By Christine Kearney

NEW YORK, June 18 (Reuters) - Several major U.S. chemical companies are directly accountable for supplying the U.S. military with dioxin, or "agent orange," during the Vietnam War and causing widespread dioxin poisoning, a lawyer for Vietnamese plaintiffs told a federal appeals court on Monday.

The plaintiffs appealed a lower court decision that dismissed a civil suit seeking class-action status on behalf of more than 3 million Vietnamese people against the chemical companies. It could have resulted in billions of dollars in damages and the environmental cleanup of Vietnam.

More than 30 companies, including Dow Chemical Co. <DOW.N> and Monsanto Co. <MON.N>, are named in the lawsuit.

U.S. warplanes dumped about 18 million gallons (70 million litres) of the defoliant on Vietnamese forests between 1962 and 1971 to destroy Vietnamese sources of food and cover. The plaintiffs seek damages from dioxin poisoning which decades later they say has caused cancer, deformities and organ dysfunction.

Jonathan Moore, the lawyer for the plaintiffs, said the chemical companies knew that the "agent orange" herbicide containing dioxin was harmful but did nothing.

"They knew how it was going to be used and they had reason to believe the effect would be disastrous and they did it anyway," Moore told the panel of three judges for the U.S. Second Circuit Court of Appeals. "We are now seeing years later the fruit of that terrible poisonous product."

BATTLEFIELD IMPLICATIONS

The judges appeared unmoved by previous cases from years following World War Two, when makers of the gas Zyklon B, used in Nazi death camps, were convicted of crimes.

Unlike those cases, the judges questioned if poisons used in war that were not directly intended to kill people and only found years later to cause harm violated international law.

"It's a different circumstance here, is it not?" asked appeals court judge Robert Sack. "Is poison designed to kill or hurt?"

The case also considers the power of the U.S. president to authorize the use of hazardous materials during war, but the U.S. government was not sued due to sovereign immunity.

Former U.S. Solicitor General Seth Waxman, arguing for the chemical companies, noted a lack of legal precedent for punishing the use of poisons in war and warned of harming U.S. battlefield decisions if judges find the suit can proceed.

"This does affect our ongoing diplomacy," he said, citing the use of depleted uranium shells by U.S. forces in Iraq.

Before the hearing, the Vietnamese plaintiffs and supporters held a rally. Among them was Nguyen Van Quy, a former member of the North Vietnamese army exposed to "agent orange" who is at the end stage of multiple cancers and has two children with birth defects.

"We need to tell the American citizens of the bad impact and consequences of 'agent orange' to many generations in Vietnam," said Quy, who traveled to New York from Haiphong, Vietnam.

The judges were not expected to make a decision for several months, and if they found the suit could move ahead, it could take years before a trial is held and any damages are awarded.

In 1984, seven chemical companies including Dow and Monsanto agreed to settle out of court for $180 million with U.S. veterans who claimed "agent orange" caused cancer and other health problems.

The United States maintains there is no scientifically proven link between the wartime spraying and the more than 3 million people Vietnam says are disabled by dioxin over three generations.

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