University of Brussels,

5 February 1970 Mr. J. Kirkpatrick, Lecturer in the Faculty of Law of the Free University of Brussels
General List No. 50 and Advocate at the Brussels Court of Appeal, as Counsel,
Mr. H. Bachrach, Member of the New York State and Federal Bars, as Assistant
INTERNATIONAL COURT OF JUSTICE Counsel and Secretary,
Mr. L. Prieto-Castro, Professor in the Faculty of Law of the University of Madrid,
BARCELONA TRACTION Mr. M. Olivencia Ruiz, Professor in the Faculty of Law of the University of Seville,
Mr. J. Girón Tena, Professor in the Faculty of Law of the University of Valladolid,
BELGIUM as Expert-Counsel in Spanish Law;
v.
SPAIN Spain: Mr. J. M. Castro-Rial, Professor, Legal Adviser to the Ministry of Foreign
Affairs, as Agent,
Assisted By
JUDGMENT Mr. R. Ago, Professor of International Law in the Faculty of Law of the University
of Rome,
Return Home Mr. M. Bos, Professor of International Law in the Faculty of Law of the University
of Utrecht,
Mr. P. Cahier, Professor of International Law at the Graduate Institute of
BEFORE: President: Bustamante Y Rivero; International Studies in Geneva,
Vice-President: Koretsky; Mr. J. Carreras Llansana, Professor in the Faculty of Law of the University of
Judges: Sir Gerald Fitzmaurice, Tanaka, Jessup, Morelli, Padilla Nervo, Forster, Navarre,
Gros, Ammoun, Bengzon, Petren, Lachs, Oneyama; Mr. F. de Castro y Bravo, Professor, Legal Adviser to the Ministry of Foreign
Judges Ad Hoc: Armand-Ugon, Riphagen Affairs,
Mr. J. M. Gil-Robles Quiñones, Professor in the Faculty of Law of the University of
PermaLink: http://www.worldcourts.com/icj/eng/decisions/1970.02.05_barcelona_traction.htm Oviedo,
Mr. M. Gimeno Fernandez, Judge of the Supreme Court, Madrid,
Citation: Barcelona Traction (Belg. v. Spain), 1970 I.C.J. 3 (Judgment of Feb. 5) Mr. P. Guggenheim, Professor of International Law at the Graduate Institute of
International Studies in Geneva,
Represented Belgium: Chevalier Y. Devadder, Legal Adviser to the Ministry of Foreign Affairs Mr. E. Jimenez de Arechaga, Professor of International Law in the Faculty of Law
By: and External Trade, as Agent; of the University of Montevideo,
Mr. H. Rolin, Professor emeritus of the Faculty of Law of the Free University of Mr. A. Malintoppi, Professor of International Law in the Faculty of Political Science
Brussels and Advocate at the Brussels Court of Appeal, as Co-Agent and Counsel. of the University of Florence,
Assisted By Mr. F. Ramirez, Secretary-General of the Spanish Institute of Foreign Exchange,
Mrs. S. Bastid, Professor in the Faculty of Law of the University of Paris Madrid,
Mr. J. Van Ryn, Professor in the Faculty of Law of the Free University of Brussels Mr. P. Reuter, Professor in the Faculty of Law of the University of Paris,
and Advocate at the Belgian Court of Cassation, Mr. J. M. Rivas Fresnedo, Inspector and Expert, Ministry of Finance, Madrid,
Mr. M. Gregoire, Advocate at the Brussels Court of Appeal, Mr. J. L. Sureda Carrion, Professor in the Faculty of Law of the University of
Mr. F. A. Mann, Honorary Professor in the Faculty of Law of the University of Barcelona,
Bonn, Solicitor of the Supreme Court, England, Mr. D. Triay Moll, Inspector and Expert, Ministry of Finance, Madrid,
Mr. M. Virally, Professor in the Faculties of Law of the Universities of Geneva and Mr. R. Uría Gonzalez, Professor in the Faculty of Law of the University of Madrid,
Strasbourg and at the Graduate Institute of International Studies in Geneva, Sir Humphrey Waldock, C.M.G., O.B.E., Q.C., Chichele Professor of
Mr. E. Lauterpacht, Lecturer in the University of Cambridge, Member of the Public International Law in the University of Oxford,
English Bar, Mr. P. Weil, Professor in the Faculty of Law of the University of Paris, as Counsel
Mr. A. S. Pattillo, Q.C., Member of the Ontario Bar (Canada), or Advocates,
Mr. M. Slusny, Lecturer in the Faculty of Law of the Free University of Brussels Mr. J. M. Lacleta y Munoz, Secretary of Embassy,
and Advocate at the Brussels Court of Appeal, Mr. L. Martinez-Agullo, Secretary of Embassy, as Secretaries.
Mr. P. Van Ommeslaghe, Professeur extraordinaire in the Faculty of Law of the
Free University of Brussels and Advocate at the Brussels Court of Appeal,
Mr. M. Waelbroeck, Professeur extraordinaire in the Faculty of Law of the Free
[p6] 6. Pursuant to Article 44, paragraph 2, of the Rules of Court, the pleadings and annexed
The Court, documents were, after consultation of the Parties, made available to the Governments of Chile,
composed as above, Peru and the United States of America. Pursuant to paragraph 3 of the same Article, the
delivers the following Judgment: pleadings and annexed documents were, with the consent of the Parties, made accessible to
the public as from 10 April 1969.
1. In 1958 the Belgian Government filed with the International Court of Justice an Application
against the Spanish Government seeking reparation for damage allegedly caused to the 7. At 64 public sittings held between 15 April and 22 July 1969 the Court heard oral arguments
Barcelona Traction, Light and Power Company, Limited, on account of acts said to be contrary and replies by Chevalier Devadder, Agent, Mr. Rolin, co-Agent and Counsel, Mrs. Bastid, Mr.
to international law committed by organs of the Spanish State. After the filing of the Belgian Van Ryn, Mr. Grégoire, Mr. Mann, Mr. Virally, Mr. Lauterpacht, and Mr. Pattillo, Counsel, on
Memorial and the submission of preliminary objections by the Spanish Government, the Belgian behalf of the Belgian Government and by Mr. Castro-Rial, Agent, Mr. Ago, Mr. Carreras Mr. Gil-
Government gave notice of discontinuance of the proceedings, with a view to negotiations Robles, Mr. Guggenheim, Mr. Jimenez de Aréchaga, Mr. Malintoppi, Mr. Reuter, Mr. Sureda, Mr.
between the representatives of the private interests concerned. The case was removed from Uria, Sir Humphrey Waldock and Mr. Weil, Counsel or Advocates, on behalf of the Spanish
the Court's General List on 10 April 1961. Government.

2. On 19 June 1962, the negotiations having failed, the Belgian Government submitted to the ***
Court a new Application, claiming reparation for the damage allegedly sustained by Belgian
nationals, shareholders in the Barcelona Traction company, on account of acts said to be 8. The Barcelona Traction, Light and Power Company, Limited, is a holding company
contrary to international law committed in respect of the company by organs of the Spanish incorporated in 1911 in Toronto (Canada), where it has its head office. For the purpose of
State. On 15 March 1963 the Spanish Government raised four preliminary objections to the creating and developing an electric power production and distribution system in Catalonia
Belgian Application. (Spain), it formed a number of operating, financing and concession-holding subsidiary
companies. Three of these companies, whose shares it owned wholly or almost wholly, were
3. By its Judgment of 24 July 1964, the Court rejected the first two preliminary objections. The incorporated under Canadian law and had their registered offices in Canada (Ebro Irrigation and
first was to the effect that the discontinuance, under Article 69, paragraph 2, of the Court's Power Company, Limited, Catalonian Land Company, Limited and International Utilities Finance
Rules, of previous proceedings relative to the same events in Spain, disentitled the Belgian Corporation, Limited); the others were incorporated under Spanish law and had their registered
Government from bringing the present proceedings. The second was to the effect that even if offices in Spain. At the time of the outbreak of the Spanish Civil War the group, through its
this was not the case, the Court was not competent, because the necessary jurisdictional basis operating subsidiaries, supplied the major part of Catalonia's electricity requirements.
requiring Spain to submit to the jurisdiction of the Court did not exist. The Court joined the
third and fourth objections to the merits. The third was to the effect that the claim is 9. According to the Belgian Government, some years after the First World War Barcelona
inadmissible because the Belgian Government lacks any jus standi to intervene or make a Traction's share capital came to be very largely held by Belgian nationals—natural or juristic
judicial claim on behalf of Belgian interests in a Canadian company, assuming that the Belgian persons—and a very high percentage of the shares has since then continuously belonged to
character of such interests were established, which is denied by the Spanish Government. The Belgian nationals, particularly the Société Internationale d'Energie Hydro-Electrique (Sidro),
fourth was to the effect that even if the Belgian Government has the necessary jus standi, the whose principal shareholder, the Société Financière de Transports et d'Entreprises Industrielles
claim still remains inadmissible because local remedies in respect of the acts complained of (Sofina), is itself a company in which Belgian interests are preponderant. The fact that large
were not exhausted. blocks of shares were for certain periods transferred to American nominees, to [p.8]protect
these securities in the event of invasion of Belgian territory during the Second World War, is
4. Time-limits for the filing of the further pleadings were fixed or, at the request of the Parties, not, according to the Belgian contention, of any relevance in this connection, as it was Belgian
extended by Orders of 28 July 1964, 11 June 1965, 12 January 1966, 23 November 1966, 12 nationals, particularly Sidro, who continued to be the real owners. For a time the shares were
April 1967, 15 September 1967 and 24 May 1968, in the last-mentioned of which the Court vested in a trustee, but the Belgian Government maintains that the trust terminated in 1946.
noted with regret that the time-limits originally fixed by the Court for the filing of the pleadings The Spanish Government contends, on the contrary, that the Belgian nationality of the
had not been observed, whereby the written proceedings had been considerably prolonged. shareholders is not proven and that the trustee or the nominees must be regarded as the true
The written proceedings finally came to an end on 1 July 1968 with the filing of the Rejoinder of shareholders in the case of the shares concerned.
the Spanish Government. [p.7]
10. Barcelona Traction issued several series of bonds, some in pesetas but principally in
5. Pursuant to Article 31, paragraph 3, of the Statute, Mr. Willem Riphagen, Professor of sterling. The issues were secured by trust deeds, with the National Trust Company, Limited, of
International Law at the Rotterdam School of Economics, and Mr. Enrique C. Armand-Ugon, Toronto as trustee of the sterling bonds, the security consisting essentially of a charge on
former President of the Supreme Court of Justice of Uruguay and a former Member of the bonds and shares of Ebro and other subsidiaries and of a mortgage executed by Ebro in favour
International Court of Justice, were chosen by the Belgian and Spanish Governments of National Trust. The sterling bonds were serviced out of transfers to Barcelona Traction
respectively to sit as judges ad hoc. effected by the subsidiary companies operating in Spain.
11. In 1936 the servicing of the Barcelona Traction bonds was suspended on account of the decision on the question of jurisdiction was in turn delayed by lengthy proceedings brought by
Spanish civil war. In 1940 payment of interest on the peseta bonds was resumed with the the Genora company, a creditor of Barcelona Traction, disputing Barcelona Traction's right to be
authorization of the Spanish exchange control authorities (required because the debt was owed a party to the proceedings on the jurisdictional issue. One of the motions contesting jurisdiction
by a foreign company), but authorization for the transfer of. the foreign currency necessary for was not finally dismissed by the Barcelona court of appeal until 1963, after the Belgian
the servicing of the sterling bonds was refused and those interest payments were never Application had been filed with the International Court of Justice.
resumed.
17. In June 1949, on an application by the Namel company, with the intervention of the Genora
12. In 1945 Barcelona Traction proposed a plan of compromise which provided for the company, the Barcelona court of appeal gave a judgment making it possible for the meeting of
reimbursement of the sterling debt. When the Spanish authorities refused to authorize the creditors to be convened for the election of the trustees in bankruptcy, by excluding the
transfer of the necessary foreign currency, this plan was twice modified. In its final form, the necessary procedure from the suspensive effect of the motion contesting jurisdiction. Trustees
plan provided, inter alia, for an advance redemption by Ebro of Barcelona Traction peseta were then elected, and procured decisions that new shares of the subsidiary companies should
bonds, for which authorization was likewise required. Such authorization was refused by the be created, cancelling the shares located outside Spain (December 1949), and that the head
Spanish authorities. Later, when the Belgian Government complained of the refusals to offices of Ebro and Catalonian Land should henceforth be at Barcelona and not [p.10]Toronto.
authorize foreign currency transfers, without which the debts on the bonds could not be Finally in August 1951 the trustees obtained court authorization to sell "the totality of the
honoured, the Spanish Government stated that the transfers could not be authorized unless it shares, with all the rights attaching to them, representing the corporate capital" of the
was shown that the foreign currency was to be used to repay debts arising from the genuine subsidiary companies, in the form of the newly created share certificates. The sale took place
importation of foreign capital into Spain, and that this had not been established. by public auction on 4 January 1952 on the basis of a set of General Conditions and became
effective on 17 June 1952. The purchaser was a newly formed company, Fuerzas Eléctricas de
13. On 9 February 1948 three Spanish holders of recently acquired Barcelona Traction sterling Cataluña, S.A. (Fecsa), which thereupon acquired complete control of the undertaking in Spain.
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. The petition was 18. Proceedings before the court of Reus, various courts of Barcelona and the Spanish Supreme
admitted by an order of 10 February 1948 and a judgment declaring the company bankrupt was Court, to contest the sale and the operations which preceded or followed it, were taken by,
given on 12 February. This judgment included provisions appointing a commissioner in among others, Barcelona Traction, National Trust and the Belgian company Sidro as a
bankruptcy and an interim [p.9] receiver and ordering the seizure of the assets of Barcelona shareholder in Barcelona Traction, but without success. According to the Spanish Government,
Traction, Ebro and Compañía Barcelonesa de Electricidad, another subsidiary company. up to the filing of the Belgian Application, 2,736 orders had been made in the case and 494
judgments given by lower and 37 by higher courts. For the purposes of this Judgment it is not
14. The shares of Ebro and Barcelonesa had been deposited by Barcelona Traction and Ebro necessary to go into these orders and judgments.
with the National Trust company of Toronto as security for their bond issues. All the Ebro and
the Barcelonesa ordinary shares were held outside Spain, and the possession taken of them 19. After the bankruptcy declaration, representations were made to the Spanish Government by
was characterized as "mediate and constructive civil possession", that is to say was not the British, Canadian, United States and Belgian Governments.
accompanied by physical possession. Pursuant to the bankruptcy judgment the commissioner in
bankruptcy at once dismissed the principal management personnel of the two companies and 20. The British Government made representations to the Spanish Government on 23 February
during the ensuing weeks the interim receiver appointed Spanish directors and declared that 1948 concerning the bankruptcy of Barcelona Traction and the seizure of its assets as well as
the companies were thus "normalized". Shortly after the bankruptcy judgment the petitioners those of Ebro and Barcelonesa, stating its interest in the situation of the bondholders resident in
brought about the extension of the taking of possession and related measures to the other the United Kingdom. It subsequently supported the representations made by the Canadian
subsidiary companies. Government.

15. Proceedings in Spain to contest the bankruptcy judgment and the related decisions were 21. The Canadian Government made representations to the Spanish Government in a series of
instituted by Barcelona Traction, National Trust, the subsidiary companies and their directors or diplomatic notes, the first being dated 27 March 1948 and the last 21 April 1952; in addition,
management personnel. However, Barcelona Traction, which had not received a judicial notice approaches were made on a less official level in July 1954 and March 1955. The Canadian
of the bankruptcy proceedings, and was not represented before the Reus court in February, Government first complained of the denials of justice said to have been committed in Spain
took no proceedings in the courts until 18 June 1948. In particular it did not enter a plea of towards Barcelona Traction, Ebro and National Trust, but it subsequently based its complaints
opposition against the bankruptcy judgment within the time-limit of eight days from the date of more particularly on conduct towards the Ebro company said to be in breach of certain treaty
publication of the judgment laid down in Spanish legislation. On the grounds that the provisions applicable between Spain and Canada. The Spanish Government did not respond to a
notification and publication did not comply with the relevant legal requirements, the Belgian Canadian proposal for the submission of the dispute to arbitration and the Canadian
Government contends that the eight-day time-limit had never begun to run. Government subsequently confined itself, until the time when its interposition entirely ceased,
to endeavouring to promote a settlement by agreement between the private groups concerned.
16. Motions contesting the jurisdiction of the Reus court and of the Spanish courts as a whole,
in particular by certain bondholders, had a suspensive effect on the actions for redress; a 22. The United States Government made representations to the Spanish Government on behalf
of Barcelona Traction in a note of 22 July 1949, in support of a note submitted by the Canadian damage suffered by Belgian nationals, natural and juristic persons, shareholders in Barcelona
Government the previous day. It subsequently continued its interposition through the diplomatic Traction;
channel and by other means. Since references were made by the United States Government in
these representations to the presence of [p.11] American interests in Barcelona Traction, the 2. to adjudge and declare that this reparation should, as far as possible, annul all the
Spanish Government draws the conclusion that, in the light of the customary practice of the consequences which these acts contrary to international law have had for the said nationals,
United States Government to protect only substantial American investments abroad, the and that the Spanish State is therefore under an obligation to secure, if possible, the annulment
existence must be presumed of such large American interests as to rule out a preponderance of of the adjudication in bankruptcy and of the judicial and other acts resulting therefrom,
Belgian interests. The Belgian Government considers that the United States Government was obtaining for the injured Belgian nationals all the legal effects which should result for them from
motivated by a more general concern to secure equitable treatment of foreign investments in this annulment; further, to determine the amount of the compensation to be paid by the
Spain, and in this context cites, inter alia, a note of 5 June 1967 from the United States Spanish State to the Belgian State by reason of all the incidental damage sustained by Belgian
Government. nationals as a result of the acts complained of, including the deprivation of enjoyment of rights
and the expenses incurred in the defence of their rights;
23. The Spanish Government having stated in a note of 26 September 1949 that Ebro had not
furnished proof as to the origin and genuineness of the bond debts, which justified the refusal 3. to adjudge and declare, in the event of the annulment of the consequences of the acts
of foreign currency transfers, the Belgian and Canadian Governments considered proposing to complained of proving impossible, that the Spanish State shall be under an obligation to pay to
the Spanish Government the establishment of a tripartite committee to study the question. the Belgian State, by way of compensation, a sum equivalent to 88 per cent of the net value of
Before this proposal was made, the Spanish Government suggested in March 1950 the creation the business on 12 February 1948; this compensation to be increased by an amount
of a committee on which, in addition to Spain, only Canada and the United Kingdom would be corresponding to all the incidental damage suffered by the Belgian nationals as the result of the
represented. This proposal was accepted by the United Kingdom and Canadian Governments. acts complained of, including the deprivation of enjoyment of rights and the expenses incurred
The work of the committee led to a joint statement of 11 June 1951 by the three Governments in the defence of their rights";
to the effect, inter alia, that the attitude of the Spanish administration in not authorizing the
transfers of foreign currency was fully justified. The Belgian Government protested against the the Memorial:
fact that it had not been invited to nominate an expert to take part in the enquiry, and reserved
its rights; in the proceedings before the Court it contended that the joint statement of 1951, "May it please the Court
which was based on the work of the committee, could not be set up against it, being res inter
alios acta. I. to adjudge and declare that the measures, acts, decisions and omissions of the organs of the
Spanish State described in the present Memorial are contrary to international law and that the
24. The Belgian Government made representations to the Spanish Government on the same Spanish State is under an obligation towards Belgium to make reparation for the consequential
day as the Canadian Government, in a note of 27 March 1948. It continued its diplomatic damage suffered by Belgian nationals, natural and juristic persons, shareholders in Barcelona
intervention until the rejection by the Spanish Government of a Belgian proposal for submission Traction;
to arbitration (end of 1951). After the admission of Spain to membership in the United Nations
(1955), which, as found by the Court in 1964, rendered operative again the clause of II. to adjudge and declare that this reparation should, as far as possible, annul all the
compulsory jurisdiction contained in the 1927 Hispano-Belgian Treaty of Conciliation, Judicial consequences which these acts contrary to international law have had for the said nationals,
Settlement and Arbitration, the Belgian Government attempted further representations. After and that the Spanish State is therefore under an obligation to secure, if possible, the annulment
the rejection of a proposal for a special agreement, it decided to refer the dispute unilaterally to by administrative means of the adjudication in bankruptcy and of the judicial and other acts
this Court. resulting therefrom, obtaining for the said injured Belgian nationals all the legal effects which
should result for them from this annulment; further, to determine the amount of the
*** compensation to be paid by the Spanish State to the Belgian State by reason of all the
incidental damage sustained by Belgian nationals as a result of the acts complained of,
25. In the course of the written proceedings, the following submissions were presented by the including the deprivation of enjoyment of rights and the expenses incurred in the defence of
Parties: [p. 12] their rights; [p.13]

On behalf of the Belgian Government, the Application: III. to adjudge and declare, in the event of the annulment of the consequences of the acts
complained of proving impossible, that the Spanish State shall be under an obligation to pay to
"May it please the Court the Belgian State, by way of compensation, a sum equivalent to 88 per cent of the sum of
$88,600,000 arrived at in paragraph 379 of the present Memorial, this compensation to be
1. to adjudge and declare that the measures, acts, decisions and omissions of the organs of the increased by an amount corresponding to all the incidental damage suffered by the said Belgian
Spanish State described in the present Application are contrary to international law and that the nationals as the result of the acts complained of, including the deprivation of enjoyment of
Spanish State is under an obligation towards Belgium to make reparation for the consequential rights, the expenses incurred in the defence of their rights and the equivalent in capital and
interest of the amount of Barcelona Traction bonds held by Belgian nationals and of their other
claims on the companies in the group which it was not possible to recover owing to the acts (10) and, should the Court consider that it cannot, without an expert enquiry, decide the final
complained of"; amount of the compensation due to the Belgian State, have regard to the considerable
magnitude of the damage caused and make an immediate award of provisional compensation,
in the Reply: on account of the compensation to be determined after receiving the expert opinion, the
amount of such provisional compensation being left to the discretion of the Court."
"May it please the Court, rejecting any other submissions of the Spanish State which are
broader or to a contrary effect, On behalf of the Spanish Government, in the Counter-Memorial:
to adjuge and declare
"May it please the Court to adjudge and declare
(1) that the Application of the Belgian Government is admissible;
I. that the Belgian claim which, throughout the diplomatic correspondence and in the first
(2) that the Spanish State is responsible for the damage sustained by the Belgian State in the Application submitted to the Court, has always been a claim with a view to the protection of the
person of its nationals, shareholders in Barcelona Traction, as the result of the acts contrary to Barcelona Traction company, has not changed its character in the second Application, whatever
international law committed by its organs, which led to the total spoliation of the Barcelona the apparent modifications introduced into it;
Traction group;
that even if the true subject of the Belgian claim were, not the Barcelona Traction company, but
(3) that the Spanish State is under an obligation to ensure reparation of the said damage; those whom the Belgian Government characterizes on some occasions as 'Belgian shareholders'
and on other occasions as 'Belgian interests' in that company, and the damage allegedly
(4) that this damage can be assessed at U.S. $78,000,000, representing 88 per cent. of the net sustained by those 'shareholders' or 'interests', it would still remain true that the Belgian
value, on 12 February 1948, of the property of which the Barcelona Traction group was Government has not validly proved either that the shares of the company in question belonged
despoiled; on the material dates to 'Belgian shareholders', or, moreover, that there is in the end, in the
case submitted to the Court, a preponderance of genuine 'Belgian interests';
(5) that the Spanish State is, in addition, under an obligation to pay, as an all-embracing
payment to cover loss of enjoyment, compensatory interest at the rate of 6 per cent. on the that even if the Belgian claim effectively had as its beneficiaries alleged 'shareholders' of
said sum of U.S. $78,000,000, from 12 February 1948 to the date of judgment; Barcelona Traction who were 'Belgian', or yet again alleged genuine 'Belgian interests' of the
(6) that the Spanish State must, in addition, pay a sum provisionally assessed at U.S. magnitude which is attributed to them, the general principles of international law governing this
$3,800,000 to cover the expenses incurred by the Belgian nationals in defending their rights matter, confirmed by practice which knows of no exception, do not recognize that the national
since 12 February 1948; State of shareholders or 'interests', whatever their number or magnitude, may make a claim on
their behalf in reliance on allegedly unlawful damage sustained by the company, which
(7) that the Spanish State is also liable in the sum of £433,821 representing the amount, in possesses the nationality of a third State;
principal and interest, on 4 January 1952, of the Barcelona Traction sterling bonds held by the
said nationals, as well as in the sum of U.S. $1,623,127, representing a debt owed to one of the that the Belgian Government therefore lacks jus standi in the present case;
said nationals by a subsidiary company of Barcelona Traction, this sum including lump-sum
compensation for loss of profits resulting from the premature termination of a contract; II. that a rule of general international law, confirmed both by judicial precedents and the
that there will be due on those sums interest at the rate of 6 per cent, per annum, as from 4 teachings of publicists, and reiterated in Article 3 of the Treaty of Conciliation, Judicial
January 1952 so far as concerns the sum of £433,821, and as from 12 February 1948 so far as Settlement and Arbitration of 19 July 1927 between Spain and Belgium, requires that private
concerns the sum of U.S. $1,623,127; both up to the date of judgment; persons [p.15] allegedly injured by a measure contrary to international law should have used
and exhausted the remedies and means of redress provided by the internal legal order before
(8) that the Spanish State is also liable to pay interest, by way of interest on a sum due and diplomatic, and above all judicial, protection may be exercised on their behalf;
outstanding, at a rate to be determined by [p.14] reference to the rates generally prevailing, on
the amount of compensation awarded, from the date of the Court's decision fixing such that the applicability of this rule to the present case has not been disputed and that the prior
compensation up to the date of payment; requirement which it lays down has not been satisfied;

(9) in the alternative to submissions (4) to (6) above, that the amount of the compensation due III. that the organic machinery for financing the Barcelona Traction undertaking, as conceived
to the Belgian State shall be established by means of an expert enquiry to be ordered by the from its creation and constantly applied thereafter, placed it in a permanent state of latent
Court; and to place on record that the Belgian Government reserves its right to submit in the bankruptcy, and that the constitutional structure of the group and the relationship between its
course of the proceedings such observations as it may deem advisable concerning the object members were used as the instrument for manifold and ceaseless operations to the detriment
and methods of such measure of investigation; both of the interests of the creditors and of the economy and law of Spain, the country in which
the undertaking was to carry on all its business; the object of the Belgian claim is to protect the Barcelona Traction company;

that these same facts led, on the part of the undertaking, to an attitude towards the Spanish 2. Whereas Barcelona Traction was adjudicated bankrupt in a judgment rendered by the court
authorities which could not but provoke a fully justified refusal to give effect to the currency of Reus, in Spain, on 12 February 1948;
applications made to the Spanish Government;
3. Whereas that holding company was on that date in a perfectly sound financial situation, as
that the bankruptcy declaration of 12 February 1948, the natural outcome of the conduct of the were its subsidiaries, Canadian or Spanish companies having their business in Spain;
undertaking, and the bankruptcy proceedings which ensued, were in all respects in conformity
with the provisions of Spanish legislation on the matter; and that moreover these provisions are 4. Whereas, however, the Spanish Civil War and the Second World War had, from 1936 to
comparable with those of other statutory systems, in particular Bel-gian legislation itself; 1944, prevented Barcelona Traction from being able to receive, from its subsidiaries operating
in Spain, the foreign currency necessary for the service of the sterling loans issued by it for the
that the complaint of usurpation of jurisdiction is not well founded where the bankruptcy of a financing of the group's investments in Spain;
foreign company is connected in any way with the territorial jurisdiction of the State, that being
certainly so in the present case; 5. Whereas, in order to remedy this situation, those in control of Barcelona Traction agreed
with the bondholders in 1945, despite the opposition of the March group, to a plan of
that the Spanish judicial authorities cannot be accused of either one or more denials of justice compromise, which was approved by the trustee and by the competent Canadian court; and
in the proper sense of the term, Barcelona Traction never having been denied access to the whereas its implementation was rendered impossible as a result of the opposition of the
Spanish courts and the judicial decisions on its applications and appeals never having suffered Spanish exchange authorities, even though the method of financing finally proposed no longer
unjustified or unreasonable delays; nor is it possible to detect in the conduct of the Spanish involved any sacrifice of foreign currency whatever for the Spanish economy;
authorities the elements of some breach of international law other than a denial of justice;
6. Whereas, using this situation as a pretext, the March group, which in the meantime had
that the claim for reparation, the very principle of which is disputed by the Spanish made further considerable purchases of bonds, sought and obtained the judgment adjudicating
Government, is moreover, having regard to the circumstances of the case, an abuse of the right Barcelona Traction bankrupt;
of diplomatic protection in connection with which the Spanish Government waives none of its
possible rights; 7. Whereas the bankruptcy proceedings were conducted in such a manner as to lead to the sale
to the March group, which took place on 4 January 1952, of all the assets of the bankrupt
IV. that, therefore, the Belgian claim is dismissed as inadmissible or, if not, as unfounded"; company, far exceeding in value its liabilities, in consideration of the assumption by the
purchaser itself of solely the bonded debt, which, by new purchases, it had concentrated into its
in the Rejoinder: own hands to the extent of approximately 85 per cent., while the cash price paid to the trustees
in bankruptcy, 10,000,000 pesetas— approximately $250,000—, being insufficient to cover the
"May it please the Court to adjudge and declare bankruptcy costs, did not allow them to pass anything to the bankrupt company or its
shareholders, or even to pay its unsecured creditors;
that the claim of the Belgian Government is declared inadmissible or, if not, unfounded."
8. Whereas the accusations of fraud made by the Spanish Government against the Barcelona
In the course of the oral proceedings, the following text was presented as final submissions Traction company and the allegation that that company was in a permanent state of latent
[p.16] bankruptcy are devoid of all [p.17]relevance to the case and, furthermore, are entirely
unfounded;
on behalf of the Belgian Government,
9. Whereas the acts and omissions giving rise to the responsibility of the Spanish Government
after the hearing of 9 July 1969: are attributed by the Belgian Government to certain administrative authorities, on the one
hand,' and to certain judicial authorities, on the other hand;
"1. Whereas the Court stated on page 9 of its Judgment of 24 July 1964 that 'The Application of Whereas it is apparent when those acts and omissions are examined as a whole that, apart
the Belgian Government of 19 June 1962 seeks reparation for damage claimed to have been from the defects proper to each, they converged towards one common result, namely the
caused to a number of Belgian nationals, said to be shareholders in the Barcelona Traction, diversion of the bankruptcy procedure from its statutory purposes to the forced transfer,
Light and Power Company, Limited, a company under Canadian law, by the conduct, alleged to without compensation, of the undertakings of the Barcelona Traction group to the benefit of a
have been contrary to international law, of various organs of the Spanish State in relation to private Spanish group, the March group;
that company and to other companies of its group';
Whereas it was therefore manifestly wrong of the Spanish Government, in the submissions in I
the Counter-Memorial and in the oral arguments of its counsel, to persist in the contention that Abuse of rights, arbitrary and discriminatory attitude of certain adminiustrative authorities
 authorities purported, with the approval of the Spanish judicial authorities, to transform two of
Considering that the Spanish administrative authorities behaved in an improper, arbitrary and them into Spanish companies, whereas such alteration is not permitted by the law governing
discriminatory manner towards Barcelona Traction and its shareholders, in that, with the the status of those companies;
purpose of facilitating the transfer of control over the property of the Barcelona Traction group
from Belgian hands into the hands of a private Spanish group, they in particular— III

(a) frustrated, in October and December 1946, the implementation of the third method for
financing the plan of compromise, by refusing to authorize Ebro, a Canadian company with Denials of justice Lato Sensu
residence in Spain, to pay 64,000,000 pesetas in the national currency to Spanish residents on
behalf of Barcelona Traction, a non-resident company, so that the latter might redeem its Considering that a large number of decisions of the Spanish courts are vitiated by gross and
peseta bonds circulating in Spain, despite the fact that Ebro continued uninterruptedly to be manifest error in the application of Spanish law, by arbitrariness or discrimination, constituting
granted periodical authorization to pay the interest on those same bonds up to the time of the in international law denials of justice lato sensu;
bankruptcy;
Considering that in particular—
(b) on the other hand, accepted that Juan March, a Spanish citizen manifestly resident in Spain,
should purchase considerable quantities of Barcelona Traction sterling bonds abroad; (1) The Spanish courts agreed to entertain the bankruptcy of Barcelona Traction in flagrant
breach of the applicable provisions of Spanish law, which do not permit that a foreign debtor
(c) made improper use of an international enquiry, from which the Belgian Government was should be adjudged bankrupt if that debtor does not have his domicile, or at least an
excluded, by gravely distorting the purport of the conclusions of the Committee of Experts, to establishment, in Spanish territory;
whom they attributed the finding of irregularities of all kinds such as to entail severe penalties
for the Barcelona Traction group, which enabled the trustees in bankruptcy, at March's (2) Those same courts adjudged Barcelona Traction bankrupt whereas that company was
instigation, to bring about the premature sale at a ridiculously low price of the assets of the neither in a state of insolvency nor in a state of final, general and complete cessation of
Barcelona Traction group and their purchase by the March group thanks to the granting of all payments and had not ceased its payments in Spain, this being a manifest breach of the
the necessary exchange authorizations; applicable statutory provisions of Spanish law, in particular Article 876 of the 1885 Commercial
Code;
II
(3) The judgment of 12 February 1948 failed to order the publication of the bankruptcy by
Usurpation of jurisdiction announcement in the place of domicile of the bankrupt, which constitutes a flagrant breach of
Article 1044 (5) of the 1829 Commercial Code;
Considering that the Spanish courts, in agreeing to entertain the bankruptcy of Barcelona
Traction, a company under Canadian law with its registered office in Toronto, having neither (4) The decisions failing to respect the separate estates of Barcelona Traction's subsidiaries and
registered office nor commer [p.18]cial establishment in Spain, nor possessing any property or sub-subsidiaries, in that they extended to their property the attachment arising out of the
carrying on any business there, usurped a power of jurisdiction which was not theirs in bankruptcy of the parent [p.19] company, and thus disregarded their distinct legal
international law; personalities, on the sole ground that all their shares belonged to Barcelona Traction or one of
its subsidiaries, had no legal basis in Spanish law, were purely arbitrary and in any event
Considering that the territorial limits of acts of sovereignty were patently disregarded in the constitute a flagrant breach of Article 35 of the Civil Code, Articles 116 and 174 of the 1885
measures of enforcement taken in respect of property situated outside Spanish territory without Commercial Code (so far as the Spanish companies are concerned) and Article 15 of the same
the concurrence of the competent foreign authorities; Code (so far as the Canadian companies are concerned), as well as of Article 1334 of the Civil
Procedure Code;
Considering that there was, namely, conferred upon the bankruptcy authorities, through the
artificial device of mediate and constructive civil possession, the power to exercise in Spain the If the estates of the subsidiaries and sub-subsidiaries could have been included in that of
rights attaching to the shares located in Canada of several subsidiary and sub-subsidiary com- Barcelona Traction—quod non—, it would have been necessary to apply to that company the
panies on which, with the approval of the Spanish judicial authorities, they relied for the special r!!!egime established by the imperative provisions of Articles 930 et seq. of the 1885
purpose of replacing the directors of those companies, modifying their terms of association, and Commercial Code and the Acts of 9 April 1904 and 2 January 1915 for the event that public-
cancelling their regularly issued shares and replacing them with others which they had printed utility companies cease payment, and this was not done;
in Spain and delivered to Fecsa at the time of the sale of the bankrupt company's property,
without there having been any effort to obtain possession of the real shares in a regular way; (5) The judicial decisions which conferred on the bankruptcy authorities the fictitious possession
Considering that that disregard is the more flagrant in that three of the subsidiaries were (termed "mediate and constructive civil possession") of the shares of certain subsidiary and
companies under Canadian law with their registered offices in Canada and that the bankruptcy sub-subsidiary companies have no statutory basis in Spanish bankruptcy law and were purely
arbitrary; they comprise moreover a flagrant breach not only of the general principle recognized time sent letters rogatory to Toronto, Canada, with the request that they be put at his disposal
in the Spanish as in the majority of other legal systems to the effect that no person may ;
exercise the rights embodied in negotiable securities without having at his disposal the
securities themselves but also of Articles 1334 and 1351 of the Civil Procedure Code and Article (11) By authorizing the sale of the property of the bankrupt company when the adjudication in
1046 of the 1829 Commercial Code, which require the bankruptcy authorities to proceed to the bankruptcy had not acquired irrevocability and while the proceedings were suspended, the
material apprehension of the bankrupt's property; Spanish courts flagrantly violated Articles 919, 1167, 1319 and 1331 of the Civil Procedure Code
and the general principles of the right of defence;
(6) The bestowal on the commissioner by the bankruptcy judgment of power to proceed to the
dismissal, removal or appointment of members of the staff, employees and management, of the In so far as that authorization was based on the allegedly perishable nature of the property to
companies all of whose shares belonged to Barcelona Traction or one of its subsidiaries had no be sold, it constituted a serious disregard of Article 1055 of the 1829 Commercial Code and
statutory basis in Spanish law and constituted a gross violation of the statutory provisions Article 1354 of the Civil Procedure Code, which articles allow the sale only of movable property
referred to under (4), first sub-paragraph, above and also of Article 1045 of the 1829 which cannot be kept without deteriorating or spoiling; even supposing that those provisions
Commercial Code; could be applied in general to the property of Barcelona Traction, its subsidiaries and sub-
subsidiaries—quod non—, there would still have been a gross and flagrant violation of them,
(7) The Spanish courts approved or tolerated the action of the trustees in setting themselves up inasmuch as that property as a whole was obviously not in any imminent danger of serious
as a purported general meeting of the two Canadian subsidiaries and in transforming them, in depreciation ; indeed thé only dangers advanced by the trustees, namely those arising out of
that capacity, into companies under Spanish law, thus gravely disregarding the rule embodied the threats' of prosecution contained in the Joint Statement, had not taken shape, either by the
in Article 15 of the 1885 Commercial Code to the effect that the status and internal functioning day on which authorization to sell was requested or by the day of the sale, in any proceedings
of foreign companies shall be governed in Spain by the law under which they were or demand by the competent authorities and did not ever materialize, except to an insignificant
incorporated; extent;

(8) The Spanish courts approved or tolerated the action of the trustees in setting themselves up The only penalty which the undertakings eventually had to bear, 15 months after the sale, was
as purported general meetings and modifying, in that capacity, the terms of association of the that relating to the currency offence, which had occasioned an embargo for a much higher sum
Ebro, Catalonian Land, Union Eléctrica de Cataluña, Electricista Catalana, Barcelonesa and as early as April 1948;
Saltos del Segre companies, cancelling their shares and issuing new shares; they thus
committed a manifest breach of Article 15 of the 1885 Commercial Code (so far as the two (12) The authorization to sell and the sale, in so far as they related to the shares of the
Canadian companies were concerned) and Articles 547 et seq. of the same code, which subsidiary and sub-subsidiary companies without delivery of the certificates, constituted a
authorize the issue of duplicates only in the circumstances they specify; they also gravely flagrant violation of Articles [p.21] 1461 and 1462 of the Spanish Civil Code, which require
disregarded the clauses of the trust deeds concerning voting-rights, in [p.20]flagrant contempt delivery of the thing sold, seeing that the certificates delivered to the successful bidder had not
of the undisputed rule of Spanish law to the effect that acts performed and agreements been properly issued and were consequently without legal value; if the authorization to sell and
concluded validly by the bankrupt before the date of the cessation of payments as determined the sale had applied, as the respondent Government wrongly maintains, to the rights attaching
in the judicial decisions shall retain their effects and their binding force in respect of the to the shares and bonds or to the bankrupt company's power of domination over its
bankruptcy authorities (Articles 878 et seq. of the 1885 Commercial Code); subsidiaries, those rights ought to have been the subject of a joint valuation, on pain of flagrant
violation of Articles 1084 to 1089 of the 1829 Commercial Code and Article 1358 of the Civil
(9) The Spanish courts decided at one and the same time to ignore the separate legal Procedure Code: in any event, it was in flagrant violation of these last-named provisions that
personalities of the subsidiary and sub-subsidiary companies (so as to justify the attachment of the commissioner fixed an exaggeratedly low reserve price on the basis of a unilateral expert
their property in Spain and their inclusion in the bankrupt estate) and implicitly but indubitably opinion which, through the effect of the General Conditions of Sale, allowed the March group to
to recognize those same personalities by the conferring of fictitious possession of their shares acquire the auctioned property at that reserve price;
on the bankruptcy authorities, thus giving decisions which were vitiated by an obvious self-
contradiction revealing their arbitrary and discriminatory nature; (13) By approving the General Conditions of Sale on the very day on which they were submitted
to them and then dismissing the proceedings instituted to contest those conditions, the judicial
(10) The general meeting of creditors of 19 September 1949 convened for the purpose of authorities committed a flagrant violation of numerous ordre public provisions of Spanish law;
appointing the trustees was, with the approval of the Spanish judicial authorities, held in thus, in particular, the General Conditions of Sale—
flagrant breach of Articles 300 and 1342 of the Civil Procedure Code, and 1044 (3), 1060, 1061
and 1063 of the 1829 Commercial Code, in that (a) it was not convened on cognizance of the (a) provided for the payment of the bondholder creditors, an operation which, under Article
list of creditors; (b). when that list was prepared, it was not drawn up on the basis of 1322 of the Civil Procedure Code, falls under the fourth section of the bankruptcy, whereas that
particulars from the balance-sheet or the books and documents of the bankrupt company, section was suspended as a result of the effects attributed to the Boter motion contesting
which books and documents were not, as the Spanish Government itself admits, in the jurisdiction, no exemption from that suspension having been applied for or obtained in
possession of the commissioner on 8 October 1949, while the judicial authorities had not at any pursuance of the second paragraph of Article 114 of the Civil Procedure Code;
 them rejected as inadmissible on the grounds of lack of capacity;
(b) provided for the payment of the debts owing on the bonds before they had been approved
and ranked by a general meeting of the creditors on the recommendation of the trustees, (c) the pursuit of those remedies and the introduction of any other such proceedings were also
contrary to Articles 1101 to 1109 of the 1829 Commercial Code and to Articles 1266 to 1274, made impossible for the subsidiary companies by the discontinuances effected each time by the
1286 and 1378 of the Civil Procedure Code; solicitors appointed to replace the original solicitors by the new boards of directors directly or
indirectly involved; these changes of solicitors and discontinuances were effected by the new
(c) in disregard of Articles 1236, 1240, 1512 and 1513 of the Civil Procedure Code, did not boards of directors by virtue of authority conferred upon them by the interim receiver
require the price to be lodged or deposited at the Court's disposal; simultaneously with their appointment;

(d) conferred on the trustees power to recognize, determine and declare effective the rights (d) the proceedings for relief brought by those in control of the subsidiary companies who had
attaching to the bonds, in disregard, on the one hand, of Articles 1101 to 1109 of the 1829 been dismissed by the commissioner were likewise held inadmissible by the Reus court when
Commercial Code and of Articles 1266 to 1274 of the Civil Procedure Code, which reserve such they sought to avail themselves of the specific provisions of Article 1363 of the Civil Procedure
rights for the general meeting of creditors under the supervision of the judge, and, on the Code, which provide for proceedings to reverse decisions taken by the commissioner in
other, of Articles 1445 and 1449 of the Civil Code, which lay down that the purchase price must bankruptcy;
be a definite sum and may not be left to the arbitrary decision of one of the contracting parties;
(e) there was discrimination on the part of the first special judge when he refused to admit as a
(e) in disregard of Articles 1291 to 1294 of the Civil Procedure Code, substituted the successful party to the bankruptcy the Canadian National Trust Company, Limited, trustee for the bankrupt
bidder for the trustees in respect of the payment of the debts owing on the bonds, whilst, in company's two sterling loans, even though it relied upon the security of the mortgage which
violation of the general principles applicable to novation, replacing the security for those debts, had been given to it by Ebro, whereas at the same time he admitted to the proceedings the
consisting, pursuant to the trust deeds, of shares and bonds issued by the subsidiary and sub- Bondholders' Committee [p.23]appointed by Juan March, although National Trust and the
subsidiary companies, with the deposit of a certain sum with a bank or with a mere banker's Committee derived their powers from the same trust deeds;
guarantee limited to three years; [p.22]
(f) the complaints against the General Conditions of Sale could be neither amplified nor heard
(f) delegated to a third party the function of paying certain debts, in disregard of Articles 1291 because the order which had approved the General Conditions of Sale was deemed to be one of
and 1292 of the Civil Procedure Code, which define the functions of the trustees in this field and mere routine; Considering that many years elapsed after the bankruptcy judgment and even
do not allow of any delegation; after the ruinous sale of the property of the Barcelona Traction group without either the
(g) ordered the payment of the debts owing on the bonds in sterling, whereas a forced bankrupt company or those co-interested with it having had an opportunity to be heard on the
execution may only be carried out in local currency and in the case of bankruptcy the various numerous complaints put forward against the bankruptcy judgment and related decisions in the
operations which it includes require the conversion of the debts into local currency on the day opposition of 18 June 1948 and in various other applications for relief;
of the judgment adjudicating bankruptcy, as is to be inferred from Articles 883 and 884 of the
1885 Commercial Code; Considering that those delays were caused by the motion contesting jurisdiction fraudulently
lodged by a confederate of the petitioners in bankruptcy and by incidental proceedings
IV instituted by other men of straw of the March group, which were, like the motion contesting
jurisdiction, regularly admitted by the various courts;
Denials of justice Stricto Sensu
Considering that both general international law and the Spanish-Belgian Treaty of 1927 regard
Considering that in the course of the bankruptcy proceedings the rights of the defence were such delays as equivalent to the denial of a hearing;
seriously disregarded; that in particular—
Considering that the manifest injustice resulting from the movement of the proceedings towards
(a) the Reus court, in adjudicating Barcelona Traction bankrupt on an ex parte petition, inserted the sale, whilst the actions contesting the bankruptcy judgment and even the jurisdiction of the
in its judgment provisions which went far beyond finding the purported insolvency of or a Spanish courts remained suspended, was brought about by two judgments delivered by the
general cessation of payments by the bankrupt company, the only finding, in addition to one on same chamber of the Barcelona court of appeal on the same day, 7 June 1949: in one of them
the capacity of the petitioners, that it was open to it to make in such proceedings; it confirmed the admission, with two effects, of the Boter appeal from the judgment of the
This disregard of the rights of the defence was particularly flagrant in respect of the subsidiary special judge rejecting his motion contesting jurisdiction, whereas in the other it reduced the
companies, whose property was ordered by the court to be attached without their having been suspensive effect granted to that same appeal by excluding from the suspension the calling of
summonsed and without their having been adjudicated bankrupt; the general meeting of creditors for the purpose of appointing the trustees in bankruptcy;

(b) the subsidiary companies that were thus directly affected by the judgment of 12 February V
1948 nevertheless had their applications to set aside the order for attachment which concerned
Damage and Reparation first place, at the percentage of such net value corresponding to the participation of Belgian
nationals in the capital of the Barcelona Traction company, namely 88 per cent.;
Considering that the acts and omissions contrary to international law attributed to the organs of
the Spanish State had the effect of despoiling the Barcelona Traction company of the whole of Considering that on the critical dates of the bankruptcy judgment and the filing of the
its property and of depriving it of the very objects of its activity, and thus rendered it practically Application, the capital of Barcelona Traction was represented by 1,798,854 shares, partly
defunct; bearer and partly registered; that on 12 February 1948 Sidro owned 1,012,688 registered
shares and 349,905 bearer shares; that other Belgian nationals owned 420 registered shares
Considering that Belgian nationals, natural and juristic persons, shareholders in Barcelona and at least 244,832 bearer shares; that 1,607,845 shares, constituting 89.3 per cent. of the
Traction, in which they occupied a majority and controlling position, and in particular the Sidro company's capital, were thus on that date in. Belgian hands; that on 14 June 1962 Sidro owned
company, the owner of more than 75 per cent, of the registered capital, on this account 1,354,514 registered shares and 31,228 bearer shares; that other Belgian nationals owned
suffered direct and immediate injury to their interests and rights, which were voided of all value 2,388 registered shares and at least 200,000 bearer shares; and that 1,588,130 shares,
and effectiveness; constituting 88 per cent. of the company's capital, were thus on that date in Belgian hands;

Considering that the reparation due to the Belgian State from the Spanish State, as a result of Considering that the compensation claimed must in addition cover all incidental damage
the internationally unlawful acts for which the latter State is responsible, must be complete and suffered by the said Belgian nationals as a result of the acts complained of, including the
must, so far as possible, reflect the damage suffered by its nationals whose case the Belgian deprivation of enjoyment of rights, the expenses incurred in the defence of their rights and the
State has taken up; and that, since restitutio in integrum is, in the circumstances [p.24]of the equivalent, in capital and interest, of the amount of the Barcelona Traction bonds held by
case, practically and legally impossible, the reparation of the damage suffered can only take Belgian nationals, and of their other claims on the companies in the [p.25]group which it was
place in the form of an all-embracing pecuniary idemnity, in accordance with the provisions of not possible to recover owing to the acts complained of;
the Spanish-Belgian Treaty of 1927 and with the rules of general international law;
Considering that the amount of such compensation, due to the Belgian State on account of acts
Considering that in the instant case the amount of the indemnity must be fixed by taking as a contrary to international law attributable to the Spanish State, cannot be affected by the latter's
basis the net value of the Barcelona Traction company's property at the time of its adjudication purported charges against the private persons involved, those charges furthermore not having
in bankruptcy, expressed in a currency which has remained stable, namely the United States formed the subject of any counterclaim before the Court;
dollar;
VI
Considering that the value of that property must be determined by the replacement cost of the
subsidiary and sub-subsidiary companies' plant for the production and distribution of electricity Objection derived from the alleged lack of Jus Standi of the Belgian Government
at 12 February 1948, as that cost was calculated by the Ebro company's engineers in 1946;
Considering that in its Judgment of 24 July 1964 the Court decided to join to the merits the
Considering that, according to those calculations, and after deduction for depreciation through third preliminary objection raised by the Spanish Government;
wear and tear, the value of the plant was at that date U.S. $116,220,000; from this amount
there must be deducted the principal of Barcelona Traction's bonded debt and the interest that Considering that the respondent Government wrongly denies to the Belgian Government jus
had fallen due thereon, that is to say, U.S. $27,619,018, which leaves a net value of about U.S. standi in the present proceedings;
$88,600,000, this result being confirmed—
Considering that the object of the Belgian Government's Application of 14 June 1962 is
(1) by the study submitted on 5 February 1949 and on behalf of Ebro to the Special Technical reparation for the damage caused to a certain number of its nationals, natural and juristic
Office for the Regulation and Distribution of Electricity (Catalonian region) (Belgian New persons, in their capacity as shareholders in the Barcelona Traction, Light and Power Company,
Document No. 50); Limited, by the conduct contrary to international law of various organs of the Spanish State
towards that company and various other companies in its group;
(2) by capitalization of the 1947 profits;
Considering that the Belgian Government has established that 88 per cent. of Barcelona
(3) by the profits made by Fecsa in 1956—the first year after 1948 in which the position of Traction's capital was in Belgian hands on the critical dates of 12 February 1948 and 14 June
electricity companies was fully stabilized and the last year before the changes made in the 1962 and so remained continuously between those dates, that a single Belgian company, Sidro,
undertaking by Fecsa constituted an obstacle to any useful comparison; possessed more than 75 per cent. of the shares; that the Belgian nationality of that company
and the effectiveness of its nationality have not been challenged by the Spanish Government;
(4) by the reports of the experts consulted by the Belgian Government;
Considering that the fact that the Barcelona Traction registered shares possessed by Sidro were
Considering that the compensation due to the Belgian Government must be estimated, in the registered in Canada in the name of American nominees does not affect their Belgian character;
that in this case, under the applicable systems of statutory law, the nominee could exercise the
rights attaching to the shares entered in its name only as Sidro's agent; Considering that in addition the pleadings refer to more than 30 decisions by the Supreme
Court;
Considering that the preponderence of Belgian interests in the Barcelona Traction company was Considering that it is not contended that the remedies as a whole of which Barcelona Traction
well known to the Spanish authorities at the different periods in which the conduct complained and its co-interested parties availed themselves and which gave rise to those decisions were
of against them occurred, and has been explicitly admitted by them on more than one occasion; inadequate or were not pursued to the point of exhaustion;

Considering that the diplomatic protection from which the company benefited for a certain time Considering that this circumstance suffices as a bar to the possibility of the fourth objection
on the part of its national Government ceased in 1952, well before the filing of the Belgian being upheld as setting aside the Belgian claim;
Application, and has never subsequently been resumed;
Considering that the only complaints which could be set aside are those in respect of which the
Considering that by depriving the organs appointed by the Barcelona Traction shareholders Spanish Government proved failure to make use of means of redress or the insufficiency of
under the company's terms of association of their power of control in respect of its subsidiaries, those used;
which removed from the company the very objects of its activities, and by depriving it of the Considering that such proof has not been supplied;
whole of its property, the acts and omissions contrary to international law attributed to the
Spanish authorities rendered the company practically defunct and directly and immediately 1. With Respect to the Complaints Against the Acts of the Administrative Authorities
injured the rights and interests [p.26]attaching to the legal situation of shareholder as it is
recognized by international law; that they thus caused serious damage to the company's Considering that the Spanish Government is wrong in contending that the Belgian complaint
Belgian shareholders and voided the rights which they possessed in that capacity of all useful concerning the decisions of October and [p.27] December 1946 referred to under I (a) above is
content; not admissible on account of Barcelona Traction's failure to exercise against them the remedies
of appeal to higher authority and contentious administrative proceedings;
Considering that in the absence of reparation to the company for the damage inflicted on it,
from which they would have benefited at the same time as itself, the Belgian shareholders of Considering that the remedy of appeal to higher authority was inconceivable in this case, being
Barcelona Traction thus have separate and independent rights and interests to assert; that they by definition an appeal which may be made from a decision by one administrative authority to
did in fact have to take the initiative for and bear the cost of all the proceedings brought another hierarchically superior authority namely the Minister, whereas the decisions complained
through the company's organs to seek relief in the Spanish courts; that Sidro and other Belgian of were taken with the co-operation and approval of the Minister himself, and even brought to
shareholders, after the sale of Barcelona Traction's property, themselves brought actions the the knowledge of those concerned by the Minister at the same time as by the competent
dismissal of which is complained of by the Belgian Government as constituting a denial of administrative authority;
Justice;
Considering that it was likewise not possible to envisage contentious administrative proceedings
Considering that under the general principles of international law in this field the Belgian against a decision which patently did not fall within the ambit of Article 1 of the Act of 22 June
Government has jus standi to claim through international judicial proceedings reparation for the 1894, which recognizes such a remedy only against administrative decisions emanating from
damage thus caused to its nationals by the internationally unlawful acts and omissions administrative authorities in the exercise of their regulated powers and "infringing a right of an
attributed to the Spanish State; administrative character previously established in favour of the applicant by an Act, a regulation
or some other administrative provision", which requirements were patently not satisfied in this
VII case;

Objection of Non-Exhaustion of Local Remedies 2. With Respect to the Complaint concerning the Reus Court's Lack of Jurisdiction to Declare
the Bankruptcy of Barcelona Traction
Considering that no real difference has emerged between the Parties as to the scope and
significance of the rule of international law embodied in Article 3 of the Treaty of Conciliation, Considering that the Spanish Government is wrong in seeking to derive an argument from the
Judicial Settlement and Arbitration concluded between Spain and Belgium on 19 July 1927, fact that Barcelona Traction and its co-interested parties supposedly failed to challenge the
which makes resort to the procedures provided for in that Treaty dependant on the prior use, jurisdiction of the Reus court by means of a motion contesting its competence, and allowed the
until a judgment with final effect has been pronounced, of the normal means of redress which time-limit for entering opposition to expire without having challenged that jurisdiction;
are available and which offer genuine possibilities of effectiveness within the limitation of a
reasonable time; Considering that in fact a motion contesting jurisdiction is not at all the same thing as a motion
contesting competence ratione materiae and may properly be presented cumulatively with the
Considering that in this case the Respondent itself estimates at 2,736 the number of orders case on the merits;
alone made in the case by the Spanish courts as of the date of the Belgian Application;
Considering that the bankrupt company contested jurisdiction at the head of the complaints set 4. With Respect to the Complaints concerning the Blocking of the Remedies
out in its opposition plea of 18 June 1948;
Considering that the various decisions which instituted and prolonged the suspension of the first
Considering that it complained again of lack of jurisdiction in its application of 5 July 1948 for a section of the bankruptcy proceedings were attacked on various occasions by numerous
declaration of nullity and in its pleading of 3 September 1948 in which it confirmed its proceedings taken by Barcelona Traction, beginning with the incidental application for a
opposition to the bankruptcy judgment; declaration of nullity which it submitted on 5 July 1948;

Considering that National Trust submitted a formal motion contesting jurisdiction in its 5. With Respect to the Complaint concerning the Dismissal of the Officers of the Subsidiary
application of 27 November 1948 for admission to the bankruptcy proceedings; Companies by Order of the Commissioner

Considering that Barcelona Traction, after having as early as 23 April 1949 entered an Considering that this measure was also attacked by applications for its setting aside on the part
appearance in the proceedings concerning the Boter motion contesting jurisdiction, formally of the persons concerned, which were quite improperly declared inadmissible; and that the
declared its adherence to that motion by a procedural document of 11 April 1953; proceedings seeking redress against those decisions were adjourned until 1963;

Considering that the question of jurisdiction being a matter of ordre public, as is the question of 6. With Respect to the Failure to Observe the No-Action Clause
competence ratione materiae, the complaint of belatedness could not be upheld, even in the
event of the expiry of the allegedly applicable time-limit for entering a plea of opposition; Considering that this clause was explicitly referred to by National Trust in its application of 27
November 1948 for admission to the proceedings;
3. With Respect to the Complaints concerning the Bankruptcy Judgment and Related Decisions
7. With Respect to the Measures Preparatory to the Sale and the Sale
Considering that the Spanish Government is wrong in contending that the said decisions were
not attacked by adequate remedies pursued to [p.28] the point of exhaustion or for a Considering that the other side, while implicitly admitting that adequate proceedings were taken
reasonable length of time; to attack the appointment of the trustees and the authorization to sell, is wrong in contending
that this was supposedly not so in respect of—[p.29]
Considering that in fact, as early as 16 February 1948, the bankruptcy judgment was attacked
by an application for its setting aside on the part of the subsidiary companies, Ebro and (1) The failure to draw up a list of creditors prior to the convening of the meeting of creditors
Barcelonesa; for the appointment of the trustees, whereas this defect was complained of in the procedural
Considering that while those companies admittedly confined their applications for redress to the document attacking the appointment of the trustees and in the application that the sale be
parts of the judgment which gave them grounds for complaint, the said remedies were declared null and void;
nonetheless adequate and they were brought to nought in circumstances which are themselves
the subject of a complaint which has been set out above; (2) Certain acts and omissions on the part of the trustees, whereas they were referred to in the
proceedings taken to attack the authorization to sell and the decision approving the method of
Considering that, contrary to what is asserted by the Spanish Government, the bankrupt unilateral valuation of the assets;
company itself entered a plea of opposition to the judgment by a procedural document of 18
June 1948, confirmed on 3 September 1948; (3) The conditions of sale, whereas they were attacked by Barcelona Traction in an application
to set aside and on appeal, in the application of 27 December 1951 for a declaration of nullity
Considering that it is idle for the Spanish Government to criticize the summary character of this containing a formal prayer that the order approving the conditions of sale be declared null and
procedural document, while the suspension decreed by the special judge on account of the void, and in an application of 28 May 1955 (New Documents submitted by the Belgian
Boter motion contesting jurisdiction prevented the party entering opposition from filing, Government, 1969, No. 30); the same challenge was expressed by Sidro in its action of 7
pursuant to Article 326 of the Civil Procedure Code, the additional pleading developing its case; February 1953 (New Documents submitted by the Spanish Government, 1969) and by two
other Belgian shareholders of Barcelona Traction, Mrs. Mathot and Mr. Duvi-vier, in their
Considering that likewise there can be no question of belatedness, since only publication of the application of 26 May 1955 (New Documents submitted by the Belgian Government, 1969, No.
bankruptcy at the domicile of the bankrupt company could have caused the time-limit for 29);
entering opposition to begin to run, and no such publication took place;
8. With Respect to the Exceptional Remedies
Considering that the bankruptcy judgment and the related decisions were moreover also
attacked in the incidental application for a declaration of nullity submitted by Barcelona Traction Considering that the Spanish Government is wrong in raising as an objection to the Belgian
on 5 July 1948 and amplified on 31 July 1948; claim the allegation that Barcelona Traction did not make use of certain exceptional remedies
against the bankruptcy judgment, such as application for revision, action for civil liability and
criminal proceedings against the judges, and application for a hearing by a party in default; (c) there have been no acts of the Spanish judiciary capable of giving rise to international
responsibility on the part of Spain on account of the content of judicial decisions; and
Considering that the first of these remedies could patently not be contemplated, not only on (d) there has not been on the part of the Spanish administrative authorities any violation of an
account of the nature of the bankruptcy judgment, but also because until 1963 there was an international obligation on account of abuse of rights or discriminatory acts;
opposition outstanding against that Judgment and, superabundantly, because Barcelona
Traction, its subsidiaries and co-interested parties would not have been in a position to prove Considering that for these reasons, and any others expounded in the written and oral
the facts of subornation, violence or fraudulent machination which alone could have entitled proceedings, the Belgian claims must be deemed to be inadmissible or unfounded;
such proceedings to be taken;
The Spanish Government presents to the Court its final submissions:
Considering that the remedies of an action for civil liability and criminal proceedings against the
judges were not adequate, since they were not capable of bringing about the annulment or May it please the Court to adjudge and declare that the Belgian Government's claims are
setting aside of the decisions constituting denials of justice; dismissed."

Considering that similarly the remedy of application for a hearing accorded by Spanish law to a ***
party in default was patently in this case neither available to Barcelona Traction nor adequate;
26. As has been indicated earlier, in opposition to the Belgian Application the Spanish
For These Reasons, and any others which have been adduced by the Belgian Government in Government advanced four objections of a preliminary nature. In its Judgment of 24 July 1964
the course of the proceedings, the Court rejected the first and second of these (see paragraph 3 above), and decided to join
the third and fourth to the merits. The latter were, briefly, to the effect that the Belgian
May it please the Court, rejecting any other submissions of the Spanish State which are broader Government lacked capacity to submit any claim in respect of wrongs done to a Canadian
or to a contrary effect, company, even if the shareholders were Belgian, and that local remedies available in Spain had
not been exhausted.
To uphold the claims of the Belgian Government expressed in the submissions [in] the
Reply."[p.30] 27. In the subsequent written and oral proceedings the Parties supplied the Court with
abundant material and information bearing both on the preliminary objections not decided in
The following final submissions were presented 1964 and on the merits of the case. In this connection the Court considers that reference
should be made to the unusual length of the present proceedings, which has been due to the
on behalf of the Spanish Government, [p.31] very long time-limits requested by the Parties for the preparation of their written
pleadings and in addition to their repeated requests for an extension of these limits. The Court
at the hearing of 22 July 1969: did not find that it should refuse these requests and thus impose limitations on the Parties in
the preparation and presentation of the arguments and evidence which they considered
"Considering that the Belgian Government has no jus standi in the present case, either for the necessary. It nonetheless remains convinced of the fact that it is in the interest of the authority
protection of the Canadian Barcelona Traction company or for the protection of alleged Belgian and proper functioning of international justice for cases to be decided without unwarranted
'shareholders' of that company; delay.

Considering that the requirements of the exhaustion of local remedies rule have not been *
satisfied either by the Barcelona Traction company or by its alleged 'shareholders';
28. For the sake of clarity, the Court will briefly recapitulate the claim and identify the entities
Considering that as no violation of an international rule binding on Spain has been established, concerned in it. The claim is presented on behalf of natural and juristic persons, alleged to be
Spain has not incurred any responsibility vis-à-vis the applicant State on any account; and that, Belgian nationals and shareholders in the Barcelona Traction, Light and Power Company,
in particular— Limited. The submissions of the Belgian Government make it clear that the object of its
Application is reparation for damage allegedly caused to these persons by the conduct, said to
(a) Spain is not responsible for any usurpation of jurisdiction on account of the action of its be contrary to international law, of various organs of the Spanish State towards that company
judicial organs; and various other companies in the same group.

(b) the Spanish judicial organs have not violated the rules of international law requiring that 29. In the first of its submissions, more specifically in the Counter-Memorial, the Spanish
foreigners be given access to the courts, that a decision be given on their claims and that their Government contends that the Belgian Application of 1962 seeks, though disguisedly, the same
proceedings for redress should not be subjected to unjustified delays; object as the Application of 1958, i.e., the protection of the Barcelona Traction company as
such, as a separate corporate entity, and that the claim should in consequence be dismissed.
However, in making its new Application, as it has chosen to frame it, the Belgian Government respect of its nationals. The second is that only the party to whom an international obligation is
was only exercising the freedom of action of any State to formulate its claim in its own way. due can bring a claim in respect of its breach." (Reparation for Injuries Suffered in the Service
The Court is therefore bound to examine the claim in accordance with the explicit content of the United Nations, Advisory Opinion, I.C.J. Reports 1949, pp. 181-182.)
imparted to it by the Belgian Government.
In the present case it is therefore essential to establish whether the losses allegedly suffered by
30. The States which the present case principally concerns are Belgium, the national State of Belgian shareholders in Barcelona Traction were the consequence of the violation of obligations
the alleged shareholders, Spain, the State whose organs are alleged to have committed the of which they were the beneficiaries. In other words: has a right of Belgium been violated on
unlawful acts complained of, and Canada, the State under whose laws Barcelona Traction was account [p.33] of its nationals' having suffered infringement of their rights as shareholders in a
incorporated and in whose territory it has its registered office ("head office" in the terms of the company not of Belgian nationality?
by-laws of Barcelona Traction).
36. Thus it is the existence or absence of a right, belonging to Belgium and recognized as such
31. Thus the Court has to deal with a series of problems arising out of a triangular relationship by international law, which is decisive for the problem of Belgium's capacity.
involving the State whose nationals are shareholders in a company incorporated under the laws
of another State, in whose territory it has its registered office; the State whose organs are "This right is necessarily limited to intervention [by a State] on behalf of its own nationals
alleged to have committed against the company unlawful acts prejudicial to both it and its because, in the absence of a special agreement, it is the bond of nationality between the State
shareholders; and the State under whose laws the company is incorporated, and in whose and the individual which alone confers upon the State the right of diplomatic protection, and it
territory it has its registered office. is as a part of the function of diplomatic protection that the right to take up a claim and to
ensure respect for the rules of international law must be envisaged." (Panevezys-Saldutiskis
*[p.32] Railway, Judgment, 1939, P.C.I.J., Series A/B, No. 76, p. 16.)
32. In these circumstances it is logical that the Court should first address itself to what was
originally presented as the subject-matter of the third preliminary objection: namely the It follows that the same question is determinant in respect of Spain's responsibility towards
question of the right of Belgium to exercise diplomatic protection of Belgian shareholders in a Belgium. Responsibility is the necessary corollary of a right. In the absence of any treaty on the
company which is a juristic entity incorporated in Canada, the measures complained of having subject between the Parties, this essential issue has to be decided in the light of the general
been taken in relation not to any Belgian national but to the company itself. rules of diplomatic protection.

33. 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 concerning the treatment to be afforded them. These obligations, however, are 37. In seeking to determine the law applicable to this case, the Court has to bear in mind the
neither absolute nor unqualified. In particular, an essential distinction should be drawn between continuous evolution of international law. Diplomatic protection deals with a very sensitive area
the obligations of a State towards the international community as a whole, and those arising of international relations, since the interest of a foreign State in the protection of its nationals
vis-a-vis another State in the field of diplomatic protection. By their very nature the former are confronts the rights of the territorial sovereign, a fact of which the general law on the subject
the concern of all States. In view of the importance of the rights involved, all States can be held has had to take cognizance in order to prevent abuses and friction. From its origins closely
to have a legal interest in their protection; they are obligations erga omnes. linked with international commerce, diplomatic protection has sustained a particular impact
from the growth of international economic relations, and at the same time from the profound
34. Such obligations derive, for example, in contemporary international law, from the outlawing transformations which have taken place in the economic life of nations. These latter changes
of acts of aggression, and of genocide, as also from the principles and rules concerning the have given birth to municipal institutions, which have transcended frontiers and have begun to
basic rights of the human person, including protection from slavery and racial discrimination. exercise considerable influence on international relations. One of these phenomena which has a
Some of the corresponding rights of protection have entered into the body of general particular bearing on the present case is the corporate entity.
international law (Reservations to the Convention on the Prevention and Punishment of the
Crime of Genocide, Advisory Opinion, I.C.J. Reports 1951, p. 23); others are conferred by 38. In this field international law is called upon to recognize institutions of municipal law that
international instruments of a universal or quasi-universal character. have an important and extensive role in the international field. This does not necessarily imply
drawing any analogy between its own institutions and those of municipal law, nor does it
35. Obligations the performance of which is the subject of diplomatic protection are not of the amount to making rules of international law dependent upon categories of municipal law. All it
same category. It cannot be held, when one such obligation in particular is in question, in a means is that international law has had to recognize the corporate entity as an institution
specific case, that all States have a legal interest in its observance. In order to bring a claim in created by States in a domain essentially within their domestic jurisdiction. This in turn requires
respect of the breach of such an obligation, a State must first establish its right to do so, for the that, whenever legal issues arise concerning the rights of States with regard to the treat [p. 34]
rules on the subject rest on two suppositions: ment of companies and shareholders, as to which rights international law has not established
its own rules, it has to refer to the relevant rules of municipal law. Consequently, in view of the
"The first is that the defendant State has broken an obligation towards the national State in relevance to the present case of the rights of the corporate entity and its shareholders under
municipal law, the Court must devote attention to the nature and interrelation of those rights. safety of investment, high dividends or capital appreciation— or a combination of two or more
of these. Whichever it is, it does not alter the legal status of the corporate entity or affect the
* rights of the shareholder. In any event he is bound to take account of the risk of reduced
dividends, capital depreciation or even loss, resulting from ordinary commercial hazards or from
39. Seen in historical perspective, the corporate personality represents a development brought prejudice caused to the company by illegal treatment of some kind.
about by new and expanding requirements in the economic field, an entity which in particular
allows of operation in circumstances which exceed the normal capacity of individuals. As such it *
has become a powerful factor in the economic life of nations. Of this, municipal law has had to
take due account, whence the increasing volume of rules governing the creation and operation 44. Notwithstanding the separate corporate personality, a wrong done to the company
of corporate entities, endowed with a specific status. These entities have rights and obligations frequently causes prejudice to its shareholders. But the mere fact that damage is sustained by
peculiar to themselves. both company and shareholder does not imply that both are entitled to claim compensation.
Thus no legal conclusion can be drawn from the fact that the same event caused damage
40. There is, however, no need to investigate the many different forms of legal entity provided simultaneously affecting several natural or juristic persons. Creditors do not have any right to
for by the municipal laws of States, because the Court is concerned only with that exemplified claim compensation from a person who, by wronging their debtor, causes them loss. In such
by the company involved in the present case: Barcelona Traction—a limited liability company cases, no doubt, the interests of the aggrieved are affected, but not their rights. Thus whenever
whose capital is represented by shares. There are, indeed, other associations, whatever the a shareholder's interests are harmed by an act done to the company, it is to the latter that he
name attached to them by municipal legal systems, that do not enjoy independent corporate must look to institute appropriate action; for although two separate entities may have suffered
personality. The legal difference between the two kinds of entity is that for the limited liability from the same wrong, it is only one entity whose rights have been infringed.
company it is the overriding tie of legal personality which is determinant; for the other
associations, the continuing autonomy of the several members. 45. However, it has been argued in the present case that a company represents purely a means
of achieving the economic purpose of its members, namely the shareholders, while they
41. Municipal law determines the legal situation not only of such limited liability companies but themselves constitute in fact the reality behind it. It has furthermore been repeatedly
also of those persons who hold shares in them. Separated from the company by numerous emphasized [p.36] that there exists between a company and its shareholders a relationship
barriers, the shareholder cannot be identified with it. The concept and structure of the company describable as a community of destiny. The alleged acts may have been directed at the
are founded on and determined by a firm distinction between the separate entity of the company and not the shareholders, but only in a formal sense: in reality, company and
company and that of the shareholder, each with a distinct set of rights. The separation of shareholders are so closely interconnected that prejudicial acts committed against the former
property rights as between company and shareholder is an important manifestation of this necessarily wrong the latter; hence any acts directed against a company can be conceived as
distinction. So long as the company is in existence the shareholder has no right to the corporate directed against its shareholders, because both can be considered in substance, i.e., from the
assets. economic viewpoint, identical. Yet even if a company is no more than a means for its
shareholders to achieve their economic purpose, so long as it is in esse it enjoys an
42. It is a basic characteristic of the corporate structure that the company alone, through its independent existence. Therefore the interests of the shareholders are both separable and
directors or management acting in its name, can take action in respect of matters that are of a indeed separated from those of the company, so that the possibility of their diverging cannot be
corporate character. The underlying justification for this is that, in seeking to serve its own best denied.
interests, the company will serve those of the shareholder too. Ordinarily, no individual
shareholder can take legal steps, either in the[p.35] name of the company or in his own name. 46. It has also been contended that the measures complained of, although taken with respect
If the shareholders disagree with the decisions taken on behalf of the company they may, in to Barcelona Traction and causing it direct damage, constituted an unlawful act vis-à-vis
accordance with its articles or the relevant provisions of the law, change them or replace its Belgium, because they also, though indirectly, caused damage to the Belgian shareholders in
officers, or take such action as is provided by law. Thus to protect the company against abuse Barcelona Traction. This again is merely a different way of presenting the distinction between
by its management or the majority of shareholders, several municipal legal systems have injury in respect of a right and injury to a simple interest. But, as the Court has indicated,
vested in shareholders (sometimes a particular number is specified) the right to bring an action evidence that damage was suffered does not ipso facto justify a diplomatic claim. Persons
for the defence of the company, and conferred upon the minority of shareholders certain rights suffer damage or harm in most varied circumstances. This in itself does not involve the
to guard against decisions affecting the rights of the company vis-á-vis its management or obligation to make reparation. Not a mere interest affected, but solely a right infringed involves
controlling shareholders. Nonetheless the shareholders' rights in relation to the company and its responsibility, so that an act directed against and infringing only the company's rights does not
assets remain limited, this being, moreover, a corollary of the limited nature of their liability. involve responsibility towards the shareholders, even if their interests are affected.

43. At this point the Court would recall that in forming a company, its promoters are guided by 47. The situation is different if the act complained of is aimed at the direct rights of the
all the various factors involved, the advantages and disadvantages of which they take into shareholder as such. It is well known that there are rights which municipal law confers upon the
account. So equally does a shareholder, whether he is an original subscriber of capital or a latter distinct from those of the company, including the right to any declared dividend, the right
subsequent purchaser of the company's shares from another shareholder. He may be seeking to attend and vote at general meetings, the right to share in the residual assets of the company
on liquidation. Whenever one of his direct rights is infringed, the shareholder has an vested with a right, whereas no such right is specifically provided for the shareholder in respect
independent right of action. On this there is no disagreement between the Parties. But a of those acts. Thus the position of the company rests on a positive rule of both municipal and
distinction must be drawn between a direct infringement of the shareholder's rights, and international law. As to the shareholder, while he has certain rights expressly provided for him
difficulties or financial losses to which he may be exposed as the result of the situation of the by municipal law as referred to in paragraph 42 above, appeal can, in the circumstances of the
company. present case, only be made to the silence of international law. Such silence scarcely admits of
interpretation in favour of the shareholder.
48. The Belgian Government claims that shareholders of Belgian nationality suffered damage in
consequence of unlawful acts of the Spanish authorities and, in particular, that the Barcelona 53. It is quite true, as was recalled in the course of oral argument in the present case, that
Traction shares, though they did not cease to exist, were emptied of all real economic content. concurrent claims are not excluded in the case of a person who, having entered the service of
It accordingly contends that the shareholders had an [p.37] independent right to redress, an international organization and retained his nationality, enjoys simultaneously the right to be
notwithstanding the fact that the acts complained of were directed against the company as protected by his national State and the right to be protected by the organization to which he
such. Thus the legal issue is reducible to the question of whether it is legitimate to identify an belongs. This however is a case of one person in possession of two separate bases of
attack on company rights, resulting in damage to shareholders, with the violation of their direct protection, each of which is valid (Reparation for Injuries Suffered in the Service of the United
rights. Nations, Advisory Opinion, I.C.J. Reports 1949, p. 185). There is no analogy between such a
situation and that of foreign shareholders in a company which has been the victim of a violation
49. The Court has noted from the Application, and from the reply given by Counsel on 8 July of international law which has caused them damage.
1969, that the Belgian Government did not base its claim on an infringement of the direct rights
of the shareholders. Thus it is not open to the Court to go beyond the claim as formulated by 54. Part of the Belgian argument is founded on an attempt to assimilate interests to rights,
the Belgian Government and it will not pursue its examination of this point any further. relying on the use in many treaties and other instruments of such expressions as property,
rights and interests. This is not, however, conclusive. Property is normally protected by law.
* Rights are ex hypothesi protected by law, otherwise they would not be rights. According to the
Belgian Government, interests, although distinct from rights, are also protected by the
50. In turning now to the international legal aspects of the case, the Court must, as already aforementioned conventional rules. The Court is of the opinion that, for the purpose of
indicated, start from the fact that the present case essentially involves factors derived from interpreting the general rule of international law concerning diplomatic protection, which is its
municipal law—the distinction and the community between the company and the shareholder— task, it has no need to determine the meaning of the term interests in the conventional rules, in
which the Parties, however widely their interpretations may differ, each take as the point of other words to determine whether by this term the conventional rules refer to rights rather than
departure of their reasoning. If the Court were to decide the case in disregard of the relevant simple interests.
institutions of municipal law it would, without justification, invite serious legal difficulties. It
would lose touch with reality, for there are no corresponding institutions of international law to *
which the Court could resort. Thus the Court has, as indicated, not only to take cognizance of 55. The Court will now examine other grounds on which it is conceivable that the submission by
municipal law but also to refer to it. It is to rules generally accepted by municipal legal systems the Belgian Government of a claim on behalf of shareholders in Barcelona Traction may be
which recognize the limited company whose capital is represented by shares, and not to the justified.
municipal law of a particular State, that international law refers. In referring to such rules, the
Court cannot modify, still less deform them. 56. For the same reasons as before, the Court must here refer to municipal law. Forms of
incorporation and their legal personality have[p.39] sometimes not been employed for the sole
51. On the international plane, the Belgian Government has advanced the proposition that it is purposes they were originally intended to serve; sometimes the corporate entity has been
inadmissible to deny the shareholders' national State a right of diplomatic protection merely on unable to protect the rights of those who entrusted their financial resources to it; thus
the ground that another State possesses a corresponding right in respect of the company itself. inevitably there have arisen dangers of abuse, as in the case of many other institutions of law.
In strict logic and law this formulation of the Belgian claim to jus standi assumes the existence Here, then, as elsewhere, the law, confronted with economic realities, has had to provide
of the very right that requires demonstration. In fact the Belgian Government has repeatedly protective measures and remedies in the interests of those within the corporate entity as well
stressed that there exists no rule of international law which would deny the national State of as of those outside who have dealings with it: the law has recognized that the independent
the shareholders the right of diplomatic protection for the purpose of seeking redress pursuant existence of the legal entity cannot be treated as an absolute. It is in this context that the
to unlawful acts committed by another State against the company in which they hold shares. process of "lifting the corporate veil" or "disregarding the legal entity" has been found justified
This, by emphasizing the absence of any express denial of the right, conversely implies the and equitable in certain circumstances or for certain purposes. The wealth of practice already
admission that there is no rule of international law which expressly confers such a right on the accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to
shareholders' national State.[p.38] prevent the misuse of the privileges of legal personality, as in certain cases of fraud or
malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion
52. International law may not, in some fields, provide specific rules in particular cases. In the of legal requirements or of obligations.
concrete situation, the company against which allegedly unlawful acts were directed is expressly
57. Hence the lifting of the veil is more frequently employed from without, in the interest of
those dealing with the corporate entity. However, it has also been operated from within, in the *
interest of—among others—the shareholders, but only in exceptional circumstances.
64. The Court will now consider whether there might not be, in the present case, other special
58. In accordance with the principle expounded above, the process of lifting the veil, being an circumstances for which the general rule might not take effect. In this connection two particular
exceptional one admitted by municipal law in respect of an institution of its own making, is situations must be studied: the case of the company having ceased to exist and the case of the
equally admissible to play a similar role in international law. It follows that on the international company's national State lacking capacity to take action on its behalf.
plane also there may in principle be special circumstances which justify the lifting of the veil in
the interest of shareholders. 65. As regards the first of these possibilities the Court observes that the Parties have put
forward conflicting interpretations of the present situation of Barcelona Traction. There can,
* however, be no question but that Barcelona Traction has lost all its assets in Spain, and was
placed in receivership in Canada, a receiver and manager having been appointed. It is common
59. Before proceeding, however, to consider whether such circumstances exist in the present ground that from the economic viewpoint the company has been entirely paralyzed. It has been
case, it will be advisable to refer to two specific cases involving encroachment upon the legal deprived of all its Spanish sources of income, and the Belgian Government has asserted that
entity, instances of which have been cited by the Parties. These are: first, the treatment of the company [p.41] could no longer find the funds for its legal defence, so that these had to be
enemy and allied property, during and after the First and Second World Wars, in peace treaties supplied by the shareholders.
and other international instruments; secondly, the treatment of foreign property consequent
upon the nationalizations carried out in recent years by many States. 66. It cannot however, be contended that the corporate entity of the company has ceased to
exist, or that it has lost its capacity to take corporate action. It was free to exercise such
60. With regard to the first, enemy-property legislation was an instrument of economic warfare, capacity in the Spanish courts and did in fact do so. It has not become incapable in law of
aimed at denying the enemy the advantages to be derived from the anonymity and separate defending its own rights and the interests of the shareholders. In particular, a precarious
personality of corporations. Hence the lifting of the veil was regarded as justified ex necessitate financial situation cannot be equated with the demise of the corporate entity, which is the
and was extended to all entities which were tainted with enemy character, even the nationals of hypothesis under consideration: the company's status in law is alone relevant, and not its
the State enacting the legislation. The provisions of the peace treaties had a very specific economic condition, nor even the possibility of its being "practically defunct"—a description on
function: to protect allied property, and to seize and pool enemy property with a view to which argument has been based but which lacks all legal precision. Only in the event of the
covering reparation [p.40] claims. Such provisions are basically different in their rationale from legal demise of the company are the shareholders deprived of the possibility of a remedy
those normally applicable. available through the company; it is only if they became deprived of all such possibility that an
independent right of action for them and their government could arise.
61. Also distinct are the various arrangements made in respect of compensation for the
nationalization of foreign property. Their rationale too, derived as it is from structural changes 67. In the present case, Barcelona Traction is in receivership in the country of incorporation.
in a State's economy, differs from that of any normally applicable provisions. Specific Far from implying the demise of the entity or of its rights, this much rather denotes that those
agreements have been reached to meet specific situations, and the terms have varied from rights are preserved for so long as no liquidation has ensued. Though in receivership, the
case to case. Far from evidencing any norm as to the classes of beneficiaries of compensation, company continues to exist. Moreover, it is a matter of public record that the company's shares
such arrangements are sui generis and provide no guide in the present case. were quoted on the stock-market at a recent date.

62. Nevertheless, during the course of the proceedings both Parties relied on international 68. The reason for the appointment in Canada not only of a receiver but also of a manager was
instruments and judgments of international tribunals concerning these two specific areas. It explained as follows:
should be clear that the developments in question have to be viewed as distinctive processes,
arising out of circumstances peculiar to the respective situations. To seek to draw from them "In the Barcelona Traction case it was obvious, in view of the Spanish bankruptcy order of 12
analogies or conclusions held to be valid in other fields is to ignore their specific character as February 1948, that the appointment of only a receiver would be useless, as positive steps
lex specialis and hence to court error. would have to be taken if any assets seized in the bankruptcy in Spain were to be recovered."
(Hearing of 2 July 1969.)
63. The Parties have also relied on the general arbitral jurisprudence which has accumulated in
the last half-century. However, in most cases the decisions cited rested upon the terms of In brief, a manager was appointed in order to safeguard the company's rights; he has been in a
instruments establishing the jurisdiction of the tribunal or claims commission and determining position directly or indirectly to uphold them. Thus, even if the company is limited in its activity
what rights might enjoy protection; they cannot therefore give rise to generalization going after being placed in receivership, there can be no doubt that it has retained its legal capacity
beyond the special circumstances of each case. Other decisions, allowing or disallowing claims and that the power to exercise it is vested in the manager appointed by the Canadian courts.
by way of exception, are not, in view of the particular facts concerned, directly relevant to the The Court is thus not confronted with the first hypothesis contemplated in paragraph 64, and
present case. need not pronounce upon it.
 73. Both Governments acted at certain stages in close co-operation with the Canadian
* Government. An agreement was reached in 1950 on the setting-up of an independent
committee of experts. While the Belgian and Canadian Governments contemplated a committee
69. The Court will now turn to the second possibility, that of the lack of capacity of the composed of Belgian, Canadian and Spanish members, the Spanish Government suggested a
company's national State to act on its behalf. The first question which must be asked here is committee composed of British, Canadian and Spanish members. This was agreed to by the
whether Canada—the third apex of [p.42] the triangular relationship—is, in law, the national Canadian and United Kingdom Governments, and the task of the committee was, in particular,
State of Barcelona Traction. to establish the monies imported into Spain by Barcelona Traction or any of its subsidiaries, to
determine and appraise the materials and services brought into the country, to determine and
70. In allocating corporate entities to States for purposes of diplomatic protection, international appraise the amounts withdrawn from Spain by Barcelona Traction or any of its subsidiaries,
law is based, but only to a limited extent, on an analogy with the rules governing the nationality and to compute the profits earned in Spain by Barcelona Traction or any of its subsidiaries and
of individuals. The traditional rule attributes the right of diplomatic protection of a corporate the amounts susceptible of being withdrawn from the country at 31 December 1949.
entity to the State under the laws of which it is incorporated and in whose territory it has its
registered office. These two criteria have been confirmed by long practice and by numerous 74. As to the Belgian Government, its earlier action was also undertaken in close co-operation
international instruments. This notwithstanding, further or different links are at times said to be with the Canadian Government. The Belgian Government admitted the Canadian character of
required in order that a right of diplomatic protection should exist. Indeed, it has been the the company in the course of the present proceedings. It explicitly stated that Barcelona
practice of some States to give a company incorporated under their law diplomatic protection Traction was a company of neither Spanish nor Belgian nationality but a Canadian company
solely when it has its seat (siege social) or management or centre of control in their territory, or incorporated in Canada. The Belgian Government has even conceded that it was not concerned
when a majority or a substantial proportion of the shares has been owned by nationals of the with the injury suffered by Barcelona Traction itself, since that was Canada's affair.
State concerned. Only then, it has been held, does there exist between the corporation and the
State in question a genuine connection of the kind familiar from other branches of international 75. The Canadian Government itself, which never appears to have doubted its right to intervene
law. However, in the particular field of the diplomatic protection of corporate entities, no on the company's behalf, exercised the protection of Barcelona Traction by diplomatic
absolute test of the "genuine connection" has found general acceptance. Such tests as have representation for a number of years, in particular by its note of 27 March 1948, in which it
been applied are of a relative nature, and sometimes links with one State have had to be alleged that a denial of justice had been committed in respect of the Barcelona Traction, Ebro
weighed against those with another. In this connection reference has been made to the and National Trust companies, and requested that the bankruptcy judgment be cancelled. It
Nottebohm case. In fact the Parties made frequent reference to it in the course of the later invoked the Anglo-Spanish treaty of 1922 and the agreement of 1924, which applied to
proceedings. However, given both the legal and factual aspects of protection in the present Canada. Further Canadian notes were addressed to the Spanish Government in 1950, 1951 and
case the Court is of the opinion that there can be no analogy with the issues raised or the 1952. Further approaches were made in 1954, and in 1955 the Canadian Government renewed
decision given in that case. the expression of its deep interest in the affair of Barcelona Traction and its Canadian
subsidiaries.
71. In the present case, it is not disputed that the company was incorporated in Canada and
has its registered office in that country. The incorporation of the company under the law of 76. In sum, the record shows that from 1948 onwards the Canadian Government made to the
Canada was an act of free choice. Not only did the founders of the company seek its Spanish Government numerous representations which cannot be viewed otherwise than as the
incorporation under Canadian law but it has remained under that law for a period of over 50 exercise of diplomatic [p.44] protection in respect of the Barcelona Traction company.
years. It has maintained in Canada its registered office, its accounts and its share registers. Therefore this was not a case where diplomatic protection was refused or remained in the
Board meetings were held there for many years; it has been listed in the records of the sphere of fiction. It is also clear that over the whole period of its diplomatic activity the
Canadian tax authorities. Thus a close and permanent connection has been established, Canadian Government proceeded in full knowledge of the Belgian attitude and activity.
fortified by the passage of over half a century. This connection is in no way weakened by the
fact that the company engaged from the very outset in commercial activities outside Canada, *
for that was its declared object. Barcelona Traction's links with Canada are thus manifold.
77. It is true that at a certain point the Canadian Government ceased to act on behalf of
72. Furthermore, the Canadian nationality of the company has received general recognition. Barcelona Traction, for reasons which have not been fully revealed, though a statement made
Prior to the institution of proceedings before the Court, three other governments apart from in a letter of 19 July 1955 by the Canadian Secretary of State for External Affairs suggests that
that of Canada (those of the United Kingdom, the United States and Belgium) made representa- it felt the matter should be settled by means of private negotiations. The Canadian Government
[p.43] has nonetheless retained its capacity to exercise diplomatic protection; no legal impediment has
tions concerning the treatment accorded to Barcelona Traction by the Spanish authorities. The prevented it from doing so: no fact has arisen to render this protection impossible. It has
United Kingdom Government intervened on behalf of bondholders and of shareholders. Several discontinued its action of its own free will.
representations were also made by the United States Government, but not on behalf of the
Barcelona Traction company as such. 78. The Court would here observe that, within the limits prescribed by international law, a State
may exercise diplomatic protection by whatever means and to whatever extent it thinks fit, for
it is its own right that the State is asserting. Should the natural or legal persons on whose 84. Though, having regard to the character of the case, the question of Canada's right has not
behalf it is acting consider that their rights are not adequately protected, they have no remedy been before it, the Court has considered it necessary to clarify this issue.
in international law. All they can do is to resort to municipal law, if means are available, with a
view to furthering their cause or obtaining redress. The municipal legislator may lay upon the *
State an obligation to protect its citizens abroad, and may also confer upon the national a right
to demand the performance of that obligation, and clothe the right with corresponding 85. The Court will now examine the Belgian claim from a different point of view, disregarding
sanctions. However, all these questions remain within the province of municipal law and do not municipal law and relying on the rule that in inter-State relations, whether claims are made on
affect the position internationally. behalf of a State's national or on behalf of the State itself, they are always the claims of the
[p.46]
79. The State must be viewed as the sole judge to decide whether its protection will be State. As the Permanent Court said,
granted, to what extent it is granted, and when it will cease. It retains in this respect a
discretionary power the exercise of which may be determined by considerations of a political or "The question, therefore, whether the . . . dispute originates in an injury to a private interest,
other nature, unrelated to the particular case. Since the claim of the State is not identical with which in point of fact is the case in many international disputes, is irrelevant from this
that of the individual or corporate person whose cause is espoused, the State enjoys complete standpoint." (Mavrom-matis Palestine Concessions, Judgment No. 2, 1924, P.C.I.J., Series A,
freedom of action. Whatever the reasons for any change of attitude, the fact cannot in itself No. 2, p. 12. See also Nottebohm, Second Phase, Judgment, I.C.J. Reports 1955, p. 24.)
constitute a justification for the exercise of diplomatic protection by another government, unless 86. Hence the Belgian Government would be entitled to bring a claim if it could show that one
there is some independent and otherwise valid ground for that. of its rights had been infringed and that the acts complained of involved the breach of an
international obligation arising out of a treaty or a generalrule of law. The opinion has been
80. This cannot be regarded as amounting to a situation where a violation of law remains expressed that a claim can accordingly be made when investments by a State's nationals
without remedy: in short, a legal vacuum.[p. 45]There is no obligation upon the possessors of abroad are thus prejudicially affected, and that since such investments are part of a State's
rights to exercise them. Sometimes no remedy is sought, though rights are infringed. To equate national economic resources, any prejudice to them directly involves the economic interest of
this with the creation of a vacuum would be to equate a right with an obligation. the State.

