Question

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?

Answer 1

In my opinion, it was fair on the part of the court to not have ordered for shutdown of Saudi Black Cement Co. as the company was already using the best technology available. In its reasoning the Court however stated that the costs of closing the plant far outweighed the benefits to be gained by the residents.

Such reasoning does not hold much relevance unless supported by facts and figures. Its difficult to value the costs/benefits associated with running/shutting the plant but not impossible. Social Accounting is one concept that focuses on calculating the costs/benefits that a society accrues as a result of the Company's operations.

Also the monthly fee to be paid by the company for ongoing harms should also be objectively based on Social Accounting concepts and an ad hoc measure for compensation which equals the fair market price for what the residents would receive if they were inclined and able to rent their property is not appropriate.

Thus, the decision of the Court is fair to a limited extent.