BEFORE INTERNATIONAL COURT OF JUSTICE

BARCELONA TRACTION CASE

BELGIUM …. APPELLANT
VS
SPAIN …. RESPONDENT

FACTS OF THE CASE:

1. The Barcelona traction, light and power company limited was
incorporated in 1911 in Toronto Canada where it has its head
office for the purpose of creating developing an electric power
production and distribution system in Catalonia Spain ,It formed
a number of subsidiary companies of had their registered office
and others in Spain.
2. In 1936 the subsidiary company supplied the major part of
Catalonia electricity requirements according to the Belgian
government some years after the First World War Barcelona
tractions share capital came to be very largely held by Belgian
Nationals But this contention was denied by the Spanish
government.
3. Barcelona traction issued several series of bonds, principally in
Sterling. The Sterling Bonds were serviced out of transfers to
Barcelona traction affected by the subsidiary companies
operating in Spain in 1936 the servicing of the Barcelona traction
bonds was suspended on account of the Spanish civil war.
4. After that war, the Spanish exchange control authorities refused
to authorise the transfer of foreign currency necessary for the
resumption of the servicing of Sterling bonds.
5. Subsequently, when the Belgian government complained of this,
the Spanish government stated that the transfer could not be
authorised unless it were shown that the foreign currency was to
be used to repeat deaths Arising from the genuine importations
of foreign capital into Spain, and that this had not been
established.
6. In 1948 three Spanish holders have recently acquired Barcelona
tracks in STERLING bonds petitioned that coat of reus situated in
province of Tarragona for a declaration adjudging the company
bankrupt , on account of failure to pay the interest on the bonds
 7. On February 12th 1948 a judgement was given declaring the
company bankrupt and ordering the seizure of assets of
Barcelona traction and of two of its subsidiary companies.
8. Pursuant to this Judgment, the principal management personnel
of the two companies were dismissed and Spanish directors
appointed. Shortly afterward, these measures were extended to
the other subsidiary companies.
9. New shares of the subsidiary companies were created, which
were sold by public auction in 1952 to a newly-formed company,
FuerzaElectricas – de Cataluina, S.A (Fecsa), which there upon
acquired complete control of the undertaking Spain
10. Proceeding was brought without success in the Spanish courts by
various companies or persons. According to the Spanish
Government, 2,736 orders were made in the case and 494
Judgments given by lower and 37 Higher Courts before it was
submitted to the international court of justice.
11. The court found that in 1948 Barcelona traction which had not
received a judicial notice of the bankruptcy proceedings and was
not represented before the reus Court, took no proceedings in
the Spanish courts.
12. Until June 18th and thus did not interrupt plea of opposition
against the bankruptcy judgement within the time limit of eight
days from the date of publication of the judgement laid down in
the Spanish legislation.
13. The Belgian government contains however that the notification
and publication did not comply with the relevant legal
requirements and that the eight day time limit never began.
14. Representations were made to the Spanish government by the
British Canadian, United States and Belgian governments as from
1948 to 1949 the interposition of the Canadian government seized
entirely in 1955.
15. The Belgian government filed the first application with the court
against the Spanish government in 1958 In 1961 it gave notice of
discontinuance of the proceedings with a view to negotiations
between the representatives of the private interest concerned
And the case was removed from the codes general list.
16. The negotiations having failed, the Belgian govt. on 19 June 1962
submitted to the court a new application. In 1963 the Spanish
 government raised four preliminary objections to this
application.
PRELIMINARY OBJECTIONS:
1. In its first preliminary objections, which was rejected, the
Respondent contended that this discontinuance precluded the
applicant from bringing the present proceedings.
2. the secondary preliminary objection Which was also rejected the
lapse of article 17 [4] off the Treaty of 1927 on the dissolution of
the permanent code to which the article referred thus questioning
the jurisdiction of international Court of justice over the case.
3. The third preliminary objection which was joined to the merits
of the Spanish government was that to the effect that Belgian
government liked the capacity to submit any claim in respect of
wrong done to a Canadian company, even if the shareholders
were Belgians.
4. The 4th preliminary objection, which was also joined to the
merits, was to the effect that local remedies available in Spain
had not been exhausted.
ISSUES:
1. The first issue of the case was if Belgium have the jus standi to
exercise diplomatic protection of shareholders in a Canadian
company.
2. The second issue of the case was does Belgium have the right and
jurisdiction to being Spain to court for actions of Canadian
company.
GENERAL PRINCIPLES OF THE CASE:
1. No Absolute Obligation:
a. The code observed that when a state admitted into its
territory foreign investments or foreign nationals it was
bound to extend to them the protection of the law and