81. The cessation by the Canadian Government of the diplomatic protection of Barcelona 87. Governments have been known to intervene in such circumstances not only when their
Traction cannot, then, be interpreted to mean that there is no remedy against the Spanish interests were affected, but also when they were threatened. However, it must be stressed that
Government for the damage done by the allegedly unlawful acts of the Spanish authorities. It is this type of action is quite different from and outside the field of diplomatic protection. When a
not a hypothetical right which was vested in Canada, for there is no legal impediment State admits into its territory foreign investments or foreign nationals it is, as indicated in
preventing the Canadian Government from protecting Barcelona Traction. Therefore there is no paragraph 33, bound to extend to them the protection of the law. However, it does not thereby
substance in the argument that for the Belgian Government to bring a claim before the Court become an insurer of that part of another State's wealth which these investments represent.
represented the only possibility of obtaining redress for the damage suffered by Barcelona Every investment of this kind carries certain risks. The real question is whether a right has been
Traction and, through it, by its shareholders. violated, which right could only be the right of the State to have its nationals enjoy a certain
treatment guaranteed by general international law, in the absence of a treaty applicable to the
82. Nor can the Court agree with the view that the Canadian Government had of necessity to particular case. On the other hand it has been stressed that it must be proved that the
interrupt the protection it was giving to Barcelona Traction, and to refrain from pursuing it by investment effectively belongs to a particular economy. This is, as it is admitted, sometimes
means of other procedures, solely because there existed no link of compulsory jurisdiction very difficult, in particular where complex undertakings are involved. Thus the existing concrete
between Spain and Canada. International judicial proceedings are but one of the means test would be replaced by one which might lead to a situation in which no diplomatic protection
available to States in pursuit of their right to exercise diplomatic protection (Reparation for could be exercised, with the consequence that an unlawful act by another State would remain
Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J. Reports 1949, p. without remedy.
178). The lack of a jurisdictional link cannot be regarded either in this or in other fields of
international law as entailing the non-existence of a right. 88. It follows from what has already been stated above that, where it is a question of an
unlawful act committed against a company representing foreign capital, the general rule of
83. The Canadian Government's right of protection in respect of the Barcelona Traction international law authorizes the national State of the company alone to make a claim.
company remains unaffected by the present proceedings. The Spanish Government has never
challenged the Canadian nationality of the company, either in the diplomatic correspondence 89. Considering the important developments of the last half-century, the growth of foreign
with the Canadian Government or before the Court. Moreover it has unreservedly recognized investments and the expansion of the international activities of corporations, in particular of
Canada as the national State of Barcelona Traction in both written pleadings and oral holding companies, which are [p.47] often multinational, and considering the way in which the
statements made in the course of the present proceedings. Consequently, the Court considers economic interests of States have proliferated, it may at first sight appear surprising that the
that the Spanish Government has not questioned Canada's right to protect the company. evolution of law has not gone further and that no generally accepted rules in the matter have
crystallized on the international plane. Nevertheless, a more thorough examination of the facts
shows that the law on the subject has been formed in a period characterized by an intense This hypothesis does not correspond to the circumstances of the present case.
conflict of systems and interests. It is essentially bilateral relations which have been concerned,
relations in which the rights of both the State exercising diplomatic protection and the State in 94. In view, however, of the discretionary nature of diplomatic protection, considerations of
respect of which protection is sought have had to be safeguarded. Here as elsewhere, a body of equity cannot require more than the possibility for some protector State to intervene, whether it
rules could only have developed with the consent of those concerned. The difficulties be the national State of the company, by virtue of the general rule mentioned above, or, in a
encountered have been reflected in the evolution of the law on the subject. secondary capacity, the national State of the shareholders who claim protection. In this
connection, account should also be taken of the practical effects of deducing from
90. Thus, in the present state of the law, the protection of shareholders requires that recourse considerations of equity any broader right of protection for the national State of the
be had to treaty stipulations or special agreements directly concluded between the private shareholders. It must first of all be observed that it would be difficult on an equitable basis to
investor and the State in which the investment is placed. States ever more frequently provide make distinctions according to any quantitative test: it would seem that the owner of 1 per
for such protection, in both bilateral and multilateral relations, either by means of special cent. and the owner of 90 per cent. of the share-capital should have the same possibility of
instruments or within the framework of wider economic arrangements. Indeed, whether in the enjoying the benefit of diplomatic protection. The protector State may, of course, be disinclined
form of multilateral or bilateral treaties between States, or in that of agreements between to take up the case of the single small shareholder, but it could scarcely be denied the right to
States and companies, there has since the Second World War been considerable development do so in the name of equitable considerations. In that field, protection by the national State of
in the protection of foreign investments. The instruments in question contain provisions as to the shareholders can hardly be graduated according to the absolute or relative size of the
jurisdiction and procedure in case of disputes concerning the treatment of investing companies shareholding involved.
by the States in which they invest capital. Sometimes companies are themselves vested with a
direct right to defend their interests against States through prescribed procedures. No such 95. The Belgian Government, it is true, has also contended that as high a proportion as 88 per
instrument is in force between the Parties to the present case. cent. of the shares in Barcelona Traction belonged to natural or juristic persons of Belgian
nationality, and it has used this as an argument for the purpose not only of determining the
91. With regard more particularly to human rights, to which reference has already been made amount of the damages which it claims, but also of establishing its right of action on behalf of
in paragraph 34 of this Judgment, it should be noted that these also include protection against the Belgian shareholders. Nevertheless, this does[p.49] not alter the Belgian Government's
denial of justice. However, on the universal level, the instruments which embody human rights position, as expounded in the course of the proceedings, which implies, in the last analysis, that
do not confer on States the capacity to protect the victims of infringements of such rights it might be sufficient for one single share to belong to a national of a given State for the latter
irrespective of their nationality. It is therefore still on the regional level that a solution to this to be entitled to exercise its diplomatic protection.
problem has had to be sought; thus, within the Council of Europe, of which Spain is not a
member, the problem of admissibility encountered by the claim in the present case has been 96. The Court considers that the adoption of the theory of diplomatic protection of shareholders
resolved by the European Convention on Human Rights, which entitles each State which is a as such, by opening the door to competing diplomatic claims, could create an atmosphere of
party to the Convention to lodge a complaint against any other contracting State for violation of confusion and insecurity in international economic relations. The danger would be all the
the Convention, irrespective of the nationality of the victim. greater inasmuch as the shares of companies whose activity is international are widely
scattered and frequently change hands. It might perhaps be claimed that, if the right of
*[p.48] protection belonging to the national States of the shareholders were considered as only
secondary to that of the national State of the company, there would be less danger of
92. Since the general rule on the subject does not entitle the Belgian Government to put difficulties of the kind contemplated. However, the Court must state that the essence of a
forward a claim in this case, the question remains to be considered whether nonetheless, as the secondary right is that it only comes into existence at the time when the original right ceases to
Belgian Government has contended during the proceedings, considerations of equity do not exist. As the right of protection vested in the national State of the company cannot be regarded
require that it be held to possess a right of protection. It is quite true that it has been as extinguished because it is not exercised, it is not possible to accept the proposition that in
maintained that, for reasons of equity, a State should be able, in certain cases, to take up the case of its non-exercise the national States of the shareholders have a right of protection
protection of its nationals, shareholders in a company which has been the victim of a violation secondary to that of the national State of the company. Furthermore, study of factual situations
of international law. Thus a theory has been developed to the effect that the State of the in which this theory might possibly be applied gives rise to the following observations.
shareholders has a right of diplomatic protection when the State whose responsibility is invoked
is the national State of the company. Whatever the validity of this theory may be, it is certainly 97. The situations in which foreign shareholders in a company wish to have recourse to
not applicable to the present case, since Spain is not the national State of Barcelona Traction. diplomatic protection by their own national State may vary. It may happen that the national
State of the company simply refuses to grant it its diplomatic protection, or that it begins to
93. On the other hand, the Court considers that, in the field of diplomatic protection as in all exercise it (as in the present case) but does not pursue its action to the end. It may also
other fields of international law, it is necessary that the law be applied reasonably. It has been happen that the national State of the company and the State which has committed a violation
suggested that if in a given case it is not possible to apply the general rule that the right of of international law with regard to the company arrive at a settlement of the matter, by
diplomatic protection of a company belongs to its national State, considerations of equity might agreeing on compensation for the company, but that the foreign shareholders find the
call for the possibility of protection of the shareholders in question by their own national State. compensation insufficient. Now, as a matter of principle, it would be difficult to draw a
distinction between these three cases so far as the protection of foreign shareholders by their result of those acts Spain has incurred international responsibility. On the other side it has been
national State is concerned, since in each case they may have suffered real damage. argued that the activities of Barcelona Traction and its subsidiaries were conducted in violation
Furthermore, the national State of the company is perfectly free to decide how far it is of Spanish law and caused damage to the Spanish economy. If both contentions were
appropriate for it to protect the company, and is not bound to make public the reasons for its substantiated, the truth of the latter would in no way provide justification in respect of the
decision. To reconcile this discretionary power of the company's national State with a right of former. The Court fully appreciates the importance of the legal problems raised by the
protection falling to the shareholders' national State would be particularly difficult when the allegation, which is at the root of the Belgian claim for reparation, concerning the denials of
former State has concluded, with the State which has contravened international law with regard justice allegedly committed by organs of the Spanish State. However, the possession by the
to the company, an agreement granting the company compensation which the foreign Belgian Government of a right of protection is a prerequisite for the examination of these
shareholders find inadequate. If, after such a settlement, the national State of the foreign problems. Since no jus standi before the Court has been established, it is not for the Court in its
shareholders could in its turn put forward [p.50] a claim based on the same facts, this would be Judgment to pronounce upon any other aspect of the case, on which it should take a decision
likely to introduce into the negotiation of this kind of agreement a lack of security which would only if the Belgian Government had a right of protection in respect of its nationals, shareholders
be contrary to the stability which it is the object of international law to establish in international in Barcelona Traction.
relations.
*****
98. It is quite true, as recalled in paragraph 53, that international law recognizes parallel rights
of protection in the case of a person in the service of an international organization. Nor is the 103. Accordingly,
possibility excluded of concurrent claims being made on behalf of persons having dual national-
ity, although in that case lack of a genuine link with one of the two States may be set up The Court
against the exercise by that State of the right of protection. It must be observed, however, that
in these two types of situation the number of possible protectors is necessarily very small, and rejects the Belgian Government's claim by fifteen votes to one, twelve votes of the majority
their identity normally not difficult to determine. In this respect such cases of dual protection being based on the reasons set out in the present Judgment.
are markedly different from the claims to which recognition of a general right of protection of
foreign shareholders by their various national States might give rise. Done in French and in English, the French text being authoritative, at the Peace Palace, The
Hague, this fifth day of February, one thousand nine hundred and seventy, in three copies, one
99. It should also be observed that the promoters of a company whose operations will be of which will be placed in the Archives of the Court and the others transmitted to the
international must take into account the fact that States have, with regard to their nationals, a Government of the Kingdom of Belgium and to the Government of the Spanish State,
discretionary power to grant diplomatic protection or to refuse it. When establishing a company respectively.
in a foreign country, its promoters are normally impelled by particular considerations; it is often
a question of tax or other advantages offered by the host State. It does not seem to be in any (Signed) J.L. Bustamante Y Rivero,
way inequitable that the advantages thus obtained should be balanced by the risks arising from President.
the fact that the protection of the company and hence of its shareholders is thus entrusted to a
State other than the national State of the shareholders. (Signed) S. Aquarone,
Registrar.
100. In the present case, it is clear from what has been said above that Barcelona Traction was [p.52]
never reduced to a position of impotence such that it could not have approached its national
State, Canada, to ask for its diplomatic protection, and that, as far as appeared to the Court,
there was nothing to prevent Canada from continuing to grant its diplomatic protection to JUDGE PETREN AND JUDGE ONYEAMA MAKE THE FOLLOWING JOINT DECLARATION:
Barcelona Traction if it had considered that it should do so.
We agree with the operative provision and the reasoning of the Judgment subject to the
101. For the above reasons, the Court is not of the opinion that, in the particular circumstances following declaration:
of the present case, jus standi is conferred on the Belgian Government by considerations of
equity. With regard to the nationality of Barcelona Traction, the Judgment refers to the existence of
opinions to the effect that the absence of a genuine connection between a company and the
* State claiming the right of diplomatic protection of the company might be set up against the
exercise of such a right. In this context the Judgment also mentions the decision in the
102. In the course of the proceedings, the Parties have submitted a great amount of Nottebohm case to the effect that the absence of a genuine connecting link between a State
documentary and other evidence intended to substantiate [p.51] their respective submissions. and a natural person who has acquired its nationality may be set up against the exercise by
Of this evidence the Court has taken cognizance. It has been argued on one side that unlawful that State of diplomatic protection of the person concerned. The present Judgment then
acts had been com-mitted by the Spanish judicial and administrative authorities, and that as a concludes that given the legal and factual aspects of protection in the present case there can be
no analogy with the issues raised or the decision given in the Nottebohm case. mean that this Court should pronounce on all the legal issues which those questions connote;
but it seems desirable that one of the judges, at least, should examine them, and that is the
Now in the present case the Spanish Government has asserted and the Belgian Government has task I have set myself in this individual opinion." (I.C.J. Reports 1949, p. 39.)
not disputed that, Barcelona Traction having been incorporated under Canadian law and having
its registered office in Toronto, it is of Canadian nationality and Canada is qualified to protect it. I subscribe to this statement, the more so since the legal questions raised by the case which
Canada's right of protection being thus recognized by both Parties to the proceedings, the first has been submitted to the Court cannot but feel the effects of the great renovating movement
question which the Court has to answer within the framework of the third preliminary objection in international law which is evident in the relations between nations and in the activities of
is simply whether, alongside the right of protection pertaining to the national State of a inter-national institutions. The development which the modern world is witnessing affects the
company, another State may have a right of protection of the shareholders of the company who very structures of international law—including the concept of sovereignty—and even its main
are its nationals. This being so, the Court has not in this case to consider the question whether sources, namely treaties, custom and the general principles of law recognized by the nations.
the genuine connection principle is applicable to the diplomatic protection of juristic persons, More than one concept, principle or legal norm of the older classical law has been called into
and, still less, to speculate whether, if it is, valid objections could have been raised against the question anew since international co-operation has become common practice, since law has
exercise by Canada of diplomatic protection of Barcelona Traction. become imbued with morality, and—a point of particular importance—since a considerable
number of States have acquired independence and sovereignty, or have siezed them by main
JUDGE LACHS MAKES THE FOLLOWING DECLARATION: force, and have entered into the world community of nations. Linked to this development,
which it will be necessary to touch upon, to this dynamism of the law which, it has been said, is
I am in full agreement with the reasoning and conclusions of the Judgment, but would wish to a continual creation, is the idea which must be formed of the international responsibility of
add the following observation: States, and its corollary, diplomatic protection, upon which the Court is called upon to
pronounce.
The Court has found, in the light of the relevant elements of law and of fact, that the Applicant,
the Belgian Government, has no capacity in the present case. At the same time it has stated 2. In order to make an exhaustive study of Belgium's jus standi in judicio which had been the
that the Canadian Government's right of protection in respect of the Barcelona Traction subject of a preliminary objection, it was recognized by the Judgment of 24 July 1964 as
company has remained unaffected by the proceedings now closed.[p.53] indispensable to refer to certain points of fact and of law relating to the merits of the case, al-
though jus standi does not thereby lose its character as an objection.
I consider that the existence of this right is an essential premise of the Court's reasoning, and
that its importance is emphasized by the seriousness of the claim and the particular nature of Belgium has however questioned whether, in view of the subject of the [p.287]dispute between
the unlawful acts with which it charges certain authorities of the respondent State. the Parties, which it contends deals only with the conditions and limits of the international
responsibility of a State towards the foreign shareholders in a commercial holding company, it is
President Bustamante Y Rivero, Judges Sir Gerald Fitzmaurice, Tanaka, Jessup, Morelli, Padilla possible to speak of a preliminary objection on this point. In other words, what is being debated
Nervo, Gros and Ammoun append Separate Opinions to the Judgment of the Court. as a preliminary issue is, it is said, international responsibility, rather than diplomatic protection.

Judge ad hoc Riphagen appends a Dissenting Opinion to the Judgment of the Court. In order to reply to this question, it is sufficient to add to the arguments appearing in the
aforementioned Judgment that the right of diplomatic protection, so far as it materializes in a
(Initialled) J. L. B.-R. legal action, is to be distinguished from the substantive right which the applicant State claims to
(Initialled) S. A. have reestablished. The question thus involves the distinction between the subject-matter of
the action and the subject-matter of the right claimed, a distinction about which legal writers
[p.286] are generally in agreement FN1. An objection, considered in opposition to the setting in motion
of a legal action, should not be confused with a defence concerning the right at issue. There
would in fact be an internal contradiction in the fact of confusing two different things in the
SEPARATE OPINION OF JUDGE AMMOUN concept of a claim, namely its admissibility and its validity. Proof that an applicant has the
status required to exercise legal power, or that he has a right entitling him to bring the matter
[Translation] before a court, may, as in the present case, involve raising questions which are not unrelated to
the merits, but it cannot have any influence on the nature of the action, or the nature of the
1. At the beginning of his separate opinion in the Corfu Channel case, Judge A. Alvarez, alluding objection to the exercise thereof.
to the fundamental changes which have taken place in every sphere of human activity in recent
decades, and especially in international affairs and international law, wrote: ---------------------------------------------------------------------------------------------------------------------
FN1 Solus and Perrot, Droit judiciaire privé, Vol. I, pp. 94-107, and the Italian and German
"It is therefore necessary to consider what is the present state of that law. We must examine it writers on Continental law to whom they refer.
in connection with the questions raised by the dispute submitted to the Court. That does not ---------------------------------------------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------------------------------------------
At all events, the joinder of the objection to the merits justifies, so far as this may be
necessary, extending the present study beyond diplomatic protection to include international This situation could however not escape the foresight of the International Court of Justice. Thus
responsibility. the Advisory Opinion which it delivered in 1949, in connection with the reparation for injuries
suffered in the service of the United Nations, must be given its full significance; it stated that:
3. That much having been said, the solution to the problem of jus standi, which calls in "Throughout its history, the development of international law has been influenced by the
question the principle of international responsibility and the rules of diplomatic and judicial requirements of international life FN3”.
protection designed to give effect to that principle, is clearly linked to the overall problem of the
development of modern international law in the face of recent transformations in international ---------------------------------------------------------------------------------------------------------------------
life. This is a burning question of today, the more complex in that it is conditioned by the FN3 I.C.J. Reports 1949, p. 178.
essential needs of various peoples, ever since nations have emerged from dependence with ---------------------------------------------------------------------------------------------------------------------
inter-ests which are manifold and often difficult to reconcile among themselves or with those of
the other nations of the world. This problem must therefore not be lost sight of throughout the This observation is more topical than ever. International life is being influenced by those States
present opinion. which have now rounded out the circle of the community of nations, increasing the number
thereof almost threefold. International law cannot leave out of account the aspirations of the
*** world in which henceforth it has its existence, and it is significant that these States are
manifesting a certain amount of impatience tinged with apprehension.
The radical transformations which have occurred in economic affairs in the last half-century, the We shall see later what their attitude has been with regard to the rules concerning the
constantly increasing expansion which has marked the recent decades in a world undergoing responsibility of States and diplomatic protection.[p.289]
rapid social and political development, and the new problems to which these changes have
given rise, call for a corresponding development of juridical structures. The [p. 288] law, a rigid 4. The problems confronting the world, now that a large-scale political emancipation of the
conservative kind of law, cannot adapt the emerging reality to sacrosanct rules rooted in the dependent peoples has been carried out, are those relating to the establishment of economic
remote past. It must, on the contrary, adapt itself to the imperious needs of an international and social justice and to development. According to one of the great African leaders, President
society which is moving towards universalism; it must adapt itself thereto in order to avoid L. S. Senghor, "legal independence without economic independence is but a new form of
confrontation between peoples, and lest it lose its footing in the upward march of progress dependency, worse than the first because it is less obvious" FN4. The Director-General of FAO
towards better justice and the common aspiration towards the ideals of prosperity and peace. recently warned the world about the dangers of a world-wide famine in the next 24 to 28 years,
unless production is increased in the developing countries. And more recently the Symposium of
It is well known that the established lead taken by facts and events over the law has had to be African archbishops and bishops, which was brought to a close on 1 August 1969 by the
corrected more than once in the past FN2. In the sphere of international law, the adaptation of Sovereign Pontiff, roundly denounced the increase in the riches of some through the
law to factual situations, rendered necessary by the political change which had world-wide exploitation of the poverty of others FN5.
repercussions in the middle of this century, was largely accomplished by the solemn enunciation
of the principles and purposes of the United Nations. The implementation of these has however ---------------------------------------------------------------------------------------------------------------------
been more effective within the political organs of the world Organization than it has been in the FN4 Extract from his address to the United Nations General Assembly in New York on 31
domain of international tribunals where problems have arisen on the legal level as a result of October 1961 (Official documents of the General Assembly, Plenary Meetings, Vol. II, p. 540).
the breach between law and social reality. Thus it is in the interests of justice and of law that See in this connection I. Brownlie, Principles of Public International Law, 1966, p. 485. He
these problems should be approached with a clear vision of the meaning of history and an writes:
overall picture of a world from which no-one should henceforth be excluded, no matter how ". . . The concept of self-determination has been applied in the different context of economic
late he has come on the scene. self-determination."

--------------------------------------------------------------------------------------------------------------------- G. I. Tunkin considers that:

FN2 In Rome, by the intervention of the Praetor whose edict, idealistic in outlook,
supplemented the formalistic quiritary law, which had lagged behind the development of the ". . . respect for State sovereignty finds itself compatible with . .. a de facto dependence of the
quasi-international structures of the Emipire; by the blossoming of Moslem law, freed from all smaller States upon the bigger ones, since their economic dependence means that their
outgrown formalism and all illusory symbolism, which set its seal on the basic transformation of sovereignty is merely formal". (Droit international public, published in co-operation with the
legal concepts in most of the countries under its sway; and nearer to our own day, in the Centre français de la recherche scientifique, p. 237 [Translation by the Registry].)
United Kingdom and those countries which adopted its law, with the institution of equity which
plays an important part in making up for the insufficiencies of the common law; lastly, by the FN5 Le Monde, 2 August 1969.
complete renewal of law in the Socialist countries in order to keep pace with the advent of a Reference may also be made to the conclusions of E. McWhinney who writes:
new ideology and a new way of life which have broken radically with the past.
"It becomes clear that the development and completion of a viable system of international weaker and deprived peoples are factors to be taken into account.
ordre public in the last third of the century will depend to a considerable extent upon the efforts
made to bridge the gap in prosperity that exists between on the one hand the countries of the ***
Soviet bloc and the West, and the Third World on the other" (Latin America, Africa and Asia).
Revue générale de droit international public, 1968, p. 341. [Translation by the Registry]). 5. In this connection, it is essential to stress the trends of Latin-American law and that of Asia
--------------------------------------------------------------------------------------------------------------------- and Africa, and their undeniable influence on the development of traditional international law.

This problem arises particularly in connection with the great economic, commercial and financial It seems indeed that among the principles and norms which have sprung from the regional law
undertakings which have multiplied and grown beyond the confines of their respective countries peculiar to Latin America are the norms and principles whose aim is to protect countries in that
in such a way as to necessitate a parallel development of international law. International law part of the world against the more powerful industrialized States of North America and Europe.
should certainly avoid trying to fit their action into outworn forms; it should work to bring about
a just protection of their interests in the bitter but beneficient struggle of international An Afro-Asian law also seems to be developing as a result of the same preoccupations,
competition FN6. springing from the same causes. In the field of the responsibility of States and of diplomatic
protection, the same points of view have been adopted in the countries of the three continents,
--------------------------------------------------------------------------------------------------------------------- thus initiating a form of co-operation which will not be of slight effect on the renewal of law
FN6 Cf. what was said by Mr. Haroldo Valladão, the then President of the Session of the Institut FN6a.[p.291]
de droit international, referring to—
---------------------------------------------------------------------------------------------------------------------
"the power of the international companies with investments in the developing countries, FN6a This co-operation received an initial implementation, as regards the effect of economic
[which] has given rise to a special treatment for such investments". (Annuaire de l'Institut de facts on international law, at the United Nations Conference on Trade and Development held in
droit international, 1967, II, p. 432 [Translation by the Registry].) Geneva in 1964, where 77 Latin American, African and Asian States resolved to meet and
--------------------------------------------------------------------------------------------------------------------- negotiate through the intermediary of common spokesmen.
---------------------------------------------------------------------------------------------------------------------
On the other hand, the law should be no less concerned with the interests of the countries to
which those powerful undertakings and the companies controlling them—trusts or holding The first reaction to the rules of traditional law came however from the countries of Latin
companies of pyramidal structure—extend their activities, thereby certainly rendering America; witness the vehement speech made by Mr. Seijas, a former Venezuelan minister, at
appreciable [p.290] service to the economy of the host countries, but also exposing that weaker the 1891 Session of the Institut de droit international at Hamburg, which was no mere display
economy to dangers which it ought to be spared. The States of the Third World showed insight of bad temper. Evidence of this too is the appearance of the Calvo Clause, excluding recourse
when they agreed to insert in the 1960 Declaration on the Grant of Independence the to international adjudication in favour of internal remedies, on which the jurists of Latin America
provision: have never compromised, because of their lack of confidence in diplomatic protection as
conceived by traditional law and the practices of western nations. This reaction on the part of
"affirming that peoples may, for their own ends, freely dispose of their natural wealth and the Latin American States would, moreover, explain their opposition from 1948 onwards to the
resources without prejudice to any obligations arising out of international economic co- draft insurance guarantee agreement proposed by the United States, providing for the exercise
operation, based upon the principle of mutual benefit and international law". (UN Doc. A/4684, of diplomatic protection by that power without local remedies having been exhausted FN7.
p. 66.)
---------------------------------------------------------------------------------------------------------------------
One cannot help thinking, in this connection, of the large companies which continue to FN7 Mexico had been forced to agree in the 1923 Convention with the United States not to
undertake the exploitation of the natural resources of the less developed countries, including avail itself of the condition of the prior exhaustion of local remedies.
their agricultural, timber and mineral wealth, their oil production, and also their transport and See in this connection the relevant speeches to the Institut de droit international by Mr. Haroldo
other public or municipal services. An equitable sharing of the profits is mandatory. The Valladáao and Mr. Kamil Yasseen and by Mr. Jiménez de Aréchaga, who rightly points to the
anxieties of the countries whose resources are being exploited by means of foreign technical discrimination which the exclusion of prior recourse to local remedies would entail (Annuaire de
and financial co-operation are deeply felt, as will be seen below in connection with the l'Institut de droit international, 1967, II pp. 431, 432, 435-436).
application of diplomatic protection and its possible extension, as in the present case, to new ---------------------------------------------------------------------------------------------------------------------
situations, with a view to the increased protection of foreign interests.
This attitude on the part of the Hispanic States, which is shared by the Afro-Asian States, is the
The development of international law cannot therefore have as its sole or principal object the more readily understandable if the extra-legal forms and means to which diplomatic protection
protection of foreign nationals and of the international economic activities of the industrialized formerly had recourse are borne in mind. It will be recalled that the claims of great States and
Powers. It must set itself an objective which is more comprehensive and more just, and a more their nationals abroad often led, during the period preceding the renewal of the law consequent
equitable and more humanitarian ideal, in which the material and intangible interests of the upon two world wars and the creation of a means of international adjudication, to acute
conflicts and to acts of deliberate violence going so far as armed intervention and permanent FN11 Cours de droit international [Translation by the Registry from] Fr. trans. by G. Gidel,
occupation FN8, or to demonstrations of force FN9, against which the Drago doctrine, which 1929, p. 522.
was endorsed by the Pan-American Conference of 1906 and has since become one of the basic ---------------------------------------------------------------------------------------------------------------------
principles of Latin American international law, has, since 1926, reacted not without success.
Recourse to force, subject to an offer of arbitration, was nevertheless tolerated by The Hague The development of Latin American thought concerning diplomatic protection and its limits
Peace Conference of 1907, which admitted intervention sub modo by virtue of the Porter must be particularly stressed in the present discussion, on account of the influence which it can
Convention, against which Convention Drago and his Latin American colleagues vainly protested have on the development of that institution. This thought is at present centred on the following
at the Conference. This was not the [p 292] least of the contradictions which attended it, aspects of the problem:
contradictions which bespeak the still predominant influence of the colonialist era. Accordingly,
one is entitled to suspect certain arbitral decisions of having been agreed to or accepted under A. The 20 States of South and Central America all reject the rule laid down by Vatel and
duress, those decisions having been preceded by ultimata or menaces or by a deployment of endorsed by the Permanent Court of International Justice, according to which the right of
force more or less in the spirit of the said Conference, which was struggling to free itself from a diplomatic protection is "to ensure, in the person of its subjects, respect for the rules of
tyrannical tradition FN10. international law". They hold it to be a fiction, which one of their most eminent jurists,[p. 293]
Garcia Robles, has described as "a product of Hegelian influence, resulting from the
--------------------------------------------------------------------------------------------------------------------- expansionism of the nineteenth century"FN12. And all these States, at inter-American
FN8 Occupation of China's western provinces—which brought on the Boxer Rebellion of 1900, conferences, in the writings of publicists, in the positions adopted by governments, are united
of Tunisia from 1881 to 1956, of Egypt from 1882 to 1954 and of Mexico from 1859 to 1866, in their efforts for its elimination, on the understanding that the individual's status as a subject
the conquest of which took the form of the installation of the ephemeral Mexican Empire (P. C. of the law is to be recognized, thus enabling him to seek legal redress himself, and not under
Jessup, A Modern Law of Nations, p. 113). the cloak of his national StateFN12a. But before what tribunal? Before an American regional
FN9 Against more than one Latin American State: Argentina, Paraguay, Mexico, Brazil, Cuba, tribunal. The resolution submitted to the Inter-American Conference at Buenos Aires and
Nicaragua, Colombia, Haiti, the Dominican Republic, Venezuela, etc. The Ottoman Empire was adopted almost unanimously reads: "American legal controversies should be decided by
also an example (referred to in footnote 64 below). American judges . . . and a correct understanding of acts pertaining to the Americas is more
FN10 Of the 44 States which took part in the 1907 Conference, there were only four Asian readily to be obtained by Americans themselves".
States and one African State.
--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------
FN12 At the Third Session of the Inter-American Bar Association, Mr. Garcia Robles won over to
If the Drago doctrine has finally triumphed, and if the Porter Convention, on the insistence of the Latin American cause Mr. F. R. Coudert, the North American President of the Association,
Mexico, expressing Latin American opinion at the Chapultepec Conference in 1945, is now and all its members.
recognized as incompatible with the terms of Article 103 of the United Nations Charter, it is
nevertheless the case that many decisions have not avoided all confusion between reparation FN12a The status of the individual as a subject of the law, which has its supporters outside
sticto sensu, as in private municipal law, and the "satisfaction" demanded by powerful States, America, was to a certain extent recognized in the 1926 award by the Mexican-American
which gives reparation lato sensu the character of a measure aimed at deterrence or Commission in the North American Dredging Company case.
punishment FN10a. This right to punish, which is arrogated to themselves by certain States, ---------------------------------------------------------------------------------------------------------------------
and to which such eminent writers as Bluntschli, Liszt and Fau-chille, as well as a 1927
resolution of the Institut de droit international have lent their authority, seems to have been Since the same causes produce the same effects, the States of the Organization of African Unity
rejected by Anzilotti, who noted that in all forms of reaction against the unlawful act there were wrote into the Addis Ababa Charter the same objective of the creation of a regional tribunal
present ". .. an element of satisfaction and an element of reparation, the notion of punishment FN13.
of the unlawful act and that of reparation for the wrong suffered"FN11. Thus, the opposition of ---------------------------------------------------------------------------------------------------------------------
Latin American or Afro-Asian jurists to the western conception of responsibility and diplomatic FN13 E. McWhinney has pointed out that—
protection is founded not only on memories of a painful past, but also on serious
apprehensions. "there has in the past been a notable reluctance on the part of numerous States, and, in
particular, of the new States, to accept the compulsory jurisdiction of the International Court of
--------------------------------------------------------------------------------------------------------------------- Justice, because those States have felt that the Court would apply the old rules, in the
FN10a See in this connection the report by Mr. Garcia Amador to the 13th Session of the elaboration and development of which they had not participated and a great number of which
International Law Commission. (Yearbook of the I.L.C., 1961, Vol. II, paras. 4 to 6, 17, 26, 53, they regarded as unreasonable or unjust" (op. cit., p. 331 [Translation by the Registry]).
56, 75, 102, 140, 142 and 145.) ---------------------------------------------------------------------------------------------------------------------
See also the dissenting opinion in the Corfu Channel case of Judge Azevedo, who regarded
measures of satisfaction as reminiscent of ultimata of a "mediaeval" nature (I.C.J. Reports
1949, p. 114). The countries of Latin America have gone further still. In 1948 they unanimously adopted a
resolution at Bogota whereby they undertook not to bring a claim before a court of international
jurisdiction, not excluding the International Court of JusticeFN13a. "... the history of the institution of State responsibility was the history of the obstacles placed in
the way of the new Latin American countries—obstacles to the defence of their . . .
--------------------------------------------------------------------------------------------------------------------- independence, to the ownership and development of their resources, and to their social
FN13a"The High Contracting Parties bind themselves not to make diplomatic representations in integration".
order to protect their nationals, or to refer a controversy to a court of international jurisdiction
for that purpose, when the said nationals have had available the means to place their case And he added:
before competent domestic courts of the respective State." (Art. VII of the Pact of Bogota,
1948.) "With State responsibility . . . international rules were established, not merely without reference
--------------------------------------------------------------------------------------------------------------------- to small States but against them FN15."

B. The States of Latin America remain firmly attached to the Calvo Clause, which they habitually ---------------------------------------------------------------------------------------------------------------------
insert in contracts entered into with foreign undertakings. Their constitutions and laws generally FN15 Yearbook of the International Law Commission, 1957, Vol. I, p. 155.
make it compulsory. Their doctrine with regard thereto, founded upon the two principles of ---------------------------------------------------------------------------------------------------------------------
equality between States and non-intervention, was forcefully expressed by Judge Guerrero, a
former President of the Court, in the report which he submitted on behalf of the Subcommittee And Mr. El-Erian, of the United Arab Republic, stressed the twofold consequence of the
set up by the Committee of Experts of the League of Nations to study the responsibility of privileged condition accorded to nationals of Western countries in their relations with the
States. Several non-American countries were not hostile to this point of view. China, Holland countries of Africa or Asia, which on[p295] the one hand had led to the system of capitulations
and Finland were frankly favourable to it.[p294] and on the other afforded a pretext for intervention in the domestic affairs of States FN16.

Finally, the United States, which had found in Borchard a vigorous defender of the thesis that ---------------------------------------------------------------------------------------------------------------------
the individual cannot dispose of a right which, according to Vatelian doctrine, is that of the FN16 Ibid., p. 161. See also S. Prakash Sinha, New Nations and the Law of Nations, pp. 91-93
State and not his own, allowed itself to be won over, with the inauguration of the "good and 140.
neighbour" policy of F. D. Roosevelt, to the doctrine of its southern neighbours FN14. ---------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------- The similarity of the essential views and objectives of the States of the three continents of
FN14 See also the important award in the North American Dredging Company case in 1926 America, Africa and Asia, and the action they are able to take to develop a positive international
between the United States and Mexico, which took a clear step in this direction and has since law of world-wide ambit, will tend to direct them toward a universalist concept of law and bring
become an authoritative precedent. The Calvo Clause was unanimously upheld in order to them back to a system of international adjudication which will no longer be of an exclusive
dismiss the claim, notwithstanding the provisions of the 1923 Treaty exonerating the claimant nature but will, through its effective composition, meet the wishes expressed in the United
from having to exhaust local remedies. The scope of the clause is, however, limited to the Nations Charter, which would have it represent the main legal systems and principal forms of
individual's right and leaves untouched that of the State in the event of a violation of civilization of the world.
international law.
--------------------------------------------------------------------------------------------------------------------- It is in the light of these preliminary considerations that the connected problem of diplomatic
protection and the jus standi of the applicant State should have been approached.
C. The Calvo clause, which on the other side of the Atlantic is regarded merely as a
compromise, was destined to prepare the way for the adoption of the Calvo doctrine, which is 6. It is generally recognized that the attribution of nationality to a company, or the recognition
aimed at nothing less than the abolition of unilateral diplomatic protection in order to substitute of its legal allegiance, on the basis of its siege social or of the law of the place of formation or
for it a protection exercised by the collectivity on the basis of human rights. registration, confer upon the national State of the company, by virtue of a rule of law enshrined
in jurisprudence and of a constant practice FN17, the right to take action for the reparation of
The path towards this unconcealed objective is certainly a long and arduous one; its success damage resulting, to the prejudice of the company, from an international tort.
seems bound up with the progress of mankind towards an inter-American or international
organization less removed than the United Nations from the concept of the Super-State. ---------------------------------------------------------------------------------------------------------------------
FN17 This practice goes back to the beginning of the nineteenth century, when the United
It was the more necessary to recall these features of American law in that other States are Kingdom intervened with the Kingdom of the Two Sicilies on behalf of 19 companies, and it was
treading the same path towards the limitation of diplomatic protection. The States of Africa and endorsed by the Committee of Experts of the League of Nations in 1927. With respect to the
of Asia, since they too have come to participate in international life, share the same concerns,— jurisprudence, in addition to a number of arbitral awards at the turn of the century, see the
as witness the proceedings of the International Law Commission. At its Ninth Session in 1957, Panevezys-Saldutiskis Railway case, P.C.I.J., Series A/B, No. 76, p. 16.
Mr. Padilla Nervo stated that: ---------------------------------------------------------------------------------------------------------------------
 an end to the proceedings, and it is not open to anyone to restore it to life in order to embark
Is it, however, necessary in addition that there should exist between the national State and the upon a new discussion which would not only be obiter dicta, but would be reasoning based
company a link of effectiveness, consisting of a substantial participation in the company by upon an hypothesis which the Court has already rejected, and which would introduce an
national capital or of control of the company's management? Since intervention by a State in internal contradiction into the judgment.
favour of its nationals is a discretionary act, the practice of States which take up a case for their
nationals only on this condition does not give rise to a legal obligation. Furthermore, no less This being my point of view on the problem, my separate opinion will deal only with the legal
than a dozen arbitral awards reported by Mr. J. de Hochepied FN18 have held that the question the solution of which has of itself, to my mind, led to the rejection of Belgium's
nationality of the company alone justified diplomatic intervention. As for those arbitral or Application.
judicial decisions that might be cited in support of the concept of effectiveness or connection
(Canevaro, I'm Alone, Nottebohm cases), they do not amount to precedents affording any 7. The question occasions no difficulty if the members of the company or shareholders
analogy based upon essential factors with the question of the nationality of companies in complain, ut singuli, of direct damage, as is generally the case in municipal law; if, in other
international law. It will be observed in particular that the Nottebohm Judgment had to words, he is injured with respect to his subjective interests, as distinct from those of the
determine a conflict of a particular kind, that of dual nationality. It was based upon concrete company: e.g., in
facts peculiar to the situation of the former German citizen Nottebohm and his endeavours to [p 297] the case of individual despoilment or discriminatory measures. He is then in the position
"substitute for his status as a national [p 296] of a belligerent State that of a national of a of any individual claiming the diplomatic or jurisdictional protection of the State of which he is a
neutral State, with the sole aim of thus coming within the protection of Liechtenstein"FN18a. national FN19.
Does not this reasoning in the Judgment seem to fall into line with the practice of the courts or
of the administration, taking into account the motive for the act, of ignoring changes of ---------------------------------------------------------------------------------------------------------------------
nationality effected for the purpose of obtaining, for example, a divorce, or changes of religion FN19 Cf. I. Brownlie, op. cit., p. 401.
or belief in order to overcome an obstacle to a marriage or to an election, in a State where ---------------------------------------------------------------------------------------------------------------------
seats in the elected chambers are distributed between members of the country's various
religions and beliefs. But what will be the position if the shareholder's claim relates to an indirect injury resulting
from a measure which affects the company as such? The charges which may be expressed as
--------------------------------------------------------------------------------------------------------------------- denials of justice, abuse of right or misuse of power are those which, according to Belgium,
FN18 La protection diplomatique des sociétés et des actionnaires, pp. 95-101. affected the company, beginning with the refusal to allocate foreign currency and the
bankruptcy judgment. It is no longer a question of the corporate action to be exercised on
FN18a I.C.J. Reports 1955, p. 26. behalf of the company, but of proceedings limited to the right or legal interest of the
--------------------------------------------------------------------------------------------------------------------- shareholder, to the extent that he is indirectly injured as a result of a measure affecting the
company.
***
***
The right of protection of the company by its national State being the rule, does this right leave
room, in appropriate circumstances, for an action by the national State of the shareholders? Since the theory of the reality of the personality of companies has generally been abandoned in
favour of the theory of artificial or juridical personality, it has seemed to certain writers that
This question relates, within the framework of the third preliminary objection, to the basic legal arbitral awards have taken a line which, whilst rejecting this fiction to the extent that it is
condition governing the exercise of international judicial protection, in other words, to the absolute or excessive, has opened a fresh perspective which is in conformity with the
existence of a rule of law which would, in the instant case, authorize recourse to a judicial international character assumed by numerous companies. As between the right and the fiction,
action. It is of a preliminary nature in relation to the fourth preliminary objection, concerning which thus stand opposed to each other, which must give way? Are we not faced with one of
the exhaustion of local remedies, as well as to the other questions raised by the third objection, those cases where the adjustment of law to the reality of human affairs and to the sense of
namely the nationality of the claim and the connected question of the continuity of the justice must carry the day?
nationality and that of legal owners and nominees. It is in fact the legal rule which, in
appropriate cases, gives access to the Court. In the absence of this rule, access to the judicial There is no doubt that the personality attributed to the group of corporate interests was so
tribunal is denied the claimant, even if his claim be absolutely justified from the point of view of attributed with a view to giving to the elements contained therein and bonded together
such other questions as might be raised at this preliminary stage of the proceedings. thereby, common means of action and effective protection. Accordingly, the moment that that
protection proves insufficient, or even harmful, in the field of international relationships, should
Since, however, the Court has affirmed the preliminary character of the question of the possible not legal personality give way, to the extent that this is necessary and possible, in favour of a
existence of the legal rule, could it embark upon one or other of the subsidiary questions and more realistic concept and one which is more in accordance with the nature of things, that of
yet manage to avoid, in the rigour of would-be logical reasoning, disregarding its first decision corporate reality, in order to leave individuals and capital appropriately revealed, in the interest
and, as it were, going back on itself? That decision had the unavoidable consequence of putting of the community and in their own interest?
 FN21 Thus, there must be excluded from this discussion the opinion expressed by Mr. Huber in
Is there not ground for thinking that it is above all in the world of fiction that value-judgments, the report of the Mohammed Ziat, Ben Kiran case, which related to a partnership.
applied to the law, should be based upon teleological considerations? Jhering stated that: "The
end in view is the creator of all law." Let us also recall the proposition of Saleilles, put forward FN22 The awards in the Delagoa Bay Railway Company, Standard Oil, Pierce Oil and Sun Oil
half a century ago, and which is more mandatory than ever: "Nothing is important", he wrote, cases.
"other than the object to be attained; often our most learned constructions serve only to
compromise the realization thereof." Curiously enough, one of those learned constructions is FN23 The award of President Grover Cleveland of the United States in the Cerruti case and the
the legal fiction. A fiction is indeed "a representation which is contrary to the truth". P. Roubier, award of King George V of Great Britain in the Alsop case
to whom I owe this formula, recommends[p 298]"direct enquiry as to what is the object of the ---------------------------------------------------------------------------------------------------------------------
legal rule which has thus been laid down in this dissimulated form FN20".
The same should be the case for awards suspected of having been given under the influence of
--------------------------------------------------------------------------------------------------------------------- other than juridical motives, or which were preceded by a demonstration of power, or by
FN20 P. Roubier, Théeorie générale du droit, p. 116. [Translation by the Registry.] threats on the part of a State which trusted in the force of its arms at least as much as in the
--------------------------------------------------------------------------------------------------------------------- force of its rights FN24.

It might therefore be considered that the fact of maintaining the fiction of juristic personality ---------------------------------------------------------------------------------------------------------------------
contrary to the avowed interest of its component parts would create a situation contrary to the FN24 Supra, Section 5.
object thereof. ---------------------------------------------------------------------------------------------------------------------

And in fact, however stubborn the fiction of juristic personality may be, as fictions generally are, ***
the diplomatic practice of the creditor Powers and of capital-exporting countries, as well as
certain arbitral decisions, have not, after the hesitation prior to the First World War, been slow In any case, arbitral precedents and diplomatic practice, supported by part of Western legal
in accepting, though not without a certain amount of circumspection, the rule which permits the writing, do not amount to, as has been said, "a coherent body of doctrine", and consequently
interests of members or shareholders to be dissociated from the abstract personality covering do not seem to constitute a custom to the effect that diplomatic protection, and its judicial
them and given independent consideration—though only where, since the company has the sequel, might cover damage caused by the national State of a company to shareholders who
nationality of the respondent State, an action in the name of the company could naturally not were aliens in relation to the company. Thus it appears that it is in treaty law that the
be brought against the latter except by local means of redress. protection of foreign investments must be sought, whether it be a question of companies which
have been obliged to adopt the nationality of the host country, or of nationalizations, "the
8. However, this arbitral jurisprudence, upon which international courts have not yet had to scandal of the beginning of the century", which followed one another at a rapid rate ever since
pronounce, is neither unanimous nor decisive on all points. the First World War, on the part of almost all countries.

In the first place, we must leave out of consideration awards given ex aequo et bono, which are 9. Be this first hypothesis as it may, namely that of the shareholders who have suffered from
not merely without relevance to the present case, but are clearly out of place in this discussion. the activities of the national State of the company, the problem now to be approached is that of
Thus, it should be recalled that the Special Agreement between the United States and Chile in whether diplomatic protection of shareholders is capable of being extended to the situation
the Alsop case empowered the arbitrator to decide in equity and as amiable compositeur. The where the damge is attributable to a third State, as in the present case.
same was the case with the awards delivered on the basis of the 1923 General Convention
between the United States and Mexico, which empowered the arbitral tribunals it set up to It is of course necessary to exclude at the very outset the possibility of the national State of the
decide in accordance with justice and equity, a customary expression for authorizing decisions shareholders substituting itself for the national State of the company for the defence of the
ex aequo et bono. latter, as Belgium claimed to do in its Application filed on 23 September 1958. A bond of legal
alle-giance connecting the company to the protecting State is a sine qua non FN25, and this
Nor can account be taken of awards dealing with partnerships, since the personality of the does not exist in this case. The problem must be kept confined within the field of protection of
members is not absorbed into the corporate personality, as the personality of the shareholders the shareholders themselves. International jurisprudence could not adopt the diplomatic
would be in the case of a joint-stock company FN21; nor of awards dealing with companies practice by which Belgium seems first to have been inspired, which was that which has been
described as "defunct", or which were obligatorily judged according to the terms of the Special tried more than once by certain Powers, and which may not be unconnected with the outdated
Agreement FN22, nor, finally, of awards couched in uncertain or ambiguous terms, nor of theory of control: first by the United States in the Chilean Alsop Company, in which the award
awards—in particular those given by heads of State FN23—where the absence of reasons for was given in 1911; then by the same Government in the Armes automatiques Lewis case, since
the decision deprives such awards of any absolute relevance.[p 299] from 1927 to 1933 Great Britain had untiringly opposed the action of the United States, which
was the national State of the shareholders, acting for the protection of the company, which had
--------------------------------------------------------------------------------------------------------------------- been formed under Belgian law; then again by Germany when in 1935 it claimed the right to
protect a Mexican company, and finally by France and Great Britain in the [p 300] dispute the expression "elementary principle" was taken, given as it is without any other qualification.
concerning the nationalization of the Suez Canal in 1956, when those two powers thought they And when other judgments have referred to this precedent, they do not seem to have been any
could intervene, as national States of the shareholders, in defence of a company whose original more explicit. The terminology of the two international Courts does not permit of there being
regime attributed Egyptian nationality to it. In each of these cases, this was to disregard the attributed to them, on this point, an opinion which they seem designedly to have kept in petto,
essential condition of the bond of nationality or allegiance between the State intervening and following a prudent practice which has already been remarked on FN28.
the entity in whose name it was intervening. The concept of effectiveness, which is not legally
required for attribution of nationality to a company, as a condition of diplomatic protection, ---------------------------------------------------------------------------------------------------------------------
cannot operate either to transfer to the national State of the shareholders the right of FN27 P.C.I.J., Series A, No. 2, p. 12.
diplomatic protection of the company itself, which right is an attribute of the company's national FN28 Separate opinion of the writer, I.C.J. Reports 1969, p. 138. See also separate opinion of
State. It has of course been pointed out that it was with shareholders' representatives that the Judge Alvarez in the Fisheries case, I.C.J. Reports 1951, p. 148.
United Arab Republic negotiated an agreement concerning the Egyptian Suez Canal Company, ---------------------------------------------------------------------------------------------------------------------
as Mr. E. Lauterpacht reports. But those negotiations do not involve recognition of the right to
bring an action at law; they amount to an ex gratia action, not implying any legal responsibility, It is true that a special tribunal, the Mixed Claims Commission (United States and Germany), set
as was the case of the provisions of the Agreement of 8 September 1923 between the United up as a result of the First World War, decided in more than one case—namely the Vinland,
States and Mexico which set up the Special Claims Commission. Standard Oil, Sun Oil and Pierce Oil cases—that the intervention of the national State of the
shareholders "is based on a general principle which such State would have relied on even in the
--------------------------------------------------------------------------------------------------------------------- absence of preliminary agreement". However, that Commission did not explain whether it
FN25 Above Section 6 and note 17. understood by "general principle" a general principle of law recognized by the nations, or a
--------------------------------------------------------------------------------------------------------------------- principle drawn directly from the idea of law. It is nonetheless the case that its jurisprudence,
although approved by some authors, though not many, has not been corroborated by other
Thus Belgium refrained, in its Application of 19 June 1962, from claiming to protect the jurisdictions. The opinions of legal writers are also divided. Nor was this the first nor the only
Barcelona Traction company, contrary to what it had done in its first Application, already time that a rule of international law has been considered by some to be a customary norm, and
quoted, of 23 September 1958, and limited its claim from then on to the protection of the by others to be a general principle of law recognized by the nations, and by others again to be
shareholders of its own nationality. Since this latter Application was deemed to have lapsed as a a principle drawn directly from the idea of law. The problem would obviously not be resolved
result of its withdrawal by the applicant Government, and that Government furthermore made were one to content oneself with the observation that the frontiers between these various
no mention of it in its final submissions, the Court only has to deal with the new Application, in- concepts are still blurred or uncertain. This is the case of the rule of exhaustion of local
dependently of the earlier one. This was the effect of the decision of the German-Mexican remedies, which is the subject-matter of the fourth preliminary objection in the present case,
Commission when it accepted the fresh submissions presented by Germany on behalf of and which is based now on the one, now on the other, of the first two concepts FN29.
German shareholders, after the error which it had made by claiming the right to protect the Furthermore, the principle of protection of human rights, which will be referred to below, has
Mexican company itself FN26. been considered to be capable of constituting a legal norm at one and the same time on the
basis of the three principal sources of international law, namely: international conventions,
--------------------------------------------------------------------------------------------------------------------- international custom, and the general principles of law FN30.
FN26 A. Feller, The Mexican Claims Commission, 1935, p. 118.
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------- FN29 Cf. the report of Max Huber in the Mohammed Ziat, Ben Kiran case in 1924, and the
decision of the French-Mexican Claims Commission in the Pinson case, of 18 October 1928.
10. Since the right of the State to protect its nationals who have been injured by acts,
decisions, omissions or measures contrary to international law, and imputable to another State, FN30 Dissenting opinion of Judge Tanaka annexed to the Judgment of 18 July 1966, in the
is undeniable, it would be useful to seek to ascertain the nature or legal foundation thereof, in South West Africa cases, Second Phase, I.C.J. Reports 1966, p. 300.
order to deduce from it the legal consequences and the extent of its application raised by the ---------------------------------------------------------------------------------------------------------------------
present case. The question upon which it would be useful to pronouce is that of whether
diplomatic protection derives from a general principle of law recognized by the nations (Article 11. If my view is accepted, that diplomatic protection and the possible right of the shareholder
38, para. 1 (c), of the Court's Statute) or from an international custom (para. 1 (b) of that do not derive from a principle of international law recognized by the nations, it remains to be
Article). considered whether the [p 302] international-law custom, upon which diplomatic protection
would then, according to predominant opinion, be based, is called upon to extend to all
The Judgment of the Permanent Court of International Justice of 1924 in the Mavrommatis interests which have been injured, in the present case those of the shareholders in a company
Palestine Concessions case FN27 does not seem to have [p 301] taken any stand on this point, attached to a third State.
when it stated, with some emphasis, in an axiomatic form that diplomatic protection "is an
elementary principle of international law". One cannot hazard a guess as to the sense in which Here we touch on the essence of the problem, the decisive, if not the only, question being that
relating to the state of the custom, as it emerges from the conduct of the nations as a whole, Statute, linked at once with the jus naturale of Roman law, and with world law, the common
and from their declared will. law of mankind according to Jenks, or transnational law according to Jessup, a term which has
become standard in international law FN33.
To this end, it is necessary to re-examine treaty practice, international jurisprudence, the
practice of States, and the trend of legal writing, which are the principal constitutive elements ---------------------------------------------------------------------------------------------------------------------
of custom. FN33 This view is developed in the dissenting opinion of Judge Tanaka annexed to the
I would observe, in addition, that the positions taken up by the delegates of States in Judgment of 18 July 1966 in the South West Africa cases (I.C.J. Reports 1966, pp. 292-296).
international organizations and conferences, and in particular in the United Nations, naturally ---------------------------------------------------------------------------------------------------------------------
form part of State practice. It is true that some of the great Powers, five or six of which
legislated for the whole world up to the beginning of the twentieth century, generally refuse In any case, to return to State practice as manifested within international organizations and
nowadays to admit that resolutions voted in the United Nations framework by a majority of, or conferences, it cannot be denied, with regard to the resolutions which emerge therefrom, or
even by practical unanimity among, the member States, have any obligatory effect. An attempt better, with regard to the votes expressed therein in the name of States, that these amount to
at San Francisco by the Philippines to have conferred upon the Assembly, possibly with the precedents contributing to the formation of custom. It is as it were an established fact of which
concurrence of the Security Council, power to lay down binding legal norms, was rejected. legal writers take note FN34. What is more, those who hold the views which have just been
Nonetheless a marked trend in legal writing is becoming apparent, reflecting the new aspects of expressed do not hesitate to accept this concept conjointly with their own views. It has also just
international life, which is in favour of attributing to the resolutions, and in particular to the been confirmed by Article 38 of the Convention on the Law of Treaties quoted above.
declarations of the United Nations General Assembly, the status of at least a subsidiary source
of international law, to be added to the classic sources in Article 38 of the Court's Statute FN ---------------------------------------------------------------------------------------------------------------------
31. FN34 This is what is observed by Professor Mohammed Sami Abdelhamid in the Revue
égyptienne de droit international, 1968, pp. 127-128 of the Arabic text.
--------------------------------------------------------------------------------------------------------------------- See also R. Higgins in The Development of International Law through the Political Organs of the
FN31 See the views to this effect of Messrs. Lachs, Mohammed Sami Abdelhamid, Falk, United Nations, p. 5, who says :
Pechota, McWhinney, Asomoah.
--------------------------------------------------------------------------------------------------------------------- "... the body of resolutions as a whole, taken as indications of a general customary law,
undoubtedly provides a rich source of evidence."
Certain writers, for their part, see in this an interpretation based upon an argument drawn from
the actual text of the Charter, strengthened by a teleological interpretation of that international Mr. Sørensen too, in his course of lectures at the Hague Academy of International Law, Recueil
constitutional instrument, which presupposes the existence of rights and liberties of man which des cours 1960, p. 38, states as follows:
"are not only moral ones, [but].. . also have a legal character by the nature of the subject-
matter313 ". They add that such an interpretation should take into account the functioning of "If the international organization is made up of representatives of States, it is clear that the
the Charter in practice FN32. The General Assembly itself adopts this point of view, as appears positions taken up by such representatives may, in principle, contribute to the formation of a
from its resolution of 11 December 1963, in which it "confirms the interpretation of free self- custom. On this hypothesis, what is involved is acts attributable to the States, acting through
determination which it gave in its resolution [p 303] of 1960 on the grant of independence". their representatives, rather than acts attributable to the international organization as such."
This is also the case of the 1969 Vienna Convention on the Law of Treaties, Article 31 of which [Translation by the Registry.]
provides that a treaty is to be interpreted "in the light of its object and purpose" and that for ---------------------------------------------------------------------------------------------------------------------
purposes of interpretation of a treaty, the context comprises "any subsequent practice".
Policy does of course crop up under the veil of resolutions or declarations in the United Nations
--------------------------------------------------------------------------------------------------------------------- Assembly. However, it will be conceded that to seek at all costs to erect a partition between
FN31a Dissenting opinion of Judge Tanaka, South West Africa cases, I.C.J. Reports 1966, pp. policy and law is calculated to bring about this result which is contrary to reality: what is at
289-290. stake is the attempt to isolate the rule from its social origins, and to snap the link of unity with
FN32 See to this effect the dissenting opinion of Judge Alvarez, Competence of the General its historic context. Policy, the policy of the great powers and the colonialist powers, dominated
Assembly, I.C.J. Reports 1950, p. 21; that of Judge De Visscher, International Status of South classic traditional law; it cannot be dissociated from law, today any more than yesterday; but it
West Africa, I.C.J. Reports 1950, pp. 189-190; G. I. Tunkin, op. cit., pp. 106 and 111, who is a new policy, one which does not escape the influence of the [p 304] great principles which
quotes the declaration of 14 December 1960 on the granting of independence as an example of are destined to govern the relationships of modern nations. The 1969 Vienna Conference took
interpretation of the principles of the Charter this consideration fully into account when it adopted numerous solutions to meet the
--------------------------------------------------------------------------------------------------------------------- suggestions included in individual opinions and proposals by new members of the international
community.
Others again deduce the authority of the principles of the Charter from the fact that they are, in
their view, general principles of law in the sense of Article 38, paragraph 1 (c), of the Court's Thus, through an already lengthy practice of the United Nations, the concept of jus cogens
obtains a greater degree of effectiveness, by ratifying, as an imperative norm of international from the Judgment of this Court in the Asylum case FN38. This reference does not of course
law, the principles appearing in the preamble to the Charter. From the domain of theory or legal relate to multilateral treaties of which the particular objective, as regards the majority of their
writing, in which some of these principles, and not the least important thereof, had as it were provisions, is the codification of certain rules of international law, such as the 1958 Geneva
remained confined, they are passing into the domain of objective existence and practice FN35. Convention on the High Seas, and the Vienna Conventions of 1961 on Diplomatic Relations, of
Thus it was that U Thant could say, at the 1969 session of the Organization of African Unity, 1963 on Consular Relations, and of 1969 on the Law of Treaties.
held at Addis Ababa in the presence of 17 African Heads of State, that the United Nations "had
widened the concept of the right of self-determination and independence, so as to cover the ---------------------------------------------------------------------------------------------------------------------
recognition of the lawfulness of the struggle carried on by such nations for the exercise and FN38 I.C.J. Reports 1950, pp. 276-277.
enjoyment of that right in practice FN36 ". He might have quoted in addition the principle of ---------------------------------------------------------------------------------------------------------------------
equality and that of non-discrimination on racial grounds which follows therefrom, both of
which principles, like the right of self-determination, are imperative rules of law FN37. Conventions which do not contemplate the codification of existing rules can nonetheless
amount to elements of a nascent international custom, which is what may be said with fair
--------------------------------------------------------------------------------------------------------------------- certainty of the Conventions which resulted from the Hague Peace Conferences of 1897 and
FN35 See I. Brownlie, op. cit., pp. 483-486. For Mr. Brownlie, the following are imperative rules 1907, of the Treaty of London on Maritime Law of 1909, of the Protocol of 1925 prohibiting the
of law: the right of self-determination, racial equality, sovereignty of peoples over their natural use of asphyxiating gas FN39, and of the 1958 Geneva Convention on the Continental Shelf
resources, the Genocide Convention, the prohibition of aggressive war, of the slave trade, FN40.
piracy, and all other crimes against humanity.
---------------------------------------------------------------------------------------------------------------------
FN36 Le Figaro, 8 September 1969 [Translation by the Registry]. FN39 The 1899, 1907 and 1909 Conventions, and the 1925 Protocol, were so little declaratory
Cf. I. Brownlie, op. cit., pp. 417, 484 and 485, where one reads: "Intervention against a of law that during two great world wars, and other comparatively minor wars, and despite their
liberation movement may be unlawful, and assistance to the movement may be lawful." clear prohibitive terms, they were no obstacle to massive bombardments of open cities;
Also R. A. Tuzmukhamedov, for whom the 1960 declaration of the United Nations General deliberate "break up" of entire populations, attempts at genocide before the term was invented;
Assembly concerning the granting of independence is a de facto recognition of the movements attacks on merchant ships belonging to neutral countries as well as enemy countries, which
for national liberation. were sunk with all hands.
FN37 Racial equality is an imperative rule of law, particularly since the adoption by the United FN40 Judgment of this Court of 1969, and separate and dissenting opinions annexed thereto.
Nations General Assembly of the declaration of 20 November 1963 on racial non-discrimination ---------------------------------------------------------------------------------------------------------------------
(Resolution 1904 (XVIII)).
See in particular Mr. J. Spiropoulos, who upheld this point of view (Sixth Committee of the So far as the Peace Treaties more particularly are concerned, whether these be bilateral or
General Assembly, 7 December 1948). multilateral, they are not such as to amount ipso facto to an element of custom. The clauses of
--------------------------------------------------------------------------------------------------------------------- these treaties, imposed upon the defeated States, must be respected by virtue of the rule pacta
sunt servanda. But can the reasoning be pressed so far as to say that their provisions reflect
12. The documents of the greatest probative force in international treaty law are, in the present the consent of, or the genuine and effective acceptance by, the defeated State, which
case, the Peace Treaties, signed by the Allied Powers and their associates with the Central acceptance or consent would, on this hypothesis, give rise to the opinio juris?.
Powers and their allies, in 1919 at Versailles, Saint-Germain, Neuilly and Trianon, in 1921 and
1922 at Vienna and Budapest, in 1923 at Lausanne; and finally the agreements of 1922 and It will be observed first of all that the clauses concerning war reparations only apply against one
1924 to which the United States were parties. party, for the benefit of the party which imposed them. Of course it could not be otherwise in a
treaty marking the end of a victorious war, even one which was waged for just cause. However,
According to the provisions of these Treaties, shareholders who were nationals of the allied does this mean that such clauses are elements of a legal custom governing the relationships
countries, holding shares in companies of enemy allegiance, had the right to reparations, between free and sovereign States? In other words, can a practice amount to a customary
without any distinction being made between direct and indirect injury.[p 305] precedent if it does not show a [p 306] conviction, a conviction of law, in the minds of the
dominant parties, as well as in the minds of the servient parties, to the effect that they have
A quarter of a century later, the provisions of these Treaties just quoted were adopted in the each of them accepted the practice as a rule of law, the application whereof they will not
Peace Treaties which brought to an end the war of 1939-1945, which were signed in 1947, as thereafter be able to evade?
well as in the State Treaty signed in 1955 with Austria.
13. When replying in the negative to this question, one should also observe, it is true, that
What value as a customary law precedent may we attribute to these provisions? other treaties, quite unconnected with war or peace between nations, were concluded during
the inter-war period, which recognize the same rights of the shareholders independently of the
It is legitimate to consider that the inclusion of an obligatory clause in a treaty indicates that company. The object thereof was to resolve claims arising from revolutions or riots, or from
that clause is not yet an integral part of positive law. In particular, this is what may be deduced nationalizations, which commenced in Latin America, and which were not long in extending to
the West, to Eastern Europe, and to the economically weak countries or developing countries: that of direct or indirect control by the shareholders, or mixed control; whereas provisions in no
agreements between Switzerland and socialist States, agreements between various States and less recent treaties do not provide for either of these concepts.
Latin American States.
No uniform tradition has therefore become established which permits of some of these bilateral
The multiplicity of these treaties, upon which the applicant State relies, is as it were a double- treaty commitments being adopted as customary precedents.
edged weapon. The Applicant argues therefrom in order to support its contention, and deduces,
from the existence of this treaty-practice, the appearance of a rule of international law. In order to make an end of these treaties, I would observe that diplomatic protection of the
shareholders was apparently included in some of them because of special political
However it is a question of bilateral treaties the effect of which-—apart from the rights of the circumstances. The Treaty of 1955 between France and Switzerland is, according to Mr. Vignes,
contracting parties—was only, at the most, to contribute to the eventual formation of custom. to be explained by the fact that Tunisia had not yet obtained political independence, and
enjoyed merely a regime of autonomy. Furthermore, the 1936 Treaty between France and
Must it not also be stressed, from a logical point of view, that treaties are the less to be Germany had as its object the settlement of the thorny problem of the Saar. Finally, the 1946
considered as declaratory law in that the States concerned have recourse thereto despite the Treaty between the United States and the Philippines was not unrelated to certain questions
existence of earlier treaties containing the same provisions? This would be the case, if this point raised by the transitional period following the independence of the latter country.
of view is accepted, for the successive treaties concluded, despite treaty precedents, on the
occasion of revolutions, riots or nationalizations, as well as for the Peace Treaties of the two 15. From the foregoing it appears that the number of States which have been parties to one or
world wars, which reproduce similar provisions. Consequently, the concept enunciated by all the other of the treaties which have been in question, the provisions of which can be taken into
these treaties would be of no less transitory a nature than the control theory, established in the account, so far as consistent with each other, is not such as to attain the degree of generality
course of the two wars. In fact, it would appear to be related thereto, if it is observed that the which is constitutive of custom as provided for in Article 38, paragraph 1 (b), of the Court's
provisions appearing in the Peace Treaties apply, as do those contained in laws and regulations Statute. It must also be stressed that many States are in open opposition to obligations
setting up the control test, to nationals of so-called enemy States. resulting from imposed, or unequal treaties FN42, or treaties concluded without their
participation, [p 308]
It is true that a certain body of opinion sees no objection to deducing lasting legal effects from before they were admitted into the international community FN 43. In particular they are hostile
the control theory. But what does that theory amount to, if not to exceptional measures born of to the extension of diplomatic protection other than by way of agreement, and within the
the circumstances of first one and then a second war, which circumstances disappeared, relationship of the contracting States alone. And it is sufficiently well known for it to be
reappeared, and then again disappeared: in short, measures which are an integral part of unnecessary to dwell on the point, what the consequences are, for the growth of a custom, of
methods of economic warfare, or simply of warfare tout court. Is it the characteristic mark of a opposition which is not thought to need to be so massive.
legal norm to be as unstable as this, or rather to be capable of taking up or laying down its life
according to the demands of ephemeral events? It could not even amount to a customary-law ---------------------------------------------------------------------------------------------------------------------
precedent, unaccompanied as it is by the conditions of generality, continuity, or constancy FN42 As to unequal treaties to which the Asian and African States are opposed, see the Asian-
which are postulated for a con-[p 307] stitutive element of custom. Thus recent agreements African Legal Consultative Committee, Eighth Session, Brief of Documents, Vol. IV, pp. 471-472,
have specified that it is only by virtue of the agreement itself that a company is considered to as well as the proposal, mentioned therein, of Burma, Czechoslovakia, India, Lebanon, Ghana,
be a non-national of the State to which it relates, because of the control exercised over it FN41. Madagascar, United Arab Republic, Nigeria, Syria and Yugoslavia, to the effect that such
treaties should be considered as without validity.
--------------------------------------------------------------------------------------------------------------------- FN43 The socialist view has been set out by Mr. G. I. Tunkin, who considers that one must
FN41 Inter alia, the Agreement signed by Mauritania and the Société des mines de Mauritanie, avoid imposing on the socialist States and the new States certain norms which these States
Article 50 of which provides: "The Company is considered, by agreement, to be a non-national have never accepted and which are unacceptable to them (op. cit., p. 88).
of the Muslim Republic of Mauritania, because of the control exercised over it by foreign ---------------------------------------------------------------------------------------------------------------------
interests." [Translation by the Registry.]
--------------------------------------------------------------------------------------------------------------------- 16. What in fact were many of these norms, and what complaints did they give rise to, and do
still give rise to, so that one-half of the States of the world dispute essential stipulations
14. One last category of treaties deserves examination: this is that of agreements generally thereof, including the scope of diplomatic protection?
called treaties of friendship, establishment and commerce.
It has become apparent that quite a number of States challenge the legitimacy of certain trends
A certain number of these treaties, subsequent to the Second World War, touch on the of this protection, sometimes going so far as to dispute the principle thereof FN44. This
problem, but from standpoints which are different from, and sometimes opposite to each other. observation is of undeniable importance in connection with the development of custom in this
Provisions may be gleaned from these which imply the right of protection of the national State matter. Consequently the advantage once again becomes apparent, in view of the
of the shareholders. It will however not fail to be noticed that the formulae which these treaties circumstances of the case, of re-examining in some detail the reasons for this opposition, which
use relate to very diverse concepts: that of majority interest or substantial interest of nationals, cannot be dissociated from the problem of elaboration of custom in general, and its application
to the present case in particular. FN47 The Harvard Law School understood the need to delete the word "civilized" from its
revised draft concerning State responsibility. Sir Gerald Fitzmaurice approved the deletion of
--------------------------------------------------------------------------------------------------------------------- this word, opting, however, for a different form of words from that of the Harvard Draft
FN44 Supra, Section 5. (Yearbook of the International Law Commission 1960, I, p. 270, para. 56). See in addition the
--------------------------------------------------------------------------------------------------------------------- writer's separate opinion in I.C.J. Reports 1969, para. 33.
FN48 A third of Justinian's Digest is borrowed from the writings of Ulpian (Encyclopaedia
Among the treaties which have been in question FN45, it is necessary to go back to those which Britannica, s.v. "Ulpian").
organized international society in the eighteenth and nineteenth centuries, and at the beginning ---------------------------------------------------------------------------------------------------------------------
of the twentieth century. It is well known that they were concluded at the instigation of certain
great Powers which were considered by the law of the time to be sufficiently representative of 18. Moreover, in the imposing mass of legal norms which make up the modern structure of
the community of nations, or of its collective interests. Moreover, the same was the case in international law, a number of rules have crept in which owe their origins to duress or illegality;
customary law: certain customs of wide scope became incorporated into positive law when in in particular those rules— often enshrined in solemn treaties—justifying racial discrimination,
fact they were the work of five or six Powers. This was certainly an exercise open to criticism, slavery, and, until the middle of the twentieth century, conquest, annexation and colonization in
and even to serious criticism. In addition, of the norms which had thus become established, and all its forms: colonies of exploitation or of settlement, suzerainty, protectorates, mandates or
which survived the recent fundamental transformations of international society marked by the trusteeships FN49, the two latter forms disguising, by means of a verbal fiction, a colonialist
League of Nations Pact and the Charter of the United Nations, taking into account the liberal practice and doctrine, the unlawfulness of which has been stigmatized at the United Nations
interpretation continually given to the latter instrument, some, as we have seen, are disputed and condemned by that body. This attitude on the [p 310] part of the World Organization has
by the States which did not take part in their elaboration, and which consider them to be been reflected, at the judicial level, in the proceedings on the Advisory Opinions of 1950, 1955
contrary to their vital interests. and 1956, requests for which were made to the International Court of Justice with regard to
supervision of the implementation of the Mandate for Namibia.
---------------------------------------------------------------------------------------------------------------------
FN45 Supra, Section 12. ---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------- FN49 Dissenting opinion of Judge V. M. Koretsky in the South West Africa cases, I.C.J. Reports
1966, pp. 239 ff.
17. It will be recalled that the great European States of nationalist tendencies withdrew their ---------------------------------------------------------------------------------------------------------------------
support for the universalist theory of the first [p 309] internationalists, such as Vittoria and
Suarez—that is, if they had ever recognized it. Thus, Mably was able to enlarge on the notion of 19. It thus becomes easier to understand the fears of a broad range of new States in three
a European public law, from the benefits of which other nations—free or independent—had continents, who dispute the legitimacy of certain rules of international law, not only because
been excluded since the sixteenth century. A closed community, as Sereni most conscientiously they were adopted without them, but also because they do not seem to them to correspond to
put it. The Treaty of Paris, signed at the conclusion of the 1856 Conference, stated for the first their legitimate interests, to their essential needs on emerging from the colonialist epoch, nor,
time in the history of international relations that one such nation, the Sublime Porte, was finally, to that ideal of justice and equity to which the international community, to which they
"admitted to participate in the advantages of the Public Law ... of Europe". This term was, have at long last been admitted, aspires. What the Third World wishes to substitute for certain
however, to be displaced in subsequent treaties entered into by Western countries, in 1885, in legal norms now in force are other norms profoundly imbued with the sense of natural justice,
1904, in 1921 and in the Statute of the Permanent Court of International Justice by another no morality and humane ideals FN50. It is, in short, a matter of a change of course towards
less discriminatory term, that of "civilized nations". The Statute of the International Court of natural law as at present understood, which is nothing other than the natural sense of justice
Justice has adopted this last form of words, although the Charter of the United Nations FN51; a change of course towards a high ideal which sometimes is not clearly to be discerned
abandoned it in favour of the sovereign equality of all the nations of the international in positive law, peculiarly preoccupied as it is with stability: the stability of treaties and the
community FN46. And N. Politis, who wrote just after the First World War that "the law . . . stability of vested rights. Thus, for example the notion of effectiveness—the usefulness of which
must, if it is to retain its value, be a faithful reflection of life, change with it, model itself in certain matters is not denied— gives a too unqualified support to the preservation of a status
unceasingly upon it . . .", still limited the area of application of this realistic conception of the quo ante the unlawful origins of which are admitted when it is said: "time sometimes effaces
relationship between life and the law to Europe and to Europe's interests, just as he restricted illegality, so that only effectiveness remains" FN52. And this is relevant to the application of this
thereto the horizons of his penetrating study of international morality FN47. Politis was notion to colonial acquisition, where we see the principle of sovereignty give way to the
nevertheless inspired throughout his book by the Roman-Phoenician jurisconsult Ulpian, rightly presumption of the so-called right of the first occupant FN53; so too with those treaties already
regarding him as the founder of international law on account of his remarkable contribution to [p 311] described in Roman law as leonine, imposed rather than concluded in a past era and
the development of jus gentium FN48, one of the ancient fields of development of this law. capable of leaving much room for the implementation of the rebus sic stantibus clause. In
short, these countries wish to take the heritage of the past only with beneficium inventarii:
--------------------------------------------------------------------------------------------------------------------- which lends significance to Westlake's observation: "The geography of international law has
FN46 Until just before the San Francisco Conference in 1945, the Atlantic Charter of 1942 was changed considerably." Nevertheless, although the old law has been pruned of many sequelae
regarded by most of its interpreters as intended for the use of Western countries. of a past of inequality and domination, in particular by the adoption of the principles of the San
Francisco Charter and of those of Bogota and Addis Ababa, those same principles are not yet Was not Voltaire giving a definition of natural law when he said: "Morality is in nature"?
imposed without restriction or reservation, nor have any developed all their potentialities. While FN51 Sisnett, Chief Justice of British Honduras and arbitrator in the Shufeldt case, took the view
tribute should be paid to the promoters of declarations concerning great humane principles of a that international law should be bound by nothing but natural justice.
universal nature, from the Wilson Declaration in 1917 with its memorable Point 4, the Atlantic See too the separate opinion of Judge Carneiro in the Minquiers and Ecrehos case, I.C.J.
Charter of 1942 and the report of the Dumbarton Oaks Conference in 1944, up to the United Reports 1953, p. 109.
Nations Charter, it must be admitted that enthusiasm for the principles proclaimed was not of FN52 The time factor, which has the attribute in private law of consolidating existing situations
long duration. There is a gap, which must be filled, between theory and practice. Thus, among under certain conditions which generally do not exclude good faith, cannot purely and simply be
these principles there is the right of self-determination—demanded for centuries by the nations transposed into international law. It ought not to prevail over manifest rights, whether those of
which successively acquired their independence in the two Americas, beginning with the 13 indigenous peoples to their own territories, or those of the community of mankind to res
Confederate States in North America, and in Central and Eastern Europe; many times communis or res nullius, such as the high seas, the sea-bed, the polar regions or outer space.
proclaimed since the First World War; enshrined finally in the Charter of the United Nations FN53 See the dissenting opinion of Judge H. Klaestad appended to the 1960 Judgment of this
FN54, added to and clarified by the General Assembly's resolution of 16 December 1952 on the Court on the Right of Passage over Indian Territory case, a judgment still influenced by the
right of self-determination and the historic Declaration by the Assembly on 14 December 1960 static view of law. India, basing itself on the 1960 Declaration on the Granting of Independence
on the Granting of Independence to Colonial Countries and Peoples, the consequences of which to Colonial Countries and Peoples, maintained before the Security Council that in terms of that
have not yet fully unfolded. The international lawmaking nature of these declarations and Declaration Portugal had lost all claim to sovereignty over Goa and, consequently, all right to
resolutions cannot be denied, having regard to the fact that they reflect well-nigh universal protest against the reoccupation of that territory, which constituted an act of liberation, the
public feeling FN55. They were, moreover, preceded by the similarly worded Pact of Bogota Security Council preserving a significant silence.
adopted by the American States in 1948 and the resolutions of the 1955 Bandung Conference, FN54 Article 1 read with Articles 55 and 56.
just as they were followed by the Addis Ababa Charter of African Unity of 1963 FN56 and the FN55 See Section 11 above.
resolutions of the Belgrade Conference in 1961 and the Cairo Conference in 1964 of Non- FN56 It should be noted that the Addis Ababa Charter accepted the "purposes" of the preamble
Aligned Countries, the latter comprising the majority of the Members of the United Nations, to the San Francisco Charter as "principles" or rules of imperative law, leaving no further room
and, finally, by the declaration of 21 December 1965 by the General Assembly on the for doubt that they definitely constitute jus cogens.
inadmissibility of intervention in the domestic affairs of States and the protection of their FN57 The whole problem was, however, already solved in an affirmative sense in 1950 by one
independence and sovereignty. Notwithstanding this, uninterrupted sequence of precedents [p of the precursors of the new concept, who wrote: "It is already the law, at least for Members of
312] in the life of nations, Western writers, with some few exceptions FN57, persist in refusing the United Nations, that respect for human dignity and fundamental human right is obligatory."
to concede to this right—though referred to as a "droit" in the French text of the Charter, and in (P. C. Jessup, A Modern Law of Nations, 1950, p. 91.)
the resolutions and declarations of the General Assembly—the attributes of an imperative Writing a few years later, Prof. G. I. Tunkin noted that: "The representatives of the colonial
juridical norm. The partisans of this doctrine seem to look back nostalgically to the era when it powers, despite lip-service to this principle, have done their utmost to pare it away to vanishing
was still possible with impunity, and without infringing "European public law", to deny the right point, to water it down and to reduce its emancipating tendency to nothing. Sometimes they
of self-determination to peoples seeking to free themselves from the yoke of the States which even deny its existence in international law." (Op. cit., p. 45 [Translation by the Registry].)
had subjected and colonized them. Against the defenders of the last bastions of traditional law, FN58 Such had been the opinion expressed in the report concerning State responsibility
there thus stand arrayed, once again, with the support of a Western minority, the serried ranks submitted to the International Law Commission (Yearbook of the International Law Commission
of the jurists, thinkers and men of action of the Latin American and Afro-Asian countries, as 1957, Vol. II, pp. 113-114, paras. 2 to 7).
well as of the socialist countries. For all of them self-determination is now definitely part of Furthermore, a joint proposal by Burma, Cameroon, Ghana, India, the Lebanon, Madagascar,
positive international law. As is known, furthermore, a majority of States, through their Syria, the United Arab Republic and Yugoslavia provided that "Any treaty which is in conflict
representatives at the 1969 Vienna Conference on the Law of Treaties, pronounced in favour of with the Charter of the United Nations shall be invalid, and no State shall invoke or benefit from
a solution to the problem of jus cogens capable of giving definitive sanction to the principles of such treaties" (Doc. UN A/AC. 125/L.35, para. 2). Article 64 of the 1969 Convention on the Law
the Charter, regarded by them as imperative juridical norms FN58. It thus seemed appropriate of Treaties endorsed the principle of this proposal by providing: "If a new peremptory norm of
that those principles—not excepting those deriving originally from the spirit of the American or general international law emerges, any existing treaty which is in conflict with that norm
French Revolutions—the religious inspiration of which is not unknown, should be solemnly becomes void and terminates."
reaffirmed. They were so in the very heart of Africa by the head of the Catholic church. FN59 Le Monde, 3 August 1969.
Addressing himself to the peoples of Africa and, beyond them, to the entire world, His Holiness ---------------------------------------------------------------------------------------------------------------------
Paul VI, resuming a tradition, on 2 August 1969, in Kampala, before five Heads of State,
denounced racial discrimination, reaffirming the equality [p 313] of peoples and the rights of 20. To conclude this necessary digression, it should be recalled that the progress achieved in
each of them to a free and decent life FN59. the effective application of the principles of the Charter is to a large extent due to the
contribution of the representatives at the United Nations of the countries of the Third World,
--------------------------------------------------------------------------------------------------------------------- which have espoused a reasonable interpretation of Article 2, paragraph 7, of the Charter,
FN50 See the writer's separate opinion previously referred to, section 33, bottom of p. 134 and concerning the reserved domain FN60.
top of p. 135; section 35, bottom of p. 136; section 36, p. 137.
--------------------------------------------------------------------------------------------------------------------- 143.)
FN60 Cf. M. S. Rajan, United Nations and Domestic Jurisdiction, pp. 521-524. ---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
It is in this field in particular that the organs of the United Nations, strengthened by the
It is well known that the wording of that paragraph, despite the opposition of Belgium, presence of the new countries yearning for a new law, outstripping judicial bodies apparently
departed from the strictness of Article 15, paragraph 8, of the Covenant of the League of still attached to tradition, have blazed a trail towards renovation. The General Assembly and the
Nations, and that it was given its present form on the insistence of the United States, no doubt Security Council, when dealing with questions of concern to the international community or
in order to take account of that evolution in the law that was already perceptible to those touching upon the great principles of the Charter, have, after long debates, session after
attending the San Francisco conference. A consensus was then reached that it was for the session, finally overridden the objection based on Article 2, paragraph 7, thanks to a reasonable
organs of the United Nations themselves to interpret the provisions of the Charter they applied. and extensive interpretation—express or tacit—of its words FN63. The road was long and
And the application of this new text was subsequently to be adapted to the growing arduous between 1946, when Egypt was unsuccessful in obtaining a decision, against the
internationalization of the life of the peoples of the world, involving a corresponding constant occupying Power, of the Security Council, and the 1960 Declaration on the Granting of
loss of ground by the concept of absolute sovereignty FN61. Independence to Colonial Countries and Peoples—a declaration upon which the peoples
struggling for their liberation have, not without success, since relied, and which the Security
--------------------------------------------------------------------------------------------------------------------- Council decided to confirm by its resolution of 20 November 1965 endorsing Southern
FN61 See, among, other separate opinions of Judge A. Alvarez, all of which were orientated Rhodesia's right to independence and its right to decide its own future.
towards what he regarded as the inevitable future, his dissenting opinion appended to the
Advisory Opinion on the Competence of the General Assembly delivered in 1950 by the ---------------------------------------------------------------------------------------------------------------------
International Court of Justice, in which he said: FN63 This was the case with respect to the demand of Tunisia and Morocco for independence
"The psychology of peoples has undergone a great change; a new universal international from 1951, that of Cyprus and of West Irian from 1954, of Algeria from 1955, of Angola from
conscience is emerging, which calls for reforms in the life of peoples. This circumstance, in 1960, of Rhodesia from 1961, and, finally, in 1963, of all the countries occupied by Portugal.
conjunction with the crisis which classic international law has been traversing for some time The same is the case with respect to the human rights of persons of Indian origin in South
past, has opened the way to a new international law." (I.CJ. Reports 1950, p. 12.) Africa since 1946, and with respect to apartheid since 1948.
---------------------------------------------------------------------------------------------------------------------
It will be noticed, however, that those Powers which firmly opposed United Nations intervention
It is remarkable to note that the Permanent Court of International Justice was so well aware of in the foregoing cases rejected the objection based on Article 2, para. 7, in respect of
this that it stated in its Advisory Opinion in 1923 with regard to The Nationality Decrees Issued interventions in Spain in 1946, in the case of Greece v. Albania, Bulgaria and Yugoslavia in
in Tunis and Morocco: 1948, in Czechoslovakia in 1948 and in Hungary in 1956. In this connection, Mr. B. Rajan has
stressed the fact that political considerations and the effects of the cold war exercised an
"The question whether a certain matter is or is not solely within the jurisdiction of a State is an undesirable influence in these cases (United Nations and Domestic Jurisdiction, pp. 177-178).
essentially relative question; it depends upon the development of international relations." ---------------------------------------------------------------------------------------------------------------------
(P.C.I.J., Series B, No. 4, p. 24.)
***
But the same Court nevertheless continued faithful to a certain positivism which culminated in
the Judgment in 1927 in the Lotus case and constantly influenced its subsequent Judgments. It It has been necessary to mention this long series of facts in order to elucidate a new aspect of
stated in its Judgment in 1932 in the case of The Free Zones of Upper Savoy and the District of the evolution of international law in general and of its two great sources in particular. That
Gex that "in case of doubt a limitation of sovereignty must be construed restrictively FN62".[p which has been admitted in respect of treaties since the condemnation of the theory of
314] representativity and the increased efficacity of the principles of the Charter—thanks to the ever
less strict interpretation of Article 2, paragraph 7—, must probably be admitted in respect of
--------------------------------------------------------------------------------------------------------------------- international custom and its application in the present case. [p 315]
FN62 P.C.I.J. Series A/B, No. 46, p. 167.
In his dissenting opinion in the Anglo-Iranian Oil Co. case, Judge Read, on the other hand, It is by taking into consideration the foregoing and the conclusions that emerge therefrom that
adopted an approach that took into account the already perceptible evolution in the concept of it will be seen to what extent the custom of diplomatic protection is capable of receiving a
sovereignty. He wrote: sufficient number of adherences to cover new hypotheses such as that which is now submitted
for the consideration of this Court.
"The making of a declaration is an-exercise of State sovereignty, and not, in any sense, a
limitation. It should therefore be construed in such a manner as to give effect to the intention 21. After this indispensable excursion in to the argument raised by the new aspects of the
of the State, as indicated by the words used; and not by a restrictive interpretation, designed to development of custom, and turning now to international case-law, it will be seen that it
frustrate the invention of the State in exercising this sovereign power." (I.C.J. Reports 1952, p. provides but few precedents which support the right of diplomatic protection in the case of
shareholders who complain of indirect injury. to seize the Customs of Mitylene, to administer them and to retain the net revenue until
complete satisfaction had been obtained (Documents diplomatiques français, Second Series,
International case-law is itself only an auxiliary source of law and does not take the place of the Vol. I, Nos. 349, 364, 455 and 497, and also the statement by M. Delcassé, Minister for Foreign
principal sources, which are treaties and custom. But, considered as an element of the latter, it Affairs, in the Chamber of Deputies on 4 November 1901).
seems that it does not in the instant case fulfil the conditions necessary for it to be regarded as ---------------------------------------------------------------------------------------------------------------------
a precedent establishing a custom.
It is not without interest, moreover, to remark that opposition to such diplomatic protection
In point of fact, those precedents which relate more or less directly to the question under came, in almost 90 per cent. of the cases, from developing countries.
consideration have so far, it is hardly necessary to reiterate, only been the work of arbitral
tribunals. Judicial tribunals have not been called upon to pronounce upon this matter until the 23. It remains to be seen, with regard to the development of custom, what are the current
present case. Furthermore, arbitral tribunals, because of the cases submitted to them, have up teachings in respect of the questions which arise.
to the present considered only cases where action was brought in favour of the members or
shareholders of a company to which its own national state had caused the damage. Decided The views there expressed do not consist solely of proposals de lege ferenda. They often
cases thus do not, any more than does treaty practice, assist the argument that diplomatic constitute a statement of the rules of positive law. They are even sometimes one of the
protection extends to shareholders indirectly injured by a State other than the national State of auxiliary factors in its formation, as, following a centuries-old practice, Article 38, paragraph 1
the company. (d), of the Statute of the Court confirms. One cannot but refer in this regard to the lasting
influence on the development of international law of many of the doctrines advanced in the
22. So far as concerns the practice of States, it cannot be denied that numerous positions have past by Ulpian, and, in modern times, by Vittoria and Suarez, by Bodin, Grotius, Vatel, Calvo,
been adopted which denote an intention to include within the framework of diplomatic Anzilotti and Politis, to mention only some of the best-known publicists.
protection the claims of shareholders in a company of a third nationality.
I hasten to add that legal teaching is not represented solely by the writings of the publicists.
To what extent can the positions thus adopted contribute to the formation of a custom? Such teaching is also expressed, as we know, in the works of legal conferences and of
institutions, institutes or associations of international law. Nor must we neglect to seek such
In the first place, it is plain that such attitudes can only be counted as precedents creating teaching— and I would stress this—in the separate opinions of judges, to which I have so
international custom if those who adopt them do not depart therefrom after having relied frequently felt bound to refer. I must emphasize in the first place that the authority of the
thereon. Now, in the analysis of such precedents, more than one State can be found against precedents of the two international courts derives, inter alia, from the very fact that their
which there can be levelled the criticism that it has adopted attitudes which are self- judgments include the dissenting or separate opinions of their members. This is no paradox;
contradictory, and thus deprived of any legal effect. The constancy of French practice and, for, in order to assess the value of a judicial decision, it is necessary to [p 317] be able to
since the turn of the century, of that of the United States, does not suffice to establish a ascertain the extent to which it expresses the opinion of the Court, and what objections judges
custom supposed to be universal. And this is still more so in that a practice only contributes to no less qualified than those who supported it were able to bring against it. Such would seem to
the for-mation of a customary rule if, as has already been said, both the State which avails be the case with the judgments of the superior courts in the Anglo-American system, where the
itself thereof or seeks to impose it and the State which submits to or undergoes it regard such value of dissenting opinions is not greatly outweighed by the recognized authority of case-law.
practice as expressing a legal obligation which neither may evade. It is probably this which led Charles Evans Hughes, a former judge of the Permanent Court and
subsequently Chief Justice of the United States, as Judge Jessup recalled in his well-reasoned
An expression of a State's will which is contested by the other party [p 316] remains an isolated dissenting opinion appended to this Court's Judgment of 18 July 1966, to say:
act without effect. And how often the attitudes of States have met with resistance from
opposing parties! This happened, merely by way of example, to France in the following cases: "A dissent in a court of last resort is an appeal to the brooding spirit of the law, to the
Société des quais, docks et entrepôts de Constantinople FN64; Société Limanova; Société du intelligence of a future day, when a later decision may possibly correct the error into which the
chemin de fer de Tirnovo; Compagnie royale des chemins de fer portugais; Société lettone de dissenting judge believes the court to have been betrayed." (I.C.J. Reports 1966, p. 323.)
chemins de fer; and, finally, various companies in Mozambique. So too, the United States, in
the following cases: Kunhardt; Alsop; Ruden; Delagoa Bay Railway Company; Vacuum Oil And do not the opinions of the judges of the two International Courts derive increased authority
Company of Hungary; Romano-Americana and Tlahualilo. The United Kingdom in the cases from the fact that those judges were elected, according to Article 9 of the Statute of both
already referred to of the Delagoa Bay Railway Company and Tlahualilo, and in the Mexican Courts, so as to assure "in the body as a whole the representation of the main forms of
Eagle Co. case. Switzerland, in the cases of the Compañía Argentina de Electricidad and of the civilization and of the principal legal systems of the world"?
Compañía Italo-Argentina de Electricidad. The Netherlands in the Baasch and Römer case and
in that of Mexican Eagle Co. Finally, Italy in the Cane-varo and Cerutti cases. This authority is nothing other than that of particularly well-qualified jurists and takes its place
in the general context of legal teaching. Thus, Mr. St. Korowicz, in a study of the opinion of the
--------------------------------------------------------------------------------------------------------------------- seven dissenting judges in the Customs Regime between Germany and Austria case, places it
FN64 The opposition of the Sublime Porte was so firm that the French Government threatened under the head of "the teachings of publicists", which are regarded in Article 38, paragraph 1
(d), of the Statute of the Court as "subsidiary means for the determination of rules of law". State of the shareholders had done so, it is not likely that it could in its turn obtain
compensation for the injury caused to the company, the compensation that would be due to it
And, it is hardly necessary to add, what authority as teaching must be enjoyed by the having already been awarded to the other State. Not only would the analogy not be logically
concordant opinions of the dissenting judges when the judgment has been delivered by an justified, having regard to the essential difference between the two hypotheses, but its
equally divided number of votes, thanks to the President's casting vote—in other words, with all consequences would in addition run counter to the proper administration of justice.
the respect due to it, by a "technical or statutory" majority, as Judge Padilla Nervo emphasized
in his dissenting opinion appended to the aforementioned Judgment of 18 July 1966. 25. The exception which authorizes action by the national State of the shareholders might,
however, be extended to cases where the company has ceased to exist. The impossibility of
To come back to the question under discussion concerning the present position of legal action on its behalf by its national State is again present, though for a different reason, as it is
teachings regarding the formation of custom in connection with the points raised in the present in the case where it has the nationality of the State to which the damage is attributed. There
case, it goes without saying that the teachings invoked must represent, if not a fairly general would furthermore be no risk of a conflict between the compensation that could be claimed, in
consensus, at least a predominant current of opinion. Now, in the case of the diplomatic respect of the same complaint, [p 319] by the national State of the company and by that of the
protection of shareholders injured by a third State, teachings are strongly divided, as are also, shareholders. The shareholder's claim would then be justified by a right of his own since, after
as to its legal basis, those writers who. admit such protection, as has been observed FN65. payment of the shareholders and other creditors, the residue of the company's assets goes
directly to the shareholders.
---------------------------------------------------------------------------------------------------------------------
FN65 See section 10 above. These circumstances would not, however, apply in the present case. A bankruptcy adjudication,
--------------------------------------------------------------------------------------------------------------------- like an order for judicial administration or for a receivership, has not the immediate effect of
putting an end to the life of the company, at any rate in most legal systems, including those of
24. I would add, solely for the purposes of discussion, that if it were [p 318] possible to follow the two Parties to the case, Spain and Belgium. A bankruptcy judgment, whilst involving
the opinion which sees in the diplomatic protection of shareholders a departure from and a immediate effects with respect to the dispossession of the bankrupt and the administration of
tempering of the rule of respect for the juristic personality of a company, it would still be the company, the collation of debts owing to and owed by the company, and the fact that such
necessary to enquire whether that exception to the rule could be extended by analogy to the debts become immediately payable, may nevertheless finally result in a composition, under the
case with which we are concerned. terms of which the company, which has not ceased to exist, resumes the course of its normal
life.
It is a well-known fact that where the company is of the nationality of the respondent State,
corporate action can only be brought against that State in its domestic courts, international Since Barcelona Traction's bankruptcy had no legal effects other than those just mentioned, it
action on the claim of the company itself against the State of which it possesses the nationality consequently does not authorize an action ut singuli by that company's shareholders.
being ruled out. There can be no assimilation, in the absence of specific provision to that effect,
to the law of the European Community. It is consequently the legal impossibility of bringing an 26. The Applicant nevertheless maintains that Barcelona Traction ceased to exist in
international action against the State of the company's nationality that is said to have opened consequence of certain measures taken by the Spanish judicial authorities, which it describes as
the way to suppletory action by the shareholders indirectly injured, and to have made its denials of justice, usurpation of jurisdiction, abuse of right or misuse of power. The company is
exercise lawful. said to be "practically defunct", to use the words employed in the arbitral award in the Delagoa
Bay Railway Company case and subsequently adopted in the El Triunfo case. It is thus no
These circumstances are not present in the case of injury caused by a State of a third longer a question of the legal effects of the bankruptcy adjudication, but of an event pertaining
nationality. For since the exercise of diplomatic protection is a matter of unfettered to the merits, which can be considered at this stage of the proceedings in consequence of the
competence, the absence of action by the national State of the company is not the joinder to the merits of the preliminary objection relating to jus standi.
consequence of a legal obstacle and may be only temporary. That State, e.g., Canada, enjoys
in this connection a discretionary power. There is consequently no ground for enquiring why it It is first of all necessary to exclude these two precedents from the discussion; for in both the
refrained from seising the Court concurrently with Belgium, not whether its abstention is final. Delagoa Bay Railway Company case and in the El Triunfo case it was held that the company
Whatever its attitude may have been or may possibly be, this does not affect the question had ceased to exist in consequence of the cancellation of the concession which constituted its
whether or not the national State of the shareholders enjoys the right to take up their claim on object. This is not so in the case of Barcelona Traction, the activities of which have not ceased.
account of harm which the company itself is alleged to have suffered. This question is a purely
legal one, on which the possible wishes of the company's national State would not have any But if that company has not ceased to exist for lack of an object, can it reasonably be alleged
effect. that the measures referred to have in fact resulted in its disappearance? It does not seem so.

