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Barcelona Traction Case

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Daniel Kim

on 18 April 2016

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Transcript of Barcelona Traction Case

Timeline:
Barcelona Traction Case
Second Application Feb 5 1970 (Belgium v. Spain)
Court Proceedings
Initial Proceedings: Did ICJ have the competency to hear the case?




Secondary Proceedings: Did the Belgian State have the jus standi to exercise the diplomatic protection of its shareholders in Barcelona Traction, though Canada clearly had jus standi?
State Level:
- Jus Standi
Court's Response to Belgium's claims on jus standi
1. Belgium Shareholders were wronged

2. Canadian Company ceased to exist

3. Canada's ceased to exercise its capacity for diplomatic protection

4. Belgium's economic resources were damaged

5. Existence on Equity
Preliminary & Secondary Proceedings
Court rules in favor of Spain - lack of jus standi prohibits Court to pronounce upon any other aspect of the case
Judges Opinions
Dissenting Opinion of Judge Riphagen:
Should have applied international customary law on “the treatment of aliens”,rather than Spanish municipal law
Jus standi and interest of the State align with its nationals, especially in an economic context
Judge Gros:
“the renvoi to municipal law leads eventually, in the present case, to the establishment of a superiority of municipal law over international law which is a veritable negation of the latter” - vagueness on the supremacy of international law
Judge Nervo:
“private investments, needed for economic development, will be encouraged if the States receiving them are convinced that the national State of the investor will not use the so-called right of diplomatic protection has a pretext for political or economic pressure, dangerous to the sovereignty and independence of weaker or less developed states.”
INTRODUCTION
What was the Barcelona Traction Case About?
By Daniel JunYeol Kim
Professor Da Silva 17h40-19h40
SciencesPo Paris Campus du Havre

Timeline:
Timeline:
Timeline:
Key Terms/Notions
Facts
1955: Canada ceased its actions of diplomatic protection towards Spain

1958: Belgian government files a first application to the ICJ, removed in 1961

1962: Belgian government files an application to the ICJ, demanding:

"Reparation for the damage caused by the breach of international law on the part of Barcelona Traction Company and various organs of the Spanish State to the Belgian national shareholders, by decision of bankruptcy and omissions to repay interests"
Critical Issue
Legal Claims
Comparison between Belgium Claims v. Spanish Claims
Key Players:
Belgium claimed:
Spanish authorities acted contrary to international law against Barelona Traction
- resulting in damage to the company and the shareholders
Declare Reparations shall take place
Spain under obligation to restore in full to BTLP its property, rights, interests and ensure compensation for all other losses
To annul all the consequences which these acts contrary to international law
Compensation due amounts
Spain should pay Belgium compensation equivalent to the value of property, rights, interests of BTLP
Spain should pay at least to Belgium, the compensation equivalent to the amount of shares of the capital of BTLP owned by Belgium nationals, together with the
1911: Barcelona Traction, Light and Power Company
Founded in Canada (Toronto)
Manufactured and supplied electricity in Spain
After the Spanish Civil War, it remained undamaged, with assets up to $500million


BTLP issued some of its bonds in pounds, for the convenience of its foreign investors.
Spanish gov't imposed currency restrictions and BTLP was unable to exchange its Spanish pesetas for pounds - so could not pay the interest.
Refusal: currency was not used to repay debts arising from genuine importation of foreign capital into Spain
1948: Juan March, Spanish Businessman, quietly bought bonds in BTLP (approx 500,000 pounds).
The company was financially sound, but b/c they were unable to make the currency conversion, they were unable to pay interest due on the bonds .
Investors/Agents of March appeared in Spanish court demanding relief for the default BTLP bonds - the Judge awarded all of BTLP's assets as payment to the new investors/Juan March

Post WWI: Majority Shareholders were Belgian
1936: Bonds in pesetas and sterling were used, but then suspended
1940: Payment of Interest on the Pesetas bonds was performed
Payment of interest on the sterling bonds was not authorized
1945: Company proposal refused - interest payments never performed
1948: BTLP Bankrupt

1948-52: Diplomatic Efforts by UK, US, CA, Belgium
1951: Conclusion: attitude of the Spanish administration in not aurhtorising the transfers of foreign currency was fully justified


