Analysis of the Barcelona Traction Case in International Law Context

This report provides an in-depth analysis of the Barcelona Traction, Light and Power Company, Limited (Second Application: 1962) case, a significant legal dispute between Belgium and Spain. The report employs the IRAC model (Issue, Rule, Application, Conclusion) to examine the core issues, which include Belgium seeking reparations for damages to shareholders of the Canadian Barcelona Traction Company due to actions by the Spanish government. The report identifies the lack of *jus standi* for Belgium to protect the shareholders in the Canadian company. It delves into the relevant rules, including international human rights law, US corporate law, and municipal law, and their application to the case. The report discusses the implications of the case, such as the legal rights of shareholders and the importance of equal treatment under international law. The report concludes with the significance of international law in resolving conflicts and fostering international relations, emphasizing the need for justice, peace, and equality in the global market. The report also highlights the importance of corporate governance and the protection of shareholder rights in international business.

INTERNATIONAL LAW
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
KEY ISSUE.....................................................................................................................................3
RULES.............................................................................................................................................4
APPLICATION...............................................................................................................................5
Implication...................................................................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
International law can be defined as system of treaties and agreement between nations that
governs the way nations with interact with other nations or countries carry business operation
and interact with citizen of other nation. So, it may be generally states legal law, set of rules,
norms and standard that are accepted between two and more countries in international market.
With globalisation, conflict among countries pertaining to international trade has increased
which lead barrier in effective exchange of products and services across worldwide. Therefore,
this law helps in reducing conflict arising between various nations and building strong
relationship through resolving key issue. This report has covered one of the international case
that is Barcelona Traction, Light and Power Company, Limited (Second Application: 1962).
Moreover, in order to analysis and understand the case IRAC model has been applied to extract
key issue, rules, application and conclusion.
MAIN BODY
KEY ISSUE
Barcelona Traction, Light and Power Company, Limited (Second Application: 1962) it is
the case between Belgium and Spain that has been application of 19th June 1962. The company
was created for providing electric power and distribution system in Spain. In this case the
government of Belgian want to seek reparation for damage cause to shareholders as well as
nation in Canadian Barcelona Traction Company which has conducted by organs of Spanish
State. Furthermore the court has identified Belgium lack jus standi to take effective steps
pertaining to protecting the shareholders in Canadian company in respect to measure that has
been taken in Spain. It is public international law case relate to abusing the rights (Mallart,
2018). Likewise it has been identified that in case that Barcelona Traction Company was
incorporated in Canada that make supply of electricity in Spain. Moreover it has issue bond to
non – Spanish investors and government disagree to allow company to transfer current to pay
interest that are due to bondholders. So this group of bondholder has sued the company for not
making payment of the relevant interest for purchasing the bond of the organisation. The court of
Spanish has taken judgement to allow the claim, then the business was sold and surplus was
distributed to the shareholders and bondholders. So other states complain that Spain has violated
series of treaty obligation and denied the justice. At the same time Canada accepted that Spain
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has right to prevent company from being transferring its currency and declaring its bankrupt. In
addition to this around 88% of shares has been held by Belgians so the government complained
that Spanish has not acted properly. Therefore, all these are major issue in the case study that has
caused international issue or affect relationship between the countries (SESSION, 2020).
In addition to this the Barcelona Traction Company has issue sterling bond that has
affected the subsidiary companies that were mainly operating in Spain. So due to Spanish civil
the servicing of Barcelona Traction bond was suspended and exchange control authority has
refuse to authorize the transfer of foreign current that is necessary for resumption of sterling
bonds. So the issue was that the Belgian government has complain that Spanish could not able to
transfer unless it is show that they are made for repayment of debts that are mainly arising due to
genuine importation of foreign capital into Spain.
