The Barcelona Traction, Light, and Power Co was incorporated and registered in Canada to develop and operate electrical power in Spain (D).
The company was declared bankrupt by a Spanish court after the Spanish Civil War and its assets were seized.
After the end of the Canadian interposition, an action for damages against Spain (D) was brought by Belgium (P) for what it termed expropriation of the assets of the traction Co. on the ground that a large majority of the stock of the company was owned by Belgian (P) nationals.
Preliminary objections were raised by Spain (D) that the plaintiff lacked standing to bring suit for damages to a Canadian company.
Issues –
Does Belgium have the Jus standi to exercise diplomatic protection of shareholders in a Canadian company?
Does Belgium have the right and jurisdiction to bring Spain to court for the actions of a Canadian company?
Judgement –
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.
The Court took cognizance of the great amount of documentary and other evidence submitted by the Parties and fully appreciated the importance of the legal problems raised by the allegation which was at the root of the Belgian claim and which concerned denials of justice allegedly committed by organs of the Spanish State.
However, the possession by the Belgian Government of a right of protection was a prerequisite for the examination of such problems.
Since no jus standi before the Court had been established, it was not for the Court to pronounce upon any other aspect of the case.
Accordingly, the Court rejected the Belgian Government’s claim by 15 votes to 1, 12 votes of the majority being based on the reasons set out above.