One should furthermore consider, from a practical point of view, the consequences that the Those measures are said to be the following, in particular:
subsequent exercise by the national State of the company of its manifest right as the latter's
protecting State would involve. If it decided to seise an international tribunal after the national The declaration of the bankruptcy of a foreign company having no real domicile in Spain, and
the dismissal of proceedings to oppose the judgment declaring the bankruptcy notwithstanding an international custom, it is to be concluded that the elements which constitute the latter, to
the fact that the time-limit therefore had not yet expired; the extension of the effects of the be drawn in various degrees from treaty or State practice, from international decisions or from
bankruptcy of the holding company to the subsidiary companies, in disregard of their separate legal literature, are not of such a nature as to lend support to this new case.
legal personalities, on the pretext of their unipersonal nature; the attachment of the shares of
the subsidiary [p 320] company Ebro and the extension of that attachment to shares that were 28. While it appears that diplomatic protection depends not on a general principle of law
in a foreign country, in violation of the sovereignty of that country and without regard for the recognized by nations but on international customary law, it would nevertheless be permissible,
rights of the company holding the above-mentioned shares as security; the powers conferred in considering the possibility of extending this protection to the shareholders of a company, to
by the Reus judge on the bankruptcy authorities for the purpose of dismissing the directors of have recourse to the analogy which the problem might present in the framework of the
the subsidiary companies and appointing new ones: all these measures, according to the relationships for which municipal law and international law make provision. In doing so it would
Applicant, constituting a prelude to the realization of the objective in view, which is alleged to not be a matter of abstracting from municipal legal systems a general principle of law, but of
have been the transfer at a derisory price to a Spanish group, Fuerzas Eléctricas de Cataluña, of seeking, in accordance with the rules of legal logic, to ascertain the consequences of those
the shares belonging to Barcelona Traction's shareholders. This transfer is alleged to have been relationships on the formation of custom in its various elements.
effected by the trustees in bankruptcy, who, constituting themselves a general meeting of Ebro,
are alleged to have decided: 29. It should be noted at this stage of the discussion that the applicability of categories of
municipal law to international law raises the important question of determining whether a State
(a) that the share register kept at Toronto should thenceforward be kept and retained at Ebro's is only obliged to grant aliens those rights which it guarantees to its own nationals or whether it
new corporate domicile, transferred from Toronto to Barcelona; must ensure for them a minimum treatment in accordance with an "international standard of
justice", which may, in certain cases or in certain countries, be more advantageous than that
(b) that the said company would recognize as shareholders only those mentioned in the said enjoyed by nationals themselves FN66.
share register created in June 1951:
---------------------------------------------------------------------------------------------------------------------
(c) the creation of new shares in substitution for the former ones and their entry in the register FN66 As we know, there are those who also envisage the possibility of granting mostfavoured-
kept at Barcelona; nation treatment, or merely fair compensation, or equitable or reasonable treatment, or, finally,
of adopting a compromise solution based on the enjoyment of individual rights and guarantees
(d) the transfer by judicial decision of the new shares to the Spanish group represented by identical with those enjoyed by nationals and which must not "be less than the 'fundamental
Fuerzas Eléctricas de Cataluña. human rights' recognized and defined in contemporary instruments". (Yearbook of the
International Law Commission, 1957, II, p. 113.)
If such were the measures of which the applicant State complains, effected for the purposes of ---------------------------------------------------------------------------------------------------------------------
the said transfer, can it be alleged that they involved the extinction of the Barcelona Traction
company? It is well known that in Latin American public international law, equality of treatment is linked
with the Latin American jurists' conception of the responsibility of States and diplomatic
The forced transfer of shares, like a voluntary or amicable transfer, is by no means something protection. Those jurists, who regard it as one of the pillars of their concept of international
calculated to affect the company's existence. The shares of a limited company, such as law, argued in favour of it at the 1930 Hague Conference, basing it upon equality between
Barcelona Traction, whether such shares be bearer or registered shares, are specifically States and the need for their countries to protect themselves against the interference of powers
designed by law to be transferable during the company's life. A transfer of the litres which is which were strong politically, militarily and economically. Seventeen jurists of various
void or illegal may, as appropriate, give rise to judicial proceedings to establish that the transfer nationalities supported this doctrine. But the upholders of traditional law, who formed the
was void or to have it set aside, but it cannot have any effect on the existence of the company majority at the Conference, carried the day, and the failure of the Latin American States only
the shares of which have passed into other hands. reinforces their attachment to their own doctrine. Thus, at the 9th session of the International
Law Commission, Mr. Padilla Nervo came forward as its authorized spokesman, and concluded
Thus, Barcelona Traction was so far from being "practically defunct" that it was able, without that "[the] international rules [on the point] were based almost entirely on the unequal
losing its juristic personality in consequence of the bankruptcy adjudication, or of the other relations between great Powers and small States"FN66a. [p 322]
measures taken against it, to seek and to obtain the diplomatic protection of Canada, of the
United States, of the United Kingdom and of Belgium, as well as the judicial protection of the
last-named country on the basis of its first Application, that of 1958. ---------------------------------------------------------------------------------------------------------------------
FN66a Yearbook of the International Law Commission, 1957, I, p. 155.
27. In short, since the right claimed by the national State of the shareholder, that of taking up ---------------------------------------------------------------------------------------------------------------------
his claim against a third country, does not constitute an exception to a legal rule, the extension
of which to a new case is asked for, but such right can derive from the possible existence of [p This was also the conception of the African and Asian countries. The Chinese delegate to the
321] 1930 Hague Conference was one of the leading spokesmen therefor, following the jurists of
Latin America. And at the same session of the International Law Commission mentioned above, (a) the right to address claims and applications to the authorities on behalf of the company;
Mr. Matine-Daftary, of Iran, supported "the . .. Latin American theory of the equality of
nationals and aliens"FN66b. Finally, the representatives of the States of Africa and Asia who (b) the right to seek judicial or administrative remedies in substitution for and in place of the
were called upon to participate in the legal conferences supported the same conception. company, or to defend proceedings brought against it;

--------------------------------------------------------------------------------------------------------------------- (c) the right to claim compensation on the grounds of a denial of justice or an abuse of right
FN66b Ibid., p. 160. suffered by the company.
---------------------------------------------------------------------------------------------------------------------
Do these different rights appear among those constituting the common fund of the generality of
*** municipal legal systems? Or, on the contrary, do they go beyond the rights generally assigned
to the shareholder by those legal systems—and, in particular, the legal systems of Canada, of
The question is no doubt a fairly complex one. In principle, if a State is bound only to establish Belgium and of Spain—these being:
equality between its nationals and aliens its municipal law must be considered and its benefits
extended to aliens. But it should be noticed right away that the rights to be granted them on (a) the right to vote at general meetings, either in respect of decisions affecting the company,
the basis of equality are substantive rights. The solution would be quite different with respect to or for the appointment of directors and the control of their conduct of the company's affairs
jurisdictional rights, according to which every State is bound to secure domestic judicial and, in appropriate cases, in order to bring action against those same directors in consequence
remedies to foreigners by adequate laws and an adequate judicial structure in conformity with of alleged wrongful conduct by them in the exercise of their powers;
international standards, failing which international proceedings would be possible.
(b) the right to dispose of the shares owned by them;
Now this is indeed the solution that prevails in respect of substantive rights, particularly from
the view-point of new or economically handicapped States. It rests upon the principle of the (c) the right to dividends and to a proportionate share in the assets in the event of the
equality of nations proclaimed in the Charter of the United Nations and upon the resolution company's liquidation;
adopted by the General Assembly on 21 December 1952 concerning the right of peoples freely
to exploit their natural wealth and resourcesFN67. (d) that of benefiting from any offers of shares, and of receiving duplicates in the event of loss
of their share certificates FN68.
---------------------------------------------------------------------------------------------------------------------
FN67 See S. Prakash Sinha, op. cit., pp. 94-96, and the speeches in the International Law ---------------------------------------------------------------------------------------------------------------------
Commission by the representatives of India, Iran, the United Arab Republic, Syria and Thailand FN68 The decision of the Arbitral Commission in 1965 in the Brincard case referred to most, if
referred to by him. not all, of these rights. The new Lebanese Commercial Code, Article 105, gives a more
See too Article 12 of the draft principles concerning the treatment of aliens drawn up by the complete list, including in particular the right to transfer the share.
Asian-African Legal Consultative Committee, quoted by Doctor Mustafa Kamil Yasseen, in ---------------------------------------------------------------------------------------------------------------------
Annuaire français de droit international, 1964, p. 665.
--------------------------------------------------------------------------------------------------------------------- I am inclined to answer in the negative. Subject to one reservation, however, which is that the
company should not have been dissolved. This reservation has already been dealt with FN69,
30. Mention of this solution leads one to wonder whether it is not established, in the legal and it does not apply in the case of Barcelona Traction.
systems of the generality of nations, that a shareholder—in addition to his own right of action
for reparation for a direct injury suffered ut singuli which damages his legally protected ---------------------------------------------------------------------------------------------------------------------
interests— possesses a right of action which he can exercise in all circumstances, concurrently FN69 Section 25 above.
with the organs of the company, in consequence of an injury suffered by the latter that affects ---------------------------------------------------------------------------------------------------------------------
him only indirectly or in mediate fashion.
A further conclusion emerges from this discussion, which can be expressed in interrogative form
Ought not international law, following the same reasoning as that just invoked in the preceding as follows: since the shareholder does not have, according to local legislation, any possibility of
section, to align itself on this point with the generality of systems of municipal law, from which, taking action before the courts in order to put forward rights which are peculiar to the
in addition to the legal institutions of the commercial-law system, there derive the concept of company, the objection of non-exhaustion of local remedies cannot be set up against him. If he
juristic personality and the limits assigned thereto? It is true that those [p 323] systems were nevertheless permitted to exercise such rights before an international tribunal, would he
sometimes differ from one country to another. What would however be both necessary and not have been granted greater right than the company itself? [p 324]
sufficient would be to prove the existence of a common fund, as between these systems, of
such essential rights, not excluding those on which Belgium in particular can rely, namely: 31. The Applicant nevertheless maintains that the specific legal nature of rights and interests of
the private parties who have suffered injury is of no importance from the point of view of the
right of protection by their national State. therefrom that any interest is capable of giving rise to an action. On the contrary, at the
international level as in municipal law, is it not the case that, in order for an action to lie, the
There is no doubt that in international proceedings the applicant State is "asserting its own interest must, as Jhering puts it, be an interest protected by the law, or, more correctly, as it
right". It is not intervening in favorem tertii. But is it any less true that that right is "to ensure, has been put in the most recent decisions under municipal law, a legally protected lawful
in the person of its subjects, respect for the rules of international law"? Both these phrases are interest?
to be found in the oft-cited judgment of the Permanent Court of International Justice in 1924 in
the Mavrommatis case FN70. Is not this tantamount to saying that the right of the applicant Furthermore, if in private law the interest must, in principle, be direct and personal, must it also
State is measured according to the individual right violated and, consequently, subject to the be so in international law in order to authorize a judicial action?
same conditions for its exercise?
This would amount to saying that diplomatic protection is subject to two conditions: that the
--------------------------------------------------------------------------------------------------------------------- claimant's interest be a legally protected lawful interest and that, at the same time, it be direct
FN70 P.C.I.J., Series A, No. 2, p. 12. and personal.
---------------------------------------------------------------------------------------------------------------------
34. In order to answer these two questions and clear the way for a solution of the case of
It is hardly necessary to add that the responsibility of a State is of course not necessarily shareholders, it seems that it is necessary to recall the various actions to which a right or
restricted to the hypothesis of an injury caused to its nationals. But where an injury lies at the interest may give rise, namely:
origin of such responsibility, the individual injury cannot be without its effect on the exercise of
that responsibility. (a) an individual action exercised on the basis of a subjective interest or right;

32. Is it possible, in order to grant the national State of the shareholders the right to institute (b) a corporate action, on behalf of a company endowed with juristic personality, similarly
judicial proceedings, to have recourse, as the Applicant also argues, if not to a formal right, at exercised on the basis of a subjective interest or right—that of the company itself;
least to the notion of interest?
(c) an action brought in defence of a collective or general interest, the objective being to
Belgium's charges against Spain, as set forth in the course of the oral argument on the merits, safeguard legality or the respect due to principles of an international or humane nature,
are some of them classified by the Applicant as denials of justice, the others as abuses of right. translated into imperative legal norms (jus cogens).
Abuse of right, like denial of justice, is an international tort, contrary to the opinion which the
Spanish Government seems to espouse. This is enshrined in a general principle of law which This distinction has seemed to me essential for the purposes of this discussion, in particular in
emerges from the legal systems of all nations FN71. The Applicant further sees in certain of order to avoid the confusion between individual interest and general interest, to which the
these manifestations a misuse of power (détournement de pouvoir), of which international law Respondent has pointed, in the award in the El Triunfo case and in the judgment relating to the
should take account, on the ground that the rights the abuse of which is condemned by Northern Cameroons.
international case-law are, as in municipal administrative law, powers or competences. This
doctrine cannot but be endorsed. But does it follow that in the international field the institution ***
of abuse of right is aimed, as is misuse of power in municipal law, at protecting a right or an
objective interest distinct from the right or subjective interest of the State considered It is generally recognized that the existence of a legally protected right or interest is a condition
individually FN72? As complete as possible a study of the notion of an interest is necessary for for the exercise of any of the above actions. The question is not open to doubt in private law,
the solution of this question, and in order to determine, in so doing, the respective fields in whether with respect to a natural person or to a juristic person. It will consequently be agreed
international law of the two concepts of objective interest and subjective interest. [ p 325] that it would be paradoxical for international law, one of the functions of [p 326] which, when
appropriate, is to make up, in the relations between States, for the weaknesses of their
--------------------------------------------------------------------------------------------------------------------- municipal laws, to be able to give a State which takes up the claim of its nationals access to
FN71 See the writer's separate opinion previously referred to, para. 35, bottom of p. 136. international tribunals on the ground of an interest which is not legally protected under the lex
FN72 Cf., the reference by Professor Rolin in his oral argument on 16 April 1969 to the course fori. And by an undoubted analogy, a State which acts proprio motu for the defence of a
delivered by Professor Guggenheim in 1949 at the Academy of International Law. personal interest or of a collective interest, must nevertheless prove the existence of a lawful
--------------------------------------------------------------------------------------------------------------------- interest which is legally protected.

33. In private law, the old adage is relied on: "no interest, no action", though there is attributed There is consequently an identity of views to be noticed on this point— that of a legally
to it a meaning somewhat different from that which the institution of actiones legis gave to it in protected lawful interest—between the national and the international legal order, dealing
Roman quiritary law. More correctly, it is asserted that "the interest is the measure of the respectively with the subjective and the objective aspects of the notion of interest.
action". But whatever formula be invoked, this does not of course mean to say that the fate of
the action is so intimately bound up with the interest of the plaintiff that it can be deduced The question that remains to be discussed is thus that of proof that the interest on which
Belgium relies is a legally protected lawful interest. No such proof can be produced in the
present case since it is necessary to go back to the lex fori, which does not afford legal ---------------------------------------------------------------------------------------------------------------------
protection to such an interest. FN77 I.C.J. Reports 1955, p. 24.
---------------------------------------------------------------------------------------------------------------------
35. Does the identity of views noticed above also exist so far as concerns the necessity of a
personal and direct interest? In other words, it is on the basis of a subjective right or interest that the State acts when taking
up the claim of one of its nationals, even if that national be a juristic person such as a
Were it a question of the third action referred to above—that based on a general interest, or an commercial company. For the corporate action of the latter is not in any way to be assimilated
international or humane interest of an objective nature—the fulfilment of this condition would to the action based on a collective interest. Whilst the company represents a bundle of
not be demanded, as is clear from the aforesaid Judgment of 21 December 1962 and the individual interests the State is nevertheless acting as an individual subject of the law in taking
opinions of the dissenting judges in the Judgment of 18 July 1966. That 1962 Judgment up its case. Where, on the other hand, it purposes to take up the defence of the general
constituted a definitive judgment, as was amply demonstrated by the dissenting judges, and it interests of the international community or of humanity as a collectivity, it intervenes in the
might also be regarded as a judgment on a point of principle, which lays down the concept of capacity of a member of that community or of that collectivity.
the general or collective interest which justifies the action that a member State of an
international organization, such as in former times the League of Nations and today the United 37. It has been said that Belgium's action must be founded on a lawful interest which is legally
Nations, may bring in defence of the purposes of that Organization which concern its members, protected FN78, just like an action on behalf of the collectivity. But, unlike the latter, it must be
as a whole, whose interests are often one with those of all mankind FN73. The principle which based on a personal and direct interest.
that Judgment enshrines, which underlies many conventions, from Article 22 of the Treaty of
Versailles and the instruments of mandate, to the treaties concerning minorities and the ---------------------------------------------------------------------------------------------------------------------
Convention on the Prevention and Punishment of Genocide, and is expressly confirmed by the FN78 See Section 34 above.
practice of the United Nations FN74, is also to be found in the Advisory Opinion delivered by ---------------------------------------------------------------------------------------------------------------------
this Court in 1951 with regard to reservations to that Convention, when it stated: "the
contracting States do not have any interests of their own; they merely have, one and all, a Neither of these conditions is met by Belgium's request for authorization to extend judicial
common interest FN75." Thus Judge Forster was able to protest vigorously against the idea that protection to the shareholders in Barcelona Traction.
"legal interest [p 327] can be straight-jacketed into the narrow classical concept of the
individual legal interest of the applicant State FN76". According to the lex fori to which it is necessary to have reference in this matter—i.e., the law
of the commercial legal order—a shareholder in a joint-stock company has, as we know, no
--------------------------------------------------------------------------------------------------------------------- personal and direct right of action instead of and in place of the corporate action ut universi if
FN73 In his dissenting opinion referred to above, Judge Forster rightly describes as an abuse of the alleged injury has been inflicted on the company as such. What interest might be
power South Africa's actions contrary to the purpose of the Mandate for South West Africa or substituted for this purported right, if not the shareholder's interest in having the undertaking
Namibia. (I.C.J. Reports 1966, p. 481.) run in such fashion as to ensure its prosperity, and in the safeguarding of the economic value
FN74 See Section 20 above. embodied in [p 328] the shares. Does it follow that he would have the right to act on behalf of
FN75 I.C.J. Reports 1951, p. 23. the company where the latter has itself suffered damage or loss through unfortunate
FN76 Dissenting opinion annexed to the Judgment of 18 July 1966, cited above, I.C.J. Reports management? Such is not the case in municipal law FN79, and it ought not to be otherwise in
1966, p. 478. international law. The interest of the shareholder and, consequently, that of the State which
--------------------------------------------------------------------------------------------------------------------- takes up his claim, no matter how personal and direct it may be, is nevertheless, as has just
been seen, not legally protected. The Permanent Court of International Justice has endorsed
36. If, on the other hand, the applicant State is not acting to protect a collective interest, but is this view FN80.
complaining of an injury it has suffered as an individual subject of law, it goes without saying
that it will only have access to an international tribunal to claim a subjective right on the basis ---------------------------------------------------------------------------------------------------------------------
of a personal and direct interest. FN79 See, to this effect, the writings of French publicists and French case-law, where the
bringing of judicial proceedings on account of the depreciation of shares as a result of a
To this hypothesis must be assimilated that where a State has taken up the claim of a national, diminution in the company's assets is only allowed in the case of faute by the directors, as was
as this Court, following the Permanent Court of International Justice, stated in its Judgment of 6 emphasized in Section 27 above.
April 1955 in the Nottebohm case, declaring: Cf. G. Ripert, Droit commercial, 5th edition, by R. Roblot, Vol. I, paras. 1327 and 1328; and
Solus and Perrot, op. cit., para. 227, and the decisions to which they refer.
"... by taking up the case of one of its subjects and by resorting to diplomatic action or And, in respect of Anglo-American law, E. Beckett, "Diplomatic Claims in Respect of Injuries to
international judicial proceedings on his behalf, a State is in reality asserting its own rights—its Companies", published in Transactions of the Grotius Society, Vol. XVII, pp. 192 and 193, who
right to ensure, in the person of its subjects, respect for the rules of international law FN77". points to the exceptional case of misconduct by directors as a rule to be found in the laws of
most States. 39. At the end of this discussion, everything goes to show that the diplomatic protection of
Finally, so far as treaty-law is concerned, mention may be made of the convention between the shareholders injured by a third State does not constitute an international custom that is
Malagasy Republic and the Ugine company, under which the parties "will not regard as contrary unequivocally and unambiguously demonstrated by the web of precedents which form the
to their mutual obligations any reduction in activity resulting from chance technical breakdowns material element, and definitively established by the conjunction of that element with the
of a serious nature or from the development of the general economic situation". [Translation by psychological element of opinio juris.
the Registry.]
FN80 Judgment in the Oscar Chinn case, P.C.I.J., Series A/B, No. 63, p. 88: "No enterprise— This conclusion is reinforced by the opinion, already mentioned, held by a multitude of States—
least of all a commercial or transport enterprise, the success of which is dependent on the new States and other, very numerous, developing States—with regard to the application of
fluctuating level of prices and rates—can escape from the chances and hazards resulting from diplomatic protection, the rules of which are only accepted by them to the extent that they take
general economic conditions. Some industries may be able to make large profits during a period account of their state of underdevelopment, economic subordination and social and cultural
of general prosperity, or else by taking advantage of a treaty of commerce or of an alteration in stagnation, in which the colonial powers left them and in which they are in danger of remaining
customs duties; but they are also exposed to the danger of ruin of extinction if circumstances for a long time, in the face of Powers strong in industry, know-how and culture.
change."
--------------------------------------------------------------------------------------------------------------------- This opinion was expressed at one and the same time by the representatives of the States of
the Third World in the General Assembly of the United Nations (Sixth Committee), in the
38. Turning to the argument which postulates the cumulative use of the corporate action and International Law Commission, in the Asian-African Legal Consultative Committee, in the
the individual action of the shareholders, which is advanced by Belgium, I can only remark the Institute of International Law, and in the works of legal authors FN81. [p 330]
lack of relevance of the examples put forward to support it, namely that drawn from the
Advisory Opinion of this Court concerning Reparation for Injuries Suffered in the Service of the ---------------------------------------------------------------------------------------------------------------------
United Nations, and that of a motor car or aeroplane accident. In the instant case, both these FN81 S. Prakash Sinha, op. cit., pp. 92-94; and J. N. Hazard in American Journal of
examples encounter the objection raised by the existence, in terms of municipal legislation, of International Law, Vol. 55, 1961, at p. 118, where he writes: ". . . Some of the states where
the company's legal personality, which covers the interests of the shareholders and ensures investment has long existed have come to relate these investments in their minds with
their representation. conditions now politically abhorred."
---------------------------------------------------------------------------------------------------------------------
So far as the Advisory Opinion is concerned, it is true that a claim by the International
Organization for reparation for injuries constitutes no obstacle to a claim by the State of which Thus the Asian-African Legal Consultative Committee, when it met in 1966 in Bangkok, stressed
the United Nations official is a national. It has been rightly said that a single action is capable of the importance of this problem by recalling the remarks of a number of delegates to the Sixth
involving international responsibility on the part of its author towards various legal personae if it Committee of the General Assembly in 1964, to the effect that—
simultaneously injures their respective rights. But the doctrine enunciated in the Advisory "The rules relating to state responsibility and to the protection of foreign investments,
Opinion is essentially different from the argument advanced by the Applicant concerning the [p profoundly affected the situation of the new or economically weak States and had been
329] claim of a shareholder concurrently with that which a commercial company might submit established, in part, contrary to their interests FN82."
in respect of an injury of which it itself has suffered the consequences. Any analogy is ruled out
by an essential difference between the two cases, resulting from the existence of the juristic ---------------------------------------------------------------------------------------------------------------------
person-ality of the company, which personifies the interests of the shareholders; so that the FN82 Brief of Documents, Vol. IV, p. 269.
injury which it suffers is the very same one as that of which the shareholders might complain. ---------------------------------------------------------------------------------------------------------------------

Can it in point of fact be deduced from the consideration that two legal personae, the United As for the Institut de droit international, at its Nice session in 1967 it had to study the problem
Nations and the national State of an official of that organization, have simultaneously been of investment in developing countries. The jurists of the Afro-Asian group who took part in the
affected by the injury which the latter suffered, that, according to the meaning of the Advisory proceedings of that session expressed the opinion of their group by replying in the negative to
Opinion, there was only one single head of damage? It would appear not. The same act caused the question whether "shareholders are entitled to ask for diplomatic protection of their State in
two distinct heads of damage, reparation for which can be cumulative, as in the case of the cases in which the company in which they have invested cannot or will not ask for it itself, as
accident already mentioned. It is however a single injury which affects the company, which can against the developing country FN83".
only give rise to a single reparation, which can be claimed either by the company, or by a
partner or shareholder under the conditions already dealt with. ---------------------------------------------------------------------------------------------------------------------
FN83 Annuaire de l'Institut de droit international, 1967, I, pp. 464, 471, 519 and 526, with the
Is there any need to add that Article 62 of the Court's Statute, which provides for intervention, opinions of India (Mr. Nagendra Singh), Iraq (Mr. Kami! Yasseen) and Turkey (Mr. Nihat Erim).
is irrelevant. What is in question in the present case is not a rule of procedure, but the right of
action on the basis of one and the same internationally unlawful act. The following observation of Professor Rolin at the same session of the Institut should be noted
:
 of those same nationals— whose economy had been affected. It is a case for saying, as before
"Thus what the Institut should aim at is not the protection of capital as such, but it is bound to FN85, that cumulative actions which would grant, for one and the same injury, first one and
encourage investments for the benefit of developing countries, by giving guarantees on both then another head of reparation, would be inconceivable.
sides, both to those countries themselves in order to avoid a form of economic neo-colonialism,
which would bring about their subjection to the rich countries, and in order to put investors out ---------------------------------------------------------------------------------------------------------------------
of reach of certain risks" (ibid., p. 414 [Translation by the Registry]). FN85 Supra, Section 38.
--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------

40. It seems definitively established that the precedents that can be prayed in aid to support Furthermore, this alleged right of action would give rise to the same objections as mentioned
the attempt to extend diplomatic protection to shareholders indirectly injured by a third State above, concerning the alleged right of action in the name of shareholders injured by a third
are manifestly insufficient. It is of course clear from the explicit terms of Article 38, paragraph 1 State, namely the nonexistence of a received rule of international law authorizing it.
(b), of the Statute of the Court, that the practice from which it is possible to deduce a general
custom is that of the generality of States and not of all of them; but we are far from even this, The opposition of the new or developing States, whose determinant influence on the
having regard to the abstentions or opposition referred to above when analysing diplomatic or development of international law and on the formation of its rules is already well-known, would
treaty practice or discussing teachings FN84. It certainly does not appear that the generality of in addition be much stronger as to the admission of a legal rule which would authorize the
States have already accepted such a custom. A fortiori is this so if account be taken, as it extension of diplomatic protection, beyond the interests of shareholders who have suffered
should, of the massive opposition of the new or developing States, which constitute the injury by the act of a third State, to the interest of the general economy of the national State of
majority of the members of the international community. A general custom, I am persuaded, the latter, or to the interest it has in international trade.
can henceforward no longer be received into international law without taking strict account of
the opinion or attitude of the States of the Third World. FN84 [p 331] It is well-known that J. L. Brierly, without venturing so far as G. Scelle, or as the Latin American
jurists, was in favour of recognition, in certain cases, of the international personality of the
--------------------------------------------------------------------------------------------------------------------- individual. He said that—
FN84 Supra, Sections 12 to 20, 22 and 23.
--------------------------------------------------------------------------------------------------------------------- "The orthodox doctrine, by insisting that only States can have [p 332] international rights or
duties, leads one to think that injury caused to an individual citizen in a foreign State is an
41. Two other questions have been discussed: injury caused to his own country .. . and that mysterious, though powerful, abstraction,
'national honour' is easily involved therein FN86."
A. That whether the national State of the shareholders may take action to defend its national
wealth, of which shares in companies form an element. ---------------------------------------------------------------------------------------------------------------------
FN86 J. L. Brierly, Recueil des cours de l'Académie de droit international, 1928, Vol. III, p. 531
B. Whether it can do so in the sphere of the legal protection of the interests which the State [Translation by the Registry].
has in international trade. ---------------------------------------------------------------------------------------------------------------------

In each of these cases, the State would enjoy a twofold right of action: that resulting from the And Mr. P. C. Jessup adopted Mr. Brierly's conclusion, observing that the recognition of the
fiction, conceived by legal authors and accepted by case-law, to the effect that the State which rights of the individual would also tend to check "the grave menace of the promotion by States
takes up the case of its nationals exercises its own right; and that which would be attributed to of private economic interests with which they identify national interests FN87". And indeed it
it inasmuch as it is protecting its national wealth or the interests of international trade. seems that this identification and the concept of national honour were in the background, if
they were not the governing motive, of the armed interventions which have taken place in the
Does this twofold action postulate two heads of damage, for which the State would present course of history in Latin America, Africa and Asia.
cumulative claims, or a single head of damage, for which the State would be claiming
reparation on a twofold ground? ---------------------------------------------------------------------------------------------------------------------
FN87 P. C. Jessup, A Modem Law of Nations, p. 99.
Since shares in a company belonging to nationals are among the elements making up the ---------------------------------------------------------------------------------------------------------------------
national wealth, the action of the State to protect the rights of its nationals, and that aimed at
the protection of the national wealth, would be motivated by a single head of damage, affecting Would not the menace be still more grave if the State, while supporting the individual interests
the same subject-matter envisaged from two different standpoints, i.e., the part or the whole. of its nationals, were to put forward their claim cumulatively with that attributed to the nation
for the defence of its economic interests, or its general interests in international trade?
On the basis of this observation, the State could not claim two different heads of reparation,
one for the injury caused to its nationals, the other in favour of the nation—the body made up 42. Failing a rule of positive law validating Belgium's jus standi, the latter State turns to equity
to seek therein a justification for its claim. by agreement of the parties to accept a decision ex aequo et bono.

The applicant Party is mistaken in thinking that in the awards made in application of the ---------------------------------------------------------------------------------------------------------------------
General Convention of 1923 between the United States and Mexico, there may be discerned a FN89"It is possible to define equity as a portion of natural justice ..." Snell's Principles of Equity,
reference to equity comparable to that mentioned in the Judgment of this Court in 1969 4th edition by R. E. Megarry and P. V. Baker, p. 9.
concerning the North Sea Continental Shelf. The Convention just referred to called upon the FN90 Note of 5 July 1928 concerning the Romano-Americana case, Hackworth, Digest, V, p.
arbitral tribunals which it set up to base themselves upon justice and equity. This expression, 843.
justice and equity, which has appeared in numerous general and special arbitration ---------------------------------------------------------------------------------------------------------------------
agreements, has always been considered to imply an authorization to decide ex aequo et bono;
whereas obviously the reference to equity contained in the Judgment of the Court mentioned ***
above should only be understood, and this is explained in one of the separate opinions annexed
thereto FN88, as meaning equity praeter legem in the sense which Papinian, the author of that While I subscribe to the Court's Judgment, such are the supplementary remarks which I have
expression, gave to it; in other words, not an extra-judicial activity, as is the settlement of a thought I should add to the grounds thereof.
dispute ex aequo et bono according to the terms of Article 38, in fine, of the Court's Statute,
with a view to filling a social gap in law, but a subsidiary source of international law taken, as a (Signed) Fouad Ammoun.
general principle of law, from paragraph 1 (c) of that Article, appeal to which is made in order
to remedy the insufficiencies of international law and fill in its logical lacunae. [p 334]

--------------------------------------------------------------------------------------------------------------------- DISSENTING OPINION OF JUDGE RIPHAGEN

FN88 See the writer's separate opinion, I.C.J. Reports 1969, para. 37, p. 139.
--------------------------------------------------------------------------------------------------------------------- [Translation]

If the study of the facts of the present case had shown a logical lacuna [p 333] in the law, the 1. To my great regret I find myself unable to concur in the decision of the Court, and I wish to
Court would have been called upon to remedy this in the interest of justice. The solution would avail myself of my right under Article 57 of the Statute to state the reasons for my dissent.
probably have been to have recourse, as has just been stated, to equity praeter legem and a
general principle of law emerging from national legal systems. But the Court is not faced with a 2. In my opinion the legal reasoning followed by the Court fails to appreciate the very nature of
logical lacuna in the law, since international legal systems do not provide for a right granted, on the rules of customary public international law applicable in the instant case.
the facts, to the shareholders to be rendered licit. The lacuna which the argument of the
applicant Party would be calculated to fill would be no more than a social insufficiency, which The Belgian State has asserted that the Spanish State is internationally responsible for the
only a special agreement conferring jurisdiction ex aequo et bono, which does not exist in the treatment which the administrative and judicial authorities of Spain afforded to a private non-
present case, could have remedied. Spanish company, the Barcelona Traction, Light and Power Company, Limited. The Court has
recognized that:
The system of Equity of the common-law countries has also been referred to in the present
case. "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
It goes without saying that there is no question of identifying Equity of English origin with obligations concerning the treatment to be afforded them." (Paragraph 33.)
l'réquité or aequitas of Romano-Mediterranean origin. But if a parallel may be drawn between
these two institutions, as to their respective effects, it is with equity contra legem or infra legem Nevertheless, the Court has refused to examine whether the treatment afforded to Barcelona
that it may be drawn. In fact, it is said in Snell's Equity that equity may be defined as a portion Traction by the administrative and judicial authorities of Spain was or was not in conformity
of natural justice FN89. This conception of Equity, which really consists of a possible derogation with Spain's international obligations, since:
from general law in a particular case, has never been applied in international law. An
international court which conferred such jurisdiction upon itself would appoint itself a legislator. ". . . the possession by the Belgian Government of a right of protection is a prerequisite for the
Its decision would create an atmosphere of uncertainty which would drive States away from a examination of these problems. Since no jus standi before the Court has been established . .."
tribunal as to which they could not foresee, with any degree of probability, what law would be (paragraph 102).
applied by it. Furthermore, who is better placed to judge of this than the British Government,
which wrote to the United States Government to the effect that: "... No shareholder has any In other words, Spain does indeed have international obligations with respect to the treatment
right to any item of property owned by the company, for he has no legal or equitable interests afforded to Barcelona Traction, but those obligations are, it is said, not obligations towards
therein . ..FN90." In fact, Equity, like equity contra legem or infra legem, cannot serve as basis Belgium.
for a judicial solution which is contrary to the rules of law which it seeks to modify, unless it be
Throughout its Judgment, the Court has in view the hypothesis that a greater or lesser part of governing relations between the State which has committed a wrongful act and the individual
Barcelona Traction's shares was, during the whole of the relevant period, in the hands of who has suffered damage. Rights or interests of an individual the violation of which rights
Belgian nationals, whether natural or juristic persons. This hypothesis is contested; the causes damage are always in a different plane to rights belonging to a State, which rights may
question, which is not dealt with in the Judgment, will be reverted to below. also be infringed by the same act. The damage suffered by an individual is never therefore
identical in kind with that which will be suffered by a State; it can only afford a convenient scale
On the basis of this hypothesis, and without drawing any distinction according to the size and for the calculation of the reparation due to the State." (Judgment No. 13 of the P.C.I.J., Series
nature of this participation by Belgian natural or juristic persons in the capital and management A, No. 17, pp. 27-28) (my italics).
of the Barcelona Traction Company, the outcome for the Court is that the Belgian [p 335] State
has no right at the international level capable of being infringed by the conduct of the Spanish 4. This complete separation between the rules of customary international law concerning
authorities towards the Barcelona Traction Company. responsibility for the treatment of aliens, and the rules and principles of municipal law, is much
more than a mere legal construct permitting of the substitution of legal relations between
This conclusion is based solely on considerations concerning what the Court calls (paragraph States for the legal relations between the government and the private citizen or between
38) the nature and interrelation of the rights of the company and the rights of the shareholders private citizens inter se.
under municipal law. It is by examining rules of municipal law which are to a great extent
common to those legislative systems which recognize the institution of companies limited by It reflects a reality of international life: it determines the very content of the rights and
shares that the Court reaches the conclusion that, under municipal law, the rights of the obligations of States on the international plane.
shareholders are not affected by measures taken against the company. It follows, according to
the Judgment, that the State of which the shareholders in a company are nationals has also no It is in fact indisputable that the State has a real interest in the development of its international
right that might be injured on the international plane by measures taken by another State commerce, of which investment in foreign undertakings and the establishment of undertakings
against the said company. in foreign countries constitute manifestations. Thus, apart from countries which practise the
system of State trading, international economic relations are in general heavily controlled by the
3. It is in making the rights and obligations of States under customary public international law public authorities. Furthermore, this international commercial activity of a State necessarily
depend purely and simply on the rules of municipal law concerning the rights and obligations of affects the economy, and thus the public interest, of the receiving State; it normally also
private persons in their relations inter se, that the Judgment seems to me to fail to appreciate involves contacts with the municipal legal system and with the public authorities of that State.
the nature of the rules of customary international law, including the rules of international law It is thus genuinely a matter of ensuring a proper balance between the interests of States, a
concerning the rights and obligations of States in the field known as "the treatment of aliens". traditional task of the rules of public international law.

It is, however, well established that international responsibility is a responsibility of State to This task is fundamentally different from that laid upon the rules of municipal law, and in
State, and that consequently, the conditions under which the international responsibility of a particular municipal private law. The considerations which determine the choice of a particular
State arises, as well as the conditions under which another State is entitled to require system of municipal private law With respect to what the Court has called "the nature and
reparation for an injury caused to it, are in principle completely independent of the content of interrelation" of "the rights of the corporate entity and its shareholders" are completely foreign
the municipal law of the States in question. to the problems which are the concern of the rules of public international law relating to
responsibility for the treatment of aliens.
"Diplomatic protection and protection by means of international judicial proceedings constitute
measures for the defence of the rights of the State. As the Permanent Court of International 5. It is true that international commercial activities are to a very large extent carried on under
Justice has said and has repeated, 'by taking up the case of one of its subjects and by resorting municipal law forms (acquisition of ownership, contracts, concessions, collection of rates and
to diplomatic action or international judicial proceedings on his behalf, a State is in reality taxes). But it is not the legal relationships of municipal law resulting therefrom—the
asserting its own rights— its right to ensure, in the person of its subjects, respect for the rules relationships between private persons inter se or between a public authority and a [p 337]
of international law' (P.C.I.J., Series A, No. 2, p. 12, and Series A/B, Nos. 20-21, p. 17)." private person—-with which customary international law is concerned. The latter does not tend
(Nottebohm (Second Phase), Judgment, I.C.J. Reports 1955, p. 24) [my italics]. in any way to unify the different municipal legal orders, even partially or indirectly, into a
common legal order applicable to cases of diversity of citizenship.
"It is a principle of international law that the reparation of a wrong may consist in an indemnity
corresponding to the damage which the nationals of the injured State have suffered as a result The international responsibility of a State is not based upon rules of any such common legal
of the act which is contrary to international law. This is even the most usual form of reparation; order; nor is the right of the State which asserts such responsibility derived from the rights
it is the form selected by Germany in this case and the admissibility of it has not been disputed. which a private person would obtain under such a common legal order. The approach of the
The reparation due by one State to another does not however change its character by reason of rules of customary international law is completely different; they are concerned rather with the
the fact that it takes the form of an indemnity for the [p 336] calculation of which the damage activity, as such, of the persons carrying on the international commerce of a State, on the one
suffered by a private person is taken as the measure. The rules of law governing the reparation hand, and the public authorities of the receiving State, on the other, as well as with the
are the rules of international law in force between the two States concerned, and not the law interrelation of those activities. That is why international responsibility for the treatment of
aliens is essentially a responsibility for "denial of justice" lato sensu. That is also why the State recognition of, or the effect to be given to, the decisions, judicial and otherwise, of the Spanish
which relies upon such responsibility does not represent the injured person but is asserting its authorities, within the framework of the legal system of another State. On the contrary, it is a
own interest in that person's activities in international commerce. That is why, finally, it is matter of determining whether those decisions constitute a denial of justice in the broad
indispensable, for the determination of the existence or inexistence of international meaning of the term, i.e., unlawful use of force, arbitrary discrimination, or a usurpation of
responsibility on the part of one State towards another State in a specific case, to take into jurisdiction, amounting to infringement of the rights of another State. In this domain there
consideration all the activities, as a whole, of the public authorities of the State whose cannot be a "renvoi" to the rules of municipal law of the State whose international responsibility
responsibility has been alleged, as well as all the injured private person's activities, as a whole, is alleged, nor, moreover, to the municipal law of any other State, nor to any "common rules"
in international commerce. that might be derived from a comparative law study of different national legislations.

6. The notion of "international commerce" must not be given a purely economic interpretation. 8. The distinction of principle drawn by the present Judgment between—
In actual fact, customary international law protects the interest which a State has in its
international commerce because international commerce in the broad sense of the term is of (a) the obligations of a State "when [it] admits into its territory foreign investments or foreign
interest to the entire international community. As Sohn and Baxter rightly remark in their nationals, whether natural or juristic persons" (paragraph 33), obligations "arising ... in the field
commentary on the Draft Convention on the International Responsibility of States for Injuries to of diplomatic protection" (ibid.);[p 339]
Aliens: "The law of State responsibility is directed to the maintenance of freedom of
communications and of movement between nations." (b) the obligations of a State resulting from "the outlawing of acts of aggression" (paragraph
34);
On the same lines, customary international law recognizes—in particular since the Second
World War—respect for fundamental human freedoms as an interest of the international (c) the obligations of a State resulting "from the principles and rules concerning the basic rights
community. In fact, even before and between the two World Wars the idea of the protection of of the human person" (paragraph 34); and
"human rights" by public international law was never absent from international decisions
concerning the responsibility of States for the treatment of aliens. Here, as in the protection of (d) the protection of the economic interests resulting from investments made by a foreigner
international commerce, it is not a matter of creating a common legal order determining the (paragraph 87);
legal relationships between the public authorities and private persons or between private
persons inter se, but of "checking" the application of the municipal legal order in order to seems very artificial and cannot in any case justify the essential legal consequences which the
sanction the unlawful use of force, arbitrary discrimination and usurpation of jurisdiction, which Judgment attaches to this distinction.
violate a human being's "right to existence". Here, as in the protection of inter [p 338] national
commerce, the different methods adopted by the municipal law of different countries are In the first place, it seems impossible to make any distinction between categories (a) and (d).
irrelevant to the attainment of the objectives of the rules of customary international law. The present Judgment even observes (paragraph 37), and rightly, that the institution known as
the diplomatic protection of foreigners has "from its origins [been] closely linked with
7. At this point I must make a digression. The Judgment seems to be based on the idea of a international commerce". How then can it on the one hand recognize that "when a State admits
"reference" by the rules of international law to the rules of municipal law. It is stated, in into its territory foreign investments . . . it . . . assumes obligations concerning the treatment to
particular, in paragraph 38 of the Judgment that "international law has had to recognize the be afforded them" (paragraph 33 of the Judgment) and, on the other, deny to the State whose
corporate entity as an institution created by States in a domain essentially within their domestic nationals have made such investments all protection at the international level apart from "treaty
jurisdiction. This in turn requires that, whenever legal issues arise concerning the rights of stipulations" (paragraph 90 of the Judgment)? It is true, as the Court says (paragraph 87), that
States with regard to the treatment of companies and shareholders, as to which rights "when a State admits into its territory foreign investments . . . it . . . does not thereby become
international law has not established its own rules, it has to refer to the relevant rules of an insurer of that part of another State's wealth which those investments represent". No one
municipal law". The legislative technique of reference or renvoi from one rule of law to another has ever employed such a formula to define the obligations of the receiving State. It is in any
rule of law, or to the results of its application, is an operation well known in legal science. So far event not the basis upon which Belgium bases its claims against Spain in the present case! The
as international law in particular is concerned, this technique is of frequent application in the problem of the extent of the protection which the rules of international law give to the interest
written rules of law, i.e., in treaties. Thus, several treaties, when defining the obligations of the of a State is one question, the determination of the State or States whose interest is protected
Contracting Parties, contain a reference to the municipal law of a specific State. This is, for is another.
example, the case with treaties concerning conflict of laws and reciprocal judicial assistance,
including the recognition and execution of foreign judgments. But this kind of renvoi is wholly Nor is this all. In all the cases enumerated above, general public international law protects the
unrelated to the situation with which the present case is concerned. rights of States by imposing obligations on other States, for the good reason that it is an
essential interest of the international community as a whole that such rights should be
In the first place, in the Barcelona Traction case it is a matter of applying the rules of general respected.
customary international law. A renvoi by such rules to the municipal law of a specific State
would seem a priori to be improbable. Furthermore, the present case does not concern the It is true, from the moral point of view, that it is difficult to compare the gravity of an
infringement of the territorial integrity and political independence of a State with that of an
infringement of the fundamental freedoms of the human person, or with that of an injury to When such a body of rules is under analysis, it can be observed, a posteriori, that a failure to
international commerce lato sensu. comply with an obligation may entail certain injurious consequences for certain interests,
without the possessor of those interests being empowered by this body of rules of law to
Nevertheless, from the legal point of view, in each of these three cases it is a matter of State demand reparation from the party which has failed to fulfil this obligation. The [p 341]
interests protected by the imposition of obligations on other States. Obviously, the details of the conclusion can then be drawn therefrom that the victim had indeed a "mere interest" but not a
protection are different in each of the three cases, both with respect to the definition of the in- "right" that was violated.
fringements prohibited—i.e., the extent of the protection—and with respect to the designation
of the State or States entitled to apply, or demand the application of, sanctions in the event of This is in fact the conclusion which the Judgment draws when analysing the rules of municipal
such conduct.[p 340] private law with respect to the legal situation of shareholders with regard to acts directed
against the company.
It is to this latter context that the question of the jus standi of a State relates.
But in the case decided by the Judgment it is a matter neither of the obligations of the Spanish
The Judgment seems to draw a distinction between obligations of a State erga omnes, authorities on the level of municipal law nor of the legal opportunities which the shareholders
obligations of a State which exist towards certain other States under general international law, might have of asserting that responsibility, by asking for the cancellation of the measures
and obligations of a State which only exist towards a State with which it has entered into taken, or for compensation.
"treaty stipulations". This distinction can of course be drawn. But it is still difficult to hold that
this distinction would necessarily correspond to an a priori classification in accordance with the It concerns, on the contrary, quite another body of rules, namely the rules of customary public
nature of the interests protected by such obligations, a classification which is already in itself a international law concerning the obligations and the rights of States in their mutual relations.
fairly doubtful one.
Now these two bodies of rules answer quite different requirements; their objects and purposes
In other words, it seems impossible to say a priori that the economic interests of a State can be are different; they have developed in different contexts.
protected through obligations on other States only by virtue of "treaty stipulations", just as it
would obviously have been incorrect to say that every State has jus standi in cases where the The body of rules of customary public international law concerning the treatment of aliens
territorial integrity or the political independence of another State is infringed, otherwise than by draws its inspiration, as we have seen, from the interest of the international community in
armed attack, or in cases where the national of another State is the victim of a violation of his respect for the fundamental freedoms of the human person as well as in respect for the
individual freedoms. freedom of international commerce.

9. No one denies, moreover, that a State's jus standi under the rules of customary international It is in relation to these two principles that both the obligations and the rights of States in their
law concerning the treatment of aliens depends on the existence of a link between such State mutual relations fall to be determined. In the instant case it is above all the second of these
and the situation that has been adversely affected in the case in question by the conduct of two principles that is involved.
another State.
11. In order to be able to describe a concrete activity in international commerce as forming part
In this connection it should be noted that in those matters governed by customary public of the international commerce of a specific State, it is obviously necessary that there be a link
international law it is a priori improbable that there will be watertight divisions between the between that activity and that State. That link can only be established through the medium of
solutions adopted for the various theoretically separate elements of which this legal rule is one or more of three elements of the State: its nationals, its territory and its government.
made up. It is the interrelation between the conduct imputed to a State and the conduct Where the international commercial activity takes the form of a natural person's establishing
imputed to another State which is the subject of the rules of customary international law, himself abroad, it is traditionally the nationality of that natural person which determines the link
manifesting itself in the creation of "obligations" and "rights" of States in their mutual relations. between that activity and a specific State. Furthermore, right from the beginning of the
In these circumstances, it is impossible, in particular, totally to disregard the nature and effect development of international commerce it will be found that the State has concerned itself with
of this interrelation in the actual case in question when determining the "responsibility" of the the treatment accorded by other States to "its" products, i.e., products originating in its
one State and the "jus standi" of the other. territory, as well as to "its" ships, i.e., ships upon which its government has conferred the right
to fly the national flag. (Sometimes the various manifestations of international commercial
10. This is one more reason for not attaching too much importance to the highly abstract and activity were not clearly distinguished. A typical example of this is afforded by the treaties the
theoretical distinction between "rights" and "mere interests" which seems to form the sole basis interpretation of which was in question in the Court's Judgment of 27 July 1952 (Rights of
of the reasoning in the Judgment. Nationals of the United States of America in Morocco, Judgment, I.C.J. Reports 1952, p. 176.)
Those treaties, dating from the turn of the century, were aimed primarily at preventing any
This distinction is only meaningful within the framework of a concrete body of known and differential treatment by a State of the nationals of the other States parties to the said treaties.
undisputed rules of law. But the[p 342] Court did not hesitate to interpret the treaties as also prohibiting any
discrimination in favour of the importation of goods coming from the territory of one of those the differences between these three types of companies. As has already been pointed out,
States (I.C.J. Reports 1952, pp. 183-186), thus recognizing that the treaties in question had as international law is concerned with the rights and obligations of States in their mutual relations
their object the protection of all the international commercial activities of each Contracting and not with the municipal law relations between the company and other private persons, nor
State.) even with the municipal law relations between the company, its shareholders and officers, and
the public authorities of a State.
The techniques of international commerce have developed since then, in particular with the
entry on the scene of limited companies as a legal form for the organization of private economic The nature of rights, like that of obligations, is different in international law, because such
activities. obligations and rights correspond to the specific requirements of the international community. It
is consequently not possible to regard the company's legal personality under municipal law as
For purposes of the determination of the link between an international commercial activity and an exclusive touchstone.
a particular State, this development poses two distinct problems, the one relating to the
relationship between the activity and a person, and the other relating to the relationship One can neither regard the company as always being the only entity affected by any measure
between that person and a State. whatsoever directed—on the plane of municipal law—against the company, nor always equate
the company, purely and simply, with a natural person so far as concerns its "nationality", i.e.,
In fact, in "classic" cases of diplomatic protection the interest of a State in "its" international its link with a specific State.
commerce merges with its interest in the welfare of its nationals, natural persons, both in
respect of their personal safety and fundamental freedoms and in respect of their power to Both these matters are moreover recognized in international jurisprudence and practice.
administer their property and their right to draw profits therefrom.
Of course this jurisprudence and practice are not uniform. On the one hand, they are often
The elements of "the undertaking" are thus united in one single indivisible natural person, and inspired by ad hoc considerations; on the other, they do not take sufficient account of the
that person's appurtenance to a specific State does not normally pose any problems. variety of cases that can arise.

The employment of the legal form of the limited company (with its own legal personality, in Nevertheless, they do show a sufficient degree of recognition of the inapplicabilty of the legal
private municipal law) complicates the situation. fiction of municipal private law on the plane of public international law. The company's juristic
personality is not by any means the last word either on the obligations or on the rights of States
12. In the first place, it is hard to recognize that a limited company as such can have personal in the matter of the "treatment of aliens".
safety or fundamental freedoms. (We may leave aside the question of whether under municipal
law the company as such might complain of an infringement of the personal safety or The Judgment recognizes this, moreover, when examining "... other grounds on which it is
fundamental freedoms of the natural persons which "represent" it.) It is thus solely a matter of conceivable that the submission by the Belgian Government of a claim . . . may be justified"
the undertaking's "economic" interests: its activities and its property. Now in reality the legal (paragraph 55). However, the Judgment seems to persist in regarding such other grounds as
form of the limited company lends itself to fairly varied kinds of organization of the economic the application of transposition on to the plane of international law of the rules of municipal law
interests of the undertaking. There is the type of company in which legal personality concerning the status of a company and its shareholders (paragraph 56).
corresponds to economic independence of the undertaking; the administration of the
undertaking is in the hands of independent directors and the profits are in principle It has already been explained above why this approach seems contrary to the very nature and
appropriated to the undertaking itself, i.e., generally re-invested (after the deduction, in function of the rules of customary public international law. It is not the rights and the
suitable cases, of a certain remuneration for the capital already invested). But there is also the obligations of the shareholders [p 344] that are in issue in the present case, but the obligations
type of company which is in reality a form of organization for co-operation in an undertaking by and the rights of States; it is not only a question of different legal personae but also of a
shareholders who not only furnish the capital but also effectively administer the undertaking different subject-matter.
and draw the profits themselves. Finally, there is a third type of company, in which the
undertaking is integrated into another more extensive undertaking, belonging to another 13. That is also why it does not seem justifiable to disregard as irrelevant the international
company which dominates it. Obviously these are types of companies (corresponding to practice and jurisprudence which relate to measures taken with respect to enemy property and
different types of [p 343] shareholders), and not categories separated by water-tight divisions. nationalizations (paragraphs 59 to 62 of the Judgment). On the contrary, these are two
Of course, the municipal private law applicable to these three types of company is generally the phenomena at the international level which directly concern international commerce as well as
same. On the other hand, in the field of municipal tax law, several countries recognize the the links between an international commercial activity and a specific State. The measures taken
fundamental difference between these three types by affording them different treatment. with regard to enemy property have the twofold purpose of excluding enemy control of
management from the national economy, and of confiscating enemy property by way of
On the plane of customary international law, i.e., both in order to determine what is affected by reparations. It is highly significant that in connection with this twofold objective the distinct
the conduct of a State towards a limited company, and in order to determine the link between personality of the company does not constitute an obstacle to the recognition of the true state
what is affected and another State, it seems a priori necessary to take account of the reality of of affairs. But how then can the link between an activity, and private property, and a State be
accepted when it is a matter of measures to be taken against that State, and the existence of States dependent on the rules of municipal private law concerning the status of companies. The
such a link be disregarded, as a matter of principle, when it is a matter of the rights of that Judgment observes (paragraph 66) that "only in the event of the legal demise of the company
State? are the shareholders deprived of the possibility of a remedy available through the company".
The Judgment does not explain how in such a case, after the legal demise of the company, the
In the case of the nationalization of undertakings belonging to a company it is obviously a action of a government other than "the company's government" might be compatible with the
question of measures of another nature. Nevertheless, here again many international rule of continuity! In reality, the legally protected interest of such other State, and consequently
agreements concluded in order to resolve the consequences of those measures recognize that also the obligations towards it of the State which took the measures of which complaint is made
such measures —which put an end to an international commercial activity—do not affect only must exist on the international plane before and independently of the company's demise on the
the State whose "nationality" the company as a distinct person is deemed to possess. plane of municipal law, a demise which is but one of the possible subsequent consequences of
those measures.
In both cases—measures against enemy property and measures of nationalization—it is a
question of an interference—for different reasons —with an international commercial activity 15. The Judgment observes (paragraph 65) ". . . that from the economic viewpoint the
taken as a whole; the object and the purpose of such measures concern the undertaking as company [i.e., Barcelona Traction] has been entirely paralyzed" and that it "has been deprived
such, even though they obviously affect the ownership of, and other rights over, individual of all its Spanish sources of income".
items of property.
It is indisputable that the measures taken by the Spanish authorities affected the undertaking
14. It is from this point of view—an interference with the foreign undertaking rather than with as such. The essential point is thus the existence or non-existence of a link between the
an isolated right belonging to a foreign private person—that one must also consider the cases in undertaking and the Belgian State sufficient for it to be considered on the international plane
which international jurisprudence and practice have recognized a State other than the one that the inter [p 346] national commerce of the latter State is affected by those measures. It is
under whose municipal law the company was formed as having an interest which is legally thus the second question referred to above which is raised by the entry upon the scene of
protected by the rules of international law. Such cases are in particular those in which the limited companies in international commerce: that of the link between what is affected by the
company had gone into liquidation, or was "practically defunct", in consequence of measures conduct of a State, and another State. In this connection too it seems impossible to disregard
taken by the State whose international responsibility was in question. Thus they were cases in the difference between the three types of companies and shareholders referred to above.
which the company had been forced to suspend or to cease its activities: in other words, in
which the undertaking as such was affected. Writers have sometimes attempted to explain such 16. So far as concerns the international commerce of a State which takes place through the
cases by seeing in them an application of the notion of municipal private law to the effect that medium of natural persons, it is undisputed, as the Judgment recalls (paragraph 36), that in
on liquidation of a company the shareholders take back their [p 345] share of the company's principle it is the bond of nationality between the State and the individual which counts. There
property (see, for example, Reuter, Droit international public, 1958, p. 166). are, however, exceptions to this general rule. On the one hand, as the Court recalled in its
Advisory Opinion of 11 April 1949 (I.C.J. Reports 1949, p. 181):
But this explanation is unsatisfactory. On the level of municipal private law, it is not the
company's going into liquidation which causes a right to arise for each shareholder, namely a ". . . there are important exceptions to the rule, for there are cases in which protection may be
right to a part of the company's property: it is only at the end of the liquidation that any surplus exercised by a State on behalf of persons not having its nationality".
there may be is distributed among the shareholders. Furthermore, the liquidation was always
subsequent to the measures taken by the State which was held responsible on the international These are, in particular, cases of "functional" protection (members of the crew of a vessel flying
plane, so that those measures could not have infringed the rights of the shareholders on the the flag of the State; members of the armed forces of a State; agent of the United Nations);
municipal private law plane. the protection of the activity as a whole, linked as such with a State, extends to persons who
These two arguments remain valid a fortiori in cases in which the company, without having participate in that whole, irrespective of their nationality.
gone into liquidation, was "dormant", "practically defunct" or "destroyed". The Judgment
(paragraphs 64-68), while recognizing "special circumstances for which the general rule" [i.e., On the other hand, the bond of nationality between the State and the individual is not always
the rule that only the State under the municipal law of which the company was formed would sufficient. In the Nottebohm case the Court held that Liechtenstein was not entitled to extend
have jus standi] "might not take effect" (paragraph 64) admits the existence of a special its protection to Nottebohm as against Guatemala, on the basis of a negative answer to the
circumstance in the present context only where "the corporate entity of the company has question—
ceased to exist" and has "become incapable in law of defending its own rights and the interests
of the shareholders" (paragraph 66). In so doing, the Judgment consequently rejects any ". . . whether the factual connection between Nottebohm and Liechtenstein in the period
exception based upon the company's going into liquidation or becoming entirely paralysed preceding, contemporaneous with and following his naturalization appears to be sufficiently
(paragraph 65) on account of the measures with respect to which the international close, so preponderant in relation to any connection which may have existed between him and
responsibility of a State is asserted. any other State, that it is possible to regard the nationality conferred upon him as real and
effective . . ." (I.C.J. Reports 1955, p. 24).
The Judgment thus once again makes the extent of the international obligations and rights of
Here again a "functional" approach may be observed. Mr. Notte-bohm's naturalization not market.
having in any way altered his activities as a whole (what the Court calls his "manner of life",
ibid., p. 26), Guatemala's alleged injury to this "undertaking" was not regarded as affecting, on In reality this connecting factor is, in a certain sense, comparable to the [ p 348] link between a
the international plane, a legally protected interest of Liechtenstein. State and a ship to which that State has granted the right to fly its national flag. It loses much
of its meaning when the incorporation of a company under the municipal law of a State is
17. A true bond of nationality, such as exists between a State and its nationals who are natural effected without any active intervention by the public authorities of that State and does not
persons, is obviously inconceivable for juristic persons as such. In order to assimilate a limited require the establishment of any real bond between the company and the territory or nationals
company to a national who is a natural person it is consequently necessary to have recourse to of that State.
[p 347] other connecting factors. In this connection, from an abstract point of view, three
courses are open: Thus it is understandable that in State practice and in international jurisprudence this
connecting factor does not play a preponderant part unless there are other links between the
(a) to take account of the nationality of the natural persons to whom the company "belongs"; company and the State in which it has been incorporated, as, for example, the fact that the
administrative control of the company is actually exercised in the territory of that State. (In
(b) to take account of the fact that juristic personality was "conferred" on the company by the certain treaties even the nationality of the natural persons who manage a company is a factor
authorities of a particular State; in determining the link between a State and that company. According to information given by
Foighel in Nationalization and Compensation, 1963, p. 235, this is the case in a treaty, with an
(c) to take account of the fact that the company, as an economic entity, is "implanted" in the attached aide-memoire, of 27 September 1948 between Switzerland and Yugoslavia.)
territory of a particular State.
Finally, the connecting factor mentioned in (c) above (the fact that the company, as an
In the practice of States, including treaties concluded between two or more States, and in economic entity, has been implanted in the territory of a particular State) reflects the
international jurisprudence, sometimes one and sometimes another of these courses is adopted, recognition of the growing importance of the economy—and therefore of its undertakings—for
or the connecting factors deriving from two or all three of these approaches are combined or the very existence of the State. From this point of view the State in whose territory a company
balanced against one another. has been implanted is necessarily interested in the expansion of that company's business
abroad, whether through isolated activities, or through the establishment of subsidiary
18. This is explained by the fact that the three solutions correspond more or less to the three companies, or through holdings in other companies which it controls and whose business
different types of companies and shareholders. If, for example, it is a matter of a company all activity forms an integral part of its own.
of whose shares are held by two or three natural persons, who have thus combined their capital In sum, this connecting factor has its application most particularly in cases involving the third
in an undertaking which they manage themselves, it seems quite natural to refer to the well- type of shareholder and company mentioned above.
known views expressed by Max Huber in his Report of 1 May 1925 in the case concerning 19. In the context of the application of the rules of customary international law relating to
British Property in Spanish Morocco: responsibility as regards the treatment of aliens, the relative importance of the three connecting
factors should be judged not only by taking into account the type of company and shareholders
". . . the protection of individuals covers all their legitimate interests. The fact that those in question in the given case, but also in relation to the nature of the injury which the conduct
interests happen to be more or less closely connected with those of a corporate legal entity complained of on the part of the State whose responsibility is alleged is said to have done to
cannot ipso facto deprive them of the protection which they would otherwise be given by virtue the international commercial activity. It is clear that in this respect injury to an isolated piece of
of belonging to a protected person" (U.N.R.I.A.A., Vol. II, p. 661). pro-perty belonging to a company cannot be put on the same plane as an injury to the very
"International law which, in this field, draws its inspiration essentially from the principles of personality of the company or an injury to the whole of the activity of that company in the State
equity, has not laid down any formal criterion for the granting or refusing diplomatic protection whose responsibility is alleged.
to national interests linked to interests belonging to persons of different nation-alities" (ibid., p.
729). The present Judgment seems to deny the relevance, so far as the jus standi of an applicant
State is concerned, of the distinctions drawn above concerning the nature of the injury, the
These considerations apply also in cases in which corporate personality has been conferred on a type of company and shareholders in question, and the nature and relative importance of the
company by the municipal law of the State whose responsibility is asserted, even though the possible forms of connection between a State and a company. Only the dis- [p 349] tinction in
company has been implanted in the territory of that State. private municipal law between the rights of a company and the direct rights of the shareholder,
as well as the separate corporate personality of the company under the municipal law of the
Moreover, the connecting factor under (b) above (the fact that the company was granted State in which it was incorporated, are recognized as relevant in the Judgment. It is true that
juristic personality by the authorities of a particular State) corresponds rather to the type of the Judgment does—though without laying down the conditions under which a given State,
company whose undertaking is independent, and whose shares are scattered among persons other than the one according to whose municipal law the company was incorporated, may have
who have nothing to do with the management of the undertaking, but simply receive such jus standi—examine various "special circumstances" and possible "grounds" which might lead to
dividends as are declared, or make profits by the purchase and sale of those shares on the the non-application of the simple and strict rule which it lays down. But in point of fact those
special circumstances and reasons are always expressed by the Judgment in relation to the no means destroyed by the formation of the company or participation therein, and which also
separate personality of the company under municipal law. Thus the Judgment considers "the does not devolve upon the State where the company was formed.
case of the company having ceased to exist" (paragraphs 64-68) solely from the point of view
of legal existence under municipal law, without taking any account of the object of the 22. It follows from the foregoing that conduct by a State which, on the plane of municipal law,
company, which is the under-taking. affects a company's property, personality or undertaking can, on the plane of international law,
infringe a legally protected interest of a State other than that under the municipal law of which
The other possibility dealt with in the Judgment (paragraphs 69-84) is "that of the lack of the company was incorporated. This also means that, in certain circumstances, the same
capacity of the company's national State to act on its behalf". conduct by a State may affect the legally protected interests of two or more States.

Here again the Judgment reaches the conclusion that the creation of a corporate entity by the Such a legal situation is by no means excluded by the rules of international law. It suffices in
municipal law of a particular State is alone relevant, without however explaining how such a this connection to refer to the Advisory Opinion of 11 April 1949 (Reparation for Injuries
formality can of itself give rise, on the plane of international law, to a legally protected interest Suffered in the Service of the United Nations, I.C.J. Reports 1949, p. 174).
of that State in the business of the company.
The present Judgment (paragraphs 96 and 97) seems, however, to seek to exclude the
The Judgment does of course mention (paragraph 71) certain other factors, but in the first possibility of concurrent diplomatic claims on account of the complications to which this gives
place those factors are partly formalities which necessarily follow from the incorporation of the rise.
company in accordance with the rules of the relevant private municipal law, and in the second
place they do not carry much weight in comparison with the relationship of the company with In this connection it should be noticed, first that one must not exaggerate the number of cases
other States. Furthermore, it appears from paragraph 70 of the Judgment that the Court does in which a company is truly international, in the sense that connecting factors of equal
not in any way consider them to be legally relevant. importance exist with several States.

20. The reasoning followed in the Judgment logically leads to the theory that a State whose In a very great number of cases the three connecting factors mentioned above connect the
nationals make investments abroad in the legal form of the incorporation of a company company with one State only. That is precisely why international practice has generally
according to the rules of the municipal law of a foreign State, or in the form of holdings in the accepted diplomatic protection on the part of the State under whose municipal law the
capital of such a company, loses its interest in the treatment given to those investments. company was in-corporated.
This theory, based on the distinction between the "rights" of the company and the "mere
interests" of the shareholders, is necessarily applicable also in cases where it is a question of Furthermore, concurrent claims, even though emanating from different [p 351] States, always
the treatment given by the State under whose municipal law the company was incorporated. have the same object, that is to say, to prevent, bring to and end, or have corrected by
restitutio in integrum the unlawful acts of another State.
The reasoning set forth in paragraphs 85-90 of the Judgment does not admit of any exception.
It is only at the stage of monetary compensation in lieu of restitutio in integrum that it is
21. The following paragraphs of the Judgment do however seem to envisage the possibility of necessary to determine the amount to be paid to each State. In its Advisory Opinion referred to
appeal being made to "considerations of [p 350] equity" so as to permit international law to "be above, the Court observed in this connection:
applied reasonably". These considerations seem to be that in the case of a foreign investment
some foreign government ought to exist which can exercise diplomatic protection. Such a "International tribunals are already familiar with the problem of a claim in which two or more
consideration seems, however, contrary to the very nature of the rules of customary national States are interested, and they know how to protect the defendant State in such a
international law, according to which in exercising diplomatic protection a State is asserting its case." (I.C.J. Reports 1949, p. 186.)
own rights. There is thus no question of finding some government or other which can act as the
shareholder's "claims agent". Consequently it does not seem that the possibility of concurrent claims—which, moreover,
occurred at the diplomatic stage of the present case—creates that "atmosphere of confusion
Such a system would, moreover, not ensure any improvement in the shareholder's position, and insecurity" to which reference is made in paragraph 96 of the Judgment. If there are com-
having regard to the complete freedom of every government to accede or to refuse the plications they are not insurmountable; they are moreover the consequence of the ever-
shareholder's request for protection, as well as to pass on or not to pass on to him any increasing interdependence of States in the modern world, a fact to which no international
compensation it may receive. tribunal can close its eyes.

If then international practice and jurisprudence admit action by the State whose nationals have The same observation holds good for the complications that would result from a settlement
invested their capital in a company formed under the municipal law of another State in the reached between the State responsible and one of the other interested States (paragraph 97 of
event of unlawful conduct by that latter State, it is because they recognize the existence of a the Judgment). Such a settlement, like any other treaty, could bind only those States which
legally protected interest of the first State in that company's activities, an interest which is by con-cluded it. In international practice governments are well aware of how to accommodate
themselves to this legal rule! In any event, if the State under whose municipal law a company such measures as the allied States might take in the context of their wartime legislation with
was incorporated concluded a settlement with the State responsible for an unlawful act towards respect to property belonging to companies resident in enemy-occupied territory. Nor is it
that company, providing for a set-off against the indemnity of any claims which the latter State disputed that this objective was in fact attained. This type of operation is well known in those
might have against the former, it would manifestly be unjust to regard such a settlement of the European countries which were occupied by German forces during the Second World War, as
affair as excluding a claim on account of the same unlawful act on the part of a third State well as in Allied countries, such as the United States and Canada, where the principal officers of
which had a legal interest in the company's activities by virtue of other connecting factors. companies in the European countries in question found a refuge which enabled them to
continue to run those companies' affairs. The authorities of the Allied host-countries, moreover,
The rule of res inter alios acta, and the rule that a State by taking up the case of one of its generally afforded the co-operation necessary [p 353] for the achievement of the operation's
nationals is asserting its own rights, both follow from the very structure of customary public purpose. In these circumstances, the events summarized above cannot be regarded, on the
international law. plane of inter-national law, as having broken the bond between the Belgian State and the
Barcelona Traction undertaking. Once again, this conclusion is independent of the relationships
* of municipal private law.

23. Barcelona Traction clearly belongs to the third type of company described above, i.e., the It consequently applies both to the period during which Securitas acted as custodian of the
type of company whose undertaking is integrated into another undertaking, that of the Sidro shares belonging to Sidro, and to the period during which it was trustee. In both capacities
company, the chief shareholder in which is a further company, Sofina. Securitas was, in the words of Spanish counsel, nothing but an "American version of Sidro".
Securitas was formed, and the trust relationship between Sidro and Securitas was created, in
The links between Sidro and Sofina have not been made completely clear (it appears that Sidro order to escape the consequences of the occupation of Belgian territory. The trust relationship
was also a shareholder in Sofina). came to an end after the war, just as, for that matter, Securitas disappeared. The precise date
of the end of this period does not seem to be of crucial importance in the present context, since
Nevertheless, throughout the relevant period, the connecting factors [p 352] between both the trust relationship was never intended to have and never had the effect of transferring to
these companies and Belgium were such that it can hardly be denied that a sufficient bond someone else the position which Sidro occupied in Barcelona Traction.
exists between the undertaking of these companies and the Belgian State. It is true that the
Parties to the dispute disagree as to the precise percentages of Sofina shares that were held by 25. So far as concerns the registration of the Barcelona Traction shares belonging to Sidro in
natural or juristic persons of various nationalities. But it does not appear to be contested that the name of Charles Gordon & Co. (subsequently Newman & Co.), it is sufficient to note that
Sofina always had a number of Belgian shareholders and that the company's other shares were these two firms were never more than nominees of Sidro and Securitas. Even on the level of
scattered among persons of various nationalities. (One of the counsel for Spain spoke of ". . . the applicable municipal private law, it is recognized that such nominees are no more than
American, British, French, Dutch, Spanish, Swiss and other holdings" (hearing of 22 July 1969).) agents for the true shareholders. On the international level, the fact that a nominee is
There is not sufficient evidence for it to be supposed that Sidro and Sofina were companies registered as a shareholder in the company's official register is of no relevance to the question
whose undertaking was integrated into another undertaking having links with a State other than of who is affected by measures taken by a State against the company.
Belgium, nor, moreover, for it to be supposed that those companies belonged to the first type,
that of companies effectively run by their shareholders, natural persons of a nationality other 26. It has been observed above that in the context of the application of the rules of customary
than Belgian. In these circumstances, the connecting factors of the incorporation of these international law concerning international responsibility for the treatment of aliens there are no
companies under Belgian law, and their implantation within Belgian territory, are sufficient to water-tight divisions between the legal problems raised by such application. In ascertaining
create the bond between these companies and Belgium which is necessary to justify a legally whether in a specific case the conduct of State A injures a legally protected interest of State B,
protected interest on the part of the Belgian State in Barcelona Traction's undertaking. one cannot wholly separate the considerations relating to the four elements of the question,
namely: (1) the character of State A's conduct; (2) the nature of the injury; (3) the nature of
24. It has nevertheless been contended that this bond, an essential element in which is Sidro's the interest injured; and (4) the link between that interest and State B.
controlling holding in Barcelona Traction, acquired a few years after the First World War, was
broken by the fact that the Barcelona Traction shares belonging to Sidro were the subject of 27. In this connection it is important to notice that in the present case it is not only a question
certain contracts entered into on the approach and at the outbreak of the Second World War. of an injury to property belonging to the company, nor again of a limitation placed upon the
free conduct of the company's affairs by its principal officers, but of an injury to the
During that period, Sidro formed in the United States a company called Securitas Ltd., as well undertaking as such, which has passed in its entirety into the hands of a Spanish group. One
as the partnership of Charles Gordon & Co. Contracts were entered into between Sidro and cannot ignore this fact in determining the jus standi of Belgium, whose interest is founded on
Securitas and between Securitas and Charles Gordon & Co. It is not disputed that Securitas the very fact that the Barcelona Traction undertaking is integrated into that of companies
Limited, as well as the firm of Charles Gordon & Co., were in reality mere alter egos of Sidro- having important connecting factors with that State.
Sofina, nor that the whole purpose of the operat-ation was precisely to ensure that Sidro's
effective share in the capital and management of Barcelona Traction might continue despite the 28. Furthermore, the character of the conduct of the Spanish State of [p 354] which Belgium
occupation of Belgian territory by the German armed forces, and without being hampered by complains is also not unrelated to the question of Belgium's jus standi. An essential element in
the Belgian claim is its contention that in the circumstances of the case the injury to the
undertaking was the result of Spanish measures which necessarily exceeded the limits which These circumstances, which are relevant to the limits on the jurisdiction of the Spanish State,
international law imposes on the jurisdiction of any State. The character of such conduct is such cannot be ignored when it comes to the question of whether the Belgian State has jus standi in
as to influence the determination of the States entitled to demand reparation for the damage the present case, and this essentially for two reasons. The rules of customary public
suffered by them in consequence of such measures. international law regarding international responsibility for the "treatment of aliens" have
developed precisely in consequence of the fact that the "aliens" in question find themselves
It is certainly not merely bilateral relations that are in issue in such a case, since a State's within the jurisdiction of another State; a fortiori then, they give legal protection against
obligation to keep within the limits of its jurisdiction on the international plane is, without any measures which exceed the limits of the jurisdiction of such a State. In addition, it must be
doubt, an obligation erga omnes. recognized that in the instant case the measures taken by the Spanish judicial authorities
against Barcelona Traction were only able to achieve their desired effect as a result of the fact
So far as this aspect of the case is concerned, two observations are relevant. that Barcelona Traction's subsidiary companies possessed important installations within Spanish
territory. In these circumstances, it seems obvious that account must also be taken of the fact
In the first place, it is indisputable that in the present case it is not a matter of a nationalization that Barcelona Traction itself is, as it were, only a "subsidiary company" of Sidro/Sofina,
of the electricity producing and distributing undertakings in Spain. companies which can be assimilated to Belgian nationals.
It is not the Spanish legislative or executive authorities which have placed Barcelona Traction's
subsidiary companies' public utility undertaking in the hands of the State; it is the Spanish 29. The limits which international law imposes on the jurisdiction of a State are also relevant to
judicial authorities which, through a bankruptcy adjudication followed by a forced sale, have another aspect of the case, namely the question known as "the exhaustion of local remedies".
placed the property of the parent company, Barcelona Traction, in the hands of other private Here again it appears to be inadmissible to separate completely the different elements of the
persons. question of the international responsibility of a State towards another State. The Court,
moreover, recognized this, it would seem, in its Judgment of 24 July 1964 on the preliminary
In the second place, it is also not a matter in the present case of a judgment by a municipal objections raised by Spain. Everything which took place within the Spanish municipal legal
court deciding a dispute between two private persons, or ordering a simple measure of forced system, including the remedies sought and those which were not sought, pertains to the facts
execution. It emerges clearly from the facts that the bankruptcy petition and everything which relevant to the weighing-up of Spain's obligations as well as of Belgium's rights.
followed it had as their purpose and their effect the reorganization of the Barcelona Traction
undertaking in such a way that that undertaking passed from the control of Barcelona Traction's The right of a State, on the international plane, to respect for its international commerce implies
Belgian shareholders into the control of a group of Spanish persons who had for that purpose an obligation on the part of its national by whose interposition such international commerce is
acquired a number of bonds issued by that company. carried on to accept the jurisdiction of the host State by making proper use of the [p 356]
means for defending his interests which the municipal legal system of that State places at his
This purpose was attained and this effect achieved by means of a threefold operation, intended, disposal. Even then, it is necessary that such jurisdiction should exist on the international plane!
as it were, to remove Barcelona Traction, its property and its relations with its bondholders, into Here again the fundamental difference emerges between the rights and obligations of the
Spain. First, on the non-payment of debts of the Barcelona Traction Company was based the individual on the plane of municipal law and the rights of the State on the international plane.
taking of possession of the property and the "normalization" of the subsidiary companies in
Spain (see paragraphs 13 and 14 of the Judgment). Secondly, new share certificates in the Finally, the limits which international law imposes on the jurisdiction of the State are also of
subsidiary companies were created in Spain, cancelling the certificates which belonged to vital importance for the context within which the responsibility of the State for the acts of its
Barcelona Traction and were situated outside Spain, and it was decided that the head office of judicial authorities should be assessed. When it is a question of acts overstepping such limits, it
Ebro and of Catalonian Land (two subsidiary companies of Barcelona Traction, incorporated is the result of the act, rather than the intention, or the error of the court in the application of
under Canadian law) should thenceforth be at Barcelona and no longer at Toronto. (See the rules of its municipal law, which is to be taken into account.
paragraph 17 of the Judgment.) Thirdly, the bankruptcy decree was [p 355] made on a petition
by certain holders of Barcelona Traction bonds on the grounds of the non-payment of interest 30. In its Judgment of 24 July 1964, the Court decided the questions relating to its jurisdiction.
(see paragraph 13 of the Judgment). Now, Barcelona Traction, the parent company, was a From this point of view, there was consequently nothing to prevent the Court's examining the
company incorporated and having its head office—under its byelaws—in Canada. All its merits of the case, that is to say, the rights and obligations of the States parties to the dispute
property, consisting essentially of shares in subsidiary companies, was in Canada, deposited by virtue of the rules of customary international law.
with National Trust of Toronto as security for outstanding bonds. The bonds which were in
question in the bankruptcy proceedings were expressed in pounds sterling, and had from the It is true that the legal notion of the conditions for the admissibility of a claim also finds a place
time of their issue been subject to a trust (containing a "no-action clause") administered in in the rules of law relating to the procedure before an international tribunal. Nevertheless, an
Canada by National Trust, a company incorporated in Canada. The non-payment of the interest extensive application of this notion has a tendency to reduce the efficacity of international
on the said bonds had, moreover, led to compromises being effected, before the petition in adjudication, as well as to confer on the norms of international law a rigidity which is
bankruptcy, and under the supervision of the Canadian courts, between Barcelona Traction, the incompatible with their function in the community of States.
trustee, and the general body of bondholders.
The 1964 Judgment, which joined the preliminary objections relating to jus standi and the Applicant, should be imputed to the Spanish Government. These responsibilities were said to
exhaustion of local remedies to the merits, did so for reasons which laid stress first on the legal arise, on the one hand, from the bankruptcy adjudication made by the Reus judge on 12
ties between the questions raised and the actual rights and obligations of States in the matter February 1948 against the holding company Barcelona Traction, Light and Power Co., Limited,
of the treatment of foreigners, and secondly on the need to elucidate certain questions of fact. of Canadian nationality, which carried on activities in Spain through the medium of various
Accordingly, the 1964 Judgment seems to be based on the considerations set forth above. subsidiary companies. They were said to relate, on the other hand, to the allegedly improper
treatment afforded this group of companies by the Spanish administrative and judicial
The present Judgment, on the other hand, confines itself to rejecting the Belgian Government's authorities before and after the bankruptcy adjudication.
claim on the sole basis that "no jus standi before the Court has been established" (paragraph
102 of the Judgment), a conclusion which, in its turn, seems to be derived exclusively from That Barcelona Traction has the character of a holding company has been recognized by both
legal considerations regarding the distinct personality of companies in municipal private law, all Parties; it is established in particular by the documents printed in Appendices 1 and 2 to Annex
of which considerations might have been put forward in 1964. 22 and in Annex 23 of the Belgian Memorial.

