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Case Concerning Barcelona Traction, Light, and Power Company, Ltd

Case Concerning Barcelona Traction, Light, and Power Company, Ltd [1970] ICJ 1 is a public international law case, concerning the abuse of rights.

Barcelona Traction
Bundesarchiv Bild 183-E20569-21, Spanien, Ausbildung durch "Legion Condor".jpg
CourtInternational Court of Justice
Full case nameCase Concerning Barcelona Traction, Light, and Power Co., Ltd (Belgium v. Spain)
DecidedFebruary 5, 1970 (1970-02-05)
Citation(s)[1970] ICJ 1
Court membership
Judges sittingJosé Bustamante y Rivero (President), Vladimir Koretsky (Vice-President), Sir Gerald Fitzmaurice, Kōtarō Tanaka, Philip Jessup, Gaetano Morelli, Luis Padilla Nervo, Isaac Forster, André Gros, Fouad Ammoun, César Bengzon, Sture Petrén, Manfred Lachs, Charles Onyeama, Enrique Armand-Ugón (ad hoc), Willem Riphagen (ad hoc)
Keywords
  • Corporations, abuse of rights, corporate veil

Contents

FactsEdit

Barcelona Traction, Light, and Power Company, Ltd was a corporation incorporated in Canada, with Toronto headquarters, that made and supplied electricity in Spain. It had issued bonds to non-Spanish investors, but during the Spanish Civil War (1936-9) the Spanish government refused to allow BTLP to transfer currency to pay bondholders the interest they were due. In 1948 a group of bondholders sued in Spain to declare that BTLP had defaulted on the ground it had failed to pay the interest. The Spanish court allowed their claim. The business was sold, the surplus distributed to the bondholders, and a small amount was paid to shareholders. The shareholders in Canada succeeded in persuading Canada and other states to complain that Spain had denied justice and violated a series of treaty obligations. However, Canada eventually accepted that Spain had the right to prevent BTLP from transferring currency and declaring BTLP bankrupt. Of the shares, 88 per cent were owned by Belgians, and the Belgian government complained, insisting the Spanish government had not acted properly. They made an initial claim at the International Court of Justice in 1958, but later withdrew it to allow negotiations. Subsequent negotiations broke down, and a new claim was filed in 1962. Spain contended that Belgium had no standing because BTLP was a Canadian company.

JudgmentEdit

The International Court of Justice held that Belgium had no legal interest in the matter to justify it bringing a claim. Although Belgian shareholders suffered if a wrong was done to the company, it was only the company's rights that could have been infringed by Spain's actions. It would only be if direct shareholder rights (such as to dividends) were affected, that the state of the shareholders would have an independent right of action. It was a general rule of international law that when an unlawful act was committed against a company, only the state of incorporation of the company could sue, and because Canada had chosen not to, this was the end. The idea of a "diplomatic protection" of shareholders was unsound because it would create confusion and insecurity in economic relations as shares are 'widely scattered and frequently change hands'. The court also said that a state is bound to give the same legal protection to foreign investments and nationals, either for natural or legal persons, when it admits them to its territory.

Padilla Nervo J said the following.

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