Case Concerning Barcelona Traction, Light, and

Power Company, Ltd

Brief Fact Summary. An actions for damages against Spain (D) on the premise that its
nationals as shareholders of the Barcelona Traction Co., incorporated and registered in
Canada had been seriously harmed by Spain’s (D) actions resulting in expropriation,
was brought by Belgium (P).

Synopsis of Rule of Law. The state of the shareholders of a corporation has a right of
diplomatic protection only when the state whose responsibility is invoked is the national
state of the company.

Facts. The Barcelona Traction, Light, and Power Co, was incorporated and registered
in Canada for the purpose of developing and operating electrical power in Spain (D).
The company was declared bankrupt by a Spanish court after the Spanish Civil War
and its assets were seized. After the end of the Canadian interposition, an action for
damages against Spain (D) was brought by Belgium (P) for what it termed expropriation
of the assets of the traction Co. on the ground that a large majority of the stock of the
company was owned by Belgian (P) nationals. Preliminary objections was raised by
Spain (D) that the plaintiff lacked standing to bring suit for damages to a Canadian
company.

Issue. Does the state of the shareholders of a company have a right of diplomatic
protection if the state whose responsibility is invoked is not the national state of the
company?

Held. Does the state of the shareholders of a company have a right of diplomatic
protection if the state whose responsibility is invoked is not the national state of the
company?

Discussion. As stated in the Restatement of the Foreign Relations Law of the United
States S 185, failure of a state to pay just compensation for the taking of the property of
an alien is wrongful under international law, regardless of whether the taking itself is
conceived as wrongful. This wrongful taking is characterized either as tortious conduct
or as unjust enrichment.
Case Concerning Barcelona Traction, Light, and
Power Company, Ltd
From Wikipedia, the free encyclopedia
Jump to navigationJump to search

Barcelona Traction

Court International Court of Justice

Full case Case Concerning Barcelona Traction, Light, and Power

name Co., Ltd (Belgium v. Spain)

Decided February 5, 1970

Citation(s) [1970] ICJ 1

Court membership

Judges José Bustamante y Rivero(President), Vladimir

sitting Koretsky(Vice-President), Sir Gerald

Fitzmaurice, Kōtarō Tanaka, Philip Jessup, Gaetano

Morelli, Luis Padilla Nervo, Isaac Forster, André

Gros, Fouad Ammoun, César Bengzon, Sture

Petrén, Manfred Lachs, Charles Onyeama, Enrique

Armand-Ugón (ad hoc),Willem Riphagen (ad hoc)

Keywords

 Corporations, abuse of rights, corporate veil

 Case Concerning Barcelona Traction, Light, and Power Company, Ltd [1970] ICJ 1 is a public
international law case, concerning the abuse of rights.

Contents
[hide]

 1Facts
 2Judgment
 3See also
 4Notes
 5References
 6External links

Facts[edit]
Barcelona Traction, Light, and Power Company, Ltd was a corporation incorporated in Canada,
with Toronto headquarters, that made and supplied electricity in Spain. It had issued bonds to non-
Spanish investors, but during the Spanish Civil War (1936-9) the Spanish government refused to
allow BTLP to transfer currency to pay bondholders the interest they were due. In 1948 a group of
bondholders sued in Spain to declare that BTLP had defaulted on the ground it had failed to pay the
interest. The Spanish court allowed their claim. The business was sold, the surplus distributed to the
bondholders, and a small amount was paid to shareholders. The shareholders in Canada succeeded
in persuading Canada and other states to complain that Spain had denied justice and violated a
series of treaty obligations. However, Canada eventually accepted that Spain had the right to
prevent BTLP from transferring currency and declaring BTLP bankrupt. Of the shares, 88 per cent
were owned by Belgians, and the Belgian government complained, insisting the Spanish
government had not acted properly. They made an initial claim at the International Court of Justice in
1958, but later withdrew it to allow negotiations. Subsequent negotiations broke down, and a new
claim was filed in 1962. Spain contended that Belgium had no standing because BTLP was a
Canadian company.

Judgment[edit]
The International Court of Justice held that Belgium had no legal interest in the matter to justify it
bringing a claim. Although Belgian shareholders suffered if a wrong was done to the company, it was
only the company's rights that could have been infringed by Spain's actions. It would only be if direct
shareholder rights (such as to dividends) were affected, that the state of the shareholders would
have an independent right of action. It was a general rule of international law that when an unlawful
act was committed against a company, only the state of incorporation of the company could sue, and
because Canada had chosen not to, this was the end. The idea of a "diplomatic protection" of
shareholders was unsound because it would create confusion and insecurity in economic relations
as shares are 'widely scattered and frequently change hands'. The court also said that a state is
bound to give the same legal protection to foreign investments and nationals, either for natural or
legal persons, when it admits them to its territory.
Padilla Nervo J said the following.