I have in this dissenting opinion set forth the legal reasons which have led me to the conclusion Accordingly, the Application gives rise to the necessity of investigating, among other cardinal
that the Court ought to examine and pronounce upon what it calls the other aspects of the points, the question of whether the fact of Barcelona Traction's being a holding company has
case, and in particular on the question of whether or not the conduct of the Spanish authorities any particular bearing on [p 55] the conditions for the diplomatic protection of that company or
was unlawful. even on the extent of the responsibility of the respondent State. Such investigation reveals an
almost total absence of specific rules of general international law or treaty law applicable to
Since, on the one hand, the Court, for the reasons stated in the Judgment, has not wished to transnational holding companies and shows why, in consequence, judges tend to encounter
examine those questions of law, and, on the [p 357] other, the questions of fact in dispute difficulty in ascertaining the law applicable in each case and may even be forced to fall back on
between the Parties to the case have not been subjected to examination by the Court, it does debatable analogies drawn from municipal law or on private international law norms of
not seem to me that a dissenting opinion ought by itself to accomplish a task which, according questionable relevance. A brief analysis of the way holding companies belie the legally
to that opinion itself, is incumbent on the Court. established mechanism of the limited company will doubtless facilitate appreciation of the
problem.
(Signed) W. Riphagen.
2. The institution of the limited company, which was destined to displace the old partnership,
[p 54] was a creation of municipal law devised within the purely national domain for the purpose of
expanding the financial potentialities and scope of activities of business associations. Each legal
system consequently laid down the rules governing the structure and working of commercial
SEPARATE OPINION OF PRESIDENT BUSTAMANTE Y RIVERO companies within the national territory, but always with the end in view of endowing them with
the character of autonomous legal personae distinct from the personae of their shareholders. At
[Translation] a certain moment, however, world-wide economic expansion, under the twofold stimulus of
increasing needs and the abundance of investment capital, multiplied the phenomena of
I subscribe to the reasons on which the Court has based its Judgment in the Barcelona Traction financial interdependence between States, thereby revealing that the purely national field of
case. Nevertheless, certain very special aspects of this case have prompted me to certain action of the classic commercial company had become insufficient. The holding company then
additional reflections concerning the question of the law applicable, and I feel it right that I appeared, as a manifestation of the new transnational character of the company. Thus it was
should communicate them as concerning matters of doctrine. I consider, moreover, that the that the centre of gravity of commercial and stock-exchange business not infrequently shifted
question of the exhaustion of local remedies, which was raised in the fourth preliminary from the field of private law into the international domain.
objection during the first phase of the proceedings, could have been taken into consideration in
the reasons for judgment and mentioned in the Court's decision. I consequently propose to Nevertheless, this practical evolution in contemporary economic life was not matched on the
examine these two points succinctly in the paragraphs which follow. legislative plane by the appearance of any new form of juridical institution. In order to achieve
it, the already familiar appearance of the limited company was quite simply borrowed, though
* the holding company introduced into that institution a heterogeneous element, one contrary to
its very nature, by denying a truly independent legal personality to the subsidiary companies of
1. The Application in the present case stands on the principle of international law which the constituent group and placing them entirely under the authority of the parent or chief
recognizes that each State has the power, subject to certain conditions, to exercise diplomatic company of the group, the holder of all or a majority of their shares. In fact, this situation arose
protection of its nationals who, in a foreign country, have suffered an injury affecting their without any visible alteration in the structure and functioning of the subsidiary companies being
persons or their rights in violation of international law. Relying on this principle, the Belgian perceptible from outside: what unites the constituent group is generally only an invisible bond,
Government's Application, filed on 19 June 1962 in behalf of certain Belgian nationals holding a network of hidden links consisting in the decisions of the central organs of control, which
shares in Barcelona Traction, treated of certain responsibilities which, according to the "radiate" to the directors of the subsidiaries who are charged with their implementation. It is a
further advantage of this system that the central entity of the holding company does not
necessarily have to be registered or be seen to carry on business in the country where the 4. Meanwhile, in the face of this reality, the only way to try and resolve disputes resulting from
capital is invested: all that is required is that the subsidiaries may ap-[p 56] pear there in the the insufficient development of the law in its present stage of evolution is to submit them to the
guise of independent legal entities. The result is a certain possibility of evading responsibilities. appreciation of municipal courts. But as the number of gaps in legislation increases, so the task
of the judge grows more difficult and more and more resembles a work of legislation,
3. This de facto reality of the conduct of holding companies—which represents the most usual something which is always dangerous and out of place on his part. It is no doubt for this reason
case—does not, in my opinion, answer the normal requirements of a de jure situation. The that in the present case the Barcelona Traction bankruptcy proceedings in Spain have given rise
foregoing historical outline shows that (for the reasons indicated) the concept of the holding to numerous controversial episodes in which scathing criticism has been met with apologetics of
company corresponded to a unilateral intention or concern on the part of investors who, a questionable kind. Having regard to the orientation the Court has given to the Judgment it is
engrossed with their own interests, relegated to the background the legal situation of the delivering, it is not possible to broach the merits of the dispute in order to examine the charges
subsidiary companies and the laws of the country of investment. However, the diplomatic relating to the denial of justice of which Belgium complains; in my opinion, however, this does
protection of foreigners doing business in the territory of a given State must be regarded as not absolve the international judge of his obligation to lay stress on the objective position of the
establishing a bilateral relationship in which a duality of reciprocal rights and obligations comes question of prin-ciple, i.e., the existing disparity between the development of certain
into play: those of the protecting State in relation to those of the State in which the investment phenomena in international economics, such as the grouping of limited companies under what
was made. It is hard to see how the terms of this relationship could be defined if no legal bond are known as holding companies, and the evolution of the law applicable. This evolution has
has first been established between the holding company which forms the subject of diplomatic lagged behind; and it is possible that the legal lacunae which have in consequence made their
protection and the State whose acts are the subject of complaint. As soon as the holding appearance may hamper the proper working of justice.
company crosses a frontier and penetrates the territory of another State, it is ipso facto
transformed into an institution of private international law, to ensure the equitable functioning *
of which would require the formulation of principles and rules defining the reciprocal interests 5. The preliminary question of the exhaustion of the remedies of Spanish municipal law, though
of the subsidiary companies and the central entity of the group, as well as the parent it was joined to the merits by the Judgment delivered by the Court in 1964, did not on that
company's relations with and duties towards the States in which the subsidiaries have their account lose its character of being a preliminary question. The relevant rule of international law
domicile and in which they carry on their business. Any other system of organization must run in fact lays it down that a claim based on the principle of the diplomatic protection of foreign
counter to the principles of the equality of juristic persons and of a State's power of imperium nationals is only amenable to decision if it is shown that the remedies provided by municipal law
over its territory. It is true that a few legal norms may be found here and there on this subject, have been exhausted. For this reason, I think the Court might have included an examination of
but, despite the importance of the problem, it can be said that neither the legal systems of this question in its Judgment, since, properly speaking, this matter merely complements the
States nor the law-making organs of the international community have yet succeeded in other, concerning Belgium's jus standi. Even supposing [p 58] that that State had proved its
grasping this elusive reality of holding companies so as to bring it within the framework of a capacity to institute proceedings in behalf of the shareholders in Barcelona Traction, the
sufficiently explicit and precise body of law. In municipal law, certain precautionary and, essential charges advanced in its Application could only have been examined by the Court if the
moreover, fairly sporadic measures have been taken, such as obliging parent companies to exhaustion of local means of complaint had first been proved.
submit consolidated balance-sheets that summarize the individual balance-sheets of the
subsidiary companies. The exportation of earnings has also been made the occasion for Due note must at all events be taken of the fact that, even though the question of the various
measures of control, so as to preclude the evasion of fiscal requirements by those who do not procedural remedies to be employed is closely bound up with the merits of the Belgian claim,
fulfil the role of either investor or taxpayer. Finally, certain legal systems require that foreign the Court has decided that, since the Belgian Government has not been shown to have jus
limited companies be entered in the national commercial register before engaging in activity standi, it must refrain from considering in the Judgment the merits of the dispute. Nevertheless,
within the territory of the State where the investment is made. But none of these provisions has while respecting this decision, it is still permissible, where the exhaustion of local remedies rule
ever been more than partially effective, and their sporadic nature stands in the way of any is concerned, to reason, while drawing the distinction which is essential in order to preclude,
systemization. With the advent of transnationality, the question of the law applicable involves when the time comes to decide the purely procedural problem, any obtrusion of elements
problems of a particularly thorny and controversial nature: for example, that of the implying a decision on the merits.
apportionment of jurisdictional[p 57] competence among the States in whose territories the
various companies of the group are established. Other, still graver questions can be posed, 6. The first question to consider in this connection is that of the ascertainment of the persons
moreover, and it may be wondered, for example, whether a holding company neither registered obliged to exhaust local remedies in the present case. In principle, this obligation lies upon
nor domiciled in the country of its operations can avail itself of the right of diplomatic those who put forward a complaint on the grounds of damage allegedly caused in respect of
protection; and whether, in such a case, the principle of the responsibility of the State charged their rights or interests. In 1958 Belgium submitted a first Application in behalf of Barcelona
with wrongdoing operates undiminished or only for the benefit of certain subsidiaries. In short, Traction; but after its discontinuance of proceedings in 1961 that same State filed a fresh
the whole subject is bedevilled, on the international plane, with the existence of gaps in the law Application in 1962, in behalf, this time, of the company's shareholders. As from that moment,
which it would be desirable to close either by way of treaties (bilateral or multilateral the burden of the obligation to exhaust local remedies fell without any doubt on the
agreements) or through the possible emergence—hardly likely in the circumstances—of shareholders concerned. Nevertheless, in my opinion all the remedies sought by the bankrupt
customary law. company before the date of the second Application must, for good legal reasons, be regarded
as having been sought for the benefit of the shareholders. The unlawful acts with which the Furthermore, this type of appeal, known as a hierarchic appeal, is indispensable if it is desired
Spanish judicial authorities are charged are the same in both Applications. If the obligation to that it should subsequently be possible for a contentious-administrative appeal to be admitted.
give the Spanish courts an opportunity to rectify those acts —which is the underlying intention
of the rule—had already once been complied with by the injured company, it seems clear that It has been alleged that no remedy is available against certain administrative decisions if they
the seeking of those same remedies by the claimants under the second Application would not fall within the discretionary power of the authority which takes them, since that power, by
still be necessary, indeed would be impossible if the time-limits for doing so had lapsed with the virtue of its very nature, excludes all possibility of their reversal. But the proceedings have
passing of time. In accordance with the logic of this reasoning, the omissions of the bankrupt shown that precedents are to be found in Spanish administrative jurisprudence of remedies
company during the first period are opposable to the shareholders protected by the terms of sought and granted against decisions of this kind, [p 60] for a discretionary power by no means
the second Application. implies an arbitrary one and only a higher authority is able to discern whether a subordinate
official has exceeded the limits of a reasonable discretion and ventured into the unlawful
7. My general impression is as follows: it is beyond doubt that, in the course of the judicial domain of arbitrariness or unjust discrimination.
proceedings which took place in Spain, Barcelona Traction and other persons and entities which
made common cause with it availed themselves of a considerable number of remedies with a So far as the remedy of a contentious-administrative appeal is concerned, it can be said to
view to having the decisions of the Spanish authorities which they considered unjust reversed. constitute the culminating point of purely administrative procedure. When appeals to the
It is no less true that, on the one hand, those interested parties did not in all circumstances administrative authorities have been totally exhausted, the way of contentious-administrative
respect certain general principles which form the essence of the rule of the exhaustion of local proceedings remains open and has the advantage that this matter falls within the purview of
remedies, and that, on the other, they neglected to seek certain available remedies or [p 59] the Supreme Court. It is true that in order to have access to this new remedy it would have
did not pursue to the very end other remedies which they had sought but which they did not been necessary in the present instance for the party concerned first to appeal to the Minister
take as far as the highest court open to them, and, finally, that certain natural or juristic against the decisions of the Spanish Institute of Foreign Exchange, in order to obtain a decision
persons who had sought various remedies had in law no chance of succeeding since under from the highest administrative authority, that is to say, an irrevocable decision. This remedy
Spanish law they were not empowered to bring such actions. For example: as is well known, in was not sought; and it ought to have been, in particular, in connection with the refusal to
bankruptcy proceedings only the bankrupt and his creditors have jus standi in judicio, yet authorize the implementation of the last plan of compromise, which provided for the payment
persons who did not possess or did not claim these capacities nevertheless sought certain of the bonds in pesetas, for the subsidiary company Ebro maintained in relation thereto that it
remedies. had been the subject of unjust discrimination on the part of the administrative authorities,
when compared with other entities.
On another point, the law is clear that it is for the judge alone and not for the interested party
to decide whether a remedy provided by law must in practice be sought or not. In order to be 9. With respect to judicial remedies, I must refer in the first place to the remedy of "opposition"
entitled to refrain from doing so, it does not suffice for such a party to prejudge the result and to the bankruptcy judgment (auto de quiebra), for which provision is made in Article 1028 of
to regard success as improbable either because there are adverse precedents or because the the Spanish Commercial Code and in Article 1326 of the Code of Civil Procedure. The former
courts are presumed partial. It seems to me that the defence, on the Belgian side, placed much article lays down a time-limit of eight days as from the publication of the bankruptcy judgment
reliance in certain circumstances on its own judgment in evaluating the relevance or viability of within which this remedy may be sought. On 17 March 1948, no plea of opposition having been
certain remedies, without leaving such decision to the courts, as ought to have been done. entered, the Reus judge gave a decision declaring the bankruptcy judgment delivered with
respect to Barcelona Traction on 12 February 1948 to be final and res judicata. The pleadings
8. Having recalled these questions of principle, I feel it worthwhile to consider the chief show that, by extra-judicial means, this Toronto company had knowledge of the bankruptcy
remedies failure to seek which must, in my opinion, be regarded as an omission for which the adjudication in Spain two days after the Reus judgment was delivered; that the newspapers of
Belgian side would be responsible. Toronto, of Montreal and of London published information on this subject as from 14 February;
that representatives of or shareholders in the company made statements to the press in
So far as administrative remedies are concerned, those that were omitted concern in particular Toronto and Madrid during the month of February alluding to the bankruptcy adjudication; that
the decisions by which the Spanish Institute of Foreign Exchange refused to grant currency that on 1 March the president of the company, on behalf of the board of directors, addressed to
would have made it possible to implement the various plans of compromise contemplated bondholders a circular letter concerning the bankruptcy adjudication; and that the company on
between Barcelona Traction and its bondholders, and, more particularly, its refusal to approve 9 March gave a power of attorney to enter judicial appearance in Spain (see Annex 81 to the
the last plan of compromise, which provided—at the cost of a considerable loss—for the Preliminary Objections). There is thus no doubt that from an extra-judicial or factual point of
conversion into Spanish currency of certain bonds expressed in foreign currency. The view Barcelona Traction would have been in a position to take legal action and enter a plea of
regulations then in force in Spain allowed private parties to apply to the competent authorities opposition to the bankruptcy judgment well before the decision taken by the Reus judge on 17
for the necessary authorizations: it is consequently evident, in accordance with well-established March. However, the bankruptcy proceedings gave rise to a controversy between the Parties
principles relating to administrative hierarchies, that all refusals of authorization of such a with respect to two points of law: the non-notification of the judgment of 12 February to [p 61]
nature could form the subject of an appeal to a higher authority. The refusals of the Spanish the bankrupt at its domicile in Toronto (Article 260 of the Code of Civil Procedure), and the
Institute of Foreign Exchange ought consequently to have led to complaints by the interested positive irregularity which, according to Belgium, characterized the mode of publication of the
party to the Minister of Commerce, to whom the Institute was directly responsible. said judgment, which took place only in Spain and never at Toronto where the bankrupt
company had its domicile. The Belgian Government maintains that in these circumstances the and in each of them independent decisions having the force of res judicata can be delivered. In
legal time-limit for making use of the remedy of "opposition" did not begin to run. In fact, this sense, it is sound doctrine that a bankruptcy judgment (auto) can be assimilated to a
Barcelona Traction did not enter a plea of opposition to the bankruptcy until June 1948. The sentencia, in particular when that judgment has become final (firme) by express judicial
Spanish Government takes the view that, since Barcelona Traction's subsidiaries were domiciled decision, either through no plea of opposition to it having been entered or through such
and carried on their activities in Spain, publication abroad was not warranted. The Court could opposition's having failed. It is consequently correct to say that in such a case the fate or final
only have decided these disputed points by examining the relevant decisions of the municipal direction of the action is settled. A bankruptcy judgment, once it has become res judicata,
courts which upheld the Spanish position, in order to establish whether or not a denial of justice automatically sets in motion all the measures of execution which must carry the proceedings
from the point of view of international law can be imputed to them: which would have meant through to their conclusion: liquidation of the assets, payment of the liabilities and distribution
deciding the merits of the case. Since such a pronouncement has been ruled out by the of the surplus if any. The effects of such a judgment are those of a true sentencia. Lastly (and
Judgment, I must refrain from taking up a position on the question of whether the Belgian side this is decisive) an examination of Title XIII, Book II, of the Code of Civil Procedure enables it
did or did not seek the local remedy of "opposition" to the bankruptcy judgment in proper to be seen that Article 1330, with Article 755, gives the name of sentencia to the judge's
fashion and in good time. pronouncement deciding, after the presentation of evidence, the incidental proceedings of
10. The judicial order of 17 March 1948, which finally confirmed the effects of the bankruptcy opposition to the bankruptcy judgment. In terms of the law, a decision which, in the absence of
judgment of 12 February, was no doubt of a very serious nature, for it opened the way for the an entry of opposition, recognizes such judgment to have the authority of res judicata, has
sale of the bankrupt's property. The remedies sought by the subsidiaries against this order were exactly the same character and weight as a sentencia (see Article 408).
paralysed, in accordance with the law, in consequence of the Boter declinatoria; it consequently
became necessary to seek a different sort of remedy in order to avoid or postpone the sale. It is consequently my belief that the remedy of revisión is available against an auto adjudicating
One of the few remedies capable of having this effect was the remedy of revisión (Articles 1796 bankruptcy, since the latter possesses the characteristics of a true sentencia. In any event,
et seq. of the Code of Civil Procedure). According to the law, this remedy may be sought if a should any doubt have remained, the rule of exhaustion required that the remedy be sought by
judgment which has become final was delivered "as a result of subornation, violence or other the interested party, for solely a judge can pronounce upon its admissibility.
fraudulent means" (paragraph 4 of the article referred to). In this connection, the Application
speaks of arbitrariness, partiality, contempt for the principle of the equality of parties, and, in Still other reservations have been expressed by Belgium with regard to the possibility of relying
short, of a "deliberate intention" on the part of certain Spanish judicial authorities "of favouring" on the ground for revisión to do with the employment of fraudulent means in the proceedings.
the personal "plans" of the enemies of Barcelona Traction. These defects, in Belgium's opinion, Although in the last stage of oral argument counsel for Belgium attenuated noticeably the
go beyond mere negligence, flagrant errors or imperfections in the law applicable. Referring accusa-[p 63] tions made in the pleadings against certain Spanish judicial authorities, there was
more specifically to the bankruptcy judgment pronounced by the Reus judge, Belgium has no formal withdrawal of them. Those accusations consequently stand and, for the purposes of
spoken in the Reply of "flagrant connivance" between that judge and the petitioners in the rule of the exhaustion of local remedies, evidence would have had to be supplied for it to
bankruptcy (para-graph 26) and in oral argument of the court's lack of scruples. It has thus be possible to establish whether the proceedings were or were not vitiated by such
unequivocally maintained that there was dolus or fraud. irregularities. It was the more indispensable in the present case in that proof of the facts
alleged would have had as its immediate consequence the annulment of the tainted procedural
Belgium has raised various objections with regard to the appropriateness and effectiveness of acts: in other words, that very correction of the legal position which is the object of the rule. It
the remedy of revisión. will consequently be seen how, from the international point of view, the results of the remedy
of revisión are of capital importance when it subsequently comes to establishing the existence
In the first place, it contends that under Spanish law revisión is only available against a or non-existence of the responsibility of the State.
sentencia firme, i.e., against a judgment finally pronouncing upon an action or claim, and that
in Spanish terminology itself [p 62] a bankruptcy judgment is only an auto, i.e., a decision The Belgian side nevertheless foresaw difficulty in obtaining tangible proof of the accusations of
which puts an end not to the dispute, as a sentencia or judgment proper does, but only to an dishonesty. But it always had at its disposal against the authorities accused the prior remedy of
incidental issue or partial aspect of the case. proceedings to establish civil liability (Code of Civil Procedure, Articles 903 et seq.), which would
have made it possible to establish whether criminal liability was involved or not (Article 918 of
This assertion might appear justified from a strictly terminological point of view, but in fact the same Code). In the event of an affirmative answer, the appropriateness of the remedy of
bankruptcy proceedings have in substance a structure all their own, which differs from that of revisión would have been beyond dispute. In short, the omission of this remedy created a legal
ordinary proceedings with their three classic stages of statement of claim and answer thereto, vacuity for which the applicant Party must bear the responsibility. The rule of exhaustion was
production of evidence and judgment. In bankruptcy, the proceedings are divided into five not complied with.
"sections", dealt with in separate "files" (Articles 1321 and 1322 of the Code of Civil Procedure).
The first section concerns the bankruptcy judgment, ancillary provisions concerning its 11. It would also be possible to consider the case of other remedies that were not sought, or
execution, and compositions; the second deals with the administration of the bankruptcy; the which were sought improperly or out of time, by Barcelona Traction, Sidro and Sofina, or other
third with the retroactive effects of the bankruptcy; the fourth with the proving and ranking of entities defending the interests of the bankrupt company. In this connection an analysis might
debts; and the fifth with the classification of the bankruptcy and the discharge of the bankrupt. be made of certain remedies aimed, for example, at challenging the jurisdiction of the courts or
The subject-matter of each of these sections, each with its separate file, is kept clearly distinct, calling in question certain aspects of the Conditions of the judicial sale. It seems to me,
moreover, to have been proved by the pleadings and oral arguments that some of the remedies ---------------------------------------------------------------------------------------------------------------------
sought on behalf of Barcelona Traction were not pursued to the end, that is to say, so far as
the obtaining of a final decision from the highest court. Others were only exhausted after the *
commencement of the international proceedings in this Court. I nevertheless do not consider it [p 65]
indispensable to enter into detail in this connection: I would merely stress that the remedies I
have just examined were considered simply as examples, without there being any intention of 3. In the next part (II) of this opinion (paragraphs 4-34) I propose to indicate the criteria on
exhaustively enumerating them; since this question has in fact been excluded from the the basis of which I have felt obliged to concur in the main conclusion reached by the Court,
Judgment, any more thorough study of its many aspects would, indeed, serve no practical but I shall do so in the light of my view that certain of the considerations of law which compel
purpose. The essential point is that, certain of the local remedies available not having been that conclusion prove, in the international field, to be unserviceable as soon as they are applied
sought or duly pursued to the end, the conditions for the continuation of diplomatic protection to any situation which is out of the ordinary. In the succeeding part (III—paragraphs 35 and
by judicial means have not been satisfied. 36), I state the conclusions which I believe ought to be drawn from part II as to the place of
equitable considerations in the international legal field, and the growing need there for a
(Signed) J.L. Bustamante Y Rivero. system of Equity. In the next two parts (IV and V) I propose, as indicated supra in paragraph 2,
to comment on a certain number of matters (also of a more or less preliminary character)
[p 64] which, though not relevant to the particular point on which the Court's decision turns, formed
part of the long series of questions debated by the Parties in the course of their arguments, and
which accounted, or could have accounted, for individual rejections of the Belgian claim by
SEPARATE OPINION OF JUDGE SIR GERALD FITZMAURICE certain Members of the Court. Part IV (paragraphs 37-65) will deal with matters affecting the
nationality of the Barcelona Traction Company's shareholders, and Part V (paragraphs 66-83)
I with certain other matters having a preliminary character,—viz. the question of jurisdiction in
bankruptcy, and a particular aspect of the local remedies rule. Finally, in the concluding part
Introductory (VI—paragraphs 84-90)—since the subject has evidently given rise to some misunderstanding—
I discuss the philosophy of the joinder of preliminary objections to the merits. There is finally a
1. Although (if with some reluctance) I agree and have voted with the majority of the Court in Postscript on the question of the length of the proceedings in this and other cases, and certain
finding the Belgian claim in this case to be inadmissible, and broadly for the principal reason on related matters.
which the Judgment is based—namely that in respect of an injury done to a company, prima
facie the company's government alone can sustain an international claim—I have a somewhat II
different attitude on various aspects of the matter, which I wish to indicate. In particular (a) I
would go considerably further than does the Judgment in accepting limitations on the principle The Question of Belgium Locus Standi in Judicio FN2
of the "hegemony" of the company and its government;— furthermore (b), though I have felt
bound to vote as I have, I nevertheless hold it to be an unsatisfactory state of the law that ---------------------------------------------------------------------------------------------------------------------
obliges the Court to refrain from pronouncing on the substantive merits of the Belgian claim, on FN2 Although I now agree with my colleague Judge Morelli's view that the question of
the basis of what is really—at least in the actual circumstances of this case—somewhat of a Belgium's right to claim on behalf of the Barcelona Traction Company's shareholders, in so far
technicality. as Belgian, is really a question of substance not of capacity (because the underlying issue is
2. In addition, there are a number of particular matters, not dealt with or only touched upon in what rights do the shareholders themselves have), it is convenient for immediate purposes to
the Judgment of the Court, which I should like to comment on. Although these comments can treat the matter as one of Belgian Government standing.
only be in the nature of obiter dicta, and cannot have the authority of a judgment, yet since ---------------------------------------------------------------------------------------------------------------------
specific legislative action with direct binding effect is not at present possible in the international
legal field, judicial pronouncements of one kind or another constitute the principal method by 4. Although, as I have said, I reach the same final conclusion as in the Judgment of the Court,
which the law can find some concrete measure of clarification and development. I agree with my approach is different. In particular I do not base myself as does the Judgment to some
the late Judge Sir Hersch Lauterpacht FN1 that it is incumbent on international tribunals to bear extent (vide its paragraphs 33-36), and as figured fairly prominently in the arguments of the
in mind this consideration, which places them in a different position from domestic tribunals as Parties, on any consideration turning on the question of to whom, or to what entity, was the
regards dealing with—or at least commenting on—points that lie outside the strict ratio obligation owed in this case, not to act in a manner [p 66] contrary to international law. This
decidendi of the case. does not seem to me to be the right question to ask where the issue involved is not one of
treaty or other particular obligations, but of general international law obligations in the sphere
--------------------------------------------------------------------------------------------------------------------- of the treatment of foreigners. If in the latter area a State, either directly or through its
FN1 The necessary references and citations are given in the opening paragraphs of the agencies or authorities, acts illicitly, it stands in breach of international law irrespective of
separate Opinion of my colleague Judge Jessup in the present case (q.v.),—and I associate whether any other State is qualified to take the matter up. For instance if an individual were
myself with the views he expresses in this connection. concerned, he might be stateless. If in the present case there have been contraventions of
international law, they are in no way legitimized, nor do they become any the less illicit, ascription to it, qua corporate entity, of a separate personality over and above that of its
because Canada has not (or even possibly could not FN3) pursue the matter, and because component parts, viz. the shareholders, with resulting carefully drawn distinctions between the
Belgium is held to possess no locus standi in judicio for doing so. Nor is the question of the sphere, functions and rights of the company as such, acting through its management or board,
entity to which the obligation is due helpful even for the purpose of identifying the party and those of the shareholder. These distinctions must obviously be maintained at the
entitled to claim, for such entity would itself previously need to be identified, and the discussion international level: indeed to do otherwise would be completely to travesty the notion of a
would turn in a circle. company as a corporate entity. Thus it is that, just as in domestic courts no shareholder could
take proceedings in respect of a tort or breach of contract committed in respect of the
--------------------------------------------------------------------------------------------------------------------- company, but only the latter could do so, through the action of its management with whom the
FN3 i.e., if it were held that no "genuine link" existed between Canada and the Barcelona decision would lie—a decision which, broadly speaking, the shareholder must accept,—so also if
Traction Company on the basis of the principle of the Nottebohm case (vide infra, paragraphs an illicit act injurious to the company or infringing its rights takes place on the international
26-32). plane, it is not the government of the shareholder but, in principle, that of the company alone,
--------------------------------------------------------------------------------------------------------------------- which can make an international claim or bring international proceedings;—the decision
whether to do so or not lying with the latter government—a decision which again the foreign
5. The material and only pertinent question is who or what entity, if, any is entitled to claim in shareholder must accept, in the sense that neither he nor his government can require (still less
respect of damage accruing to shareholders in consequence of illicit treatment of the compel) the company's government to take action.
company;—and in order to answer this since the matter concerns a company and its
shareholders—it is above all necessary to have regard to the concept and structure of ---------------------------------------------------------------------------------------------------------------------
companies according to the systems of their origin, which are systems of private or domestic FN5 It is inevitable that these concepts should be referred to herein in very broad and general
law,—and furthermore to insist on the principle that when private law concepts are utilized, or terms. The details vary from country to country, and some things may not be true or may need
private law institutions are dealt with in the international legal field, they should not there be considerable qualification for certain countries.
distorted or handled in a manner not in conformity with their true character, as it exists under ---------------------------------------------------------------------------------------------------------------------
the system or systems of their creation. But, although this is so, it is scarcely less important to
bear in mind that conditions in the international field are sometimes very different from what 7. In neither case does it make any difference that the wrong done to the company recoils or
they are in the domestic, and that rules which these latter conditions fully justify may be less "repercusses" onto the shareholder FN6, e.g., by [p 68] causing the market value of his shares
capable of vindication if strictly applied when transposed onto the international levelFN4. to fall or the profits of the company to be diminished—whence lower dividends; or by causing
Neglect of this precaution may result in an opposite distortion,—namely that qualifications or difficulty as to disposing of the shares—(for want of ready buyers),—for while the shareholder
mitigations of the [p 67] rule, provided for on the internal plane, may fail to be adequately has a legal right not to have his shares cancelled or confiscated without compensation, he has
reflected on the international,—leading to a resulting situation of paradox, anomaly and no legal right that they shall have, or be maintained at, any particular market value,—and while
injustice. the shareholder has a right to receive a dividend if a dividend is declared, he has no right that it
shall be declared, or (if declared) be for any particular amount FN7,—and again, while he has a
--------------------------------------------------------------------------------------------------------------------- right freely to dispose of his shares FN8, the law does not guarantee him either a buyer or a
FN4 In this respect I fully associate myself with the views expressed by Lord McNair in his price.
South West Africa case (1950) Opinion when, speaking of the United Nations Trusteeship
System, he said (I.C.J. Reports 1950, at p. 148) that private law institutions could not be ---------------------------------------------------------------------------------------------------------------------
imported into the international field "lock, stock and barrel", just as they were, and that private FN6 Suppose that by the tortious negligence of a third party the company's warehouses are
law rules could only serve as indications of principle and not as rigid injunctions in the burned down,—the shareholder may indirectly be seriously affected, but he can have no right of
international domain. However, in the present case there is no question of international law action: the property was not his but the company's. It is the same if his interest is affected by
setting up a new international institution analogous to the private law institution of the limited the failure of a third party to carry out a contract with the company, for he himself is not a
liability company. The latter remains a purely private law creation, which international law must party to the contract. It is quite another matter if the act complained of is directed against, or
take as it finds it. The complaint I am making in this Opinion is that international law has directly infringes, his specific rights as a shareholder,—if for instance his right freely to dispose
indeed taken it as it has found it over part of the ground, but not over the rest, thereby of his shares were illicitly interfered with, or if resolutions duly passed at the general meeting of
introducing an unjustified distortion. shareholders were declared null and void, etc.
--------------------------------------------------------------------------------------------------------------------- FN7 Except of course in the case of fixed interest securities of various kinds.
FN8 As a general rule, that is. Under wartime or other emergency conditions, owners of certain
6. This is what seems to have occurred in the field of the corporate entity at the international kinds of securities (e.g., those expressed in foreign currency) might be required to dispose of
level. Since the limited liability company with share capital is exclusively a creation of private them to, or only to, the government or central bank.
law, international law is obviously bound in principle to deal with companies as they are,—that ---------------------------------------------------------------------------------------------------------------------
is to say by recognizing and giving effect to their basic structure as it exists according to the
applicable private law concepts FN5. Fundamental to the structure of the company is the 8. But at this point it becomes clear that something has gone wrong,— that the analogy has
broken down,—because certain qualifications or modifications, it might be said mitigations, fortunes follow the latter's; that having elected to throw in his lot with the company, he must
which, in the domestic field, affect and as it were alleviate the situation just described, are not, abide by the consequences, be they good or bad, so long as he maintains his connection with
in the present state of the law, reflected, or not adequately so, in the international domain;—for it, etc., etc. The idea has been well expressed in a recent work FN11 as follows (my
whereas at that level this situation is one which, as the law now seems to stand, may leave the translation):—
shareholder powerless to protect his interests, this is not the case on the domestic plane, where
the principle of the "hegemony" of the company is accompanied by certain balancing elements, "If, in principle, the shareholders must suffer the fate of the company, this is because the
acting as a counterweight, which are only up to a point reflected in the present condition of corporate entity is a legal person capable by its corporate action of protecting the interests
international law— (vide infra, paragraph 11 and the footnotes thereto). which the shareholders have entrusted to it . . . transferring to the corporate [p 70]entity a part
of their personality and rights, with the object of thereby obtaining a better return and a more
* effective safeguard. But on that account, if such is the justification for the indivisibility of the
corporate entity, such is also its limit."
9. In order to understand this matter, it is necessary to have regard to the underlying rationale
of the "hegemony principle". This resides in something more than the purely juridical situation ---------------------------------------------------------------------------------------------------------------------
resulting from the separate legal personality of the company, and the fact that, in the type of FN11 Paul De Visscher, "La Protection Diplomatique des Personnes Morales"— (Diplomatic
case now in question, the rights infringed are those of the company, not of the shareholder— Protection of Corporate Entities)—Recueil [i.e., Collected Courses] of the Hague Academy of
though his pocket may be affected, actually or potentially—(vide supra, paragraph 7 and International Law, 1961, Vol. I, at p. 465.
footnote 6). Nor does it reside in the practical considerations which, on the domestic plane, at ---------------------------------------------------------------------------------------------------------------------
least, must in all normal circumstances rule out the possibility of separate and independent
action by shareholders in respect of the treatment of the company, as such, by third parties. The nature and extent of this limit on the international plane will be considered later. In the
domestic sphere it takes two main forms, the external and the internal—the latter being action
10. The true rationale (outside but underlying the law) of denying to [p 69] the shareholder the within the company itself by means of its own processes and procedures (vide infra, paragraph
possibility of action in respect of infringements of company rights is that, normally, he does not 12). As to the former, most developed systems of law contain provisions which have been
need this. The company will act and, by so doing, will automatically protect not only its own described in very general terms as being
interests but those of the shareholders also. That is the assumption;— namely that the
company is both capable of acting and will do so unless there are cogent reasons why, in the "intended to protect the interests of shareholders if the company's officers are considering their
interests of the company and, hence, indirectly of the shareholders, it should refrain FN9,—the own interests rather than the interests of the company, and also to protect the interests of
decision involved being one of policy, prima facie for the determination of the management. (It minorities of shareholders" FN12.
is precisely here, however, that the beginnings of a profound difference between the domestic
and the international situations can be discerned, for if and when a government declines or fails ------------------------------------------------------------------------------------------------------------
to intervene on behalf of a company of its nationality detrimentally affected by illicit foreign FN12 Beckett, "Diplomatic Claims in Respect of Injuries to Companies", Transactions of the
action, the reasons will be the government's not the company's FN10, and will normally have Grotius Society, Vol. 17 (1932), at p. 193, footnote (7), citing (and see also at p. 192) Dutch,
nothing to do with the company's interests, which indeed are likely to be adversely affected still English, French and German law. Beckett also cites a passage from Halsbury's Laws of England.
further by the government's refusal or failure, so that no contingent or long-term advantage, or The same passage as it figures in the later (1954) edition, after stating that normally only the
avoidance of disadvantage, will result, as might be expected if the decision were the company not shareholders can sue third parties, continues as follows:
company's. The motivations involved are quite distinct. But all this is to anticipate.)
"Where, however, the persons against whom relief is sought hold and control the majority of
--------------------------------------------------------------------------------------------------------------------- the shares, and will not permit an action to be brought in the company's name, shareholders
FN9 Because, e.g., too expensive, or likely to have undesirable repercussions, to offend some complaining may bring an action in their own names and on behalf of the others and they may
powerful interest, interfere with some other objective, involve some awkward revelation, etc. do so also where the effect of preventing them so suing would be to enable a company by an
FN10 These may, but just as probably may not, have to do with the actual merits of the claim. ordinary resolution to ratify an improperly passed special resolution."
For instance a government may well not wish to press a private claim against another
government with which it is conducting difficult negotiations on a matter of overriding national See also Mervyn Jones, "Claims on behalf of Nationals who are Shareholders in Foreign
importance. Many other instances could be given. Companies" in British Year Book of International Law, Vol. XXVI (1949), at pp. 232-234, citing
--------------------------------------------------------------------------------------------------------------------- American, Austrian, Belgian, English, French, Italian, Norwegian, Swedish and Swiss law.

11. The assumption that the company will act, or will have good reasons for not doing so— See further as to German law in "La Personnalité Morale et ses Limites"— (The Corporate Entity
(reasons which will be in the eventual interests of the shareholders also)—underlies equally the and its Limits), published by Pichon & Durand-Auzias for the Institute of Comparative Law of
variously expressed axiom, on the presumed truth of which so much of the applicable law is the University of Paris in Librairie Générale de Droit et de Jurisprudence, 1960, at pp. 43-44
based—namely that the fate of the shareholder is bound up with that of the company; that his (per Dr. Ulrich Drobnig); and, in ibid., at p. 150, the following statement of Swiss law (per Prof.
J. M. Grossen—my translation): "There are fortunately other [sanctions] which enable [the right of the government of the company to intervene, and admitting the possibility of
shareholders] to compel the corporate entity—or more exactly its management—to change its intervention by that of the shareholders, even though the injury is to the company as such,
attitude." rather than to any independent stricto sensu shareholding right. This question has to be asked
For analogous provisions of French law see paragraph 11 of my colleague Judge Gros' separate because, if it is [p 72] not right that international law should distort the structure of the
Opinion. company (an essentially private law concept) by failing to give all due effect to the logic of its
------------------------------------------------------------------------------------------------------------ separate personality, distinct from that of the shareholders,—it is no less wrong, and an equal
distortion, if international law fails to give due effect to the limitations on this principle
Such provisions of course differ from country to country but, without attempting to recognized by the very system which, mutatis mutandis, it is sought to apply on the
particularize, their broad effect is either to enable shareholders to bring an action in their own international plane. In short, such application should be integral, not partial. But is it?—or is it
names against a third party, in a variety of circumstances involving fraud, malfeasance, not rather the case that international law, while purporting to base itself on, and to be guided
negligence or [p 71] other improper refusal or failure on the part of the management to act for by the relevant features of municipal law, really does so only to a certain extent, departing from
the protection of the company's interests, or else to enable shareholders to bring proceedings it at precisely that point where, under municipal law the management of the company can in
against the management itself to compel it so to act. In short, generally speaking, domestic law certain circumstances be compelled by the shareholders to act?
makes at least some provision for the case where the basic assumption of action by the
company, rendering action by the shareholders unnecessary, ceases to hold good FN13. 14. It seems that, actually, in only one category of situation is it more or less definitely
admitted that intervention by the government of foreign shareholders is allowable, namely
--------------------------------------------------------------------------------------------------------------------- where the company concerned has the nationality FN14 of the very State responsible for the
FN13 In addition to the passage from Halsbury's Laws of England cited in the first paragraph of acts or damage complained of, and these, or the resulting circumstances, are such as to render
footnote 12 supra, the following sections from the same work also indicate the position under the company incapable de facto of protecting its interests and hence those of the shareholders
English law (loc. cit., pp. 222-223, omitting references to footnotes): FN15. Clearly in this type of case no intervention or claim on behalf of the company as such
can, in the nature of things, be possible at the international level, since the company has local
"458. Statutory right of members collectively. The members of a company collectively have not foreign nationality, and since also the very authority to which the company should be able
statutory rights, some of which are exercisable by a bare majority, as, for instance, a resolution to look for support or protection is itself the author of the damage. Consequently, the normal
at the statutory meeting; others by a particular majority, as in the case of a reconstruction; and rule of intervention only on behalf of the company by the company's government becomes not
others by a minority, as in the case of a requisition for a meeting of shareholders, or of an so much inapplicable as irrelevant or meaningless in the context. The efficacity of the corporate
application to the Board of Trade to appoint an inspector to investigate the company's affairs, entity and its capability of useful action has broken down, and the shareholders become as it
or of an application by an oppressed minority to the court for relief. were substituted for the management to protect the company's interests by any method legally
open to them. If some of them have foreign nationality, one such way is to invoke the
Statutory rights cannot be taken away or modified by any provisions of the memorandum or intervention of their government, and in the circumstances this must be regarded as admissible.
articles [i.e., of the company]." Thus the same [p 73] authority as was cited in paragraph 11 above continues (translation):
FN16
"461. Rights under the general law. The rights of a member under the general law include his
right... to restrain directors from acting ultra vires the company or in excess of their own ". .. From this it necessarily results that if the rational justification for the mechanism of the
powers or acting unfairly to the members." corporate entity is brought to a collapse by the act of the very State whose law governs the
--------------------------------------------------------------------------------------------------------------------- status and allegiance of the corporate entity, its personality is no longer anything but a fiction
void of all meaning, in which there can now be seen nothing but a bundle of individual rights."
12. The other type of possibility which private law affords to shareholders (or at least to a
majority of them; and often even to a minority) if dissatisfied with the policies of the ---------------------------------------------------------------------------------------------------------------------
company—including therefore such a thing as a failure to proceed against a third party in the FN14 For present purposes I am taking the nationality of a company to be that of the country
protection of the company's interests—is to take action on the internal plane within the confines of incorporation, the laws of which govern the company's constitution and functioning.
of the company itself, and through its normal procedures (shareholders' meetings, voting of However, vide infra paras. 33 and 34.
resolutions, etc.), directed to influencing and if necessary changing, those policies or even, in FN15 If the wrong done to the company, or breach of contract with it, comes not from another
the last resort, modifying or changing the management itself. In certain circumstances, private party but from the authorities of the country, it is again in principle only the company
reconstructions constitute another possibility. which can take legal action, to the extent that the local law allows the government to be sued.
If however, as happened for instance in the El Triunfo case (United Nations Reports of
* International Arbitral Awards, Vol. XV, p. 464), the action taken against the company by the
13. The question that now has to be asked is how far these domestic law limitations on the authorities has the effect of completely paralyzing it, then the shareholders can act and, if they
exclusive power of the management, allowing of independent action by the shareholders, are are unable to obtain redress locally, but have foreign nationality, can, according to the view
reflected at the international level, so as correspondingly to qualify the principle of the exclusive here discussed as being now more or less generally recognized, invoke the aid and intervention
of their government. thorough determination would however take up a disproportionate amount of space here: nor is
FN16 Loc. cit. in footnote 11 supra. it necessary,—for the considerations of principle invoked in previous paragraphs of this Opinion,
--------------------------------------------------------------------------------------------------------------------- based on domestic law analogies, are quite sufficient in themselves to justify the doctrine of a
right of intervention on behalf of shareholders "substituted" for a moribund or incapable
15. Notwithstanding these cogent considerations of principle, the validity of this exception to or company of local nationality, in order to protect its interests and their own.
limitation on the rule of non-intervention by the government of the shareholders in respect of
wrongs done to the company, is contested on a variety of grounds. It is said for instance that 19. It is my view therefore, that the legal position is correctly stated in the following two
this type of intervention on behalf of foreign shareholders ought only to be permissible where paragraphs from the same source as was previously cited FN17:
the company itself is also essentially foreign as to its management and control, and the nature
of the interests it covers, and where its local nationality did not result from voluntary "In sum, in order to weigh the admissibility of the protection of shareholders, it is necessary to
incorporation locally, but was imposed on it by the government of the country or by a provision adhere essentially to the idea of the effectiveness of the corporate entity. It matters little
of its local law as a condition of operating there, or of receiving a concession. In such cases, it whether, according to internal law criteria, the corporal personality subsists or not. Even where
is said, the company's nationality is an artificial one that does not correspond with the it does, an international tribunal can admit the [p 75] diplomatic protection of shareholders
underlying realities, and for this reason (but for this reason only) the local government should from the moment when it finds as a fact that the damage caused to the corporate entity has
not be able to avail itself of the obstacle of its nationality which it has designedly insisted on had the effect of paralysing or sterilising the usefulness that the mechanism of corporate
interposing between itself and those realities— possibly for the express purpose of preventing personality ought normally to bring about for the benefit of the shareholders.
foreign intervention. Where however the local nationality was deliberately assumed by the
company as a matter of choice, then, so it is said, there is no reason for making any such ------------------------------------------------------------------------------------------------------------
departure from the basic rule of the company screen. FN17 Loc. cit. in footnote 11 supra, at p. 477.
------------------------------------------------------------------------------------------------------------
16. It is doubtless true that it is in the case of such "enforced" local nationality that situations
leading to foreign shareholders in the company invoking the intervention of their government In that case, an international tribunal, not being bound by internal law criteria, 'pierces the
are most liable to arise. Nevertheless, there does not seem to be any sufficient reason of corporate veil', as it is said, [but] it would be more accurate to say that it registers the absence
principle for drawing the distinction involved. The fact of local incorporation, but with foreign of all effective personality, of any effectual intermediary between the shareholders and the
shareholding, remains the same in both types of case, whatever the motivations or processes rights infringed."
that brought it about. Nor are the motivations which lead foreign interests to seek or not seek
local nationality always easy to assess: they may be very mixed. Nor again is it always the case These two paragraphs moreover, even if only in general terms, almost exactly describe the
that companies with a large foreign shareholding, and mainly controlled from abroad, do not situation of the Barcelona Company which, though still subsisting and formally in existence
voluntarily obtain local incorporation: they often do, and there may be sound business reasons FN18 has, as to its functioning in Spain, been entirely paralyzed and rendered incapable of
for it. Yet they are just as liable in practice to be regarded locally as [p 74] basically foreign, further useful action—a situation not only admitted but, for their own purposes, considerably
and to suffer from action which may prevent them, as companies, from acting for themselves. insisted upon by the Spanish side. The Company was indeed crippled to the point where,
deprived of all its Spanish assets and sources of income, it could no longer find the funds for its
17. Another objection to be urged was that in so far as the doctrine of a right of intervention on legal defence, these having to be supplied by the very same shareholders whose right to invoke
behalf of foreign shareholders in a locally incorporated company unable to act for itself, or the diplomatic protection of their Government, Spain denies.
rendered incapable of so doing, may depend on a number of precedents deriving from cases
decided by international tribunals, it will be found on a careful examination of those cases that ---------------------------------------------------------------------------------------------------------------------
the "company" that was concerned was usually more in the nature of a firm, partnership, or FN18 I share the view expressed in the passage just cited that the formal keeping alive of the
other similar association of persons, than of a true separate corporate entity distinct from those company does not affect the realities of the matter. However, the Belgian position would
persons. Hence, it is objected, in so far as the latter were admitted, to claim and their (ironically) have been stronger if the Spanish events had resulted not merely in the
governments to support their claims, they were acting in respect of damage to specific stricto "hispanicization" of the undertaking in Spain, but in forcing the liquidation or winding up of
sensu rights of their own in the association concerned, and not of the rights of the association Barcelona Traction itself,—for it would then have been much more difficult to maintain, through
as such. Where on the other hand, so it is said, a corporate entity really was involved, the the fiction of the Company's continued existence, that only the Canadian Government could
capacity to claim on behalf of shareholders resulted from the express terms of the treaty, claim.
convention or "compromis" submitting the case to the tribunal,—consequently these cases ---------------------------------------------------------------------------------------------------------------------
cannot be cited as implying recognition of any general principle of law allowing of such claims.
20. In consequence, had the Company been Spanish by incorporation, instead of Canadian, I
18. It may be true that the exact rationale of a number of the decisions concerned is not very should have had no hesitation in holding that a claim by Belgium on behalf of the Belgian
easy to determine precisely, and lends itself to much controversy, as the course of the written shareholders in the Company was admissible;—and it is indeed one of the ironies of this case
and oral proceedings in both phases of the present case have amply demonstrated. Any (but not the only one FN19) that the Belgian Government would have been in a much stronger
position as regards the admissibility of its claim had the Company been Spanish rather than shareholders but of the company itself. What are these reasons? They are of course that a
Canadian. government is not in the same position as a company and cannot be made subject to the same
constraints. The management of a company owes a duty, not only to the company but to the
--------------------------------------------------------------------------------------------------------------------- shareholders, and is bound to act in the best interests of the company, and hence of the
FN19 See previous footnote. It may also be thought (see the separate Opinion of my colleague shareholders, basing itself on an informed and well-weighed estimate of what these are. A
Judge Gros, paragraph 12) that the Company would have fared better through an open and government is under no such duty. It is perfectly free on policy grounds to ignore the interests
avowed nationalisation or expropriation of its Spanish undertaking, accompanied by the of the company or even to act in a manner it knows to be contrary to these; and if it does this,
payment of adequate compensation, than it did through the process of the bankruptcy. But this there are no international means of recourse against it, such as there would be against the
would have depended on the nature and amount of the compensation. management of a company so acting on the internal plane. There is no means, internationally,
--------------------------------------------------------------------------------------------------------------------- of proceeding against a government which refuses to intervene on behalf of, or support, the
claim of one of its nationals or national companies FN20,—nor could such a refusal conceivably
*[p 76] entail the breach of any general international law obligation. Still less of course is there any
means of changing or replacing a government which refuses or fails to act as, internally, the
shareholders may be able to do as regards the company's management.
21. Must the Canadian nationality of the Company then rule out the Belgian claim? In the
present state of the law it would seem that it must. In connection with this conclusion, ---------------------------------------------------------------------------------------------------------------------
however, a number of points have to be considered in order to show why, although it is correct FN20 Theoretically, the internal law of the country concerned might provide a means of
on the basis of extant law, this law itself, as it now stands, is in this respect unsatisfactory. recourse against the government in such circumstances: and political action might be possible.
But in neither case would the essential point be affected.
22. The first of these points is that, as required by the logic of the considerations indicated in ---------------------------------------------------------------------------------------------------------------------
paragraphs 5 to 13 supra, if on the domestic plane there are circumstances in which some
action is open to the shareholders notwithstanding that it is prima facie the company's position, 24. All this at present provides an excuse for saying, as the law now does, that if the company's
rather than (directly) their own, that is in question,—then in corresponding circumstances the government does not act no other one can. Instead, it should constitute a reason for coming to
government of the shareholders should, on the international plane, be entitled to intervene and precisely the opposite conclusion. An enlightened rule, while recognizing that the national
claim. One such case has already been discussed supra in paragraphs 14-20: the company is government of the company can never be required to intervene, and that its reasons for not
defunct or paralyzed and there can be no question of intervention or claim by its government, doing so cannot be questioned even though they may have nothing to do with the merits of the
for the latter is itself the tortfeasor government, if wrong there has been. Similarly, if claim, would simply provide that in such event the government of the shareholders may do so
international law is to remain faithful to the concept of the company and, in dealing with the FN21— particularly if, as is frequently the case, it is just because the shareholding is mainly
latter on the international plane, is to give due effect to its essential elements, then it must foreign that the government of the company feels that no sufficient national interest exists to
provide for the case where the company's government— not being the tortfeasor government warrant intervention on its own [p 78] part FN22. The law's present attitude is based on
(but also not being the government of the majority of the shareholders)—for reasons of its own predicating for the company's government not merely a prima facie right (which would be
that have nothing to do with the interests of the company (see supra paragraph 10) refuses or understandable) but an exclusive one (which is not). There is no reason of principle why, if the
fails to intervene, even though there may be a good, or apparently good case in law for doing law so wills, failure to utilize a right of action by the party prima facie entitled to do so should
so, and the interests of the company require it. Just as on the domestic plane an analogous not sanction its exercise by another party whose material interest in the matter may actually be
failure or refusal on the part of the management of the company would normally enable the greater. Practical difficulties there might be; but this is not a serious objection where no
shareholders to act, either (if the element of dolus or culpa were present) by legal action inherent necessity of the law stands in the way. That such a situation of primary and secondary
against the management, or against the tortfeasor or contract-breaking third party,—or else (or latent) entitlement to act can work, if properly regulated, seems to be indicated by the
through the internal processes of the company;—so also, on the international plane, ought the shareholders' possibilities of action on the domestic plane, as earlier described.
inaction of the company's government enable that of the shareholders to act— (and obviously
there would be ways of resolving the practical difficulties of the company's government ---------------------------------------------------------------------------------------------------------------------
subsequently changing its mind—if the servants of the law cared to work them out;—I think FN21 I am not greatly impressed by the point which comes up in several connections that the
that in this respect paragraphs 94-98 of the Court's Judgment make too much of this matter). Belgian position, with a big block of majority shareholding, is peculiar, and that in other cases
there might be foreign shareholders of several nationalities and a consequent multiplicity of
23. In fact, international law does not at present allow of this— except possibly in the one case claims. This would only go to the quantum of reparation recoverable by the various
of the company's government being actually disqualified at law from acting (as to which see governments,—and once the principle of claims on behalf of shareholders had been admitted
infra, paragraphs 26-32). The reasons for this insufficiency—for such it is—may be perfectly for such circumstances, it would not be difficult to work out ways of avoiding a multiplicity of
understandable, but this does not alter the fact that international law is in this respect an proceedings, which is what would really matter.
under-developed system as compared with private law, and that it fails to provide the recourses FN22 This is or has been the settled policy of a number of governments. I am not impressed by
necessary for protecting [p 77] on the international plane the interests not merely of the the argument that those who acquire shares in companies not of their own nationality must be
deemed to know that this risk exists. That does not seem to me to affect the principle of the company's government to claim (whether it chooses to do so or not) the shareholders are not,
matter. at least in law, deprived of all chance of protection.
---------------------------------------------------------------------------------------------------------------------
27. These aspects are particularly important if consideration is given to what the ground of
* Canada's possible disqualification would be, namely (on the basis of certain previous decisions
and other elements FN24) that there was an absence of a sufficiently close link between the
25. International law must in consequence be regarded as deficient and underdeveloped in this Canadian Government and the Barcelona Company to give the former an actionable interest at
field because, while retaining the rule of the "hegemony" of the company and its government, it law. Moreover, a major factor would precisely be the absence of any Canadian shareholding or
fails to provide those safeguards and alternatives which private law has instituted for preventing share capital in the Company and the fact that most of it was Belgian. In my view, a
the hegemony of the company's management leading to abuse. More exactly, what the law disqualification—[p 80] at least if it takes place on those grounds—must in logic and in law ipso
enjoins, and the Judgment of the Court therefore inevitably endorses (see its paragraphs 66-68, facto imply legal capacity for the government of the shareholders whose non-Canadian status
77-83 and 93), is the by-passing of the difficulty by a sort of "ostrich-act"—a hiding of the face has brought the disqualification about.
in the sands of the fiction that so long as it remains theoretically possible for the company's
government to act (and however little reality there may be about this possibility), no other ---------------------------------------------------------------------------------------------------------------------
government can do so. Thus the law allows the company's government eternally to dangle FN24 In particular the decision of the Court in the Nottebohm case (merits)—I.C.J. Reports
before the foreign shareholder the carrot of a hypothetical protection that will never be 1955, p. 4 et seq.; and the Report of the Commission of Arbitration in the "I'm Alone" case
exercised, and tells the hungry fellow that he must be satisfied with this because, although he (U.N. Reports of International Arbitral Awards, Vol. III, p. 1614). The same sort of questions
will never be allowed to eat that carrot, it will always remain there to be looked at FN23! also arise over the use of flags of convenience; supposed head-offices that are no more than an
International law has of course to accept the fact that governments cannot[p 79] be compelled address and a letter-box; etc.
to act or be changed. But it does not have to accept (and even positively decree) that ---------------------------------------------------------------------------------------------------------------------
nevertheless no other government can ever act—that the carrot must be eternally dangled but
never eaten—the maiden ever pursued but never attained!—(see footnote 23 above). 28. Having regard to the importance of this issue and, consequently, of the possible
applicability to the situation of Canada of the Court's decision in the Nottebohm case FN25,
--------------------------------------------------------------------------------------------------------------------- which obviously could affect the whole outcome of this part of the case, I consider that it
FN23 Or, like the nymph pursued by the ephebus, as depicted in the timeless stasis of the attic should not have been side-tracked on the basis that neither of the Parties contested the
vase that inspired the poet Keats' celebrated Ode on a Grecian Urn (verse 2, lines 7-10): existence of a Canadian right of intervention and claim. In my view they should have been
"Bold Lover, never, never canst thou kiss, asked, in the exercise of the Court's power to act proprio motu, to present full argument on the
Though winning near the goal—yet, do not grieve; matter; and the intervention of the Canadian Government under Article 62 of the Court's
She cannot fade, though thou hast not thy bliss, Statute should have been sought, in order that its views might be made known. If for various
Forever wilt thou love, and she be fair!" reasons, it would not have been practicable to do this during the normal course of the oral
--------------------------------------------------------------------------------------------------------------------- hearing, I consider that the Parties should have been recalled later for the purpose, after such
interval as might have been thought appropriate for any necessary written exchanges on the
*** subject. This was not done: yet the Court's Judgment (see paragraph 70 and, generally,
paragraphs 70-76) not only touches on the matter, but gives the reasons why the Court did not
The Nottebohm case believe that it need consider the Nottebohm case, viz. that there was no true analogy between
the situation in that case and this one. At the same time, the Court does in fact find
26. There remains however a quite different order of point, which is in my view by far the most affirmatively that there is a sufficient link between Canada and the Barcelona Company to
important to arise on the question of Belgian locus standi, namely what the situation would be qualify Canada to sustain a claim if it chooses to do so,—and the Court does so without going
if Canada, instead of having merely failed to pursue the case, were actually to be unable to do into the counter arguments to be derived from the Nottebohm case. In these circumstances,
so because of a legal disability created by international law itself, disqualifying Canada from and without myself attempting to pronounce on the substance of the matter, I feel obliged to
acting. It is one thing for the law to predicate, on the basis of an exclusive right of action for indicate why the Nottebohm decision unquestionably does have a bearing on this—one of the
one government, that even in the event of its not being exercised, no other government may main issues dealt with in the Judgment of the Court; and why indeed there is a strikingly close
exercise it. Such a position may be regrettable, for the reasons I have indicated, but is at least analogy between the two cases, so that the principle of the Nottebohm decision could well be
tenable. What would be totally inadmissible would be for the law simultaneously to confer a regarded as very neatly applying to the situation obtaining in the present case.
right, yet disqualify the indicated government from exercising it in certain circumstances, and
then, when these arise and the disqualification operates, continue to maintain the rule of ---------------------------------------------------------------------------------------------------------------------
exclusivity and the consequent incapacity of the governments of other parties whose interest in FN25 See reference in footnote 24 above.
the matter is undeniable. Implicitly the Judgment takes the same view because an important ---------------------------------------------------------------------------------------------------------------------
part of it (see preceding paragraph) rests on the basis that so long as it is possible for the
29. In the Nottebohm case, in which Liechtenstein was claiming against Guatemala, the three Commission, International Law Reports, 25 (1958—I), p. 91;—and see Brownlie's whole
main grounds on which the Court found against Liechtenstein's capacity to put forward the discussion of the Nottebohm decision in loc. cit., pp. 334-347. It can also be queried whether
claim of Mr. Nottebohm were: that decision is in any event properly applicable to corporate entities as well as to individuals.
These questions, and others, needed to be gone into.
(i) that this Liechtenstein nationality—acquired by naturalization just before the outbreak of war --------------------------------------------------------------------------------------------------------------------
in 1939, he being then a German [p 81]national—was purely artificial, in the sense that he had
no,t acted from any real desire to identify himself with Liechtenstein and its fortunes, but with *
the ulterior object of endeavouring to divest himself of enemy character by acquiring neutral
status; 31. I have already indicated (paragraph 28 above) that the Court was not in my opinion
absolved from going into these very fundamental issues merely because the Parties did not
(ii) that his true connection by residence, domicile and business interests was Guatemalan; and raise them, and did not for the purposes of these particular proceedings challenge the ius
standi of the Canadian Government. It is true that in the Nottebohm case the Court relied to
(iii) that it was precisely against Guatemala that the claim was being brought. some extent on the fact that Guatemala had never, admitted Liechtenstein's right of
intervention,—whereas it can be argued that Spain has admitted that of Canada, and would
In these circumstances the Court held that although Mr. Nottebohm was undoubtedly of now be precluded from denying it. This may be correct, but the notion does not appear to be
Liechtenstein nationality under the law of that State, such nationality could not be regarded as self-evidently well-founded. In the first place it rests on mere Spanish non-objection to
entitling Liechtenstein to make a claim on his behalf against GuatemalaFN26;—or in other diplomatic representations made by Canada on behalf of Barcelona Traction some 20 years
words his claim was not "opposable" to Guatemala at the instance of Liechtenstein, which ago,—whereas it must be at least doubtful how far this could operate as a positive admission of
meant that Liechtenstein was in those particular circumstances disqualified. a Canadian right now to present a diplomatic claim on behalf of the Company (if that occurred),
in such a way as formally to preclude any Spanish right of objection under this head. In this
--------------------------------------------------------------------------------------------------------------------- context, diplomatic representations—which need not necessarily be based on or imply a claim of
FN26 The Court was extremely careful to limit its finding to the case of a claim against right, but are often admitted or received in the absence of any such claim or pretension to it—
Guatemala. It did not postulate a general incapacity for Liechtenstein to claim on behalf of belong to a different order of international act from the presentation of a formal claim before an
Nottebohm—i.e., against some other country. To have done so would have been virtually to international tribunal.
relegate Nottebohm to the category of a stateless person so far as international claims were
concerned. 32. More important is the fact that, if any preclusion operated as a result of past Spanish non-
--------------------------------------------------------------------------------------------------------------------- objection to Canadian intervention (as it quite possibly might), it could only operate as against
Spain in proceedings brought by Canada against the former. It could not possibly operate
30. If these tests were now to be applied to the case of the Barcelona Company, it could very against Belgium in proceedings brought by the latter against Spain. In contrast to the case of
cogently be contended that a similar, if not almost identical pattern emerged: that the Company Belgium, Spanish non-objection was at least significant, for Spain at all times had an interest in
obtained Canadian incorporation not in order to do business in Canada (on the contrary), but objecting to Canada's intervention, if there were possible legal grounds for so doing. Belgium
on account of certain particular advantages, fiscal and other, that this might bring;—that the did not have any such interest; on the contrary, the true interest of the Belgian shareholders at
Company's entire undertaking was in Spain where, through its subsidiaries, it carried on its sole all times lay in Canadian intervention on behalf of the Company: it is precisely the lack of such
business, none being transacted anywhere else;—and finally that it would be precisely against intervention since about 1952 that has placed the Belgian shareholders in the position in which
Spain that the Canadian Government would be claiming if it decided to intervene. The analogy [p 83] they now find themselves. Consequently no inference adverse to Belgium can be drawn
is clearly striking,—and if to this is added the shareholding situation in the Barcelona Company's from the Belgian non-objection to Canada's ius standi, for this could not be expected in the
case—namely that it was not Canadian, thus rendering the link with Canada still weaker—it circumstances, and was not called for in proceedings in which the Belgian position essentially
becomes manifest that there was here something that required to be gone into,—all the more was (see paragraph 46 infra) that irrespective of any Canadian right, Belgium had a right of
so if it is correct to say that a finding of Canadian disqualification (if such had been the outcome claim. It was for the Court, acting proprio motu, as it has the power to do, to go into this
FN27) should automatically have entailed a recognition of Belgian capacity to claim [p 82] on cardinal issue, the silence of the Parties notwithstanding.
behalf of any person or entity who, at the material times, was both of Belgian nationality and a
shareholder in the Barcelona Company. **

--------------------------------------------------------------------------------------------------------------------- 33. While on this part of the case, another question which in my opinion needed to be
FN27 There are of course arguments contra,—but this only underlines the need for a full considered was whether, in all the circumstances, the very "nationality" of the Barcelona
consideration of the matter. It could be asked for instance whether the Nottebohm case itself Company itself should not be held to be Belgian rather than Canadian. There has, doctrinally,
was rightly decided, exchanging as it does the certainties of nationality for the uncertainties of been much discussion and controversy as to what is the correct test to apply in order to
less well-defined criteria?—see Brownlie on the Flegenheimer case in The Principles ofPublic determine the national status of corporate entities; and although the better view is that (at
International Law (Oxford, 1966) at p. 328 (case heard before the Italo-United States Claims least for public as opposed to private international law and some other purposes) the correct
test is that of the State of incorporation, there is equally no doubt that different tests have been will, as a result not be susceptible even of investigation. As my colleague Judge Jessup
applied for different purposes, and that an element of fluidity is still present in this field FN28. reminded me, it was stated in the award in the Cayuga Indians case (U.N. Reports of
This being so, it is surely a highly tenable proposition that the very circumstances which might International Arbitral Awards, Vol. VI, at p. 179) that:
lead to the State of incorporation being held to be disqualified from claiming,— because of the
absence of a "genuine link" due to the company's ownership and control and main business "The same considerations of equity that have repeatedly been invoked by the courts where
interests being elsewhere,—might equally tend to suggest that in such a case a different test of strict regard to the personality of a corporation would lead to inequitable results . . . may be
nationality should be applied FN29. There are also certain other aspects of the matter invoked here. In such cases courts have not hesitated to look behind the legal person and
considered in the opening paragraphs of my colleague Judge Gros' separate Opinion which are consider . . . who were the real beneficiaries." [p 85]
highly pertinent to the question of the national status of companies.
This is consequently surely a situation that calls for the application of the well-known dictum of
--------------------------------------------------------------------------------------------------------------------- President Huber in the much cited Ziat, Ben Kiran case FN30, where what was involved was an
FN28 See the discussions in Beckett, "Diplomatic Claims in respect of Injuries to Companies", entity of the nationality of the defendant State—a type of case in which the idea of admitting
Transactions of the Grotius Society, Vol. 17 (1932), at pp. 180-188; Paul De Visscher in Hague foreign intervention is really much more startling, conceptually, than it is in the present type of
Recueil, 1961, Vol. I, pp. 446-462; van Hecke, "The Nationality of Companies Analysed" in case. Yet there is a resemblance, and Huber's dictum is equally apt (my translation):
Netherlands International Law Review, 1961, Issue 3, pp. 223-239; and Ginther, "Nationality of
Corporations" in the Austrian Public International Law Review, 1966, Vol. XVI 1-2, pp. 27-83. "International law which, in this field, draws its inspiration essentially from the principles of
FN29 Or else that the proper test of the right to claim internationally should be that of where equity, has not laid down any formal criterion for granting or refusing diplomatic protection to
the real weight of interest lies. On this matter I associate myself (de lege ferenda however) national interests linked to interests belonging to persons of different na-tionality."
with much that is contained in paragraphs 57-70 of my colleague Judge Jessup's Opinion.
--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------
FN30 U.N. Reports of International Arbitral Awards, Vol. II, p. 729.
34. I am of course aware that there are difficulties about this view [p 84] which would ---------------------------------------------------------------------------------------------------------------------
doubtless have been brought out had the matter been properly argued. My purpose here is to
indicate that this is what I think should have occurred. The Parties should have been requested In the present context the equitable considerations to which the Court refers in paragraphs 92-
to present a full argument on the subject. It was not enough, in my opinion, to proceed on the 101 of the Judgment, stress the need for a less inelastic treatment of certain of the issues of
basis that since neither Party had contested the Canadian nationality of the Barcelona admissibility involved.
Company, and both had proceeded on the assumption that the Company was Canadian, the
Court was not called upon to speculate otherwise. Such an attitude may be quite in order in 36. The matter can however be put on a broader basis than that merely of the requirements
domestic courts where, normally, appeals or alternative procedures exist. It is not appropriate that may exist in this particular field. As an old authority (Ménignhac) said in terms even more
to international proceedings in which, almost always, there are no possibilities of appeals or applicable today— "international law is to be applied with equity". There have been a number of
other recourses. In this field the principle of caveat actor can be carried too far, when the point recent indications of the need in the domain of international law, of a body of rules or principles
involved is not at all merely incidental but could be of major importance for the outcome of the which can play the same sort of part internationally as the English system of Equity does, or at
case. least originally did, in the Common Law countries that have adopted it. Deciding a case on the
basis of rules of equity, that are part of the general system of law applicable, is something quite
III different from giving a decision ex aequo et bono, as was indicated by the Court in paragraph
Equitable Consideration and Equity as a system 88 of its Judgment in the North Sea Continental Shelfca.se (I.C.J. Reports 1969, at p. 48), when
introducing the considerations which led it to found its decision in part on equitable
35. The general conclusion to be drawn from the considerations set out in part II supra, is that considerations, as it might well have done in the present case also. Be that as it may, I should
in cases of this kind, the results to which a strict view of the law leads—as it stands de lege like to take this opportunity of placing on record in a volume of the Court's Reports a classic
lata—are not satisfactory. By means of a partial application of domestic law principles short statement of the way in which, historically, the need for a system of Equity makes itself
connected with the inherent structure of the corporate entity, necessary and correct so far as it felt,—taken from a standard work FN31 current in the country in which Equity as a juridical
goes, but one-sided, international law may give rise to situations that cannot, or at any rate do system originated,—and in language moreover that might almost have been devised for the
not occur in corresponding circumstances on the domestic plane; or which, if they did, would case of international law:
certainly result in remedial legislative action. By failing to take account of various other
domestic law principles directed to enabling the shareholders to act in certain kinds of cases "Equity is that body of rules or principles which form[s] an appendage or gloss to the general
where the action of the company is unavailable or not forthcoming, or to influence or change rules of law. It represents the [p 86]attempt... of the ... legal system to meet a problem which
the management or its policy, or by taking account of this situation only to a somewhat limited confronts all legal systems reaching a certain stage of development. To ensure the smooth
extent, the present state of international law leads to the inadmissible consequence that running of society it is necessary to formulate general, rules which work well enough in the
important interests may go wholly unprotected, and that what may possibly be grave wrongs majority of cases. Sooner or later, however, cases arise in which, in some unforeseen set of
facts the general rules produce substantial unfairness. When this occurs, justice requires either FN32 Panevezys-Saldutiskis Railway case (P.C.I.J., Series A/B, No. 76 (1939), at p. 16).
an amendment of the rule or, if ... the rule is not freely changeable, a further rule or body of
rules to mitigate the severity of the rules of law." ------------------------------------------------------------------------------------------------------------
and
---------------------------------------------------------------------------------------------------------------------
FN31 Snell's Principles of Equity, 26th edition by R. L. Megarry and F. W. Baker, 1966, pp. 5-6. "By taking up the case of one of its subjects and by resorting to diplomatic action or
--------------------------------------------------------------------------------------------------------------------- international proceedings on his behalf, a State is in reality asserting its own right, the right to
ensure in the person of its subjects respect for the rules of international law FN33."

It would be difficult to find words more apt to describe the sort of impasse that arises in ------------------------------------------------------------------------------------------------------------
circumstances such as those of the present case, which a system of Equity should be employed FN33 Mavrommatis Palestine Concessions case (P.C.I.J., Series A, No. 2 (1924), at p. 12). The
to resolve: and, as the author of the passage cited points out subsequently, equity is not passage quoted was repeated in almost identical language in the Panevezys decision, q.v., loc.
distinguishable from law "because it seeks a different end, for both aim at justice But, it might cit.
be added, they can achieve it only if they are allowed to complement one another. ------------------------------------------------------------------------------------------------------------

A true question of capacity as such is here involved FN34, for without the "bond of nationality"
IV and what it entails, the claimant State would lack the necessary qualification for intervention
Nationality of the Shareholders and Continuity of Shareholders and claim, since it could not then be "taking up the case of one of its subjects", in whose
person alone it could be "asserting its own right... to ensure . . . respect for the rules of
37. Since in this and the next part (V) of this Opinion, I shall be discussing certain matters international law".
(described in the second half of paragraph 3 supra) which, having regard to the particular basis
of the Judgment of the Court, did not arise for decision by it, I should like to state what effect I ---------------------------------------------------------------------------------------------------------------------
am intending to give to my observations concerning these matters. Evidently it would be FN34 As was observed in footnote 2 supra (part I), the aspect of the third preliminary objection
impossible to comment on them in total abstraction from the facts and surrounding dealt with in the Judgment of the Court is not really one of the capacity of the claimant State,
circumstances of the case itself. But although I shall be expressing a judicial view on the points but of substance: have shareholders any substantive rights at all where the injury is to the
of law involved, and possibly also on some points of fact, I do not wish to be understood (even company as such? But veritable questions of capacity and admissibility are involved where the
though I may use the language of it) as making any judicial pronouncements or findings on nationality, and the status as shareholders, of the private parties concerned are in issue.
them. These were matters which, although the Court considered them, it did not need for the ---------------------------------------------------------------------------------------------------------------------
particular purposes of the Judgment to go into fully. Had a more ample collegiate discussion
taken place I might have been led to form a different opinion on some points, and therefore it 39. In terms of the present case, this means establishing in respect of the private parties
is by way of analysis that I now give my views. concerned that, at all the material dates, and with the necessary degree of continuity, they
*** were both (a) Belgian and (b) shareholders in the Barcelona Traction Company. Implied in this,
[p 87] there figured in the present case such questions as (i) whether it sufficed for a shareholder to
be a company having Belgian nationality by incorpora-[p 88] tion, or must it also be shown that
(A) Nationality of Shareholding Claims the individual shareholding in that company was equally Belgian, or at least predominantly
so?—also (ii) whether a beneficial owner of shares actually vested in nominees or trustees of
38. The third preliminary objection, really had two aspects. The first, namely whether, in the non-Belgian nationality, with whom pro tern lies the legal ownership, still ranks as a
particular circumstances of this case, a claim is sustainable at all on behalf of shareholders, "shareholder" while that situation continues; and, if not, whether this does not entail such a
whatever their nationality may be, has been answered in the negative by the Judgment, and break in the "ownership of the claim" as to disqualify the private party concerned, and hence
this accordingly disposes of the whole claim. Had the answer been in the affirmative, however, his government;—and finally (iii) what are the material times at which the necessary
it would still have been necessary, before the third preliminary objection could be dismissed and shareholding status and nationality must exist, and did the latter in fact do so at these times?
the claim be held to be admissible (so far as this ground of objection was concerned), that its Clearly, however, the present discussion must be confined only to those points that were of
national character should be established as being that of the claimant State. The two classic especial prominence in the case.
dicta of the Permanent Court may be recalled:
**
"... it is the bond of nationality which alone confers upon the State the right of diplomatic
protection . . .FN32" (1) Onus of proof, question of quantum, etc.

----------------------------------------------------------------------------------------------------------- 40. It was naturally maintained on the Spanish side that presumptions of share-ownership,
even if in themselves strong, do not suffice, and that affirmative proof is required. This is interest in which is owned by another Belgian registered and incorporated company—Sofina
doubtless true in principle, but requires some qualification in the light of the particular FN37. Since this last category, which it will be convenient to designate as the Sidro-(Sofina)
circumstances. There was never any real doubt about the existence over the years, and interest, comprised not far short of two-thirds of the entire issued share capital of the Barcelona
probably since at least 1920, of a substantial Belgian shareholding, or at least interest of some Company, and about five-eighths of the shares allegedly in Belgian hands,—then, on the basis
kind, in the Barcelona Company. What was controversial was, rather, such matters as (a) was of the principle of the sufficiency of "even a single shareholder", the only practical issue
the interest concerned strictly one of shareholding as such, or was it more a mere beneficial becomes that of deciding on the character and status of the Sidro-(Sofina) holding;—whereas,
interest in shares the legal ownership of which was vested in non-Belgian hands?—(b) how big the status of the other shares—the bearer shares and the non-Sidro registered [p 90] shares—
an interest was it,—did it amount to the 88 per cent, claimed on the Belgian side?—(c) did it would be a secondary matter which, except as to quantum of damage, would become
exist at the two crucial dates of the original Spanish declaration in bankruptcy of the Barcelona important only if the Sidro-(Sofina) holding could be shown to lack the necessary status and
Company, and the date when proceedings were started before the Court,—and not merely character adequate in itself to sustain a Belgian claim. It is therefore to this question that I shall
before or after each or either of these dates? now address myself. It has two aspects, first what was and is the true national character of
Sidro-(Sofina)?—and secondly, was this entity at the material dates the actual shareholder?
41. Much of the argument was rendered irrelevant by a failure to distinguish clearly between
whether, on the one hand, a basis of claim existed in principle, and, on the other hand, what ---------------------------------------------------------------------------------------------------------------------
would be the quantum of damage or reparation recoverable by the claimant State if such a FN36 Standing for "Société Internationale d'Energie Hydro-Electrique, S.A.".
basis did exist and the claim was shown to be good. In theory, if it appeared that there was FN37 Standing for "Société Financière de Transports et d'Entreprises Industrielles, S.A."
even one single private party or entity which, at the material times, both was a shareholder in ---------------------------------------------------------------------------------------------------------------------
the Company and had the nationality of the claimant State, then that State would, in principle,
be entitled to claim, since the validity of the claim—its legal merits in itself—could not depend (2) Status of Sidro-(Sofina)
on the size of it in terms of the numbers of shareholders, or of the financial values involved.
The latter could, in law, only affect the quantum [p 89] of reparation or damages recoverable if 43. Even if it could not otherwise be established, Sidro-(Sofina's) original ownership of over 1
the claim should be made good FN35. This situation, while it does not exactly shift the burden million of the Barcelona registered shares (this block was registered in the name of Sidro),
of proof entirely, does place it in a different light by suggesting that in some circumstances, in constituting a more than majority holding of the entire Barcelona share issue, is conclusively
claims of this kind, the defendant State could only validly contest the standing of the claimant proved by the fact that in 1939, in expectation of the outbreak of war, Sidro transferred the
party if it could show that there was no evidence of the existence of even one indubitable entire block first to an American firm of brokers as nominees, then to an American Trustee
shareholder of the latter's nationality, and no reasonable presumption of there being any. This Company known as "Securitas Ltd." and, after the end of the war, to another American
is just the sort of situation which arises where, as in the present case, the claimant Party has, nominee firm, by whom they were eventually re-transferred to Sidro FN38. Since "nemo dare
over a long period of years, possessed what might be called a "historic interest" in a case, the potest quod non habet", and the. validity of these transfers has never been questioned—
existence of which is and always has been a matter of common knowledge, constantly acted (indeed the assumption of such validity was basic to the Spanish argument on this part of the
upon by both parties, implicitly recognized, and scarcely contested, at least formally, until case)—it follows that Sidro-(Sofina) must, at least originally, have been Barcelona shareholders.
international legal proceedings are started. In such circumstances there is an almost irresistible The allegation is, however, that by these transfers Sidro-(Sofina), though retaining as a matter
inference that a substantial body of private interests exists belonging to the State concerned. of law the beneficial interest in the shares, divested themselves of the legal ownership—in fact
But as will be seen in a moment (infra, paragraph 43) the matter does not in any way depend ceased to be the actual shareholders, so that thenceforth, and until the eventual re-transfer to
on inferences or presumptions. Sidro (which however is alleged to have come only after the main critical date in the case FN39)
the shareholding in the Barcelona Company was non-Belgian so far as this block of shares was
--------------------------------------------------------------------------------------------------------------------- concerned; and so no Belgian claim could now be based on them. This matter I consider infra
FN35 Clearly the fact that in practice a government would not normally put forward a claim in in paragraphs 48-59, and in the meantime turn to the first question indicated at the end of
this class of case unless the interests involved were substantial, has no relevance to the merits paragraph 42 supra—that of the true national character of Sidro-(Sofina).
of the argument here stated.
--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------
FN38 Thus it seems that during the "Securitas" period (as to which see paragraphs 5559 infra)
42. In the present case the attempt to maintain that the Belgian nationality of the shares had the nominees held for that Company, not Sidro-(Sofina).
not been established, took a particular form, which involved not so much denying the FN39 This was 12 February 1948, the date of the original declaration by a Spanish court of the
existence—or proved existence— of any Belgian shareholding at all,—as maintaining that the bankruptcy of the Barcelona Traction Company. There is a certain difficulty as to the date at
apparent, or ostensible, Belgian shareholding did not have the requisite character. Here it is which the damage to the Company occurred as it took several years to complete. However I
material to note that the shares in the Barcelona Company fall into three main categories,—the agree with what Judge Jessup says in paragraph 75 of his separate Opinion.
bearer shares; the registered (i.e., non-bearer) shares standing in the names of various private ---------------------------------------------------------------------------------------------------------------------
persons and entities other than a Belgian incorporated company known as Sidro FN36 for short; *[p 91]
and finally the shares registered in the name of this same Sidro, a company the principal
44. It was never at any time contended that Sidro and Sofina were other than Belgian entities underlying shareholding interests in it. This seems to me to involve a misunderstanding of the
in the sense that they were companies incorporated under Belgian law, having their registered Belgian position, which does not imply any denial of the Canadian nationality of the Barcelona
head offices in Belgium, and therefore that, according to the most generally received canons Company or the right of the Company and its Government to claim, but merely asserts (failing
FN40, not disputed by either Party, they were companies invested with Belgian nationality. The such a claim) a "parallel" right of Belgium also to claim on behalf of any shareholders who are
objection advanced—a curious one to receive Spanish sponsorship—was that although Sidro- Belgian. If amongst these shareholders there are companies of Belgian nationality by
(Sofina) were Belgian by incorporation, yet if the corporate veil was lifted, it would be found incorporation, then Belgium asserts a right to claim on their behalf as Barcelona shareholders.
that the shareholding interest in Sidro-(Sofina) itself was largely non-Belgian. The relevance of According to this "parallel right" position, what would have to be conceded by Belgium is
this contention was maintained as existing on two levels, one of these being that it revealed as something quite different from what the Spanish argument maintains. Belgium does not have to
being quite unfounded the Belgian contention that the savings of numerous humble Belgian concede that, if it appears that most of the shareholding in Sidro-(Sofina) itself is non-Belgian,
individuals, channelled into the Barcelona Company via Sidro-(Sofina), had been detrimentally then Belgium is disqualified from claiming on behalf of Sidro-(Sofina) as an entity,—for she
affected by the Spanish treatment of the Company,—for, so it was alleged on the Spanish side, makes no such assertion as regards Canada's right to claim on behalf of the Barcelona
the ultimate interests in Sidro-(Sofina) were not Belgian, or at least it had not been established Company, despite its non-Canadian shareholding. What Belgium would have to concede, and
that they were. presumably would have difficulty in conceding, is that if Belgium refused to claim on behalf of
Sidro-(Sofina)—it might be because of non-Belgian interests in that entity, just as it may be that
--------------------------------------------------------------------------------------------------------------------- Canada does not claim on behalf of Barcelona because of the non-Canadian interest—then it
FN40 See footnote 14 in part I, supra. would become legitimate, on the "parallel right" basis, for yet other governments—those of the
--------------------------------------------------------------------------------------------------------------------- non-Belgian shareholders in Sidro-(Sofina)—to make a claim on behalf of those shareholders, in
the absence of any Belgian claim on behalf of Sidro-(Sofina) as such. This is the true analogy,
45. I do not find it necessary to consider this particular aspect of the matter since the Belgian and only in this sense, and in such circumstances, would Belgium's position over Barcelona
contention that the savings of hundreds of small Belgian shareholders were injuriously affected oblige her to concede a lifting of the veil of Sidro-(Sofina).
through their interest in Sidro-(Sofina) goes largely to the moralities rather than the legalities of
the issue. The essential legal question is different—namely whether (the Belgian status by 47. It is of course an entirely different question whether Belgium's "parallel right" position is
incorporation of Sidro-(Sofina) itself, being established and not contested)—there are good in law. According to the Judgment of the Court (which, de lege lata I agree), it is not. But
nevertheless grounds upon which it can be maintained that the corporate veil must be lifted in within the four corners of its premisses, the argument is entirely logical, and it operates to
order to see what is the character of the ultimate interests lying behind this veil. It would absolve Belgium from the charge of inconsistency in asserting a right to claim on [p 93] behalf
certainly seem that whoever else can adopt such an attitude it cannot be Spain,—that Spain is of Sidro-(Sofina) as an entity of Belgian nationality by incorporation, irrespective of its detailed
indeed precluded from doing so,—because it is precisely Spain which, in relation to the composition. In consequence, the result is the same whichever way the matter is looked at:
Barcelona Traction Company maintains that the Canadian nationality of the Company, by namely if a claim on behalf of shareholders is permissible at all, a Belgian claim on behalf of
incorporation, is conclusive, and that its corporate veil cannot be lifted in order to take account Sidro-(Sofina) is permissible;—for according to the basic Spanish position the veil of a company
of the non-Canadian shareholding lying behind it. Yet, paradoxically FN41,—that is just what can never be lifted save in exceptional circumstances not here admitted to exist,—while
Spain has sought to maintain in relation to Sidro-(Sofina),—but not Barcelona. On what basis according to Belgium the veil can be lifted if the company's government refuses to claim on its
does this attempt proceed? behalf,— but Belgium, as the Government of Sidro-(Sofina), is not refusing to claim on that
entity's behalf, so here also there is no occasion to go behind the corporate facade.
---------------------------------------------------------------------------------------------------------------------
FN41 This, however, is only one of the many instances of "having it both ways" in this most (3) Question of nominees, trustees, etc.
paradoxical of cases.
--------------------------------------------------------------------------------------------------------------------- 48. The second main challenge to the standing of Sidro-(Sofina) as owners of the greater part
of the Barcelona Traction shares, was based on objections, not as to the Belgian national
46. The argument was that it was Belgium which was precluded from contesting the lifting of character of these entities but as to their character qua Barcelona shareholders. Over certain
the Sidro-(Sofina) veil, since it was precisely Belgium which maintained, in relation to the periods, it was pointed out, covering dates material to the validity of the Belgian claim, the
Barcelona Company, that the veil must be lifted in order to reveal the true Belgian interests Sidro-(Sofina) shares were vested in nominees and/or trustees of American nationality. The fact
underlying the Company. But at this point it becomes clear that the rival positions, like two is admitted. The effect, according to the Spanish argument, was that Sidro-(Sofina) while
mathematical negatives that make a positive, cancel each other out and leave the objective retaining the beneficial ownership, or the beneficial interest, ceased to be the legal owners of
question of the legitimacy, and [p92] occasions, of lifting the veil still to be determined. Let it the shares, or rather, ceased to be the actual shareholders. Consequently, at the time when the
be assumed, notwithstanding, that a purely "tu quoque" argument might have some validity on Belgian claim arose—that is to say at the date when the alleged injury to the Barcelona
a sort of preclusive basis. Accordingly, it is said, the Belgian case must concede what it claims: Company was inflicted—the shareholders were not Belgian, but American, and therefore the
just as it claims that the Canadian nationality of the Barcelona Company is not conclusive, so "bond of nationality" postulated by the Permanent Court (supra, paragraph 38) as being
must it also concede that the ostensibly Belgian nationality of Sidro-(Sofina) is not conclusive as necessary to found a right to claim, did not exist so far as Belgium was concerned, at least on
to that entity's true character, which must in consequence be established by reference to the the basis of this block of shares FN42.
 else also be the shareholder? Insistence that the real question at issue was not who "owned" or
--------------------------------------------------------------------------------------------------------------------- was the "owner" of the shares, but who was, or was registered as, the "shareholder", became
FN42 And as regards all the other shares—i.e., the bearer shares and non-Sidro-(Sofina) increasingly prominent during the course of the oral hearing; but I share Judge Jessup's view
registered shares, the Spanish position was that their alleged Belgian ownership rested on (paragraphs 99 et seq. of his Opinion) that the distinction is unreal. If a nominee shareholder
presumptions and had not been proved were in truth "the shareholder", he would be entitled to exercise the normal rights of a
--------------------------------------------------------------------------------------------------------------------- shareholder,—but in fact he is not so entitled: he is even, by law, expressly forbidden from
doing so. His is in fact merely a sort of "twilight" status, according to which he is no more than
a pipe-line through which the supposedly merely beneficial owner continues to exercise all the
49. This Spanish contention is in part related to the "continuity" question: the transfer of the rights of legal ownership. In this context the following propositions of Anglo-American-Canadian
shares to non-Belgian nominees or trustees caused a break, covering a material date, in the law (which is the system constitutive of the nominee position), and which have not been
Belgian ownership or status. In the next section (B) below certain comments are made on the disputed—have indeed been admitted on the Spanish side—are pertinent:
continuity requirement for international claims, namely the requirement that the claim must be
"owned" by a national of the claimant State[p 94] both at the time when the act complained of (i) a shareholder can freely dispose of his shares: a nominee can do so only with the consent of
occurred, and continuously up to the date when an international claim is put forward and the beneficial owner (in effect his "principal")FN43 and at his direction;
proceedings are commenced—(and indeed, strictly, according to one view, up to the date of (ii) a shareholder can exercise his voting rights at General Meetings according to his own views:
judgment or award). At this moment I shall only discuss what, in relation to a claim of the a nominee is obliged to vote as directed by his principal;
present kind, is the correct effect to be attributed to the transfer of shares to foreign nominees, (iii) a shareholder has the right to receive any dividends that are declared: a nominee must
or to foreign trustees, as the case may be. In either case, does it deprive the transferor of his pass these on to the principal, who also pays the tax on them;
status as shareholder in relation to the claim, and hence deprive his government of the right (if (iv) shares held by a nominee, as nominee, do not figure in any statement of his assets;
right otherwise exists) to make the claim on his behalf? (v) the principal can direct the nominee to take any steps necessary for the protection of the
shares and, under some systems of law, can himself initiate proceedings for that purpose;
50. It should be noted in the first place that from the Belgian standpoint in the case—which was (vi) the principal can at any time replace or eliminate the nominee, by directing the latter to
throughout that the realities must be looked to rather than the form—the whole question of the have the necessary changes made in the company's register of shareholders (add to this that,
nature of the interest acquired by the American nominees or trustees was irrelevant, since in in the case of the transfers made by Sidro, no transfer fee was payable under the relevant law,
any event (and this was common ground between the Parties) the beneficial ownership of or because no change of ownership was deemed to occur).[p96]
interest in the shares remained with Sidro-(Sofina) and, according to the Belgian contention,
this was sufficient per se to found a Belgian claim. However, it was also maintained on the ------------------------------------------------------------------------------------------------------------
Belgian side that in any event the effect of the transfers was not to divest Sidro-(Sofina) of the FN43 There is not of course in the formal sense a relationship of principal and agent, but the
status of shareholder, and it is this aspect of the matter that I wish to consider here. use here of the term "principal" is convenient and seems justified by the realities of the
situation.
* ------------------------------------------------------------------------------------------------------------

51. I need not set out the facts concerning the vesting of the Sidro registered shares in 53. The only possible conclusion must be that even if, as was contended, the matter is to be
American nominees and in the trustee company "Securitas Ltd.", except to say that the object considered not on the basis of who "owns" the shares but of who is the shareholder, the true
was of course (in view of war and probable enemy occupation) to avoid their falling into enemy shareholder throughout is the principal, the nominee being shareholder in name only, i.e., as
hands. The details of the various transactions are fully set out in paragraphs 90 et seq. of Judge the very term "nominee" implies, his shareholding is nominal only. He has no real control over
Jessup's separate Opinion,—and although I do not draw the same conclusion as he does on the the shares, this remaining with the principal at whose direction the nominee is bound to act. It
question of the effect of the "Securitas" transaction, I can associate myself with his statement follows that apart from disguising the identity of the real owner (which is one of the main
of the facts. I will however start with the question of the effect of the nominee transactions. purposes of the nominee device), a nominee is the shareholder only for the purpose of carrying
out his principal's directions,—so that what alters upon transfer to a nominee is not the control
(a) Nominees over the shares, but the manner of its exercise. It is little more than a question of mechanics. It
equally follows that, if for any purpose the nominee had to establish the existence of a "genuine
52. The Spanish contention was that the effect of putting the shares into the names of link" between himself and the shares—i.e., of something going beyond the bare fact that the
nominees was to vest in the latter the legal ownership, and moreover that this result was not shares are registered in his name, he would, according to all the cannons accepted in other
affected by the special juridical position of a nominee, whereby his ownership is, in law, fields as to what constitutes a genuine link, be unable to do so.
conditioned in various ways—so that he cannot deal with the shares except by direction[p 95]
of the "real" owner; but equally, must do so upon such direction, etc. This, it was said, did not 54. Furthermore, the comparison sometimes made between the position of a nominee and that
alter the fact that it is the nominee who appears on the books of the company as the registered of a trustee is quite illusory, but is for that reason illuminating,—for a trustee has real rights
owner of the shares, and therefore, if he is thus the registered shareholder, how can someone over the trust property, which he can assert even against the beneficiary of the trust. Subject to
any specific term of the trust, and of the general law of trusts, not only is the trustee under no for present purposes one is in any case "assuming the worst", viz. that between them these two
obligation to carry out the instructions or conform to the directions of the cestui que trust Deeds did transfer the legal ownership of the shares to "Securitas", for the duration of the war
(beneficiary): it is often his legal duty not to, and to act in a manner quite different from what so to speak.[p 98]
the latter wants. The cestui que trust can take legal steps to compel the trustee to conform to
the terms of the trust but, within the scope of those terms, and of the relevant provisions of 57. This brings me to the third of the inherent probabilities affecting this matter, namely that
trust law, the trustee is completely independent, and free to act at his own discretion. the Trust Deeds would (as Belgium asserts they did) have contained a clause providing for the
termination of the situation they created, so soon as an agreed period after the end of the war
* had elapsed,—for it is hardly credible that Sidro-(Sofina) would, even to avoid enemy seizure,
have signed away all future control over their shares without some such guarantee of eventual
(b) "Securitas" Ltd. retrocession. That there was such a clause, and that it duly operated in the second half of
1946, seems to me indeed, even apart from inherent probabilities, to be an inference that can
55. This brings me to the question of the vesting of the Sidro-(Sofina) shares in "Securitas" reasonably be drawn from the facts given in Judge Jessup's paragraph 92. The result was the
under the various trust deeds described in Judge Jessup's Opinion. According to the logic of the change in the situation to which I referred at the beginning of paragraph 56 supra,—namely
view just expressed supra in paragraph 54, I ought to hold (as he does) that the vesting in that "Securitas"—who in a letter of 14 April 1947 to Sidro described themselves as having from
"Securitas" did indeed transfer the legal ownership, Sidro-(Sofina) retaining merely the 31 December 1946 held the shares "in custody for your account" (not the language of a
beneficial interest; especially as the object of the whole transaction was to put "Securitas" in a Trustee)—now reverted to their original status of being merely custodians, and Sidro-(Sofina)
position of being legally [p 97] entitled to refuse to comply with Sidro-(Sofina's) own reverted to being the legal owners and actual shareholders—(that the shares were still in the
instructions if they judged that these were given under enemy pressure. Furthermore, as Judge name of nominees is immaterial for the reasons given in paragraphs 52-54 supra). Accordingly,
Jessup points out, no positive evidence (despite several requests for it) was produced to show if this view is correct, the shares were again Belgian owned on the crucial date of 12 February
that the trust relationship was determined before the crucial date of 12 February 1948 (when 1948. There would have been a break in the continuity of their status as such, from 1939-
the first step that led to the eviction of the Barcelona Company from its Spanish interests was 1946,. but as this occurred before the earliest possible crucial date, it would not signify.
taken),—although it appears that the relationship was duly determined only two or three
months later when (acting on a request from Sidro) "Securitas" sent the share certificates that 58. It has to be admitted that in the absence of the relevant instruments, the foregoing
had been deposited with them to the New Jersey firm of nominees henceforth holding for Sidro- conclusion can only be conjectural. But it is I believe a reasonable conjecture, warranted by
(Sofina). On this basis therefore the shares would, in the absence of the necessary evidence to those facts that are known, and by the probabilities involved. Of course the Trust Deeds would,
the contrary, have to be presumed still to have been American, not Belgian owned, at the if produced, constitute what is known in Common Law parlance as the "best" evidence, and
crucial date of 12 February 1948. unless they could be shown to have been lost or destroyed, it is unlikely that a municipal court
would admit secondary evidence of their contents. International tribunals are not tied by such
56. It seems to me however that, even if one accepts the view (which, for reasons to be stated firm rules, however, many of which are not appropriate to litigation between governments. It is
later, I do not) that the effect of the "Securitas" transaction was to deprive Sidro-(Sofina) pro by no means in the nature of an inescapable inference that the reason why the Deeds were not
tem of the status of being a Barcelona shareholder, a radical change came over the situation produced was because they contained material that would have been prejudicial to the Belgian
about, or shortly after the middle of 1946, when the war in Europe had been over for case. Documents drawn up in contemplation of war, and in the situation which confronted
somewhat more than a year. Although the trust deeds entered into with "Securitas" were, as countries such as Belgium at that time, may well have contained provisons, or phraseology,
Judge Jessup describes, never produced during the case, they were preceded in time, or at which after the lapse of nearly 30 years—or for other reasons—a government would be
least in operative effect, by something that was produced, namely a "custodian" agreement reluctant to make public. In my opinion, weighing the whole matter up, and having regard to
between Sidro and "Securitas" dated 6 September 1939 (the war having then broken out, but what seems to be a very reasonable presumption as to what [p 99] occurred, Belgium should
Belgium not yet being involved), which figures as Appendix 2 to Annex 3 of the Belgian be given the benefit of the doubt.
Memorial in the case. It is absolutely clear from the terms of this agreement that its object was
merely to get the securities it covered physically out of harm's way, and that it had no effect
whatever on Sidro's status as shareholder. This came later with the two Trust Deeds,—one also *
dated 6 September 1939, but evidently with suspensive effect pending Belgium's actual
involvement in the war; and the other dated February 1940. Because of its inherent probability, 59. And this brings me to a point which I consider more important than any yet mentioned on
I see no reason to doubt the Belgian affirmation that these Trust Deeds were not to become this particular matter. It is not in my opinion possible to regard instruments drawn up in
operative unless and until the Brussels area should pass into enemy occupation, for only then emergency circumstances, for the protection of property in contemplation of war, and of a
would the danger of enemy pressure to surrender or procure the surrender of the shares arise. singularly predatory enemy (I am of course speaking of the nazified Reich, not of Germany or
It is also I think unimportant that the modifications effected in the first Trust Deed by the Germans under any normal circumstances) in the same light as instruments entered into at
second have never been revealed. I see no reason to doubt the Belgian assurance that they other times and in the ordinary way of business. Certainly an international tribunal should not
were technical in character, intended to take account of certain contemporary Belgian war do so. In my opinion such transactions in shares as those now in question, whatever the effect
legislation, which again seems to me inherently probable. But it does not really matter, because that would be given to them in municipal courts for internal or private law purposes, must, on
the international plane, be regarded as creating between the parties a relationship of a special not only had ex hypothesi a different nationality from that of the original claimant, but had the
character, neither divesting the shares of their pre-existing national character, nor debarring nationality of the defendant State—which, created a special situation. In other ways also the
the transferor's government from sustaining a claim in respect of them in subsequent Umpire's finding did not constitute an outright rejection of the "ab initio" thesis.
international proceedings. Outside of a mediaeval disputation, if ever there was a case for FN47 If value was received in respect of the transfer concerned, the question might arise
having regard to the reality rather than the form, this is surely it. whether the "damage" had not been made good—but this is another matter.
---------------------------------------------------------------------------------------------------------------------
***
62. In his dissenting opinion in the Panevezys case FN48, Judge van Eysinga clearly thought
(B) The "Continuity" of Claim Requirement that the continuity rule, though a reasonable stipulation to be inserted by agreement in treaties
about claims—(or to be read into them in consequence of provisions limiting their application to
60. I do not propose to consider here whether it was in fact established that there were persons having the nationality of the claimant State at the treaty date)— was not a rule of
Barcelona shares which were continuously in Belgian hands FN44 up to at least the date when customary international law, in which sphere it could lead to unreasonable results. Thus a rigid
the present proceedings were commenced. As Judge Jessup, who goes into the matter in some application of it, though justified where necessary to prevent abuses FN49, should be eschewed
detail, says, the case rests largely on a series of presumptions, even though it may be difficult where it would work injustice, and this view has received support in recent writings contending
to believe that no shares at all were continuously Belgian held; and according to the view for a more eclectic application of the rule, so as not to "leave a [p 101] substantial body of. . .
propounded earlier (supra paragraph 41) even one such share would, as far as the theory of rights without a practical remedy . . .FN50". A clear case of this would be where the change in
the matter goes, suffice to constitute a basis of claim. I want rather to comment on the nationality was involuntary, e.g., because of a re-alignment of State boundaries, or because the
continuity doctrine itself. successor in title to the affected property, e.g., under a will, happened to have a different
nationality from that of the original claimant or owner. Or again, why should the fact that a
--------------------------------------------------------------------------------------------------------------------- former dependent territory attains independence and becomes a separate State deprive whole
FN44 It is generally accepted that this requirement does not involve continuity in the same categories of claimants in that State of all possibility of redress? Such would however be the
individual person or entity, but only in successive persons or entities of the same nationality. effect of the continuity rule, for there would technically have been a change in the claimant's
--------------------------------------------------------------------------------------------------------------------- nationality, and the former sovereign or protecting State could no longer sustain the claim,
while the new one also could not or, according to the doctrines involved, should not be able to
61. Clearly the "bond of nationality" between the claimant State and the private party for whom do so, because the private claimant was not, at the time of the injury, its national,—or
the claim is brought (see supra, paragraph 38) must be in existence at the time when the acts alternatively because, since the latter State did not then exist as a separate State, it could not
complained of occurred, or it would not be possible for the claimant State to maintain that it itself, qua what it now is, have suffered any wrong in the person of its national FN51 . (This
had suf-[p 100] fered a violation of international law "in the person of its national",— and was in fact more or less the situation that arose in the Panevezys case. The matter ought of
although this doctrine has been called the "Vatellian fiction", it nevertheless seems to constitute course to be provided for by a rule of the law of State Succession, but it is somewhat doubtful
an indispensable foundation for the right of international claim on behalf of private parties whether this is yet the case—see the detailed discussion in O'Connell, State Succession in
(unless there is some alternative, e.g., functional, foundation—as when an international Municipal Law and International Law (Cambridge, 1967), Vol. I, pp. 537-541).
organization claims in respect of a member of its staff). It is however less clear why, as a
matter of principle, if the private claimant is duly a national of the claimant State at the date of ---------------------------------------------------------------------------------------------------------------------
the injury, he must remain so, or the property concerned must do so, or the claim must not FN48 P.C.I.J., Series A/B, No. 76 (1939) at pp. 33-35.
pass into the hands of a national of another State, even after that date,—for the wrong done to FN49 For instance, if, as suggested by Judge van Eysinga, the object were to found compulsory
the State in the person of its national arises, and the consequent right "to ensure . . . respect jurisdiction, where none would otherwise have existed, by seeking out a State able to invoke a
for the rules of international law" accrues, at the moment of injury, so that, as was pleaded in treaty clause to that effect.
the Stevenson case FN45 (though unsuccessfully FN46), the claim then becomes indelibly FN50 O'Connell, International Law (Stevens-Oceana, 1965), Vol. II, p. 1120;—and Professor R.
impressed ab initio with the national character concerned: in short, the injury to the claimant Y. Jennings in Hague Recueil (General Course of 1967), Vol. II, pp. 476477, citing Sinclair,
State is not, so to speak, "de-inflicted" by the fact that the individual claimant or company British Year Book for 1950, at p. 127 says, that Judge van Eysinga's view "is in accord with
ceases to have its nationality, or that the property involved passes into the hands of a national what Mr. Sinclair has shown to be the history of the development of the rule of nationality of
of another State FN47;—and the position becomes even slightly absurd when the continuity rule claims: that it was evolved in the 19th century in the context of the interpretation of treaties
is interpreted as even excluding such claims though they subsequently return to their setting up claims commissions and was a product of the ordinary rule that such treaties must
nationality of origin after a comparatively short interval, as might well be the case with, be interpreted strictly"—i.e., it was not really a rule of customary international law.
precisely, shares. FN51 This last point is essentially the same as the one which arose in the Cameroons case
(I.C.J. Reports 1963) under the head of the "objection ratione temporis" which I felt obliged to
--------------------------------------------------------------------------------------------------------------------- uphold de lege lata in my separate Opinion, for the reasons given in Part V of it (I.C.J. Reports
FN45 U.N. Reports of International Arbitral Awards, Vol. IX, p. 494. 1963, pp. 127-130). The particular point material in the present context is dealt with in the first
FN46 But in this case the beneficiaries resulting from the change in the nationality of the claim, paragraph on p. 129 of the Volume. But I failed then to take account of the possibility that the
matter might be regarded as covered by the law of State Succession, though this is still Belgium were successful, or affecting only the identity of the actual persons or entities whom
uncertain—see end of paragraph 62 supra. the Belgian Government would eventually select to become the recipients of a due share of any
--------------------------------------------------------------------------------------------------------------------- damages recovered.