assumed obligation concerning the treatment to be
afforded to them but such obligations were not absolute in
order to bring a claim in respect of the breach of such an
obligation, a state must first establish its right to do so.
2. Municipal Laws (Distinction between company and shareholders):
3. The Limitation that diplomatic protection can only be exercised
by the nation state of the company:
a. In the field of diplomatic protection international law was
in continuous evolution and was called upon to recognise
institution of municipal law In municipal law the concept of
company was founded on a firm distinction between the
rights of the company and those of the shareholders Only
the company, which was endowed with the legal
personality could take action in respect of matters that
were of a corporate character
b. A wrong turn to the company frequently costs prejudice to
a shareholders But this did not imply that both were
entitled to claim compensation Whenever a shareholders
interest were harmed by an act done to the company it was
to the latter that he had to look to institute appropriate
action against the company.
c. An act infringing only the company’s rights did not involve
responsibility towards the shareholders even if their
interests were affected, international law had to refer to
those rules generally accepted by municipal legal systems,
an injury to the shareholders interest resulting from an
injury to the right of the company was insufficient ground
to make the claim
d. If we follow this line of thought then it would aptly justify
how diplomatic protection can only be exercised by the
nation state of the company
e. Where it was a question of an unlawful act committed
against the company representing foreign capital The
general rule of the international law authorised the nation
state of the company alone to exercise diplomatic
protection for the purpose of seeking redresses no rule of
international law expressly conferred such a right on the
shareholders national state.
i. EXCEPTIONS: Special Circumstances, If there are
general rules there must be exceptions and the court
considered these exceptions, the former the latter
might not take affect as these are commanding
principles, and they looked upon on it with two key
aspects. / The court considered whether there might
be in the present case, special circumstances for
which the general rule might not take place.
1. The case of the company having cease to exist
as regards to the all first of these possibilities
the code absorbed advice partial and attraction
had lost all its assets in Spain and had 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 any corporate action
2. The case of the protecting state of the company
lacking capacity to take 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 cease to act on behalf of Barcelona
attraction it nonetheless retains its capacity to
do so which the Spanish government had not
questioned Whatever the reasons for the
Canadian government’s change of attitude the
fact that could not constitute a justification for
the exercise of diplomatic protection. It had
been maintained that a state could make a
claim when investment by its nationals abroad
Sachin was being part of a state’s national
economy resources, were prejudicially affected
in violation of the right of the state itself to
have its nationals enjoy certain treatment. If we
consider reasons of equity, a state should be
able to take up the protection of its nationals,
shareholders in a company which had been the
victim of a violation of international law The
code considered that the adoption of the theory
of diplomatic protection of shareholders as such
would open the doors to competing claims on
the part of different states, which could create
 an atmosphere of insecurity in the international
economy. In the particular circumstances of the
present case where the company’s national
state was able to act the code was not of the
opinion that jus standi.
JUDGEMENT:
The court took cognizance of great amount of documentary and other
evidences submitted by the parties and fully appreciated the
importance of its legal problems raised by the allegations which was at
the root of Belgian claim and which concerned denials of Justice
allegedly committed by organs of Spanish government. However, the
position 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 code to
pronounce upon any other aspect of the case Accordingly the code
rejected the Belgian government’s claim by 15 votes to one, 12 votes
of the majority being based on the reason set out above.

CONCLUSION:
The court’s ruling of dismissal of the case adequately demonstrates the
difference between states and individuals and who is considered
sovereign in the international trend The court ruled in favour of Spain
since Benjamin had no jurisdiction to do so and the shareholder’s
seeking compensation was not given diplomatic immunity, As both are
not entitled to compensation and when ever the rights or interest of
the shareholders are wrongly affected they have a right to take
appropriate action against the company. However if the shareholders
were to seek aid from Canada in which the companies headquartered
and given correct identity a lawsuit could occur thus an individual
cannot bring a claim against the state since it is not given that
authority This case will be viewed as an excellent reference for the
cases dealing with the organisation and Sovereign immunity claims and
how to correctly deal with them.