In: Accounting
Case Study In 1997, the Saudi Black Cement Co began operating a cement plant outside of Riyadh, KSA. The Company employed over 100 local residents and by 2000 had invested SAR 60 million in this plant. The plant, however emitted large amounts of pollution as well as causing constant vibrations and loud noise. Local residents filed suit against the Company claiming that the air pollution, the noise, and the vibrations were harming their health and property. The suit asked that the court issue an injunction that would close down the plant until the pollutions and vibrations could be eliminated. The Company was already using the best available technology, which meant that the suit was asking that the pant be closed down indefinitely. The court refused to issue the injunction. It reasoned that the costs of closing the plant far outweighed the benefits to be gained by the residents. Instead, the court ruled that the cement company should pay residents a one-time fee for damages that could be proven to exist already, and then pay them a monthly fee to compensate them for ongoing harms. This fee was calculated to be a fair market price for what the residents would receive if they were inclined and able to rent their property. Questions: Was the decision of the court in this case fair. If so, why? If not, why not?
The issue here is |
the local residents filing suit against the Company claiming that the air pollution, the noise, and the vibrations were harming their health and property,requesting the court to issue stop operation of the plant until a solution is found out. |
and the court itself taking a stand against the residents' welfare. |
The decision of the court in this case in certainly not fair for the following reasons: |
1. As is seen from the description, the court itself is well aware/acknowledges that the issues quoted by the residents are ,in fact existing and also genuine ,when it awards continuing ,ie. monthly damages. |
2. It indirectly accepts that the harm is going to be continuous and may not end , till the plant functions. |
3. Even ,if it compensates the current occupants,the future occupants will be affected , if they happen to live near-by. |
4. Not renting means that the entire near-by area ,will become un-inhabitable & the permanent residents of that area need to look-out for alternative location. |
But the court seems to have refused to issue injunction on the basis of the following: |
1. The current employees who may be disadvantaged of not getting salaries , when the plant is kept closed. |
2. The court being aware that , as already the company has been adopting the best available standards , there is nothing more that can be done to obviate the above issues & that the problem may not be resolved at all. |
3. Benefits that the surrounding society is getting presently, like employment of the local population & other social and infrastructural development of the area , is really hard to ignore --even when compared to the above issues. |
In the light of the above, |
the court can take a long-term view of the situation and should issue an injunction to the company ,to stop operations, till such time , a solution is found out on the lines of: |
1. either shifting the plant or |
2.help shifting the residents to new locations , by giving adequate compensations |
The court should understand the fact that both the operation of this plant(that too after adopting the best available technology) & residents' welfare cannot go together. |
But both need to be addressed for their share of benefits to the society at large--by geographically separating them. |
And this is bound to take the required time. |
Hence,the suit asking that the court issue an injunction to close down the plant until the pollutions and vibrations are eliminated, is justified. |
And the court refusing to issue the injunction IS NOT FAIR, when so much is pending to be negotiated. |