Holmes Institute HI5015: Barcelona Traction Case Analysis Report

This report provides a comprehensive analysis of the Barcelona Traction, Light and Power Co. (Belgium v. Spain) case. It begins with an executive summary, background, and introduction to the case, followed by a detailed examination of the facts and issues. The report delves into the main arguments presented by both parties, leading to the tribunal's decision, which is based on various factors. The analysis includes the four objections raised by the Spanish government, the court's rulings, and the importance of international law provisions. The report also discusses the legal issues, including jurisdiction and the jus standi of Belgium to protect the interests of its shareholders in a Canadian company. The tribunal's decision is presented, along with the implications for international law, focusing on obligations, municipal laws, diplomatic protections, and special circumstances. The report concludes with a summary of the case's significance in shaping international legal principles.

Barcelona Traction , light and Power CO.(Belgium v spain)
CASE Analysis
5/9/2019
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Executive Summary
This report covers the case Barcelona Traction , light and Power CO.(Belgium v spain)
The Report includes a small background and introduction to the case and is next followed by
the issues and fats of the case. The facts and issues of the case are discussed in detail in the
report. After that the main arguments are discussed which take us to the tribunal deciosn that
is based on various factors. The last section of the report covers the importance of various
international laws and their relevance to the case.
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Contents
Section 1................................................................................................................................................4
Background............................................................................................................................................4
Facts......................................................................................................................................................4
Section 2................................................................................................................................................5
Issue......................................................................................................................................................5
Arguments-........................................................................................................................................5
Termination of proceeding by one party gives other the right to start new proceeding.- first
objection........................................................................................................................................5
Lack of jurisdiction –second objection...........................................................................................7
Jus-standi and non-exhaustion of Remedies- third and forth objection........................................7
Section 3................................................................................................................................................8
Tribunal Decision...................................................................................................................................8
Section 4................................................................................................................................................8
International law and importance of case.............................................................................................8
a) No absolute obligation...............................................................................................................8
b) Municipal laws...........................................................................................................................9
c) Diplomatic protections..............................................................................................................9
d) Special circumstances................................................................................................................9
Conclusion.............................................................................................................................................9
References.......................................................................................................................................11
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Section 1
Background
In this case Belgian government asked compensation for the loss caused to Belgian
shareholders in Barcelona traction company ltd. . Due to the conduct of various organs of the
Spanish government. There is emergence of some very important provisions of international
law which are resulted due to this case (Tejada, Romero and Rello, 2018).The case has
judgement in two phases.In which the first phase(1964), Spanish government raised four
objections in which the court rejected first objection and secondary objection and brought
third and fourth objections to the merits.
In the second phase of judgment, the court held the inadequacy of Belgian government to
protect the interests of Belgian shareholders in Canadian company as compared to the
measures taken by Spain in this regard. Also the court rejected Belgian claims by fifteen
cotes to one (Icj-cij.org, 2019).
Facts
The Barcelona Traction Light and Power Company, Ltd. Is a company based in Toronto
Canada as head office. It was established in 1911 in Toronto.It has created a number of
subsiadary companies for generation and transmission of electric power to Catalonia in
Spain. Its subsidary company has supplied major share of Catalonia’s need of power in 1936
(Icj-cij.org, 2019).It was told by Belgian administration that the company’s share were majorly
held by Belgian individuals butthis argument was clearly rejected by Spanish Governmnt. It
was evident that the traction company has issued bonds dominated in Sterling. These special
bonds were to be serviced out of the remittances to Barcelona Traction from its subsidiary
companies operated in Spain. But on count of Spanish civil wars , the servicing of Barcelona
Traction bond were affected . And after the war, the Spanish authorities for exchange control
refuses to honour the transfer of the foreign currency which were mandatory for resuming the
servicing of Sterling bonds. Such activities resented the Belgian authorities and they
registered their grievances towards Spanish authorities . In response to which the Spanish
government told that they will not be able to authorise any kind of foreign transfers unless it
was proven that the foreign currency is required to repay the import of capital into Spain
from other country.
Further , three Spanish bond holders of recently bought Barcelona Traction Sterling bond in
1948, petitioned for declaring the company as bankrupt because of their inability to pay
dividends to bond holders .The court declared the company bankrupt and ordered the
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liquidation of company’s assets along with two other subsidiary companies. After the
judgment Spanish directors were appointed . After some times these measures extended to
other subsidiaries and new shares were issued to be sold to public in 1952.
As per Spanish government, 2736 orders has been by various courts before submitting it to
International court of Justice. The court found that Barcelona Traction does not take any
proceeding in Spanish courts and didn’t enter a plea of resistance against the bankruptcy
verdict within 8 days from the date of verdict .However, Belgian govt told that the
notification does not comply with adequate legal requirements and so the 8day limit never
began .