RULES
This segment of IRAC model explained about relevant rules and regulation that can be
applied to the above case so that particular judgement can be taken regarding the way the case
can be solved. Government is solely responsible for formulating strict rules and regulation which
need to be followed by each and every individual, company for their smooth operation in
international market (Reed, 2018). Therefore, the rules that are application or related to the
above case study can be illustrated as follows:
 International human right law: It is one of the laws that are mainly design to promote
human right in context of social, domestic and regional level. These laws are generally
made up of agreement between sovereign states, or treaties that wants to legally bind
between two parties on the basis of agreed terms and condition. Likewise Bosnia and
Herzegovina v Serbia and Montenegro [2007] is public international law in which Serbia
and Montenegro raise issue of jurisdiction. It states that there was no party to Genocide
convention when the proceeding was instituted or party to Statute of the court (Diallo,
2020). So in this case the highest judicial body of United nation while having hearing of
dispute between states related to Serbia’s has attempted to wipe out Bosnian Muslim
population of Bosnia. Therefore, it is violated right of various human individuals as in the
case of Canadian Barcelona Traction Company.
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 United States corporate law: It is another law that specify about the way governance,
finance and power of corporation in context of US law. Every state has its own corporate
code along with minimum federal law related to trade in company governance right and
share. Thus it is law that emphasis on governing the right, relationship and conduct of
person, business and companies (Paddeu, 2018). Moreover it is related to legal practices
that need to be followed by each and every enterprise while performing its respective task
to enjoy huge profit margin. Security and exchange act 1934 and securities act 1933 has
two that has clearly outlined the standard that can be followed by company.
 Municipal law: It is one of the laws that have come after effective continuous evaluation
of international law in field of diplomatic protection. This laws contribute in distinguish
between the right of company and its shareholders. It also states that company that have
endowed legal personality can take action in respect of matter related to corporate
character. Due to action or any act of company, shareholder interests are harm that it
looks into institute appropriate actions (Radović, 2019). Therefore municipal law clearly
states that any injury to shareholder interest which is caused due to right of company then
it may not be sufficient to claim.
So, all these three are relevant case and law pertaining to the case law of Barcelona
Traction, Light and Power Company, Limited (Second Application: 1962) in which there has
been conflict between Spanish and Belgium government. The above law will contribute in
coming to particular solution so that justice, peace and equality can be maintained between
the countries and there is good international relationship.
APPLICATION
Importance of international law in context of Barcelona Traction, Light and Power
Company, Limited (Second Application: 1962)
From the above analysis it can be clearly stated that the international law are important
to reduce the conflict that arise between two countries thereby contributing in effective trading
between them. The main purpose of international law is to promote the justice, peace and
common interest likewise it has contributed between the Belgium and Spanish company. It also
leads to promote global peace and prosperity through governing the way nation interacts with
each others. The international law has helped in coming to particular decision or judgement that
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is beneficial for both Spanish and Belgium country (Rajput, 2019). Moreover, it has helps
country in knowing all procedure and policies that they need to follow while working in
international market so that no harm can be caused to other. So it helps in maintaining equality
and justice by applied strict rule and regulation related to relationship between countries.
International law also contributes in resolving issue of jurisdiction that arise due to trade among
different countries with range of people. Thereby helps in finding alternative solution for free
and fair trade and relationship between various nations.
Implication
The Barcelona case could face different legislative requirements that needed to fulfils in
this act. Shareholders of company contain legal rights over the profit sharing ratio of the business
entity. The value of share company’s shareholders has bough provide the legal right to the
respective shareholder to challenge the profitability of the business entity in against to provide
the legal support to the business entity. Company law support the shareholders of company to
claim over the profitability of the business entity (Espenlaub, Goyal and Mohamed, 2020). As
per the provision of the companies act this is a legal right of the shareholder to challenge
profitability of the company. Every shareholder eventually become the owner of the company of
the respective proportion of which the respective stakeholder has bought the holding in the
company. The law respectively allow the shareholders associated with the business entity to
claim a certain profitability percentage of the company over all the allocation of profits company
done in form of profitability to the shareholder group associated with the company.