Belgium submits case to ICJ after failed negotiations with Spanish Gov't
Second Application: June 19 1962
To what extent does the Barcelona Traction case evolve the notions of nationality, diplomatic protection, and legal personality of shareholders in the context of international economic law?
Jus standi

Erga Omnes

Diplomatic Protection

Nationality
Spanish Claims
Four Preliminary Objections: First two were rejected, the latter two were added to the merits of the case
1st Preliminary Objection:
Discontinuance of the proceedings earlier precluded the applicant from recommencing the proceedings
2nd Preliminary Objection
Combined effect of Article 17(4) of the 1927 Treaty, which provided disputes between Parties thereunder to be submitted to the Permanent Court of Justice, and Article 37 of the Statute of the ICJ, which transferred the subsisting competence of the PCIJ to consider a case to the ICJ
3rd Preliminary Objection
Capacity of Belgium to espouse the claims of Belgian nationals, which according to Spain, were different from the interests of Barcelona Traction - Belgium lacks jus standi.
4th Preliminary Objection
Objection that Belgium shareholders did not exhaust the available local remedies in Spain
Court REJECTED: no evidence of the renunciation of right to recommence proceedings
Court REJECTED: Belgium met the 3 conditions of Article 37, treaty of 1927 still in force
Court APPROVED: and added to the merits of the case
Court APPROVES: and adds to the merits of the case
YES
Belgium's Defense of their Jus Standi
1. Belgian Shareholders were wronged
2. Canadian Company ceased to exist
3. Canada's ceased exercise of its capacity
4. Belgian Economic Resources were damaged
5. Existence of Equity
State Subject Level: Legal Personality of the Shareholders/Corporate Entities
Legacies of the Case
- Erga Omnes
Rights of the Shareholder V. Rights of Corporation
Court finds that Belgium lacks jus standi to exercise diplomatic protection of shareholders in Canadian company with respect to measures taken against that company in Spain
Para 51: "formulation of Belgium claim to jus standi assumes the existence of the very right that requires demonstration...Belgium has repeatedly stressed there exists no rule of international law which would deny the national State the right ... by emphasizing the absence of the any express denial of the right ... there is no rule of international law which expressly confers such a right..."
Shareholder
Only directly aimed and then would have legal personality
Company/Corporation
Only the company was endowed legal personality, and only it could pursue a legal action for injuries suffered
Or 2 exceptions:
a) company had ceased to exist
b) protecting state of the company lacked capacity to take action
Must use their national/home state (incorporation state) to make claims
- via Para 70

Nationality & Diplomatic Protection:
"In allocating corporate entities to States for purposes of diplomatic protection, international law is based, but only to a limited extent on an analogy with the rules governing the nationality of the individual. TRADITIONAL RULE attributes the right of diplomatic protection of a corporate entity to a state under the laws of which it is incorporated and in whose territory it has its registered office" - Para 70
Nottebohm Case: other elements to consider in diplomatic protection - Court Dismissed
When a State admits into its territory foreign investments or foreign nationals, whether natural or juristic persons, it is bound to extend to them the protection of the law and assumes obligations concering the treatment to be afforded them ... in particular, an essential distinction should be drawn between the obligations of a State towards the

international community
as a whole, and those arising vis-à-vis another State in the field of diplomatic protection... very nature of the former are concern of all states...all states can be held to have a legal interest in their protection; they are obligations
erga omnes
Para 33
Triangular Case
Para 46, 48, 49: Rights of Shareholders v. Company/Erga Omnes

Para 68: receivership in Canada - take action

Para 77: discretionary

Para 90: Special Agreement/treaty

Para 89: complications in conflicting claims of shareholders
Court Rejects: 15 to 1
Conclusion | Contributions to International Law
Nominal corporate nationality > Effective corporate nationality
Diplomatic Protection of National Shareholders
Renvoi to municipal law
Birth/First Explicit Mention of Erga Omnes
Discussion Questions
As the world and economy becomes more and more globalized, do you think judgement on corporate nationality must be revisited?

How can we mitigate the effects of international economic norms on developing nations, when they are usually imposed by developped nations?


Future of International Law
Draft Articles on Diplo. Protection (2006) & Responsibility of States for International Wrongful Acts (2001)

wirtschaftliche Betrachtungsweise
(German legal philosophy) that expresses that social and economic needs assume normative character because of their very existence
Full transcript