“
The history of the responsibility of States in respect to the treatment of foreign nationals is the history
of abuses, illegal interference in the domestic jurisdiction of weaker States, unjust claims, threats and
even military aggression under the flag of exercising rights of protection, and the imposing of sanctions
in order to oblige a government to make the reparations demanded.
Special agreements to establish arbitral tribunals were on many occasions concluded under pressure, by
political, economic or military threats.
The protecting States, in many instances, are more concerned with obtaining financial settlements than
with preserving principles. Against the pressure of diplomatic protection, weaker States could do no
more than to preserve and defend a principle of international law, while giving way under the guise of
accepting friendly settlements, either giving the compensation demanded or by establishing claims
commissions which had as a point of departure the acceptance of responsibility for acts or omissions,
where the government was, neither in fact nor in law, really responsible.
In the written and in the oral pleadings the Applicant has made reference, in support of his thesis, to
arbitral decisions of claims commissions—among others those between Mexico and the United States,
1923.
These decisions do not necessarily give expression to rules of customary international law, as ... the
Commissions were authorized to decide these claims "in accordance with principles of international
law, justice and equity," and, therefore, may have been influenced by other than strictly legal
considerations. ...
Now the evolution of international law has other horizons and its progressive development is more
promising, as Rosenne wrote:
There is prevalent in the world today a widespread questioning of the contemporary international law.
This feeling is based on the view that for the greater part international law is the product of European
imperialism and colonialism and does not take sufficient account of the completely changed pattern of
international relations which now exists....

Careful scrutiny of the record of the Court may lead to the conclusion that it has been remarkably
perceptive of the changing currents of international thought. In this respect it has performed a major
service to the international community as a whole, because the need to bring international law into line
with present-day requirements and conditions is real and urgent.
The law, in all its aspects, the jurisprudence and the practice of States change as the world and the
everyday requirements of international life change, but those responsible for its progressive evolution
should take care that their decisions do, in the long run, contribute to the maintenance of peace and
security and the betterment of the majority of mankind.
In considering the needs and the good of the international community in our changing world, one must
realize that there are more important aspects than those concerned with economic interests and profit
making; other legitimate interests of a political and moral nature are at stake and should be considered
in judging the behavior and operation of the complex international scope of modern commercial
enterprises.
It is not the shareholders in those huge corporations who are in need of diplomatic protection; it is
rather the poorer or weaker States, where the investments take place, who need to be protected against
encroachment by powerful financial groups, or against unwarranted diplomatic pressure from
governments who appear to be always ready to back at any rate their national shareholders, even when
they are legally obliged to share the risk of their corporation and follow its fate, or even in case of
shareholders who are not or have never been under the limited jurisdiction of the State of residence
accused of having violated in respect of them certain fundamental rights concerning the treatment of
foreigners. It can be said that, by the mere fact of the existence of certain rules concerning the treatment
of foreigners, these have certain fundamental rights that the State of residence cannot violate without
incurring international responsibility; but this is not the case of foreign shareholders as such, who may
be scattered all over the world and have never been or need not be residents of the respondent State or
under its jurisdiction.
In the case of the Rosa Gelbtrunk claim between Salvador and the United States, the President of the
arbitration commission expressed a view which may summarize the position of foreigners in a country
where they are resident. This view was expressed as follows:
A citizen or subject of one nation who, in the pursuit of commercial enterprise, carries on trade within
the territory and under the protection of the sovereignty of a nation other than his own, is to be
considered as having cast in his lot with the subjects or citizens of the State in which he resides and
carries on business. (Italics added.)

"In this case," Schwarzenberger remarks, "the rule was applied to the loss of foreign property in the
course of a civil war. The decision touches, however, one aspect of a much wider problem: the
existence of international minimum standards, by which, regarding foreigners, territorial jurisdiction is
limited." ...
Much has been said about the justification for not leaving the shareholders in those enterprises without
protection.
Perhaps modem international business practice has a tendency to be soft and partial towards the
powerful and the rich, but no rule of law could be built on such flimsy bases.
Investors who go abroad in search of profits take a risk and go there for better or for worse, not only for
better. They should respect the institutions and abide by the national laws of the country where they
chose to go.