Barcelona Traction Light and Power Co ltd (Belgium V Spain, ICJ 1970)

Barcelona Traction Light and Power Co ltd (Belgium V Spain, ICJ 1970)

Principle: Companies are separate entity in the eye of law.

Fact: The Barcelona Traction, Light and Power Co. Ltd., (hereinafter called Barcelona Traction) were a Canadian company. The greater part of its share capital belonged to Belgian nationals. Barcelona Traction also owned the shares of several other companies, some of which were operating in Spain under Spanish law. Barcelona Traction, Light, and Power Company, Ltd. manufactured and supplied electricity in Spain. Although doing business in Spain, it was incorporated in Canada and maintained its headquarters in Toronto. The company issued corporate bonds to investors outside of Spain. During the Spanish Civil War (1936  – 1939), the government of Spain refused to allow Barcelona Traction to transfer currency from Spain to pay interest to the bondholders. The interest payments were never resumed. In 1948, several Spaniards purchased some of the bonds and then brought suit in a Spanish court asking it to declare Barcelona Traction bankrupt because it had failed to pay the interest on the bonds. The court did so and, following several motions and appeals, all of the assets in Spain belonging to the company were finally sold by public auction in 1952. The proceeds from the sale were distributed to creditors and only a very small sum was to be paid to shareholders. The shareholders then sought the assistance of their home states in seeking to obtain a larger settlement. Canada, among other states, complained to Spain of denials of justice and of the violation of certain treaties it alleged were applicable. Canada, however, eventually agreed that Spain had acted properly in denying Barcelona Traction the right to transfer currency abroad and later in declaring the company bankrupt. Belgium took an interest in the matter because Belgians owned 88 percent of the shares in Barcelona Traction. It disagreed that Spain had acted properly and after Spain became a member of the United Nations in 1955, Belgium filed a complaint before the International Court of Justice in 1958. The proceedings were suspended and then discontinued while representatives of the private interests concerned carried on negotiations. When the negotiations failed, Belgium submitted a new application to the Court in 1962.

Spain promptly objected that Belgium could not sponsor Barcelona Traction‘s or its shareholders‘complaints because Barcelona Traction was a Canadian company.

Issues:

  1. Whether the company and the shareholders are separate entities?
  2. Whether Belgium had locus standi?

Decision: Company and shareholders are separate entities. Belgium had no locus standi.

Reasoning: The Belgian government lacked the standing to exercise diplomatic protection of Belgian shareholders in a Canadian company with respect to measures taken against that company in Spain. The court ruled on the side of the Spanish, holding that only the nationality of the corporation (the Canadians) can sue. The case is important as it demonstrates how the concept of diplomatic protection under international law can apply equally to corporations as to individuals

Rayhanul Islam

The author is an original thinker; often challenges the regular rule of conduct considering various perspective on the basis of scientific reasoning to ensure the peace and prosperity of the society. He works as freelancer advocate and promotes legal knowledge and human right concept to the root level. The author is also a tech enthusiast and web developer, he loves psychology as well.

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