Case Concerning Barcelona Traction, Light, and Power Company in United States

Case Concerning Barcelona Traction, Light, and Power Company, Ltd. (Second Phase)

CASE CONCERNING THE BARCELONA TRACTION,
LIGHT AND POWER COMPANY, LIMITED
(SECOND PHASE)

Judgment of 5 February 1970

In its judgment in the second phase of the case concerning the Barcelona Traction, Light and Power Company, Limited (New Application: 1962) (Belgium v. Spain), the Court rejected Belgium’s claim by fifteen votes to one.

The claim, which was brought before the Court on 19 June 1962, arose out of the adjudication in bankruptcy in Spain of Barcelona Traction, a company incorporated in Canada. Its object was to seek reparation for damage alleged by Belgium to have been sustained by Belgian nationals, shareholders in the company, as a result of acts said to be contrary to international law committed towards the company by organs of the Spanish State.

The Court found that Belgium lacked jus standi to exercise diplomatic protection of shareholders in a Canadian company with respect to measures taken against that company in Spain.

Judges Petrén and Onyeama appended a joint declaration to the Judgment; Judge Lachs appended a declaration. President Bustamante y Rivero and Judges Sir Gerald Fitzmaurice, Tanka, Jessup, Morelli, Padilla Nervo, Gros and Ammoun appended Separate Opinions.

Judge ad hoc Riphagen appended a Dissenting Opinion.

Background of Events in the Case

(paras. 8-24 of the Judgment)

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 and developing an electric power production and distribution system in Catalonia (Spain) it formed a number of subsidiary companies, of which some had their registered offices in Canada and the others in Spain. In 1936 the subsidiary companies supplied the major part of Catalonia’s electricity requirements. According to the Belgian Government, some years after the first world war Barcelona Traction share capital came to be very largely held by Belgian nationals, but the Spanish Government contends that the Belgian nationality of the shareholders is not proven.

Barcelona Traction issued several series of bonds, principally in sterling. The sterling bonds were serviced out of transfers to Barcelona Traction effected 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. After that war the Spanish exchange control authorities refused to authorize the transfer of the foreign currency necessary for the resumption of the servicing of the sterling bonds. Subsequently, when the Belgian Government complained of this, the Spanish Government stated that the transfers could not be authorized unless it were shown that the foreign currency was to be used to repay debts arising from the genuine importation of foreign capital into Spain and that this had not been established.

In 1948 three Spanish holders of recently acquired Barcelona Traction sterling bonds petitioned the court of Reus (Province of Tarragona) for a declaration adjudging the company bankrupt, on account of failure to pay the interest on the bonds. On 12 February 1948 a judgment was given declaring the company bankrupt and ordering the seizure of the assets of Barcelona Traction and of two of its subsidiary companies. Pursuant to this judgment the principal management personnel of the two companies were dismissed and Spanish directors appointed. Shortly afterwards, these measures were extended to the other subsidiary companies. New shares of the subsidiary companies were created, which were sold by public auction in 1952 to a newly-formed company, Fuerzas Electricas de Cataluna, S.A. (Fecsa), which thereupon acquired complete control of the undertaking in Spain.

Proceedings were 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 by higher courts before it was submitted to the International Court of Justice. 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 until 18 June and thus did not enter a plea of opposition against the bankruptcy judgment within the time-limit of eight days from the date of publication of the judgment laid down in Spanish legislation. The Belgian Government contends, however, that the notification and publication did not comply with the relevant legal requirements and that the eight-day time-limit never began to run.

Representations were made to the Spanish Government by the British, Canadian, United States and Belgian Governments as from 1948 or 1949. The interposition of the Canadian Government ceased entirely in 1955.

Proceedings before the International Court and the Nature of the Claim

(paras. 1-7 and 26-31 of the Judgment)

The Belgian Government filed a 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 interests concerned, and the case was removed from the Court’s General List. The negotiations having failed, the Belgian Government on 19 June 1962 submitted to the Court a new Application. In 1963 the Spanish Government raised four preliminary objections to this Application. By its Judgment of 24 July 1964, the Court rejected the first and second objections and joined the third and fourth to the merits.

In the subsequent written and oral proceedings the Parties supplied abundant material and information. The Court observed that the unusual length of the proceedings was due to the very long time-limits requested by the Parties for the preparation of their written pleadings and to their repeated requests for an extension of chose limits. The Court did not find that it should refuse those requests, but it remained convinced that it was in the interest of the authority of international justice for cases to be decided without unwarranted delay.

The claim submitted to the Court had been presented on behalf of natural and juristic persons, alleged to be Belgian nationals and shareholders in Barcelona Traction, a company incorporated in Canada and having its head office there. The object of the Application was reparation for damage allegedly caused to those persons by the conduct, said to be contrary to international law, of various organs of the Spanish State towards that company.

The third preliminary objection of the Spanish Government, which had been joined to the merits, was to the effect that the Belgian Government lacked capacity to submit any claim in respect of wrongs done to a Canadian company even if the shareholders were Belgian. The fourth preliminary objection, which was also joined to the merits, was to the effect that local remedies available in Spain had not been exhausted.

The case submitted to the Court principally concerned three States, Belgium, Spain and Canada, and it was accordingly necessary to deal with a series of problems arising out of this triangular relationship.

The Belgian Government’s jus standi

(paras. 32-101 of the Judgment)

The Court first addressed itself to the question, raised by the third preliminary objection, which had been joined to the merits, of the right of Belgium to exercise diplomatic protection of Belgian shareholders in a company incorporated in Canada, the measures complained of having been taken in relation not to any Belgian national but to the company itself.

The Court 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 obligations concerning the treatment to be afforded 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.

See: Case Concerning Barcelona Traction, Light, and Power Company 2