63. In short, too rigid and sweeping an application of the continuity rule can lead to situations V
in which important interests go unprotected, claimants unsupported and injuries unredressed,
not on account of [p 102] anything relating to their merits, but because purely technical Issues Connected with the Fourth Preliminary objection
considerations bring it about that no State is entitled to act FN52. This situation is the less
defensible at the present date in that what was always regarded as the other main justification 66. The Judgment of the Court does not deal with the fourth preliminary objection that had
for the continuity rule (and even sometimes thought to be its real fons et origo), namely the been advanced on the Spanish side and which, together with the third, was joined to the merits
need to prevent the abuses that would result if claims could be assigned for value to nationals by the Judgment which the Court gave in the preliminary (1964) phase of the case—namely the
of powerful States whose governments would compel acceptance of them by the defendant question of the exhaustion of local remedies. On the other hand, this question has had its
State, has largely lost its validity. Even powerful States are not now in a position to act in this importance for certain Members of the Court, and it was always possible that individual
way: indeed, for reasons that need not be gone into here, they are in these days at a positive rejections of the Belgian claim might be based not on Belgium's lack of ius standi but on the
disadvantage in such matters. view that the Barcelona Company did not adequately avail itself of the means of recourse open
to it in the Spanish courts. In these circumstances, without attempting to discuss the fourth
--------------------------------------------------------------------------------------------------------------------- preliminary objection generally, I consider it legitimate to make certain limited comments on
FN52 This would be a situation even worse than the present one regarding the Barcelona one or two aspects of the matter to which I attach special importance (and which are also of
Company, for that Company has a government which did formerly act, could have continued to importance for the clarification of the law—see paragraph 2 supra,— recalling however, as
act, and still could in theory act : whereas according to the continuity rule, it may result that no being equally, if not even more applicable here, what I said in paragraph 37 above.
government can act.
--------------------------------------------------------------------------------------------------------------------- ***

64. Nor can it plausibly be contended that, if the continuity rule were not strictly applied, legal (1) The issue of jurisdiction
objections would arise because, if the claim were successful, the damages or compensation
would be payable to the claimant State, although the private party concerned was no longer its 67. While the question of Spanish jurisdiction to conduct bankruptcy proceedings in respect of
national, or the affected property no longer belonged to one of its nationals;—for on the basis Barcelona Traction, a Canadian company, is not technically part of the fourth preliminary
that the State is asserting its own right in making the claim, it is always the position, and it is objection, which concerns the exhaustion of local remedies, it is related to it in an important
well recognized internationally, that any compensation due is paid to the claimant State, and way, as will be seen; and since it too has a certain preliminary character, it may properly
belongs to it, for use at its discretion. This was implicit in the view expressed by the Permanent receive some consideration here.
Court in the Chorzów Factory case, when it said that the damage suffered by the individual
could "only afford a convenient scale for the calculation of the reparation due to the State"— 68. It appears to me probable that, considered at the international level FN54, the declaration
(my italics)FN53. If there are any fetters on the State's discretion as to what it does with the of bankruptcy made in respect of the Barcelona [p 104] Company did involve an excess of
com-pensation awarded, they are imposed by the domestic law concerned. So far as legitimate, or at least normal, Spanish jurisdiction—internationally. This view is not of course
international law goes, the claimant State can use this compensation as it pleases: it can keep it based on the non-Spanish nationality of the Company,—still less because of doubts (though
for itself (though this naturally is not normally done) or it can pay it to the private party who these certainly subsist) as to whether the Company did, in the proper sense of these notions,
was injured, whether (as it will usually be the case) he is still its national, or has since become carry on business in Spain, or own property or have a domicile or seat there FN55. It is based
the national of another State, or to the national owner of the affected property, or to a foreign on the nature of the alleged default on which the petition in bankruptcy was based, and
owner who may have bought it, or the claim, off the former, etc. There is, internationally, acceded to by the court. The point may be illustrated by reference to Barcelona's subsidiary,
neither legal nor practical difficulty here. Ebro FN56, which, although equally a Canadian company, did undoubtedly carry on business in
Spain, owning property, occupying offices, etc., there. Consequently, had it been Ebro that was
--------------------------------------------------------------------------------------------------------------------- bankrupted, and for non-payment of commercial debts arising out of its local activities, no
FN53 P.C.I.J., Series A, No. 17 (1928), p. 28. question of any excess of jurisdiction could have arisen despite Ebro's Canadian nationality—for
--------------------------------------------------------------------------------------------------------------------- such matters would have been legitimately of Spanish concern. (It was indeed noticeable that it
was expressly admitted on the Belgian side that the bankrupting of Ebro (had that occurred)
65. If these considerations are applied here, the conclusion would be that, provided Belgian would have been quite proper, jurisdictionally) But Barcelona was not bankrupted for anything
shareholding existed on 12 February 1948, the[p 103]claim then became once and for all of that kind, as is clear from the bankruptcy judgment itself. It was bankrupted exclusively for
indelibly impressed with Belgian national character, and that any subsequent dealings in the the non-payment of the interest on its sterling bonds, issued outside Spain, and also held
shares were immaterial, affecting only the quantum of the damages eventually payable if outside Spain except in so far as certain private Spanish parties had recently acquired a few of
them, apparently for the express purpose of bringing the bankruptcy proceedings. Yet in sold to the new and specially formed Spanish company, Fecsa FN57, without any reference to
respect of these same bonds, issued under Canadian law, all the necessary machinery for the the competent Canadian authorities or any action to procure the enforcement of these
guaranteeing and enforcement of the obligation, through a well-known Canadian institution, the measures in Canada, so that there (and everywhere outside Spain) the original scrip remained
National Trust, had been set up, and existed for utilization in Canada, where also, in the last and remains perfectly valid. The same observations apply to the purported transfer of Ebro's
resort, the Company could have been made the subject of proceedings for the appointment of a Canadian share register, its Canadian registered offices, and its very seat itself (also Canadian),
receiver. to the city of Barcelona,—in disregard of the fact that these things, which could not physically
be transferred without Ebro's consent or enforcement action in Canada, remained where they
--------------------------------------------------------------------------------------------------------------------- were, and are still there today, not only in actuality but in law, [p 106] seeing that Ebro is a
FN54 The question whether there was jurisdiction under Spanish law, in the circumstances Canadian company whose status, seat and location of share register and registered offices are
appertaining to the Barcelona Company, is irrelevant or inconclusive for international purposes, all governed by Canadian law. In short what really took place appears to have had the
since the very question at issue in international proceedings is whether the jurisdiction which a character of a disguised expropriation of the undertaking.
State confers upon its own courts, or otherwise assumes, is internationally valid.
FN55 Barcelona was a holding company, and a holding company is by definition not an ---------------------------------------------------------------------------------------------------------------------
operating company. This has been brought out in several decided cases, but is too often lost FN57 Standing for "Fuerzas Eléctricas de Cataluña, S.A."
sight of. ---------------------------------------------------------------------------------------------------------------------
FN56 Standing for "Ebro Irrigation and Power Co. Ltd."
--------------------------------------------------------------------------------------------------------------------- 72. If therefore it were necessary to reach a conclusion on this matter, it could in my view only
be in the sense that the whole bankruptcy proceedings were, for excess of jurisdiction,
69. Clearly, if the real object had been to obtain payment of the arrears of interest on the internationally null and void ab initio, and without effect on the international plane.
bonds, action would have been taken in Canada,— and not merely would but should, for the
step taken by the Spanish bankruptcy petitioners was in clear breach of the important "no **
action" provisions of both the trust deeds—(clauses 44 of the Prior Lien deed and 35 of the First
Mortgage deed—Annex 28 to the Memorial, Vol. I). These provisions were of course conditions (2) Exhaustion of local remedies: the question of notification
of the bond obligation, by [p 105] which the petitioners automatically became bound on
acquiring the bonds. They provided that no proceedings to obtain payment should be taken by 73. The conclusion just indicated would also be of importance as regards the question of
any bondholder until after the (Canadian) Trustee had, upon a request to act, refused or exhausting local remedies, in so far as it might tend to suggest that, strictly, this question did
neglected to do so. not arise at all,—for there should be no necessity to exhaust such remedies in respect of
proceedings which, for excess of jurisdiction were, internationally, a nullity and void ab initio. At
70. In these circumstances the primary jurisdiction was clearly Canadian, and the Spanish least, in respect of the substance of the proceedings, there could be no such obligation if—
courts should have declined jurisdiction,—at least in the first instance and until the remedies internationally—the proceedings were vitiated from the start.
available through the Canadian National Trust had been invoked. It is true that, under present
conditions, international law does not impose hard and fast rules on States delimiting spheres 74. Be that as it may, there are other considerations which suggest that the whole issue of the
of national jurisdiction in such matters (and there are of course others—for instance in the exhaustion of local remedies may be irrelevant in such circumstances as those of the present
fields of shipping, "anti-trust" legislation, etc.), but leaves to States a wide discretion in the case;—for if it is the fact (as to which, vide infra) that the Barcelona Company was never,
matter. It does however (a) postulate the existence of limits—though in any given case it may according to the applicable international standards, properly notified of the original bankruptcy
be for the tribunal to indicate what these are for the purposes of that case; and (b) involve for declaration, so that, on the international plane, the bankruptcy procedure never began to run
every State an obligation to exercise moderation and restraint as to the extent of the against it, the correct conclusion might well be that no obligation to exhaust local remedies
jurisdiction assumed by its courts in cases having a foreign element, and to avoid undue could ever have been generated;—in much the same way that (even if the case is not entirely
encroachment on a jurisdiction more properly appertaining to, or more appropriately exercisable on the same plane) a person entitled to diplomatic immunity does not lose that immunity
by, another State. through ignoring proceedings brought against him in the local courts,—nor is it a condition of
his government's right to complain that he should have exhausted local means of recourse in
* the assertion or defence of his immunity. Again, the possibility, and even probability, that the
management of the Company did de facto become aware of the proceedings, in sufficient time
71. These considerations apply equally, not only to the initial Spanish assumption of jurisdiction to put in an opposition within the prescribed period, is clearly irrelevant;—for if a certain kind of
in bankruptcy, but to various later stages of the bankruptcy proceedings themselves, and in notification is required by law, and this is not given, then any time-limits dependent on it simply
particular (as part of the process of finally disposing of the Barcelona Company's Spanish do not, as a matter of law, begin to run,—and once again the whole procedure is vitiated and
under-taking) to the purported cancellation of its shares in Ebro (a Canadian company)—these rendered void. [p 107]
being at the time under the control of the Canadian National Trust or of a receiver appointed by
the Canadian courts—and the "replacement" of these by scrip issued in Spain, and subsequently 75. In this connection a clear distinction must be drawn between proceedings which, if invalid,
are so ab initio, and proceedings the complaint as to which concerns their outcome, e.g., that whole, comes very near to constituting, if not a species of concealment, at least a serious
they resulted in a denial of justice. As regards the latter kind of proceedings, it is evident that, obstacle to the possibility of a timely challenge to the bankruptcy;—so that a procedure already
in principle at least, local remedies must be exhausted. The case is different, at any rate as highly favourable to the creditor interest, becomes loaded against that of the debtor to an
regards the substance of the issues involved, where the alleged vice relates not to the outcome extent difficult to reconcile with the standards of the administration of justice required by
but to the very inception of the proceedings. international law. More especially is this the case when the only period within which the
bankruptcy can be challenged is a period of eight days running not from the date of notice but
76. In considering what kind and, so to speak, degree of notification is legally requisite, it is from that of the press publication of the bankruptcy declaration itself, and failure to observe it
clearly not sufficient, in cases involving a foreign element, merely to apply domestic law apparently has, thenceforth, a permanently preclusive effect.
standards, or to rely on, or rest content with, the fact that the requirements of the local law
concerned were duly complied with,—if such was indeed the case. Internationally, it is ---------------------------------------------------------------------------------------------------------------------
necessary to consider whether—objectively—in the case of a foreign company having its seat FN58 Under English law—to cite the system I am most familiar with—in the case of the
and management abroad—a "notice" which takes the form of nothing more than a simple press winding-up of a company on the basis of a petition, not only must the existence of the petition
publication of the adjudication in bankruptcy, suffices,—particularly if this publication is local be advertised (and not merely in the official London Gazette but in one of the ordinary daily
only, and not effected in the country of the company's management and seat. There is here a newspapers also) at least seven clear days before the petition is due to be heard,—but, in
direct connection with the question of excess of jurisdiction already discussed above; and it is addition, notice of it must be served on the company at its registered head office, equally
important to remember (see paragraph 68) that it was not anything to do with the conduct of before the hearing of the petition, at which of course the company is entitled to be represented
the Barcelona Company's Spanish undertaking that was in question in the bankruptcy (Halsbury's Laws of England, loc. cit., in notes 12 and 13 supra, pp. 544-549). In the case of
proceedings, or which formed the basis of the bankruptcy adjudication, but a primarily extra- foreign companies, notice must no less be served, and, if this cannot be effected at an address
Spanish matter, the servicing of the sterling bonds—which was directly the concern of the for service or place of business in England leave will be given to effect service abroad (ibid., pp.
Company in Canada, and of the bondholders' trustee, the Canadian National Trust. The very 842-843).
fact that, as was expressly recognized in relation to the Company's domicile, by the bankruptcy ---------------------------------------------------------------------------------------------------------------------
petition itself, namely that "it [the Company] does not have [a domicile] in Spain, any more
than it has any specific commercial establishment there", must logically lead to the conclusion 79. The pertinence and force of these considerations is of course greatly increased where, as in
that, on the international plane, a notification effected in Canada, or by Canadian means of the present case, a foreign element is involved,—where the bankrupt is a foreign entity, with its
some kind, was called for. It is difficult to see how the apparently admitted non-Spanish seat and management abroad, and where the occasion of the bankruptcy is not the local
domicile of the Company could possibly lead to the conclusion suggested in the bankruptcy commercial activities of that entity, but one affecting its (chiefly non-local) bondholders. In such
petition, and accepted by the judge, that in these circumstances it would be "necessary to limit circumstances, mere publication in the local press, and then not in the ordinary newspapers but
publication to the Official Bulletin of Tarragona"—which the judge extended to the Official in journals of a highly specialized kind, normally little read except by persons having a [p 109]
Bulletin of the province of Barcelona, but no further. particular reason to do so, can not be regarded as sufficient. It is in fact doubtful whether press
publication suffices at all, if it is the only measure taken. But it should at least be effected not
77. I fully appreciate that Spanish law, like certain other historic and highly developed legal only in the local press but also in that of the country or city where the bankrupt resides or (if a
systems, approaches the subject of bankruptcy mainly from the standpoint of the creditors, and company) has its seat;—and, although the point was never finally resolved, there is some
with the object above all or at any rate in the first instance, of safeguarding their rights, and reason to think that this was in fact what Spanish law itself really required.
hence of avoiding so far as possible any premature disposal, dispersal or concealment of the
debtor's assets, in such a way as to prejudice those rights. I [p 108] therefore discount the 80. However, in my opinion, in the circumstances of cases such as the present one, even
natural reactions of a jurist trained in the common-law school when confronted with a situation publication of the latter kind is hardly adequate. Something in the nature of judicial notice is
in which a debtor can be declared bankrupt, or a company liquidated or wound-up, on the basis necessary and, as mentioned in the statement of facts given in the early part of the Court's
of proceedings, of which no previous notice has been or will be given, and at which the debtor Judgment (paragraph 15), no such notice was given at the time: indeed it was not until 15
is not represented or afforded an opportunity to appear—and this although the declaration years later, in June 1963, that the Barcelona Company's longstanding request for an official
takes immediate effect, and that effect involves for the bankrupt a complete loss of commercial copy of the bankruptcy judgment was acceded to. The reason given in that judgment for
status and of legal capacity to act. I also accept the fact that according to the philosophy of this publication in the official bulletins of Tarragona and Barcelona only, namely that the domicile of
point of view, only a very short interval is allowed in which the bankruptcy can be challenged the Company was "unknown", is difficult to reconcile with the fact that the seat of the company
with a view to its cancellation and the reversal of its effects. was shown as "Head Office, 25 King Street West, Toronto, Canada" on one of the most
important documents which, together with a translation into Spanish, was furnished to the
78. But for these very reasons, it appears to me to be an essential counterpart of the bankruptcy judge by the petitioners, as Nos. 3 and 3bis in the dossier of the case, namely the
considerable stringency of such a system that, at the very least, the debtor, having been report of the council of administration (Board of Directors) of the Company, covering its balance
declared bankrupt, should receive actual notice—judicial notice—of the declaration of sheet for 1946, the figures of which were cited in support of the bankruptcy petition (Annexes
bankruptcy, and should do so in a form which must ensure that it is brought directly to the to the Memorial, Vol. II, p. 258).
attention of the person or entity concerned FN58. Unless this is done, the process, viewed as a
81. Even if Spanish law did not require action to be taken in Toronto in such a case (see end of founded, the situation—though fully explained on pages 44-46 of the Report of the Court's
paragraph 79 above), it certainly in no way prohibited this. Indeed, such action would have earlier Judgment-was perhaps not so obviously clear although, as was pointed out in that
been entirely consistent with the relevant provisions of that law, and it had been taken by the Judgment, matters relating to the merits had been discussed in the written and oral
Spanish courts in other cases, particularly the Moncayo and Niel-on-Rupel cases, and was to be proceedings in that phase of the case, in connection with this objection. It may therefore be
taken again in an analogous context in the Namel case a year later by the actual judge who desirable to point out that, apart from the doubt (see loc. cit., pp. 44-45) whether the objection
was then in charge of the Barcelona bankruptcy. There existed at least three or four ways of had an exclusively [P111] preliminary character, and did not at least in part appertain to the
doing this: by publication in the Toronto newspapers; through the registered letter post, with merits, the Court could not, without hearing the merits, regard itself as adequately informed on
postal certificate of delivery; by personal service through a Spanish consulate in Canada, if what was evidently one of the key questions in the case,— namely whether, in addition to the
Canadian law so allowed; or in the last resort by service effected through the Canadian alleged infringements of the Barcelona, Traction Company's rights, there had not also been
authorities themselves. infringements of the specific rights, stricto sensu, of the shareholders, caused either by the
same acts as had affected the Company, or by separate acts affecting only shareholding rights
82. It was contended that service or publication in Canada would have constituted an as such. It was indeed this very point which, inter alia, the Court had in mind in the two
internationally impermissible act of imperium carried out in foreign territory. But in fact such following passages from its earlier Judgment, more than once cited or referred to in the course
acts take place every day, and constitute indeed the usual ways in which persons resident or of the oral pleadings in the present phase of the case, but which appear to have been
domiciled in one country are formally apprised of proceedings affecting them, instituted in misunderstood to a certain extent, namely (I.C.J. Reports 1964, p. 44):
another country. Local publication, or service by post, at least, [p 110] can involve no act of
imperium; and the other forms of service mentioned above have the actual concurrence, "It can be asked whether international law recognizes for the shareholders in a company a
general or specific, of the local authorities. The Spanish cases cited in the preceding paragraph separate and independent right or interest in respect of damage done to the company by a
show that the Spanish courts themselves, in other cases, made use of the method of foreign government; and if so to what extent and in what circumstances and, in particular,
publication in foreign papers. The truth is that in the present case no attempt to notify the whether those circumstances (if they exist) would include those of the present case"
Barcelona Company in Canada was made.
and (ibid., p. 45):

83. In my opinion this omission—and even if it could have been the result only of inadvertence "In short, the question of the jus standi of a government to protect the interests of
or oversight—was of such a character as to vitiate the whole proceedings on the international shareholders as such, is itself merely a reflection, or consequence, of the antecedent question
plane, and to render them void or inoperative ab initio. Relative to the Company, the of what is the juridical situation in respect of shareholding interests, as recognized by
proceedings were never properly initiated at all. Consequently (recalling the observations made international law."
in paragraph 75 above)—in the presence of a nullity, the question of exhausting legal remedies
did not arise. 86. These observations no doubt indicated that there could be shareholding interests
recognized and protected by law, which therefore amounted to rights, and that there might be
VI circumstances in which an infringement of the company's rights would also infringe the
separate rights of the shareholders. But what the Court said in no sense warranted the view
The philosophy of Joinder to the Merits that prejudice caused to the shareholders through illicit damage done to the company,
necessarily and of itself gave the former a basis of claim which their government could
84. When, in the earlier (1964) phase of the present case, the Court joined the third and fourth legitimately put forward on the international plane—this being, broadly speaking, the
preliminary objections to the merits, it made a number of observations both on the general proposition advanced on behalf of Belgium.
philosophy of joinder as a judicial act, and also as regards the particular reasons for effecting it
on that occasion (I.C.J. Reports 1964, pp. 41-46). On the present occasion the Court has not 87. This matter was not the only one in respect of which a hearing of the merits was necessary
thought it necessary to supplement these observations. But I believe there are certain in order to enable the Court to deal with the third preliminary objection,—for in addition to the
additional points that can usefully be made—except however as regards the fourth preliminary question of the legal status of shareholders and the nature of their rights and interests, this
objection, for it was always clear that this objection, relating to the exhaustion of local objection also involved that of the nationality of those concerned. It was contended by Spain,
remedies, was intimately connected with the ultimate issues of substance involved by the claim, not only that in principle no claim at all could be made on behalf of shareholding interests in
and could not even be considered except in relation to these,—and so could not be pronounced respect of damage caused, not [p 112] to those interests as such, but to the company,—but
upon without in large measure prejudging the merits—a situation that has generally been also that, even if such a claim could be made, these particular shareholding interests were not
viewed as eminently calling for a joinder. really Belgian, or were not in Belgian hands at the material times. The Court felt it necessary to
hear the merits in order to ensure that it was sufficiently informed as to the character and
* relative weight of the interests involved in the Barcelona Traction Company and its affiliates:
indeed it was not until the merits were reached (even if then) that all the facts were fully
85. As regards the third preliminary objection, on which the Court's present Judgment is mainly brought out regarding this matter; and it was in this context, rather than that of the status of
shareholders, that, according to one current of opinion in the Court, the Belgian claim should be ---------------------------------------------------------------------------------------------------------------------
regarded as inadmissible. FN* A previous Order of the Court as to time-limits in the present proceedings drew attention to
the matter.
---------------------------------------------------------------------------------------------------------------------
*
88. There are other ways in which the implications of a joinder are liable to be misunderstood— Strong objection exists however when the blame for such delays is publicly ascribed to the
particularly if, as in the present case, the objection is eventually upheld and the merits, though supposed dilatoriness or procrastination of the Court itself,—in evident ignorance, or else
heard, are not pronounced upon. There may be a tendency to assume that an international heedlessness, of the true facts FN**.
tribunal which effects a joinder is already half-way to dismissing the objection and will
eventually do so and give a decision on the merits. Even if the present case, and others before ---------------------------------------------------------------------------------------------------------------------
it, did not demonstrate the unwarranted nature of such an assumption, this would result as a FN** Some indication of the real facts will be found, for instance, in footnote 14 on p. 447 of a
matter of principle from the fact that if the assumption were correct, the whole process of review article contributed by me to the Kansas Law Review, Vol. 13, No. 3, March, 1965. Since
joining preliminary objections to the merits would be rendered meaningless—a mere futile (and this was written, periods requested by the parties have grown to 4-5 years for the written
unjustified) postponement, not a genuine suspension, of judgment on the objection. proceedings, and 3-6 months for the oral hearing. See also for a much more complete
statement, Professor Leo Gross, "The Time Element in Contentious Proceedings in the
89. Equally unjustified, as other cases show, is the opposite assumption,—that a joinder International Court of Justice", American Journal of International Law, 1969, Vol. 63, p. 74.
indicates a favourable attitude to the objection on the part of the tribunal concerned—a theory
that only needs to be stated for its implausibility to be manifest. There may indeed be cases in ---------------------------------------------------------------------------------------------------------------------
which, on various grounds that seem good to it, a tribunal will hesitate to take, at the
preliminary stage of a case, a decision the effect of which would be permanently to shut out, Nor is this by any means the only way in which the Court has been misrepresented in a manner
then and there, all possibility of a hearing and decision on the merits. But, although the task of detrimental to the dignity and good order of its functioning as an independent judicial
evaluating the factors involved must be left to the tribunal concerned, adequate grounds for the institution.
joinder must always exist,—for the process is one that can never be other than a simple
suspension of judgment on the objection, effected because the tribunal, for one reason or (Signed) G.G.Fitzmaurice
another, considers that it cannot pronounce upon it at that stage, consistently with giving their
due weight to all the various aspects of the case, and to holding the scales of justice even
between the parties. A joinder can never be interpreted as foreshadowing a conclusion already [p114]
half arrived at.
SEPARATE OPINION OF JUDGE TANAKA

*[p113] I

90. No less unwarranted would be any attempt to draw from the upholding of a preliminary Although I subscribe to the Court's conclusion in dismissing the Belgian claim that Spain
objection inferences as to what the attitude of the tribunal was, or would have been, in regard violated an international obligation and incurred responsibility vis-a-vis Belgium, I regret to have
to the substantive merits of the claim. No such inferences—in whatever sense—could possibly to say that my view differs from that of the Court in its reasoning. The majority opinion reached
be justified by reason of the fact that, on the basis simply of a preliminary objection as such, its conclusion by deciding the question of the jus standi of Belgium in the negative, i.e., by
the tribunal holds the claim to be inadmissible. upholding the third preliminary objection of the Spanish Government, whereas my position
would be to proceed to examine the question of the merits after the third and fourth (non-
***** exhaustion of local remedies) preliminary objections. An examination of the merits, however,
leads to the same result as that reached by the majority opinion, namely the dismissal of the
Postscriptum Belgian claim.

I entirely approve of the initiative taken by the Court in paragraph 27 of the Judgment (and for Such preliminary remarks are made necessary in order to determine the scope and limit of
the first time in a judgmentFN *) of drawing attention to the length of the proceedings in the individual, separate or dissenting opinions. By reason of the complexity of the instant case, we
present case,—so as to indicate where the responsibility for this lies. If the parties in a litigation are confronted with a need to make judges' rights, as provided by Article 57 of the Statute,
before the Court think it necessary to take several years to prepare and deliver their written clearer.
and oral arguments, that is their affair,—and, having myself formerly, on a number of
occasions, been in the same position, I can understand the reasons for it. A question may arise as to whether judges' opinions should be limited to those matters which
have been dealt with in the majority opinion or whether they are not subject to some limitation.
 Within the framework of diplomatic protection, the third preliminary objection involves other
Here, I do not go deeper into the study of this question. I simply wish to say that my view issues concerning proteges, in particular the question of the nationality of shareholders, their
favours a liberal attitude which would not allow any limitation to be imposed on judges' identification and the question concerning the separation of legal and beneficial owner—which
statements, other than considerations of decency. of them is to be treated as the true shareholder from the viewpoint of diplomatic protection?—
in shareholding, which also involves a legal question.
That this issue was taken up in some of the opinions of judges in the Judgment of the South
West Africa case (South West Africa, Second Phase, Judgment, I.C.J. Reports 1966) is still vivid First, let us deal with the question concerning the diplomatic protection of shareholders in a
in our memory. So far as the detail is concerned I should like to refer to a declaration of company of a nationality other than that of the protecting State. Assuredly it constitutes a most
President Sir Percy Spender (ibid., pp. 51 ff.) representing a restrictive theory and my contrary fundamental question underlying the third preliminary objection and is logically prior to other
view on this issue as stated in my opinion (ibid., pp. 262-263), appended to that Judgment. ques-[p 116]tions, so that a decision on the former in the negative would make a decision on
the latter unnecessary. Therefore the question of diplomatic protection of shareholders may be
For the above-mentioned reason my following statement is not obliged to remain within the recognized as constituting the core of the third preliminary objection.
framework of the majority opinion. I feel that I must follow a logical process of my own which,
according to my conscience, I believe to be just. If the question of Belgium's jus standi is Here, it is not necessary to emphasize the spirit of a universally recognized rule of customary
resolved in the affirmative, the question of the exhaustion of local remedies will remain to be international law concerning every State's right of diplomatic protection over its nationals
examined. If given an affirmative answer, then the question on the [p 115] merits, namely the abroad, that is, a right to require that another State observe a certain standard of decent
denial of justice allegedly committed by the Spanish authorities vis-a-vis the Barcelona Traction treatment to aliens in its territory. The spirit of the institution of diplomatic protection is clearly
Company and its subsidiaries should be taken up. This logical process cannot be interrupted in declared by a Judgment of the Permanent Court of International Justice:
the middle. ". . . in taking up the case of one of its nationals, by resorting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own right, the
*** right to ensure in the person of its nationals respect for the rules of international law. This right
is necessarily limited to intervention on behalf of its own nationals because, ... it is the bond of
The Judgment of 24 July 1964 rejected the first and second preliminary objections and joined nationality between the State and the individual which alone confers upon the State the right of
the third and fourth preliminary objections to the merits. diplomatic protection, and it is as a part of the function of diplomatic protection that the right to
take up a claim and to ensure respect for the rules of international law must be envisaged."
Considering that the joinder of these two preliminary objections would not cause them to lose (Panevezys-Saldutiskis Railway case, P.C.I.J., Series A/B, No. 76, p. 16.)
their preliminary character, we must first deal with these objections before examining questions
relating to the merits, though bearing the latter in mind. Briefly, the idea of diplomatic protection does not seem to be a blind extension of the sovereign
power of a State to the territory of other countries; the spirit of this institution signifies the
We shall begin with the third preliminary objection. collaboration of the protecting State for the cause of the rule of law and justice.

The object of the Belgian Government's Application of 14 June 1962 is reparation for the Now, in the present case, we are confronted with concrete questions of whether a national who
damage allegedly caused to a certain number of its nationals, including juridical persons, in is a shareholder in a company other than that of the protecting State, is covered by diplomatic
their capacity as shareholders of the Barcelona Traction Company, by the conduct, allegedly protection and whether the interest involved in the shares is susceptible of being protected by
contrary to international law, of various organs of the Spanish State toward that company and the national State of the shareholders. In other words, can the rule of diplomatic protection be
various other companies in its group. extended to a shareholder in a company of a nationality which is not that of the protecting
State, and to an interest which is characterized by many corporative particularities? This is a
The Spanish Government, on the other hand, denies by the third preliminary objection that the question of interpretation of customary international law regarding the diplomatic protection of
Belgian Government possesses jus standi either for the protection of the Barcelona Traction the nationals of a State.
Company of Canadian nationality (Application filed on 23 September 1958) or for the protection
of alleged Belgian "shareholders" of that company (present case). To solve these questions, we shall start from the examination of the nature and characteristics
of a shareholder in a corporation (joint-stock company). For that purpose we shall consider the
The third preliminary objection involves questions of both law and fact. The question of law, concept of a corporation, legal relations between a corporation and its shareholders, and more
which is a most important one in deciding this case, is concerned with whether a State has a particularly the legal significance of the juridical personality of a corporation. We can easily
right to protect its nationals who are shareholders in a company of a nationality other than that understand the importance of the consideration of [p 117] this last issue, if we see that many
of the protecting State. More concretely, the question may be formulated as follows: has the questions discussed in the course of the proceedings on the preliminary objections and on the
Belgian Government jus standi to protect its nationals, namely Sidro and others, who are merits appear to be centred round the question of the juridical personality of a corporation,
shareholders in the Canadian Barcelona Traction Company? especially the question of whether in particular matters an interpretation of the "piercing of the
veil of the corporate personality" is to be admitted or not.
 parent-and-child relationships, by means of holding, subsidiary and sub-subsidiary companies.
***
The concentration due to the aforesaid anonymity disregards national frontiers and may cover
We shall first make some observations on the characteristics of corporations. many countries. In this way international investments are facilitated. The case of the Barcelona
Traction Company offers an excellent example of the concentration of enterprises and
The corporation, which is a product par excellence of the capitalistic economic system, international investment.
possesses in many points remarkable characteristics compared with other forms of commercial
entities such as partnership and limited partnership which are called in continental countries The relationship existing among innumerable companies possessing separate juridical
"société de personnes" or "Personalgesellschaft", as distinguished from the corporation, personality is commonly called a "group".
designated as "société de capitaux" or "Kapitalgesellschaft". As these nomenclatures indicate,
the partnership is an association which presents itself as a combination of individuals who have The anonymity of shareholders manifests itself in the recent tendency to separate power or
personal con-fidence in one another in moral as well as in economic aspects and who, in many management from the ownership by mechanisms such as life insurance companies, pension
cases, as the name "société en nom collectif" indicates, are united usually on the basis of a trusts, and mutual funds, as pointed out by Professor Adolf A. Berle Jr. (Power Without
family tie, whereas the corporation is nothing other than an aggregation of strangers, passers- Property, 1959, pp. 160 ff.). The separation of nominee and beneficial owner of shares, one of
by, who become united only from an economic motive, namely the desire for possible increased the issues with which the third preliminary objection in the present case is concerned, may be
dividends. considered an example of the manifestation of this tendency.

In a partnership the members of a partnership retain their own legal and economic individuality. Anonymity of shareholders and separation of control from ownership in corporative life
In internal relations, they are bound by a contractual nexus (between the members qua necessarily exercise a profound influence upon the character of a corporation as a juridical
individuals and between the members and the partnership) and in external relations they have entity. In contrast with the partnership, where autonomy among members or contractual
an unlimited liability toward the creditors of the partnership. On the contrary, in the case of a freedom largely prevails and consequently the corporative regulation by the articles of
corporation, its members, the shareholders, stand in no legal relationship either to one another incorporation is limited to a minimum, matters concerning corporations are, even in regard to
or to outsiders, i.e., the creditors of the corporation. The shareholders, different in that from their internal relations, minutely prescribed by jus cogens in company law and a very narrow
partners whose entire personality and individuality is absorbed into the business of the sphere is left to the autonomy of the general meeting as the highest organ of the corporation.
partnership, do not and cannot participate in the activities of the corporation save by way of The degree of the rule of law in commercial societies is in [p 119] inverse proportion to the
exercising their voting rights in the general meeting. Even this kind of participation of the importance which law attaches to the individual member. In the partnership it is minimal; in the
shareholders in the corporate business is reduced to a minimum by the natural tendency to corporation maximal.
indifference and "absenteeism" on the part of shareholders. Their only obligation consists in the
payment of a sum of money for the shares subscribed by them and their only risk is the From what has been stated above, we may conclude that the tie of the juridical personality is,
impossibility of reimbursement of their invested sum in case of liquidation or bankruptcy of the in the case of a corporation, far stronger than in the case of a partnership. In a corporation
corporation. juridical personality plays the role of holding together incoherent individuals by a compact legal
frame, while in the case of a partnership, even under some legal systems recognizing its
Thus the legal position of shareholders lacks the individuality which is [p 118]found in the case juridical personality, the partners are directly liable to creditors of the partnership in the event
of partners. It is characterized by its abstractness and makes the existence of shareholders of its insolvency and accordingly the function played by its juridical personality is extremely
something passive. limited.

The typical corporation, considered from the point of view of those characteristics in which it The above-mentioned characteristics of a corporation are very succinctly indicated by the
differs from the partnership, is designated as a "société anonyme". This term is used in contrast following description :
with the "société en nom collectif". The anonymity relates of course to the corporation itself,
but we may assert that this character is derived from the anonymity of each shareholder in the "Dans les sociétés de capitaux ... le lien de la société avec la personne de ses membres est
corporation. The anonymity can be said to be a characteristic not only of a bearer share but of moins marqué; le concept de personnalité morale est donc pour elles plus nécessaire. Les
a registered share as well. associés ne sont pas normalement responsables des dettes de la société; l'actif social seul en
répond. La durée de la société ne dépend pas de la vie des associés, qui ne se connaissent
The anonymity of corporations as well as of shareholders makes possible and facilitates the souvent pas, et ont réuni leurs capitaux, non leurs personnes; les actions, qui représentent les
establishment among several corporations of dependent relationships and concentrations of parts sociales, sont, en principe, librement négociables et ainsi appelées à changer
diverse kinds and degrees such as the cartel, the "Interessengemeinschaft", "concerns", continuellement de mains." (Professeurs Henri et Léon Mazeaud et Conseiller Jean Mazeaud,
mergers (fusion), etc. Particularly, it tends to produce at the national and international levels Leçons de droit civil, tome I, 3e éd., 1963, pp. 602, 603.)
the phenomenon of the mammoth pyramidal structure in which innumerable enterprises,
crowned by a controlling holding company at the top, are affiliated with one another in links of If we recognize these observations as right, the natural conclusion therefrom would be that the
object of diplomatic protection in the case of a corporation should be the corporation itself and In short, both Governments, the Belgian and the Spanish as well, appear to base their
not its shareholders. respective positions on a theory of juridical personality: either on the theory of fiction or on the
realistic theory, either disregarding or emphasizing the functional importance of juridical
From the viewpoint of emphasizing the significance of the juridical personality of the personality.
corporation, it appears that it must be the company as juridical person which is capable of
enjoying the protection and not the shareholders, since they are excluded from the protection ***
by the screen of juridical personality of the company.
However, we must approach the issue in question from a different angle. The question should
The traditional doctrine on this matter has been based on the theory of the juridical personality be considered on quite another plane. What we have seen above and what the Spanish
of a corporation, which holds that "a corporation is a juridical person distinct from its Government has put forward are arguments concerned with the juridical concept of corporation
members". J. Mervyn Jones stated : in the [p 121]
"Assuming, therefore, that corporations may be nationals, it follows that only the state of which meaning of municipal law, private law and particularly commercial law, and they deal with this
they are nationals may intervene on their behalf, and this notwithstanding the fact that most of concept only.
the members may be nationals of another state." ("Claims on behalf of nationals who are
shareholders in foreign companies", British Year Book of International Law, 1949, p. 227.)[p Law relating to corporations is concerned with matters of private law, namely private interests,
120] relationships between corporation, shareholders and third parties. Company law in respect of
incorporation, formation, ultra vires, capital, its increase and reduction, organs, the rights and
The argument of the Spanish Government which denies the right of diplomatic protection of duties of shareholders (particularly limited liability), the transfer of shares, accounts, the issuing
shareholders in favour of the national State of the Barcelona Traction Company, namely of bonds, dissolution, liquidation, etc., is above all related to internal matters of corporations, or
Canada, is precisely based on the above-mentioned theory of a juridical personality recognized business transactions with outsiders and belongs to the plane of municipal law. The principles
as being distinct from its members. prevailing in these matters are directed, on the one hand, to the protection of third parties,
namely the creditors of a company, and on the other hand, to the protection of the
The Belgian Government on the contrary, wishes to advocate its position by arguing from a shareholders in the company itself. These principles are not in themselves connected in any
fundamental theory concerning the juridical person. It intends to defend its viewpoint on the way with international law. The protection of shareholders is intended to be guaranteed in
strength of the doctrine of fiction, which denies the real existence of the juridical person by corporation law mainly by provisions concerning the limited liability of shareholders, the
reducing it to a simple conglomeration of its constituent members and minimizing the juridical maintenance of enterprises, the principle of publicity, liability of corporate organs, etc. ; it
person as being a mere legal technique that makes it possible for plural individuals to own belongs to an entirely different plane of law the prevailing principle of which is quite extraneous
property or conclude a transaction. to that of diplomatic protection.

In order to assert its view, the Belgian Government has repeatedly referred to a figurative The Spanish concept of the impenetrability of a company's wall of juridical personality is based
concept of "piercing the veil" of corporate personality. So far as this slogan is concerned, on a principle of private law, and therefore it cannot be applied to the question of diplomatic
however, it simply means that the shareholders must be protected by their national State protection of shareholders.
regardless of the juridical personality of the corporation. It is a petitio principii and nothing
more. Since the matter of diplomatic protection of shareholders belongs to an entirely different plane,
namely to the field of international law, the juridical personality created from the necessity of
The Belgian Government, basing itself on the fiction theory, insists that the real existence of a the viewpoint of private law or commercial law cannot be recognized as an obstacle for the
corporation is its shareholders and that accordingly the subject to be protected is not limited to protection of shareholders on the plane of international law.
the Barcelona Traction Company, but includes its shareholders who are Belgian nationals.
For this reason the fact that a corporation has juridical personality under the law of a State
The argument developed by the Spanish Government to deny the protection of shareholders is, does not necessarily justify diplomatic protection by that State only.
as indicated above, based on the role attributed to the juridical personality of corporation.
This conclusion is based on recognition of the relativity of the validity of each legal principle and
The viewpoint of the Spanish Government is not in itself wrong. As we have seen, in a concept.
corporation the role of the juridical personality is at a maximum and that of shareholders is
reduced to a minimum. Never can the shareholders come in contact with a third person through Every branch of law, for example, private law, procedural law, administrative law, fiscal law,
the wall of the corporate personality. This wall seems too solid to be penetrated. It appears that private international law, law concerning enemy character in wartime, etc., has its own purpose
diplomatic protection cannot reach to shareholders, consequently the Spanish view on this point and accordingly, the sphere which it governs is necessarily limited. Certain legal principles and
seems to be well founded. concepts may have a relative validity in the specific sphere to which they belong. Each legal
system or institution has its own objective; to attain this objective, a system of norms, i.e.,
principles, rules and provisions, is developed. The system is teleologically constructed. The separately (Ernst Rabel, The Conflict of Laws, 1947, Vol. II, p. 21).
meaning of the norms and concepts included in it will be relative to the objective of the system
itself and limited by it, although the existence of [p 122] common principles and concepts ***
underlying diverse systems cannot be denied. To give an example: we cannot help recognizing We may quote an example for the purpose of demonstrating the non-application of a rule of
the difference between the legal position of seller and purchaser and that of parties each municipal law to a matter of international law.
playing a specific role with regard to a bill of exchange, although both cases belong to the law
of obligations. We may cite another example, namely the difference between the legal The so-called principle of equal treatment of shareholders, we believe, is considered one of the
relationship governing a company and its shareholders and that involved in an ordinary most fundamental principles governing the law of corporations. According to this principle, all
commercial trans-action. shares in a corporation— or, if several categories of shares exist, all shares in the same
category— are, from the viewpoint of the rights and duties incorporated in them, equal (with
What we want to emphasize is that each branch of law, each system and institution, each the exception of quantative differences proportionate to the degree of participation), and
provision belonging to it, possesses a specific character from the viewpoint of its objective and therefore shareholders are to be treated equally. This principle is perhaps derived from the fact
is susceptible of or requires a different interpretation. This phenomenon is what a distinguished of anonymity or lack of individuality where the position of shareholders is concerned, in contrast
commercialist, Rudolf Müller-Erzbach more than 55 years ago ingeniously pointed out in an with that of partners ; the idea may go back to canon law and, further, to the Aristotelian
article ("Relativität der Rechtsbegriffe und ihre Begrenzung durch den Zweck des Gesetzes", notion of justifia distributiva.
Jherings Jahrbücher für die Dogmatik des heutigen Römischen und Deutschen Privatrechts, Bd.
61, 1912, ss. 343-384). The principle of equal treatment of shareholders, however important it may be, nevertheless
has its limitation. The limitation may come from municipal law, but in any case it comes from
On the matters we are interested in, a concept such as nationality, which is concerned with outside commercial law. It may take the form of a restriction of the rights of foreign
both municipal and international law, may have a different content according to the objective of shareholders in public law. Or it may be based on international law where the latter recognizes
each branch of law and its interpretation and application may be relative. Even if the nationality the protection of shareholders in a foreign company who are nationals of the protecting State.
of an individual is established by municipal law, it may not necessarily have validity in Unequal treatment arising as the result of a discretionary exercise of diplomatic protection
international law. It is possible that one may not be entitled to diplomatic protection from one's cannot be avoided when there are shareholders of different nationalities. A situation wherein
national State by reason of lack of effectiveness, as the Nottebohm case indicates (I.C.J. some of the shareholders enjoy effective protection and the rest do not is inevitable. Whether
Reports 1955, p. 23). The fact that the effectiveness is questioned, implies that the concept of such situation is desirable or not is a different matter.
nationality may vary in meaning according to whether it is interpreted by municipal law or by
international law. What we meant above is that a principle such as equal treatment of shareholders, being of
municipal law character, is not ipso jure applicable to matters belonging to the plane of
The viewpoint mentioned above may be stressed further with regard to the question of the international law, including matters concerning diplomatic protection of shareholders. The
nationality of a corporation in relation to its juridical personality. To begin with, the concept of shareholders who have been excluded from diplomatic protection cannot protest against [p
nationality as applied to a physical person differs from that applied to a juridical person. In 124]
regard to the latter, the relationship of allegiance originating from the natural tie between diplomatic protection of other shareholders by their respective national States by referring to
physical persons and their national State may be lacking. Furthermore, the meaning implied in the principle of equal treatment of shareholders, which is valid only in municipal law and not in
the nationality of corporations may not be identical according to different branches of law, for the matter of international law to which the rule of diplomatic protection belongs.
example, law concerning the treatment of foreign corporations, conflict of laws, diplomatic
protection of nationals, law on enemy character, etc. (Prof. Paul Reuter, Droit international What has been said concerning the principle of the equality of shareholders can be applied
public, 1958, pp. 164, 165.) mutatis mutandis to the question of the juridical personality of a corporation. Juridical
personality is, as stated above, conferred on a corporation primarily for the purposes of
Hypothetically, a corporation obtains juridical personality by being incorporated in a State under maintaining the enterprise, owning property, concluding transactions with outsiders and limiting
the law of that State and acquires the nationality of that State, but the corporation may possess or denying the liability of shareholders in regard to creditors of the company. Accordingly,
a foreign [p 123] character in other respects: preponderance of foreign participation in the juridical personality possesses meaning only as a legal technique to serve and guarantee the
capital stock, nationality of members of boards of directors, place of control, place of business corporate existence in respect of private and commercial law. Its validity is relative and
activities, etc. In such cases it may become controversial whether the national State of the therefore limited.
corporation can claim diplomatic protection on its behalf solely because the corporation has its
nationality; in any event, the national State of the corporation, even if it is entitled to diplomatic The Spanish Government conceives the juridical personality of a corporation as an impenetrable
protection, may hesitate to exercise its right. wall lying between corporation and shareholders as far as diplomatic protection is concerned, so
that it can prevent protection of the shareholders and monopolize it in favour of the corporation
It is not without reason that Rabel renounced his attempt to seek a uniform content for the itself. In other words, the framework of juridical personality should involve in itself the
concept of nationality of corporations and declared that each rule should be interpreted susceptibility of diplomatic protection of the company and at the same time the exclusion of
shareholders from the protection. The question of diplomatic protection could not be distin- corporation law call the rights in the first category eigennützige Rechte (rights for self-interest)
guished from the conclusion of ordinary transactions, where the corporation itself was and the rights in the second category gemeinnützige Rechte (rights for common purpose). The
represented and the shareholders excluded. latter category constitutes rights of shareholders sensu lato; however they are not exercised by
them as shareholders but as an organ composing the general meeting, and therefore this kind
Such a construction, however, would fall into the error of conceiving the juridical personality of of right cannot be classified in a category of rights of shareholders in sensu stricto. Of course a
a corporation as an aim in itself, whereas it is nothing but a means in the interest of its preponderant shareholding in the general meeting would confer on the shareholder right of
constituent members. control, but this so-called right cannot be said to be a "right" in the proper sense, but mere
"interest".
Professor (at that time Judge) Charles De Visscher said:
As to the rights of shareholders to request dividends or surplus assets, we cannot deny them
"L'intérêt de l'individu, l'intérêt de l'homme est toujours le but du droit et sa fin suprême. Il en the nature of a right sensu stricto; nor do we hesitate to classify shares in the categories of
est ainsi alors même que la poursuite de cet intérêt s'effectue sous le couvert du régime de la "property", "rights" or "interests" which may be covered by diplomatic protection.
personnalité civile." ("De la protection diplomatique des actionnaires d'une société contre l'Etat
sous la législation duquel cette société s'est constituée": Revue de droit international et de This conclusion, we consider, cannot be denied on the ground that the realization of the right to
législation comparée, Vol. 61, 1934, p. 639.) dividends or surplus assets presupposes the [p 126] existence of profits or surplus assets on
the balance sheet, and is therefore conditioned by the future financial circumstances of the
*** company. It is true that the position of shareholders is, in this respect, more uncertain than the
position of creditors and bondholders, but a conditional right cannot be excluded from
By what is set forth above, we have tried negatively to remove an important obstacle to the diplomatic protection simply because it involves uncertainty; nor can the fact that shareholders
recognition of diplomatic protection in favour of shareholders. Next, we shall demonstrate do not possess any right as regards corporate property—its formal owner being the company
positively the necessity and raison d'être of protection of shareholders and establish the reason itself— be used to deny diplomatic protection.
why the shareholders should be protected independently of the company to which they belong.
In short, whatever construction may be put on the rights of shareholders each constituent
We shall solve the question of whether the shareholders' rights and interests are included in the element of a share can be characterized as a "right" or "interest". Furthermore, we can
subject-matter of diplomatic protection [p 125] according to the universally recognized conceive rights and interests as a whole, as a conglomeration of diverse rights, duties and
customary rule of international law, the existence of which does not admit of any doubt; we are interests. Perhaps we can consider them as Mitgliedschaft or Mitgliedschaftsrecht, which is
confronted with the interpretation of this customary rule of international law, i.e., whether nothing else but a kind of legal position possessed by a shareholder. That this legal position can
diplomatic protection covers the position, namely rights and interests, of shareholders in a be and will be considered an object of diplomatic protection, is easily understood by the fact
corporation or not. that the legal position as a whole, being incorporated in the share certificate, becomes
negotiable as a movable and quoted in stock-exchange operations.
Roughly speaking, international law places no qualification on "property", "rights" and
"interests", and consequently it seems that the position of shareholders can be recognized as In this context, we shall clarify the distinction between protection of shareholders from the
involving property, rights or interests, and is able to be covered by diplomatic protection. Before viewpoint of the material content of shares and protection of shareholders as owners of the
we reach a definite conclusion, however, we must examine the nature of the shareholders' legal share certificates. What we are concerned with is only the former case in which alleged
position and their rights and interests, because some aspects of the legal position of wrongful acts vis-à-vis the company are involved and consequently the intrinsic value of shares
shareholders have appeared to be an obstacle to the recognition of its diplomatic protection is affected, while in the latter case the question of protection is concerned with an owner or
and, therefore, much discussion has taken place between both Parties concerning this issue. possessor of a particular share certificate as a titre-valeur as in the case of rei vindicatio, where
a share certificate has been stolen or damaged; the latter case therefore, is not concerned with
Let us examine what are usually indicated as shareholders' rights in books on corporation law of the protection of shareholders which is what we are dealing with here.
many countries: the right to dividends, the right to surplus assets in case of liquidation, the
right to vote in general meetings, the right of minority shareholders to sue for the liability of In sum, the legal position of shareholders can itself be considered to be the object of diplomatic
directors, the right to transfer shares, the right to request certificates, etc. protection by their national State. From the viewpoint of diplomatic protection it does not
matter whether this position can be conceived as "property", "a right" or "interests". Even if it
cannot be recognized as property or a right, it constitutes "interest".
Examining these so-called shareholders' rights we can distinguish two categories of rights: the The share can be said to be a new type of property which is a product of modern capitalism;
one includes those rights which are enjoyed by shareholders themselves, namely the right to although, unlike copyright, patents and trademarks, it has its origin in municipal law, it has
dividends, the right to surplus assets and the right to transfer shares; and the other includes acquired a highly international character owing to its anonymity and transferability. There is no
the right of voting and all those rights the aim of which constitutes the common interest of the other movable property comparable with the share which is furnished with the highest degree
corporation itself and not the individual interest of the shareholders. Some German scholars of of negotiability through the mechanism, of international exchange markets.[p 127]
 participation in the capital stock of Barcelona Traction. It has been claimed that this
Parallel with the development of international investment, the necessity of its protection preponderance constitutes an essential condition for the existence or exercise of the right of
becomes acute. It will be recognized that absence of a uniform law relative to companies and diplomatic protection of shareholders. But we consider that the preponderance of percentage
the highly imperfect state of private international law on this matter increasingly require does not appear to constitute a condition of diplomatic protection. It seems that the percentage
diplomatic protec-tion of shareholders in a way that supplements the measures provided by itself possesses no relevance to the legal possibility of diplomatic protection. Even the holding
municipal law. of one share would jusify—theoretically— the right of diplomatic protection. Whether this right
will be exercised or not, is a matter belonging to the discretion of the national State. What is
Briefly, we should approach the customary rule of diplomatic protection from a teleological essential is the existence of an interest worthy of protection by the shareholders' national State.
angle, namely from the spirit and purpose of diplomatic protection, without being bound by In this sense the total value of the shares to be protected should be considered objectively
municipal law and private law concepts, recognizing its relative validity according to different without regard to the percentage which it occupies in the total capital stock. A holding of 25 per
fields and institutions. The concept of juridical personality mainly governs private law cent. in a big company may be sufficient for the exercise of diplomatic protection; contrariwise,
relationships. It cannot be made an obstacle to diplomatic protection of shareholders. a 99 per cent. holding in an insignificant company may be excluded from the consideration of
Concerning diplomatic protection, international law looks into the substance of matters instead diplomatic protection. Of course other factors may come into consideration. This is a matter of
of the legal form or technique; it pays more consideration to ascertaining where real interest political expediency, belonging to the discretion of the protecting State, which presupposes the
exists, disregarding legal concepts. International law in this respect is realistic and therefore possibility of protection, and not a matter of law which is concerned with the legal possibility of
flexible. protection.

Judge Wellington Koo in his separate opinion appended to the 1964 Judgment concerning the We presume that the discussion concerning the percentage of the participation of Sidro in the
third preliminary objection in the present case says: capital stock of Barcelona Traction is motivated by the idea of protection of the Barcelona
Traction Company itself, on which viewpoint the Belgian Application of 1958 stood. Con-
"International law, being primarily based upon the general principles of law and justice, is troversy around the percentage of participation, so far as the third preliminary objection is
unfettered by technicalities and formalistic considerations which are often given importance in concerned, may be understood as a residuum of the viewpoint of protection of the company
municipal law ... It is the reality which counts more than the appearance. It is the equitable represented by the initial Application; therefore, it seems that it is not relevant to the question
interest which matters rather than the legal interest. In other words it is the substance which with which we are dealing now.
carried weight on the international plane rather than the form." (Barcelona Traction, Light and
Power Company, Limited, Preliminary Objections, Judgment, I.C.J. Reports 1964, pp. 62 and The question of whether a State is entitled to exercise a right of diplomatic protection of a
63.) foreign corporation is entirely another matter. It seems that it must be decided in the negative
sense, by reason of the fact that the corporation itself does not possess the nationality of the
*** protecting State. However, some State practice recognizes the protection of a foreign
corporation, if substantial interest in the corporation [p 129] is owned by its nationals (see
Even if the existence of an interest (in a broad sense) in diplomatic protection is recognized, Edwin M. Borchard, The Diplomatic Protection of Citizens Abroad, 1915, p. 622). This is not the
however, the State concerned would have the discretion to exercise the power of diplomatic case which we are now considering. Here we are concerned with the issue of the protection of
protection on certain matters. Here, we must distinguish two questions: the one is whether shareholders and not the company itself. But much progress has been made such that through
diplo-matic protection is, from the viewpoint of the nature of the object of protection, legally protection of a foreign company the protection of shareholders is attained. It is quite natural
possible or not; the other is whether, in a specific case, intervention for the purpose of that, so long as the standpoint of protection of a company itself is defended, the percentage of
diplomatic protection by a State on behalf of its national, is appropriate or not. The former the participation of the protected shareholders does come into consideration. However, since
question is of a legal nature, to be distinguished from the latter which constitutes nothing else we refuse to recognize an obstacle to diplomatic protection in the juridical personality of a
but the political evaluation of the fact from various aspects (above all, economic company and attribute to shareholders an independent status which may be an object of
considerations). The two questions should not be confused.[p 128] diplomatic protection, the fact of Sidro's holding a certain fairly large percentage of the
Barcelona Traction Company must be deemed to be one of the factors to be taken into
These two questions arise from the existence of the two kinds of interest pertaining to the consideration in exercising diplomatic protection but not one legally required as a condition for
diplomatic protection of shareholders: one is the original interest of shareholders which requires the right of protection.
the protection of their national State, the other is the interest which the national State of the
shareholders possesses and which may become a deciding factor in the exercise of a ***
discretionary power of intervention. These two interests must not be confused either.
It is true that the internationally wrongful acts allegedly committed by the Spanish
In this respect, we shall consider the meaning of the percentage of participation of shareholders administrative or judicial State organs, such as refusal of the transfer of foreign currency, the
to be protected in the capital stock of a company. This matter has been repeatedly discussed bankruptcy judgment of 12 February 1948, etc., are directed to the Barcelona Traction
between the Parties in the present case relative to the preponderance of percentage of Sidro's Company, which possesses Canadian nationality. Accordingly, the Spanish Government argues
that only Canada, the national State of the company, is entitled to exercise its diplomatic Since the two rights of diplomatic protection—that of Canda and that of Belgium—co-exist in
protection. This argument is based on the municipal law concept of the corporation on which parallel but independently, it is not a necessity for Belgium's right of diplomatic protection that
we made observations above and according to which only the corporate personality prevails Canada should finally waive its right of protection in regard to the Barcelona Traction Company.
regarding external matters. According to this concept, since only the company could be the Such a fact is not relevant to the existence of the right of diplomatic protection of Belgium in
victim of a wrongful act, the damage suffered by the shareholders should be indemnified favour of its shareholders.
through the company indirectly. In short, only the national State of the company would be
entitled to exercise diplomatic protection and not the national State of the shareholders. We cannot deny the possibility of a cumulative existence of rights of diplomatic protection in
the case of a company just as a natural person may have dual nationality. If a claim of one
It is also true that the national State of a company is entitled to take measures of diplomatic State is realized, [p 131] the claim of the other State will be extinguished to this extent by
protection on behalf of the company, assuming that the bond of nationality is effective, and losing its object. Accordingly, the defendant State cannot be compelled to pay the damage
that the national State is materially interested in the protection of the company. But there are twice over.
many cases where the nationality of the company is not effective, where the bond between the
national State of the company and the shareholders is lacking and, accordingly, the national Of course, we recognize that the fear of complication which would be caused by plural or
State is not inclined to exercise the right of protection. There may exist another circumstance multiple interventions of several governments has some justification. But if we deny them, the
for the national State of the company, such as the fact that between this State and the State legitimate interests of shareholders might be left without protection by their national States.
responsible for the wrongful acts a nexus of compulsory jurisdiction is lacking; or the former These phenomena would represent some of the defects inherent in the present institution of
State, for some political or other reasons may not wish to pursue diplomatic protection against diplomatic protection, which might be related to the non-acceptability of individuals to
the latter[p 130] international tribunals. Practically complication and confusion might be avoided to a
State; or diplomatic protection by the former State might not bring a satisfactory result, etc. considerable degree by negotiations and "solutions inspired by goodwill and common sense ..."
Under these circumstances there remains no other remedy than that the national State of the (Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J.
shareholders should take the initiative for the purpose of the protection of its nationals. A Reports 1949, p. 186) between the States concerned. Or it would be a task of international
vacuum with respect to protection should not be tolerated: otherwise shareholders would be legislative policy to provide means to guarantee the protection of private investments and to
left in an entirely helpless condition and the result would be injustice and inequity which would find appropriate solutions in order to overcome the difficulties arising from the multiple
be harmful for the healthy development of international investment. intervention of several governments. We should not refuse the necessary remedies to protect
legitimate shareholders by conjecturing extreme cases.
As one of the objections raised to the above-mentioned argument in favour of diplomatic
protection of a national State of shareholders, we may point out the difficulty which would be It is true that there is no rule of international law which allows two kinds of diplomatic
produced by the cumulative existence or competitive concurrence of rights of several States protection to a company and its shareholders respectively, but there is no rule of international
concerning the same object of diplomatic protection. It follows that in the case of multinational law either which prohibits double protection. It seems that a lacuna of law exists here; it must
composition of capital, more than one national State of shareholders might intervene on the be filled by an interpretation which emanates from the spirit of the institution of diplomatic
condition that the jurisdictional basis exists, either by the way of intervention as provided for in protection itself.
Articles 62 and 63 of the Statute or by special agreement or application (Article 40 of the
Statute). Each of those entitled to diplomatic protection would be able to exercise its right of ***
protection according to its discretion without prejudicing the rights of protection of other States
concerned. From what is stated above, we can conclude that whether Canada is entitled to diplomatic
protection of the Barcelona Traction Company as its national State or whether the Canadian
Such competitive existence of rights of diplomatic protection of diverse States appears an Government once wanted to intervene in the dispute but finally gave up the original intention,
extraordinary phenomenon, but we consider that the same kind of legal phenomenon can be is not legally relevant to solve the question of the right of diplomatic protection of shareholders
found in contractual or delictual matters where the same contract or wrongful act gives rise to a by their national State. This right exists independently of the right of the national State of the
claim for compensation by diverse persons concerned. In such a case, concurrent plural claims company. The history of the comparatively short-lived Canadian intervention (1948-1952 or
may serve a common purpose; if one of them were exercised and satisfied, the remaining rights 1955), however, would prove the raison d'étre of the right of diplomatic protection of
would be extinguished, having attained their purpose. shareholders by their national State.

Accordingly, in the present case, there does not exist any contradiction between, on the one The above-mentioned protection of the shareholders themselves is based on the concept which
hand, the right of diplomatic protection of the Barcelona Traction Company by its national characterizes relationships between the company and its members, namely the shareholders.
State, namely Canada and, on the other hand, the right of diplomatic protection of its Although an inde- [p 132]pendent juridical personality is conferred on a company, this
shareholders by their national State, namely Belgium. The existence of the former right does personality does not present itself as an end, but simply as a means to achieve an economic
not exclude either the existence of the latter right or its exercise. purpose, namely a maximum degree of pecuniary interest by a limited sum of investment.
A company in the sociological sense belongs to the category of the "Gesellschaft", and presents fields of an educational, scientific and philanthropic nature and are contributing to the solution
itself as a pure means to achieve the economic purpose of its members, namely the of social and cultural problems for the welfare of humanity (A. A. Berle, The 20th Century
shareholders; the shareholders constitute the substance of its existence; they are the sovereign Capitalist Revolution, 1954, pp. 164, 188). Accordingly, even in the case of a corporation
of the company like the citizens in a democratic State. Who require, in the material sense, created for the egoistic purposes of shareholders, there may exist a common interest of the
diplomatic protection in the case of a company? No-one other than the shareholders in the company distinct from the individual interest of the shareholders, and therefore we cannot deny
company, although in some cases the company itself, may appear as a formal protege on the the possibility of conflict between these two interests.
scene, having its cause espoused by its national State. Therefore in a company, the
shareholders, as being its real substance, and the subject of interests, must be considered as However, the possibility of common interest does not preclude the fact that between the
the object of diplomatic protection; not the company itself which has nothing but a Active company and the shareholders a relationship of community normally exists and wrongful acts
existence and can only play the role of a technique for the purpose of protection of the done to and damage inflicted on the former can be considered also as being directed against
shareholders who are the real owners of the corporate property and enterprise. the latter.

From what has been said above, we can conclude that there exists between a company and its We recognize that an adequate connection of cause and effect may exist between the wrongful
shareholders a relationship of community of destiny which has been repeatedly emphasized, acts done to the company and the damage inflicted on the shareholders, but we can explain
particularly in the oral arguments by the Belgian Government, in order to justify its right of this fact, as is mentioned above, by the existence of a community of destiny or a substantial
diplomatic protection on behalf of its shareholders in the present case. The alleged economic identity between them.
internationally wrongful acts, it is true, are directed against the company itself and not against
the shareholders, but only in a formal sense; in reality both are inseparably connected to each ***
other in such a way that prejudicial acts committed against a company necessarily produce an
effect detrimental to its shareholders by reduction of the sum of dividends or surplus assets. In From what has been stated above, we consider that we can demonstrate the raison d'étre of
a company, we can recognize the existence of unity between company and shareholders in the the right of diplomatic protection by a State of its nationals who are shareholders in a company
sense that profit and loss are in the final instance attributed to the shareholders —of course of a nationality other than that of the protecting State.
under the condition that the liability of each shareholder is limited to the sum of shares which
he has subscribed. The Parties have argued by quoting international arbitral precedents, the practice of States and
the writings of authoritative publicists to defend their standpoints. Although cases concerning
Therefore, the alleged internationally wrongful acts directed against a company can be the protection of shareholders exactly analogous to the present case cannot be found, [p 134]
conceived as directed against its shareholders themselves, because both can be considered, in international practice and doctrine do not seem to deny the protection of shareholders by their
substance, i.e., economically, identical. national State to which the company itself does not belong.

Accordingly, one cannot deny to the national State of shareholders the right of diplomatic The Spanish Government admits the protection of shareholders by their national State (1)
protection of its nationals on the ground that another State may possess or exercise the same where, following the general tendency of international practice and doctrine, the company
right on behalf of the company itself. Consequently, in the present case, the recognition of the possesses the nationality of the State responsible for the damage, and (2) where the foreign
right of diplomatic protection of Canada, which is the national State of the Barcelona Traction company has been dissolved or is practically defunct. In these cases there exists the
Company, does not exclude the same right of Belgium, the national State of the shareholders of circumstance that the protection of the shareholders by the national State of the company
that company on their behalf; hence Belgium may be entitled to exercise its original [p 133] cannot be expected, either factually or legally. This is why in these cases the protection of
right of protection of her shareholders independently of the protection of the company itself by shareholders directly by their national State is justified. The question is whether these two
Canada. Therefore, the Belgian Government cannot be regarded as substituting the Canadian instances are to be considered as a manifestation of a more general principle in favour of the
claim to the protection of the company. protection of shareholders or as an exception to the main principle which does not admit their
protection.
It might be said in passing that by this assertion we do not go so far as to maintain that the
interest of the company coincides perfectly with the totality of the shareholders' interests. We The principle of customary international law concerning diplomatic protection by the State of its
must recognize that originally a company is no more than a means for its shareholders to nationals, however general and vague it may be, does not prohibit the rights or the legal
achieve their lucrative purpose; but so long as the company continues as a going concern it position of shareholders being included in "property, rights and interests" as an object of
would enjoy in some measure an independent existence free from the arbitrary decision of the protection. This conclusion can be justified as a correct interpretation of customary international
shareholders. So long as a company exists for a considerable space of time and fulfils its law concerning diplomatic protection, particularly taking into account the above-mentioned
corporate purpose it acquires an objective existence (the idea of so-called "Unternehmen an necessity of international investment in the past as well as in the future. The nature of the
sich" of Walther Rathenau) which, owing to its important social role the shareholders would not interest of shareholders is to be interpreted as a legitimate one worthy of protection by their
dare dissolve arbitrarily, even if it were legally possible, by the prescribed majority vote. We national State.
know that many contemporary big and influential corporations are extending their activities to
Next, customary international law does not prohibit protection of shareholders by their national In the present case, the register of the shareholders of the Barcelona Traction Company kept
State even when the national State of the company possesses the right of protection in respect by the National Trust Company of Toronto gives successively as from 7 November 1939 the
of the latter. names of the Charles Gordon Company, a partnership of New Jersey and Newman & Company,
a partnership of New York—the two are of American nationality— and does not give the name
The Spanish Government denies the right of protection of shareholders by their national State. of Sidro which is of Belgian nationality. It is contended by the Belgian Government that a
It admits diplomatic protection of shareholders only in the two above-mentioned exceptional contractual nominee-beneficial-owner relationship exists between the two American
cases. Protection of shareholders from this viewpoint is considered only as a substitute for the partnerships and Sidro. The purpose of the establishment of such a relationship [p 136] seems
protection of the company itself which has become impracticable through the circumstances to have been a wartime necessity of German-occupied Belgium to protect Sidro's participation
indicated above. From our viewpoint, the protection of the shareholders possesses a meaning in the capital and management of Barcelona Traction against an enemy power. Under such
independently of the protection of the company itself. Accordingly, it can exist regardless of relationships a question arises: which of the nationalities—American or Belgian—prevails, in
circumstances which might make the exercise of the right of protection of a company and the deciding the national character of Sidro's shares?
intervention of its national government impossible or difficult. There does not appear to exist in
international law any restriction to the effect that the protection of shareholders in a foreign The Spanish Government denies the effect of the Belgian nationality of Sidro by regarding the
company by their national State must be limited to the above-mentioned two cases. The nominees, who are of American nationality, as the true shareholders. We consider that the
national State of shareholders, in the present case Belgium, is entitled to protect them just as in beneficial ownership, and, accordingly, in the present case, Sidro's position as beneficial owner,
the cases where a company possesses the nationality of the responsible State, or a company must be the criterion for deciding this question. The reason therefor is as follows: diplomatic
has been dissolved or is practically defunct. protection depends upon where the real interest resides; it is not concerned with a legal
mechanism of private law such as corporate personality, nominee relationship, etc. As we have
In short, the contention of the Spanish Government is based on the [p 135] municipal law seen in another context, just as the rule of diplomatic protection should disregard the legal veil
concept of corporate personality and that of shareholders which is its corollary. The two of the corporate personality of the company in favour of its real substance, namely the
protections, we consider—protection of the company and that of the shareholders—may co- shareholders, so it should disregard the legal veil of the nominee in favour of the beneficial
exist and on equal terms; the latter is not supplementary to the former. owner. The existence of a nominee relationship does not exercise any influence upon the
diplomatic protection of shareholders. Sidro loses neither its shareholding in the Barcelona
For the foregoing reasons, we conclude that Belgium has an independent right to protect the Traction Company nor its Belgian nationality. It is quite unthinkable that the conclusion of the
Belgian shareholders in Barcelona Traction in conformity with the interpretation of customary nominee contract which was motivated by a wartime necessity could exercise any influence
international law concerning the diplomatic protection of nationals. upon the status of Sidro as a shareholder of the Barcelona Traction Company.
In short, the fact that the two above-mentioned partnerships are of American nationality has no
II relevance for the purpose of establishing the jus standi of the Belgian Government. What is
So far we have been concerned with the question of the legal, that is to say, the theoretical relevant for the jus standi of Belgium is the fact that Sidro is the beneficial, that is to say, the
basis for the jus standi of the Belgian Government: the question whether a State has a right to real owner of Barcelona Traction's shares in respect of which the American partnerships are
protect its nationals who are shareholders in a company of a nationality other than that of the nominees.
protecting State. This question having been answered in the affirmative, we must now consider
some questions from the viewpoint of the identification of individual shareholders with ***
reference to the present case.
Next, we shall consider the question of the existence of a bond of nationality between the
These questions are concerned of course with the existence of shareholders who are entitled to shareholders and the protecting State as a condition of protection in the present case.
receive diplomatic protection by their home State. Not all so-called "shareholders", but only
those who are qualified from the functional and temporal viewpoint to receive protection. (It The object of the Belgian Government's Application of 14 June 1962 is reparation for the
goes without saying that proof of their status as shareholders must be furnished as a matter of damage allegedly caused to a certain number of its nationals in their capacity as shareholders
principle either by the register in the case of registered shares or by possession in the case of of the Barcelona Traction, Light and Power Company. In the shareholders are included both
bearer shares.) natural and juridical persons.

From the viewpoint of functional differentiation a question arises when shares are owned by The contention of the Belgian Government concerning its jus standi is based on the
two persons: the one, a nominee, whose name is entered in the share register and who preponderance of the Belgian interest in the Barcelona Traction Company. The preponderance
exercises rights as alter ego of the real owner; the other, the beneficial owner, who enjoys of the Belgian interest is evident, the Belgian Government argues, from the fact that the
rights as the real or economic owner of the shares. By what criterion shall it be decided which majority of the shareholders in that company are of Belgian, nationality and that it [p 137]
of those two is entitled as shareholder to be the object of protection : the nominee or the amounted to 88 per cent. of Barcelona Traction's capital stock. The most important shareholder
beneficial owner? in the Barcelona Traction Company, according to the Belgian Government, is admitted to be
Sidro, S.A. (Société Internationale d'Energie Hydro-Electrique), whose holding is said to amount
to 75 per cent. of the shares of the Belgian holding. of 1,798,854 shares issued, which represented 75.75 per cent. of the capital of the company.

The preponderance of the Belgian participation in Barcelona Traction at the time of its 3. Facts derived from the information gathered by the Institut belgo-luxembourgeois du change
adjudication in bankruptcy is indicated by the Belgian Government (Memorial, paragraphs 1-10) (Belgo-Luxembourg Exchange Institute).
by the following figures:
At the time of adjudication in bankruptcy of Barcelona Traction, this company had issued
Registered shares issued............ 1,080,446 1,798,854 shares, of which at least 1,607,845 were owned by Belgian nationals; that is to say,
Bearer shares issued ............. 718,408 1,362,593 shares owned by Sidro (1,012,688 registered and 349,905 bearer shares), and at
Total shares issued.............. 1,798,854 least 245,252 shares (420 registered and 244,832 bearer shares) owned by other Belgian
nationals.
Shares owned by Belgian nationals (minimum) . . 1,607,845
Belgian participation amounted therefore to at least 89.3 per cent. of the capital of the
Shares not owned by Belgian nationals (maximum) 191,009 company.
Next, we shall see Belgian interests in Barcelona Traction at the time of the institution of
Belgian participation in the capital of Barcelona Traction at the date of the adjudication in international proceedings (14 June 1962) (Memorial, paras. 11-19). This is shown by the
bankruptcy of that company therefore amounted to not less than 89.3 per cent. of the capital following figures:
issued.
Registered shares issued..........… 1,472,310
Of this figure of 89.3 per cent., 75.75 per cent. belonged to Sidro, so that 13.55 per cent. at Bearer shares issued.............. 326,544
least of the capital of Barcelona Traction belonged to other Belgian nationals. Total shares issued.............. 1,798,854
Shares owned by Belgian nationals....... 1,588,130
The figures given above come from three main sources of information, namely : Shares not owned by Belgian nationals..... 210,724
Proof of the preponderance of Belgian participation at that date will be given with the help of
1. Information derived from the register of Barcelona Traction registered shares. information furnished by:

A statement drawn up by the National Trust Company of Toronto, which keeps the register of 1. The register of registered shares of Barcelona Traction. The statement drawn up by the
the shares of Barcelona Traction, National Trust Company of Toronto gives the following facts :
gives the following figures: 2.
Total issued shares.............. 1,798,854
Total issued shares.............. 1,798,854 Registered shares............... 1,472,310
Registered shares............... 1,080,446 Registered shares owned by Sidro ....... 1,354,514
Registered shares owned by Sidro........ 1,012,688 Registered shares owned by shareholders other than
Registered shares owned by shareholders other than Sidro................... 117,796
Sidro................... 67,758 Total .... 1,472,310 [p 139]
1,080,446
The total number of registered shares in Belgian hands was therefore 1,356,902 in which 2,388
The total number of registered shares in Belgian hands was 1,013,108 in which 420 shares shares belonging to Belgian shareholders other than Sidro are included.
belonging to Belgian shareholders other than Sidro are included.
As to the registered shares owned by Sidro, the nominee this time was the firm of Newman &
The shares mentioned above as belonging to the Sidro Company had been entered in the list of Co., New York, which had succeeded Charles Gordon & Co.
registered shares since 7 November 1939 in the name of Charles Gordon & Company as
nominee.[p 138] 2. Information derived from the accounts of Sidro.

2. Information derived from the accounts of Sidro. A certificate drawn up by the firm of Deloitte, Plender, Griffiths & Co., dated 23 August 1962,
shows that on 14 June 1962 Sidro owned 1,354,514 Barcelona Traction registered shares, and
The above information is confirmed and supplemented by the accounts of Sidro, for the 31,228 bearer shares, that is to say, a total of 1,385,742 shares out of 1,798,854 shares issued,
certificate drawn up by the firm of chartered accountants, Deloitte, Plender, Giffiths & Co., which represented 77 per cent. of the total capital of Barcelona Traction.
dated 6 May 1959 shows that, as at 12 February 1948, Sidro owned 1,012,688 Barcelona
Traction registered shares and 349,905 bearer shares, i.e., in all 1,362,593 shares out of a total 3. Information concerning bearer shares owned by Belgian nationals.
 The Spanish Government denies the Belgian character of Sidro by contending that Sofina, the
As at 1 April 1962 there were in circulation 326,554 Barcelona Traction bearer shares of which principal shareholder of Sidro, is very limited in its Belgian holding. However, to establish the
31,228 shares were owned by Sidro. Belgian character of Sidro, which is required for its protection, we need not go to such
excessive lengths of logical formalism.
When the proceedings were instituted the number of Barcelona Traction shares in circulation
was 1,798,854 of which at least 1,588,130 were owned by Belgian nationals. Of these The fact that Sidro is of Belgian nationality can be recognized without the slightest doubt. This
1,385,742 shares were owned by Sidro (1,354,514 registered and 31,228 bearer shares) and at company was formed under Belgian law and it has its seat (siege social) in Belgian territory,
least 202,388 (2,388 registered and 200,000 bearer shares) were owned by other Belgian namely in Brussels. Its Belgian nationality has never been denied by the Spanish Government.
nationals. Sidro, accordingly, is entitled to receive diplomatic protection from the Belgian Government,
being qualified therefor by the facts of its formation and seat. These facts are sufficient to
From the facts given above, it can be concluded that more than 88 per cent. of the Barcelona justify the connecting link between Sidro and Belgium. Just as the Barcelona Traction Company
Traction shares were in Belgian hands both at the time of the adjudication in bankruptcy of that can enjoy the diplomatic protection of the Canadian Government by reason of similar factors, so
company and at the time the present proceedings were instituted. Sidro is entitled to receive diplomatic protection from the Belgian Government by reason of its
Belgian nationality.
This Belgian participation is made up as follows: 10 to 15 percent. of the capital of Barcelona
Traction is owned by the general public in Belgium, whilst 75 to 77 per cent. of the capital is It is possible that Sidro may be susceptible of two protections which are compatible with each
owned by Sidro, a company under Belgian law. other: on the one hand, it might be protected indirectly by the Canadian Government as a
shareholder of a Canadian company, Barcelona Traction, on the other hand, it might be
The foregoing is the demonstration on the part of the Belgian Government concerning the protected directly by the Belgian Government owing to its Belgian nationality. In this latter
preponderance of the Belgian participation in the capital of Barcelona Traction. respect Sidro is subject to Belgian protection as a shareholder of Barcelona Traction, by virtue
Are the figures of 88 per cent. of the Belgian participation and 75 per cent. of Sidro's of having Belgian nationality and as a company as such.[p 141]
participation at a critical date in Barcelona Traction correct? It depends on the reliability of
information furnished by the National Trust Company of Toronto, the firm of chartered In this context we must add a few words concerning a Judgment of the International Court of
accountants, Deloitte, Plender, Griffiths & Company, and the Institut belgo-luxem-bourgeois du Justice in the Nottebohm case (Second Phase, I.C.J. Reports 1955, pp. 16, 17, 25, 26). This
change. Judgment denied the extension of the right of diplomatic protection of Liechtenstein to Mr.
Nottebohm vis-à-vis Guatemala on the ground that his nationality of Liechtenstein lacked
It is argued that these three main sources being on the Belgian side, one cannot therefore effectiveness. That Judgment was concerned with the effectiveness of nationality of a natural
expect unprejudiced information from them. But it is also not just to deny absolutely their person and not that of a company. That Judgment is not germane to the present case,
evidential value in such circumstances. Each case should be valued according to its own merits. however, because here the nationality of Sidro is undoubtedly established.
[p 140]
In short, the jus standi of the Belgian Government can be founded on the Belgian nationality of
Particularly, the matter in question is that of degree. The figure for Belgian participation may Sidro, even if the Belgian nationality of the majority of the shareholders ultimately cannot be
not be correct to the last digit. It may be 90 or 80 per cent. instead of 88 per cent. But one proved.
cannot deny the evidential value of a statement simply because it may involve some minor
incorrectness or mistake. Whether the percentage is 80 or 10 per cent. the question of the jus The percentage of Sidro and other Belgian holdings in the whole capital stock of the Barcelona
standi of the Belgian Government is entirely the same. Traction Company has no particular relevance for the question of the jus standi of the Belgian
Government, but it would become an important factor for the assessment of damage allegedly
*** incurred by Belgian shareholders.

Next, we are confronted with the question as to whether Sidro can be said to have Belgian The question of continuity of nationality, that is, identification of shareholders from the
character. It is quite a different question from that of whether the 75 per cent. participation of temporal viewpoint, can be decided in the affirmative. Sidro's continued existence since 1923,
Sidro in the Barcelona Traction's capital stock really existed. It is concerned with the covering the two critical dates, is sufficient to prove this continuity.
constitution of Sidro as a corporate body which may include natural and juridical persons as its
constituent elements. In the case where a shareholder of Sidro is a company, the Belgian As to the question of bearer shares, this does not seem relevant to a decision concerning jus
character of Sidro might depend on the nationality of individual shareholders of that company. standi and continuity.
If a shareholder of this latter company is a company the same process should be repeated, and
would go on ad infinitum. Under such circumstances the national character of Sidro could only For the above-mentioned reasons the third preliminary objection raised by the Spanish
be decided by the nationality of ultimate individual shareholders who were natural persons. Government should be rejected.
We shall proceed to examine the fourth preliminary objection raised by the Spanish the purpose of requiring it to be joined to the merits; for this is not a case where the allegation
Government against the Belgian Application. of failure to exhaust local remedies stands out as a clear-cut issue of a preliminary character
that can be determined on its own. It is inextricably interwoven with the issues of denial of
III justice which constitute the major part of the merits. The objection of the Respondent that local
remedies were not exhausted is met all along the line by the Applicant's contention that it was,
In the fourth preliminary objection the Spanish Government holds that the Belgian Application inter alia, precisely in the attempt to exhaust local remedies that the alleged denials of justice
of 14 June 1962 is inadmissible by reason of the non-exhaustion of local remedies by the were suffered." (Barcelona Traction, Light and Power Company Limited, Preliminary Objections,
Barcelona Traction Company and those concerned, as required by international law. Judgment, I.C.J. Reports 1964, p. 46.)[p 143]
Therefore, before deciding whether the fourth preliminary objection is to be upheld or not, we
The Spanish Government invokes not only the rule of customary international law on local shall make some observations on the complicated relationship existing between the exhaustion
remedies, but Article 3 to the Treaty of Conciliation, Judicial Settlement and Arbitration of 19 of local remedies and the denial of justice.
July 1927, which provides as follows:
There can be no doubt that the local remedies rule possesses a procedural character in that it
"In the case of a dispute the occasion of which, according to the municipal law of one of the requires the person who is to be protected by his government to exhaust local remedies which
Parties, falls within the competence of the national courts, such Party may require that the are available to him in the State concerned, before his government espouses the claim before
dispute shall not be submitted to the procedure laid down in the present Treaty until a an international tribunal.
judgment with final effect has been pronounced within a [p 142] reasonable time by the
competent judicial authority." [English text from League of Nations Treaty Series, Vol. LXXX, pp. What is the raison d'être of this rule?
28 ff. Note by the Registry.]
In the first place, the consecutive existence of two procedures—municipal and international—
That the local remedies rule constitutes "a well-established rule of customary international law" would guarantee and promote the justness of a decision. (It goes without saying that the
and that "the rule has been generally observed in cases in which a State has adopted the cause procedure of an international tribunal is not comparable to that of, for instance, the Cour de
of its national whose rights are claimed to have been disregarded in another State in violation Cassation.)
of international law", is clearly declared by the International Court of Justice (Interhandel,
Judgment, I.C.J. Reports 1959, p. 27). Secondly, so long as local remedies are not exhausted, and some other remedies remain, the
condition is not fulfilled. The exhaustion means the existence of a "judgment with final effect"
The International Court of Justice continues: or analogous circumstances. In such situation recourse to international remedies will be
justified.
"Before resort may be had to an international court in such a situation, it has been considered
necessary that the State where the violation occurred should have an opportunity to redress it Thirdly, this procedural rule appears to express a higher conception of equilibrium or harmony
by its own means, within the framework of its own domestic legal system." (Ibid., p. 27.) between national and international requirements in the world community. The intention of this
rule is explained as follows by Professor Charles De Visscher: "Il s'agit donc ici avant tout d'une
The provision of Article 3 of the said Treaty is nothing else but the recapitulation of this already règle de procédure propre a réaliser un certain équilibre entre la souveraineté de l'Etat
existing rule, the spirit and principle of which are found amplified in the Court's decision and recherché et, d'autre part, les exigences supérieures du droit international ..." ("Le déni de
implemented in conventions providing for the compulsory jurisdiction of international tribunals. justice en droit international", 52 Académie de droit international, Recueil des cours, 1935, II,
p. 423), or, as Judge Córdova said:
Before examining the well-foundedness or otherwise of the fourth preliminary objection, we
must consider the relationship between two concepts, namely exhaustion of local remedies in "The main reason for its existence lies in the indispensable necessity to harmonize the
detail and denial of justice, which is regarded as the main or central issue arising from the international and the national jurisdictions— assuring in this way the respect due to the
alleged internationally wrongful acts imputed by the Belgian Government to the Spanish sovereign jurisdiction of States—by which nationals and foreigners have to abide and to the
authorities. diplomatic protection of the Governments to which only foreigners are entitled" (separate
opinion, Interhandel, Judgment, I.C.J. Reports 1959, p. 45).
We cannot understand the position of the Court, which ordered the joinder of the fourth
preliminary objection to the merits, without considering the relationship of the exhaustion of The procedural requirement of the exhaustion of local remedies presupposes the existence of a
local remedies to denial of Justice. high degree of confidence by the claimant in the judicial system and in its application, and this
constitutes one of the fundamental conditions to be fulfilled in the matter of the exhaustion of
The Court decided as follows: remedies in the State concerned.

"As regards the fourth Preliminary Objection, the foregoing considerations apply a fortiori for ***[p 144]
 cours même de la procédure, le plaideur étranger est victime de lenteurs ou d'obstructions
Next, we shall consider the concept of denial of justice. équivalant à un refus de statuer et qui l'autorisent à abandonner une voie qui se révèle sans
issue." (Charles De Visscher, op. cit., pp. 423-424.)
Although the exhaustion of local remedies belongs to the plane of procedural law, denial of Under these circumstances respect for and confidence in the sovereign jurisdiction of States
justice belongs to the plane of substantive law. In the present case, the latter constitutes the which, as indicated above, constitute the raison d'être of the local remedies rule, do not exist.
fundamental concept applied to all the allegedly internationally wrongful acts imputed by the The rule does not seem to require from those concerned a clearly futile and pointless activity,
Belgian Government to the Spanish authorities. The former, on the contrary, is nothing other or a repetition of what has been done in vain.
than a condition for the obtaining of reparation for the damage suffered by the Barcelona
Traction Company's shareholders through denial of justice. It is said that "a claimant cannot be required to exhaust justice in a State when there is no
justice to exhaust" (Charles De Visscher, op. cit., p. 424); and again "A claimant in a foreign
We shall examine, in the first place, the concept of denial of justice, and next the logical State is not required to exhaust justice in such State when there is no justice to exhaust".
relationship between this latter and the local remedies rule. (Statement by Mr. Fish, Secretary of State, quoted in Moore, International Law Digest, Vol. VI,
1906, p. 677.) If a state of denial of justice prevails in the country concerned, there can be no
The term "denial of justice" in its loose sense means any international delinquency towards an possibility of exhausting local remedies. In the above-mentioned extreme cases, it is impossible
alien for which a State is liable to make reparation. It denotes in its ordinary meaning an injury for the interested parties to comply with the condition concerning the exhaustion of local
involving the responsibility of the State committed by a court of justice. As far as acts of a court remedies; accordingly this condition must be dispensed with for them.
which would involve the State in responsibility are concerned, a very narrow interpretation
practically does not admit the existence of a denial where decisions of any kind given by a court We must limit the application of the local remedies rule to cases and circumstances where its
are involved, but seeks to limit the application of this institution to the case of the denial to fulfilment is possible. Thus it may be said that this rule is not of an absolute character in its
foreigners of access to the courts. This view would virtually mean by denial the exclusion of application.
foreigners from all actions instituted in courts of law; therefore this concept cannot be
accepted. Another more moderate and generally approved view which can be considered as In the light of the above considerations, we shall examine whether the exhaustion of local
acceptable is that denial of justice occurs in the case of such acts as— remedies can be required from the Belgian Government and whether in the case of an
affirmative answer it has been observed or not.
"corruption, threats, unwarrantable delay, flagrant abuse of judicial procedure, a judgment
dictated by the executive, or so manifestly unjust that no court which was both competent and It is clear that the claim put forward by the Belgian Government is based on the alleged
honest could have given it, ... But no merely erroneous or even unjust judgment of a court will internationally wrongful acts imputed to the Spanish Government and that these acts are
constitute a denial of justice, ...". (Brierly-Waldock, The Law of Nations, 6th ed., 1963, p. 287; characterized globally as a denial of justice.
see also Sir Gerald Fitzmaurice, "The meaning of the term 'denial of justice' ", British Year Book
of International Law, 1932, p. 93.) According to the Belgian Application (paragraph 43) they—

*** "relate to a whole series of positive measures, acts or omissions which are often contradictory,
which overlap and are interrelated, and of which the unlawful character from the point of view
Now we shall consider the logical relationship between the two concepts: exhaustion of local of the law of nations is seen particularly in the final result to which they have led". [p 146]
remedies and denial of justice, and proceed to examine the admissibility of the fourth
preliminary objection. The Belgian Government classifies these measures, acts and omissions into administrative
measures manifestly arbitrary or discriminatory, and conduct on the part of the courts revealing
As we have seen above, the exhaustion of local remedies is a condition of a procedural nature, a lack of impartiality, contempt for the principle of the equality of parties before the court, and
which is imposed on an individual whose interests his national State wants to protect by other defects amounting to a denial of justice from the point of view of international law. As to
international proceedings. But to be able to fulfil this condition there must exist in the State the conduct of the courts, the Belgian Government contends that a large number of decisions of
concerned a judicial situation such as to make the realization of exhaustion possible. the Spanish courts are vitiated by gross and manifest error in the application of Spanish law,
Consequently, we must recognize that some cases constitute exceptions [p 145] in regard to arbitrariness or discrimination in international law, denials of justice lato sensu. Furthermore,
the application of the local remedies rule. Instances of such cases are given in the following the Belgian Government contends that in the course of the bankruptcy proceedings the rights of
passage: the defence were seriously disregarded (denials of justice stricto sensu). (Final submissions of
the Government of Belgium filed on 14 July 1969.)
"La réclamation internationale n'est pas subordonnée à l'épuisement préalable des recours
quand ceux-ci sont absents, inadéquats ou a priori inefficaces. Il en est ainsi quand In sum, the claim of the Belgian Government is based on the alleged denials of justice, sensu
l'organisation judiciaire de l'Etat ne fournit aucune voie légalement organisée, quand les voies stricto as well as sensu lato, committed by the Spanish authorities in regard to the Barcelona
légales n'ouvrent aux intéressés aucune perspective raisonnable de succès, ou enfin quand, au Traction Company and others concerned. In the circumstances of the present case, however,
we cannot recognize that so serious a situation of denial of justice has in general prevailed that insists that, as a result of the Barcelona Traction Company's failure to observe the time-limit of
the interested party should be exempted from the obligation to exhaust local remedies. But eight days for a plea of opposition to the Reus judgment of 12 February 1948, the case became
concerning this particular case it is conceivable that, from the Applicant's viewpoint, the conten- res judicata and, consequently, all actions of the Barcelona Traction Company and its
tion of the alleged denial of justice would imply the uselessness of the exhaustion of local subsidiaries should be null and void. The Belgian Government, on the contrary, basing itself on
remedies. the nullity of the publication in Spain of the judgment, argues that the time-limit of eight days
did not begin to run and therefore it did not expire. If the former argument is right, the
If the facts of collusion and connivance of the Spanish courts or judges with the March group Barcelona Traction Company and its subsidiaries would lose the means of redress by becoming
really existed in dealing with the proceedings of the Barcelona Traction bankruptcy case, as unable to exhaust local remedies, the result of which would be highly inequitable.
contended by the Belgian Government in the written and oral pleadings, we can conclude with
reason that, under such circumstances, to expect a successful outcome of the exhaustion of We are led to the conclusion that in the matter of the exhaustion of local remedies the same
local remedies by those concerned would be simple nonsense. spirit of flexibility should exist which, as indicated in another context, prevails in matters of
diplomatic protection in general. If we interpreted the provision of Article 3 of the Treaty of
The two concepts—exhaustion of local remedies and a denial of justice—are in contradiction so Conciliation,[p 148] Judicial Settlement and Arbitration of 1927 and the customary international
far as the latter is meant in sensu stricto. The former is based on a positive viewpoint, namely rule on the matter of local remedies too strictly, possible minor errors in the technical sense
the expectation of the realization of a certain result by the courts; the latter on a negative would cause those concerned to be deprived of the benefit of diplomatic protection, particularly
viewpoint, namely its renouncement. in such an affair as the Barcelona Traction case the complexity and extensiveness of which,
from the substantive and procedural viewpoints, appear to be extremely rare in the annals of
Hypothetically, if a denial of justice really existed, there would be justification for believing that judicial history.
the local remedies rule would have become useless to that extent, as in the case of lack of an
appropriate legal and judicial system and organization. The guiding principle for resolving the questions concerning exhaustion of local remedies should
be the spirit of diplomatic protection according to which, in addition to a juristic, technical
Briefly, in the concept of a denial of justice there seems to be inherent the contradiction of construction, practical considerations led by common sense should prevail. The decision as to
denying the possibility of the fulfilment of the exhaustion of local remedies. It seems that, in a whether legal measures offer any reasonable perspective of success or not, should be flexible in
case where the "original wrong" consists in a denial of justice, the fulfilment of the exhaustion accordance with the spirit of diplomatic protection. Even if, for instance, institutionally an
[p 147] of local remedies cannot be expected, unlike the case of other internationally wrongful administrative or judicial remedy exists whereby an appeal may be made to higher authority,
acts (for instance, murder, confiscation of property, etc.) where independent fulfilment of the this remedy may be ignored without being detrimental to the right of diplomatic protection, if
exhaustion rule can be required. such an appeal would be ineffective from the point of view of common sense.

If there is an element in the denial of justice which makes the fulfilment of the exhaustion rule From what has been said above, "exhaustion" can be seen to be a matter of degree. Minor
impossible, then the Belgian Government would be dispensed to that extent from the omissions should not be imputed to the negligence of those concerned. It is sufficient that the
observance of this rule. Despite the contentions by the Belgian Government concerning alleged main means of redress be taken into consideration. The rule of exhaustion does not demand
facts of a denial of justice in the bankruptcy proceedings against the Barcelona Traction from those concerned what is impossible or ineffective but only what is required by common
Company, the Belgian Government does not insist that "there is no justice to exhaust" in Spain sense, namely "the diligence of a bonus paterfamilias".
and that Belgium should exceptionally be exempt from the obligation to exhaust local remedies.
The Belgian Government does not contend that the Spanish judiciary as a whole is paralyzed ***
and corrupt or that the fulfilment of the exhaustion rule is impossible; its complaints are
concerned only with some of the judges and courts. Next, let us enumerate some of the main measures alleged to have been taken by the
Barcelona Traction Company and those concerned (according to the final submissions filed on
*** 14 July 1969 by the Government of Belgium, Section VII).

