BY EXPRESS MAIL, FAX & EMAIL July 18, 2016
The Dow Chemical Company E.I. du Pont de Nemours and Company
2030 Dow Center 974 Centre Road
Midland, Michigan 48674 Wilmington, Delaware 19805
Attn: Board of Directors Attn: Board of Directors
Re: DowDuPont Merger
To the Boards of Directors of E. I. du Pont de Nemours and Company and The Dow Chemical Company:
I am writing on behalf of The International Campaign for Justice in Bhopal, a coalition of Bhopal survivor organisations, international volunteers and environmental, social justice and human rights groups committed to achieving complete justice for people impacted by the world’s largest industrial disaster, along with those affected by ongoing contamination of their environment due to toxic waste abandoned by Union Carbide in Bhopal, concerning a number of inadequate and/or misleading disclosures within the companies’ joint merger proxy (the “Proxy”). We hope that, in bringing these deficiencies and outright omissions to your attention, the Boards of Directors will avoid the need for shareholders to seek judicial intervention, instead remedying the disclosure violations in the proxy by providing Dow and DuPont shareholders the necessary and required disclosures prior to their voting with shares at the Companies’ July 20, 2016 special meetings.
Under Delaware law, directors have fiduciary duties to shareholders, which include a duty to disclose all facts that are material to the stockholders’ consideration of a transaction or a matter. As DuPont shareholders are being asked to vote on a merger where they will be inheriting all of Dow’s liabilities, this duty is especially active. Though it is therefore critical that all of those material liabilities be disclosed, they have not been, even as the special shareholder meetings are absolutely imminent.
In particular, the Bhopal chemical disaster and its legacy amounts to the single most iconic corporate social responsibility issue of the 20th century. In 1984, a Union Carbide subsidiary’s chemical plant in India released toxic gases into the community, killing thousands overnight and many thousands more in the aftermath. Union Carbide and its CEO have averted criminal accountability for the disaster by refusing to appear in Indian courts. Though criminal and civil matters related to the disaster were unresolved and remain so to this day, Dow Chemical purchased Union Carbide in full in 2001. With the acquisition of the company, Dow Chemical also acquired the unresolved legal issues and reputation affiliated with the Bhopal legacy. In the years since, many battles have taken place in the courts, the media and via public protest in India and elsewhere around the world to hold Dow Chemical responsible for bringing closure to the Bhopal matter. On July 20th, shareholders of DuPont are being invited to enter the ‘eye of the storm’, without the Boards of Directors having disclosed that there is a storm lying ahead.
The reputational impact of the Bhopal legacy upon Dow is measurable and material. Though India currently represents one of the world’s fastest growing markets for chemical products, and though Dow identified India as “a key component of Dow’s global business strategy and a significant potential contributor to Dow’s corporate growth and profitability” (Dow in India “Facts and Figures”, 2008), Dow has suffered numerous crippling setbacks in its efforts to invest in the country as a result of public protest and political engagement on Bhopal. Publicly available financial analysis, as documented in Dow Chemical-Government of India official director-level signed correspondence, states total business losses in India from 2008 to 2016 to be estimated at $300 million. For example, a proposed 50% / 50% joint venture between Dow and GACL for producing chloromethanes had to be cancelled in 2012.The Government of India, Ministry of Chemicals & Fertilizers, Department of Chemicals & Petrochemicals stated at the time “that until the Dow Chemical Company of whom the Dow Europe GMBH Switzerland is a subsidiary owns up responsibility for environmental remediation in Bhopal Gas Leak site disaster remediation, no proposals of investment should be considered favorably by Government of India.” As a result of this cancellation, Dow realised losses of $17 million between 2011-13, and missed out on expected revenues of $283 million (expected revenue until 2016 was to be $565 million, with each partner receiving half). Similarly, an intended R&D development at Pune, within which Dow planned to employ “500 high calibre scientists” at an investment of $100 million, had to be abandoned, with between $15 to $20 million written off. The abandonment was caused, according to India’s Minister for Chemicals and Fertilisers, by Dow’s refusal to accept responsibility for remediating the contaminated Bhopal plant site. The Director of Corporate Affairs at Dow Chemical India Private Ltd., Rakesh Chitkara, is quoted by U.S. Embassy officials as saying that the Dow had formerly intended to invest up to $5 billion in India by 2015. Officials concluded “that given the difficulties Dow has recently experienced, that level of investment looks extremely unlikely.” Returns upon the intended investment of $5 billion would have resulted in a materially significant percentage of the Company’s overall business and been reflected in current and future earnings. As Motley Fool observed in 2012, “Dow’s refusal to take responsibility for Bhopal has hit the company’s bottom line well beyond the associated legal costs. The unaddressed liability has hurt its reputation, resulted in protests and media backlash, and even limited its ability to invest overseas”
The unresolved issue of toxic ground and water contamination at the former Union Carbide plant site in Bhopal is currently being litigated in both India and New York. In the Madhya Pradesh High Court, Dow has been asked to provide a $15 million advance payment prior to determination of liability. There are currently no secure estimates for how much remediation of the site will cost, though as contaminants associated with production processes at the plant have been detected in community water several kilometers away from the site the problem is large and growing.
