a second case study in order to explore the alternative side of the argument. Being that corporations are in fact held accountable with sufficient repercussions for their crimes. In order to consider this side of the argument, I have studied ‘The Khulumani et al v. Barclays et al Case’. This was a case brought forward by human rights activists as a protest against Barclays Bank’s involvement in the oppressive Apartheid regime in South Africa. The Khulumani support group won their case against Barclays in a court of law, thereby meaning that the company was held accountable for its heinous actions. While this is evidence of corporate accountability, it is still up for debate as to whether or not the repercussions that Barclays received, adequately punished their involvement in such a barbaric scheme. I will explore this debate further as it will better aid me in coming to a conclusion for my proposed question.

 I chose this topic as I have always had a fascination with capitalism, more specifically those victimised by such an ideology. Additionally, I was once conversing with my father about my aspirations to become a lawyer in later life, and he enlightened me to corporate lawyers and their role within society. This career path intrigued me, thus resulting in my choice of topic for my essay. During my initial research into corporate crime, I came across a quote by Howard Scott, an economist, in which he states, ‘criminal: a person with predatory instincts without sufficient capital to form a corporation’ (1933). The conclusion I have come to in regard to my questions is heavily supported by case studies, court hearings and scientific evaluations.

International Corporate law

As stated previously, a ‘corporation’ is defined as a company that exists as an entirely separate body from its members and all those who work within it; this includes the separation of power, liability, and authority. The distinct disassociation between the corporation and its associates mean that should a corporation take actions that do not abide by the law, the harshest of repercussions they receive will most likely be that of a fine. This is owing to the fact that no one person can be blamed for the illegal activity of an entire corporation - a company itself is an artificial entity and therefore cannot be prosecuted. Many business owners declare their businesses as a corporation on the principle that it secures them as an individual from ever being held solely responsible for any illegal activity that the corporation may be involved in. Arguably a ‘loophole’ or a ‘flaw in the system’, corporation status paves the way for exploitation and manipulation of power by those who head the company. Additionally, it is these people who gain all profit while the workers they employ receive nothing but maltreatment and substandard working conditions.

The separation of a corporation and its members follows the concept of a legal practice known as ‘limited liability’. Which, stated previously, simply enforces that the members of an organisation or corporation cannot be held accountable for its illegal activity. However, there are exceptions to the concept of limited liability. If a corporation fails to meet the legally required aspects of maintaining a corporation, then those at the head of the body can be held accountable for their negligence. One of these requirements states that proper records must be kept, and any required reports must be made to the state. It is this exception to the limited liability that brings the Bhopal disaster, the first of my researched case studies, into importance.

Case study: Bhopal Disaster 1984

Overview

 The city of Bhopal in the state of Madhya Paresh, India, housed the greatest industrial disaster of the age, following a spill of Methyl Isocyanate which had horrific repercussions for many. The chemical in question is a colourless liquid, used in the production of pesticides. In the case of Bhopal, it was used in order to produce Sevin - a pesticide that is toxic to insects owing to the way in which it is able to prevent their nerves from functioning. When ingested by humans, this chemical can have a large range of damaging health effects, from ulcers and anorexia to pregnancy loss and death. Union Carbide, an American corporation with an Indian subsidiary who housed this toxic chemical, were arguably responsible for the death of 15’000 - 20’000 people, and the injuring of 500’000 more.

Could the Bhopal disaster have been prevented?

Both the international confederation of free trade unions and the international chemical energy and general worker’s unions have spoken out publicly since the disaster and claimed that fault for such incidents lie with Union Carbide and their negligence towards their Indian subsidiary. This is evident given that prior to the disaster, the plant had experienced five separate incidents involving toxic materials since 1981; One involving the leak of Methyl Isocyanate, the same chemical leaked in the Bhopal disaster, simply on a far smaller scale. Despite these evident system failures, no safety measures were put in place to prevent such occurrences from happening again. In addition to this, some have argued that the corporation's handling of dangerous chemicals was substandard, thus resulting in the fatal chemical leak. As mentioned previously, the limited liability concept comes into play in regard to the report carried out in 1982 of the chemical plant in Bhopal. Carried out by American inspectors, the report detailed ten issues at the Indian subsidiary that carried the potential to cause sufficient harm to human beings and wildlife. While there were multiple insufficiencies identified at the plant, all failed to be mentioned in the copy of the report given to the Indian subsidiary, thereby alluding them from any changes to production that had to be made.