Now let us see whether the obligation of exhaustion of local remedies was fulfilled by the (1) Concerning the Reus court's lack of jurisdiction to declare the bankruptcy of Barcelona
Barcelona Traction Company and those concerned. Traction:
opposition proceeding of 18 June 1948;
First, we must consider what kind of remedies should be exercised and to what degree these application of 5 July 1948 (for a declaration of nullity); its pleading of 3 September 1948;
remedies have been pursued. Owing to the highly complicated structure and proceedings of this a formal motion of National Trust in its application of 27 November 1948;
dispute, it is extremely difficult to answer these questions. Everything depends on the Barcelona Traction Company entered an appearance (23 April 1949) in the proceedings
circumstances of the case and the issues and, in particular, on the effectiveness of the available concerning the Boter declinatoria; its formal adherence to that declinatoria (11 April 1953).[p
remedies (such as revision by the supreme court). Sometimes, complication arises from a 149]
difference of interpretation of law between the Parties. For instance, the Spanish Government
(2) Concerning the bankruptcy judgment and the related decisions: application of 16 February unfounded.
1948 on the part of the subsidiary companies, Ebro and Barcelonesa to have the bankruptcy
judgment set aside; Therefore, the fourth preliminary objection raised by the Spanish Government must be rejected.
the bankrupt company itself entered opposition to the judgment by a procedural document of
18 June 1948, confirmed on 3 September 1948; IV
incidental application for a declaration of nullity submitted by the Barcelona Traction Company
(5 July 1948). The third and fourth preliminary objections having been decided in favour of Belgium, we must
now consider a basic question on the merits, namely whether Spain is responsible for
(3) Concerning the blocking of the remedies: internationally wrongful acts allegedly committed by Spain which constitute "a denial of justice".
numerous proceedings taken by the Barcelona Traction Company, beginning with the incidental
application for a declaration of nullity (5 July 1948). First it must be made clear that the charge of a denial of justice imputed to Spain by the
Belgian Government does not denote a very narrow interpretation, namely the denial to
(4) Concerning the failure to observe the no-action clause: foreigners of access to the courts. What the Belgian Government contends is not only not
clause referred to by National Trust in its application for admission to the proceedings (27 limited to a denial in such a formal sense, but includes a denial of justice in a wider material
November 1948). sense, in which, generally speaking, gross injustice, irregularities, partiality, flagrant abuse of
judicial powers, unwarranted delay, etc., are included, as we indicated in another context.
(5) Concerning the conditions of sale:
The judgment of the Reus judge of 12 February 1948 declaring the bankruptcy of Barcelona
the conditions of sale were attacked by Barcelona Traction in an application to set aside and on Traction, its consequences and the successive acts of the Spanish courts constitute the main
appeal, in an application of 27 December 1951 for a declaration of nullity containing a formal complaints of the Belgian Government. But the complaints include acts not only of a judicial
prayer that the order approving the conditions of sale be declared null and void, and in an nature but also of an administrative nature, since it is alleged that some acts and omissions of
application of 28 May 1955; the Spanish administrative authorities, particularly of the Institute of Foreign Exchange, had
the same challenge was expressed by Sidro in its action of 7 February 1953 and by other caused the adjudication in bankruptcy of the Barcelona Traction Company.
Belgian shareholders of the Barcelona Traction Company in their application of 26 May 1955.
From the lengthy arguments in the written and oral proceedings, we can guess the existence of
These facts which have not been contested by the Spanish Government and whose existence antagonism between the two economic and financial groups: the one, the Mr. Juan March
may be considered as being of judicial notice, prove that the case was effectively pursued group and the other, the Barcelona Traction group. While the Belgian Government emphasizes
before the Spanish courts or judges and that local remedies were exhausted as a condition for the financial and political ambition and the collusion with the Spanish administrative and
diplomatic protection by the Belgian Government. juridical authorities of the former group, the Spanish Government contends that there was
abuse of the pyramidal structure of the latter group and stresses the tax evasion and financial
Whether local remedies have been exhausted or not must be decided from a consideration of irregularities [p 151] committed by that group, such as the creation of fictitious debts and the
whether the most fundamental spirit of this institution has been observed or not. Now, this sacrifice of creditors by means of auto-contracts between Barcelona Traction and its
spirit, as is indicated above, constitutes a means of ensuring the respect and confidence due to subsidiaries.
the sovereign jurisdiction of a State. The important point is that this spirit has been respected.
The Spanish Government contends that the Barcelona Traction Company had been constantly in
The aim of the rule of exhaustion of local remedies is a practical one and its application should a state of "latent bankruptcy" owing to its financial methods detrimental to creditors and
therefore be elastic. Each situation, being different, requires different treatment. We must bondholders; the Belgian Government on the contrary insists that the financial situation of
beware of the danger to which this rule is exposed because of its procedural and technical Barce-lona Traction had been normal or even prosperous except in the period of the Spanish
nature, lest it make necessary diplomatic protection futile by an excessive raising of the Civil War and the Second World War.
objection of non-exhaustion.
The Belgian Government also contends that individual judicial and administrative measures
Moreover, the fact that in this case, which was pending for more than [p 150] 14 years, from which constitute separate subjects of complaint, were combined into an integral whole to bring
12 February 1948 (date of the bankruptcy judgment against the Barcelona Traction Company about the "hispanicization" of a prosperous foreign enterprise. According to the Belgian
by the Reus judge) to 14 June 1962 (date of the Application by the Belgian Government), 2,736 Government, the adjudication in bankruptcy of Barcelona Traction is nothing other than the
orders and 494 judgments by lower courts and 37 by higher courts had been delivered, result of the machinations of Juan March in collusion with Spanish judicial and administrative
according to the Spanish Government. Even if these figures are not correct in every detail, we authorities. This is the reason why the Belgian Government, alongside of individual complaints,
can none the less recognize from them as a whole the fact that the condition of exhaustion of advanced an overall complaint which unites and integrates numerous separate complaints.
local remedies was indeed satisfied by the Barcelona Traction Company or its subsidiary
companies. Accordingly, the argument contrary thereto by the Spanish Government is The main complaints put forward by the Belgian Government focus on the irregularities
allegedly committed by the Spanish courts in the bankruptcy judgment and the judicial acts companies in the matter of the attachment of their property in Spain; irregularities concerning
following this judgment. These alleged irregularities are included in the concept of denial of the convening of the general meeting of creditors of 19 September 1949; violation of the
justice lato sensu. The usurpation of jurisdiction may come within denial of justice in this sense. provisions concerning the sale of the property of the bankrupt company; authorization of the
The usurpation of jurisdiction by the Spanish courts is alleged on the ground that Barcelona sale based on the allegedly perishable nature of the property to be sold; in violation of the legal
Traction was a company under Canadian law with its company seat in Canada, having neither provisions the commissioner fixed an exaggeratedly low upset price on the basis of an expert's
company seat nor commercial establishment in Spain, nor possessing any property or carrying opinion submitted by one side only; numerous irregularities in the General Conditions of Sale.
on any business there.
Next, the Belgian Government alleges that various denials of justice stricto sensu (Final
Also, disregard for the territorial limits of acts of sovereignty is pointed out in the measures of Submissions, Section IV) were committed by the Reus court in the course of the bankruptcy
enforcement taken in respect of property situated outside Spanish territory, without the proceedings, the Spanish [p 153] courts disregarding the rights of the defence; in particular:
concurrence of foreign authorities. Furthermore, irregularities are said to have been committed insertion by the Reus court in its judgment on an ex parte petition of provisions which went far
by conferring upon the bankruptcy authorities, through the device of "mediate and constructive beyond finding the purported insolvency of or a general cessation of payments by the bankrupt
civil possession"—not physical possession—the power of exercising in Spain the rights which company (particularly in respect of the attachment of the property of the subsidiary companies
attached to the shares located in Canada of several subsidiary and sub-subsidiary companies without their having been summonsed and without their having been adjudicated bankrupt);
and on which, with the approval of the Spanish judicial authorities, they relied for the purpose the applications for relief presented by subsidiary companies directly affected by the judgment
of replacing the directors of those companies, modifying their articles of association, etc. of 12 February 1948 were rejected as inadmissible on the grounds of lack of jus standi; it was
impossible to develop or argue the complaints against the General Conditions of Sale because
It is to be noted that Canada did not protest against the Spanish Government's usurpation of the order which had approved the General Conditions of Sale was regarded as a matter of mere
Canadian jurisdiction which was alleged by the Belgian Government. routine.

As denials of justice lato sensu the Belgian Government complains that a large number of The Belgian Government considers that "many years elapsed after the bankruptcy judgment
decisions made by the Spanish courts are vitiated by [p 152] gross and manifest error in the and even after the ruinous sale of the property of the Barcelona Traction group without either
application of Spanish law, by arbitrariness or discrimination, in particular: the bankrupt company or those co-interested with it having had an opportunity to be heard on
the numerous complaints put forward against the bankruptcy judgment and related decisions in
(1) flagrant breach of the provisions of Spanish law which do not permit that a foreign debtor the opposition of 18 June 1948 and in various other applications for relief". It continues that
should be adjudged bankrupt if that debtor does not have his domicile, or at least an "those delays were caused by the motion to decline jurisdiction fraudulently lodged by a
establishment, in Spanish territory; confederate of the petitioners in bankruptcy and by incidental proceedings instituted by other
men of straw of the March group . . .". Furthermore, it concludes: "that both general
(2) adjudication in bankruptcy when the company was not in a state of insolvency, was not in a international law and the Spanish-Belgian Treaty of 1927 regard such delays as equivalent to
state of final, general and complete cessation of payment either, and had not ceased its the denial of a hearing".
payments in Spain;
(3) the judgment of 12 February 1948 failed to order the publication of the bankruptcy by ***
announcement in the place of domicile of the bankrupt, which constitutes a flagrant breach of
Article 1044 (5) of the 1829 Commercial Code; From what we have seen above, we can recognize that the alleged ground for complaint on the
merits consists essentially of a denial of justice for which the Belgian Government blamed the
(4) the decisions failing to respect the separate estates of Barcelona Traction's subsidiaries and Spanish State. It is one of the cases in which a State may incur responsibility through the act or
sub-subsidiaries, in that they extended to their property the attachment arising out of the omission of any of its organs (legislative, administrative, or judicial). But whether a State incurs
bankruptcy of the parent company, and thus disregarded their distinct juridical per-sonalities; responsibility or not depends on the concrete circumstances of each case; in particular, the
characteristics of the three kinds of State activities—legislative, administrative and judicial—
(5) the judicial decisions which conferred on the bankruptcy authorities the fictitious possession must be taken into consideration. Mechanical, uniform treatment must be avoided.
(termed "mediate and constructive civil possession") of securities of certain subsidiary and sub-
subsidiary companies have no legal basis in Spanish bankruptcy law and were purely arbitrary. The case before the Court is concerned mainly with the acts and omissions of some judicial
(Final Submissions filed on 14 July 1969 by the Agent of the Belgian Government, Section III.) organs, particularly of the Spanish judges and courts, which, the Belgian Government alleges,
constitute denials of justice.
There are other items which are concerned with the alleged violation of the provisions on
bankruptcy and which include among others: the bestowal on the commissioner of power to Whether the above-mentioned acts and omissions allegedly constituting denials of justice would
proceed to the dismissal, removal or appointment of members of the staff, employees and entail international responsibilities as constituting infringements of international law, must of
management, of the companies all of whose shares belonged to Barcelona Traction or one of its course be decided from the nature of each act and omission in question; but we must consider
subsidiaries; ignoring the separate legal personalities of the subsidiary and sub-subsidiary also [p 154] the characteristics of the judicial function of a State as a whole and the judiciary in
relation to the executive in particular.
"In the overwhelming majority of the legal systems investigated, the State is not liable for the
One of the most important political and legal characteristics of a modern State is the principle of conduct of its judicial organs." (Op. cit., p. 773.)
judicial independence. The independence of the judiciary in a formal sense means the
guarantee of the position of judges, and in a material sense it means that judges are not bound In addition, it must be pointed out that those countries exceptionally recognizing State
except by their conscience. responsibility limit its application to criminal matters under specific circumstances (in particular,
the compensation of innocent persons who have been held in custody).
Although judges possess the status of civil servants, they do not belong to the ordinary
hierarchy of government officials with superior-subordinate relationships. They are not As to the international sphere, an analogous principle exists. Unlike internationally injurious acts
submitted to ordinary disciplinary rules, but to rules sui generis. committed by administrative officials, a State is, in principle, not responsible for those acts
committed by judicial functionaries (mainly judges) in their official capacity. The reason for this
As to the institutional independence of courts as a whole, differences exist among various is found in the fact that in modern civilized countries they are almost entirely independent of
countries. In the first category of countries a system is adopted whereby the highest court or their government.
the lower courts, or both, have conferred upon them the power of judicial review, namely the
power to pass judgment on the constitutionality of laws, ordinances and official acts. In these We shall take into account the above-mentioned characteristics of the judiciary to resolve the
countries, as a corollary of this system, the independence of courts and judges vis-à-vis the question of whether the Spanish State incurs responsibility by reason of alleged internationally
government is outstanding. But in other countries where the whole body of courts and judges is wrongful acts and omissions of the Spanish courts and judges, because their activities
under the authority of the Minister of Justice who is a member of the Cabinet, this does not constitute the main grounds for the complaints which are presented as charges of denials of
seem to create much difference, so far as judicial independence is concerned, from the former justice.
group of countries. What is required from judges by judicial ethics does not differ in the two
systems. The question may be whether the acts and omissions mentioned here (in the final submissions)
really constitute an international wrong for which the Spanish State is responsible for reparation
The judicial independence of courts and judges must be safeguarded not only from other in respect of the damage.
branches of the government, that is to say, the political and administrative power, but also from
any other external power, for instance, political parties, trade unions, mass media and public If judicial organs function quite independently of the government, it may be impossible for a
opinion. Furthermore, independence must be defended as against various courts and as State to incur responsibility by reason of any judicial act or omission on the municipal as well as
between judges. Courts of higher instance and judges of these courts do not function as on the international plane. But, in the case of some serious mistakes injudicial actions, a State
superiors exercising the power of supervision and control in the ordinary sense of the term vis- is made responsible, by special legislative measures, for the reparation of damage; grave
à-vis courts of lower instance and their judges. irregularities committed by the municipal judiciary may involve a State's responsibility on the
plane of international law.
This is a particularity which distinguishes the judiciary from other branches of government. This
distinction, we consider, seems to be derived, on the one hand, from consideration of the social In short, on the one hand, a State by reason of the independence of the [p 156] judiciary, in
significance of the judiciary for the settlement of conflicts of vital interest as an impartial third principle, is immune from responsibility concerning the activities of judicial organs; this
party and, on the other hand, from the extremely scientific and technical nature of judicial immunity, on the other hand, is not of an absolute nature. In certain cases the State is
questions, the solution of which requires the most highly conscientious activities of specially responsible for the acts and omissions of judicial organs, namely in cases where grave
educated and trained experts. The independence of the judiciary, therefore, despite the circumstances exist. That is the reason why denial of justice is discussed by writers as a matter
existence of differences in degree between various legal systems, may be considered as a involving a State's responsibility.
universally recognized principle in most of the municipal and international legal systems of the
world. It may be admitted to be a [p 155] "general principle of law recognized by civilized The concept of a denial of justice, understood in the proper sense, is that of an injury
nations" (Article 38, paragraph 1 (c), of the Statute). committed by a court of justice involving the responsibility of the State. A difference of views—
narrower and broader interpretations—exists concerning acts of this kind, as we have seen in
The above-mentioned principle of judicial independence has important repercussions in dealing other contexts. The view which we consider as acceptable is the broader one, which covers
with the question of the responsibility of States for acts of their organs internally as well as cases of denial of justice, such as "corruption, threats, unwarrantable delay, flagrant abuse of
internationally. judicial procedure, a judgment dictated by the executive, or so manifestly unjust that no court
which was both competent and honest could have given it". But from the latter viewpoint, as a
In the field of municipal law, we have, in the matter of responsibility of States for acts of their principle, no erroneous or even unjust judgment of a court will constitute a denial of justice.
judiciary, the following information furnished by the Max-Planck Institute in Haftung des Staates
für rechtswidriges Verhalten seiner Organe, 1967. So far as the judiciary is concerned, it Justification for this interpretation can be found in the independence of the judiciary
concludes: (Oppenheim-Lauterpacht, International Law, Vol. I, 8th ed., 1955, p. 360). Brierly-Waldock
says: been made and experts' opinions are divided. It is difficult to conclude that one method is
absolutely right and the other wrong and, therefore, that a judge by adopting one alternative
"It will be observed that even on the wider interpretation of the term 'denial of justice' which is instead of the other would commit a denial of justice.
here adopted, the misconduct must be extremely gross. The justification of this strictness is
that the independence of courts is an accepted canon of decent government, and the law Arguments developed on the question as to whether the rights incorporated in negotiable
therefore does not lightly hold a state responsible for their faults. It follows that an allegation of securities may be exercised without possession of the securities, in other words on the question
a denial of justice is a serious step which states. . . are reluctant to take-when a claim can be of the temporal separability or non-separability of right and instrument as regards the share
based on other grounds." (Op. cit., p. 287.) may be considered to have no relevance to the question of a denial of justice.

*** The innumerable controversies concerning the details of the bankruptcy proceedings may also
be considered as possessing no relevance from this point of view.
Next, we shall consider the content and character of a denial of justice allegedly committed by
the Spanish judicial authorities. In short, since these issues are of a technical nature, the possible error committed by judges in
their decisions cannot involve the responsibility of a State. That the above-mentioned doctrine
It is to be noted that the various complaints raised by the Belgian Government are mainly precludes such an error from being a constituent element in a denial of justice as an
concerned with the interpretation of municipal law, namely provisions of the Spanish internationally wrongful act is not difficult to understand from the other viewpoints also. The
commercial code and civil procedure code in the matter of bankruptcy, and provisions of reason for this is that these issues are of a municipal law nature and [p 158] therefore their
Spanish private international law on the jurisdiction of Spanish Courts concerning bankruptcy. interpretation does not belong to the realm of international law. If an international tribunal
Questions relating to these matters are of an extremely complicated and technical nature: they were to take up these issues and examine the regularity of the decisions of municipal courts,
are highly controversial and it is not easy to decide which solution is right and which wrong. the international tribunal would turn out to be a "cour de cassation", the highest court in the
Even if one correct solution could be reached, and if other contrary solutions could be decided municipal law system. An international tribunal, on the contrary, belongs to quite a different
to be wrong, we cannot assert that incorrect decisions constitute in themselves a denial of order; it is called upon to deal with international affairs, not municipal affairs. Now, as we have
justice and involve international responsibility. seen above, the actions and omissions complained of by the Belgian Government, so far as they
are concerned with incorrectness of interpretation and application of municipal law, cannot
For instance, the attachment of the property of the subsidiary com-[p 157]panies by the Reus constitute a denial of justice. This means that in itself the incorrectness of a judgment of a
judge in disregard of their juridical personalities and relying on the doctrine of "piercing the municipal court does not have an international character.
veil", even if it might be deemed illegal, could not be recognized as a denial of justice. As a
legal question, this issue involves an element similar to the question of whether the Belgian A judgment of a municipal court which gives rise to the responsibility of a State by a denial of
Government can base its jus standi for the purpose of the diplomatic protection of Belgian justice does have an international character when, for instance, a court, having occasion to
shareholders on the doctrine of "piercing the veil". The controversies concerning the alleged apply some rule of international law, gives an incorrect interpretation of that law or applies a
failure to order the publication of the bankruptcy in the place of domicile of the bankrupt and rule of domestic law which is itself contrary to international law (Brierly-Waldock, op. cit., p.
the validity of decisions failing to respect the separate estates of Barcelona Traction's subsidiary 287). Apart from such exceptionally serious cases, erroneous and unjust decisions of a court, in
and sub-subsidiary companies or conferring on the bankruptcy authorities the fictitious general, must be excluded from the concept of a denial of justice.
possession (termed "mediate and constructive civil possession") of securities of certain
subsidiary and sub-subsidiary companies, should be considered in themselves irrelevant to the ***
question of the existence of a denial of justice also.
Now, excluding allegedly erroneous or unjust decisions of the Spanish judiciary as constituent
These questions which are concerned with the interpretation of the positive law of a State and elements of a denial of justice, it remains to examine whether behind the alleged errors and
which are of a technical nature, cannot in themselves involve an important element which irregularities of the Spanish judiciary some grave circumstances do not exist which may justify
constitutes a denial of justice. Questions of the kind mentioned above may constitute at least the charge of a denial of justice. Conspicuous examples thereof would be "corruption, threats,
"erroneous or unjust judgment" but cannot come within the scope of a charge of denial of unwarrantable delay, flagrant abuse of judicial procedure, a judgment dictated by the
justice. executive, or so manifestly unjust that no court which was both competent and honest could
The same can be said concerning the validity of the bankruptcy judgment from the viewpoint of have given it", which were quoted above. We may sum up these circumstances under the single
the existence or non-existence of a cessation of payments or a state of insolvency. Even if any head of "bad faith".
error in fact-finding or in the interpretation and application of provisions concerning bankruptcy
exists, it would not constitute in itself a denial of justice. Two questions arise. Does the Belgian Government contend that there existed such
circumstances as bad faith in order to justify its complaints based on a denial of justice? If this
The question of valuation of the property of the Barcelona Traction Company as a going question is answered in the affirmative, has the existence of aggravating facts been sufficiently
concern is a very complicated matter; various methods are conceivable, diverse proposals have proved?
 involves not only the imputation of a lower international standard to the judiciary of the State
Here we must be aware that we are confronted with questions belonging to a dimension concerned but a moral condemnation of that judiciary. As a result, the allegation of a denial of
entirely different to the one which we have dealt with above: it is not a municipal or legal- justice is considered to be a grave charge which States are not inclined to make if some other
technical, but an international and moral dimension. An ethical valuation of the conduct of formulation is possible.
national judicial organs has been introduced. It is not the correctness or incorrectness of the
interpretation or application of the positive law of a country which is in question, but the In short, for the reasons indicated above, the Belgian allegation that Spain violated an
conduct of judicial organs as a whole which must be evaluated from supra-positive, international obligation and incurred responsibility vis-à-vis Belgium is without foundation.
transnational viewpoints (Philip C. Jessup, Transnational Law, 1956). We would say that we Therefore, the Belgian Government's claims must be dismissed.
should consider the [p 159] matter from the viewpoint of natural law which is supra-national
and universal. An ethical valuation such as a condemnation for bad faith, abuse of powers or (Signed) Kotaro Tanaka.
rights, etc., would become a connecting link between municipal and international law and the
two jurisdictions—municipal and international—in respect of a denial of justice, and would [p 161]
cause the alleged acts to involve responsibility on the plane of international law.

It is true that the Belgian Government maintains the existence of bad faith in actions and SEPARATE OPINION OF JUDGE JESSUP
omissions of the Spanish judiciary. However, most of its arguments concentrate on pointing out
the simple irregularities in each measure. As stated above, this does not differ very much from 1. I agree with the majority of the Court that the Belgian claim must be dismissed, but since I
controversies concerning the interpretation and application of Spanish bankruptcy law—matters reach that conclusion by different lines of reasoning, I feel it is incumbent on me to explain
which in themselves cannot justify the existence of bad faith on the part of the Spanish what my reasons are.
judiciary.
Although the Belgian Government insists on the existence of bad faith on the part of the 2. I regret that the Court has not considered it appropriate to include in its Judgment a wider
Spanish judiciary and puts forward some evidence concerning the personal relationship of Mr. range of legal considerations. For my part, I share the view of the late Judge Sir Hersch
Juan March and his group with some governmental personalities, the use of henchmen in Lauterpacht, "that there are compelling considerations of international justice and of
instituting and promoting bankruptcy proceedings, etc., we remain unconvinced of the development of international law which favour a full measure of exhaustiveness of judicial
existence of bad faith on the part of Spanish administrative and judicial authorities. What the pronouncements of international tribunals" (Lauterpacht, The Development of International Law
Belgian Government alleges for the purpose of evidencing the bad faith of the Spanish judges by the International Court, Revised Edition, 1958, Chapter 3, p. 37). Sir Hersch went on to say
concerned does not go very much beyond surrounding circumstances; it does not rely on (at p. 39):
objective facts constituting collusion, corruption, flagrant abuse of judicial procedure by the
Spanish judiciary, etc. If corruption of a judge were considered to have been committed, the "The administration of justice within the State can afford to rely on purely formal and
Barcelona Traction Company and its group should have had recourse to the measure of revision procedural grounds. It can also afford to disregard the susceptibilities of either of the parties by
and, if it was upheld, the fact of proving a denial of justice in the present case could have been ignoring such of its arguments as are not indispensable to the decision. This cannot properly be
established. done in international relations, where the parties are sovereign States, upon whose will the
jurisdiction of the Court depends in the long run, and where it is of importance that justice
Despite this, the Belgian Government did not choose this measure. Instead of producing should not only be done but that it should also appear to have been done."
concrete objective facts to evidence the bad faith of the Spanish authorities, the Belgian
Government put forward an "overall complaint" consisting of art agglomeration of 3. Six months after he wrote the Preface to that important book, Judge Lauterpacht put his
circumstances which do not appear to be relevant to the issue. The relying upon such an preachment into practice in his separate opinion in the Certain Norwegian Loans case, wherein
"overall complaint" would mean in itself a weakness in the standpoint of the Belgian side, and it he wrote (I.C.J. Reports 1957, p. 9 at p. 36):
would have no reinforcing or supplementing effect on the cause of the latter.
"In my opinion, a Party to proceedings before the Court is entitled to expect that its Judgment
We consider that aggravating facts, namely those of bad faith, have not been sufficiently shall give as accurate a picture as possible of the basic aspects of the legal position adopted by
proved. that Party. Moreover, I believe that it is in accordance with the true function of the Court to
It is not an easy matter to prove the existence of bad faith, because it is concerned with a give an answer to the two principal jurisdictional questions which have divided the Parties over
matter belonging to the inner psychological process, particularly in a case concerning a decision a long period of years and which are of considerable interest for international law. There may
by a State organ. be force and attraction in the view that among a number of possible solutions a court of law
ought to select that which is most simple, most concise and most expeditious. However, in my
Bad faith cannot be presumed.[p 160] opinion such considerations are not, for this Court, the only legitimate factor in the situation."
[p 162]
It is an extremely serious matter to make a charge of a denial of justice vis-a-vis a State. It
4. In Interhandel (I.C.J. Reports 1959, p. 6), the Court had before it four preliminary objections
advanced by the United States. (One notes in passing that Interhandel, like Barcelona Traction, 8. One of the great jurists of the Permanent Court of International Justice, Judge Anzilotti, also
was a case involving a holding company and complicated corporate stock interests.) In its shared the Lauterpacht philosophy of the nature of the international judicial process, as is
Judgment, the Court found it appropriate to record its view on all four preliminary objections. shown in his dissenting opinion in Diversion of Water from the Meuse (P.C.I.J., Series A/B, No.
By nine votes to six, the Court upheld the third preliminary objection to the effect that 70, p. 4 at 45):
Switzerland had not exhausted the local remedies available to it in the United States. Since the "The operative clause of the judgment merely rejects the submissions of the principal claim and
case was disposed of on this ground, it could be argued that the Court should not have ruled in of the Counter-claim. In my opinion, in a suit the main object of which was to obtain the
its Judgment on the other three preliminary objections. However, the Court held: by ten votes interpretation of a treaty with reference to certain concrete facts, and in which both the
to five, that it rejected the first preliminary objection; unanimously, that it rejected the second Applicant and the Respondent presented submissions indicating, in regard to each point, the
pre-liminary objection; by ten votes to five, that it was not necessary to adjudicate on part (a) interpretation which they respectively wished to see adopted by the Court, the latter should not
of the fourth preliminary objection; by fourteen votes to one, that it rejected part (b) of the have confined itself to a mere rejection of the submissions of the Applicant: it should also have
fourth preliminary objection. expressed its opinion on the submissions of the Respondent; and, in any case, it should have
declared what it considered to be the correct interpretation of the Treaty.
Judge Sir Percy Spender, in his separate opinion, and President Klaestad and Judge Sir Hersch
Lauterpacht in their dissenting opinions, felt it necessary also to deal with part (a) of the fourth It is from the standpoint of this conception of the functions of the Court in the present suit that
preliminary objection on which the Court declined to rule, because that objection dealt with the the following observations have been drawn up."
important issue of the self-serving or automatic reservation of the United States to its
declaration accepting the jurisdiction of the Court. 9. The specific situations in each of the cases cited can be distinguished from the situation in
the instant case, but all of the quoted extracts are pervaded by a certain "conception of the
5. In the Arbitral Award Made by the King of Spain on 23 December 1906 (I.C.J. Reports 1960, functions of the Court" which I share but which the Court does not accept. Article 59 of the
p. 192), Judge Moreno Quintana in his declaration (p. 217) stated that while he was in Statute indeed provides: "The decision of the Court has no binding force except between the
agreement with the decision, he believed that a number of "legal questions which are of parties and in respect of that particular case." But the influence of the Court's decisions is wider
particular concern . .. should have been dealt with in the first place". He listed the questions than their binding force.
which he had in mind and on which the judgment failed to pronounce.
The instant case, however, presents its own particularity. In its decision in 1964 the Court
6. In the Temple of Preah Vihear case (I.C.J. Reports 1961, p. 17), the Court in its Judgment joined to the merits two of Spain's preliminary objec-[p164]tions. Whatever the legal
said that the reasons it gave for upholding its jurisdiction made it unnecessary to consider interpretation of the character of those preliminary objections at this stage of the proceedings,
Cambodia's other basis for asserting jurisdiction or Thailand's objection to that basis. In the it remains true that the Belgian claim must be dismissed if either of the objections is well
joint declaration of Judges Sir Gerald Fitzmaurice and Tanaka (pp. 36, 38), one reads: founded. Since one of them is sustained by the Court (and on different grounds in this opinion),
it can be said that the Court would reach out too far if it made a judicial finding on the basic
"As regards the second preliminary objection of Thailand— whilst we are fully in agreement question of the existence of a denial of justice—an issue which it has decided Belgium has no
with the view expressed by Sir Hersch Lauterpacht in the South West Africa—Voting Procedure right to bring before the Court. Under these circumstances, I agree that it would be excessive
case (I.C.J. Reports 1955, at pp. 90-93) to the effect that the Court ought not to refrain from for a separate opinion to analyse and pass upon the voluminous proceedings before the
pronouncing on issues that a party has argued as central to its case, merely on the ground that Spanish administrative and judicial authorities. There are situations in which the logical must
these are not essential to the substantive decision of the Court—yet we feel that this view is yield to the practical; this is such a situation.
scarcely applicable to issues of jurisdiction (nor did Sir Hersch imply otherwise). In the present
case, Thailand's second [p 163]preliminary objection was of course fully argued by the Parties. I associate myself with Judge Gros' allusion, in paragraph 28 of his separate opinion, to the
But once the Court, by rejecting the first preliminary objection, has found that it has jurisdiction problem of the exhaustion of local remedies.
to go into the merits of the dispute . .. the matter is, strictly, concluded, and a finding, whether
for or against Thailand, on her second preliminary objection, could add nothing material to the I would also observe that the procedural processes of the Court happily facilitate an informal
conclusion, already arrived at, that the Court is competent." but nonetheless fruitful division of labour when some judges feel obliged to file separate
opinions. Having had the benefit of a preview of the separate opinions of Judges Sir Gerald
7. In Barcelona Traction, Light and Power Company, Limited, Preliminary Objections, I.C.J. Fitzmaurice and Gros, I feel content to leave to their opinions, and to other separate opinions
Reports 1964, p. 4, Judge Tanaka in his separate opinion said (at p. 65): as well, the amplification of certain juridical considerations which I do not treat, even as they
have been willing to rely on some of my factual summaries. In neither case does it necessarily
follow that I or they reach the same conclusions on each point of law or fact.
"The more important function of the Court as the principal judicial organ of the United Nations
is to be found not only in the settlement of concrete disputes, but also in its reasoning, through ***
which it may contribute to the development of international law."
10. In adjudicating upon the Barcelona Traction case the Court must apply rules from one of ---------------------------------------------------------------------------------------------------------------------
the most controversial branches of international law. The subject of the responsibility of States FN1 Paul De Visscher sees the change developing after the decision in the Ruden case in 1870;
for injuries to aliens (otherwise referred to as the diplomatic protection of nationals), evokes in 102 Hague Recueil 1961, II, at pp. 467-468.
many current writings recollections of political abuses in past eras.FN1. The Court is not ---------------------------------------------------------------------------------------------------------------------
involved here in any conflict between great capital-exporting States and States in course of
development. Belgium and Spain are States which, in those terms, belong in the same Since the critical date in this case is 1948, developments in the law [p 166] and procedures
grouping. I do not agree with the Spanish contention on 20 May 1969 that Belgium was merely during the ensuing last two decades are not controlling.
trying to get the Court to internationalize a private litigation, but it is true that basically the
conflict was between a powerful Spanish financial group and a comparable non-Spanish group. 12. Any court's application of a rule of law to a particular case, involves an interpretation of the
This case cannot be said to evoke problems of "neo-colonialism". rule. Historical and logical and tele-ological tools may be used by the judge, consciously or
unconsciously. If the Court in the instant case had decided to include more factors in its
--------------------------------------------------------------------------------------------------------------------- Judgment, it could have clarified the traditional system in the light of clearer understandings of
FN1 The writer may be excused for mentioning that he described and deplored such abuses, business practices and forms of corporate organization, as these were already well developed
more than two decades ago: A Modern Law of Nations, 1947, Chapter V. Happily, the days of two decades ago when the events called into question in this case transpired. Legal norms
"gun-boat diplomacy" are now lost in limbo. applicable to those events should not be swept aside on the assumption that they have already
--------------------------------------------------------------------------------------------------------------------- become mere cobwebs in the attics of legal history. Corporations today and tomorrow may well
[p 165] utilize other methods of financing and controlling foreign enterprises, and governments will
have adapted or will adapt their own laws and practices to meet the realities of the economic
Moreover, the Court is not here in the least concerned with such provocative problems as State factors which affect the general interests of the State. The "law of international economic
sovereignty over natural resources or the rules applicable to compensation in case of development" will mature. Thus joint business ventures, State guarantees of foreign
nationalizations or expropriations. Professor F. V. García Amador, in his sixth report as Special investment, the use of international organizations such as the IBRD and UNDP, may in the
Rapporteur of the International Law Commission on State responsibility (Yearbook of the course of time relegate the case of Barcelona Traction to the status now occupied by Delagoa
International Law Commission, 1961, Vol. II, p. 2 at p. 46), set forth an admirable attitude: Bay—a precedent to be cited by advocates if helpful to the pleading of a cause, but not a
guiding element in the life of the international business community.
". . . his purpose was to take into account the profound changes which are occurring in
international law, in so far as they are capable of affecting the traditional ideas and principles Nevertheless, the Court has the duty to settle a specific dispute between Belgium and Spain
relating to responsibility. The only reason why, in this endeavour, he rejected notions or which arose out of Spain's exercising jurisdiction over a complex of foreign corporate
opinions for which acceptance is being sought in our time, is that he firmly believes that any enterprises.
notion or opinion which postulates extreme positions—whatever may be the underlying purpose
or motive —is incompatible and irreconcilable with the idea of securing the recognition and 13. There is a trend in the direction of extending the jurisdictional power of the State to deal
adequate legal protection of all the legitimate interests involved. That has been the policy with foreign enterprises which have contact with the State's territorial domain; ". . . all that can
followed by the Commission hitherto and no doubt will continue to be its policy in the future." be required of a State is that it should not overstep the limits which international law places
upon its jurisdiction; within these limits, its title to exercise jurisdiction rests in its
11. The institution "of the right to give diplomatic protection to nationals abroad was recognized sovereignty[FN1]. But what are the limits placed by international law? Do the courts of the
in . . . the Vienna Convention on Diplomatic Relations, 1961", as Mr. Gros (as he then was) United States, for example, go too far in applying its anti-trust laws to foreign enterprises,
reminded the sub-committee of the International Law Commission (Yearbook of the following the statement of principle by Judge Hand in Alcoa [FN2]? But that principle is
International Law Commission, 1963, Vol. II, p. 230). The institution of the right to give accepted in at least six other countries [FN3]. Are the jurisdictional limits on national jurisdiction
diplomatic protection is surely not obsolete although new procedures are emerging. exceeded in the cases dealing with product liability of a [p 167]"giant octopus corporation" with
multiple subsidiaries abroad? Rules valid enough for inter-state conflicts within the
With reference to diplomatic protection of corporate interests, the customary international law constitutional system of the United States, may be improper when placing a burden on
began to change in the latter half of the nineteenth century FN1. As Jennings writes, in international commerce FN1. The Committee on International Law of the Association of the Bar
somewhat picturesque and Kiplingesque language : of the City of New York concluded that ". . . the extension of the regulatory and penal
provisions of the Securities Ex-change Act of 1934 ... to foreign corporations which have neither
listed securities in the United States nor publicly offered securities within the United States is a
"It is small wonder that difficulties arise when 19th century precedents about outrageous violation of international law FN2".
behaviour towards aliens residing in outlandish parts are sought to be pressed into service to
yield principles apposite to sophisticated programmes of international investment." (121 Hague ---------------------------------------------------------------------------------------------------------------------
Recueil 1967, II, p. 473.) -
[FN1] Lotus, Judgment No. 9, 1927, P.C.I. J., Series A, No. 10, p. 19.
[FN2] 148 Fed. 2d 416 (1946). Cf. Jessup, Transnational Law, 1956, pp. 73 ff. FN1 Under the British-United States Claims Convention of 1853, the umpire awarded damages
[FN3] Drachsler, "American Parent and Alien Subsidiary: International Anti-trust Problems of the to the owners of the British collier Confidence, which had been run down by the United States
Multinational Corporation", Bulletin of the Section of International frigate Constitution;III Moore, International Arbitrations, 3063. Cf. The Lindisfarne, in the
FN1 Mecsas, "Personal Jurisdiction over Foreign Corporations in Product Liability Actions: Forum United States-Great Britain Claims Commission under the 1910 Treaty, VI U.N.R.I.A.A., 21.
Non Conveniens and Due Process Limitations on In Personam Jurisdiction over Foreign FN2 So in Ruden's case and in Johnson's case, in the United States-Peruvian Claims Commission
Corporations", 50 Cornell Law Quarterly, p. 551 at p. 563 (1965). Cf. American Law Institute, 1870, awards were made to the claimants when a circular of the Minister of Justice forbade the
Restatement of the Law, Second,— Conflict of Laws, Title C (1967 ed.). judges to receive suits of the type in question. Moore, International Arbitrations, Vol. III, pp.
FN2 The Record of the Association, Vol. 21, No. 4, April 1966, p. 240 at p. 252. 1653 and 1656.
--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------

14. In States having different types of economic and financial problems, international law has 16. In connection with the instant case, the question arises from the argument that there can
become increasingly permissive of actions involving nationalizations. In place of what used to be no international right to damages for shareholders indirectly injured by damage to the
be denounced as illegal expropriation, the issues now turn largely on the measure of company in which they hold shares, since no such right is generally established in municipal
compensation, since even the famous General Assembly Resolution on Permanent Sovereignty law. Much reliance is placed upon the proposition that under most systems of municipal law,
Over Natural Resources FN3, provides that compensation is due. shareholders have no rights in or to the assets of the corporation until after it is dissolved or
wound up. Shareholders' suits are indeed provided by law in the United States and somwhat
To whom, in such cases is compensation due? If in the anti-trust, product-liability and other less extensively in Great Britain. In the United States "The derivative stockholder-plaintiff is not
situations, the corporate veil is freely pierced to assert the State's jurisdictional power, why only a nominal plaintiff, but at the same time a real [p 169] party in interest. He sues not solely
should it not also be pierced to determine the State's responsibility to the interests actually upon a corporate cause of action but also upon his own cause of action". See Koessler, "The
injured by action damaging to a foreign enterprise? In the instant case, Spain asserted its Stockholder's Suit: A Comparative View", 46 Columbia Law Review 1946, pages 238 and 242.
power to deal with Barcelona Traction's subsidiaries in Spain, disregarding the Canadian The provisions for shareholder suits in the European countries seem to be somewhat less
nationality of Ebro and others. The equitable balance of legal interests permits Belgium to favourable to the shareholder. But the trend in France is toward more protection of
pierce the veil of the Canadian "charter of convenience" and to assert the real interests of the shareholders, as Judge Gros points out in paragraph 11 of his separate opinion.
shareholders—assuming of course that their continuous Belgian character is established. In so
far as there has been an increase in the permissible limits of the exercise of State authority over 17. Although the concept of corporate personality is a creature of municipal law, none of the
foreign corporate enterprises, there must be an accompanying realistic liberalisation of rules theories evolved in that frame of reference can be relied on universally to explain the legal
identifying the State or States which may, in case of abuse, invoke the right of diplomatic relations surrounding that "technical legal device".
protection.
"Gierke's theory was based upon Germanic village communities, medieval guilds and similar
15. The legal rights which are vindicated through the international [p 168] procedure of truly corporate entities. But such a theory hardly fits the modern holding company. . . The
diplomatic protection, are not identical with rights derived from the applicable municipal law; result is that those who administer the law, whether as judges, revenue authorities, or as
the rights are on different planes. There are situations in which no right under municipal law administrators, in civilian and common law systems alike [and I would add in the international
exists because that law does not provide or permit legal action to enforce the claim, but law system] have had to discard all known theories of corporate personality, and to relativise
international law does afford a remedy. The obvious cases are those where an injury is inflicted the conception of juristic personality, respecting it for some purposes FN[1], disregarding it for
by a State instrumentality or agent which is immune from suit. If, for example, a naval vessel of others, in accordance with the nature of the problem before them." (Friedmann, Legal Theory,
State A negligently rams and sinks a merchant vessel of State B, and the law of State A does 5th ed. 1967, pp. 522-523. See also p. 571.)
not permit any legal action against the State or its instrumentality, State B, on the international
plane, may press a claim for damages on behalf of the vessel which possesses its nationality -----------------------------------------------------------------------------------------------------------
FN1. Of course if there are no local remedies, the international rule for exhaustion of such FN1 Thus, for example, where a corporation carries on a purely commercial activity,
remedies is not applicable and a State may incur international liability for the very reason that international law does not "pierce the veil" to grant it the sovereign immunity attaching to the
there is no local remedy FN2. Although statutes now provide in many countries a cause of State by which it is wholly owned and managed; see Harvard Research in International Law,
action for damages caused by the death of a person, no such cause of action existed at Report on Competence of Courts in Regard to Foreign States, 1932, Art. 12, p. 641.
common law. The subject was discussed by Umpire Parker in the Lusitania cases ((1923) VII ------------------------------------------------------------------------------------------------------------
U.N.R.I.A.A., pp. 32, 34 ff.), in holding that international law and practice support the
presentation of claims of heirs and widows (where the nationality requirements are met), I would paraphrase and adapt a dictum from a recent decision of the Supreme Court of the
irrespective of the question whether under the law of the State charged with responsibility for United States in an anti-trust case: the International Court of Justice in the instant case is "not
wrongful death, the heir or widow has a right to damages. bound by formal conceptions of" corporation law. "We must look at the economic reality of the
relevant transactions" and identify "the overwhelmingly dominant feature" [FN2]. The
--------------------------------------------------------------------------------------------------------------------- overwhelmingly dominant feature in the affairs of Barcelona Traction was not the fact of
incorporation in Canada, but the controlling influence [p 170] of far-flung international financial Judgment (I.C.J. Reports 1955, pp. 4, 22), which will be discussed later in this opinion.
interests manifested in the Sofina grouping.
---------------------------------------------------------------------------------------------------------------------
It may well be that the new structures of international enterprise will be increasingly important FN1 The analogy may be drawn even though the nationality of shareholders is not the test of
FN1, but any glance at the world-wide picture today shows that non-governmental corporations the nationality of a corporation for purposes of international law.
still have a major role to play FN2. That is why so many new States, and the United Nations ---------------------------------------------------------------------------------------------------------------------
itself, encourage the investment of private capital FN3.
If Canada could be considered the State of the "real and effective nationality" of Barcelona
--------------------------------------------------------------------------------------------------------------------- Traction and if Canada assumed and maintained the role of Barcelona Traction's diplomatic
[FN2] Mr. Justice Marshall delivering the opinion of the Court in United States v. The protector, such facts would militate against the Belgian posture that Belgium was the State
Concentrated Phosphate Export Assn. Inc. et al., 89 S. Ct. p. 361 at pp. 366-367, 1968. Cf. the entitled to press the claim. The arguments of the Parties followed some such theory; Counsel
statement of a leading member of the New York Bar: "To give any degree of reality to the for Spain called it an "essential point" and examined at length the record of Canadian diplomatic
treatment, in legal terms, of the means for the settlement of international economic disputes, activity in the case (20 June 1969). The lack or failure of Canadian diplomatic protection is
one must examine the international community, its emerging organizations, its dynamics, and distinctly relevant to an analysis of the so-called "exceptions" to the alleged general rule that
relationships among its greatly expanded membership." (Spofford, "Third Party Judgment and only the State of which the company has the nationality is entitled to claim on its behalf. Such
International Economic Transactions", 113 Hague Recueil 1964, III, pp. 121-123.) "exceptions" will be discussed later. The facts relative to the positions as claimant Governments
FN1 See Friedmann et al., International Financial Aid, 1966; Kirdar, The Structure of United of Canada and Belgium—and of Great Britain and the United States as well—must accordingly
Nations Economic Aid to Underdeveloped Countries, 1966. be taken into account. The record throws light on the nature and extent of the several national
FN2 See Friedmann, The Changing Structure of International Law, 1964, Chap. 14; Hyde, interests.
"Economic Development Agreements", 105 Hague Recueil 1962, I, p. 271.
FN3 Blough, "The Furtherance of Economic Development", International Organization, 1965, In the instant case, Spain was at one time confronted by diplomatic representations of Great
Vol. XIX, p. 562, and especially, Dirk Stikker's report to UNCTAD on "The Role of private Britain, Canada, the United States and Belgium. But at that stage of multiple diplomatic activity,
enterprise in investment and promotion of exports in developing countries" (1968), UN Doc. specific claims for damages were not being advanced; Spain was being asked to take steps to
TD/35/Rev.l, and "Panel on Foreign Investment in Developing Countries", Amsterdam, 16-20 halt what were considered to be destructive actions against Barcelona Traction. Spain's replies
February, 1969, E/4654, ST/ECA/117. in the early stages rested on the proposition that the Government could not interfere with the
--------------------------------------------------------------------------------------------------------------------- normal functioning of the Spanish courts.

*** Great Britain

The Right to Extend Diplomatic Protection to Corporate Enterprises 20. The first British Note was dated 23 February 1948 and asserted an interest due to the
dismissal of high-ranking British officers in the Barcelona Traction company and to the position
18. The decision of the Court, in this case, is based on the legal conclusion that only Canada of bondholders "resident in the United Kingdom". (A.P.O. (1960), Vol. III, pp. 193 ff. for this
had a right to present a diplomatic claim on behalf of Barcelona Traction which was a company and subsequent demarches, except as otherwise noted.) In the next British Note, of 27 March,
of Canadian nationality. My own conclusion is that, for reasons which I shall explain, Canada did there was support for the Canadian representations [p 172] "on behalf of the United Kingdom
not have, in this case, a right to claim on behalf of Barcelona Traction. As a matter of general bondholders". On 28 September 1951, the British Note speaks on behalf of the protection of
international law, it is also my conclusion that a State, under certain circumstances, has a right (unidentified) "shareholders and bondholders". Thereafter, aside from correspondence about
to present a diplomatic claim on behalf of shareholders who are its nationals. As a matter of the failure of Spain to reply to the British Notes and about the committee of experts and its
proof of fact, I find that Belgium did not succeed in proving the Belgian nationality, between the report in 1951, the British position seemed to be merely one of supporting Canada. Throughout
critical dates, of those natural and juristic persons on whose behalf it sought to claim. The this period, Canada had no embassy in Madrid and its notes were transmitted through the
Belgian claim must therefore be rejected. British Embassy. But the Receiver and Manager of Barcelona Traction, in a memorandum
submitted to the Supreme Court of Ontario, on 24 December 1951, reported a conference with
The Record of Actual Diplomatic Representations British Treasury officials in London on the preceding 25 July, during which Mr. Eggers, a
representative of the Treasury, "stated that Great Britain had taken no action independent of
19. If a State extends its diplomatic protection to a corporation to which it has granted a Canada. He insinuated that the British had merely followed the Canadian lead which we know
"charter of convenience" while at the same time [p 171] similar diplomatic assistance is being to be untrue". (Emphasis supplied.) (Receivership Docs., Vol. 5, p. 772.) The basis for this last
extended by another State whose nationals hold 100 per cent, of the shares, the situation conclusion is not clear.
might be considered analogous to cases of dual nationality of natural persons FN1. In those
cases, international jurisprudence supports the principle that preference should be given to the Canada
"real and effective nationality", as was held by this Court in the Nottebohm, Second Phase,
21. The aid of the Canadian Government was originally requested by National Trust, as trustee informing him that the Canadian Department of External Affairs had asked him to put up
for certain Barcelona bond issues, which made representations to the Canadian Government $20,000 to cover the fees and expenses of Mr. Norman, the Canadian member of the
when it learned of the developments in Spain following the bankruptcy judgment of 12 Commission. The Receiver and Manager asked for authority to pay that amount and said:
February 1948. Counsel for National Trust informed the Supreme Court of Ontario that:
"It is my opinion that the intervention of the Government of Canada in this matter has been of
"The Government of Canada as a result of such representations made a demarche to the the utmost importance and that the continued support of the Government of Canada is
Government of Spain through appropriate diplomatic channels with regard to the matter . . . essential if the integrity of the portfolio held by the plaintiff [National Trust] is to be restored
FN1" (Receivership Docs., Vol. 1, p. 16. A memorandum in ibid., Vol. 4, p. 585, indicates that and the properties presently under seizure in Spain are to be recovered." (Receivership Docs.,
Barcelona Traction joined National Trust in its representations.) Vol. 4, p. 585.)[p 174]

----------------------------------------------------------------------------------------------------------- In its pleading, Spain took the position, on 20 June 1969, that when the Canadian and British
FN1 This statement was made by Counsel on 9 July 1948 in connection with National Trust's members of the Committee joined in signing an Agreed Minute which supported the Spanish
application for the appointment of a receiver and manager, an application which was granted contention that foreign exchange had been denied to Barcelona Traction because the company
by the Court on 15 July 1948. refused to furnish the information demanded by the Spanish authorities, this was an indication
------------------------------------------------------------------------------------------------------------ that the Canadian Government was satisfied that there was no basis for Barcelona's complaints.
However, Mr. Glassco, the Receiver and Manager, informed the Ontario Court through his
22. The first Canadian Note—like the first Belgian Note and the second British Note—was dated memorandum of 24 December 1951 that he had attended a conference in the Department of
27 March 1948. (The Belgian Note will be cited later to A.M., Vol. IV, Annex 250.) Canada made External Affairs in Ottawa together with representatives of National Trust and Barcelona
an official protest, alleging a denial of justice to Barcelona Traction, Ebro and National Trust, Traction. He said they—
because of a lack of proper notice and an absence of jurisdiction under the principles of private
international law. Passing over some of the Canadian notes, one finds that on 21 July 1949 a ". . . were advised that the Canadian and British Governments had signed the Agreed Minute in
long [p 173] note of protest alleges discrimination against Canadian interests and against order to prevent the issuance of a much stronger unilateral statement by the Spanish
"foreign investments in Spain"; the emphasis is on Ebro, a Canadian corporation. Government; that the statements in the Agreed Minute with respect to foreign exchange had
been agreed with a view to saving the face of the Spanish Government as regards the non-
23. In February of 1950, there was close collaboration between the Canadian and Belgian provision of foreign exchange to the subsidiaries of the defendant [Barcelona Traction] in the
Governments; they proposed to urge the Spanish Government to agree to the appointment of a past; and that the Canadian and British Governments hoped that the atmosphere created by
committee of experts composed of representatives of Spain, Canada and Belgium to study the Agreed Minute would be such that the private interests concerned could work out a
certain financial aspects of the Barcelona case. The Governments of Great Britain and of the settlement of their differences in the expectation that a suitable modus operandi for the future
United States were also consulted by Canada and it was planned that those governments would could be achieved with the Spanish Government". (Ibid., Vol. 5, p. 756.)
support the démarche. Canadian drafts of the proposed note to Spain were submitted to the
three other Governments. Throughout, Canada stressed its appreciation of the large financial 25. The next Canadian Note of 26 July 1951 reflects a continuing Canadian interest since it
interest of Belgian nationals in Barcelona Traction. A text provisionally approved, stated that the objects to the issuance of new share certificates of the subsidiaries which "would be to render
Governments of the United Kingdom and of the United States "are interested in this matter as it valueless the previously issued shares". Ebro, National Trust and Barcelona Traction
relates to the security of foreign investments generally". The phrasing of the quoted clause was bondholders are mentioned. The Canadian Note of 28 September 1951 stresses both Ebro and
suggested by the United States. Before the final text could be co-ordinated with all the four Barcelona Traction and says Canada "feels bound to renew its representations .. . for the
Governments, the Spanish Government took the initiative by a Note of 16 March 1950 to the protection of the interests of these companies". A long Note of 22 December 1951 invokes
British Embassy in Madrid, proposing a similar commission, but composed of Spanish, Canadian Canadian rights under a treaty between the United Kingdom and Spain concerning respect for
and British representatives; Belgium was omitted FN1. corporate personality and offers to arbitrate that issue. The Note reserves the "right to make
any claim under international law which may be open to it if the sale of the assets takes place
--------------------------------------------------------------------------------------------------------------------- on the 4th January, 1952, since it is advised that this would constitute a denial of justice". In
FN1 The documentation is in A.R., Annexes 37 and 38. Mr. Heineman, the directing personality this Note, Barcelona Traction, Ebro, Catalonian Land, International Utilities and National Trust
of Barcelona Traction, on 24 February 1950, was apparently confident that the Canadian Note as trustee for the bonds, are all mentioned. (A.C.M., Vol. VI, Annex 1, No. 28 FN1) [p 175]
was about to be delivered with the support of the other three Governments; telegram
Heineman to Brosens in Buenos Aires, 24 February 1950, O. & S., New Docs. 1964, App. 8. ---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------- FN1 Consequent upon certain enquiries and observations from the Bench, Belgium produced
additional documentation in 1964 and in 1969: see e.g., Distr. 64/72 and 64/74 and 1969 New
24. There is some question whether the Canadian and British participation in the Tripartite Docs. 42-45.
Committee of Experts in 1950-1951 should be considered as an aspect of diplomatic protection. ---------------------------------------------------------------------------------------------------------------------
The Receiver and Manager on 16 November 1950 sent a memorandum to the Ontario Court
26. On 12 February 1952, the Belgian Ambassador in Madrid reported a conversation with the Nos. 44-45.)
Spanish Minister for Foreign Affairs, Mr. Artajo, in which the latter told him that the Spanish
Consul in Ottawa had talked about the Barcelona case with the Canadian Secretary of State for It is a fair conclusion that Canadian diplomatic protection of Barcelona Traction ceased in April
External Affairs who said: (tr.) "The Canadian interests in this case are so small that it interests 1952.
us very little." Such a view does not seem to be quite in line with the Canadian Note of 21 April
1952 which was produced as a new document by Belgium in May 1964. The Note repeats the United States
Canadian view of the mistreatment of the companies in Spain, especially Ebro; invokes again
the treaty of 1922 and willingness to resort to arbitration ; but concludes that no further 28. Apparently the first diplomatic demarche by the United States Government on behalf of
exchange of Notes was apt to help reach a settlement and that private negotiations might be Barcelona Traction was a Note from the Charge in Madrid to Foreign Minister Artajo on 22 July
the best way to a solution. In sending a copy of this Note to the Belgian Ambassador in Ottawa, 1949. The Note stated that:
the Canadian Government noted that it was much shorter than a draft which had previously
been shown to the Belgian Government— there was no use reiterating legal arguments. (K. J. ". . . the Government of the United States lends its support to and is in concurrence with the
Burbridge to Vicomte du Parc, 7 May 1952.) It was not until 10 May 1969 that Mr. Artajo, in a Note of 21 July 1949, submitted to your Ministry by the British Embassy on behalf of the
letter in reply to an enquiry from the Spanish Agent in the Barcelona Traction case before this Canadian Government, the Note in question relating to the treatment which has been and is
Court, flatly denied the accuracy of the Belgian Ambassador's report. (Spanish New Docs., 16 currently being accorded to the Canadian company, Barcelona Traction, Light and Power
May 1969, Vol. III, p. 181.) The lapse of time in securing such a denial was not explained. Company Limited, a company in which American citizens have interests ... The treatment which
had been accorded this company, in which [p 177] foreign capital is so heavily invested, has
27. Canada's further activity in the case was moderate. On 15 February 1955, Mr. Arthur Dean, had an adverse effect in foreign banking and investment circles . . ." (A.P.O., 1960, Vol. III, p.
American attorney for Sidro, suggested to Wilmers in Brussels that it would be helpful if Canada 247.)
would join in a demarche in Madrid, although he doubted whether Canada could be convinced
that they had sufficient interest other than in the rights of the Canadian trustee for the bonds. Attention has already been called to the co-operation of the United States with Canada in
(O. & S., New Docs., 1964, App. 13.) Canada had by this time established its own embassy in February 1950, where American interests were described as arising from "the security of foreign
Madrid and it appears that the Canadian Secretary of State for External Affairs had paid a investments generally".
personal call on the Foreign Office in Madrid in connection with the Barcelona case in 1954
(A.C.M., Vol. VI, p. 109). On 21 March 1955 the Canadian Government had commended Mr. In June and July 1951, the United States Embassy requested complete copies of the reports of
Dean's visit, saying that Canada "continues, of course, to be deeply interested in the affair of the Spanish experts on the international tripartite committee and "reiterates its deep interest in
Barcelona Traction". (A.C.M., Chap. II, Ann. 1, Doc. No. 30.) On 1 July 1955, Mr. Dean wrote at the issues involved in the case of the Barcelona Traction Company . .." (ibid., pp. 249 and 251).
length to Mr. Pearson, Canadian Secretary of State for External Affairs, reporting on his visit in It seems that the United States Secretary of Commerce, when in Madrid in October 1954,
Madrid. He hoped Canadian Ambassador Pope would be instructed to join in energetic brought up with some officials of the Spanish Government the possibility of that Government's
representations [p 176] to Foreign Minister Artajo. (New Docs., 1964.) Mr. Pearson replied on intervention in the judicial proceedings; he was told this was hardly possible. (Spanish New
19 July that Canada believed that the best hope lay in private negotiations. Docs., 1969, Vol. III, p. 174.)

"The Canadian Government has not been prepared actually to intervene in this matter or to 29. In 1955, United States Ambassador John Lodge in Madrid lent his assistance to Mr. Arthur
make representations to the Spanish Government as to the measures which ought to be taken Dean in connection with his efforts on behalf of Sidro. An office memorandum of the Spanish
toward a settlement." Ministry of Foreign Affairs, 30 March 1955, recorded that Ambassador Lodge had phoned to
support Mr. Dean's request for an interview with Minister for Foreign Affairs Artajo.
The requested instructions to Ambassador Pope would not be sent. (Ibid.) In 1957, Belgium
informed Canada that they intended to resort to the International Court of Justice. The "The United States Ambassador stressed the extraordinary interest —he insisted that it be put
Canadian official merely expressed his appreciation for the courtesy of keeping him informed. that way—which the State Department attributes to a rapid and satisfactory solution of that
Belgium similarly notified Ottawa in 1964 and 1965. (Belgian New Docs., Nos. 42 et seq.) matter about which the aforesaid Department continues to be concerned. He suggests the
opportuneness of a solution by direct negotiations between the parties." (Loc. cit.)
Finally, further questions from the Bench were conveyed by the Belgian Ambassador in Ottawa
on 23 June 1969, to the Canadian Secretary of State for External Affairs, who replied on the The interview was granted—the request having been supported by the Canadian Embassy
following day that the correspondence which had passed between the Canadian and Spanish also—and Mr. Dean in writing to Mr. Artajo to express his thanks, stated:
Governments was in the dossier before the Court and was self-explanatory.
"Our inability to arrive at an appropriate settlement of this matter is naturally a matter of very
"As was suggested in a communication of 21 April 1952, the Government of Canada was of the great concern to the management and shareholders of Sofina, in which there is now a
opinion that there was little chance of settling this dispute by means of additional diplomatic substantial American interest. . ." (Spanish New Docs., 1969, Vol. III, p. 178.)
representations. The Government of Canada has acted accordingly." (My trans., New Docs.
Mr. Dean informed Mr. Lester Pearson, the Canadian Secretary of State for External Affairs,
about his visits as already noted. He explains that if his receivership is successful, he will have plenty of United States dollars to
repay the loan but:
30. But despite the warmth of Ambassador Lodge's message to the Spanish Foreign Office, it is
clear that the interest of the United States was of a general nature and that its support did not "Looking at the darkest side of the picture, should the portfolio prove unsaleable, the position
amount to diplomatic protection of the Barcelona Traction company or of any identified [p 178] would simply be that Amitas would be unable to collect anything upon the Receiver's certificates
shareholders in that company or in Sidro or in Sofina. In a cable of 15 February 1955, before as there is no personal liability attached thereto." (Ibid., p. 277. The last receiver's request to
the visits to Madrid which have just been described, Mr. Dean advised Wilmers, President of the Court for authority to borrow, which is recorded in the Receivership Documents filed with
Barcelona Traction and then in Brussels, that he had— this Court by Spain, was on 19 March 1963; Vol. 8, p. 1356.)

". . . received request from our Department [sc. Department of State] suggesting they have This evidence supports the Belgian assertion that the Receiver was financed by Sofina, but of
never considered operating company in question [sc. Barcelona Traction] American and have course there were American interests in Sofina. The Receiver in his numerous requests did not
treated this matter not as a protection case but on more general grounds of principle regarding refer to nominees or to the trust agreement of Sidro with Securitas which will be discussed later
treatment and encouragement of international investment and would appreciate extent to in this opinion.
which U.S. capital now participating in company". (O. & S., New Docs. 1964, App. 13.)
32. On 25 May 1967, the Belgian Embassy in Washington enquired of the United States
It is not known what information was given to the State Department concerning the extent of Department of State whether the first United States Note of 22 July 1949, concerning American
the United States capital participation at that time FN1. It seems clear from the record that the interests in Barcelona Traction, had in mind Americans interested as owners or beneficial
placing of Barcelona Traction shares in the names of American nominees did not require any owners of shares or whether it included also American citizens acting as trustees or nominees
investment of United States capital. But Mr. Dean apparently represented both Sidro and Sofina for third persons not having American nationality. The State Department's reply of 5 June 1967
and on 1 February 1955 he informed the Spanish Ambassador in Washington that Sofina was stated that the 1949 Note was inspired by questions of principle relative to the equitable
"the majority common shareholder" in Barcelona Traction, and informed the Spanish Foreign treatment of foreign investments in order to preserve the confidence of foreign investors in the
Minister that there was a "substantial American interest" in Sofina. (The letter to the security of their investments in Spain. The interests of American citizens which were mentioned
Ambassador is in the New Documents presented by Spain on 16 March 1964.) in the 1949 Note, referred only to those who had rights of property or beneficial ownership in
the company. (Belgian New Doc. 5 presented 7 April 1969.)
---------------------------------------------------------------------------------------------------------------------
FN1 As indicated elsewhere, the evidence offered concerning certifications and payments of Belgium
coupons does not seem persuasive despite the argument of counsel for Belgium on 8 July 1969
citing A.M., Vol. I, Annexes 18 and 20, pp. 133 and 142. 33. The first Belgian Note concerning the Barcelona Traction case is dated 27 March 1948
--------------------------------------------------------------------------------------------------------------------- (A.M., Vol. IV, Annex 250). The Note stresses the importance of Belgian interests in Barcelona
Traction by asserting that Sidro owns more than 70 per cent. of the shares of Barcelona
31. There were references by Spain to Amitas, a Delaware corporation which financed the Traction and other Belgian individuals own enough to bring the total to 80 per [p 180] cent. In
National Trust receivership, as if it represented a United States interest, but the real interest addition, the Belgian State had 50,000 shares of Sidro received as a capital tax, and 40 to 45
there seems to have been Belgian. The Canadian Receiver and Manager of National Trust per cent. of the First Mortgage bonds of Barcelona Traction were also held by Belgians. Like the
borrowed at least $980,000 from Amitas by selling to Amitas Receiver's 5 per cent. certificates. British Government, the Belgian Government notes that some of the higher ranks of the
In his request to the Ontario Court for authorization to borrow the first $100,000 on 25 August personnel of the companies have been discharged, especially Mr. William Menschaert, a Belgian
1949, the Receiver and Manager referred to this— national, President and sole legal representative of Ebro in Spain. The proceedings in Spain are
summarized and declared improper or illegal. The note concludes with the statement that there
"American Intercontinental Trade & Service Company (Amitas) Inc., a Delaware corporation has been a series of denials of justice which cannot help but gravely injure legitimate Belgian
which is understood to be associated or affiliated with a Belgian corporation which holds bonds interests in the companies involved. The Spanish reply as usual indicated that the Government
and the majority of the outstanding shares" could not interfere with the courts.

of Barcelona Traction. (Receivership Docs., Vol. 2, p. 273.) On 3 August he had written to the The next Belgian Note on 22 July 1949 touched on the refusal of foreign exchange, reviewed
Canadian Foreign Exchange Control Board about [p 179]the anticipated dollar transaction, and the further steps in the Spanish proceedings and repeated that the denial of justice continued
made a more definite statement. He stated that Amitas is— to injure very important Belgian interests (ibid., Annex 252). Spain sent a reasoned rebuttal on
26 September 1949 but did not challenge Belgium's right to speak for the Belgian interests
"controlled, I believe wholly owned, by the Belgian interests, commonly referred to as 'Sofina', (ibid., Annex 253).
who are the majority owners of the equity stock of the Barcelona company and who also hold a
substantial quantity of its bonds". 34. As already noted, in February 1950 Belgium was actively cooperating with Canada on the
project for establishing a tripartite committee of experts. When this demarche was frustrated by pledged under the Barcelona Traction Prior Lien and First Mortgage bonds held by National
the Spanish proposal, Belgium vigorously objected to being left off the Committee of Experts. Trust Co., Ltd., as trustee, included bonds and shares of Ebro and of Catalonian Land Co., Ltd.,
Belgium's next diplomatic protest was on 13 July 1951 (ibid., Annex 254). Stress was laid on and other subsidiaries. Of Ebro, for example, there were some £11 million face value, of bonds
the effect of the measures in Spain on the Belgian investors. It was said that in equity, note and some 300,000 shares of stock. (In another connection, it is interesting that many of the
should be taken of the interest of Barcelona Traction in Ebro and of the interest of Sidro in shares had blank powers of attorney attached to the certificates. [p 182]
Barcelona; the interest of the Belgian investors in Sidro was given at 40 to 45 per cent., without
counting the participation of Sofina which was 35 per cent. After there had been some See Receivership Documents, Vol. 1, p. 54.) But Canada apparently had no deep abiding
conversations on the subject, the Belgian Note of 7 November 1951 again stressed their interest either in Canadian shareholdings in Barcelona Traction, for they were not large, or in
concern in the protection of very important Belgian interests and enclosed a memorandum on the company itself which (at least after the payment of the bonds) was linked to Canada only
Spanish law (ibid., Annex 256). by the "charter of convenience" and the receivership proceedings FN1. The latter were not of a
nature to stimulate Canadian diplomatic action, although, under the supervision of the Ontario
35. The Spanish reply of 14 November 1951 now insisted that diplomatic intervention in the court, the Receiver and Manager took an active part in trying to promote a settlement through
Barcelona Traction case was the exclusive function of the Canadian and British Governments, negotiations of the private interests involved. (See Receivership Documents, Vol. 5, p. 774.) I
whose representatives had been asked to join in the expert committee to examine the question do not find it credible that Canada can be considered to be competing with Belgium in
of the refusal of foreign exchange (ibid., Annex 257). Belgium replied on 6 December, diplomatic protection of the interests clustered around Barcelona Traction.
discussing the merits of the matter and asserting that the importance of the Belgian interests in
the capital of Barcelona Traction justified Belgium being represented on the Committee of ---------------------------------------------------------------------------------------------------------------------
Experts. On the same date, Belgium proposed arbitration under the treaty of 19 July 1927; [p FN1 Belgian counsel's argument on 30 June 1969 about the "violation of Canadian sovereignty"
181] the issue would be the damage to Belgian interests caused by the bankruptcy of Barcelona and interference with the functions of the receiver as a Canadian "public authority" does not
(ibid., Annex 258). The Spanish reply of 22 December 1951 argued that Belgium had not seem to reflect the actual thinking of the Canadian Government.
complied with the 1927 treaty since it had not presented a formal claim, had not proved the ---------------------------------------------------------------------------------------------------------------------
Belgian nationality of the shareholders in a Canadian company, and had not shown that Belgian
interests had been injured by an illegal act on the part of Spain (ibid., Annex 259). Belgium The interests of the United States and Great Britain were those of governments of States which
replied in rebuttal on 31 December 1951, and Spain countered on 3 January 1952 (ibid., contain great financial capitals—New York and London. Neither of them pressed claims on
Annexes 260 and 261). At this stage the issue concerning the right of Belgium to interpose in behalf of specific persons whether natural or juristic. Both Governments have a general interest
connection with a Canadian company, comes sharply into focus. in the welfare of international "banking and investment circles" which are closely linked with
their national economies.
36. A Belgian Note of 21 March 1955, indicating the possibility of private negotiations which
were then in train, and mentioning the visits of Mr. Dean, is not printed in the Annexes to the Belgium remains the only identifiable claimant against Spain in connection with the bankruptcy
Belgian Memorial but as Annex 66, Document No. 2, of the 1963 Preliminary Objections. Then, of the Barcelona Traction Company.
on 31 December 1956, Belgium sent a long Note summarizing the whole affair (A.M., Vol. IV,
Annex 262). On 16 May 1957, a further Belgian Note refers to certain personal conversations of If, under international law, a State is not entitled to extend its diplomatic protection to large
their Ambassador in Madrid and broaches the possibility of a judicial settlement (ibid., Annex shareholder interests of its nationals in circumstances such as those in the instant case, none of
263). The Spanish Note of 10 June 1957 and the Belgian Note of 8 July deal extensively with the equity interests in the Barcelona Traction enterprise would be entitled to diplomatic pro-
the question of the right of Belgium to act in this case (ibid., Annexes 264 and 265). The last tection. I do not believe international law requires that such a conclusion be reached.
Note puts more stress on the 50,000 shares held by the Belgian State and summarizes again
the extent of the interests of Sidro. It seems unnecessary to follow the ensuing correspondence ***
which involves the actual Application to this Court, the discontinuance and the new Application
of 1962. 38. There is no question that, under international law, a State has in general a right to extend
its diplomatic protection to a corporation which has its nationality, or national character as it is
37. It is hard to explain the apparent reluctance of the applicant Government to place this more properly called. The proposition raises two questions :
entire record before the Court in a composite and coherent form especially in view of their
recent initiative in eliciting the information from the Government of the United States as noted (1) What are the tests to determine the national character of a corporation?
above. But the conclusion emerges that although in 1948 the Canadian Government, like the
other three Governments involved, was disturbed by the judicial proceedings which overtook (2) Assuming the appropriate tests are met, must that national char [p 183]acter be "real and
Barcelona Traction in Spain, the chief Canadian interest was in the securities of which National effective" as shown by the "link" between the corporation and the State, just as, in the
Trust was trustee and that when the bonds were paid off after the assets were sold in Spain, Nottebohm case, this Court decided that a certain claim to nationality is not enough in all
Canadian interest declined. This was the conclusion reached by counsel for Belgium in his situations to justify a State in extending its diplomatic protection to a natural person?
pleading in 1964. (Oral Proceedings, 13 May 1964.) It must be borne in mind that the securities
39. There are two standard tests of the "nationality" of a corporation. The place of ---------------------------------------------------------------------------------------------------------------------
incorporation is the test generally favoured in the legal systems of the common law, while the
siège social is more generally accepted in the civil law systems. (See Kronstein, "The Nationality It has been argued that the doctrine is equally applicable in the case of ships flying "flags of
of International Enterprises", 52 Columbia Law Review (1952), p. 983.) There is respectable convenience" and in relation to the diplomatic protection of corporations. I have maintained the
authority for requiring that both tests be met FN1. view that it should apply in both those situations FN2.

--------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------
FN1 There is ample coverage of the literature in the excellent study by Ginther, op. cit., infra. FN2 Jessup, "The United Nations Conference on the Law of the Sea", 59 Columbia Law Review,
-------------------------------------------------------------------------------------------------------------------- 1959, pp. 234, 256. Meyers, The Nationality of Ships, 1967, fully covers the question of flags of
convenience, and the applicability of the rule to corporations is treated in Harris, "The
It is not possible to speak of a single rule for all purposes. The tests used in private Protection of Companies in International Law in the Light of the Nottebohm Case", 18
international law have their own character, as well brought out by Caflisch, "La nationalité des International and Comparative Law Quarterly, April 1969, p. 275.
sociétés commerciales en droit international privé", Annuaire suisse de droit international, Vol. ---------------------------------------------------------------------------------------------------------------------
XXIV, 1967, page 119.
41. In the instant case the Parties did not debate the applicability of the link principle to the
Commercial treaties and claims conventions often contain their own definitions of which Barcelona Traction Company, but they were certainly aware of the question. The Spanish side
companies shall be considered to have the nationality of a State for purposes of the treaty. (Cf. stated:
Walker, "Provisions on Companies in United States Commercial Treaties", 50 American Journal
of International Law, 1956, p. 373; Wilson, United States Commercial Treaties and International ". . . the Spanish Government never disputed the effective character of Barcelona Traction's
Law, 1960; and, for a more comprehensive survey, Ginther, "Nationality of Corporations", Canadian nationality, because a number of factors were present which were sufficient proof of
Österreichische Zeitschrift für Öffentliches Recht, Vol. XVI, 1966, p. 28 at pp. 31-59.) The tests the existence of a real link between the company and the economic life of Canada". (P.O.,
used for such purposes may be quite different—even in the practice of the same State—from 1963, p. 190.)
the tests used for other purposes. For example, the "control" test was widely used to determine
the enemy character of property during war, but it is not established in international law as a Counsel for Belgium argued on 4 July 1969 that "if the Canadian Government had been able to
general test of the nationality of a corporation FN2. On the other hand, control may constitute espouse in international judicial proceedings the cause of Barcelona Traction, its action could
the essential link which, when joined to nationality, gives the State the right to extend have been challenged on the ground of the lack of sufficient true Canadian interest". Counsel
diplomatic protection to the corporation. It is a familiar fact that the laws of certain States for Spain responded directly to this remark on 21 July.
provide favourable conditions for companies incorporating therein, especially in relation to
taxation. Canada is one such State, Liechtenstein is another. In the United States, many 42. I am in full agreement with the proposition that the decisions of the International Court of
companies find it advantageous, for various reasons, to incorporate in Delaware or New Jersey Justice should not be based upon a legal rule or principle which has not been considered by the
FN3. Charters secured for such reasons may be called "charters of convenience". parties [FN3]—indeed, I believe that the failure to heed that proposition is the only criticism
which can properly be directed at the Court's decision in Nottebohm. When, however, both
--------------------------------------------------------------------------------------------------------------------- Parties have revealed a full awareness of the fact that the "link" principle might be applied to
FN2 See the observations of the Permanent Court of International Justice on the control test in test the national quality of Barcelona Traction, the fact that they did not choose to develop their
Certain German Interests in Polish Upper Silesia (Series A, No. 7, at p. 70). arguments on the ground of legal principle, rather than of fact, cannot operate to prevent the
FN3 Cf. Cahill, "Jurisdiction over Foreign Corporations and Individuals who Carry on Business Court from dealing with the principle. Of course [p 185] the question whether the link principle
within the Territory", 30 Harvard Law Review, 1917, p. 676. does apply to juristic persons is a question of international law and jura novit curia. The
--------------------------------------------------------------------------------------------------------------------- implication in the pleading of Belgian counsel just cited, intimated a conclusion that the link
principle does apply to juristic persons.
40. The Judgment of the Court in Nottebohm, Second Phase, in 1955 [p 184](I.C.J. Reports
1955, p. 4), has been widely discussed in the subsequent literature of international law, ---------------------------------------------------------------------------------------------------------------------
particularly with reference to the so-called "link theory" by which the effectiveness of nationality [FN3] The proposition has been admirably expounded in Carsten Smith, The Relation Between
may be tested FN1. Proceedings and Premises, a Study in International Law, 1962.
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
FN1 The wide range of unfavourable comments is reflected in the text and citations in Grossen, It is indeed true that since Spain admitted that Canada had a right to extend diplomatic
"Nationalité et protection diplomatique", Ius et Lex, Festgabe zum 70. Geburtstag von Max protection to Barcelona Traction, it may be argued that Spain is estopped to deny such a right
Gutzwiller, 1959, p. 489. Brownlie, Principles of Public International Law, 1966, has a full although the elements of true estoppel may be lacking and such estoppel could be claimed (if
treatment at pp. 323 ff. His position is generally favourable to the Court's judgment. at all) by Canada and not by Belgium. Aside from the fact that I believe the jurisprudence of the
Court has tended to rely too heavily on estoppel or preclusion, the question posed here is in the the nationality certificate or the acts of naturalisation produced, the right to citizenship was
first place a question of the Court's finding a rule of law. The Court in its Judgment does not regularly acquired, is in conformity with the very broad rule of effectivity which dominates the
accept the application of the link theory to juristic persons. Since I have reached the conclusion law of nationals entirely and allows the court to fulfill its legal function and remove the
that the existence of a link between a corporation holding a "charter of convenience" and the inconveniences specified." (Emphasis supplied.) (53 American Journal of International Law,
State granting the charter, is the key to the diplomatic protection of multinational corporate 1959, p. 944.)
interests, I cannot avoid the problems of law and fact on any such basis as the application of
the doctrine of estoppel in this particular case. That the link concept represents a general principle of law and not merely an ad hoc rule for
the decision of a particular case, is indicated also by its applicability to the test of the nationality
43. It has also been argued that the Court should not pass judgment on the question whether of ships which fly "flags of convenience". These maritime situations are comparable to the
there existed the necessary link between Canada and Barcelona Traction without hearing corporate situations just discussed since they involve corporate decisions to register their ships
argument on behalf of Canada. Canada might have sought to intervene in the instant case under the flags of States which offer special advantages in connection with tax, labour and
under Article 62 of the Statute, but it did not do so. It is said that after judgment is pronounced other laws.
in this case of Belgium v. Spain, Canada might find some jurisdictional ground to found an
application to institute a case of Canada v. Spain. It is known that no such jurisdictional ground 45. The Judgment in Nottebohm, Second Phase, was pronounced on 6 April 1955. At that time,
now exists. It seems quite unreal to suppose that Spain would now agree with Canada upon a the International Law Commission, which was preparing its projects on the law of the sea, had
compromis submitting to the Court a Canadian claim on behalf of Barcelona Traction, thus not yet developed [p 187] the concept of a "genuine link" as a requisite for the recognition of
exposing Spain to the new hazard of being required to pay some two hundred millions of dollars the nationality of a ship. But the link theory was thereafter actively argued in the Commission
of damages. But if the Court were properly seised of an application by Canada, it would have to and at length in the Geneva Conference of 1958 on the Law of the Sea. Article 5 of the
take cognizance of the fact that following Article 59 of the Statute, "The decision of the Court Convention on the High Seas was adopted in the following terms:
has no binding force except between the parties and in respect of that particular case". Had the
Court endorsed the application of the link principle to juristic persons, in its present decision in "Each State shall fix the conditions for the grant of its nationality to ships, for the registration of
Belgium v. Spain, Canada could have argued against that conclusion in the hypothetical case of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State
Canada v. Spain, or might have relied on Spanish admissions that Canada was entitled to whose flag they are entitled to fly. There must exist a genuine link between the State and the
protect the company. [p 186] ship; in particular, the State must effectively exercise its jurisdiction and control in
administrative, technical and social matters over ships flying its flag." (Emphasis supplied.)
The "Link" Concept
46. In 1959, governments were submitting to the International Court of Justice views on the
44. It seems to be widely thought that the "link" concept in connection with the nationality of Constitution of the Maritime Safety Committee of the Inter-Governmental Maritime Consultative
claims, originated in the International Court of Justice's Judgment in Nottebohm. I do not agree Organization case. The influence of the link concept was apparent. (Meyers, The Nationality of
that in that instance the Court created a new rule of law. Indeed the underlying principle was Ships, 1967, pp. 227 ff.) When the Court gave its Advisory Opinion on the above case in 1960,
already well established in connection with diplomatic claims on behalf of corporations. To look it clearly confined itself to a particular question of treaty interpretation and declined to examine
for the link between a corporation and a State is merely another example of what is now the general customary law on "a genuine link". (I.C.J. Reports 1960, p. 171.) It made a passing
familiar practice of "lifting the veil". See, for example Cohn and Simitis "'Lifting the Veil' in the reference to Article 5 of the "unratified Geneva Convention on the High Seas". In his dissenting
Company Laws of the European Continent", 12 International and Comparative Law Quarterly opinion, Judge Moreno Quintana said that the provision in Article 5—
(1963), page 189; Drachsler in Report of the Section of International and Comparative Law of
the American Bar Association, July 1964, page 29. The practice of such States as the United ".. . by which international law establishes an obligation binding in national law, constitutes at
States and Switzerland had already given weight to the proposition that a corporation would not the present time the opinio juris gentium on the matter". (Ibid., p. 178.)
be protected solely because it was incorporated in the State, i.e., had the State's nationality;
some other link was required and that link usually was related to the ownership of shares. Such The Nottebohm case itself was not discussed at length in connection with the law of the sea in
abstention, being as it were "against interest", has special probative value FN1. the International Law Commission but Dr. Garcia Amador, Special Reporter for the International
Law Commission on State Responsibility, in his Sixth Report, noted that he had added a
--------------------------------------------------------------------------------------------------------------------- paragraph to his earlier draft "in order to incorporate the rule laid down by the International
FN1 State practice is noted infra, paras. 60 et seq. Court of Justice in the Nottebohm case". (Yearbook of the International Law Commission, 1961,
--------------------------------------------------------------------------------------------------------------------- Vol. II, p. 53; see Article 23 of his revised draft at p. 49.) Although the "link" concept was much
discussed at the Geneva Conference, only a few governments or delegates referred to the
Three years after the decision in Nottebohm, the Italian-United States Conciliation Commission, Nottebohm case (Meyers, op. cit., pp. 269 ff.). Four States—Netherlands, Norway, Liberia and
under the presidence of the late Professor Sauser Hall, in the Flegenheimer case stated: the United Kingdom—in their pleadings in the Constitution of the Maritime Safety Committee of
the Inter-Governmental Maritime Consultative Organization case made some reference to the
"The right of challenge of the international court, authorizing it to determine whether, behind Court's statements in Nottebohm, Second Phase, about "unilateral acts" of States. (I.C.J.
Pleadings, pp. 357-359; 365-366; 374; [p 188] 404-405.) The important point is that there was (I.C.J. Reports I960, p. 169.)
growing recognition of the rule that if a State wishes to have its "unilateral acts" recognized and
given effect by other States, those acts must conform to the principles and rules of international It would be unsound to transpose some of these words from their context, where persuasive
law. If a State confers its nationality on a person who has no genuine link with it, another State reasons are set out for the particular issue before the Court, to support an argument that it is
may not need to recognize the person as such national. Such nationality has been styled "a not practical to ascertain the existence of preponderant, majority or substantial stock interests
citizenship of convenience" FN1. If a State purports to confer its nationality on ships by allowing in corporations. In particular it will be shown that in at least certain cases, international law
them to fly its flag, without assuring that they meet such tests as management, ownership, does not exclude the protection of shareholders on the ground that it is difficult to identify
jurisdiction and control, other States are not bound to recognize the asserted nationality of the them, e.g., in the case where international law permits the protection of foreign shareholders in
ship FN2. As a matter of principle and logic—supported by State practice—a comparable rule is a corporation which is the victim of unlawful destructive acts performed by the State of
applicable to corporations. A State may, by extending diplomatic protection to a corporation, incorporation. Nor can the rule which permits the protection of shareholders in certain
hold out that corporation as having its "nationality", because the State had granted it its charter circumstances be discarded because company management may sometimes find it inconvenient
of incorporation. But if in fact there is no "genuine link" between the corporation and the State to reveal the exact position in regard to the ultimate ownership of the shares.
in question, the State to which diplomatic representations are made may, on that ground reject
them. Perhaps one makes here an analogy to stateless persons but the stateless individual has 48. One of the reasons for the rule on continuity of nationality of claims is the avoidance of
nothing behind him and cannot be protected until the present imperfect law of human rights is assignments of claims by nationals of a small State to nationals of a powerful State. If a
fully developed FN3. On the other hand, the corporation which has a nominal connection with a powerful State should seek to attract corporations to incorporate under its laws so that it could
State of incorporation but whose shares are all owned by nationals of another State in which claim them as its nationals even though the corporations had no further connection with that
latter State the actual management and control of the company are carried on, has behind it State, this Court should not "regard itself as bound by the unilateral act" of that State. The
the shareholders who represent the real interest. No rule of law, no principle, forbids that latter same conclusion must be reached when less powerful States attract the incorporation of
State to extend its diplomatic protection to those interests. companies or the registration of ships by providing "charters of convenience" or "flags of
convenience".
---------------------------------------------------------------------------------------------------------------------
FN1 Uebersee Finanz-Korporation A.G., Liestal, Switzerland, Plaintiff, Fritz von Opel, Intervener- It has been noted that Canada is one of the States which attracts the incorporation of
Plaintiff v. Herbert Brownell, Jr., Attorney General, et al., 133 F. Supp. 615, 619 (1955), affd. companies through favourable tax laws, etc. Counsel for Spain called attention to the fact that a
244 F. 2d 789 (1957). This case, decided by the United States District Court, District of corporation called the San Antonio Land Company was incorporated in Toronto in the same
Columbia, in the same year as the decision of the International Court of Justice in Nottebohm, year— 1911—as Barcelona Traction by Mr. Pearson, "the promoter and first president of
also involved a consideration of the validity of the naturalization of a German in Liechtenstein Barcelona Traction". The identity of some of the personalities in the two companies, as well as
during the Second World War. The question was in part whether the intervener was an their London agents, was stressed. The [p 190] business of the Land Company was carried on
innocent stockholder in a company vested by the Alien Property Custodian as enemy alien in Texas. Counsel quoted from the report of the Special Master of the Federal District Court in
property. The United States Court did not cite the Nottebohm case. New York FN1:
FN2 There are, however, situations in which national courts still find it appropriate to recognize
"the law of the flag"; see McCulloch v. Sociedad Nacional de Marineros de Honduras, 83 S. Ct. "It is perfectly clear that the Toronto office, the Board of Directors, etc., was maintained only in
(U.S.) 671 (1963). pursuance of the requirements of the statutory existence of the corporation under the laws of
EN3 And query whether the term "man" in "The Rights of Man" includes a corporation! the Dominion of Canada. The effective control of the affairs of the corporation plainly was
The Court's decision in Nottebohm, Second Phase, has been criticized as creating a new group lodged elsewhere than in Toronto and followed the peregrinations of Dr. Pearson, the master
of apatrides; see Bindschedler-Robert, "La protection diplomatique des sociétés et des mind FN2." (Hearing of 27 May 1969.)
actionnaires", Revue de la Société des juristes bernois, Vol. 100, 1964, p. 141.
--------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------
FN1 The nature of the litigation in question is not relevant to the point being discussed here.
47. It is true that the Court in the Constitution of the Maritime Safety[p 189] Committee of the FN2 The rebuttal of counsel for Belgium, on 27 June 1969, while correctly pointing to some
Inter-Governmental Maritime Consultative Organization case, as a matter of treaty errors in the Spanish analysis of the San Antonio Land Co. case, did not affect the point here
interpretation, and taking into account the travaux préparatoires, stated that: under consideration.
-----------------------------------------------------------------------------------------------------------
".. .it is unlikely that it was contemplated [in drafting the Convention which established IMCO]
that the test should be the nationality of stock-holders and of others having beneficial interests 49. The evidence shows that counsel for Spain was correct in asserting that the situation in
in every merchant ship; facts which would be difficult to catalogue, to ascertain and to Barcelona Traction was parallel. Throughout, one finds that the important decisions, the vital
measure. To take into account the names and nationalities of the owners or shareholders of planning, was done by such persons as Heineman, Wilmers, Speciael, Hubbard and Lawton,
shipping companies would . . . 'introduce an unnecessarily complicated criterion'... On the other whose instructions issued from Great Britain, the United States and Belgium and Spain itself,
hand, the criterion of registered tonnage is practical, certain and capable of easy application." but rarely if ever from Canada. The general meetings of shareholders held in Toronto seem to
have been pro forma affairs. It is true that in 1948 a "Receiver and Manager" of Barcelona considered "exceptions" to a general rule allowing protection of the corporation itself.
Traction was appointed in Canada and operated out of Toronto, but since the operating
companies in Spain had passed into the control of the bankruptcy officials there, the Receiver 51. The first of these situations is where the corporation has been incorporated in the State
and Manager could merely try to encourage a settlement; he did not have the power to make a which inflicts the injury on it without legal justification, and where the shareholders are of
settlement. another nationality.

Counsel for Belgium, in the same pleading in which he rebutted some of the Spanish It is in such situations that one finds the widest agreement that a State may extend diplomatic
contentions about the San Antonio Land Co. case, quoted from a judgment of Mr. Justice protection to shareholders who are its nationals [FN2]. The rationale seems to be based largely
Roxburgh in the English High Court of Justice, the following passage which strongly confirms on equitable considerations and the result is so reasonable it has been accepted in State
the fact that Barcelona Traction's management was not centred in Toronto: practice. Judge Charles De Visscher says this result is required by "des considérations
impérieuses de justice". ("De la protection diplomatique des actionnaires d'une société contre
"Barcelona was a holding and not an operating Company. Sterling was its life blood. It also l'Etat sous la législation duquel cette société s'est constituée", 61 Revue de droit international et
borrowed pesetas but it had little interest in Canadian dollars. London was its financial seat.... de législation comparée, 1934, p. 624.) By hypothesis, the respondent State has committed an
There were in Canada, so far as I know, or rather so far as I have been told, nothing but a unlawful act from which injury results. The corporation itself cannot seek redress and therefore
registered office of undisclosed size with a staff of undisclosed dimensions, and share the State whose nationals own the shares may protect them ut singuli. The equities are
registers." [p 191] particularly striking when the respondent State admits foreign investment only on condition that
the investors form a corporation under its law. These points are clearly made by Petrén, 109
Counsel noted that on the final point the judge had not had discovery, but counsel did not deny Hague Recueil, 1963, II, pages 506 and 510.Petrén refers with approval to the earlier lectures
the truth of the judge's comment. by Paul De Visscher, 102 Hague Recueil, 1961, I, page 399; see especially pages 478-479.

It is true that Roxburgh J. was dealing with a period of time anterior to the bankruptcy ---------------------------------------------------------------------------------------------------------------------
proceedings in Spain, but I find nothing in the record to suggest that there was later a material [FN2] The Respondent here shares in this agreement. Bindschedler-Robert (op. cit., p. 174),
change whereby the principal power centre of Barcelona Traction was located in Toronto FN1. writing in 1964, considered that this view was being accepted in international law. She cites the
--------------------------------------------------------------------------------------------------------------------- well-reasoned and well-documented study by Kiss, "La protection diplomatique des actionnaires
FN1 In the same court proceeding, the testimony of Mr. Hubbard, Chairman or President of dans la jurisprudence et la pratique internationale", in La personalité morale et ses limites
Barcelona Traction during several years, is not wholly clear. He testified that all meetings of the (1960), p. 179. Kiss indeed cites abundant authority for even broader rights to protect
Directors of the Company were held in Canada; that he attended some but not all such shareholders; he refers to Borchard, Ch. De Visscher, Sibert, Ralston, Fitzmaurice, Pinto, Paul
meetings; that neither he nor his predecessor or successor as President or Chairman was De Visscher, Perry, Séfériades, Jones, Guggenheim, Battagliani, Bindschedler, but query
resident in Canada; that Mr. Speciael, as President may have gone to Canada from New York to whether all these carry their conclusion as far as does Kiss. See also in support of the broader
attend some directors' meetings; it was not necessary for the President or Chairman of the rule allowing protection of shareholders, Agrawala, "State Protection of Shareholders' Interests
Board to preside over directors' meetings. (According to the company law of Canada, it seems in Foreign Corporations", The Solicitor's Quarterly, 1962, p. 13; Nial, "Problems of Private
that the directors present may elect a chairman of the meeting if neither the President nor vice- International Law", 101 Hague Recueil, 1960, III, p. 259.
president is present; Fraser and Stewart, Handbook on Canadian Company Law, Fifth Ed. 1960, ---------------------------------------------------------------------------------------------------------------------
p. 134.) Mr. Hubbard indicated that some decisions were made in London, with notice to the
office in Toronto and that in other cases "instructions came from Canada". Mr. Hubbard testified Judge Wellington Koo, in his separate opinion in this Barcelona case in 1964 asserted
that "There was a very strong Board in Canada" but of the directors listed as residing in Canada emphatically:
(according to a list submitted to the Court in the same proceeding) the only one appearing in
the list of registered shareholders in 1948 (A.M., Ann. 2) held one share. (The records of the ". . . the original simple rule of protection of a company by its national State has been found
Court proceedings are in A.C.M., Vol. I, Annex 13, especially Document No. 6.) This was a Mr. inadequate and State practice, treaty regulation and international arbitral decisions have come
Merry who is listed as Secretary of the Company (but not a director) in 1918. (A.P.O., Ann. 22, to recognize the right of a State to intervene on behalf of its nationals, shareholders of a
Doc. No. 2. This is the only extract from minutes of directors' meetings which lists those company which has been injured by the State of its own nationality, that is to say, a State
present, so far as I have been able to ascertain; three directors were present.) where it has been incorporated according to its laws and therefore is regarded as having
-------------------------------------------------------------------------------------------------------------------- assumed its nationality" (I.C.J. Reports 1964, p. 58).