The application of the companies act do not oppose the company to pay return over
investment every single year. This is not a financial obligation has been done over the
shareholders of company that they need to pay the profitability share to the shareholders of
company. The companies law do not mandate the organisation to pay profit every single
financial year. This is the individual decision making of the company and business entity to pay
profit to its shareholder. The application of this law is such that this is completely unethical that
if the company is paying any specific profit share to its shareholder than it can be partial with its
allocation of profit. Company side out a respective percentage of profitability every year in
which the profitability has been generated to allocate to the shareholder of the company (Abascal
and González, 2019). The remaining profit are deposited in retained earning section for future
possible reserves. In case the company is allocating the profitability to its shareholders than it has
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to pay the return to all its shareholders,. It cannot segregate or behave impartial with some
specific shareholder group to pay the return. In the present case company has paid the
shareholder a specific return except the inventors belong to some international borders. This was
completely against the companies act law. This is the right of the shareholders to get return
against the investment done. All the shareholders of company can claim and fill a case against
the decision making of company’s board of director that they skipped the shareholder group
while paying the profitability share to such a holder.
This is not ethical if the company was paying a certain legal of return to the shareholder
than it should not have been segregate the shareholder into a group where they will not pay any
return against the investment made. Companies act do not favour such type of treatment. All
shareholders contain right of receiving profit if other shareholders are receiving the same. In case
of business entity did not paid any profit share than this would be an another situation that cannot
be challenges by the shareholder of the business entity. International human right is another such
law that favour this type of implication regarding the decision making done by the business
entity (Tran, 2019). The law also allocate legal rights to the investors for getting the equal
treatment in the company they have invested. International human right favour the shareholder
group of company for getting and receiving the same treatment as other investors are receiving
from the business entity. In case of due to any decision of the board of director some of the
shareholders of company get different treatment or some kind of discrimination than this is a
criminal offense as the business entity cannot entertain such type of practices. This is the right of
the company shareholder group to get the return over the investment if other respective
shareholders of company belong to same category are getting return over the investment.
Business entity cannot impose discrimination like practices at the business or corporate level.
International human right law favour the equal treatment of all shareholder group of company.
This law directly frame a policy to overcome illegal practices. Any discrimination at the business
entity level with the stakeholder group belongs to the international boundaries than this is against
the legal; guidance and regulations.
As per the implication of the international human right that company decision of paying
the return over the investment made by shareholder to only few specific holders was wrong. The
organization has completely avoided or ignored the shareholder group belong to the international
community when it comes to paying the appropriate return against the investment made. The
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practice followed by the company to ignore certain shareholder group as they were belonging to
the international boundaries was completely partial in nature and imposed discrimination like
practices. International human right law support all types of legal rights of the human being at
the international level (Hill, 2019). This legal right allow the shareholders of the company even
if they belong to some international boundary as per company place of origin bound the
company in case if the business entity has decided to pay return over the investment of the
shareholders than this is the legal right of the shareholder group to receive the respective return
over the investment done.
Municipal law is another law that favour the legal right of the shareholders to claim in the
profitability allocation process done by the company. This law also found the board of directors
responsible for takings such type of decisions where they allocate profitability margins by
skipping the shareholders belong to the international boundaries. Municipal law also favour the
legal right of the shareholders of the company to favour the equal treatment with all shareholders
associated with the business portfolio of company. The application of this law also favour and
support the shareholder group of the company even in case of the international investment made
by the shareholder group this is the legal rights of the shareholders to gain return against the
investment made in business operations of company (Barreca, 2020). The law certainly support
the shareholders and disagree the decision made by the company and board of directors of the
business entity to not to pay a reasonable profitability level to some specific shareholder group.
This is completely a disrespect of the investment made by such a shareholders in business
operations of organization. It is essential that the business entity should have allocated the profits
in all its shareholder group in equal manner. All the different laws and legal regulations favour
and support the shareholders to claim return against the investment made in the company. All the
laws mentioned above clearly challenge the decision made by the business entity and board of
directors to allocate certain level of return only one special group of shareholders and by
overshadowing there shareholders of the company.
Judgement
On the basis of several rules, laws, document and evidence submitted by parties, the court
has taken decision in favour of Spain. It has appreciate the importance of legal problem which
has been raised by Belgian claim that emphasis on denial of justice committed by Spanish state.
Thereby the final judgement that has been made by the court is that since the Belgian
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government does not have jus standi so the court cannot pronounce upon any other aspects of the
case. So, according the claim of Belgian government by 15 vote has been reduced to 1 by
rejection of claim by the court.