 Union Carbide’s negligence of the plant is apparent and has been condemned by international unions in Geneva, Switzerland, and New Delhi. All of which claim that the chemical leak was a devastating result of poor maintenance, lack of training, inadequate attention to safety procedures, unreliable equipment, and failure to organise any form of emergency response should there be a need for it. Which there evidently was. One of the most significant and fatal equipment failures that contributed towards the devastating chemical spill, was the failed refrigerating system. This posed a huge threat given the fact that Methyl isocyanate is highly reactive to heat. Some have argued that it was this specific system failure that triggered the entire industrial disaster. While this was arguably the most significant equipment failure, the plant had a wide range of substandard equipment, shown in the diagram to the left, all of which contributed greatly to the chemical leak. As previously mentioned, in addition to the poor equipment, human error due to the employing of inadequately trained staff also played a role in the disaster. As a part of an economic drive, the safety training that was provided to all on site staff was dramatically cut, resulting in a body of staff who were uneducated and unable to recognise both indications of system failures and how to properly address such indications. Moreover, trained staff and up to date equipment would not have mattered in the slightest without the implementation of sufficient safety procedures, which the Indian subsidiary had failed to do. Should there have been a dangerous chemical leak, there were no warning alarms and limited evacuation routes at the plant, preventing many from being aware of the danger they were in. If all the aforementioned substandard aspects of the plant were at the level they should have been, many have argued that the Bhopal disaster could have been avoided entirely.

What happened?

The plant facilitated 68’000 litre tanks containing the toxic chemical, methyl isocyanate. However, no tank was able to be filled up to any more than 50% of its capacity. Each tank was then pressurised with nitrogen gas, enabling the liquid gas to be pumped out. On the night of December 3rd, 1984, one of the tanks severely malfunctioned and failed to adequately contain the pressure produced by the nitrogen gas. The malfunction in question caused a tank to fill to more than 50% capacity, thus triggering the chain of unfortunate events that followed. Water entered the tank setting off a chain of chemical reactions. When exposed to water, the compounds within methyl isocyanate react with one another creating a heat reaction; as previously mentioned, this chemical is highly reactive to heat. Thus, this resulted in the devastating chemical leak which took the lives of 15’000-20’000 workers and local residents, while leaving 500’000 others with long term health defects. These included, respiratory problems, blindness, and a boom in neonatal mortality rate. The surrounding wildlife was also deeply affected by the disaster as many trees became barren.

Bhopal: the legal process

 Directly following the Bhopal disaster, while the Indian subsidiary did admit moral guilt, neither the Union Carbide corporation in the United States, nor their Indian counterpart, admitted legal guilt. After years of failing to compensate the masses of people affected by the chemical leak, both directly and indirectly, it was not until 1999 that a group of those affected filed a lawsuit against the corporation at fault. They aimed to win compensation for the incident, loss of human life and ongoing environmental contamination. This marked the beginning of the court case, ‘State of Madhya Pradesh vs Warren Anderson’ (former CEO of Union Carbide). However, the case was rejected on juridical grounds.

 In 2004, 330 million dollars was distributed among the survivors of the incident, following a settlement agreed in 1989 between the Indian supreme court and Union Carbide India for 470 million dollars. The pittance of a fine in relation to the devastation that the corporation's negligence had resulted in came 15 years late and 140 million dollars less than the agreed upon settlement. This fuelled the anger and frustration of those affected and in 2010, a petition was filed by the victims calling for the settlement’s revaluation after evidence had been uncovered suggesting the number of victims and level of environmental damage was far greater than presumed at the time of the initial settlement in 1989. In June of 2010, Union Carbide India and seven executives were found guilty of criminal negligence. The imposed punishments were a fine of 10’870 dollars for the company, and two years’ imprisonment as well as a 2175 dollar fine for each of the seven executives. Yet again, this was viewed by many to be a mere pittance of a repercussion, leading to the Indian central bureau of investigation filing a petition against the supreme court the following month. They sought for harsher punishments to be made. The petition in question called for the reinstatement of the original charges made against the accused, being that of culpable homicide; these charges had been lowered to criminal negligence in 1996. Despite the widespread discontent regarding the minor punishments imposed onto the accused, in May of 2011, the supreme court refused to reinstate the charges or reopen the case.

