Liability of Multinational corporations/Companies — MCQs

All questions with answers and explanations

Read the full set here, or use the practice card above to test yourself one question at a time.

1. Why does classical international law create a structural gap for multinational corporation (MNC) liability?

   • Because international law binds States, not private companies, directly (correct answer)
   • Because MNCs cannot legally operate in more than one country
   • Because environmental law does not apply to companies at all
   • Because all MNCs are automatically state-owned

   Explanation. International law in its classical form binds States, not private companies, so a victim usually cannot sue an MNC before an international tribunal the way one State can arbitrate against another.

2. In the Bhopal Gas Tragedy litigation, why did the US court dismiss the case against Union Carbide Corporation?

   • Because the plant never actually leaked gas
   • On the ground of forum non conveniens — India was held to be the appropriate forum (correct answer)
   • Because Union Carbide Corporation had no connection to the Bhopal plant
   • Because the Indian Government refused to participate

   Explanation. The US District Court held India was the appropriate forum since the plant, victims, and evidence were all located there, sending the case back to Indian courts.

3. Which Indian legislation authorised the Government of India to represent all Bhopal victims in a single consolidated claim?

   • The Environment (Protection) Act, 1986
   • The Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (correct answer)
   • The Public Liability Insurance Act, 1991
   • The National Green Tribunal Act, 2010

   Explanation. The Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 authorised the Government of India to represent all victims in a consolidated claim, leading to the 1989 settlement.

4. The doctrine of 'separate corporate personality' creates difficulty in MNC liability cases because:

   • It automatically makes parent companies liable for everything
   • It treats a parent company and its subsidiary as distinct legal persons, each responsible only for its own wrongs (correct answer)
   • It only applies to companies registered in India
   • It has been abolished worldwide

   Explanation. Separate corporate personality can shield a wealthy parent from liability for a subsidiary's environmental harm, even where the parent set relevant policy.

5. Which of these is a non-binding 'soft law' instrument addressing MNC environmental and human-rights conduct?

   • The Kyoto Protocol, 1997
   • The UN Guiding Principles on Business and Human Rights, 2011 (correct answer)
   • The Ramsar Convention, 1971
   • The Indian Penal Code, 1860

   Explanation. The UN Guiding Principles on Business and Human Rights (2011), the 'Ruggie Principles', are a widely cited but non-binding soft-law framework.

6. In Vedanta Resources plc v. Lungowe (2019) and Okpabi v. Royal Dutch Shell plc (2021), the UK Supreme Court held that:

   • Foreign claimants can never sue a UK parent company
   • Foreign claimants may bring a negligence claim in England against a UK parent over a foreign subsidiary's pollution, and the claim can go to trial (correct answer)
   • Only the subsidiary, never the parent, can ever be sued
   • International treaties automatically make parent companies liable

   Explanation. Both rulings decided only whether the claims could go forward. Neither found the parent liable. The parent's control over the subsidiary is only a starting point, and group-wide policies may or may not create a duty.