CONCLUSION
It can be concluded from the above analysis that the necessary judgement that has been
undertaken by the court on the basis of international law and procedure for maintaining good
relationship among different countries. Such as in 1958, Belgian government has firstly field the
application with court against the Spanish government. So, it raise four preliminary objective
related to application, among which the first one has been rejected because the respondent states
that discontinuance precluded applicant will bring present proceeding. Similarly the second
application was also rejected as it was questioning the jurisdiction of ICJ over the case because it
was related to the lapse of Article 17(4). The third preliminary objection was in favour of
Spanish government as Belgian government is not able to submit the claim related to the wrong
that has been done by Canadian company to its shareholders, irrespective that the shareholders
were Belgian only (Olmedo, 2018). On the other hand in the last or fourth preliminary objection
states that all local remedies available in Spain have not been exhausted.
It has also be identified that the second phase of judgement has two issue that is Belgium
have jus standi to diplomatic protect its shareholder in Canadian company. Furthermore it has
right and jurisdiction to bring Spain in court for act of Barcelona Traction, Light and Power
Company, Limited. Likewise there was no absolute obligation, municipal law and diplomatic
protection can only be exercised by nation state of company.
Moreover, it can be concluded from above analysis that court has make judgement in
favour of Spain as compared to Belgium because it does not have jurisdiction, along with that
shareholder were seeking compensation that has not given diplomatic immunity. At the same
time it has been identified that if the shareholders of Belgium were seek aid to Canada company
and have correct identified then there were chances of lawsuit against the Spanish for not
following legal practices or procedure. So, through above analysis it has been learn that any
individual or company cannot claim against a state that it has not given authority. Moreover it
has been learn from above study that investors take high right in order to get maximum return so
they should respect that institution as well as abide to international law for benefits of all.
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REFERENCES
Books and journals
Mallart, L., 2018. From Electricity to the Photo Archive: National Identity and the Planning of
the 1929 Barcelona International Exhibition. In Urban Histories of Science (pp. 208-
226). Routledge.
Reed, P. C., 2018. Human Rights Litigation Against Corporations After Jesner v. Arab Bank.
Diallo, A.S., 2020. xxvi table of cases.
Paddeu, F., 2018. Book Review: Third-Party Countermeasures in International Law. The
Cambridge Law Journal, 77(2). pp.427-430.
Radović, R., 2019. Mera Investment Fund Limited v. Republic of Serbia: Is the international
protection of domestic foreign investors justified?. Glasnik Advokatske komore
Vojvodine, 91(3). pp.332-347.
Rajput, A., 2019. Cross-border Insolvency and International Investment Law. Manchester
Journal of International Economic Law, 16(3). pp.341-358.
Olmedo, J. G., 2018. Rethinking the Relevance of Customary International Law to Issues of
Nationality in Investment Treaty Arbitration. In International Challenges in Investment
Arbitration (pp. 3-20). Routledge.
Espenlaub, S., Goyal, A. and Mohamed, A., 2020. The impact of shareholders and creditors
rights on IPO performance: An international study. The British Accounting
Review. 52(1). p.100872.
Abascal, R. and González, F., 2019. Shareholder protection and bank executive compensation
after the global financial crisis. Journal of Financial Stability. 40. pp.15-37.
Tran, Q. T., 2019. Creditors and dividend policy: Reputation building versus debt
covenant. European Research on Management and Business Economics. 25(3). pp.114-
121.
Hill, J. G., 2019. The Trajectory of American Corporate Governance: Shareholder Empowerment
and Private Ordering Combat. U. Ill. L. Rev.. p.507.
Barreca, E., 2020. Accountable Compensation: The Progressive Case for Stakeholder-Focused,
Board-Empowering Executive Compensation Laws. Yale J. on Reg. 37. p.338.
SESSION, S., Saturday, May 1, 1971, at 2: 40 pm RouND TABLE: Toward More Adequate
Diplomatic Protection of Private Claims:" Aris Gloves,"" Barcelona Traction," and
Beyond (Jointly Sponsored with the Deutsche Gesellschaft ffir V6lkerrecht) The Round
Table was convened at 2: 40 o'clock pm in the Senate Room.
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