Case Concerning Barcelona Traction, Light, and Power Company 2

In the field of diplomatic protection, international law was in continuous evolution and was called upon to recognize institutions of municipal law. In municipal law, the concept of the company was founded on a firm distinction between the rights of the company and those of the shareholder. Only the company, which was endowed with legal personality, could take action in respect of matters that were of a corporate character. A wrong done to the company frequently caused prejudice to its shareholders, but this did not imply that both were entitled to claim compensation. Whenever a shareholder’s interests were harmed by an act done to the company, it was to the latter that he had to look to institute appropriate action. An act infringing only the company’s rights did not involve responsibility towards the shareholders, even if their interests were affected. In order for the situation to be different, the act complained of must be aimed at the direct rights of the shareholder as such (which was not the case here since the Belgian Government had itself admitted that it had not based its claim on an infringement of the direct rights of the shareholders).

International law had to refer to those rules generally accepted by municipal legal systems. An injury to the shareholder’s interests resulting from an injury to the rights of the company was insufficient to found a claim. Where it was a question of an unlawful act committed against a company representing foreign capital, the general rule of international law authorized the national State of the company alone to exercise diplomatic protection for the purpose of seeking redress. No rule of international law expressly conferred such a right on the shareholder’s national State.

The Court considered whether there might not be, in the present case, special circumstances for which the general rule might not take effect. Two situations needed to be studied: (a) the case of the company having ceased to exist, and (b) the case of the protecting State of the company lacking capacity to take action. As regards the first of these possibilities, the Court observed that whilst Barcelona Traction had lost all its assets in Spain and been placed in receivership in Canada, it could not be contended that the corporate entity of the company had ceased to exist or that it had lost its capacity to take corporate action. So far as the second possibility was concerned, it was not disputed that the company had been incorporated in Canada and had its registered office in that country , and its Canadian nationality had received general recognition. The Canadian Government had exercised the protection of Barcelona Traction for a number of years. If at a certain point the Canadian Government ceased to act on behalf of Barcelona Traction, it nonetheless retained its capacity to do so, which the Spanish Government had not questioned. Whatever the reasons for the Canadian Government’s change of attitude, that fact could not constitute a justification for the exercise of diplomatic protection by another government.

It had been maintained that a State could make a claim when investments by its nationals abroad, such investments being part of a State’s national economic resources, were prejudicially affected in violation of the right of the State itself to have its nationals enjoy a certain treatment. But, in the present state of affairs, such a right could only result from a treaty or special agreement. And no instrument of such a kind was in force between Belgium and Spain.

It had also been maintained that, for reasons of equity, a State should be able, in certain cases, to take up the protection of its nationals, shareholders in a company which had been the victim of a violation of international law. The Court considered that the adoption of the theory of diplomatic protection of shareholders as such would open the door to competing claims on the part of different States, which could create an atmosphere of insecurity in international economic relations. In the particular circumstances of the present case, where the company’s national State was able to act, the Court was not of the opinion that jus standi was conferred on the Belgian Government by considerations of equity.

The Court’s Decision

(paras. 102 and 103 of the Judgment)

The Court took cognizance of the great amount of documentary and other evidence submitted by the Parties and fully appreciated the importance of the legal problems raised by the allegation which was at the root of the Belgian claim and which concerned denials of justice allegedly committed by organs of the Spanish State. However, the possession by the Belgian Government of a right of protection was a prerequisite for the examination of such problems. Since no jus standi before the Court had been established, it was not for the Court to pronounce upon any other aspect of the case.

Accordingly, the Court rejected the Belgian Government’s claim by 15 votes to 1, 12 votes of the majority being based on the reasons set out above.

DECLARATIONS AND SEPARATE AND

DISSENTING OPINIONS

Judge ad hoc Riphagen appended to the Judgment a Dissenting Opinion in which he stated that he was unable to concur in the Judgment as the legal reasoning followed by the Court appeared to him to fail to appreciate the nature of the rules of customary public international law applicable in the present case.

Among the fifteen members of the majority, three supported the operative provisions of the Judgment (rejecting the Belgian Government’s claim) for different reasons, and appended Separate Opinions to the Judgment. Judge Tanka stated that the two preliminary objections joined to the merits ought to have been dismissed, but that the Belgian Government’s allegation concerning denials of justice was unfounded. Judge Jessup came to the conclusion that a State, under certain circumstances, had a right to present a diplomatic claim on behalf of shareholders who were its nationals but that Belgium had not succeeded in proving the Belgian nationality, between the critical dates, of those natural and juristic persons on whose behalf it had sought to claim. Judge Gros held that it was the State whose national economy was adversely affected that possessed the right to take action but that proof of Barcelona Traction appurtenance to the Belgian economy had not been produced.

Among the twelve members of the majority who supported the operative provision of the Judgment on the basis of the reasoning set out in the Judgment (lack of jus standi on the part of the shareholders’ national State), President Bustamante y Rivero and Judges Sir Gerald Fitzmaurice, Morelli, Padilla Nervo and Ammoun (Separate Opinions) and Judges Padrone and Onyeama (joint declaration) and Judge Lachs (declaration) stated that nevertheless there were certain differences between their reasoning and that contained in the Judgment, or that there were certain observations which they wished to add.

(Judge Sir Muhammad Zafrulla Khan had informed the President at the beginning of the Preliminary Objections stage that, having been consulted by one of the Parties concerning the case before his election as a Member of the Court, he considered that he ought not to participate in its decision.)

Conclusion

Notes

See Also

References and Further Reading

About the Author/s and Reviewer/s

Author: international

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