Were they held to account?

Owing to the fact that the legal system in the United States were able to reject the case entirely on juridical grounds, neither the Union Carbide corporation nor its CEO, Warren Anderson, ever faced repercussions. Rather, it was the Indian subsidiary who were held criminally accountable for the chemical leak. Even with this in mind, the fines imposed were measly in comparison to the devastation reaped on the environment and the mass loss of human life. Additionally, the fines settled on were not met. The corporation were convicted of criminal negligence as opposed to culpable homicide, which many argue was the far more fitting charge; subsequently, preventing Union Carbide from receiving suitable repercussions, despite being responsible for approximately 20’000 deaths. Warren Anderson passed away in 2014 without ever having been reprimanded for the poor state of the Indian subsidiary, evident in the lack of safety procedures, poorly trained staff, and substandard equipment. Many were outraged at this given that the aforementioned American inspection of the plant discovered numerous inadequacies yet failed to inform Union Carbide India of such.

The evidence of the Bhopal disaster case supports the notion that corporation status enables large profitable companies to evade accountability for the impacts their negligence has on human and environmental life. This is done at the expense of their less progressed counterparts, evident in the prosecution of Union Carbide India, and absence of punishment enforced onto Union Carbide United States. Hypothetically, even if the court case against Union Carbide US was reopened, they could not face prosecution as following the death of its CEO, Warren Anderson, the corporation split into two separate organisations and Union Carbide as it was, ceased to exist.

Case study: Barclays involvement in the Apartheid

While the lack of accountability enforced onto Union Carbide US and Warren Anderson is apparent, there have been cases of corporate crime where the perpetrators are held responsible for their criminal activity. This was true of Barclays bank and their endorsing of the Apartheid regime in South Africa.

What was the Apartheid?

 The Apartheid, meaning ‘apartness’ in Afrikaans, was a government policy enforced in South Africa that established a division between the minority white inhabitants of the country, from the majority non-white inhabitants. It sanctioned segregation and economic discrimination on the grounds of race, with the non-white majority being victimised by such regime. Opposition to this inhumane and oppressive scheme was put down by the South African Defence force, deployed to prevent an uprising by the non-white victims of the Apartheid.

Barclays role in the regime

 The United Nations had come forward and publicly condemned the ongoing barbarous actions taking place in South Africa, claiming that the crimes committed under the regime included forced labour, genocide, torture, sexual assault, unlawful detention, and degrading treatment. The United Nations Assembly then proceeded to pass a resolution stating, ‘Any collaboration with the racist apartheid regime is defiance of the United Nations/ condemning those who continue their collaborations/those who continue to do so are ‘accomplices to the crimes of the apartheid regime’.’ This was huge in dismantling the racist inequalities that swept across South Africa, given that this was the first act of criminalising supporting or involvement in the Apartheid.

Despite this clear criminalisation of involving oneself, or one’s company, with the proceedings in South Africa. In 1976, Barclays bank purchased ten-million-rand worth of South African Defence force bonds. The money used to do so went on to finance the South African forces. As previously mentioned, it was these forces who were suppressing any and all opposition to the Apartheid regime. Therefore, whether it be willingly or not, Barclays arguably funded the continuation of the cruel scheme, built upon the foundations of racial inequality and injustice.