British, Canadian, united states and Belgian government made representation to Spanish
court from 1948 to 1949 (Dipublico.org, 2019).
Section 2
Issue
when you investigate the case thoroughly you will come to know the following main issues
involved in the case-
 Does Belgium have the jus standi to exercise diplomatic protection of shareholders in
a Canadian. company ?
 Does any states is obligated regarding the foreign investment depending upon
international terms ?
 Does Belgium has jurisdiction to sue Spain fir actions of Canadian company?
Arguments-
Termination of proceeding by one party gives other the right to start
new proceeding.- first objection
Here in this case the Spanish government put forward various arguments to support its dispute
regarding not continuing the legal aspects in 1961 from applicant (Belgian) side (System,
2019)
.
a) Spanish government argumented in court that the discontinuance of hearing
was a deliberative act whose real importance must be described in attendant
situations .
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b) In its second argument, Spanish government advances that practice of
discontinuance of proceedings implies withdrawal of further right of action
otherwise the right to initiate fresh proceedings will be reserved.
c) The third argument by Spanish governmentexplains the situation when
representative of both the parties reached each other in which the
representative of Spanish interests to reopen the proceedings met with refusal
unless Belgian government withdraws its case.. The dispute was denied by
Spanish government stating that the only intention was the discontinuance of
proceedings. However the court also rejected this argument bystating that the
exchanges took place completely for the representative of private interests
involved.It must be expressed that representatives behaved in a way so as to
bind the bind their governments which has not been given by Spanish
government (Justice.gov.za, 2019) .
d) Fourth argument was basically a plea of estoppel by Spanish Gvernment . It
says that the Belgian government misled Spanish government about the
termination due to which Spanish government agreed for negotiations and
suffered prejudice.The statement was again not accepted by court.Here the
court stated thatcourt is not going to speculate the loss met by Spanish
government because of termination of proceedings.If the respondent had not
been agreed to the settlement then the proceedings will stil get continued
because negotiations always shows the possibility of settling whole dispute.
e) In context of fifth and last argument the Spanish authorities argued that
present proceedings are not at per with spirit and is in contradiction with
economy of Hispanic- Belgian Treaty of 1972, which stayed that some
preliminary actions needed to be undertaken before bringing the case for
adjudication.These proceedings has been gone through and now been repeated
in connection with present proceedings which is contrary to the provisions of
treaty. That’s why the present proceedings are out of order.Court rejected this
argument by saying that if right to bring new proceedings exists then treaty
provisions must not be regarded as exhausted untill the case has been
prosecuted to verdict.
In the opinion of court, the first and second proceedings are in the sense of
mutual contradiction as the termination of proceeding cant be a purely
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procedural as well as neutral act and also it cant be a withdrawal of claim
primafacie.
Lack of jurisdiction –second objection
To honour jurisdiction of the court, the applicant based itself on the combined effect
of Article 37[i] of the Statute of the Court and Article 17[ii] of the Hispanic-
Belgian Treaty of Conciliation, Judicial Settlement and Arbitration (1927).
a) The applicant emphasises that court must by virtue of article 37 be have to
replace the PCIJ between parties as both being the parties of ICJ (Chang, 2017).
b) Court observed that article 37 intended to secure many jurisdictional clause
from becoming inoperative by reason of prospective dissolution (Murungi,
2012) .
c) Respondent again objected that this view can lead to situation where the article
become inoperative and then again become operative after some time.
Here also court rejected second objection of respondent.
Jus-standi and non-exhaustion of Remedies- third and forth objection.
a) While explaining the jus-standi the court observed the obligation of state
toward the foreign investment and foreign nationals admitted to its
country.
b) For the question reagrdingunlawful act that has been committed towards
company representing foreign capitals, General rule will prevalent that
allows the state to exercise diplomatic protection for the purpose of
grievance redressalexcept the following situation where General rule will
not take place-
 The contention having ceased to be in existence .
 Inability of states in taking adequate steps.
Court also observed that Canadian nationality of Barcelona traction
company has not been disputed. The Canadian government has
protected the company on its behalf for long time. If at some point
it fails , it does not justify the action of diplomatic protection by
any other country .
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A state should make claim when the interest of its investors in foreign which is the part of
economic resource to that state is affected. In present scenario the claim can only be
entertained if backed by any treaty which doesn’t exist.