Potential costs associated with environmental contamination pale, however, in comparison with pending civil liabilities deriving from the 1984 Union Carbide gas disaster in Bhopal. In 2010, the Government of India, which acts as parens patriae of the victims of the 1984 Bhopal disaster, filed a ‘Curative Petition’ in India’s Supreme Court seeking to remedy the gross inadequacies of the 1989 civil settlement between India and Union Carbide. “The present Curative Petition is an attempt by the Union of India to cure gross miscarriage of justice and perpetration of irremediable injustice being suffered by the victims of the Bhopal Gas Tragedy. It is submitted that the settlement compensation amount determined by this Hon’ble Court was based on certain factual assumptions which have been found to be completely incorrect and far removed from reality. This has vitiated the very basis of the compensation.” On this basis, India seeks an additional amount in civil payments from both Union Carbide and Dow in excess of $1 billion. Additional filings by survivor organisations in support of the petition request an additional $8.1 billion to address the original shortfall.
Further, the Companies disclosures entirely omit ongoing developments in the criminal case in India against Dow’s subsidiary Union Carbide Corporation. Crime No.1104/84 was registered less than 24 hours after the onset of the Bhopal gas disaster, and remains unresolved over three decades later. The case involves several serious charges outstanding against Union Carbide, including a charge equivalent to criminally negligent manslaughter. Though this criminal matter has generated summonses, arrest warrants and asset attachment orders in India against Union Carbide, as a corporation – and it has been proclaimed an ‘absconder’ by the Indian courts (equivalent to the term ‘fugitive from justice’ under U.S. law) as a consequence of its refusal to attend court – parent Dow has not compelled its appearance at trial and, as a result, has itself been issued four “notices to appear” before the Bhopal criminal proceedings to explain the actions of its subsidiary. On July 13th, 2016, the court was moved to consider conducting trial against Union Carbide ex parte, in its absence. Under Indian law, criminal courts have the power to impose punitive and restitutionary fines that have “no upper limit” and that are determined by the magnitude of the crime and the ability of the convicted to pay. As the Bhopal manslaughter charges concern the deaths of an estimated 25,000 people, the penalties cannot be anything but substantial. In respect of the Deepwater Horizon disaster, for example, in which 11 people tragically died, BP was forced to pay $4 billion in criminal fines and penalties alone. The ineluctable progress of criminal proceedings in Bhopal will bring a comparable day of financial reckoning upon Union Carbide – and therefore Dow & DuPont – in the future.
DuPont and Dow Chemical shareholders must be made aware of the material reality of these active, pending Bhopal liabilities before voting to approve or reject the merger proposal.
These undisclosed items are substantial, material liabilities that Dow faces as parent and sole shareholder of the company embroiled in civil, criminal and environmental litigation regarding the world’s worst environmental disaster, and which DuPOnt shareholders stand to inherit in the event the Dow/DuPont merger is consummated. Incredibly, none of these liabilities has been disclosed in the Proxy, in clear derogation of the directors’ fiduciary duties to their shareholders.
We expect that by bringing this matter to the attention to the Dow and DuPont boards of directors, the Companies are able to remedy their defective disclosures immediately, in advance of shareholder voting at the Companies’ special meetings, and without need for further shareholder action.
Tim Edwards (Coordinator, UK & EU, International Campaign for Justice in Bhopal)
 Office Memorandum, “Proposal for approval of foreign investment No.197/FC/2008 dated 02/0712008 –
M/s Dow Europe GMBH Switzerland re.” Geeta Menon, Director, Ministry of Chemicals & Fertilizers
Department of Chemicals & Petrochemicals, Government of India, September 11, 2008.
 “Proposal for setting up a joint venture with Gujarat Alkalies and Chemicals Limited to manufacture inter alia chloromethanes and for payment of technology fees”, DUA CONSULTING PRIVATE LIMITED on behalf of Dow Europe GmbH, July 1, 2008.
 “TWENTY-FIVE YEARS LATER, BHOPAL DISASTER NOW HAUNTS DOW CHEMICAL”, Unclassified cable, US consulate Mumbai, to US Secretary of State and others, June 22, 2009. Accessed at: https://wikileaks.org/plusd/cables/09MUMBAI265_a.html
 Pino, Isaac; Kannel, Charlie; Gardner, Tom. “How Dow Chemical Can End the Bhopal Tragedy.” Fool.com.
 Curative petition no. 345-347 of 2011(Against the impugned judgment and order dated 14th and 15th February 1989) in Union of India vs. Union Carbide Corporation and Ors.
 IN THE COURT OF CHIEF JUDICIAL MAGISTRATE BHOPAL MP, (Presided By Mohan P.Tiwari), Cr.Case No. 8460 / 1996 Date of Institution 01.12.1987, State of Madhya Pradesh through CBI Vs Complainant, Decision and Order Dated 07 June, 2010:
- Mr. Warren Anderson, UCC USA and UCC Kowlnn (sic) Hongkong are still absconding and therefore, every part of this case (Criminal File) is kept intact along with the exhibited and unexhibited documents and the property related to this case, in safe custody, till their appearance.
Accessed at http://bhopaldistrictcourt.nic.in/UCIL.pdf
 Indian Penal Code, section 304, ch. 16. Punishment for culpable homicide not amounting to murder.—Whoever commits culpable homicide not amounting to murder shall be punished with … [imprisonment for life], or imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine, if the act by which the death is caused is done with the intention of causing death. or of causing such bodily injury as is likely to cause death; or with imprisonment of either description for a term which may extend to ten years, or with fine, or with both, if the act is done with the knowledge that it is likely to cause death, but without any intention to cause death, or to cause such bodily injury as is likely to cause death.
 “Ex-parte trial proceedings against Dow Chemical sought in Bhopal District Court in the 1984 gas disaster case”, Livelaw Research Team, July 14th, 2016. http://www.livelaw.in/ex-parte-trial-proceedings-against-dow-chemical-sought-in-bhopal-district-court-in-the-1984-gas-disaster-case/