Outraged at a large western corporations financing of the Apartheid, on November 11th, 2002, the Khulumani support group and 87 plaintiffs filed legal complaint to the Southern District court of New York, on the grounds that Barclays bank had aided and abetted the crimes (as stated previously, included forced labour, genocide, and torture) of the Apartheid regime. In the court of law, it was claimed that Barclays had, ‘Participated in the criminal enterprise of the apartheid…acted in the face of an unjustifiably high risk of harm that was either known or so obvious that it should have been known’. As the case, ‘Khulumani et al v. Barclays et al’ was opened, the Khulumani support group claimed that the accused had broken the law in relation to the alien tort statute. However, the southern district court of New York had dismissed their case entirely, thus propelling them to take their case to the New York Circuit court of appeal and await their decision. The court of appeal held that the liability of a corporation's involvement of infringing upon human rights does exist, and additionally, can be argued under the alien tort statute - as proposed by the Khulumani support group. The statute in question, commonly referred to as ATCA, states that should a person anywhere in the world have experienced damage to themselves due to the actions of a United States-based corporation, they are within their rights to testify against such corporation in a court of law. The khulumani support group won their appeal and their proposed case was sent back to the southern district court of New York. Simultaneously, in South Africa the general public embarked on a sixteen yearlong campaign in an attempt to persuade Barclays to withdraw any and all business from South Africa. ‘Profited from the Apartheid’ and ‘Boycott Barclays’ (shown in the poster above) were just two of the phrases adopted by native south Africans to push their message. Masses of protesters relentlessly disrupted the bank's attempts to hold their annual meetings. However, it was the student population of South Africa that fore fronted the campaign, with student unions forcing mass closures of onsite branches of Barclays and unprecedented amounts of people closing their accounts. While the legal process was ongoing, the demonstrations displayed in South Africa resulted in the eventual withdrawing of Barclays business in 1986.


Who held Barclays accountable?

While there was indeed an ongoing legal process, with claims made under the alien tort statute that were upheld by the New York circuit court of appeal. However, it was ultimately the protests, demonstrations, and boycotting of Barclays bank, largely carried out by the student population in South Africa, that pushed for the eventual withdrawal of Barclays business. Should these demonstrations have not happened, the legal possess may have prosecuted Barclays for their involvement in the oppressive apartheid regime. Especially considering that the New York circuit court of appeal had disregarded the southern court of New York’s decision to not uphold the allegations of the Khulumani support group. Nevertheless, while some may argue that the legal process would have adequately held Barclays accountable, and enforced appropriate sanctions, this cannot be stated as truth or fact given that their business was withdrawn from South Africa before enough time was given to allow the legal system to play out. It was the will of the South African population and the hurt felt by the masses that a major western corporation had endorsed the actions of a scheme so racially unjust, such as the Apartheid, that forced Barclays to withdraw their business. Therefore, with this in mind, this does not uphold the notion that the law does and can hold corporations accountable. Rather, this case study suggests that human co-operation and conviction can lead to significant changes.

Conclusion

When I began researching my proposed question, I aimed to reach a conclusion by researching corporate law cases, assessing the repercussions enforced onto such organisations, and considering whether or not the sanctions adequately punished the devastation inflicted onto human life and the environment. Since carrying out the research and considering my findings, I believe that I have reached a conclusion built upon the basis of legal facts and statistics. While it of course must be taken into consideration that I have only included two case studies in my final essay, although I have researched a third (being that of the Sanlu Tragedy 2008). For that reason, it means that I have not covered a wide variety of case studies that support both sides of the argument. My conclusion is limited due to this - there will be alternative cases that do support each side of the argument more so, and less so, than my choice of the Bhopal disaster (1984) and Barclays involvement in the Apartheid (2002). Furthermore, it could also be said that the case studies I have chosen to include in my evaluation of the proposed question are not particularly contemporary. There will unarguably be a more present-day example of corporations both evading the law and being reprimanded by it. Moreover, some may argue given that both case studies are at least twenty years old, or more, that it limits the dependability of them providing a conclusion to the title of my essay.