Section 3
Tribunal Decision
International Court of justice in this case observed that, although Belgian investors suffered
due to wrong done with the company, but Belgium does not have right to claim as it was in
the company’s right that was affected by Spain’s actions.States have liberty to take action if
the rights of shareholder affected. As shares in corporate are widely scattered and change
hands frequently so it would be not in the benefit of shareholders and create confusion with
fear of insecurity if diplomatic protection has been given to shareholders. It also observed
that states will have to give same legal protection to foreign nationalseither natural or legal
person, when admits to its territory. Theory of diplomatic protection to shareholder leads to
competing claims by states which has potential to create diplomatic insecurity in International
economic relations. Therefore court denied the provision of jus standi in the case concerned
and didn’t find any other aspect to inspect in this case .
Section 4
International law and importance of case
Barcelona Traction case while in the process of jurisdiction set some governing principles for
the jurisdictions to be applied in international laws which can be given as general principles
which can be explained as –
a) No absolute obligation-whenever a country caters foreign individuals for
investment from foreign investors of foreign nations, it was bound to protect them
against law and holders responsibilities for the management of treatment to be
afforded.But such protections are not absolute and subject to condition.
b) Municipal laws –The foundation of company was founded on distinction
between company and shareholders. Any act infringing company’s right did not need
to infringe shareholders right and does not contains any obligations even if their
interests were affected. International laws the have to refer to generally affected
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municipal rules . If shareholder interest is affected or injured resulting due to injury
occurred to company does not have right to claim.
c) Diplomatic protections- whenever there is incident of unlawful act against
a company in foreign capital then in context of General rule the company will have
the right to authorise the diplomatic protection for the grievance redressal.There
doesn’t exist any law that confers such right on shareholders national interest.
d) Special circumstances-if there exists reasons of equity, a State should
consider the protection of its nationals, shareholders in a company which had been the
prosecuting in violation of international law. The Court supposed that the
implementation of the theory of diplomatic supervision of shareholders as such would
motivate the competing claims from other States, which could create an atmosphere
of insecurity in multilateral economic dealings. In specific context of present case,
where the company’s national State was able to act, the Court was not of the opinion
that jus standi was conferred on the Belgian Government by considerations of equity.
In this case , dismissal of the case demonstrate the adequate differences between a
individual and state which in national context considered sovereign. Here the court
decided in favour of Spain as the Belgium state does not posses any jurisdiction to do
akin to this and shareholder doesn’t not get diplomatic protection and immunity.
However, if shareholder wants to get help from Canada, headquarter at Canada .An
individual does not have authority to claim against a state. Therefore, in the context of
International law, this case can be proved as a excellent reference while dealing with
cases of sovereign entities and organisation and their claims and how to deal with
them.
Conclusion
It can be concluded from the above analysis of the case that there are various
differences in the rulings of the court. The ruling of the court was carried out in the
favour of Spain as there was no jurisdiction with Belgium and no diplomatic
immunity was given by the shareholders for seeking any compensation. But, if it was
possible for the shareholders to give a proper identity where the headquarters of the
company are situated than it is possible that an aid could be given.
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References
Chang, Z. (2017). A Revision of Article 38(1) of the Statute of the International Court of
Justice?. SSRN Electronic Journal.
Dipublico.org. (2019). [online] Available at: https://www.dipublico.org/cij/doc/45.pdf
[Accessed 9 May 2019].
Icj-cij.org. (2019). Judgments | Barcelona Traction, Light and Power Company, Limited
(Belgium v. Spain) (New Application: 1962) | International Court of Justice. [online]
Available at: https://www.icj-cij.org/en/case/50/judgments [Accessed 9 May 2019].
Icj-cij.org. (2019). Latest developments | Barcelona Traction, Light and Power Company,
Limited (Belgium v. Spain) (New Application: 1962) | International Court of Justice.
[online] Available at: https://www.icj-cij.org/en/case/50 [Accessed 9 May 2019].
Justice.gov.za. (2019). [online] Available at:
http://www.justice.gov.za/sca/judgments/sca_2012/sca2012-028.pdf [Accessed 9 May
2019].
Murungi, P. (2012). 10 Years of the International Criminal Court (ICC): The Court, Africa,
The United Nations Security Council (UNSC) and Article 16 of the Rome Statute. SSRN
Electronic Journal.
System, N. (2019). New York City Civil Court. [online] Nycourts.gov. Available at:
https://nycourts.gov/COURTS/nyc/housing/definitions.shtml [Accessed 9 May 2019].
Tejada, S., Romero, A. and Rello, J. (2018). Community-acquired pneumonia in adults:
What’s new focusing on epidemiology, microorganisms and diagnosis?. Erciyes Tıp
Dergisi/Erciyes Medical Journal.
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