*** Judge Wellington Koo considered it immaterial whether this rule should or should not be
considered as an "exception".
50. There are three situations in which there is wide agreement that a State may extend its
diplomatic protection to shareholders who are its nationals, although the company whose 52. It is curious that this "exception" should have been so widely accepted since it ignores the
shares they hold has the nationality of another State. These three situations are sometimes traditional rule that a State is not guilty of a breach of international law for injuring one of its
own nationals. It rebuts also the notion that an injury to a corporation is not a direct [p 193] the Belgian company, Sidro.
injury to the shareholders. Moreover, if the foreign shareholders may be protected in such a
situation, it is also necessary to choose one horn of a dilemma: either one admits that the right It is true that after 1948 there was some trading in Barcelona Traction shares on the Brussels
of the shareholders existed at the moment when the injury was done to the corporation, which Bourse (Verbatim Record for 7 July 1969), and according to Moody's Manual of Investments, for
means that the rights of shareholders may be damaged by an injury to the corporation, or, if years ranging from 1952 to 1967, there were sales in New York, Canada and London. No infor-
that right came into existence subsequently, then one ignores the rule of international law that mation is available to make it possible to say whether the transactions were merely speculative,
a claim must be national in origin. Moreover, the admission of this "exception" negates the but it may be noted that in 1961, when the first Belgian application was withdrawn from this
argument, sometimes advanced against the diplomatic protection of shareholders, to the effect Court in expectation of a private negotiated settlement, the quoted price was somewhat higher.
that such claims expose an accused State to a vast variety of claims on behalf of persons of
whose existence it was ignorant. Since customary practice has, however, accepted this 55. It is true that so far as Canadian law is concerned, the shareholders had not yet acquired a
"exception", other arguments against protection of shareholders are correspondingly weakened, direct right to the assets but since I do not base my conclusion on this factor, I do not pursue it
especially since the doctrine in question generally does not insist that the life of the corporation further.
must have been extinguished so that it could be said the shareholders had acquired a direct 56. I also find it unnecessary to consider in detail what is considered the third "exception"
right to the assets. where shareholders may admittedly be protected, namely where the injury is inflicted directly
on the shareholders and not indirectly through damage to the company.
53. The second situation in which it is widely agreed that a State may claim on behalf of its
shareholders in a foreign corporation, is where the State of incorporation has liquidated or ***
wound up the corporation after the injury was inflicted by some third State.
57. It is now possible to turn to the question which is crucial for the instant case, namely
This situation differs from that just considered in that the respondent State has committed its whether the three situations just mentioned are the only ones in which international law
unlawful act (let us say total confiscation) against a foreign corporation. Here some doctrine permits a State to extend diplomatic protection to shareholders who are its nationals.
would say that ordinarily State A, the State of incorporation, should be the one to extend
diplomatic protection. But by hypothesis the corporate life has been extinguished by State A, so I find no evidence or reasoning which precludes such protection in other situations, but the
that—just as in the first situation—a claim can not be pressed for the corporation. Brownlie question can be answered only by analysing the fundamental principles underlying the right of
states the situation as follows: diplomatic protection. [p 195]

"Where the State under the law of which the company is incorporated terminates the existence The Basic Principle of State "Interest"
of the company in law, or other circumstances make the company practically defunct, the
shareholders remain as the interests affected by government act: intervention on their behalf 58. In this opinion traditional language has been used, for example in speaking of injuries to a
would seem to be justified in such a case." (Brownlie, Principles of Public International Law, corporation as such, but this is really a bit of anthropomorphism since, as Sir Edward Coke
1966, p. 401.) remarked, corporations "have no souls" (case of Sutton's Hospital, 10 Rep. 32) and as stated by
more recent jurists, the corporation "is not a thing. It is a method." (Douglas and Shanks,
Here it may be said that after liquidation and payment of creditors, the shareholders—under an "Insulation from Liability through Subsidiary Corporations", 39 Yale Law Journal, 1929, pp. 193,
applicable system of municipal law—have a property interest in the assets and for that reason 194.) That corporations have a nationality, is a legal fiction FN1. In legal principle and practice,
may be protected. But at the time of the unlawful act ("confiscation") they did not have such a the situation is that in relations with other States, a State is entitled to treat a corporation as if
property interest and therefore under the rule of continuity the claim did not have in origin the it were one of its nationals, provided the corporation is connected with it by certain links.
appropriate nationality on that basis. [p 194]
---------------------------------------------------------------------------------------------------------------------
54. But Brownlie equates the case of the termination of the existence of the company with the FN1"Legal fiction", according to Morris Cohen, "is the mask that progress must wear to pass the
case where it is "practically defunct". This is a term which was used by the British Government faithful but blear-eyed watchers of our ancient legal treasures. But though legal fictions are
in the Delagoa Bay case and used a good deal by the Parties in their pleading in the instant useful in thus mitigating or absorbing the shock of innovation, they work havoc in the form of
case. Its exact meaning is not clear but Barcelona Traction did have some life in Canada even intellectual confusion." Quoted in Transnational Law, p. 70.
after the practical annihilation in Spain. From 1948 on it was under a receivership, but the ---------------------------------------------------------------------------------------------------------------------
"appointment of a receiver and manager over the assets and business of a company does not
dissolve or annihilate the company . . ." (Kerr, On the Law and Practice as to Receivers, 13th "Indeed, it is at least arguable that all cases of apparent protection of corporations are in reality
ed. by Walton, 1963, p. 232). As already noted, the Receiver and Manager of Barcelona cases of protection of the shareholding interest of nationals of the protecting State." (Clive
Traction concerned himself only with promoting negotiations for a settlement between the Parry, "Some Considerations upon the Protection of Individuals in International Law", 90 Hague
private parties; none of the public utility enterprises in Spain were under his direction or within Recueil, 1956, II, p. 657 at p. 704.)
his control; and he had to borrow the money for his operations from an affiliate or subsidiary of
It is customary also to speak about "claims of individuals" or "of natural persons" and about
"corporate claims" or "claims of corporations". Such language is convenient, but it conceals the 61. The primacy of the general economic interests of the State in protecting private investments
fact that in international relations, the claims in question are always the claims of a State, not abroad, and the minimizing of any one es-[p 197] sential test justifying diplomatic protection,
of a natural or juristic person. A citizen has no right to diplomatic protection; it is wholly within are strikingly brought out in the message of the Swiss Conseil federal of 29 October 1948 to the
the discretion of the government whether it will or will not extend its diplomatic protection. As-semblée f!!!edérale, concerning the negotiation of agreements with Yugoslavia on trade,
payments, and a global settlement of Swiss claims for nationalized property:
59. A State takes up a claim against another State when it considers that its own interests have
been affected. As the Court said in Nottebohm, Second Phase (p. 24) "Diplomatic protection "Article 5 indicates what must be considered as Swiss assets, holdings or claims. This question
and protection by means of international judicial proceedings constitute measures for the presents no difficulty when the assets belong to natural persons; in that case the nationality of
defence of the rights of the State". In Mavrommatis Palestine Concessions (P.C.I.J., Series A, the owner or creditor serves as the criterion. So far as corporate persons and companies are
No. 2, p. 12) the Court identified the State's "own rights" as "its right to ensure in the person of concerned, the seat, which must be in Switzerland, has not been made the only test, but the
its subject respect for the rules of international law". Almost the identical words were repeated question is also raised as to whether there is a substantial Swiss interest in the corporate
by the Court in Panevezys-Saldutiskis Railway (P.C.I.J., Series A/B, No. 76, p. 16), although in person or company. In most cases the substantial Swiss interest will be shown to exist when
this latter case the Court went on to elaborate the importance of "the bond of nationality". [p the effective majority of the capital is in Swiss hands. If there is no such majority, it is the
196] minority exerting a decisive influence on the company which is to be taken into account; this is
particularly easy to discern when there is a compact minority on one side and a scattered
In explaining the basis for a State's right to give diplomatic protection, the rather simplistic majority on the other. The composition of the board of directors and senior management may
notion that a State was injured when an injury was inflicted abroad upon the least of its also be a determining factor when it belongs to them to shape the will of the corporate person
nationals, has come to be superseded by the realization of the national economic importance of and decide on its behalf. Lastly, in certain cases the creditors ought not to be overlooked either,
foreign invest-ments as State interests. for they too may exert a certain influence on the undertaking. But it is always necessary to
consider the real circumstances and not trust in purely legal constructions, whose sole aim may
This is one reason why it is not now pertinent to stress the difference in municipal law between be to dissimulate the true facts." (Feuille fédérale de la Confédération suisse, 100 année 1948,
private "rights" and "interests", as Judge Gros shows so clearly in his separate opinion. Vol. III, p. 672 at 686. [Translation from French by the Registry.])

". .. States protect their corporations chiefly on the basis of the real national interest and not, in 62. In its note of 20 April 1938 to the Mexican Government, in regard to the case of Mexican
fact, on the basis of nationality. In such a situation, it seems necessary to allow the State of the Eagle Oil Company, a Mexican corporation, the British Government said:
nationality of these shareholders to present their claims to the limit of their interest in the
corporation. ... "But the fact remains that the majority of shareholders who are the ultimate sufferers from the
Since the protection of national interest in foreign corporations is based on protecting an action of the Mexican Government are British, and the undertaking in question is essentially a
economic or pecuniary interest, it matters little whether the party in whose behalf the British interest.
protection is exercised is a shareholder or a bondholder, or even if the national interest is held For this reason alone His Majesty's Government have the right ... to protest against an action
indirectly; e.g., if a national corporation controls another corporation which holds bonds or which they regard as unjustified." (8 Whiteman Digest of International Law, p. 1273.)
shares in a third corporation sustaining an injury." (Khalid A. Al-Shawi, The Role of the
Corporate Entity in International Law, 1957, pp. 55 and 59.) In a section of the British Digest of International Law, entitled "Protection of British Interests in
Foreign-Incorporated Companies", one finds a number of passages in which the stress is on the
"In three countries—Italy, Britain and France—all proposals for foreign investment must clear British "interests" rather than on the nationality of the company. (See Vol. 5, Part VI, pp. 535
government agencies before they can be carried out, whether or not government sources of ff.)
credit are used . . . The Government of Japan, through the Ministry of Finance (and when [p 198]
required, through such additional agencies as the Ministry of International Trade and
Investment and the Ministry of Agriculture), must approve all foreign investments . . ." 63. In regard to the practice of the United States, it has already been noted that that
(Friedmann and Kalmanoff, Joint International Business Ventures, 1961, pp. 188 and 190.) Government maintains that it is entitled under international law to protect substantial American
shareholder-interests in foreign corporations and that it declines to protect American companies
60. No survey of State practice can, strictly speaking, be comprehensive and the practice of a in which the substantial interest is alien-owned. Thus, in 1912, the Department of State
single State may vary from time to time— perhaps depending on whether it is in the position of declined to make representations on behalf of an American company in which Americans owned
plaintiff or defendant. However, I am not seeking to marshal all the evidence necessary to only $100 worth of shares out of a total of $450,000. (V. Hackworth, Digest of International
establish a rule of customary international law. Having indicated the underlying principles and Law, p. 845.) In 1965, the same Department informed an American embassy: ". . . the
the bases of the international law regarding diplomatic protection of nationals and national Government of the United States has the right under principles of international law to intervene
interests, I need only cite some examples to show that these conclusions are not unsupported or espouse a claim on behalf of nationals of the United States who own a substantial interest in
by State practice and doctrine. a corporation organized under the laws of... [a foreign country]". (8 Whiteman Digest, p. 1272.)
 67. In an ordinary case of dual nationality, both of those States of which claimant is a national
The Restatement of Foreign Relations Law of the American Law Institute (1965) in Section 173 may extend protection although in case of conflict an international tribunal may apply the
provides that a State is liable for damage to alien stockholder interests in a corporation of a doctrine of effective nationality. This Court said in the Reparation for Injuries Suffered in the
third State if "a significant portion of the stock" is alien-owned, the corporation fails to obtain Service of the United Nations case: "International Tribunals are already familiar with the
reparation, for reasons which the shareholders can not control, and the corporation has not problem of a claim in which two or more national States are interested, and they know how to
waived or settled its claim. protect the defendant State in such a case." (I.C.J. Reports 1949, pp. 174, 186.) In that case,
the Court was asked by the General Assembly to consider, and it did consider, whether a claim
"In international law, as in the domestic law of the United States, there has been a gradually might be brought both by the State of which the injured person was a national and by the
increasing tendency to disregard the separate corporate entity when necessary to avoid United Nations. The Court said that "there is no rule of law . . . which compels either the State
injustice. Originally the United States, like Great Britain, refused to intervene on behalf of its or the Or-ganization to refrain from bringing an international claim". The General Assembly
national shareholders in a foreign corporation . .. Since late in the 19th century, a number of thereafter recognized that two claims might be presented, and authorized the Secretary-
such claims have been presented to and allowed by international tribunals. In most of these, General to negotiate agreements to reconcile action by the United Nations with the rights of the
the international responsibility of the State with respect to the injury to the alien shareholder as State of which the victim was a national. (UN General Assembly Res. 365 (IV), 1 Dec. 1949,
such was not squarely presented as a question of international law, since this point was settled para. 2.) [p 200]
by the terms of the international agreement establishing the tribunal or by the compromis
under which the case was submitted to it. . . [citing Delagoa Bay]. However, the practice of 68. The situation is not so simple when one considers the condition of artificial or juristic
providing for such cases in international arbitration agreements has apparently come to be persons. International law has not developed a clear rule of dual nationality for such entities
regarded as a reflection of customary international law, and it now seems to be recognized although different criteria are employed for determining nationality. Respondent indicated that
that, at least under some circumstances, the State is responsible for the injury to alien a company may have dual nationality because both criteria are acceptable (Preliminary
shareholders owning a significant interest in the injured corporation." (Reporter's Notes to S. Objections, 1963, p. 191), but it insisted only one of the two States may make a claim. Yet in
172; cf. II, Hyde, p. 904.) cases which are now very common in the commercial life of the world, the corporation may
have various links with more than one State—links just as real as those which may connect a
64. In the Hannevig case, Norway espoused against the United States, the claim of Hannevig, a natural person with two different States whose nationality he possesses. International law
Norwegian national, on the ground that he had a [p 199] substantial interest in certain cannot be oblivious to these corporate links. As already indicated above, they include the place
American corporations alleged to have been damaged by action of the United States of incorporation, the place of management, the place of operation (probably including
Government. (The case is described in 32 American Journal of International Law, 1938, p. 142.) employment of labour and payment of taxes), the nationality of the persons (natural or
The United States did not assert the American character of the corporations as a basis for artificial) who exercise control, whether through the board of directors and management, or
resisting the claim. through stock interests, which not infrequently may exercise control even when a relatively
small minority.
65. This section of the opinion may close with the words of Judge Huber in the familiar Ziat,
Ben Kiran claim: 69. I shall not go over all the cases but merely note the double or joint diplomatic interposition
in Delagoa, Mexican Eagle and Tlahualilo. (Cf. Paul De Visscher, 102 Hague Recueil, 1961,1, pp.
"International law, which in this field, is in the main based on principles of equity, has laid down 477-478.) In the case of Barcelona Traction, diplomatic representations, some perhaps only in
no formal criterion for granting or refusing diplomatic protection to national interests bound up the nature of good offices, were made by Canada, the United Kingdom, United States of
with interests belonging to persons of different nationalities." (8 Whiteman Digest, p. 1283.) America and Belgium.

*** In the case of two different but simultaneous justifiable diplomatic interpositions regarding the
same alleged wrongful act, the Respondent can eliminate one claimant by showing that a full
The Question of Double or Multiple Protection settlement had been reached with the other. If, in this case, Spain made a settlement with
Canada for Barcelona Traction, the Belgian claim for the shareholders might be considered
66. Counsel for the Respondent made numerous statements to the effect that diplomatic moot.
protection could never be extended by more than one State in any one case. Such an argument
is advanced against the possibility that more than one large shareholding interest might be 70. With all respect to the Court, I must point out the irrational results of applying a rule which
protected, it being alleged that if the State of which the company has the nationality is the only would provide that only the State in which a company is incorporated may extend diplomatic
State entitled to extend diplomatic protection, impermissible double protection would be protection in case of damage inflicted under circumstances in which the State inflicting the
avoided. That position is not correct since there are various situations in which international law damage incurs liability under international law, as illustrated by the organization of the Iranian
recognizes the right of more than one State to interpose in connection with the same allegedly Oil Consortium. In September 1954 an agreement was concluded between eight oil companies
wrongful act. on the one side and, on the other side, the Government of Iran and the Government-owned
National Iranian Oil Company; it was ratified by the Iranian Parliament. [p 201]
 shareholders on whose behalf Belgium claims. The Belgian argument (7 May 1969) that Spain
The agreement gives to the Consortium the exclusive rights in a defined area for the was estopped or precluded from contesting the Belgian character of Sidro and Sofina, is not
production, refining and processing of crude oil and natural gas, together with other facilities. per-suasive.
The eight participating oil companies include the former Anglo-Iranian Oil Company, now British
Petroleum Company, which participates to the extent of 40 per cent.; five American oil The Continuity Rule
companies also having 40 per cent.; the one Dutch company having 14 per cent. and the
French company having 6 per cent. To carry out the operations, the Consortium caused to be 73. The two dates on which the nationality had to be proved, are determined by the rule of
incorporated in the Netherlands, two Dutch companies, one a Producing company and the other continuity. As the term implies, the rule requires that the nationality remain unchanged
a Refining company. All the shares of the Dutch Producing company and of the Refining between those two dates. Sir Gerald Fitzmaurice makes a forceful argument against any "too
company are owned by an English holding company, Iranian Oil Participants Limited, with rigid and sweeping" application of the continuity rule, but I believe his illustrative situation in
offices in London. The shares of the "Holding Company" are owned by the members of the paragraph 62 of his separate opinion may be covered by another rule deriving from the law of
Consortium in the percentages indicated aboveFN1. The two operating companies were State succession, and on that basis would escape the application of the continuity rule for
incorporated in the Netherlands because of the liberal provisions of its commercial code which international claims which I consider to be generally binding—specialia generalibus derogant.
permit the companies to have their head offices and board of directors and management
overseas, in this case, in Iran. The code also permits "one-man" companies, which makes it 74. Although the phraseology varies, there is general agreement on the principle that the claim
possible for all their shares to be held by the "Holding Company" in London. Fortunately, the must be national in origin, that is to say that the person or persons alleged to have been
Iranian Oil Consortium agreement was so skilfully drawn in a co-operative spirit, that one does injured must have had the nationality of the claimant State on the date when the wrongful
not anticipate the likelihood of any diplomatic claims, quite aside from the fact that the injury was inflicted. One might well admit that there is a certain artificiality in the whole notion
agreement includes notable arrangements for arbitration of any disputes FN2. But should there since it rests basically on the Vatelian fiction, but I do not think the Court can change a long
be any question in the future of representations by any government, it would be absurd to established practice on this matter. (But cf. 1932 Annuaire de l'Institut de droit international,
maintain that the Netherlands Government would be the sole government entitled to make such Vol. 37, pp. 479 ff., and Jessup, A Modern Law of Nations, 1947, p. 116.)
representations. Nor would it seem rational to assign an exclusive role to the British
Government on the ground that the Holding Company was incorporated in Great Britain and has 75. There was a fleeting attempt by Belgium to identify the origin of the claim as the refusal of
its office in London. Perhaps a stronger link between the enterprise and Great Britain would be foreign exchange, which indeed started the toboggan down the slide in terms of the Belgian
the extent of British Government participation in holding shares in British Petroleum. contentions. (See especially the statement by counsel for Belgium on 18 April 1969: "Belgium
rests its case on the illegality in international law of Mr. Suanzes's rulings in October and
--------------------------------------------------------------------------------------------------------------------- December 1946 and the circumstances surrounding them.")
FN1 Actually, in 1955 nine independent American companies were admitted to participate and
each of the original American participating companies surrendered 1 per cent. of their This position was abandoned (it would have weakened the Belgian case in terms of the
shareholdings to the new group. For the purposes of this illustrative example, it is not continuity rule), and throughout much of the written pleadings and oral argument it seems to
necessary to explain further the position of another British company, Iranian Oil Services Ltd. have been taken for granted [p 203] that the critical date, when the injury complained of was
This account of the organization of the companies is based upon "History and Constitution of inflicted, was that of the Reus decree declaring Barcelona Traction bankrupt, namely 12
Iranian Oil Participants and Iranian Oil Services", a talk by Mr. J. Addison, General Manager of February 1948 FN1. I think the Court is entitled to accept that date, at least to the extent of
Iranian Oil Participants Ltd. to Staff Information Meeting, Tehran, 21 August 1961. saying that if the claim was not Belgian on that date, the claim must be dismissed.

FN2 See "The Oil Agreement Between Iran and the International Oil Consortium: The Law ---------------------------------------------------------------------------------------------------------------------
Controlling", by Abolbashar Farmanfarma, of the Tehran Bar, in 34 Texas Law Review, 1955, p. FN1 In its final submissions on 15 July 1969 under heading VI, Belgium asserted:
259. "that the Belgian Government has established that 88 per cent. of Barcelona Traction's capital
--------------------------------------------------------------------------------------------------------------------- was in Belgian hands on the critical dates of 12 February 1948 and 14 June 1962 and so
remained continuously between those dates. . ." (Emphasis supplied.) The same assertion was
***[p 202] amplified under heading V.
---------------------------------------------------------------------------------------------------------------------
71. The Court could logically have begun its analysis of the case by examining the proof of the
nationality of the physical or juristic persons whom Belgium asserts the right to protect. If it
found that such nationality was not proved, the Belgian claim must be dismissed without regard 76. The terminal date under the continuity rule is more controversial. Historically, many
to the rule concerning the diplomatic protection of shareholders in a corporation chartered in a international claims have been settled through the diplomatic channel and never were
third State. presented to an international tribunal. In many mixed claims commissions, claims were heard
long after the events complained of because the commissions were established ad hoc after a
72. The burden of proof was clearly on the Applicant to prove the Belgian nationality of the certain number of claims had accumulated. For a moderate example, the British-American
Mixed Claims Commissions established under a treaty concluded in 1910, decided in 1920 a [FN2] The "company" in question is Sidro as shareholder in Barcelona Traction. Mr. Arthur
claim based on events which took place in 1898. (VI, U.N.R.I.A.A., p. 42.) This diplomatic Dean, in his letter of 1 February 1955 to the Spanish Ambassador in Washington, stated that he
practice supported the view that the nationality of the claim had to be proved up to the time represented "Sofina, the majority common shareholder" in Barcelona Traction. [Footnote
when it was espoused by the State. Thereafter, it was argued, the claim could be regarded as added.]
statal and, for the purposes of the continuity rule, the status of the individual on whose behalf ------------------------------------------------------------------------------------------------------------
the claim was made, became immaterial.
In the next section Belgium states that it is not obliged to show that Sidro's shares are, for the
Now the first Belgian representation in regard to the bankruptcy proceedings involving major part, Belgian owned but has nevertheless done so particularly in Annex 133 to the Reply.
Barcelona Traction, was dated 27 March 1948 (A.M., Vol. IV, Annex 250). But in its Note of 22
December 1951 (ibid., Annex 259), Spain maintained that Belgium had not then as yet made a 79. In the light of this statement in its written pleading, the Court is justified in deciding
formal claim. This was denied by Belgium (Annex 260), which insisted that its diplomatic protest whether Belgium succeeded in its attempt to prove the nationality of the alleged Belgian
of March 1948 should be considered a formal claim. In any event, at that period Belgium seems shareholders in Sidro and Sofina, in other words, to pierce the corporate veils of these two
to have claimed on behalf of the Barcelona Traction company and not the Belgian shareholders. Belgian companies. I repeat that share-ownership is not a test of corporate nationality [p 205]
in the broad sense, but, as Belgium states, a test of whether the nationality is "real and
77. However, when a case is brought before a permanent tribunal such as the International effective". Belgium in effect thus accepts the application to corporations of the Nottebohm link
Court of Justice, the date of the application takes the place of the first diplomatic representation principle. But there are other Belgian statements in the oral argument which seem to modify
[FN2]. Counsel for Belgium on 4 July 1969 made a persuasive argument in favour of choosing that position and which object to the Spanish demand for proof of Belgian shareholding in the
that as the date required by the continuity rule although I do not agree that the Court is driven two Belgian companies.
to making new law no matter what terminal date it selects. Counsel for Spain on the other
hand, insisted on 21 July 1969 that the critical moment for the terminal date should be when 80. If, as I maintain, Canada was not legally competent to protect Barcelona Traction because
the terms of the dispute were clearly defined which could only be after the respondent State of the absence of a link (such absence being in part proved by the extent of foreign
had indicated its position. I find slight precedent for this view and see no logic in it FN1. I shareholding) [FN1], then Belgium by the same token would not be legally competent to
therefore conclude that the terminal date for compliance with the continuity rule is 19 June protect Sidro unless the presence of a link is established. This is the challenge which Belgium
1962, the date of the "new" Application. seems to have accepted. Apparently Belgium was willing to have the link tested entirely by the
extent of shareholdings and not by other factors. This may be due to inability to prove that the
--------------------------------------------------------------------------------------------------------------------- international controlling group was associated with or operated out of Belgium. Here again
- there is an illustration of the fact that the rule which permits claims to be submitted on behalf
[FN2] See Institut de droit international, Annuaire, 1965, Vol. II, p. 270 of shareholders places a heavy burden of proof on the claimant State, especially in the case of
[FN1] Nevertheless, there is some support for the view that nationality must be continuous to great international holding companies whose focus of power can not easily be proved especially
the date of the Court's judgment; see the convenient summary in Ro!!!ed, "Bankruptcy and the over a period of years. There is added difficulty in time of war when many steps, some of them
Espousal of Private Claims under International Law" in Legal Essays—A Tribute to Frede devious, but quite justifiable, need to be taken to avoid enemy appropriation or exploitation and
Castberg, 1963, pp. 307-309. also characterization as enemy by allied or friendly States. As Berle has abundantly
--------------------------------------------------------------------------------------------------------------------- demonstrated, the centre or focus of power is not necessarily to be identified by the location of
Piercing the Veil of Sidro and Sofina the largest number of shares [FN2]. Counsel for Belgium recognized this fact in stating, on 13
May 1969, that Sofina was, at one period, controlled by about 8 per cent. of the shareholdings.
78. Belgium conceded that to prove the nationality of Sidro and Sofina it should go, and had The place of in-corporation, whence the promoters of an enterprise secure a "charter of
gone, beyond the simple facts of State of corporation and séige social. It stated that in strict convenience", has lost its significance as evidence of the real identification [p 206] of a holding
law it was not necessary to go beyond that but— company. Moreover, the siege social in terms of an office, etc., can be merely a facade.

"it has always admitted—basing itself on the constant practice of States—that a government is ---------------------------------------------------------------------------------------------------------------------
only justified in taking up the claim of a company [FN2] if the latter's nationality be real and -
effective. For this reason, the Belgian Government has made a point, from its very first [FN1] In all the analyses of the nationality of shareholders, very little emphasis is put on any
pleadings, of showing that three-quarters of Sidro's shares belonged to Belgian shareholders on Canadian holdings. On 1 April 1962, out of 1,798,854 issued shares of Barcelona Traction
the two crucial dates (1948 and 1962). On account of the size of the participation in Sidro's 41,294 were held in Canada. The Canadian shareholders included 57 individuals (of whom 20
capital of another Belgian company, Sofina, the Belgian Government has taken a further step; it held less than 5 shares each) and 43 Canadian companies of which one, Houston & Co., held
has shown that on the same dates Belgian shareholders had an even larger holding in Sofina 30,225 shares. In the "U.S.A. Section", 11, not counting Newman & Co., held over 1,000 shares
than in Sidro." (Reply, Part III, Sec. 1013, p. 738.) each. 15 shareholders holding a total of 2,387 shares, had addresses in Belgium. Of these, 7
held only 1 share each; in at least some of these cases they seem to have been simply
------------------------------------------------------------------------------------------------------------ qualifying shares (A.M., Annex 10).
[FN2] "... it is just possible that in talking the language of 'ownership' in relation to the flow of at certain times, as already noted, stress by Great Britain and by Canada upon the interests of
national capital, we are talking the language of history rather than the language of reality" bondholders. As a characterization of the claim as Belgian, bondholding does not seem to be
(Berle, Power Without Property (Eng. ed. 1960), p. 45). significant.
This is true because, as Judge Tanaka has pointed out, anonymity brings about the separation
of management from the ownership. (Cf. Morphologie des groupes financiers, Centre de Proof by Presumptions
recherche et d'information socio-politiques, 1962, pp. 9 and 60, and Meyssan, Les droits des
actionnaires et des autres porteurs de titres dans les sociétés anonymes, 1962, pp. 9-10.) 85. In the attempt by Belgium to prove that Sofina's shares were held by Belgians, at least in
--------------------------------------------------------------------------------------------------------------------- large part, there is a very extended analysis of Belgian wartime legislation. The subject is
covered in greatest detail in Annex 133 of the Reply and in counsel's pleading on 13 May 1969.
81. There is, to be sure, a certain logic in taking the position that if international law permits a In this line of argument it is explained that under the legislation in question, various rules were
State to protect a shareholder interest, the State should be able to protect a single shareholder laid down concerning certifications and the declarations of ownership of types of shares,
and would not have to prove that a substantial percentage of the shares were held by its whether held in Belgium or abroad. The argument is to say the least devious and rests on a
nationals. This seems to be the Swiss practice but not that of the United States and there is pyramid of presumptions. In Annex 133 to the Reply at page 769, it is said that the proof
very little support in the doctrine for pushing logic to such extremes. Nor does the claimant adduced "rests on presumptions, but presumptions represent a mode of proof recognized by all
State in the instant case rely on any such principle—quite the contrary. Law is constantly legislative systems . . .". Yet counsel for Belgium on 17 April wisely admonished the Court: "The
balancing conflicting interests. The British-American Claims Commission, under the Presidency Court will, I trust, here as elsewhere, reject any attempt to substitute allegations for proof or
of Henri Fromageot, in 1923 in the Eastern Extension case, declared that "the function of insinuations for fact." It must also be noted that Belgian counsel admitted on 4 July 1969 that
jurisprudence is to resolve the conflict of opposing rights and interests by applying ... the the certificates did not purport to establish continuity of Belgian ownership. Moreover, there are
corollaries of general principles". (VI, U.N.R.I.A.A., pp. 112, 114.) It is such reasoning which facile transitions as from broad categories such as "non-enemy", which included "allied", to the
supports Dunn's allocation of risk theory in the law of State responsibility. I have elsewhere particularity of "Belgian". I do not find the evidence at all convincing.
pointed out as a transnational illustration, the power of a single shareholder to induce a great
corporation to change its policies. But the international protection of broad State interests of an In the pleading of Belgian counsel in 1964, it was stated on 15 April that there is a presumption
economic and financial character does not require permitting a State to protect, let us say, a "that when a company is established in a [p 208] particular State and enjoys the national
holder of just one of the hundreds of millions of shares of a company like A.T. & T. character of that State, the company is also owned and controlled by shareholders of the same
nationality". By this token, the controlling shareholders of Barcelona Traction would have been
82. It must be realized how different in character are various corporations. Holding companies Canadian. Counsel offered a further presumption that since the shares of Sidro and Sofina "are
like Barcelona Traction are very different from, let us say, the Ford Motor Company or the Du traded principally in the Brussels stock market", Belgian nationals own the shares in those
Pont Company. In these two examples, regardless of foreign holdings or interests of the companies. [Ibid., p. 14.] It was further suggested that if shareholders give an address in
companies, and regardless of the number of their shares which may be held by foreign Belgium, they must be presumed to be Belgians. [Ibid., pp. 9-10.]
interests, the location of plant, the employment of labour and the payment of taxes are all
factors, in addition to place of incorporation and of policy making, identifying the companies as 86. The Belgian Memorial filed in 1959 after the first Application, was more realistic in its
"American". Generalizations clustered around the word "corporation" or "company" are appraisal of a submitted classification of ownership of Barcelona Traction shares. The Memorial
therefore dangerous. stated (at p. 19):
"It should be noted that the foregoing classification was, in almost all cases, established on the
83. If one looks at the link of management-brains, the citizenship of an individual is not basis of the place of residence of the person in whose name the shares were registered at that
conclusive. If a "Nottebohm" were the sole managing and controlling personality in a company, time. Having regard to the Anglo-Saxon custom of resorting to nominees who are merely
this would not prove that the company was identified with Liechtenstein, for purposes of the custodians of the securities, such a classification does not necessarily correspond to the place of
application of rules of international law. Nor is apparent residence conclusive; compare the residence of the real owners of the securities. Sidro itself had its Barcelona Traction shares
arguments of the Parties about the residence of Juan March at [p 207] certain periods, and the registered in the name of an American nominee.
challenges to evidence produced to prove residence. From the point of view of explaining the Furthermore, the place of residence may not correspond to the nationality of the person
reasons for diplomatic protection, it may be significant that the controlling power group has, for concerned, but this is of no great importance in view of the small number of shares considered
one reason or another, strong political influence with a certain government. Spain's invocation as Belgian apart from those held by the Sidro company."
of old press reports of scandalous connections between Belgian Government officials and
personalities connected with Sidro or Sofina, suggested this element. On 13 May 1969, Belgian counsel presented a long detailed list of presumptions, largely based
on the time and place of declaration and certification under the Belgian wartime legislation. The
information does not seem, as claimed by counsel, to be "both exact and consistent".
84. There are, of course, abundant precedents for protection of bondholders—I refer to the
holders of corporate bonds and not the holders of government bonds which raise entirely On 7 May counsel for Belgium had argued from certain reports of trading in Barcelona Traction
different legal (and political) problems, as Drago clearly showed. In the instant case, there was bearer shares on the bourse in both Paris and Brussels during 1961-1962. (The reports are in
A.R., Annexes 131 and 132.) In Paris the shares were apparently unlisted and there was no but not the latter certificates themselves. (App. 2 to Annex 11 of the Anexes to the Memorial.)
record of the number of shares bought and sold. In Brussels 44,264 shares were traded and In January 1952, Sidro converted the 341,326 bearer shares then in its [p 210] possession to
counsel remarked: "True it cannot be said that all the purchasers were necessarily Belgian but registered shares; they were registered in the name of Newman & Co. (See ibid., Annexes 11
the likelihood is that they were." [Emphasis supplied.] and 4.) I have not been able to establish that none of these 341,326 bearer shares changed
hands be-tween 12 February 1948 and January 1952.
87. The actual Belgian position seemed to fall back on that taken by counsel on 7 May 1969 in
the following statement: It is alleged that 244,832 additional bearer shares were owned by other Belgians in February
1948. (M., Sec. 10.) It was claimed that on 14 June 1962, 200,000 bearer shares were held by
"After all, and this is a point of some importance, it is not necessary for the Government of Belgians other than Sidro. (O.S., p. 206). I find no proof that these bearer shares were
Belgium to satisfy the Court regarding [p 209] the identity and Belgian nationality of every continuously Belgian-owned (assuming the above allegations to be correct) between 1948 and
individual shareholder whose rights and interests underlie the Belgian claim. According to the 1962.
doctrine recognized by this Court and generally accepted by States, Belgium is presenting a
claim for injury done to the State of Belgium through wrongs inflicted upon its nationals. The 89. In reply to a question from the Bench concerning the possible effect on continuity if shares
Court therefore, need do no more than estimate in proximate terms the number of Belgian were transferred during the period 1948-1962, counsel for Belgium said, on 4 July 1969, that if
shareholders in Barcelona Traction." shares were sold to other Belgians and then repurchased by Sidro, "the continuity requirement
would be satisfied". But "if the shares had been sold to, and then repurchased from, non-
Although he argued that the evidence is enough for the Court to find that as of 14 June 1962 Belgian nationals, other than Spanish nationals, the requirement might possibly not have been
"at least 200,000 bearer shares in Barcelona Traction were owned by Belgians other than satisfied . . .". The Spanish side challenged this statement, and properly so, because one does
Sidro", it was actually left to the Court to make an approximate estimate. All of these not see why this situation would differ from counsel's third case. The third case he put was
presentations and others not noted here, do not suffice to discharge the burden of proof which where the shares had been sold to, and then repurchased from, Spanish nationals; here he
rested on the Applicant. agreed the continuity requirement would not have been satisfied. Counsel sought to justify his
answer to his own second case by various quotations to the effect that the continuity rule is
88. One cannot deny that it is far from easy to trace the ownership of bearer shares. In the artificial and should be re-examined. But he merely says that Belgium "feels it right that the
Certain German Interests in Polish Upper Silesia case, the Polish Government argued that "no existence of this body of critical opinion should be drawn to the attention of the Court". He did
importance can be attached to the possession of bearer securities, since it is impossible to not, however, deny the existence of the rule. When later he analysed his evidence of Belgian
ascertain in whose hands they may be at a given moment". (P.C.I.J., Series A, No. 7, p. 67.) holdings in 1948, he did not try to adduce proof that the shares did not change hands between
The Court did not find it necessary to pursue this point. In the instant case, Belgium said that 1948 and 1962. It was in this context that he rejected the Spanish suggestion that Belgium
Spain was seeking to drive them with their backs to the wall by demanding a probatio diabolica should prove in regard to each shareholder that he was a Belgian and that he was a
for identification of holders of bearer shares. But Belgium insisted that in this instance it was shareholder during the critical period. Counsel said:
able to accomplish this almost impossible task. (Memorial, 1959, p. 17; Reply, Part III, p. 156,
and C.R. for 13 May 1969.) I am not convinced that it succeeded FN1 "It is a lengthy and expensive procedure to carry out the investigation proposed by the
Government of Spain. It is justifiable if there is something to be distributed. [Sc. an award in
--------------------------------------------------------------------------------------------------------------------- this case.] It is not justifiable otherwise."
FN1 The Belgian State in 1946 or 1947 possessed 10,000 shares of Sofina and 50,000 shares of
Sidro. The shares were acquired in payment of a capital levy in 1946 but were apparently held He felt this was the more true because he considered that Belgium had proved that there was
by the State only briefly and probably not after 31 December 1947. See A.O.S., Ann. 30, App. at all material times Belgian ownership of at least 200,000 shares aside from the Sidro holdings.
3, pp. 368 and 381 and Sub-App. 3, p. 388. It was in another context that Belgian counsel None the less, the statement is a damaging admission of Belgium's inability to identify the [p
spoke, on 4 July 1969, of "the overall claim, here put forward by the Belgian Government, in 211] shareholders it sought to protect. The exhaustive effort to trace the bearer shares would
respect of the injury done to the Belgian State by the unlawful acts for which Spain is hardly have been necessary if Belgium had been confident that the Court would be convinced
responsible". that Sidro was the real owner of the 1,012,688 registered Barcelona shares throughout the
--------------------------------------------------------------------------------------------------------------------- critical period since so large a holding would presumably satisfy the demand that Sidro be
identified with Belgian interests. This may be another slight indication that Belgian counsel were
Apparently 341,326 bearer shares were in the trust account with Securitas (to be discussed aware that they were, for one reason or another, not in a position to prove when the Securitas
later herein), after being deposited 31 December 1939 (O.S., p. 203). Then 8,525 more bearer trust arrangement terminated. (See paragraph 96 below.)
shares were deposited by Sidro with Securitas—7,925 on 12 December 1939 and 600 on 22
February 1940—while 2,075 bearer shares were, for some reason, left in Brussels. (Ibid., pp. ***
203-204.)
When on 19 April 1948, Sidro asked Securitas to send to Newman & Co. various securities, it Securitas as Trustee for Sidro
included in the lot to be sent 6,025 bearer shares and the coupons of 341,326 bearer shares,
90. On 6 September 1939 Sidro concluded a "custodian" contract with Securitas Ltd. which was "suspense period" ended 14 August 1946, which was six months after the certified date of the
a United States corporation formed under the laws of Delaware. (P. 722 of the Chayes Opinion, end of the danger; this is said to be according to Article 4 (III) of the trust deed. Securitas
A.R., Ann. 125; so stated also in A.O.S., Ann. 11, p. 206. Other statements of fact here are reports an inventory of what they held in trust on that date. The letter says they hold the
taken from the recital in Annex 3 of the Memorial unless otherwise stated.) It is said that this securities subject to future instructions from Sidro. There is no flat statement that they ceased
contract was concluded "foreseeing the danger of war".. (The contract is in A.M., Ann. 3, App. at that moment to be trustee although this is implied. A further letter of 17 April 1947 (A.M.,
2.) Such a custodian contract did not transfer the "real ownership" which was vested in Sidro. Ann. 3, App. 8) encloses a statement of securities held for Sidro "in custody for your account"
as of 31 December 1946. It was not until 19 April 1948 that Sidro instructed Securitas to send
91. The recitals in Annex 3 of the Memorial do not mention the fact (revealed later in A.O.S., the securities to Newman & Co. On 3 May 1948 Securitas wrote that they had delivered the
Ann. 11, p. 207) that on the same date, 6 September 1939, Sidro made with Securitas a second securities and that this operation closed Sidro's deposit account with them (A.O.S., Anns. 19
contract which was a trust agreement. It was further revealed that this trust agreement of 6 and 20). The lists showed 1,012,688 shares registered in the name of Charles Gordon & Co.,
September 1939 was replaced by another trust agreement on 27 February 1940, but it is said and certificates (presumably of bearer shares?) 6,025. On 7 June 1948, Newman & Co. wrote
that the differences between the two trust agreements are without relevance for this case! It is that the shares in the former [P 213] group had been registered in their name and were in the
said that the second agreement merely took advantage of some new Belgian war legislation. Chase Safe Deposit Co. in New York (ibid., Ann. 22).
The texts of the trust agreements have never been revealed throughout the pleadings. But the
existence of the trust agreement of 27 February is recorded in Annex 3, page 36, to the 93. Securitas was dissolved by legal action in Delaware, 16 September 1948 (ibid., Annex 25, p.
Memorial, where it is described as completing the measures for protection during the war. It is 258). An affidavit by Duncan, Alley and Newman, all directors or officers of Securitas, 30
said that this trust agreement was to enter into force when the Brussels area was occupied by October 1958, attesting this fact, says they examined the books of Securitas and that it had
the enemy or when any other critical situation developed threatening the normal operations of held (in addition to the registered shares) 341,326 bearer shares at Winchester House, London,
Sidro. It is further recited that the period of the application of the trust agreement was and 7,925 plus 600 bearer shares in Chase National Bank, New York. Further, on 20 January
indicated by a "suspense period" which would cease six months after the end of the critical 1947 Securitas "delivered" to Sidro 1,400 of these bearer shares and on 25 February 1947,
period. Turning again to Annex 11 of the Observations and Submissions, at pages 207 and 208, 1,100 of the same. On 16 January 1947, the safe deposit box at Winchester House, with
it is stated that when one of the "Operative Events" occurred, [p 212] Securitas automatically contents, was "assigned" to Sofina. On 3 December 1947, in accordance with request of Sidro,
became a trustee of Sidro's property outside Belgium and especially of 341,326 bearer shares of the 341,326 bearer shares were credited by Sofina to Sidro's account (ibid., Annex 26).
Barcelona Traction. The 1,012,688 registered shares were also already on deposit with
Securitas and its possession was transformed into "legal ownership" when Securitas became 94. Now title to bearer shares may be considered to pass by delivery of the certificates, unless
trustee FN1. Securitas became the trustee in May 1940 (ibid., p. 209). the transferee is a nominee or other depositary, for the trustee. It is not clear to me from the
documents whether Securitas, as trustee, did actually divest itself of title to these bearer shares
--------------------------------------------------------------------------------------------------------------------- through these transactions. It should be noted that the communications in question were
FN1 Securitas held for Sidro many securities other than and in addition to those of Barcelona originally in English and the words quoted above—"delivered" and "assigned"—are the actual
Traction. For example, of Mexican Light & Power Co. 6 per cent. cumulative income debenture terms used, which might or might not indicate passage of title from the trustee. (See A.O.S.,
stock, they held shares to par value of $2,254,250, registered in the name of the Midland Bank Ann. 25.)
of London as nominees, and to the value of $I,958,000 registered in the name of the Schroder
Bank in London as nominees, the nominees in both instances holding for the account of Charles 95. It is a vital matter to know when the trust ceased to exist. Professor Chayes, Belgium's
Gordon & Co. (A.O.S., Ann. 14, p. 219). American expert, clearly points out why this is so; he says that during the German occupation
--------------------------------------------------------------------------------------------------------------------- of Belgium—

Curiously enough, Mr. Mockridge, Belgium's Canadian expert, refers to the agreement of 6 "... Securitas acted as trustee of the property. As such, Securitas held legal title to the property
September 1939 as the "trust agreement" under which Securitas "became Trustee rather than and could manage the property in its own discretion, without regard to any instructions from
Custodian". (A.R., Ann. 126, p. 8). On the other hand, Professor Chayes, Belgium's American Sidro. Indeed, the whole point of the arrangement was to free Securitas from the control of
expert, bases the trust on the agreement of 27 February 1940 and does not reveal a familiarity Sidro, since during the German occupation, instructions might come from Belgium with respect
with the earlier trust agreement of 6 September 1939. to the shares that were inimical to Sidro's true interests and to the allied cause. Securitas was
of course, bound to use its discretion for the benefit of Sidro, the beneficiary under the trust
92. Annex 17 to the Observations and Submissions is a certificate without date signed by instrument. The trustee would be liable if it abused its discretion or used its position to take
members of the committee named in application of clause 9 of the trust deed of 27 February advantage of Sidro. And it had to account to Sidro, ultimately, for dividends and other profits.
1940, certifying, in conformity with clause 4 (III) of the trust deed, that the state of danger But subject to these general limitations, [P 214]as trustee during the war Securitas had full
which threatened Sidro (citing clause 3 of the trust deed) had ceased to exist on 14 February authority over the property" (A.R., Ann. 125, p. 707)FN1
1946 (p. 230). (I note that the Belgian Government had returned to Brussels on 8 September
1944 and Germany surrendered on 7 May 1945.) According to the report of Securitas to Sidro -----------------------------------------------------------------------------------------------------------
dated 24 September 1946 (op. cit., Ann. 18, p. 231; photocopy in A.R., Ann. 123), the FN1 Securitas evidently was not a "passive trustee" in the sense described by Judge Augustus
Hand in the San Antonio Land and Irrigation Co. case to which the Spanish side attached such ---------------------------------------------------------------------------------------------------------------------
importance. (New Documents, Vol. III, p. 114.) FN1 Wigmore, Evidence, 3rd ed. 1940, Vol. 2, sees. 285 and 291. Wigmore traces the rule back
------------------------------------------------------------------------------------------------------------ to the beginning of the seventeenth century.
---------------------------------------------------------------------------------------------------------------------
Chayes concludes that the trust had been terminated by 12 February 1948, but in proof of this
statement he merely cites Annex 3 to the Memorial, paragraph (g), where it is asserted that the Article 48 of the Rules of Court concerning documents submitted after the close of the written
trust ended on 14 August 1946. It is apparent that he either never saw the trust deeds or was proceedings, requires consent of the other party or a special decision of the Court; in this
not at liberty to disclose their exact terms. instance, the other party asked for the production of the trust document. Nor was the Court
strict in the instant case about applying the rule—witness the fact that over 4,000 pages of
96. Spain, in its Preliminary Objections in March 1963, pages 61-62, remarked on the failure to "new" documents were introduced by the two Parties during the oral proceedings between 21
produce the trust deeds. It also noted the fragile character of the "proof" that the trust ended April and 8 July 1969.
on 14 August 1946. It noted other documentary omissions by Belgium, some of which at least
were later supplied—but the trust deeds were not supplied. The Belgian omission is especially 98. The legal aspect of the trust situation which is important is the one which distinguishes it
remarkable in Annex 11 to the Observations and Submissions, page 208, where it discusses the from the nominee situation. As Chayes points out, during the trust, Securitas had not only legal
two trust agreements of 6 September 1939 and 27 February 1940 and, as already noted, title but full control, even though the beneficial title was in Sidro. Accordingly Belgian character
blandly remarks that the differences between the two contracts are irrelevant for the purposes of the claim did not exist during the trust. But in the nominee situations, the nominee is in the
of this case! The content of the trust agreements is described but the text is not produced. In position of an agent and the legal title coincides with the beneficial title in the principal even
the Rejoinder (p. 951) Spain hammers the point that, with all its documentation, Belgium has though he is not a registered shareholder.
not produced the text of the trust agreements, adding a footnote that it was again calling
attention to this abnormality. The Rejoinder cites the Chayes opinion along the lines noted ***[p 216]
above. It makes the sound point that since the personalities acting for Sidro, Securitas and
Sofina are essentially the same, their assertions supporting each other are equivalent to self- The Status of "Nominees"
serving declarations which have little probative value.
99. The requirements of linguistic simplicity necessitate the constant use of the term
In his pleading on 7 May 1969, counsel for Belgium dealt with the question of nominees but did "shareholder". The danger is that the reality behind the term will be lost to sight through
not discuss the trust. On 4 July, he brushed aside the trust issue which had again been raised semantic insistence upon the term itself FN1. To my mind, this defect faults the Spanish
by counsel for Spain on 18 June. Nor do I find elsewhere in the Belgian oral arguments an arguments concerning nominees. The Spanish argument identifies in all situations, the real
attempt to meet the Spanish criticism of the failure to produce the text of the trust agreements. "shareholders" with the names inscribed on the stock registers. See the Counter-Memorial,
Chapter VI, Sections 47 ff. and Rejoinder, Part III, Chapter II, especially Subsection 2. The legal
In his final pleading of 21 July, counsel for Spain stressed the non-production of the trust situation of nominees reveals the fallacy of this approach, quite aside from the fact that the
agreements, calling attention to the whole record on this matter, ending with a reference to the names of holders of bearer shares do not appear on the register although they are certainly
opinion of Professor Chayes. In particular he remarked that the only transfer of shares which "shareholders".
Securitas made was that of 3 May 1948 to Newman & Co.—two-and-a [p 215] half months after
the critical date of the declaration of bankruptcy. (This is in accord with A.M., Ann. 11, App. 2). ---------------------------------------------------------------------------------------------------------------------
FN1 On this point counsel for Belgium, speaking on 4 July 1969, was absolutely correct: "The
97. I fully agree with Sir Gerald Fitzmaurice (in paragraph 58 of his separate opinion) that this question is not who has the right to term himself 'shareholder' but, in Professor Ago's own
Court does not have any fully developed practice on rules of evidence, but I believe that in the words, 'who in the last resort has a proper claim to the economic content of the ownership of a
circumstances which have been described it is proper to apply the common law rule which is to share'... so as to enjoy the protection of international law."
the effect that if a party fails to produce on demand a relevant document which is in its ---------------------------------------------------------------------------------------------------------------------
possession, there may be an inference that the document "if brought, would have exposed
facts unfavourable to the party .. ." FN1. Although it is true, as Sir Gerald Fitzmaurice 100. Under principles of private international law, the legal nature of the right, title, or interest
emphasizes, that one should give due weight to the pressures engendered by the situation in of nominees in whose names Barcelona Traction shares were registered, must be determined
the Second World War, international law has long taken cognizance of practices designed to by either New York or Canadian law. Counsel for Belgium properly noted on 7 May 1969 that
thwart belligerents by concealing the truth; the history of the law of neutral rights and duties, is the principles governing the choice of law are not unfamiliar to the Court in view of the
full of examples. If disclosure of the text of the trust deeds would have prejudiced some Permanent Court's decisions in the Serbian and Brazilian Loans cases, P.C.I.J., Series A, Nos. 20
governmental interest, Belgium could have pleaded this fact, as the United Kingdom and 21. Since according to the unrebutted expert opinions of Chayes and Mockridge there is no
successfully pleaded "naval secrecy" in the Corfu Channel case, I.C.J. Reports 1949, pages 4, material difference between the two legal systems in the matters here involved, they need not
32. be analyzed separately.
Annex 125 of the Reply is the opinion of Professor Chayes, and Annex 126 is the opinion of Mr. time of war to cloak the identity of the real owner, they are generally used in the United
Mockridge on the Canadian law. I think it is clear that under both New York and Canadian law, States—where bearer shares are not issued— simply to facilitate transactions in shares FN1.
the nominee does not have "real title", is not the "real owner" and that the one for whom the Somewhat comparably, when shares are pledged with a bank as collateral for a loan, a stock
nominee acts has all the real elements of ownership [FN2]. The limitations on this statement power endorsed in blank will be attached. [p 218]
are only those which relate to the rights of the corporation, as for example, its right to deal with
the registered owner in the payment of dividends, etc. As has been shown, where shares are ---------------------------------------------------------------------------------------------------------------------
held by a trustee under a trust instrument, the same conclusion cannot be drawn. The FN1 Under the name of "share warrants" bearer shares may be issued in Canada as in England,
distinction is clear in both opinions although Mockridge lays more stress on cases where there is but they are not extensively used; Schlesinger, Comparative Law, 2nd ed., 1960, p. 442
a "bare trust". There can be situations in which the legal owner of even 97 per cent. of the ---------------------------------------------------------------------------------------------------------------------
shares may own something [p 217] worthless because, for example, of the beneficial interests 103. Chayes noted (ibid., pp. 714 and 715) that unregistered owners of shares may bring a
of a usufruct under German law—but this is not such a case. (Cf. the decision of the United shareholder's derivative suit, or under Delaware and New York law, in case of voting against a
States District Court in the Uebersee case cited above, at p. 13 of that Court's opinion.) merger, may demand an appraisal of their shares and cash payment of the appraised value. In
an appraisal case the New York court said there was no justification for interpreting the word
--------------------------------------------------------------------------------------------------------------------- "stockholder" in the statute as meaning "registered stockholder" (ibid., p. 720). Mockridge
- shows that Canadian courts interpreted the word "shareholder" in agreements, as being
[FN2] In opposition to the Belgian position on nominees, Spain invokes an opinion from an broader than and not limited to "registered shareholders" FN1.
eminent New York law firm—Davis, Polk, Wardwell, Sunderland & Kiendl. (See C.M., Chap. VI,
p. 675, and the text of the firm's letter of 28 February 1963 in Annex 65, Appendix 2, ---------------------------------------------------------------------------------------------------------------------
Preliminary Objections 1963). In my view, this opinion does not controvert the essentials of the FN1 Cf. Henn, Corporations, 1961, sec. 179: "Statutory references to shareholders are not
Chayes opinion. always clear as to whether they refer only to shareholders of record or also to the beneficial
--------------------------------------------------------------------------------------------------------------------- owners of shares. A substantial amount of stock is held by brokers in their own names (known
as 'street names') in behalf of their customers."
101. Chayes in his conclusion on page 722 (loc. cit.) says "I have the honor to conclude that ---------------------------------------------------------------------------------------------------------------------
neither Securitas, Ltd., Charles Gordon & Company, Newman & Company ever had any property
interest in the Barcelona Traction shares, except for the period of the German oc-cupation of Mockridge (ibid., p. 730) indicates that shares registered in Charles Gordon & Co.'s name were
Belgium during World War II, when Securitas, Ltd., held them as Trustee". Mockridge (A.R., p. vested in Canada although Charles Gordon & Co. had United States nationality, because Sidro
732) agrees with Chayes except he adds the period during which the shares were vested in the as beneficial owner was "enemy" during the German occupation. He does not mention Securitas
Canadian Custodian of Enemy Property which period he says terminated before the in this context. In the Observations and Submissions (p. 199), it is said that while the trust was
commencement of the bankruptcy proceedings. According to the Observations and Submissions still in force, Sidro declared the Barcelona Traction shares under Belgian law, although they
(p. 204), they were deblocked 29 April 1947; this fact is confirmed in the Reply, paragraph 994. were registered in the name of Charles Gordon & Co.
When the shares were first transferred to Charles Gordon & Co., there was attached (in
accordance with cabled instructions by Wilmers) a notice reading: 104. The jurisprudence of the Foreign Claims Settlement Commission of the United States is of
interest, notwithstanding the fact that this is a national body, operating in accordance with its
"We hereby certify that the within transfer does not involve a change of ownership of the statutory terms of reference and with the terms of agreements with various governments FN2.
shares represented by the annexed certificates as it is being made to Charles Gordon & Co. as For example, the Commission "denied recovery to a domestic [i.e., United States] corporation
nominee of our depositary therefore no transfer tax is exigible." (A.M., Vol. I, Ann. 3, App. 5, p. with more than eighty per cent, of its stock registered in the names of American citizens but
50.) beneficially owned by aliens. (Claim of Westhold Corporation . . .)" (Foreign Claims Settlement
Commission of the United States, Decisions and Annotations, 1968, p. 20). Thus neither place
This was on 11 September 1939 and Chayes stresses that there was nothing inconsistent with of incorporation nor majority of shares registered in the names of American nominees, sufficed
the Securitas arrangement in the fact that Sidro transferred direct to Gordon & Co. (A.R., Vol. to make the claim "American".
II, Ann. 125, p. 5). Chayes states on the same page that Sidro listed the shares registered in
Gordon's name with the United States authorities before the United States entered the war but ---------------------------------------------------------------------------------------------------------------------
there is no documentary record of this listing. But he says that Sidro reported the trust FN2 For the contrary Spanish view on the interest of this jurisprudence, see C.M., Chap. VI,
agreement with Securitas and did not report Gordon as holding any interest. Section 55.
---------------------------------------------------------------------------------------------------------------------
102. I find that it is of no legal consequence that the agents in whose names the shares were
registered were not listed publicly as professional nominees. (So also in Canada; Mockridge, In the Annotations one reads (at pp. 39-41):
A.R., p. 729.) The practice of registering shares in the names of nominees is very common in "Beneficial interest.—Occasionally legal title is vested in one person while the true owner is
the United States as Chayes shows (ibid., pp. 708-709). Although nominees were much used in another. Normally such an arrange-[p 219]ment is unnecessary; but as the Arndt decision
indicates, a 'cloaking' of title was sometimes imperative in view of the discriminatory measures investments which have been referred to earlier in this opinion, will overtake the possible
that were practiced during World War II. Applying settled rules of international law, the consequences of the rule which the Court now holds to be the law. But not all of the older
Commission held that beneficial interest, as opposed to nominal or bare legal title, was business practices have been abandoned and the managerial community of the commercial
controlling in deciding the question of ownership. [Emphasis supplied.] world might have to meet the announced rule by new devices. If, for example, it is agreed that
when the company has been wound up and has ceased to exist, the shareholders, now having
A more common example of beneficial ownership is the case of an agent who acquires title to a direct right to the assets, may benefit from the diplomatic protection of the State of which
property on behalf of his principal.. . they are nationals, it would be quite feasible to secure the cancellation of the "charter of
convenience" which the corporation had obtained. But surely no economic, social or political
The technical, legal form in which title to property is held, and the legal capacity to sue, advantage would be gained if in a situation like that in the instant case, the life of the Barcelona
constituting the so-called 'indicia of title,' must be considered of secondary importance to the Traction Company had to be officially ended in Canada so that the principal shareholders, who
question whether the interest for which espousal is sought is truly that of a United States are the real parties in interest, could be protected diplomatically. And could it be reasonably
national.... argued in such circumstances, that the United States would be the State entitled to extend
diplomatic protection because a majority of the shares were found to be registered in the name
A claim concerned an interest in a family fund or 'syndicate', that owned shares of stock in a of American nominees? One is entitled to test the soundness of a principle by the consequences
Swiss corporation, which assertedly owned all the outstanding shares of stock in a Yugoslav which would flow from its application; the consequences here would clearly be undesirable.
corporation. It was stated that 18,949 shares of stock held by the 'syndicate' in Switzerland had With deference to the opinion of the Court, I cannot agree that international law imposes such
been transferred to claimant in 1942, in recognition of her undivided fractional interest in the a solution of [p 221] the problem which the Barcelona Traction case has laid before the
family fund ... It appeared that the various record entries of the transactions were designed International Court of Justice FN*.
merely to cloak the shares of stock with ownership by a national of the United States, a device
which was then considered best calculated to safeguard the family interests. The Commission ---------------------------------------------------------------------------------------------------------------------
held that on the date of loss claimant was not the owner of the 18,949 shares of stock, but was FN* Since I have personally had occasion to correct misconceptions about the "law's delays" as
the beneficial owner of only a 5.29 % interest in the family fund. (Claim of Antonia Hatvany, a feature of the procedure in the International Court of Justice, I, like Sir Gerald Fitzmaurice,
Docket No. Y-1063, Dec. No. Y-910, Final Decision.)" welcome the inclusion in this Judgment of the Court of an indication of the fact that the fault
lies with governments of States and not with the Court or its Registry. The Court has never
*** been asked to treat a contested case or a request for an advisory opinion by summary
procedure, quite apart from the possible use of the standing Chamber of Summary Procedure,
105. Belgium not having established the Belgian character of any substantial number of shares but if the governments concerned desired a prompt decision, the Court could meet their
throughout the critical period which the continuity rule defines, might rely, and at times seemed request.
to rely, on the Belgian nationality of the group which shaped the will of the corporate person ---------------------------------------------------------------------------------------------------------------------
and dictated its policies. This also may be a difficult task in the case of great holding companies
with many cross-holdings of shares, which cross-holdings, Belgium stated, were permissible
under Belgian law. The centre of power may be deliberately concealed, not only in time of war, (Signed) Philip C. Jessup.
but for reasons of avoidance of taxation or of the application of anti-trust laws, or otherwise.
The individuals who give instructions—for [p 220] example, in this case, Mr. Heineman and Mr.
Wilmers—may be acting for unidentified financial interests, although I have no reason to [p 222]
suggest that this was actually the case. Belgium in the Reply (Ann. 127, Vol. II) quotes from
the report of the Spanish members of the International Committee of Experts in 1950, passages SEPARATE OPINION OF JUDGE MORELLI
attesting that Sidro controlled Barcelona Traction and that Sofina controlled Sidro; and counsel
stated on 13 May 1969 that at least in a certain period, Sofina "était contrôlée par des filiales". [Translation ]
The Spanish arguments and Belgian explanations about the alleged "Belgianization" and take-
over bids in 1964 do not prove what the situation was on 19 June 1962. But whatever is the I
alleged basis for the State interests which justify protection, that basis must be proved just as
much as if the justification were to be found solely in the continued nationality of shareholders. Subject of the dispute and object of the claim

*** 1. It will be advisable to begin by defining, on the one hand, the subject of the dispute between
the Belgian State and the Spanish State and, on the other, the object of the claim submitted to
106. The influence of the Court's judgments is great, even though Article 59 of the Statute the Court by Belgium in its Application of 19 June 1962. This Application has been compared,
declares that the decision "has no binding force except between the parties and in respect of particularly from the Spanish side, with the other Application submitted by Belgium on 23
that particular case". It may be said that the new methods and institutions for foreign September 1958, and the question has been raised as to whether what is involved is the same
claim or two different claims. case, the justification for this alternative claim was changed, so that reference is no longer
made to the damage suffered by Barcelona Traction, but to the damage suffered by the
Having regard to the circumstances of the case, comparison of the two Applications is useful company's Belgian shareholders. However, neither the reduction of the amount claimed nor the
only for the purpose of a precise determination of the object of the claim submitted by the 1962 alteration of the argument in support of the claim for compensation in any way changes the
Application, the only one on which the Court had to give a decision in the present Judgment. object of that claim as to its substance.
The proceedings instituted by the 1958 Application having been closed pursuant to the
discontinuance, there was no litispendance obstacle to prevent Belgium from again submitting 5. Between the two claims there is identity not only of petitum but also of causa petendi.
the same claim to the Court. On the other hand there can be no doubt that Belgium was
completely free to refer a different claim to the Court. In this case the causa petendi is the allegedly unlawful character where Belgium is concerned of
a particular course of conduct on the part of the Spanish authorities composed, according to
2. As regards the subject of the dispute between Belgium and Spain, that dispute has from the both Applications, of the same acts and omissions. Thus the identical nature of the causa
outset been characterized, in the first place, by the complaint put forward by Belgium on petendi is not affected by the fact that there is, as between the two Applications, a difference in
account of the measures taken by the Spanish authorities in respect of Barcelona Traction and, the way in which they set out to prove that a right of [p 224] Belgium's was indeed infringed by
in the second place, by Belgium's claim to reparation of some kind for the damage sustained as the measures complained of. The fact that in the first Application Belgium complained of the
a result of those measures, regarded as contrary to international law. Now these elements (and damage suffered, as a result of those measures, by a company in which there was asserted to
the resulting dispute) remained unchanged even after the discontinuance, which did not affect be a preponderance of Belgian interests, whereas in the second Application Belgium complained
the dispute in any way. It may also be said that the subject of the dispute remained of the damage indirectly suffered as a result of the same measures by Belgian nationals in their
unchanged, for that subject can only be the product of the component elements of the dispute. capacity as shareholders in the company, is merely a change of argument which has nothing to
do with the object of the claim.
3. Is it possible, despite the continuance of the same dispute, to consider that in its 1962
Application Belgium referred to the Court a claim having a different object from that submitted Whenever, as in the present case, there is a claim for reparation on account of the breach,
to the Court in 1958? I am of the opinion that this question must be answered in the negative. through a particular course of conduct, of the rules of international law concerning the
When a State is said to be exercising, as against another State, diplomatic protection of a treatment of foreigners, the specifying of such and such a person as the one in respect of
particular person, to be protecting that person, to be [p 223] taking up his case, what is meant whom diplomatic protection is exercised is not a matter which is at all relevant to the object of
by these expressions is that a State is exercising as against another State a right of its own the claim, for the claim has no other object than the reparation sought by the State for itself.
conferred on it by the international legal order, concerning a particular treatment due to the This is so of course only if the description of the allegedly unlawful conduct of the other State
person concerned. The national State of the person is entitled to demand that that person be remains unchanged throughout, otherwise there would be a change of claim because of a
accorded the treatment required by the relevant rules of international law and, should such change in the causa petendi.
treatment not be accorded, may claim reparation in the form of either restitutio in integrum or
compensation. International reparation is always owed to the State and not to the private Matters are otherwise when diplomatic protection is exercised not in the form of a claim for
person, even in the case of compensation and despite the fact that the amount of reparation on account of a wrong asserted to have been done but, on the contrary, in the form
compensation must be determined on the basis of the damage suffered by the private person. of a claim to a particular sort of treatment due by the other State to a private person. In this
case the specifying of the private person in respect of whom diplomatic protection is exercised
These very elementary notions explain quite simply why in the present case the two claims is an integral part of the specification of the conduct which the State exercising diplomatic
successively referred to the Court by Belgium, that of 1958 and that of 1962, must be regarded protection calls for on the part of the other State. Consequently, in the case of such a claim
as completely identical. submitted in judicial proceedings, the substitution of one protected person for another entails a
change in the object of the claim. In such a case there is indeed a change of petitum.
4. In the first as in the second Application Belgium asked the Court to adjudge and declare that
the Spanish State was under an obligation towards Belgium to make a certain form of 6. The reasons why I am of the opinion that both claims submitted by Belgium to the Court
reparation for an alleged international wrong. Naturally the international wrong, as such, could must be regarded as objectively identical are not the same as those advanced by the Spanish
have been done by the Spanish State only to the Belgian State and not to the injured persons. Government in reaching the same conclusion.

The wrong complained of by Belgium is described in the same way in both Applications: The Spanish Government appears to start from the idea that in order to determine the object of
according to both it consists of the same conduct on the part of the Spanish authorities. The the claim (or of the case, as it sometimes puts it) regard must be had to the identity of the
principal claim for reparation as expressed in both Applications has restitutio in integrum as its protected person. In the argument and submissions of the Counter-Memorial it reaches, by the
object and seeks the annulment by the Spanish State of the measures complained of against it use of a perhaps elliptic form of words, the point of envisaging either the Barcelona Traction
in the same way in both Applications. As regards the alternative claim for compensation, it is Company or the Belgian shareholders as themselves constituting the possible "objet" of the
perfectly true that in the 1962 Application the amount of compensation was reduced to 88 per Belgian "claim". Thus in that pleading a case involving company protection is contrasted with a
cent. of Barcelona Traction's net assets and that, in conformity with the new presentation of the case involving shareholder protection.
 the infringement of a right pertaining to Belgium, or in other words from the breach by Spain of
Now if the idea is accepted that the protected person himself constitutes the objet of the claim, an obligation it owed to Belgium. For the international rules concerning the treatment of
or at least the decisive element for determining the object of the claim, it would have to be foreigners, although they are rules of general international law and, as such, are binding on
inferred as a logical conclusion that the claim submitted by Belgium in 1962 is different from every State with regard to every other State, take concrete form in the shape of bilateral legal
[p225] that submitted to the Court in 1958, because Belgium now states that it is protecting not relationships, so that a State's obligation to accord the required treatment to a particular person
Barcelona Traction but its Belgian shareholders. exists solely towards the national State of that person and not towards other States.

However, according to the Spanish Government, this conclusion must be rejected, because, it In order to prove that it was indeed a right pertaining to Belgium which was infringed by the
alleges, Belgium sought in its 1962 Application to disguise, under the appearance of a case measures complained of, the Belgian Government contends that those measures, although
concerning Belgian shareholders in Barcelona Traction, a case which really concerns the taken in respect of a Canadian Company, indirectly injured Belgian nationals as shareholders in
company as such. This is purported to be proved by, on the one hand, the complaints advanced the company. The Spanish Government challenges this argument from several standpoints,
(relating to the measures taken by the Spanish authorities in respect of the company) and, on thus posing, inter alia, a problem as to Belgium's capacity.
the other, the form of reparation claimed (in the first place restitutio in integrum of the
undertaking). 2. It is necessary to be clear as to the sense in which it is possible in this connection properly to
speak of capacity; in particular because the Parties have used terms which are open to
7. I am of the opinion that, in submitting its new claim in the way it considered most suitable, misunderstanding: "qualité pour agir" or "jus standi". These terms would appear to indicate a
Belgium was only exercising a freedom which —as the Court has observed in the Judgment—it form of procedural capacity relating to the right to apply to court. But that right is not now in
undoubtedly possessed. The claim had therefore to be examined and judged in accordance with issue, since the 1964 Judgment upheld the Court's jurisdiction in the present case and thereby
the content which Belgium had imparted to it. It would have been quite arbitrary, on the Belgium's corresponding power to seise the Court, that is to say, Belgium's power to institute
pretext of bringing to light what was alleged to be hidden behind a disguise, to substitute for proceedings.
the actual claim as formulated by Belgium a different, purely hypothetical claim.
At the present stage it is possible to speak of capacity only in the sense of substantive and not
If, then, the 1962 claim is to be compared with that submitted to the Court in 1958 (the only procedural capacity, that is to say in the sense of the vesting in one State rather than in
useful purpose to be served thereby, as already said, being the better to define the content of another of the substantive right invoked in the case. The hypothesis of the existence of a
the new claim), both claims must be regarded as objectively identical. But the reason for this is certain obligation on the part of a given State (the respondent State) is assumed, and the
not, as alleged by the Spanish Government, that the new claim also concerns, despite its question is which State possesses the corresponding hypothetical right; in particular whether or
outward appearance, diplomatic protection of the Barcelona Traction Company as such, but not that right pertains to the applicant State.
rather that in both claims there is identity of petitum (the reparation sought) and of causa
petendi (the allegedly unlawful conduct of the Spanish authorities). As I said in my dissenting opinion attached to the Judgment on the Preliminary Objections
(I.C.J. Reports 1964, pp. 1ll f), the question of capacity, understood in this way, is one
This having been established, it must however be observed that as between the two claims concerning a substantive right with regard to the actual merits of the case. A judgment
there is a difference in respect of the way in which Belgium seeks to prove that the measures declaring that the applicant State is devoid of capacity in respect of the right of diplo-[p 227]
complained of constitute a wrong done by Spain to Belgium. In its endeavour to prove this (and matic protection which it invokes is not a judgment declaring the claim inadmissible, but one
hence its right to reparation) Belgium ceased relying on the contention of damage suffered by a dismissing the claim on the merits. A judgment of this kind has the effect of res judicata in the
company in which there were allegedly preponderant Belgian interests and, on the contrary, material sense.
based its claim on the purported fact that the measures complained of, although taken in
respect of the company, indirectly injured the Belgian shareholders in it. But this new argument 3. In my dissenting opinion (pp. 112 ff.; see also pp. 98 ff.) I also explained that the question
could not be rejected out of hand on the ground that it was only a means of disguising a of capacity, as a question concerning the possession by the applicant State of the substantive
different claim. It was the actual argument put forward by Belgium in its 1962 Application which right invoked by it as the basis for its claim, does not have any preliminary character, in the
had to be considered on its own merits in order to judge whether or not it was well-founded. [p sense that there is no logical necessity to resolve the question of capacity before going on to
226] examine the other questions that likewise concern the merits.

II It follows that it rests with the judge to determine the most suitable order, taking convenience
and economy as his criteria. It is open to him to begin with an examination of the question of
The Order of the Questions capacity, assuming as a hypothesis the existence of the obligation relied on as the basis for the
claim. But he may also find it simpler, without going into the question of capacity at all, to find
1. Belgium claims reparation from Spain for the measures taken by the Spanish authorities in that the claim should be dismissed on the ground that the obligation asserted by the Applicant
respect of Barcelona Traction, which are considered by Belgium as internationally unlawful. The is not one which exists on the part of the Respondent vis-à-vis any State at all. For this it might
unlawfulness here concerned must naturally be unlawfulness vis-à-vis Belgium resulting from be sufficient to resolve a question of pure law, either by showing the nonexistence of the legal
rule invoked as the basis for the claim, or by ascertaining its true content FN1. rule confers the right invoked? More particularly, is it in fact on the Applicant that such a right is
conferred? If the very existence of the rule is negated, any possibility of raising a problem of
--------------------------------------------------------------------------------------------------------------------- capacity is excluded.
FN1 See, in my separate opinion on the cases concerning South West Africa, Second Phase,
J.C.J. Reports 1966, pp. 65 f., the observations as to the relationship between the question of Consequently, to say that there is no rule which authorizes diplomatic protection of
capacity (standing) and that of the existence of obligation, and as to the hypothetical nature of shareholders on account of measures taken in respect of the company is to exclude the
the former question when raised before the obligation has been shown to exist. existence of any obligation of Spain in this connection, vis-a-vis any other States. Belgium's
--------------------------------------------------------------------------------------------------------------------- right is thereby denied, not because such a right might hypothetically belong to a State other
than Belgium (in other words, not for lack of capacity on the part of Belgium), but rather
4. Now the Spanish Government opposes the Belgian claim by raising, among others, questions because no such right can be invoked by any State, since no rule exists from which it could
which are undoubtedly questions of capacity. For it denies the existence of major Belgian derive. [p 229]
shareholdings in Barcelona Traction by disputing the possibility of regarding certain persons, in
respect of whom Belgium claims to exercise diplomatic protection, as Belgian shareholders in On the other hand, the other question, that of the nationality of the claim, does concern
the company; and it does this from two different standpoints. In the first place the Spanish capacity. The possible existence is postulated of a rule authorizing each State to exercise
Government denies that certain persons described by Belgium as Belgian nationals can really be diplomatic protection of its nationals holding shares in a company, in respect of the treatment
regarded and treated as Belgian. In the second place the Spanish Government denies that given to the company by another State; and the question is whether, on the basis of this
certain persons protected by Belgium can be regarded as shareholders in Barcelona Traction. hypothetical rule, it is to Belgium that the right to protect certain private persons would belong,
on the ground of their being, according to Belgium's assertion, both Belgian nationals and
There is thus raised from two different standpoints a problem which is undoubtedly one of shareholders in Barcelona Traction. Thus, as will be seen, a true problem of capacity is raised,
capacity, relating as such to the direction of the obligation assumed to exist on the part of the problem, in other words, of the attribution of the right deriving from a certain rule which is
Spain. In the first instance the question is whether the right corresponding to the hypothetical assumed to exist. A negative answer to this question would also have brought about the
obligation pertains to Belgium or to some other State which must be considered to be the dismissal of the Belgian claim on the merits.
national State of the person concerned. Similarly, in the second [p 228] instance, the question
is whether the right of diplomatic protection pertains to Belgium or to some other State as the 7. Nevertheless, the fact that this problem is one of capacity does not mean that it ought to
putative national State of the real shareholder. In short, it is what is known as the nationality of have been examined and settled in the affirmative before the Court had any possibility of going
the claim which is the issue in both instances. on to examine the other problem, that of the existence of an obligation owed by Spain to the
national States of the shareholders in Barcelona Traction with regard to the treatment of that
5. As will have been noted, all this assumes the existence with regard to the treatment of company. I said above that the problem of capacity also concerned the merits and that there
Barcelona Traction of an obligation on the part of Spain toward the national State or States of was, on that account, no logical necessity to solve it before the others likewise concerning the
the shareholders. But the existence of any such obligation is denied in another argument put merits. The order to be followed could only be dictated by considerations of economy.
forward by the Spanish Government. That argument does not raise a problem of capacity at all;
it raises no problem concerning the nationality of the claim. It raises on the contrary a problem As it happens, the Court gave priority to examining the problem of pure international law
concerning the very existence of the rule of law invoked by Belgium as the basis for its claim; relative to the diplomatic protection of shareholders in a company by their national State, in
and it is possible to pose this problem even if it is assumed that the protected persons really are respect of measures taken vis-a-vis the company. This choice appeared in itself the most apt;
Barcelona Traction shareholders and also Belgian nationals. that it was so was subsequently borne out by the result to which it led.

It is not possible to maintain that this issue is none the less one concerning the direction of the For, having settled that problem in the negative—having, in other words, denied the existence,
obligation (hence one of capacity in relation to the corresponding right) on the ground that as regards the treatment accorded by a State to a given company, of any obligation owed by
regard must also be had to the right of diplomatic protection pertaining to Canada as the that State to the national States of the shareholders—, the Court was thereby enabled to leave
national State of the company, and therefore seek to resolve the question of whether it is not aside any problem of capacity, that is to say, the problem as to whether the persons that
Canada rather than Belgium which has the capacity to claim reparation. This is so because Belgium claims to protect are or are not shareholders in the company and at the same time
Canada's right is derived from a rule different from that invoked by Belgium, the latter Belgian nationals. In that way many very delicate problems of fact and of municipal law, the
concerning not diplomatic protection of the company as such, but diplomatic protection of the solution of which was not necessary for the disposal of the case, have been avoided.
shareholders in connection with measures taken in respect of the company. If it is decided that
no such rule exists, no problem of capacity arises at all. 8. And so the Court has been able to bestow a very simple logical structure on its decision,
which in substance consists in negating the major premise of the syllogism or, in other words,
6. The point is that any question of capacity can only be raised in relation to a rule of law which in denying the existence of the rule relied upon by Belgium. In this way the Court has given a
is either undisputed or assumed to exist. The question is then as follows: which is the entity, as final, concrete solution to the fundamental problem at issue between the Parties, which lay in
between the various entities to which that rule is directed, on which, in the actual case, that the very question whether the rule of international law invoked by Belgium existed or not. The
negative answer to this question implies that none of the national States of the shareholders, [p
230] Furthermore, the very usefulness of any preliminary, hypothetical solution of the capacity
irrespective of the quantity of shares possessed by its nationals, could exercise diplomatic problem depends on the choice of the assumed rule in relation to which the problem is raised.
protection. In consequence, the Belgian claim had to be dismissed on that basis, even if it had It need only in this connection be pointed out, for example, that an affirmative solution of the
been proved that the whole or nearly the whole of the shares in Barcelona Traction were in the capacity problem would be absolutely useless unless the rule whose existence was assumed for
hands of Belgian nationals. the sake of argument coincided with a rule subsequently shown to exist.

If, on the other hand, the Court had begun by examining the problem of capacity, its reasoning Ill
and the logical structure of its decision would have been, at all events, much more complex. As
I have already said, any question of capacity can only be raised in relation to a given rule, The problem of the diplomatic protection of shareholders
which, if it is disputed, as in the present case, must be supposed to exist for the purposes of
the argument. Thus the Court would have set out from the hypothesis that a certain rule, 1. I shall now turn to the problem of whether a State has the right to exercise diplomatic
constituting the major premise of the syllogism, existed; assuming that premise to be true, the protection over those of its nationals who, as shareholders in a company of a different
Court would have examined and settled the various questions of fact which went to make up nationality, have suffered damage on account of measures taken with regard to the company
the minor premise (it being borne in mind that, in the eyes of an international tribunal, by a foreign State. To solve this problem correctly it is in my opinion necessary to begin with a
questions of municipal law also are questions of fact). few very general observations on the rules of international law governing the treatment of
foreigners.
Now the problem of capacity raised in this hypothetical way would have had to be settled either
in the affirmative or in the negative. These rules are invariably concerned to ensure the protection of certain interests proper to
individuals or collective entities. These interests, although contemplated by rules of
In the first event, once the Court had decided that Belgium would have capacity on the basis of international law, remain simple interests for the purposes of the international legal order. For it
a rule of law supposed for the sake of argument to exist, it would have been obliged to would be contrary to the present structure of the international community and of the
examine and solve the problem as to whether that rule really existed or not: that is to say, the international legal order to consider that the latter might either bestow or simply predicate
very problem to which the Court did in fact give priority and the negative solution of which has rights upon individuals or upon any collective entities other than those, such as States, which
been sufficient in itself to dispose of the case without there being any need to tackle the highly qualify as subjects of inter-national law. It is only within the State legal order that the interests
complex question of capacity. of foreign nationals may acquire protection by means of the attribution to the latter either of
rights or of other personal legal situations in their favour (faculties, legal powers or
It was only in the event of replying in the negative to the question of capacity that the Court expectations).
could, on that basis, have dismissed the Belgian claim without troubling to see whether the
hypothesis on which it had been based corresponded or not to the real state of affairs in However, the fact that this possibility is open to the legal order of the State may in one way or
international law. But the hypothetical character of the reasoning would have appeared another be taken into account in such rules of international law as are framed with a view to
somewhat strange. Faced with a very important problem of international law, one basic to the imposing certain obligations upon States in the treatment of foreigners.[p 232]
respective arguments of the Parties, the Court would have evaded the task of solving it
because, instead of setting about that problem, it had started from a mere hypothesis, that of The rules of international law in this matter, although they all seek to protect interests, as such,
the solution of the same problem in the affirmative. of individuals or collective entities, may employ different means to attain their ends and refer in
different ways to the systems of municipal law.
9. It must further be observed that the solution either way of a problem of capacity is
dependent on the particular rule in relation to which the problem is raised. If for example the 2. In the first place there are rules of international law concerning the treatment of foreigners
postulate consisted of a hypothetical rule whereby each State had the right to protect its which directly specify the interests they seek to protect, regardless of the prevailing attitude of
nationals holding shares in a company, irrespective of the quantity of shares possessed by the municipal legal order in that respect. The interests contemplated by the rules in this
those nationals, there would be no difficulty in the present case in finding that Belgium had category are always interests personal to individuals and never interests of collective entities.
capacity, considering that Spain does not dispute the existence in the hands of Belgian Moreover, the rules in question always concern those interests of individual foreign nationals
nationals of a certain number of shares in Barcelona Traction, whether that number be large or which are of fundamental importance, such as their interest in life or liberty, and never interests
small. The [p 231] question of capacity would, on the other hand, appear very delicate if, in of a purely economic nature.
accordance with the Belgian position, one were to posit the existence of a different and, in a
sense, more restricted rule, one bestowing a monopoly of the diplomatic protection of the In such cases the international rule refers to the legal order of the State solely in the sense that
shareholders in a company affected by a certain measure on the State whose nationals it is addressed to the State with a view to laying upon it an obligation to observe a given line of
possessed the largest proportion of the shares, or of a rule confining diplomatic protection to conduct in its own internal legal order; which conduct may consist in conferring, within that
the various States whose nationals possessed a substantial quantity of shares. legal order, certain rights or other personal legal situations on foreign nationals.
 consequence of the very content of the obligations imposed by those rules; obligations which,
The international rules in this category are somewhat analogous to the rules of international law precisely, presuppose rights conferred on foreigners by the legal order of the State in question.
concerning the protection of human rights. For the latter rules also are concerned not with the Both the obligation to afford rights judicial protection and the obligation to respect them apply,
protection of such rights as may already have been conferred by the internal legal system but then, to rights as conferred by the municipal legal order. This provides an indirect way of
with the actual predication, binding upon States, of rights within the municipal order. While it is determining what interests the international rule is intended to protect, given that this rule only
true that, in this context, it is to human "rights" that reference is made as being the subject of protects the interests of foreign individuals or foreign collective entities if those interests already
the protection sought by the rule of international law, the term is here employed in the sense of enjoy a certain degree of protection within the municipal legal system. This means that the
natural rights. In this case also international law envisages the protection of certain individual international rule refers to the municipal legal order in that, to impose upon a State a particular
interests and not of rights already resulting from any positive legal order. [p 234] obligation, it presupposes a certain freely adopted attitude on the part of the legal
3. Those international rules regarding the treatment of foreigners which belong to the category order of that State.
I have just described may be contrasted, having regard to their structure, with the rules in a
second category. These have a much wider area of applicability, because, on the one hand they 4. There is nothing abnormal in this reference of an international rule to the law of a given
concern not only foreign individuals but also foreign collective, entities, while they are, on the State. It is wholly untenable to object, as the Belgian Government has done, that in this way
other hand, for that very reason, designed not to protect a small number of interests of the international responsibility of the State is made to depend upon categories of municipal law,
fundamental importance to the human person but rather to protect other, more numerous thus enabling a State to set up the provisions of its own legal order as a means of evading the
interests which more often than not possess a purely economic character. international consequences of its acts. In reality, no subordination of international responsibility,
as such, to the provisions of municipal law is involved; the point is rather that the very
Like the rules in the first category, those in the second are also intended for the protection of existence of the international obligation depends on a state of affairs created in municipal law,
interests, to which end they enjoin upon the States to which they are directed a certain line of though this is so not by virtue of municipal law but, on the contrary, by virtue of the
conduct which they place those States under an obligation to observe in their municipal legal international rule itself, which to that end refers to the law of the State.
orders. But [p 233] before referring in this way to the internal legal order, the international
rules of which I now speak refer to that same legal order for the purpose of performing a Nor is it possible to invoke against this, as has also been done, the alleged basic principle of the
preliminary task, that of determining what interests are to be the subject of the protection supremacy of international law. Despite what the Belgian Government has asserted to the
envisaged. This is so in that the international rule postulates a certain attitude on the part of contrary, this principle has never been affirmed, as such, by the International Court and, so far
the State legal order, inasmuch as it has regard solely to interests which, within that legal as the Permanent Court is concerned, it stands in clear contradiction to the idea, by which that
order, have already received some degree of protection through the attribution of rights or Court was always guided, of the separateness of international and municipal law.
other advantageous personal legal situations (faculties, legal powers or expectations): an
attitude on the part of the State legal order which in itself is not obligatory in international law. Quite another principle underlay the Permanent Court's statement to the effect that municipal
laws were simply facts from the standpoint of international law (P.C.I.J., Series A, No. 7, p. 19).
It is on the hypothesis that this state of affairs has arisen in the municipal legal order that the This was a reference not to any supposed principle of the supremacy of international law but
international rule lays upon the State the obligation to observe a certain line of conduct with rather to the exclusive character of the international legal order, as of any non-derivative legal
regard to the interests in question : with regard, one might thenceforward say, to the rights system. But this principle does not by any means rule out the possibility that a rule of
whereby the interests in question stand protected in the municipal legal order. I should explain international law may refer to municipal law in some way or another: for example, for the very
that it is only for the sake of brevity that in this connection I speak of rights, because instead of purpose of rendering an obligation laid upon a State subject to a certain point of fact within the
a right some other advantageous legal situation may be involved: a faculty, legal power or province of that State's municipal law. Very clear illustrations of that possibility are to be found
expectation. in treaties dealing with extradition or with the recognition of foreign judgments.

The conduct which international law renders incumbent upon a State with regard to the rights 5. In the present instance, the interests concerned are either interests of collective entities, or
which the same State confers on foreign nationals within its own municipal order consists, in more precisely companies, such as Barcelona Traction and the companies holding shares in it,
the first place, in the judicial protection of those rights. Any State which, having attributed or interests of individuals, such as the individual shareholders in Barcelona Traction. But, either
certain rights to foreign nationals, prevents them from gaining access to the courts for the way, we are dealing with interests of a purely economic nature.
purpose of asserting those rights is guilty, in international law, of a denial of justice. In addition,
international law lays upon a State, within certain limits and on certain conditions, the It follows that the international rules which may be invoked for the sake of protecting those
obligation to respect, in the conduct of its administrative or even legislative organs, the rights interests are exclusively rules entering into the second of the two categories I have described.
which the municipal legal order of the same State confers on foreign nationals. This is what is But, as has been seen, these rules postulate that, if those same interests are to be protected,
known as respecting the acquired rights of foreigners. certain rights must already have been bestowed by the municipal legal order. It is on the
hypothesis that the municipal order has adopted this attitude, op-[p 235] tional in international
As will be observed, the fact that the rules of international law in question envisage solely such law, that the international rule imposes certain obligations on the State.
interests of foreigners as already constitute rights in the municipal order is but the necessary
From the considerations I have set forth it needs must follow that, in terms of general subject to any specific protection in international law. They may however be interests of the
international law at least, a State is free even to deny companies—or certain companies—legal members which coincide with interests of the company. In that event, if the interests of the
personality. For it is only in respect of individuals that the State is under an obligation in company are legally protected within the municipal order, it is to these interests (constituting
international law to recognize personality, or in other words to confer a set of rights. The rights rights of the company) that the international obligations apply.
in question are precisely those which the State, by virtue of the rules of international law
entering into the first category, has an obligation to confer upon individuals so as to protect 6. The application to the present case of the principles I have just mentioned does not occasion
certain of their interests which are fundamental in nature. It is only in the event that certain any difficulty.
rights and, consequently, legal personality are conferred on a company within the municipal
order that the State is bound by certain international obligations with regard to the judicial There is no disagreement between the Parties with regard to the attitude of the Spanish
protection of those rights and respect for the same. municipal order so far as concerns the way in which it deals with the legal situation of a limited-
liability company, on the one hand, and the rights of its shareholders on the other. No-one
Where the municipal legal order denies a company legal personality, this signifies that the denies that Barcelona Traction, like any such company, enjoyed legal personality in the legal
municipal order in question considers the corporate property as the subject-matter of rights order of Spain and that it had consequently to be regarded as the owner of the rights over the
pertaining to the members. In that event it is in relation to these rights, freely conferred on the corporate property. Accordingly, the shareholders in Barcelona Traction were not recognized to
members by the municipal order, that there is incumbent upon the State an international possess any rights over the corporate property; they enjoyed only those rights proper to
obligation of protection and respect. shareholders in a limited-liability company, such as the right to dividend and certain rights
relating to the conduct of the company's business.
If, on the other hand, the municipal legal order allows the company legal personality, it can but
treat the members' rights accordingly. Consistently with the attribution of the corporate However, Belgium does not complain of any damage that might have been suffered by
property to the company, considered as a juristic person, the members will in this case enjoy no Barcelona Traction shareholders in respect of their own rights as shareholders on account of
more than limited rights, the subject-matter of which will not be the corporate property. the measures taken by the Spanish authorities. On the contrary, Belgium complains of the fact
Needless to say, in this case too, the rights accorded to the members, whatever they may be, that those measures, although (or rather, precisely because) they were taken vis-a-vis the
enjoy the international protection which is appropriate to them. company, were detrimental to the interests of the shareholders. But these were simple
interests, not interests constituting rights in the Spanish legal order.
In other words, there is on the one hand a set of rights conferred by the municipal order on the
company and, on the other hand, within the same legal order, another, quite distinct set of It follows, in accordance with the principles I have stated, that, so far as such shareholders'
rights conferred on the members. Each set of rights is entitled to its own, distinct international interests are concerned, Spain was under no obligation in international law; which rules out any
protection. international responsibility on the part of Spain for such damage as the measures taken by its
authorities may have caused to the interests of foreign shareholders. If simple interests are (as
As has been seen, both these protections afforded by the international legal order presuppose a they must be) disregarded, and only rights considered, such as they arise out of the Spanish
certain attitude on the part of municipal law, namely a certain manner in which it deals with the legal order, it is only to the rights of the company that the measures of which complaint is
rights of the company, on the one hand, and those of the members on the other. In the made could have caused harm. But damage caused in respect of the rights of Barcelona
present case, the State legal order to be considered is the Spanish legal system, that is to say Traction, a Canadian company, could, if internationally un-[p 237] lawful, have constituted an
the legal order of the State whose international obligations have to be determined. international wrong only vis-a-vis Canada, not vis-à-vis Belgium or any other State. In this
connection it can properly be said that it is the Canadian State alone which, on account of the
So far as the members of the company are concerned, to say that the international legal order nationality of the injured private party, has capacity to claim reparation.
affords protection only to their rights, such as recognized by the municipal order of the State
whose international obligation is in question, is not in any way to deny that the subject of inter- 7. Mention must now be made of another way in which the Parties put the question of whether
national protection is, in the upshot, in this case as always, interests.[p 236] the measures taken by the Spanish authorities were of an unlawful nature vis-a-vis Belgium. In
place of reference to the distinction between rights and simple interests, a distinction was
The reference to the legal order of the State and to the rights which it confers constitutes drawn between direct damage and indirect damage, and it was asked whether the measures
merely the means whereby international law establishes what interests it is concerned to complained of, although taken with respect to Barcelona Traction and, as such, causing it direct
protect. International law protects, by laying certain obligations upon a State, solely such damage, constituted an internationally unlawful act vis-a-vis Belgium because they also, albeit
interests of the members as already enjoy protection within the municipal legal order of that indirectly, caused damage to the Belgian shareholders in Barcelona Traction.
State on account of the attribution to those members of rights or other personal legal On the basis of what I have said with regard to the different attitudes evinced by the
situations. international rules on the treatment of foreigners with respect to simple interests on the one
hand and rights on the other, I find that the distinction between direct damage and indirect
If that condition is not satisfied or if, in other words, what is at stake is interests which do not, damage serves no useful purpose.
within the municipal order, constitute rights conferred on the members, those interests are not
For, to consider that very limited category of international rules on the treatment of foreigners concerned, from the exercise by Canada of diplomatic protection of the company and that such
which is concerned to protect certain interests independently of whether or not they constitute protection was not pursued.
rights in the municipal legal order, an injury to such an interest is, of itself, an internationally
unlawful act. No importance could be attached in this connection to the relationship in which We have seen that the interests of shareholders, as simple interests not constituting rights
such an injury might stand towards an injury to another interest, more especially in the sense within the municipal legal order, enjoy no protection under the international rules governing the
of its having to be regarded as the latter's indirect consequence. treatment of foreigners. This obviously does not rule out the possibility that those interests
might benefit indirectly from the protection which those same rules afford the company's
Similarly, to consider the other category of international rules, concerned to protect solely rights interests in so far as these constitute rights under the municipal legal order. It is therefore
recognized by the municipal legal order, what matters in a given instance is of course to possible that the exercise of diplomatic protection of the company by its national State may
establish whether or not there was an injury in infringement of such a right. If this is not the eventually lead, through the retrieval of the interests of the company, to the indirect retrieval of
case or if, that is to say, there was only an injury to a simple interest, such injury will not the shareholders' interests too.
constitute an international wrong even if it stands in some relationship to an injury in respect of
a right which might, as such, constitute an unlawful act vis-a-vis the national State of the But this in no way influences the attitude evinced toward the interests of shareholders by the
injured party. international rules governing the treatment of foreigners. The mere possibility of an indirect
protection of shareholders' interests, in the sense indicated above, does not warrant any
It would appear, moreover, that the distinction between direct damage and indirect damage is, inference
in substance, merely a different way of stating the distinction between injury in respect of a [p 239] that whenever such indirect protection is lacking it must be replaced by direct
right and injury to a simple interest. For, supposing a measure to have been taken with respect protection. There could be no question of such direct protection unless a State owed an
to a private party who, as a result of that measure, has directly suffered damage, if it be obligation and happened to have incurred responsibility toward the national State of the
enquired, in a concrete case, who is the private party with respect to whom the measure can be shareholders. And I cannot see where any basis for such an obligation or such responsibility is
regarded as having been taken, the only way of answering this question is to consider the legal to be found.
effects of the measure. A measure can only be regarded as having been taken with respect to a
particular party if it produces legal effects for that party; if, [p 238] in other words, it involves Actually the very idea of the diplomatic protection of shareholders by their national State, it
the rights of that party. All that other parties could suffer from such a measure would be being conceived as a second line of protection that may be brought into play if protection of the
consequences affecting their simple interests. To term such consequences indirect is in fact company by its own national State should be lacking, is strictly bound up with a way of thinking
merely an imprecise way of describing the injury of a particular party's simple interest, an injury that misconceives the very basis of diplomatic protection in general, regarding it not as a
standing in a certain relationship to the injury suffered by another party in respect of his right. State's mere exercise of a right bestowed upon it by the rules of international law concerning
the treatment of foreigners, but rather as a procedure entirely independent of the existence of
8. From this I conclude that an international obligation on the part of Spain with respect to the a right.
treatment of Barcelona Traction and, in consequence, international responsibility on the part of Only by taking such a standpoint could it be possible, where the treatment afforded a company
Spain for any breach of that obligation, could only be held to exist vis-à-vis Canada, the is concerned, to envisage diplomatic protection of the shareholders by their national State as a
company's national State. Neither an obligation nor responsibility on the part of Spain could be second line of protection, that is to say as a protection subordinated to the condition that
held to exist vis-à-vis Belgium, or vis-à-vis any other State of which Barcelona Traction diplomatic protection is not exercised, or not pursued, by the national State of the company.
shareholders might be nationals. This view, on the contrary, would be utterly inconceivable on the correct premise that an act of
diplomatic protection is simply the exercise of an international right, and is consequently con-
The absence of any responsibility on the part of Spain vis-à-vis Belgium in respect of the ditional on the existence of such a right.
measures taken by the Spanish authorities with regard to Barcelona Traction is simply a
consequence of the absence of any obligation owed in this respect by Spain to Belgium; this, in 10. Neither is it possible, with a view to demonstrating the admissibility of a second-line
its turn, results from the fact that there is no rule of international law from which such an diplomatic protection of shareholders in the event that diplomatic protection of the company is
obligation might be derived. lacking, to rely on a supposed analogy or rather parallel between that alleged second-line diplo-
matic protection and such possibility as may be afforded shareholders in municipal law of taking
In sum, therefore, Belgium has no possibility of exercising diplomatic protection with respect to action against the organs of the company, or in their stead, should they remain inactive.
the Belgian shareholders in Barcelona Traction, since, as has already been said, a State which
exercises diplomatic protection with respect to one of its nationals is merely demanding for It is the very idea behind such reasoning which, in my opinion, is unacceptable: the idea that
such national the treatment required by the international rules governing the matter or else international law must necessarily offer some kind of protection to shareholders' interests.
claiming reparation for the violation of those rules. There is nothing necessary about such protection; it exists only within the limits and on the
conditions which are fixed by international law itself. Furthermore the requirements which
9. No importance can be attached in this connection to the facts that the Belgian shareholders municipal law is concerned to satisfy are not necessarily requirements that ought also to be the
in Barcelona Traction might have benefited indirectly, so far as their own interests were concern of international law.
 For to envisage the possibility of indirect protection in certain eventualities is tantamount to
Needless to say, if the municipal legal order does, in the event of the inactivity of the organs of recognizing the absence, so far as shareholders are concerned, of any direct protection on the
a company, confer certain rights on the shareholders, those rights, like any other rights peculiar part of international law— to recognizing, in other words, that international law does not
to shareholders, will as such enjoy the protection which international law affords in general to consider the interests of shareholders, as simple interests, worthy of its protection and that it
rights conferred on individuals by a municipal legal order.[p 240] consequently refrains from imposing upon a State, in this connection, any obligations toward
shareholders' national States. This negative attitude on the part of international law cannot be
11. The lack, in a given case, of any exercise of diplomatic protection in respect of the company reversed on the ground that the interests of shareholders might, in other circumstances, benefit
might result from the actual impossibility, in that case, of exercising such protection. from a purely indirect protection. Such artificial and illogical reasoning would lead to the
creation, for the interests of shareholders, of a direct protection such as their national States
As an example of a case where it would be impossible for the national State of the company to might take up: the very protection which is refused by international law.
exercise diplomatic protection in its respect, the hypothesis has been adduced of the company's
being dissolved, or being in a state of legal or simply material incapacity to act. 13. A fortiori, the diplomatic protection of shareholders by their national States must be ruled
out where, as in the present case, the diplomatic protection of the company by its national
With regard to the extreme case, that of dissolution, this must naturally be taken to mean a State is possible but, for some reason or other, is not exercised or not pursued.
dissolution which took place after the measure complained of, whether as a result or
independently of that measure. For if the company were already dissolved at the time when the To my general remarks on the notion of a second line of diplomatic protection for shareholders,
measure complained of was taken, it would obviously be impossible to speak of a measure and to those I have just made regarding the hypothesis of the impossibility of the company's
taken with regard to the company; one would on the contrary have to speak of a measure receiving diplomatic protection, remarks which remain no less valid for the hypothesis now
taken directly with regard to the members of the company, which would ipso facto authorize under consideration, I would add certain other observations of specific application to the latter.
the national States of the members to exercise diplomatic protection of them. According to this latter hypothesis, the possibility of a State's exercising diplomatic protection of
those shareholders in a company who are its nationals would not be absolute, but contingent
Furthermore the logic of the argument implies that the dissolution in question must be an on a certain attitude which a third State, i.e., the national State of the company, is free to
extinction which is effective from the standpoint of the legal order of the company's national adopt or not: an attitude consisting either in refraining from exercising diplomatic protection of
State. Such an extinction is not necessarily the automatic consequence of an extinction the company or in not pursuing diplomatic protection once exercised. It would not be easy to
occurring in the legal order of the State that had taken the measure complained of. establish at what moment the requisite condition might be regarded as fulfilled. In any event,
there would be a point in time before which the diplomatic protection of the shareholders would
Now it is quite obvious that if a company is dissolved from the standpoint of the legal order of not be admitted; as from that moment, on the other hand, the possibility of exercising such
its national State, there is no possibility of its applying to that State for diplomatic protection. protection would exist.
However, the ability of persons to request diplomatic protection of their national State is one
thing, and entirely depends on the internal legal system of the State in question; but the But any diplomatic protection presupposes that the State approached by the protector owes an
exercise of diplomatic protection on the international plane is quite another matter. Diplomatic obligation or, it may be, has incurred a debt of responsibility, because it is precisely such
protection, as the exercise of a right arising out of the international legal order, belongs obligation or responsibility that diplomatic protection relies on and asserts. Consequently, to say
exclusively to the State, which has entire discretion in its respect. A State is free not to exercise that the national State of the shareholders cannot exercise diplomatic protection for so long as
diplomatic protection even if the national concerned requests it. Conversely, a State may it is not possible to affirm that the national State of the company is refraining from exercising
exercise diplomatic protection even if there is no request from its national. It follows that the diplomatic protection of the [p 242] latter amounts to excluding the existence, until then, of any
dissolution of a company does not prevent its national State from exercising diplomatic obligation or responsibility vis-à-vis the national State of the shareholders. It is only later that
protection in its respect and that, consequently, the hypothesis envisaged cannot arise at all. such an obligation and, it may be, such responsibility (indeed the very unlawfulness of the
measure taken vis-à-vis the company) would arise, necessarily with retroactive effect, owing to
12. On the other hand it must be recognized that diplomatic protection of a company really may the conduct of a third State, the national State of the company, in abstaining—for some motive
be impossible when there is no foreign State to exercise it. This would be so in the case of a the appraisal of which would be a matter for its own discretion—from the exercise of diplomatic
company which had the nationality of the very State whose international obligation was in protection in respect of the company.
ques-tion.
Simply to propound such a theory is to expose its absurdity. Generally speaking, it is hard to
Nevertheless, to say that in such a case the national States of the shareholders are entitled to see how a State's non-exercise of its right could have any influence on the possibility of
protect the latter's interests because there is no possibility of their benefiting indirectly from any exercising, let alone the very existence of, another State's right. I have already pointed out that
protection afforded the company would be to make havoc with the system of international [p the international rules governing the treatment of foreigners take concrete shape in bilateral
241] rules regarding the treatment of foreigners. It would, furthermore, be a wholly illogical relationships. Now each of these relationships, between clearly circumscribed subjects, is
and arbitrary deduction. absolutely independent of any other relationship which, though deriving from those same rules,
might exist between other, or partly other, subjects. Hence no such relationship could, through
its own existence or merely through its activation, exert any influence on the very existence of separate and independent right or interest in respect of damage done to the company by a
another. Consequently, if the view be taken that a State is not, vis-à-vis the national State of foreign government".[p 244]
shareholders in a limited company, under any obligation whatever concerning the treatment of
that company, it is impossible to see how such an obligation could arise retroactively out of the The Belgian Government, in its first submission, asked the Court to adjudge and declare that
fact that the national State of the company does not, for whatever reason, exercise its own the Spanish State is under an obligation towards Belgium to make reparation for the damage
right. caused to "Belgian nationals, individual or legal persons, being shareholders of Barcelona
Traction".
(Signed) Gaetano Morelli In the second submission, it asks that the Court will—

[p 243] "adjudge and declare that this reparation should, as far as possible, annul all the consequences
which these acts, contrary to international law, have had for the said nationals, and that the
SEPARATE OPINION OF JUDGE PADILLA NERVO Spanish State is therefore under an obligation to secure, if possible, the annulment by
administrative means of adjudication in bankruptcy and of the judicial and other acts resulting
In its Judgment of 24 July 1964 the Court joined to the merits the third preliminary objection therefrom, obtaining for the said injured Belgian nationals, all the legal effects which should
raised by the Spanish Government to the Application of Belgium. result from this annulment.. .". (Application filed 19 June 1962, second submission.)