While, as previously stated, I do believe that I have reached a conclusion to the proposed argument, it must be said that I have not reached a conclusion of as much solidarity and conviction as I had hoped to. After researching the Bhopal disaster, considering the court proceedings and the way in which Union Carbide US were able to deflect liability onto their less progressed Indian subsidiary. It has indisputably refuted the notion that the law does hold corporations accountable for their actions. Given that 15’000-20’000 human lives were tragically lost, trees were made barren, and animal carcasses made swollen and bloated; the damage inflicted onto a mass variety of demographics, caused by the neglect of Union Carbide US, is distinctly evident. A harsh prosecution by the law was expected by many of those affected by the industrial disaster. Therefore, Union Carbide US’ ability to deflect liability onto their Indian subsidiary based on juridical grounds, was a shocking revelation in the court proceedings. Following this, the punishment imposed onto the Indian subsidiary was a mere fine, expected to compensate for the mass damage caused by the industrial disaster. Many were unclear on Union Carbide US’ ability to reject accountability, given their failure to inform their Indian subsidiary of the inadequacies in the maintenance of their plant, despite having carried out an entire inspection. Thus, leading many to the presumption that given that the Indian subsidiary were unaware of the need for them to renew their equipment and safety procedures, they could not be held responsible for that unprecedented disaster that followed on December 3rd, 1984. The decision to prosecute on Indian soil resulted in the fines imposed upon the corporation being far less, due to the difference in currencies, than it would have been should the court hearings have proceeded under the American legal system. Moreover, despite the fines being measly, with many arguing that it did not compensate for the devastating aftermath on both the population and environment, the fines were still failed to be met. Disregarding the agreed upon 470 million, only 330 million was dispersed amongst the survivors of the Bhopal disaster. With all this in mind, the evidence of this case study concludes that Union Carbide US were not sufficiently reprimanded for the horrific impact their negligence had on surrounding communities and wildlife.

In relation to the opposing side of the argument, I conducted research into a second case study, Barclays bank’s financial association with the oppressive Apartheid regime in South Africa. In contrast to the Bhopal disaster, Barclays were eventually forced to withdraw any and all business from South Africa, triggering a plummet in their financial and economic position, while also damaging their worldwide reputation. The impact of their decision to associate themselves, financially speaking, with prominent figures, such as the South African Defence force, of the racially unjust Apartheid scheme which was dominating South Africa for a number of years, caused many to close their Barclays accounts. This decline in trust affected the corporation's image to the public, both in terms of morality and business, thus resulting in a decline in the number of individuals putting their faith in Barclays as a banking institution. The court proceedings, when addressed in front of the New York circuit court of appeal, did declare that this case did hold value and substance. This resulted in their calling for the cases revaluation by the Southern district court of New York. There were also mass demonstrations in South Africa that coincided with this. The protests were demanding that Barclays bank withdraw their business from the country as they had ‘invested’ in one of the most racially segregating and unjust schemes of the modern day. Therefore, promoting and pushing the pre-existing inequalities and divisions in South Africa further. While these demonstrations were unarguably successful in achieving their aims of removing Barclays Bank as a corporation from the country entirely, it must be said that due to this, the proceedings of the legal side of the case were never given adequate time to fulfil its duty to the South African population. The corporation were held liable for their heinous actions and involvement in the Apartheid, however, the question of whether or not this accountability was imposed by the general South African population, or the legal system is a question of relevancy. Therefore, this case study does not unequivocally support the notion that the law does hold corporations to account. This being due to the social unrest and demonstration that were taking place at the same time as the court hearings. Thus, establishing a sense of uncertainty in regard to whether or not it was the legal system, or the public outrage that led to Barclay’s eventual withdrawal of their business in South Africa. Moreover, this uncertainty limits my findings as mentioned previously, and it is with this in mind that I do not believe that my essay has reached a conclusion of as much solidarity as I wished it to.

Nevertheless, the research I have conducted has been particularly useful in gaining a broad perspective of corporate accountability and the compensations that victims receive, or do not receive, for the horrors they endure at the hands of large corporations. From the case studies I have used, it must be said that they conclude the legal system does not enforce appropriate sanctions onto corporations for the crimes. Union Carbide US evaded all accountability for the negligence of the Indian subsidiary, which many argue was the leading cause of the Bhopal disaster. Barclays bank, although they were indeed forced to withdraw their business, there remains uncertainty as to whether or not it was the social unrest or the legal process that forced this. Therefore, with all this in mind, corporate accountability is not evident in either case. Thus, concluding that the legal system does not hold corporations adequately accountable for the devastating impact that their actions can have on both humanity and environmental life.


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Antony, St. (2009) Transnational Corporations and Global Governance, 5 (1), 55 - 63.

 Khulumani Wins Lawsuit Appeal ! - » Khulumani Support Group

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