The Court then stated that: What is then the real meaning and scope of the present Belgian claim? The new Application
presents as the object of Belgium's protection, not the Canadian commercial company of
"the third objection involves a number of closely interwoven strands of mixed law, fact and Barcelona Traction but Belgian nationals who are said to be shareholders of Barcelona Traction.
status, to a degree such that the Court could not pronounce upon it at this stage in full
confidence that it was in possession of all the elements that might have a bearing on its The Spanish Government disputes the Belgian Government's capacity to act—
decision" (I.C.J. Reports 1964, p. 46).
"in view of the fact that the Barcelona Traction Company does not possess Belgian nationality
In the present proceedings the Parties have dealt fully with questions of merits, in the course of and that, in the case in point, it is not possible to allow diplomatic action or international judicial
their written and oral pleadings. proceedings on behalf of the alleged Belgian shareholders of the company on account of the
damage which the company asserts it has suffered". (P.O., submissions on third objection.)
The Spanish Government contests the Belgian Government's capacity to act, its jus standi, its
right to intervene on behalf of Belgian nationals (natural or artificial persons) whom the Belgian I do concur in the view that, in the present case, diplomatic action or international judicial
Government claims to have been injured by a breach of international law, for which liability is proceedings on behalf of the shareholders in the company on account of damage which the
attributed to the Spanish authorities. company alleges it has suffered, could not be allowed.

The Belgian Government asserts that it is exercising protection exclusively and directly on It has not been proved that there exists a special customary rule which, by derogation of the
behalf of persons of Belgian nationality and contends that the legal question which arises when basic principles of international law with regard to the status of aliens, would have helped the
examining its jus standi in the present case is that of the diplomatic judicial protection, "not of Belgian contention.
foreign trading companies, but of natural and artificial persons" who, having invested their
funds in the said companies, suffered losses as shareholders in these companies, as a result of Nor has it been demonstrated that there exists an alleged general rule establishing, in all
illegal actions committed against the companies. circumstances, the lawfulness of the protection of shareholders following damage caused to the
company.
The respondent Government contends that—
I believe it is right to say that international law does not recognize the right of diplomatic
"international law does not recognize, in respect of injury caused by a State to a foreign protection of shareholders as such if their rights stricto sensu have not been violated.
company, any diplomatic protection of shareholders exercised by a State other than the
national State of the company". Nor does any rule of international law give support to the admissibility of a double diplomatic
protection, one for the corporation and another for the shareholders in that corporation.[p 245]
The applicant Government asserts its right to intervene on behalf of Belgian nationals,
shareholders in the company, and contends that such right is conferred on it in respect of its To say that the corporation and the shareholders have parallel interests does not make
nationals by the rules of international law concerning the treatment of foreigners. admissible a concurrent diplomatic intervention.

The real issue is whether international law recognizes for the shareholders in a company "a No State could be safe from the pressure and danger of a plurality of diplomatic interventions
by States protecting their nationals, shareholders in a given corporation, if the right of 1911-20 in Mexico transformed the political and social outlook of the nation, as did the later
diplomatic protection of shareholders were recognized. revolutions in central Europe after the First World War, and those in eastern Europe after the
For the time being, the principle which recognizes the capacity of a State to intervene, by way Second. These revolutions were accompanied by measures of expropriation, which inevitably
of diplomatic protection of a company of its own nationality, has proved to be a fair and well- raised the question of the position under international law of individuals who had invested in
balanced safeguard or insurance, both for the investor and for the State, where foreign companies carrying on business in the countries concerned." (British Year Book of International
companies operate. Law, 1949, p. 225.)

This regime, whose consequences are well known, has no surprises and establishes a legal The history of the responsibility of States in respect to the treatment of foreign nationals is the
order which, so far, has proved to be generally adequate and satisfactory. 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,
There seems to be no fundamental reason or essential need to depart from it. If a door is open and the imposing of sanctions in order to oblige a government to make the reparations
to the intervention, by way of diplomatic protection of shareholders, of a plurality of States—as demanded.
many as could claim to have shareholders of their nationality—a chaotic situation of the gravest
international consequences would, in time, develop. Special agreements to establish arbitral tribunals were on many occasions concluded under
pressure, by political, economic or military threats.
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 The protecting States, in many instances, are more concerned with obtaining financial
right of diplomatic protection as a pretext for political or economic pressure, dangerous to the settlements than with preserving principles. Against the pressure of diplomatic protection,
sovereignty and independence of weaker or less developed States, who cherish more their weaker States could do no more than to preserve and defend a principle of international law,
national dignity than the speed of their development. In the relation between the investor and while giving way under the guise of accepting friendly settlements, either giving the
the State where the investment takes place, a just balance should be aimed at, for it is good for compensation demanded or by establishing claims commissions which [p 247] had as a point of
the international community that capital which goes abroad in search of gain should not be a departure the acceptance of responsibility for acts or omissions, where the government was,
potential threat to the essential values and dignity of States. neither in fact nor in law, really responsible.

The lessons of history and past experience are, after all, the source of the law and of judicial In the written and in the oral pleadings the Applicant has made reference, in support of his
precedents and must have place and weight in the conscience of the judge. thesis, to arbitral decisions of claims commissions—among others those between Mexico and
the United States, 1923.
Mervyn Jones, in his work Claims on behalf of nationals who are shareholders in foreign
companies, makes the following historic remarks by way of introduction: "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
"The era of foreign investment on a large scale reached its height during the fifty years or so international law, justice and equity' and, therefore, may have been influenced by other than
preceding the First World War, when British and American capital poured into all parts of the strictly legal considerations." (Schwarzenberger, International Law, Vol. I, p. 201.)
world, financing railway and harbour construction, exploitation of mineral deposits and
innumerable other projects in undeveloped countries. At the same time the institution of the In the Special Claims Commission: Mexico-United States, established by the convention of 10
joint-stock company with limited liability (which was of recent growth) made it possible for [p September 1923, Article II states:
246]small capitalists to invest their money in remote countries for a better yield than was
obtainable at home. There is little doubt that, at first, those countries welcomed foreign capital, ". . . each member of the Commission . . .shall make and subscribe a solemn declaration stating
which was badly needed, and were not strict as to conditions of investment. It was but rarely, that he will. .. examine and decide, according to the best of his judgment and in accordance
during these early days, that any necessity arose for diplomatic intervention by foreign powers with the principles of justice and equity, all claims presented for decision . . .". (Italics are
on behalf of their nationals. With the turn of the nineteenth century, however, nationalist mine.)
movements became directed against 'economic exploitation' by the foreigner. These
movements emphasized economic, as well as political, sovereignty, and, as time went on, The second paragraph of the same Article II reads as follows:
began to interfere more and more with the projects of foreign capital. The decay of liberal
capitalism and laisser-faire, accompanied by the spread of socialist doctrine throughout the "The Mexican Government desires that the claims shall be so decided because Mexico wishes
world, caused governments everywhere to assume greater control of the economic assets and that her responsibility shall not be fixed according to the generally accepted rules and principles
resources of the nation: in certain countries foreign capital came to be regarded as an emblem of international law, but ex gratia feels morally bound to make full indemnification and agrees,
of subordination, and not merely as a means of developing the country. Much, of course, had therefore. . ." {U.N.R.I.A.A., Vol. IV, p. 780.)
happened to justify such an attitude; the extent to which foreign capital held a grip on the
economic life of many countries was considerable. Against this background the revolutions of Article VI of the same convention makes another exception to the accepted general rules, when
it states: In the case of the Rosa Gelbtrunk claim between Salvador and the United States, the President
of the arbitration commission expressed a [p 249] view which may summarize the position of
". . . the Mexican Government agrees that the Commission shall not disallow or reject any claim foreigners in a country where they are resident. This view was expressed as follows:
by the application of the general principle of international law that the legal remedies must be
exhausted as a condition precedent to the validity or allowance of any claim". (Ibid., p. 781.) "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,
Some of the decisions of claims commissions invoked during the pleadings are not, in my view, is to be considered as having cast in his lot with the subjects or citizens of the State in which he
relevant precedents in respect to this case. resides and carried on business." (Italics added.)

Now the evolution of international law has other horizons and its progressive development is "In this case", Schwarzenberger remarks, "the rule was applied to the loss of foreign property
more promising, as Rosenne wrote: 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,
"There is prevalent in the world today a widespread questioning of the contemporary territorial jurisdiction is limited."
international law. This feeling is based on the [p 248] view that for the greater part
international law is the product of European imperialism and colonialism and does not take As the Permanent Court of International Justice said in the Lotus case in 1927 (P.C.I.J., Series
sufficient account of the completely changed pattern of international relations which now exists. A, No. 10, p. 19)—
...
"all that can be required of a State is that it should not overstep the limits which international
Careful scrutiny of the record of the Court may lead to the conclusion that it has been law places upon its jurisdiction; within these limits, its title to exercise jurisdiction rests in its
remarkably perceptive of the changing currents of internationalist thought. In this respect it has sovereignty".
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 The rules concerning the treatment of foreigners are a limitation of a State's jurisdiction ratione
urgent." (Rosenne, The Law and Practice of the International Court, 1965, Vol. I, pp. 17-18.) personae. Schwarzenberger says in this respect:

The law, in all its aspects, the jurisprudence and the practice of States change, as the world "States generally exercise exclusive jurisdiction over their nationals within their territory,
and the everyday requirements of international life change, but those responsible for its concurrent jurisdiction over their nationals abroad, and limited jurisdiction over, for example,
progressive evolution should take care that their decisions do, in the long run, contribute to the individuals and groups within their territory who are protected by international customary or
maintenance of peace and security and to the betterment of the majority of mankind. treaty law." (Italics added.)

In considering the needs and the good of the international community in our changing world, "While, in principle, territorial sovereignty applies to nationals and foreigners alike, the home
one must realize that there are more important aspects than those concerned with economic State retains a concurrent jurisdiction over its nationals abroad. .. . Furthermore, the
interests and profit making; other legitimate interests of a political and moral nature are at unrestricted exercise of territorial jurisdiction over foreigners on the part of the State of
stake and should be considered in judging the behaviour and operation of the complex residence may be limited by rules of international customary law or treaties. If such exercise of
international scope of modern commercial enterprises. territorial jurisdiction happens to come into conflict with international law, the question turns
into an issue between the subjects of international law concerned. The home State is entitled to
It is not the shareholders in those huge corporations who are in need of diplomatic protection; demand respect for international limitations of territorial jurisdiction, and the State of residence
it is rather the poorer or weaker States, where the investments take place, who need to be may have to answer for its interference 'with the rights which each State may claim for its
protected against encroachment by powerful financial groups, or against unwarranted national in foreign territory'. As the World Court laid down in the case of the Mavrommatis
diplomatic pressure from governments who appear to be always ready to back at any rate their Palestine Concessions (1924), 'it is an elementary principle of international law that a State is
national shareholders, even when they are legally obliged to share the risk of their corporation entitled to protect its subjects, when injured by acts contrary to [p 250] international law
and follow its fate, or even in case of shareholders who are not or have never been under the committed by another State, from whom they have been unable to obtain satisfaction through
limited jurisdiction of the State of residence accused of having violated in respect of them the ordinary channels'." (Schwarzenberger, International Law, Vol. I, pp. 189-190.)
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 Much has been said about the justification for not leaving the shareholders in those enterprises
certain fundamental rights that the State of residence cannot violate without incurring without protection.
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 Perhaps modern international business practice has a tendency to be soft and partial towards
State or under its jurisdiction. 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, more rights to claim, in so far as the rules relating to the treatment of foreigners have not been
not only for better. They should respect the institutions and abide by the national laws of the respected.. ..
country where they chose to go. Indeed, if one disregards the fact that the shareholders are foreigners, if one admits that these
foreign shareholders have no rights or interests distinct and independent from those of the
*** company, that they are totally inseparable from the latter vis-a-vis the outside world, that they
are entirely covered by the veil of the juristic personality, one must then conclude that, in this
The main preliminary question on the merits in the present proceedings is that of the event too, the case is entirely outside the scope of international law."
international diplomatic and legal protection of natural and artificial persons who, having
invested funds in foreign trading companies, have suffered losses in their capacity as That line of argument leads up to saying that therefore:
shareholders of those companies, as a result of acts contrary to international law of which a
State has been guilty towards those companies. "The national State of the shareholders cannot exercise any right conferred on it in favour of its
nationals by the rules of international law concerning the treatment of foreigners." (Hearing of
This problem is of capital importance in the modern world, and preoccupies the governments, 9 May 1969.)
economists and businessmen of numerous countries which are anxious to ensure the security of
investments made abroad. Jurists, for their part, are actively concerned with it and are I disagree with the above statements; of course, any State can exercise such rights in favour of
constantly examining it. its nationals abroad, but not because they happen to be in possession of bearer shares, but
because and only if they have been injured in their own specific rights by the State of residence
A necessary foundation of a valid international claim is that the national of the plaintiff State which has a duty to respect the rights of foreigners under its jurisdiction, according to the
would have been directly injured in his rights by an act contrary to international law done by relevant rules of international law concerning the treatment of foreigners. [p 252]
the State to whom the claim is addressed.
It is claimed by the Belgian side that the Spanish Government admitted "that there were certain
It is indispensable that the protected person be himself the possessor of a right which would cases in which diplomatic protection of the shareholders in the event of damage done to the
entitle him to formulate a claim for damages in the internal judicial order. company was allowed under international law", and quotes the Spanish admission as saying
that such protection is allowed "solely in cases where the company possesses the nationality of
If a debtor of a foreign creditor is affected in his rights by an act which violates international the State against which the claim is made, so that diplomatic protection of the company as such
law, the national State of the foreign creditor is not authorized, by that fact, to the diplomatic is excluded".
protection of such creditor. This question has been submitted and decided in various instances
by arbitral tribunals in the sense that "creditors do not have legal bases to plead for damages The Spanish Government, in its Rejoinder, contends that in all the cases in which the protection
inflicted on their debtors". of the shareholders was admitted, the complaints raised concerned damage done exclusively to
the shareholders' "own rights", that is to say not affecting the company itself.
In U.S.A. (W. C. Greenstreet, Receiver) v. United Mexican States, General Claims Commission, it In the present case, for Belgium to be able to intervene, it would thus be necessary that there
was held that the nationality of the creditors of an insolvent corporation need not be shown, had been a violation of the rights of the Belgian shareholders.
"the nationality [p 251] of the creditors being just as immaterial as is that of the stockholders of
an insolvent company". Such a violation is excluded, if what is complained of is steps which were ostensibly directed
against the company. It was admitted by the Applicant, during the oral proceedings, that the
The case of Société civile des porteurs d'obligations du Crédit foncier mexicain, before the Belgian claim did not include damage resulting from an infringement of any of the recognized
French-Mexican Commission involved a claim on behalf of the shareholders of a bank. The bank direct rights of a shareholder as such.
held mortgages on rural property and damages were claimed because the security had been
dam-aged by depredations of revolutionary forces. The Commission held that only the owners International law goes no further than imposing on States certain obligations towards other
of the property might claim. (Feller, The Mexican Claims Commission, p. 122.) Arbitral States, including the obligation to afford aliens certain treatment, for example, to give them
jurisprudence confirms the thesis that international law does not authorize the protection of access to their courts and to enable them to have their lawsuits impartially judged within
affected economic interests, but only of rights really violated. reasonable time limits and without discrimination.

The following arguments were made by counsel for the applicant State: A careful distinction should be drawn, contends the Spanish Government, between two
hypotheses which are mutually exclusive. Either there is a wrongful injury to the rights of the
"The problem of the diplomatic protection of the shareholders practically only arises when the shareholders, in which case diplomatic protection of the latter is permissible and indeed is the
shareholders are of a different nationality from that of the company. Indeed, an infringement of only protection permissible, or else there is a wrongful injury to the rights of the company and
the interests and rights of the company and of its shareholders might then in this case affect only the company may be the subject of such protection. The contention is that it is utterly
the rights possessed by two or even several States, and might consequently give rise to two or impossible to escape from this option.
 What follows expresses my views on the matter:
To this contention the Belgian answer was:
International law lays upon every State in whose territory foreign natural or juristic persons
"The Spanish Government really wishes to demonstrate by this argument that in cases of reside, remain, operate or even simply possess property, an obligation towards the State of
multiple claims, no one may bring action by relying on the right of another party. But is it which such persons are nationals: the obligation to afford them certain treatment. That
necessary to take this extraordinary detour to reach a conclusion which nobody contests? treatment, which is defined most usually and in greater detail by the rules of treaty law,
Belgium is not concerned with the injury suffered by Barcelona Traction itself—that would be nevertheless has its minimum requirements laid down by cus-[p 254] tomary international law.
Canada's business; it is concerned with the damage suffered by its own nationals who held Those minimum requirements consist essentially in the respect, within given limits and
shares in the company." conditions, of certain rights of a personal or corporate nature, and in the granting, at the same
time, of the possibility of making use, if necessary, of appropriate judicial or administrative
*** remedies.

If the owner of the right or rights which have suffered injury is the company and not the Correlative with that obligation, the State of which such persons are nationals has, at the
shareholder, it is beyond all doubt that the case is[p 253] one which falls entirely outside the international level, a right to require the State which is bound by the obligation to act in
sphere in which the diplomatic protection of shareholders by their national State can be conformity therewith, and it has a right, if occasion arises, to submit a claim in proper form and
admissible, or even conceivable. The Respondent in its Rejoinder states: through accepted channels, should that obligation fail to be discharged. That is precisely what
is known as the exercising of diplomatic protection. It also includes protection by means of
"The international society of today is certainly not asking for a further reinforcement of the recourse to international jurisdiction.
protection of certain capitalist groups already too powerful and only too capable of securing
support for themselves, a reinforcement which would take the shape of the possibility of
increased pressure on the weaker nations." (Rejoinder, Part III, Chapter II, Section II, para. The rights attributed to a State by international legal rules concerning the treatment of
43.) foreigners, on the one hand, and, on the other hand, the rights granted to individuals by the
rules of municipal law, are situated at different legal levels.
It adds:
The existence of the individual's right at the municipal level is the condition whereby a State is
"Contemporary international law tends to concern itself more with the need to protect countries authorized, at the international level, to require that that right be not infringed. All that a State
with a weak economy than to favour, as the Belgian Government would wish, 'the financial can require of another State for its own nationals is the respect of those rights which are
needs of great modern undertakings'." (Ibid.) accorded to them under the national legal system, as they are defined by that legal system.

"Very many States insist, for very good reasons, that foreign capital must be invested in When the foreigner in question is a juristic person, the case is no different, theoretically, from a
national companies. This is the case, in particular, in many countries in the course of case in which a natural person is involved. All legal systems agree in considering joint-stock
development, but a certain number of highly industrialized countries impose similar con-ditions companies (sociétés de capitaux) as independent legal entities. The latter represent
either de facto or de jure. What is more, foreign investors themselves frequently and autonomous beings to which rights and obligations may be ascribed; they are, in short, of
spontaneously chose this legal formula which may in their view offer certain advantages." themselves subjects in law.

International law, both customary and treaty law, recognizes precisely in respect of the
*** treatment of foreigners, the existence of companies as entities which are separate from their
members.
There is a case to which the Belgian side ascribe importance. This is the case of the American
national, McPherson, who laid a claim before the U.S.-Mexican Commission in 1923 against the For juridical persons as for natural persons, "nationality" expresses a link of legally belonging to
Mexican Government, which had refused to honour the postal money-orders which McPherson a specific State. The requirement for juridical persons as for natural persons, is that the
had bought through an agent from illegal authorities and which the latter had issued in the existence of the link of legally belonging to a specific country must, if it is to serve as a plea at
name of the agent. The decision in that case was delivered on the basis of a convention which, the inter-national level, be accompanied by that of a "real" link with the same country. In
in several essential aspects and by its very spirit, manifestly derogated from general general international law, a State is not entitled to require a specific treatment for a person who
international law. has not its nationality and it can thus not complain that such treatment has not been accorded
to that person.
Which are the applicable principles of international law and what are the consequences of their
application to the present case?
A State may present a claim on behalf of its national if it becomes apparent that there has been
a breach of a right belonging to the latter; but no State may present a claim on behalf of a
person of its nationality [p 255] on the ground that there was failure to respect a right One cannot accept the transformation of a shareholder's hope for the prosperity of the
belonging to another person, possessing another nationality. company into a right or a legal interest, nor any possibility for a shareholder to claim that an
infringement of the rights of the company constitutes an infringement of his own legal situation.
The national State of the company can present a claim for the breach of a right of the company
as such; the national State of the shareholder can present a claim for the breach of a right The rules of international law concerning the responsibility of the State regarding the treatment
"stricto sensu" of the shareholder as such. The fact that there are relationships and links of foreigners would not make it possible to impute to a State an internationally unlawful act
between different persons does not imply that they merge into a single person. even in a case where the said State had only harmed an interest which was not protected by
the municipal legal system of that State.
A claim by a State under the head of diplomatic protection of a national who is a shareholder of
a commercial company is only admissible subject to a two-fold condition: the applicant State There has not been established, in respect of the alleged Belgian shareholders of Barcelona
must be able to claim violation of a right of the shareholder as such; and it must be established Traction, the existence of any juridical situation whatsoever attaching to their status as
that the State which was the author of the alleged violation was under an international shareholders which suffered any internationally unlawful attack on the part of the Spanish
obligation to the applicant State to ensure respect for the right in question. The receivability of administrative or judicial authorities.
a claim under that head is ruled out if it appears, firstly, that the right which is said to have
been violated is a right of the company and not of the shareholder, and, secondly, that the ***
international obligation to ensure respect for the said right was incumbent on the respondent Barcelona Traction is said to have been a "practically defunct" company.
State in respect of the national State of the company and not in respect of the national State of
the shareholder. Shareholders are not entitled to take the place of the company in defending the latter's own
It follows from the principles of international law that in order for a State to be able to submit a rights when it is these rights which have been affected, for so long at least as the company has
claim in behalf of a national, it must be able to claim that its national has suffered an not yet been dissolved and liquidated and the shareholders therefore have ho right to its
infringement of his own rights by a foreign State, and that rights have been infringed for which property and assets.
the latter State was bound to ensure respect by virtue of an international obligation binding on
it in respect of the claimant State. It is only when a company has been dissolved and consequently ceases to exist as a separate
legal entity that the shareholders take its place and are entitled to receive the balance of its
There is nothing to prevent a State's submitting a claim in behalf of a national which relates to property, after the corporate debt has been deducted. Thus it is only the "legal death" of the
that national's position in his capacity as a shareholder in a company; but, in such a case, it corporate person that may give rise to new rights appertaining to the shareholders as
must prove that the person in question has been injured in the rights conferred upon him successors to the company.
himself precisely on account of his capacity of being a shareholder: that he has been injured in
rights which are inherent in that capacity. In 1925 the United States claimed the right, as against the Government of the United Kingdom,
to intervene on behalf of American interests in a non-American corporation (the Romano-
It is by no means sufficient that the claimant State rely upon an injury to the rights of the Americana).
company as such, for no State may submit a claim in behalf of a person on the ground that
there has been a failure to respect a right which belongs to another person, whether such latter In the United Kingdom answer to the American contention, it was said: ". . . it is not until a
person be a natural or a juristic person. Company has ceased to have an active existence or has gone into liquidation that the interest
of its shareholders ceases to be merely the right to share in the Company's profits and becomes
International law only authorizes a State to intervene by way of diplomatic protection if such [p 257] a right to share in its actual surplus assets" (Hackworth, Digest of International Law,
State relies upon a complaint which is its own complaint: that is to say, if it complains of the Vol. V (1943), p. 843).
infringement of a right of one of its nationals, committed in violation of an international
obligation which binds to it the State which has committed the infringement. In the case of the Mexican Eagle, a company incorporated in Mexico, in which the
shareholdings were 70 per cent. British and Dutch, 25 per cent. French and the remainder
If there has not been in the case at issue any infringement of any right of a shareholder, that Swiss, Danish and other interests (as the shares were in bearer form it was impossible to state
fact cannot be altered simply by referring to interests as well as rights.[p 256] the exact proportion of each national interest), a dispute arose between the Mexican
Government and the United Kingdom Government regarding claims by British shareholders
The situation of the shareholder as defined by the various legal systems, covers the rights arising from the expropriation of the properties of the Mexican Eagle Company.
which are defined in the decision on the Brincart case. No system of positive law confers on a
shareholder in a limited company other subjective legal situations and, in particular, no system The Mexican Government in a Note of 26 April 1938, maintained the view that a shareholder
attributes to him any legal interest in the property of the company, as has been expressly was not a co-owner of the property of the undertaking but "merely the possessor of a right in
acknowledged by both sides. equity to represent a part of the liquid assets at the moment of the dissolution or liquidation of
the company". Colombia, dated 27 April 1866, wrote as follows:

It was not until the moment of dissolution that it was possible to establish the damage and "It may well be that subjects of Great Britain, France and Russia are stockholders in our
injuries sustained by shareholders as distinct from the company (Mervyn Jones, British Year national banks. Such persons may own all the shares except a few necessary for the directors
Book of International Law, 1949, p. 241). whom they select.

On that occasion the Mexican Government stated: "Mexico cannot admit that any State, on the Is it to be thought that each of those Governments shall intervene when their subjects consider
pretext of protecting the interests of the shareholders of a Mexican company, may deny the the bank aggrieved by the operations of this Government? If it were tolerated, suppose England
existence of the legal entity of companies organised in Mexico in accordance with our laws." were to agree to one mode of adjustment, or one measure of damages, while France should
insist upon another, what end is conceivable to the complications that might ensue?
I do not concur with the view that the national State of the shareholders may exercise
diplomatic protection when the act complained of was done by the national State of the It is argued that there is no policy which requires us to encourage the employment of American
company, for this would be equivalent to admitting that any State, on the pretext of protecting capital abroad by extending to it any protection beyond what is due the strictest obligation.
the interests of the shareholders in a foreign company, may deny the existence of the legal There is no wise policy in enlarging the capacity of our citizens domiciled abroad for purposes of
entity of companies organized in accordance with the laws of the national State of such mere pleasure, ease or profit to involve this Government in controversy with foreign powers."
companies. (Loc. cit., pp. 645-646.)

I have reservations about paragraph 92 of the Judgment. For the reasons stated above I am of ---------------------------------------------------------------------------------------------------------------------
the opinion that the so-called theory to which the paragraph refers does not have any validity.
The fact that the Judgment ends the paragraph with the sentence: " Whatever the validity of I therefore cannot accept that this situation—which is not the one before the Court—should be
this theory may be, it is certainly not applicable to the present case, since Spain is not the considered as a limitation or exception to the strict application of the rule of international law,
national State of Barcelona Traction" should not be interpreted as an admission that such according to which the shareholders cannot be protected by their national State except in two
"theory" might be applicable in other cases where the State whose responsibility is invoked is instances: (a) when the company has been liquidated, and (b) when a right of the shareholder
the national State of the company. as such (right stricto sensu) has been violated by an illicit act entailing international
responsibility.
This is a fundamental point in the field of intervention on behalf of nationals who are The scope and increasing activities of powerful international corporations have had as their field
shareholders in foreign companies of limited liability. of operation the exploitation of the natural [p 259] resources of many countries in the process
of development and have controlled the functioning of many of their public services over which
Regardless of the numerous cases of protection which took place in the past—outside the territorial States have come to be, notwithstanding their sovereignty, in a subordinated
international law or contrary to it—by the use of economic, political or military pressure, it is position, and their right to demand compliance with the prescription of their municipal law on
worth recalling that—also in the past—[p 258] in other cases when a stand was taken within a the matter has in many cases been challenged and put in jeopardy. Faced with the structure
legal point of view and respect for the sovereignty of other States, there has been a historical and practice of capitalist society in regard to foreign investment, many countries have imposed
recognition of the separate entity of corporations of limited liability, and the opinions given in the requirement on foreign capital of taking the legal form prescribed by local legislation. The
such instances did stress the independent existence of a company as juridical person. exercise of the sovereignty of States in this matter cannot be legally construed as a device to
deprive the even-tual shareholders in corporations of limited liability (sociétés anonymes) of the
For example, when the Government of the United States was approached in 1875 with a diplomatic action of their national State. Nationalization and expropriation, in accordance with
request that it should intervene on behalf of American stockholders in Chilean corporations, it the law on the matter, have been the result of the essential need not to have public utilities and
refused to do so. It adhered to the view that a corporation formed under local law should have national resources subordinated to the private interests of foreign corporations.
recourse to the local courts and that although the good offices of the Government might with
propriety be exercised on behalf of American interests, there could be no official intervention I am also of the opinion that neither is a limitation to the rule— according to which it is the
FN1 (Moore, Digest of International Law (1906), Vol. VI, p. 644). The practice of the United national State of the company who has the right of protection—the fact that the protecting
Kingdom followed similar lines. Thus Sir Robert Phillimore advised that the British Minister to State does not exercise its right or ceases to do it. The right of protection is a discretionary one
Mexico should be instructed to limit himself to "good offices" on behalf of a British shareholder and the national State of the company is not under a duty to protect.
in a Mexican railway siezed by the Mexican Government and that the British subject should be
told that he must rely principally on local remedies. Years later both Governments found reason In respect to paragraph 93 I must make the following observations.
to depart from this practice.
The paragraph begins with the consideration that "in the field of diplomatic protection of
--------------------------------------------------------------------------------------------------------------------- shareholders as in all other fields ... it is necessary that the law be applied reasonably".
FN1 The Secretary of State of the United States in a dispatch to the (American) Minister to
The phrase immediately following refers to a suggestion which might be interpreted as an two countries had been broken. It proposed the settlement of the differences on that point by
example of reasonableness on the matter. The suggestion, or hypothesis, is to the effect that, arbitration.
"if in a given case it is not possible to apply the general rule" . . . then, "considerations of equity In the third phase, after expressing regret that the Spanish Government had not accepted the
might call for the possibility of protection of the shareholders in question by their own national proposal to submit the specific point about the treaties to arbitration, the Canadian
State". The last sentence in this paragraph states: "This hypothesis does not correspond to the Government, which had meanwhile become better acquainted with the facts, definitely [p 261]
circumstances of the present case." opted for endeavouring to get the dispute settled on an amicable basis through direct
I am of the opinion that there is no need for the Judgment to include reference to an irrelevant negotiations between the private parties concerned.
hypothesis. It is difficult to imagine a case in which it would be impossible to apply the general
rule that the right of diplomatic protection of a company belongs to its national State. It is thus once again clearly confirmed that the famous exceptional circumstances of 'the
absence of protection by the national government of the company', which the Belgian
It might be argued that in case the company is liquidated and therefore ceases legally to exist Government has relied on so often and in so many forms in order to justify its claim to have jus
its national State loses the subject of its right and the general rule cannot be applied. In such standi in the case to act under the head of the protection of the Belgian 'shareholders' in
eventuality the shareholders can undertake the defence of their interest before the courts of Barcelona Traction, quite apart from the fact that even theoretically it cannot constitute any
the State whose responsibility is invoked and exhaust the local legal remedies open to them. If valid justification, is not in fact by any means present in the case."
a denial of justice is claimed, then the national State of the person whose rights are violated
may intervene according to the rules concerning the protection of foreigners, but in such
hypothesis the State of the shareholders exercises a right of its own (whether or not such right ***
[p 260] is qualified as "secondary") and if so its action is not based on "considerations of
equity". In my view the right of diplomatic protection of shareholders in a company of a nationality
other than that of the protecting State, is not in accordance with the principles of international
The whole Judgment is based on the ground that according to international law the national law in force, i.e., the rule of the diplomatic protection of companies by the State of which they
State of the company, and only and exclusively it, has the right of diplomatic and judicial are nationals.
protection of such company. Therefore it is a contradiction of a legal nature to state even as an
irrelevant hypothesis that there might be a circumstance when that State which, by definition, Nor is such protection recognized by any special customary rule in international practice. The
has the legal capacity to act could be legally or juridically incapacitated—the State concerned is arbitral decisions rendered on the basis of special bilateral conventions are not norm-creating,
free to exercise its right or not but its abstention to pursue an action does not affect its right to nor have constituted the foundation of, or generated a rule of customary international law
take it. It cannot lose its legal capacity and a hypothesis based on the impossibility to apply the which is now accepted as such by the opinio juris.
general rule is a juridical contradiction and has no reasonable explanation even as a whimsical
hypothesis. It is also inconceivable that if Canada does not exercise its discretionary right of There are not, in the present case, exceptional circumstances justifying any departure from the
protection then this fact gives birth to the right of the shareholders' State. strict application of the general rule of international law on the matter.

*** The right of diplomatic protection, like any other right, has to be understood as a right which a
particular State has against another particular State. To which State does that right pertain in
Therefore on those hypothetical limitations it is not possible to build a Belgian ius standi. the present case? Does it pertain to the Applicant? Is Spain under an international obligation
towards Belgium?
In respect of the attitude in this case of the national State of Barcelona Traction, the
Respondent describes as follows the three successive phases of the Canadian Government's Has the respondent State committed a breach of an international obligation owed to the
action, resulting from the examination of the diplomatic correspondence and relevant applicant State by the measures taken in respect to Barcelona Traction? Is the person affected
documents: by the measures of which Spain is accused linked to the applicant State by a bond of
nationality?
"The first, going up to the time of the Tripartite Statement, was the phase in which,
misinformed by the interested parties, it accused Spain of having violated obligations in general In my opinion all those questions ought to be answered in the negative and, if so, the
international law with regard to the treatment of foreigners and, on that ground, requested the international liability alleged by the Applicant does not exist.
Spanish Government to intervene with a view to the annulment of the acts of the judicial
authorities. Towards the eventual and sporadic possessor of a bearer share there is not a direct and
The second phase, which followed upon the Tripartite Statement and did not last long, was immediate obligation from the State accused of having violated the rights of a private foreign
characterized by the definite abandonment of that request and of any allegation of a breach by national (natural or juristic person) by an unlawful act damaging the corporation (société
Spain of obligations under general international law. The Canadian Government, on the other anonyme) which has issued the bearer shares.
hand, raised the particular complaint that certain clauses of the treaties in force between the
The fact that theoretically there is not (or there need not be) continuity [p 262] of ownership of before State action is initiated."
a bearer share, the nationality of the eventual possessor does not give to his State a right
towards the Respondent, who is not under an international obligation owed to every State "The individual has in fact sustained no injury in international law, until the State of residence
which might have, or has, at a given date, some nationals in the possession of bearer shares in or its authorities have in some way connected themselves with the original act or have declined
the corporation alleged to be injured by an illicit international act, unless specific rights of the to afford him legal means of redress."
shareholders as such were violated.
***
It is not justifiable to create an ad hoc rule in disregard of existing and generally accepted ones
to fit a particular case which could and should be decided by the application of the rules of In the present case, it is not Belgium but Canada who is the one entitled to protect its national,
general international law governing the matter. Barcelona Traction, in accordance with the existing recognized rule of protection of a company
only by its national State.
The claim in the present case and its characteristics are in the nature of a request to go around
or avoid the strict application of the relevant rules of international law which "does not Regarding the question: ". . . whether international law recognizes the right of a State to
recognize, in respect of injury caused by a State to a foriegn company, any diplomatic protect its nationals, natural or juristic persons, as shareholders in a foreign company, for the
protection of shareholders exercised by a State other than the national State of the company". damage they might have suffered as a consequence of an internationally illicit act done to the
company by a third State", the answer, as a matter of law, should be in the negative.
The shareholders in commercial limited liability companies (sociétés anonymes) do not have a
separate and independent right in respect to damage done to the company by a foreign As regards the facts and circumstances of the particular case, they do not constitute a
government. juridically valid ground to justify an exception to the existing rule.

The rules of international law concerning the treatment of foreigners are not rightly invoked in ***
respect of shareholders as such.
The shareholders of bearer shares in a société anonyme do not have responsibility and they are
This question ought to be considered in relation to the protection of citizens abroad and taking unknown. If the alleged right of diplomatic and judicial protection of shareholders in a société
into account the jurisdiction of the State where the foreigner resides. anonyme were recognized, any State investor of capital abroad could buy, in the stock market,
the capacity to present claims in the name of its nationals to the territorial State who admitted
The following concepts contained in Borchard's Diplomatic Protection of Citizens Abroad are in its territory a foreign company whose nationality it knew, and who was also aware that,
relevant in this respect: according to the [p 264] existing and accepted rules on the matter, the national States of the
numerous and unknown shareholders did not have, in international law, a right of diplomatic
"The bond of citizenship implies that the State watches over its citizens abroad, and reserves protection independent from that of the national State of the company.
the right to interpose actively in their behalf in an appropriate case. Too severe an assertion of
territorial control over them by the State of residence will be met by the emergence of the Such recognition would be a derogation of the relevant principles of international law and would
protective right of the national State, and the potential force of this phenomenon has largely entail unexpected complications and unnecessary conflicts in modern commercial and financial
shaped the rights assumed by States over resident aliens." international relations.

"The principles of territorial jurisdiction and personal sovereignty are mutually corrective forces. If the different States, whose nationals were shareholders in the same corporation, were
An excessive application of the territorial principle is limited by the custom which grants foreign empowered to undertake, each one in his own right, acts of diplomatic protection on behalf of
States certain rights over their citizens abroad, sometimes merely the application of foreign law their respective nationals, the admission and operations of foreign commercial corporations of
by the local courts, sometimes, in acknowledgment of the principle of protection, a certain limited liability (sociétés anonymes) would constitute a great risk to the territorial States in need
amount of jurisdiction."[p 263] of investments who admit them.

"Each State in the international community is presumed to extend complete protection to the Such recognition will create distrust, insecurity and unforeseen potential danger of pressures
life, liberty and property of all individuals within its jurisdiction." from unforeseen quarters. It will, besides, hinder the activities of modern commercial
"Not every injury warrants immediate interposition by the State. In the first place, reparation is enterprises eager to invest capital abroad.
demanded only for such injuries as the State in its discretion deems a justification for diplomatic
protection. Factors which enter into consideration in determining the State's interposition are Mervyn Jones, in regard to the law on the subject, states:
the seriousness of the offence, the indignity to the nation, and the political expediency of
regarding the private injury as a public wrong to be repaired by national action—in short, the "If a State of which the corporation is not a national could normally take up a claim in respect
interests of the people as a whole, as against those of the citizen, receive first consideration of an injury to the corporation merely because there are shareholders who are nationals of that
State, and who have suffered loss, the results would be just as chaotic on the international diplomatic or judicial intervention, the rules concerning the treatment of foreigners would be, in
plane as they would be under municipal law if any group of shareholders were allowed to sue in fact, substituted by vague and undefined concepts regarding non-existing duties of the
any case where the company has sustained damage. territorial State to guarantee against loss, the investment, by a person, of money which the
national State could, arbitrarily, claim was originally part of its national wealth when the
If a State could intervene without restriction on behalf of its individual nationals who were investor sent his money abroad.
shareholders in a foreign corporation, the position of Governments whose national the
corporation was and that of the State against whom the claims were brought, would be
rendered intolerable. It might well be, in such circumstances, that the number of possible State The national wealth is affected, maybe, when any resident takes or [p 266] sends his money
claimants in respect of an injury to one large company could comprise half the world. Again, abroad, rather than the moment he loses such money, or his interests, dividends, or hopes of
shareholders are not infrequently corporations themselves, and the process of identifying pecuniary gains from his investment.
individual shareholders might be prolonged ad infinitum; such a process is in any case difficult If the defence of the national wealth would entail the right to intervene, the violation of a duty
in practice." ("Claims on behalf of Nationals who are Shareholders in Foreign Companies", towards a foreigner would not be the foundation of the claim, but the so-called harm to the
British Year Book of International Law, 1949, pp. 234-235.) wealth of a State as an automatic consequence of the pecuniary losses eventually suffered by
its nationals abroad. Such losses could be traced to events in the territorial State regardless of
*** its international responsibility, or the existence of any legal duty towards the success of
business enterprises, or speculative ventures of foreign nationals.
The Court did not examine the merits regarding the fourth preliminary objection. Nevertheless
the written and oral pleadings did show that [p 265] the local remedies in respect to the alleged ***
wrongs and damages were not exhausted.
There are no grounds to say that a miscarriage of justice took place or that the bankruptcy was I agree with the Judgment of the Court that the Belgian claim be dismissed.
fictitious. There is no question that the bankruptcy declaration was made in accordance with
Spanish law on the subject.
There are no legal bases to state that Spain is responsible internationally for the standard of its (Signed) Luis Padilla Nervo
laws and for the quality of the justice administered by its courts. .
By which criterium is the Court to measure the standard of Spanish laws in order to decide if it
is high or low, good or bad? And by which test could the Court make a finding regarding the
quality of the justice administered? [p 267]
Which principles of international law, recognized by all nations, give the Court authority to pass
judgment on those matters?
SEPARATE OPINION OF JUDGE GROS

*** [Translation ]

After careful consideration of the arguments from both sides contained in their pleadings, I 1. Although the force of res judicata does not extend to the reasoning of a judgment, it is the
conclude that there is not convincing evidence of a predominant Belgian interest in natural or practice of the Court, as of arbitral tribunals, to stand by the reasoning set forth in previous
juristic Belgian persons, having the character of shareholders of Barcelona Traction at the decisions (cf. Judgment No. 10: "The Court sees no reason to depart from a construction which
critical dates, even if it is admitted that those critical dates are 1948 and 1962. Namely the date clearly flows from the previous judgments the reasoning of which it still regards as sound";
of the bankruptcy declaration and the date of the filing of the present Application. P.C.I.J., Series A, No. 11, p. 18). Although I accept the operative part of the present Judgment,
my reasoning is entirely different. Considering the importance of the case from the point of
It has not been proved that the majority of shareholders in Barcelona Traction had the Belgian view of its consequences on the law applicable to international economic relations, I feel it my
nationality at the critical dates, nor that the capital in the Belgian corporations alleged to be duty to set forth, as briefly as possible, the reasons which lead me to accept only the operative
shareholders of Barcelona Traction, was a capital invested or belonging to Belgian nationals or part of the Court's decision.
necessarily linked to the national wealth of the Applicant.
2. The separation of fact and law is for the international judge merely a working-method in the
The unfavourable impact on the wealth of a nation cannot be the legal foundation of a claim first stage of considering a case; but to judge is always to apply a rule of law to particular facts.
when a State considers that its nationals have lost money abroad, due to an act of the What has therefore to be done is to ascertain, taking account solely of the facts of the case,
territorial State which is alleged to be a breach of an international responsibility. what rules of international law are applicable to the treatment given in Spain to a limited
company, Barcelona Traction, as from the decision rendered by the Reus judge on 12 February
If the defence of the national wealth could be the legal foundation of the State's own right to 1948, according to the terms of the claim set forth in the Application dated 19 June 1962 and in
the final submissions of the Belgian Government on 9 July 1969. "Each case must be considered were made, international law cannot ignore the phenomenon of investment, and it can hardly
on its individual merits" (P.C.I.J., Series A, No. 7, p. 69). be claimed that it did not exist in the critical period of 1948-1952.

3. If the question of the nationality of the claim is taken first, which is the way the Court 5. To facilitate this expose and simplify its presentation, one funda-[p 269]mental observation is
decided to proceed, the facts assume crucial importance in the present case, and it was called for with respect to the right of protection in international law. When the Court defined
precisely the idea that the third and fourth preliminary objections could not be decided without such protection in the Nottebohm case, it was in these terms:
full knowledge of the merits which served to justify the joinder effected by the Judgment of 24
July 1964 FN1. This was thrown into particular relief, as regards the third objection, i.e., the "Diplomatic protection and protection by means of international judicial proceedings constitute
very point on which the present Judgment is based, by the observation which the President measures for the defence of the rights of the State. As the Permanent Court of International
made on the Court's behalf in opening the hearing of 13 March 1964. Justice has said and has repeated, 'by taking up the case of one of its subjects and by resorting
to diplomatic action or international judicial proceedings on his behalf, a State is in reality
--------------------------------------------------------------------------------------------------------------------- asserting its own rights—its right to ensure, in the person of its subjects, respect for the rules
FN1 I share the views on this joinder expressed by Judge Sir Gerald Fitzmaurice in paragraphs of international law' . . ." (I.C.J. Reports 1955, p. 24.)
84-90 of his separate opinion.
--------------------------------------------------------------------------------------------------------------------- This classic formula is usually held to be an explanation of the role of the State when acting on
the international plane, in relation to the position of the individual. This view of matters might
What then are the facts of the case? Since Belgium is claiming to protect Belgian nationals, it well originally have been that called for by the comity of nations as it appeared in the
has to be verified that the persons in question [p 268] were Belgian at the time of the acts with nineteenth century and, already with evident attenuations, during the first third of the twentieth
which Spain is reproached and were still Belgian at the moment when the Application was filed. century. But since then, and particularly at the present day, the formula that in defending its
Yet this question of proof of the nationality of the claim has been left aside and the Court has nationals a State is asserting "its own rights" at the international level has acquired a reality
dealt in the first place and exclusively with Belgium's right to institute proceedings in behalf of which goes further than the procedural justification of its origin. Leaving aside the position of
the shareholders in Barcelona Traction. Though the Court, in the reasoning it chose to follow, the socialist States where the question of private investments cannot arise and the security of
dealt only with this point of law, I shall also have to refer to the question of proof of the public investments is obtained by other methods FN 1, and confining our consideration of the
nationality of the claim. legal nature of international judicial action to States with a liberal economic system, the
4. In seeking to ascertain what are the persons whose case Belgium has taken up, one must economic world today exhibits phenomena of State intervention in and responsibility for the
first and foremost pay attention to a fundamental aspect of the case from which it is evident economic activity of the subject within the national territory or abroad which are so frequent
that any general theory on the status of limited companies fails to take account of the particular and thoroughgoing that the separation of the interest of the individual from that of the State no
facts in the present case and ignores the legal problem with which the Court is faced. In longer corresponds to reality.
protecting shareholders in the company, Belgium claims to be protecting a moderate number of
natural persons and certain companies that hold stock in Barcelona Traction; i.e., an important ---------------------------------------------------------------------------------------------------------------------
investment on the part of the Belgian economy. This is not a simple situation, as if it were a FN1 See "Observations sur les méthodes de protection des intérêts privés à l'étranger" in
question of a limited company whose capital was shared among a few hundred natural persons Mélanges Rolin, 1964, pp. 125-133.
the list of whose names was readily available (cf. on this point the role of shareholders' ---------------------------------------------------------------------------------------------------------------------
protection associations, either national or ad hoc, in particular in the Certain Norwegian Loans
case, I. C.J. Pleadings, Vol. I, p. 86). Barcelona Traction is a company heading 14 others in a A few brief illustrations will suffice, since this situation is well known. To remain in the field of
group of its own (see A.M., Vol. I, Ann. 24; the table shows the composition of the Barcelona limited companies, the scale on which many States have acted to preserve the national
Traction group of companies as at 31 December 1947), while itself forming part of a group character of such companies or regulate the labour problem, the direct aid granted by the State
which appears to be controlled by the Sofina company and, judging by the Belgium- to encourage investment, and the system of State guarantees against the risks incurred in
Luxembourg index in Who Owns Whom (Part I, B.E. 13), involves over 80 closely linked foreign countries by domestic companies, are examples of the way in which the State asserts its
companies. One cannot simply ignore this fact and argue as if the case concerned the "own right" to control the growth of the national economy, ranging over the whole of the
diplomatic protection of an ordinary limited company. The present case is a special one, firstly activities of private undertakings, the results of which enter into the gross national product.
because the principal shareholders in Barcelona Traction are companies and secondly because Thus when, in consequence of a risk covered by an export-credit guarantee, a State undertakes
Barcelona Traction itself is the holding company of a group of 14 others which it controls either to make good to a domestic com-[p 270]pany any damage caused it by another State within
100 per cent, (nine companies), or nearly 100 per cent, (four) or 90 per cent. (one). These the latter's territory, it is a financial effort on the part of the national community which enables
features have several legal consequences for the question of diplomatic protection and for that this liability to be assumed, through a solidarity based on the idea that certain exports are
of the jurisdiction competent to pass judgment on the activities of the group. The question that necessary for the prosperity of the nation FN1. (Cf. likewise the United States legislation
has been raised concerns the fate of a large investment claimed to have been made by the providing for the protection of domestic industries against "actual or potential" threats; the
Belgian economy in Spain, and it is to this question that an answer must be given. When the provisions prohibiting the subsidiaries of American companies, wherever they may be, from
times are such that from 1954 to 1968 private investments of the order of 30,000 million dollars trading with certain countries when 50 per cent, or more of their capital belongs to American
shareholders; the Japanese law of 10 May 1950 authorizing foreign investment "which In terms of the reasoning followed by the Court, the problem may be divided into two: in the
contributes to a healthy and independent expansion of the Japanese economy and to the first place, is it the status of shareholder which makes protection impossible or is it, in the
improvement of the country's balance of payments . . .".) The Luxembourg Agreement of 29 second place, the nature of the damage caused to the shareholder "through" the assets of the
January 1966 between the six member-States of the European Economic Community contains a company?
recognition of the national character of the "very important" economic interests of a State (one
of the signatories declared that no majority could force a member-State to take measures which In the present case, the shareholder has been treated in discussion as a uniform abstract being.
it regarded as contrary to its national interests). It is clear from all these examples, which are But there are in fact at least three categories of shareholder: the small private investor, largely
merely illustrations of a planned industrial society, that it is nowadays out of touch with the unfamiliar with the detailed problems of investment and inclined to leave his investments
facts of economics to represent the relations between private investors and the State—whether undisturbed FN1; the speculator, who buys for a quick resale; the businessman or company
that of the investor or the State where the investment is made—as mere relations of municipal that, as shareholders, control the activity of a company in their own interest, at times with a
law. Private investment is no longer an isolated operation but a factor in the national economic proportionally small holding (financial circles speak of 10 per cent.), either by means of their
growth policy. actual presence in the organs running the company or the banks lending it vital assistance or by
the conclusion of agreements for technical or commercial co-operation.
---------------------------------------------------------------------------------------------------------------------
FN1 See "A Note on Recent Developments and Problems of Export-Credit Guarantees" in ---------------------------------------------------------------------------------------------------------------------
Economic Bulletin of U.N. Economic Commission for Europe, Vol. 12, 1960, No. 2, pp. 51 ff. FN1 It is in respect of this category of shareholder that one would tend to concede, prima facie,
--------------------------------------------------------------------------------------------------------------------- a "continuity" in the ownership of Barcelona Traction shares acquired before 1948, up to 1962.
It is also in respect of these individual shareholders that, despite the particular characteristics of
6. For the examination of the present case, however, there is no need to expound the classic the holding company, the question might arise of whether direct rights have been infringed, as
theory of planned economies: it will be sufficient to recall the situation of the Parties at the the Judgment says in paragraph 47. However, the claim was not concerned with this legal
material time, i.e., in 1948-1952. In a period when Belgium and Spain were endeavouring to point.
restore their economies, devastated by the world war or the civil war, a true account of the ---------------------------------------------------------------------------------------------------------------------
economic facts shows that all their resources, like those of other European States, were at that
time mobilized for reconstruction; imports, exports and transport were State-controlled. Any There is no essential difference between a shareholder in the first category whose investment
harm done to essential elements of the national economy constituted, indeed, harm to the abroad is lost on account of an unlawful act attributable to the foreign State, and the owner of
efforts at reconstructing that economy. If, as has been maintained, the Belgian investment in a deposit of money or some other property abroad which has disappeared for the same reason.
the Barcelona Traction undertaking in Spain was so considerable, it formed an element on It therefore remains to be shown that the share is a form of property right which, for reasons
which the Belgian Government was entitled to count in its plans for reconstruction (in its final peculiar to the legal regime governing the rela-[p 272]tionships between a limited company and
submission's the 1948 value is estimated at 116 million dollars). The effects of two world wars its shareholders, is not protected. This is the reasoning followed by the Judgment, and I regret
on the foreign investments of nationals of the belligerent States are well known: each time that I am unable to accept it. For it is based on a conception of the role of the Court, and of the
funds invested abroad have had to be liquidated and repatriated. [p 271] relationship between international and municipal law, which may be summarized as follows:

7. In respect of a period when the economic life of Belgium was ordered by planning, it is an (a) an international court must fall back on concepts of municipal law when seeking to define
academic view of the facts that would construe them in terms of the classic legal relationships the legal relationships between the company and the shareholder;
which obtained between individuals and limited companies in a world of liberal economics that
had disappeared by the advent of the world war. (b) municipal law does not comprise any right of action of the shareholder in behalf of the
company;
If the economic situation of the Parties at the time of the dispute be taken into account, the
distinction between rights and interests upon which the Judgment bases its explanation of the (c) since such right of action does not exist, the State of the shareholder cannot invoke its right
position of the shareholders does not correspond to the facts of the case. of protection for what is no more than an individual financial interest.

8. The position adopted by the Court is that an individual cannot, owing to his legal status as a 9. The premise of this reasoning seems to me as unacceptable as its conclusions: the renvoi to
shareholder in municipal law, obtain, in international law, the protection of his national State in municipal law leads eventually, in the present case, to the establishment of a superiority of
cases of unlawful acts, attributable to a foreign State, which result in material loss for the municipal over international law which is a veritable negation of the latter. It may happen, in
company. I have indicated the reason why the problem before the Court is a different one: certain cases, that the only problem to be decided is that of whether a rule of municipal law is
because the relationship between the individual shareholder and the company is inextricable in conformity with a treaty rule, and that it is necessary for the purpose to interpret municipal
from the phenomenon of overall investment. However, even on the Judgment's own ground, law as it stands. But here we have a different situation, one in which a denial of justice is
the position does not strike me as convincing. alleged to have been committed against foreign nationals, both the company itself and the
shareholders. To consider as a ground for exonerating a State from international responsibility
for an alleged denial of justice the fact that its municipal law, or some systems of municipal law, The protocol of 20 March 1952 to the European Convention on Human Rights declares:
do not feature a shareholder's right of action is not admissible; any more than the absence of
municipal rules on the responsibility of the State for damage caused by the legislature, "Article I: Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
administration or judiciary is taken into account by international law. No one shall be deprived of his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of international law. . . ." (My
10. In the present case, the rules of municipal law are nothing more than facts in evidence, and italics.)
they deserve the same attention as the other facts, and the same rigour in their interpretation,
but no more. The Court does not have to apply the rules of municipal law, as a municipal court Although Spain is not a party to that convention, there can be no doubt but that it accepts its
of last instance would, to the relationships between the company and the shareholder; it takes content. The least that can be said is that here is a general principle of law which loses none of
account of them as being facts for the purpose of its appraisal of the legal situation laid before its binding force through being restated in the 1952 protocol; irrespective of any treaty
it by Parties and in order to see whether that situation as a whole is in conformity with the rules provisions, it is directly opposable to Spain. Investment consists of a decision to assign assets
of international law or not. It is the latter rules which for an international tribunal go to to a productive activity; it does not, merely [p274] because it takes place in a foreign country,
constitute the reasons of its decision. It is therefore not enough to say that since a given thereby turn into a vulnerable form of property subject to confiscation without redress, when it
municipal legal system creates a certain legal relationship, an international tribunal is obliged, enjoys secure protection from unlawful acts if carried out within the national territory. The
on account of renvoi to municipal law, to accept that relationship as possessing the same legal opponents in the present case are two States whose economic and legal conceptions are the
cogency. The international tribunal takes this legal relationship as an established fact and tests same; any reference to different legal systems is the less acceptable that, generally speaking,
it against the rules of international law. This holds good in the present case for the [p 273] they exclude resort to an international court, with the result that their rules cannot be subjected
relationship between the shareholder and the limited company, which we will examine further to the examination of such a tribunal. I would add that it is paradoxical, to say the least, to
below. invoke the protection of human rights in the name of universality while at the same time
excluding from it the protection of property from unlawful acts in the name of a particular way
of thinking which contests that right.
11. First, an observation with regard to the limited scope of the Judgment. If it is true that
between 1948 and 1952, at the time of the acts complained of whereby the investment in One cannot but observe how an industrial undertaking which nobody ever claimed to be
question changed hands from the viewpoint of Hispano-Belgian relations the legal system of Spanish before 1948 became Spanish, against the will of the corporate organs of Barcelona
neither country contained any provision generally enabling a shareholder to act in place or in Traction, as a result of acts characterized as a denial of justice both overall and in detail. In fact
behalf of a limited company, that is not a generally accepted rule. Suffice it to refer to the the undertaking is today incorporated into the economy of Spain by a sort of "nationalization"
provisions of the French law of 24 July 1966, which institutes for a minority of shareholders a which, if it was effected by a misuse of legal procedure, constitutes a breach of international
mechanism enabling them to participate in controlling the way a limited company is run, as well law as between the Parties. It is clear that any nationalization of a regular kind would have
as an action for the reparation of damage sustained by the company (Articles 226 and 245) been accompanied by compensation. The fact that negotiations between the private groups
FN1. The result finally produced is that the position of the shareholder as regards the exercise involved halted the first proceedings also shows that the Spanish private group accepted in
of diplomatic protection would depend in each case on the existence of provisions of municipal principle that some compensation should be provided. I find it hard to see how it could be
law; if, in a given case of investment abroad, one of the States in question allowed claimed that, as between the Parties, an irregular confiscation would not be a breach of
shareholders an individual right of action, that would be sufficient to preclude basing on the international law, on the sole ground that in municipal law the shareholder, as such, would
renvoi theory any finding that the State had no capacity. have no direct remedy. That is really to displace the problem rather than solve it.

--------------------------------------------------------------------------------------------------------------------- 13. If the view that it is impossible to take international proceedings in behalf of the
FN1 Likewise the Swedish company-law of 1944, revised in 1948, provides a right of action for shareholders in a limited company cannot be justified by a renvoi of the question to a system of
a 10 per cent. minority of shareholders (Art. 129); there are similar provisions in Norwegian law municipal law from which a shareholder's right of action is absent, it remains to examine the
(Art. 122 of the 1957 company-law) and in Articles 122-124 of the corresponding law of the second reason advanced for finding that the State of which the shareholders are nationals lacks
Federal Republic of Germany. capacity to institute proceedings.
---------------------------------------------------------------------------------------------------------------------
It has been maintained that the shareholder cannot sustain direct damage: the damage is
12. If the renvoi method is not applicable in the present case and if the provisions of municipal always to the company; it is true that the shareholder's personal finances might be adversely
law are merely factual data, the complaint that the shareholders in a limited company were affected, but only "on the rebound". Here we once again come up against the theory based on
despoiled must be judged in terms of the rules of international law applicable to foreign invest- certain systems of municipal law as they stood in the early stages of limited-company
ments in the territory of a State, and it would appear that, as between two European States legislation, explaining the latter by the idea that the shareholder confides his investment to the
such as Belgium and Spain, on the critical dates no less than at present, a total loss of assets company for better and for worse, and must accept all the risks without having any right to the
that results from acts described as unlawful and is wholly unindemnified, which amounts to protection which the holder of a bond enjoys. As applied to the small private investor, this
confiscation, constitutes a grievance justifying a claim to establish international responsibility. theory is incorrect in its economic justification, but it is even more incorrect as regards the
majority of large companies in the modern economic scene—and this was already true in 1948. FN2 Modern bankruptcy law has evolved to no less an extent than corporation law, so that the
The [p 275] proceedings in the present case can be seen to have developed on anachronistic lines. It is
shareholder no longer plays any useful part in controlling the management of the company via nowadays the tendency to rescue the enterprise no matter what the faults committed by its
general meetings, for "we observe that the board of directors has entirely confiscated the officers and the penalties to which they are liable. See M. Houin's account of the matter in
power of the general meeting and become to all intents omnipotent" (A. Tunc, in Travaux et Idées nouvelles sur le droit de la faillite, 1969, pp. 122 ff. Suffice it to observe that the judge
conf!!!erences de l'Université libre de Bruxelles, 1959, p. 11)FN1. chooses between the liquidation of the assets (bankruptcy) and judicial settlement
(composition) in accordance with an economic yardstick: the chance of bringing the enterprise
--------------------------------------------------------------------------------------------------------------------- back to normal. Furthermore, French legislation has set up special machinery for preventing the
FN1 With regard to the United States, see J. K. Galbraith, The New Industrial State, London, failure of important undertakings whose disappearance would be likely to result in grave
1967, p. 403: perturbations for the national economy (Ordonnance of 23 September 1967).
---------------------------------------------------------------------------------------------------------------------
"For many years those who specialize on the problems of the corporation have been much
concerned with the way control in the large firm has been passing without recourse from 15. In the analysis based on municipal law, it is indeed stated that the damage at all events is
stockholders to the hired management. The latter, as sufficiently noted in this study, selects never "personal" and proper to the shareholder, but solely damage sustained by the company;
itself and its successors as an autonomous and self-perpetuating oligarchy." this makes it possible to maintain that there has been no damage suffered by the shareholder,
and therefore no confiscation. Here again, even if the standpoint adopted is that of municipal
Of course one must not forget the efforts made by certain countries to remedy this situation by law, abstraction must not be driven too far: a limited company is always an assemblage of
legislative means: cf. paragraph 11 above. persons who do not vanish with the attribution of a corporate personality, the raison d'être of
--------------------------------------------------------------------------------------------------------------------- which is to facilitate the running of the business. The shareholders form the company, and the
Judgment recognizes the possibility of action by the State of the shareholders when the
The theory in question, therefore, bases the refusal of shareholder protection on a reason company has disappeared. In the present case the company has been entirely deprived of the
which is today incorrect, because the "legal nature" of the relationships between the company means for pursuing its corporate objects and, from the point of view of the shareholders, this
and the shareholder now has scarcely anything in common with the legislative texts of the early produces the same effects as a disappearance of the company. The shade of differentiation is
nineteenth century. It is inadmissible for the legal analysis to ignore the economic facts; the therefore a matter of form or rather of formality. As from 1952 the corporate objects of the
shareholder-bondholder contrast is now meaningless if the situation of the State in relation to Barcelona Traction group have been void of meaning FN1.
the company be envisaged. The various guarantees that the State gives the shareholders no
less than the company by its protecting interventions (advancing credit in the event that an ---------------------------------------------------------------------------------------------------------------------
undertaking be threatened with closure) are the very negation of the notion of risk. Investment FN1 The argument using the fact that Barcelona Traction shares have recently been transacted
is an instrument of general economic policy. But the theory of the financial risk to be borne by to prove that the company is still active is unconvincing. A few purchases or sales are enough
the shareholder must be ruled out for a reason deriving from the above-mentioned idea that to keep certain loan-stock, unpaid for over half a century, quoted on some exchanges. When it
the situation created in international law by a confiscation characterized as unlawful cannot be is said that the shareholder has the right to dispose of his share, this certainly means to dispose
ignored on the sole ground that shareholders must accept all the risks. That is to proceed as if of it under normal conditions, which—apart from a few speculations on the outcome of the
the substantive issue had been settled, for if there has been unlawful confiscation, there has present case before the Court—is no longer true in respect of Barcelona Traction.
been a breach of international law. Foreigners are not, just because they are shareholders, ---------------------------------------------------------------------------------------------------------------------
bound under international law to run the risk of seeing their investments disappear as a result
of unlawful acts. The shareholder's risk is a financial one, not a risk of subjection to unlawful If a shareholder were to claim compensation for the loss of profits of a company whose
treatment. activities had come to an end, he would be demanding a kind of "functional" protection, a
guarantee of the right to trade abroad, which, if it existed by virtue of a treaty or of general
14. The international-law situation which must be taken into account in the present case is international law, could be invoked only by the State in whose territory the company is
made up of a series of acts on the part of one State which have been described as unlawful, incorporated and to the economy of which it is linked. But when shareholders ask for
and of their effects upon investments made by the nationals of another State. To affirm that compensation for their investment and what it represented on the date of the damage, on the
the shareholder is always a speculator who must shoulder every risk, on the strength of an ground that the company is no longer in a position to continue its operations, the fact that this
explanation that no longer corresponds to prevailing corporation law, not only constitutes, on damage, by the totalling of the damages sustained by all the shareholders, is also the damage
the international plane, an irrelevant submission vis-á-vis a State complaining that, via its done to the company does not seem to be relevant, leaving aside the problems of assessment
nationals' investments, its general economy has been damaged by an act described as unlawful, and apportionment. The damage to the company is that it is destroyed; the damage to the
but also leaves out of account the rule of international law which prohibits confiscation without shareholders is that they are injured in respect of their property through the destruction of the
compensation FN2. [p 276] [p 277] investment; the damage suffered by the State of the shareholders is that one
component element of the national economy has undergone spoliation. The cause of the
--------------------------------------------------------------------------------------------------------------------- responsibility is in all cases the unlawful act of the State, and the action for the protection of
the shareholders cannot be described as an intervention in the domestic affairs of that State, as responsible for the damage; hence the conventional reference to payments "in equity", "without
has sometimes been alleged, unless it is claimed that denial of justice does not come within the admitting any legal obligation", "without reference to the question of liability" (cf. Moore,
purview of international law. The point that there should not be any double reparation, on the International Law Digest, Vol. VI, in particular with regard to the lynching of Italians in Colorado
one hand for the company and on the other for the shareholders, denotes a very (p. 841) and at New Orleans, and the lynching of Chinese at Rock Springs (p. 830)). But these
understandable concern for fair play. Nevertheless, intellectually and juridically, the forms of words do not remove the problem of the imputation of international responsibility.
individualization of the damage remains a possibility. ---------------------------------------------------------------------------------------------------------------------

Finally, the Judgment's view which admits the possibility of action by the State of the 17. In the current ethos the limited company is simply a means of investment in the industrial
shareholders in the event of the disappearance of the company is lacking in logic for, in such an economy. The State, now having scarcely any property of its own FN2 , supervises and directs
eventuality, if the company's State had started an action it could not be nonsuited through the the activities which go to make up the gross national product, by drawing up the economic
disappearance of the company. And even if such action had been instituted after the policy of the nation. The supervision requisite to make sure that the components of the national
disappearance of the company, it is difficult to see why the State of the company should be economy are maintained in normal working conditions, and in particular to prevent their
unable to make a claim in respect of the unlawful act which was the root cause of the disappearance as a result of decisions contrary to law, constitutes one of the normal functions
disappearance. If then, in this case, both States can act, does this not mean that the general of the State, and takes the form of anticipating, guiding and assisting at the time of the
rule conferring the right of action on the State of the company is not an exclusive rule? decision to make the investment, and of protecting in case of need after the investment has
been made. Investments which have made possible the creation or the development of an
16. Let us now return to the argument of the financial risk that must be borne by the enterprise abroad are as essential to the national economy as investments which are made
shareholder: the shareholder is not injured in respect of his "rights", but only in respect of an within the national territory. The action of the State for the purpose of protecting a component
economic interest which is not legally guaranteed and not entitled to diplomatic protection or item of the national economy is a natural feature of the economic society of which Belgium and
recourse to proceedings. If a partnership were involved, those very persons who refuse the idea Spain formed part at the time when the dispute arose.
of protection of the shareholder admit that protection would be possible, but we are told that,
as a shareholder does not enjoy any right over the company, he has merely an interest in its ---------------------------------------------------------------------------------------------------------------------
optimum functioning. FN2 When, in liberal economies, public bodies buy stock in companies and become
shareholders, are they to be deprived of the protection of the State? (The Industrial
In the first place, this is again to erect definitions taken from certain municipal systems of law Reorganisation Corporation in the United Kingdom ; the Institut de développement industriel in
into a rule of international law; this is paradoxical in the present-day world, when two-thirds of France.)
the population live outside the capitalist system and the legal rules to which the Parties adhere. ---------------------------------------------------------------------------------------------------------------------
The principle asserted must therefore be demonstrated to form a veritable rule for States with a
liberal economic system, one accepted by them as a rule of regional international law. Such is 18. It would be a distortion of this argument to claim that it leads to the recognition that, in all
patently not the case, as is shown by diplomatic practice and arbitration. Moreover, we must circumstances, every shareholder has the right to secure the protection of his State in respect
recall the numerous agreements, which were concluded precisely in the period when the of any act which has inflicted damage on the limited company itself. In the first place, the
dispute arose, by which minority holdings in companies were indemnified at the request of the present opinion has been directed towards showing that, while accepting for the sake of
State of which the minority shareholders were nationals (the agreement of 19 March 1948 argument the renvoi to systems of municipal law, the alleged legal obstacles to the exercise of
between France and Poland, for instance). In the conventions concluded by Switzerland with a right of protection of shareholders, as such, were not insuperable even within this legal
Hungary on 19 July 1950, with Romania on 3 August 1951 and with Bulgaria on 26 November framework. It is not the case that the legal characteristics of the bond between the shareholder
1954, compensation is granted even to the holders of single shares. It seems to me impossible and the company do not permit the State to act; neither is it the case that the [p 278] damage
to dismiss these agree-[p 278] merits with a stroke of the pen, in particular those of done to the company necessarily rules out the possibility of there being a damage proper to the
Switzerland, which are not peace settlements imposed by a victorious State; it is not the habit shareholder in respect of which the State may intervene; neither, lastly, is it the case that the
of States to make each other free gifts FN1 and the number of agreements for the State of the shareholders possesses no right of its own to seek to preserve the component
compensation of shareholders considered apart from the limited company does imply the items of the national economy. In fact there are no legal obstacles to such protection; there are
recognition of an obligation. only necessary dispositions, precautions to be taken so as to reach a reasonable solution in
each case.
---------------------------------------------------------------------------------------------------------------------
FN1 In the Hammaken case (U.S.A./Mexico, Moore, International Arbitrations, Vol. IV, p. 3471) In the second place, the view that investments may be defended by the State whose national
the umpire rejected the argument by the agent of Mexico that a sum of $100,000 allowed by economy is adversely affected is subject to limitation by the terms of that very definition. The
Mexico on account of the cancellation of a concession was only an ex gratia donation: "if the investments in question must be connected with the national economy (and therefore not an
[Mexican Government] did not think that the wrong had been done by the Mexican authorities, ephemeral transaction in securities) and there must have been an unlawful act involving the
it would not have agreed to grant compensation . . ." responsibility of a State. The only problem is that of deciding in each case how to co-ordinate
In many cases the respondent State prefers to pay an indemnity rather than to be declared the protections possible, that of the company and that of the shareholders.
 Canadian nationality of the Barcelona Traction company. That Canada did in fact act at the
19. To apply this reasoning more specifically to the case, there is a complaint of denial of diplomatic level for a certain time, that it proposed arbitration, these are not reasons for
justice, the claim that an industrial undertaking was made to change hands by procedures that recognizing its right to institute proceedings; it is not enough to claim a right to be recognized
are described as unlawful, and therefore a problem of violation of international law. The as possessing it. All litigants make claims and one is always the loser, and, his claim having
substance of the obligation invoked against the Spanish Government is the obligation to respect been dismissed, he finds that he did not have a right. A holding company whose capital is
the investments of Belgian nationals and to protect them from unlawful acts: this is a general apportioned among shareholders of several nationalities and of which the object is to operate
obligation incumbent upon States in the conduct of their economic relations. The Belgian an industry abroad cannot be governed by one system of municipal law in respect of all the
Government's capacity to institute proceedings corresponds to the right possessed by every problems concerning it (cf. paragraph 29 below). And the question of which municipal law is
State to secure the respect of that obligation, when the investments of its nationals constitute applicable to a specific problem is a matter for international law. That is what underlies the
an important part of the national economy. The foundation of a rule of economic international problem of the "nationality" of companies. The assertion by a State that it has jurisdiction over
law must abide by economic realities. The company's link of bare nationality may not reflect any a company is nothing but a claim so long as it has not been admitted by all the States directly
substantial economic bond. As between the two criteria the judge must choose the one on the concerned in that situation or by an international judicial decision.
test of which the law and the facts coincide: it is the State whose national economy is in fact
adversely affected that possesses the right to take legal action. 22. It has not been established that Canada has capacity to institute [p 281] proceedings in
behalf of Barcelona Traction, since that company was Canadian in appearance only FN1 and
*** since, in the economic sphere, the protection of investments must conform to the reality of the
connection. The decision regarding Nottebohm, an individual, which tacitly left the case of
20. In the present matter one must seek to ascertain what is reasonable both on the legal plane companies open, can be applied with even greater reason to companies, for the connecting
and on the plane of economic realities. When a limited company has been set up, it may be factor of economic interest, as between investments and the State from which they really come,
granted that the shareholder is, in principle, defended by the company, subject to the remarks is essential, as has been stated above FN2. It is even more true of investment via a limited
above as to the three categories of shareholder and the special character of holding companies. company than of an individual or a ship that it cannot be given consideration at the
Accordingly, the State which has the right to protect the Barcelona Traction investment would international level unless the State which puts forward the claim has suffered a damage to its
be Canada, and that, according to the Judgment, is what both Parties have admitted. But that national economy; when there are several States with which a company has a genuine
is a proposition which must be verified, just as any contention made by a State which brings an connection, a complication may arise, but that is not the case of all limited companies engaged
international claim before a court must be verified, to make sure that it [p 280]really in activities abroad and the Court is not called upon to deliver a judgment laying down the law
corresponds to the facts. The issue here relates to certain investments which have suffered for the protection of limited companies in general.
serious damage; who has been harmed? If any property suffers damage, reparation should be
sought by the State with which the property is genuinely linked. Now, supposing that Canada ---------------------------------------------------------------------------------------------------------------------
had intervened before the Court in order to be recognized as having an interest of a legal FN1 Notwithstanding the references in the Judgement in paragraph 71 to various points of
nature, relying on Article 62 of the Statute, Spain would not have failed to object that there connection with Canada, I agree with the observations made by Judge Jessup in paragraph 49
were not in Barcelona Traction any substantial or genuine Canadian interests. It is of course of his separate opinion (in particular the footnote thereto). Those really in control of Barcelona
inevitable in complicated cases that parties should commit self-contradictions, but it would be Traction do not seem to have featured any genuine connection with Toronto.
regrettable if the Court were indirectly to recognize these as possessing significance. There is FN2 The distinction between seeking a genuine connection in favour of or against a company is
indeed a major reason why no account should be taken of the statements made by the Parties devoid of legal significance. No party is ever either favoured or penalized by the law, because of
concerning the Canadian character of the company. The example of the right to intervene the fundamental principle of equality before the law. The purpose of seeking the reality behind
provided for in Article 62 is to the point: if Canada had intervened, even an agreement between appearances is to discover the true legal situation underlying the forms adopted. The bringing
the two Parties by which Canada were recognized to have a legal interest as being the national of truth to light is not inspired by any favourable or unfavourable attitude towards one of the
State of the company would not have dispensed the Court from examining the question elements of the problem but by the needs of the process of ascertaining the law.
whether Canada really had a legal interest, for Article 62 says that "It shall be for the Court to ---------------------------------------------------------------------------------------------------------------------
decide" whether an intervention is justified, and it seems to me that, in the matter of
jurisdiction, the Court cannot content itself with taking note of an agreement between the 23. One final observation must be made concerning the attitude of Canada ever since the
Parties concerning the existence of a legal interest on the part of a third State which is absent proceedings were brought. If Canada had felt any interest in the case it had means so to inform
from the proceedings. The legal interest of Canada either exists or does not exist; it is not for the Court, without having to intervene and run the risk of judicial rejection of its intervention. In
third States to create it, and the most they could have done would be to recognize this legal the Corfu Channel case various documents were proposed to the Court by the Yugoslav
interest so far as their positions in the present case were concerned, without such recognition Government, which was not a party to nor intervening in the proceedings, and they were finally
having for the Court any effect whatever in regard to the obligation laid upon it by its Statute to submitted to the Court by the Albanian Government following a decision taken by the Court on
verify its own competence. 10 December 1948 (I.C.J. Pleadings, Vol. III, p. 190; see also the Judgment on that case, with
regard to this point: I.C.J. Reports 1949, p. 17). In the present case, any Canadian document
21. It is therefore an obiter dictum void of judicial significance to assert at the present time the relating the course of diplomatic protection by Canada and giving the exact views of the
Canadian Government could have been furnished to the Court by the same procedure. Yet, on
the contrary, the elliptical answer returned by the Canadian Government on 24 June 1969 to To claim the right to protect investments, the presumption that Belgian interests existed is
the question put by Members of the Court did not supply any clarification (New Documents Nos. indeed not enough; what is needed is to prove a genuine connection with the economy during
44 and 45 submitted by the Belgian Government). On this point I would refer to paragraphs 19 a continuous period, thus enabling it to be said that appurtenance to the State in which the
ff. of the separate opinion of Judge Jessup. company was incorporated is not in line with economic realities. If it is possible to verify the
genuineness of the seat, that cannot be for the purpose of substituting one presumption for
24. Although the Court has rejected the possibility of considering any analogy with the another. In all cases of this kind, it is naturally difficult to pinpoint effective appurtenance to a
Nottebohm case, it seems to me that the Nottebohm [p 282] Judgment does establish a relative particular national economy, but the fault does not lie in any inadequacy of legal rules: it lies in
standard and does not go further than the rule already recalled: "each case must be considered the very features of a complex undertaking. Within the ramification of companies in such a
on its individual merits." Thus, even without any need to rely on that Judgment, the particulars group it is perhaps possible at a given moment, and with reference to a given operation, to
of the present case are such as to place in the forefront of the matters which the Court should determine with what national economy that operation is connected; it is not certain that this
have investigated the problem of the real provenance of the investments in question. The will be possible for the whole of the group's operations, especially not with regard to long
theory of the genuine connection implies comparison between Canada, Belgium and Spain— periods during which there will have been changes in stockholdings, control and management.
and perhaps other States—, and inquiry into the concentration of the undertaking in Spain, the But each case raises its own particular problem and it would not, conversely, be difficult to refer
problem as to whether the real control lay with the organs of Barcelona Traction or elsewhere, to company-groups which, despite their complexity, are incontestably connected with a given
and the reality of the Belgian investment. As the Court did not in fact consider these national economy.
verifications to be necessary, it is difficult to give any final opinion concerning the real
connection of Barcelona Traction with any national economy, but the documents in the case do 27. There is therefore no reason to treat company-groups as stateless and deprive them of all
permit of a few conclusions. protection at the level of international law; it is not unlawful either in municipal or in
international law to set up such groups, and the problems to which they give rise are in no way
25. The connection with the national economy of Canada is certainly not the most conspicuous, different from those arising out of the commercial, financial or industrial operations carried out
for the undertaking has never appeared to constitute a factor of production in that economy. by other corporations. The difficulty of determining the connecting link creates a complication,
The connection of Barcelona Traction with the Spanish economy cannot be disputed so far as not an incapacity. What is necessary is to ascertain in each case whether the investment in
the factor of the production of goods and services in Spain is concerned. The company question is, in fact, connected with a particular national economy and whether the national
concentrated all its activities in Spain, and its subsidiaries, Spanish companies all but three, economic prosperity of the claimant State has been harmed by the unlawful act which directly
were under its absolute control, so that it may be considered that the Barcelona Traction group affected the company. When several economies are affected, this produces a situation which is
as an integrated enterprise formed a component in the Spanish national production. But familiar in international law and is resolved by the acknowledgment of an obligation to
although this aspect of the matter may have legal consequences, more particularly in respect of negotiate (cf. the agreements nowadays concluded among several creditor States vis-à-vis a
certain problems of jurisdiction, it has none Whatsoever for the purpose of ascertaining with debtor State).
which State the foreign investments underlying the creation and development of the enterprise That the connection should be genuine is a necessary condition for the protection of a
are truly connected. It has not been established that these investments were mainly Spanish. corporate person no less than for that of an individual, and in its absence the link with the State
There is therefore, from the standpoint of the law applicable to the investments, no genuine is fictitious and does not confer capacity to institute proceedings. Finding that proof of
connection with the Spanish economy. Barcelona Traction's appurtenance to the Belgian economy has not been produced, whether on
account of the internal organization of the group or for other reasons, I am obliged to conclude
26. The connection with the Belgian economy has been made the subject of exhaustive that the claim must be dismissed.
commentary by Judge Sir Gerald Fitzmaurice and Judge Jessup. For the sake of brevity, I will
merely say that I do not feel proof has been supplied that the investments in question belong to ***
the Belgian economy in the sense of the view propounded in this opinion.
28. I would add that there is another ground on which I would consider the dismissal of the
In this case, proof has not been supplied in a manner satisfying for a court that Barcelona claim justified, but as the Court has not dis-[p284] cussed the matter I can do no more than
Traction, in continuous fashion, predominantly—or even substantially—represented an allude to it. Within the limits of a separate opinion on a point not settled by the Judgment and
investment on the part of the Belgian economy. While it was possible to furnish prima facie not deliberated, I must needs be brief FN1. Nevertheless the matter is of sufficient interest and
evidence that over certain periods, in terms of origin of capital invested and of actual control of priority to justify an outline of my reasoning.
industrial and financial operations, the Belgian economy was more involved than others, the
observations made by Judge Jessup in paragraphs 72-98 of his opinion show that the same has ---------------------------------------------------------------------------------------------------------------------
not been proved true of the period after 1940, more particularly during part of the critical FN1 I consider that this point of principle remains governed by the observation of President
period. Neither was it possible to demonstrate a predominant, constant and certain [p 283] Huber in July 1926 (P.C.I.J., Series D, addendum to No. 2, p. 15) and the resolution adopted by
connection with the Belgian economy on the basis of an inspection of the company-group of the Permanent Court of International Justice on 17 February 1928 (StaufFenberg, Statut et
which Barcelona Traction forms part. Réglement de la Cour permanente de Justice internationale, p. 414). When a point of law has
not been retained, in application of Article 4 of the Resolution concerning the Internal Judicial of publication in Canada can be seen in a particular light; furthermore, the considerations set
Practice, as one which should be decided by the Court, any observations thereon that a judge forth in a number of separate opinions concerning the genuineness or otherwise of the
may make are precluded from possessing the character of judicial pronouncements. company's headquarters in Toronto could have been adduced by the Spanish judge, who could
--------------------------------------------------------------------------------------------------------------------- also have invoked the judicial precedents of certain States, where foreign companies which
have a branch, have carried on business, issued bonds or entered into contracts within the
The fact that a State may invoke the right to protect its nationals who are shareholders in a national territory have been adjudged bankrupt FN1. It should be noted that the courts of
company does not exempt the company from the obligation of exhausting the local remedies certain States have declared bankruptcies for non-repayment of loans, when a businessman has
available for the rectification of the situation complained about. Barcelona Traction ought to called on credit in their territory, though that is an exceptional circumstance. The claim to
have entered a plea of opposition to the judgment declaring bankruptcy within the legal time- possess a certain jurisdiction over the activities of the Barcelona Traction group in Spain was
limit, and there are no reasonable grounds for deciding that the company's failure to enter such consequently not, a priori, illegitimate, though this does not imply the legitimacy of all the
opposition within the time-limit does not form a bar to the institution of proceedings on the measures for the execution of the bankruptcy, or of the actual petition made to the Reus judge.
international level. As Sir Hersch Lauterpacht wrote in Ms separate opinion on the Certain But the state of the law concerning the bankruptcy of foreign companies was not, at the time of
Norwegian Loans case: "however contingent and theoretical these remedies may be, an the facts, such as to justify any abandonment by the company of the remedies open to it.
attempt ought to have been made to exhaust them" (I.C.J. Reports 1957, p. 39). As it happens,
at the time when the Reus judge gave his decision, there was nothing to justify the contention ---------------------------------------------------------------------------------------------------------------------
that the remedy of opposition was merely theoretical. Generally speaking, in bankruptcy law the FN1 In several European legal systems a debtor can be declared bankrupt by the courts of a
bankruptcy judgment divests the bankrupt as soon as it is delivered and before any publication; country in which he carries on a secondary occupation or possesses assets (Article 9 of the
the rule is perhaps too rigorous but there are reasons for it with which specialists in commercial Italian, Article 2 of the Netherlands and Article 238 of the Federal German laws concerned), or
law are familiar, and that effect was at all events a feature of Spanish law in 1948 FN2. Even if if he is in debt there (French case-law). Some doubt is thrown on the character of Barcelona
it had been intended to maintain that this rule was contrary to a general principle of law, it was Traction as a holding company by direct activities in Spain (cf. hearing of 14 July 1969).
necessary to enter opposition to the judgment while expressing the necessary reservations as
to the lack of notification; this complaint ought indeed to have been laid in the first instance ---------------------------------------------------------------------------------------------------------------------
before the local judge so that he could rule upon it and, if need be, rectify the situation.
Whether it be Spanish law or international law that is considered to have been violated, it is After the passage of many years and countless proceedings, it is not easy to recover the
necessary to request the local courts to look into the matter and allow them the opportunity of standpoint of the time when the act complained of occurred, but that is what has to be done in
correcting any mistake. utter objectivity, and in that light it will be seen that a plea of opposition to the declaration of
bankruptcy ought to have appeared to the company as an immediately available and practicable
--------------------------------------------------------------------------------------------------------------------- remedy.
FN2 There is nowhere to be found in the different legislations of the same legal system, at that
time, any provisions concerning publication which are such that they enable the existence to be (Signed) Andre Gros.
deduced of a general principle of law the infringement of which would ipso facto render the
entire proceedings null and void. And if it be held that failure to publish the judgment at the
bankrupt's place of domicile constitutes a breach of Article 1044 (5) of the Spanish Commercial
Code, then it is to the Spanish courts that complaint must first be addressed in this regard.
---------------------------------------------------------------------------------------------------------------------

29. The necessity of entering a plea of opposition becomes still more evident when it is
observed how the concentration of the industrial under-[p285] taking in Spain lends colour,
prima facie to, the Spanish assumption of jurisdiction, on considering the jurisdiction problem in
general and quite apart from the petition for bankruptcy on account of failure to honour bonds.

The corporate purpose of the undertaking is to develop the hydro-electricity industry in Spain,
and the electric railway and tramway system in the city and province of Barcelona (cf. Moody's
Public Utility Manual, 1968, p. 2067). No area other than Spain is contemplated for
hydroelectric development, and in fact Barcelona Traction never undertook works in any other
country; its subsidiaries operated electricity production and distribution systems in Barcelona,
Catalonia "and the industrial cities of Tarrasa, Tarragona, Reus" (sic) "and Tortosa" (ibid.: it
should be noted that these details are based on information supplied by the company; see the
paragraphs "Property Seized" and "Assets in Spain sold"). In these circumstances, the absence