AUTHOR: SANTOSH TIWARI, SISTER NIVEDITA UNIVERSITY
(NEW APPLICATION: 1962)
(BELGIUM v. SPAIN)
SECOND PHASE
This was the landmark case of the International Court of Justice(ICJ) which explained that the state is diplomatically protected and can raise compensation on behalf of its Company if the Company is of the same state, this power is only to the Company nation not the Shareholder nations. Lets Scrutiny this case further:
FACTS
1.The Barcelona Traction Power & Light Company limited was incorporated in Canada and it was a Canadian Company.
2.The Barcelona Traction CO. Carried its business in Spain.
3.The majority of the Shareholders of the Barcelona Traction CO. was from Belgium. 4. In early 1940 the Spanish Government took measure action against led this Company to bankruptcy, seizure of assets and led to the sale of this Company in Spain. 5. This caused a vital loss to the shareholders of this Company which majorly belong from Belgium.
6. The Belgium state on behalf of the Shareholder went to ICJ to claim Compensation from Spain regarding this loss occurred by the shareholder of the Barcelona Traction Company which majorly belongs to Belgium.
7. Spain Argue and raise objection on this claim saying that the Belgium has no legal standing in this case as the Company belongs to Canada as it is incorporated in Canada
Contentions
1.Whether the diplomatic compensation can be claimed by Belgium on behalf of its Belgium Shareholder for the Loss caused to the shareholders due to bankruptcy of the Company by Spain.
2. If the foreign Company goes through a legal harm, does their harm violate the legal rights of shareholders or just their financial interest in the Company is violated. 3. Are remedies available in the Spanish court for the Company and its shareholders finished? Before taking the case to the ICJ .
4. Does Spain violate any law of the International by denying the justice in the Company bankruptcy and proceedings with the assets Sale.
This was the landmark case of the International Court of Justice(ICJ) which explained that the state is diplomatically protected and can raise compensation on behalf of its Company if the Company is of the same state, this power is only to the Company nation not the Shareholder nations. Lets Scrutiny this case further:
Statutory Provisions
The ICJ uses its Statutes of International Court of Justice to deliver this judges the Statutory provisions are as follows:
Article 38(1)-This article tell us that the dispute comes in the ICJ is according to the International law
Article 38(1)(b)-This article tells us that the right to claim Compensation of the Corporate entity only belongs to the Company nation where it is incorporated.
Article 38 (1)(c)-This article says that the ICJ relies on the Municipal law i.e Common Civil law like Corporate personality Corporate veil may be pierced.
Article 37-This article says that whenever the dispute arises between the two states and they are the member of the treaty and the dispute is going to Permanent International Court of Justice them the matter can straightly bring to the ICJ,Belgium use this article to bring the Spain to the ICJ once Spain Joined the United Nations in 1955.
Article 31(3)-This article is used for the Ad Hoc judge to constitute for the bench. Belgium and Spain both use this article to appoint the judge as neither of them has the International judge,by using this article Belgium appoint Prof. William Riphage and Spain appoints judge Enrique C.Armond-Ugon as an ad hoc judge to the Constitute Bench.
Article 34(1)– This article says that only the parties to the dispute has right to bring the court to the dispute.Belgium need to show that he is acting as an Right ful parties to the dispute and demand of an diplomatic Protection rather just acting as an agent of Company as an Corporate investor.
Averments
Both the Countries submitted their Averments which are below:
(A)Belgium
1.Belgium argued that his nationals own approx 88 percent of share in the Company name Barcelona Traction Power &Light Company limited. Action Spanish Authorities of Stripping all of the assets of the Company led to the very Economical and Mental harm to the Belgium nationals.
2.The Barcelona Traction Co. was Financial paralysed and Cannot raise their defense to protect their investors as the Spain Authorities has seized all assets of the Company due to this reason the Belgium nationals has to Step in to protect their investment.
3. The Company incorporated nation that is Canada has stepped aside as they ceased their diplomatic protection of this Company in 1952 So therefore without Belgium intervention the Investor will be left as a legal vacuum and with no government to defend them.
4.The Spanish declaring the Company as Bankrupt and seize all their assets led to be a Fraudulent, arbitrary activity of the State Spain which is Completely against the Standard of international justice and it violates the International Justice
5.The Belgium nationals had appeal in dozens the local court of Spain but they didn’t recieve a fair hearing and a relief for the investors.
(B)Spain
1.Spain uses the International law of Jus Standi which says that only parties to the dispute that is the Company where it is incorporated and registered that is Canada can bring action of claim against Spain not the investors of the company, therefore Belgium lacks the Jus Standi law.
2. Spain further argued with the help of Corporate entity rules that the Company has a separate legal entity from their Shareholders.Any unlawful activity affects the Company itself not the Shareholder of the Company.
3.Spain further argues that Belgium Nation never shows a vital proof that the majority of share of the Company belongs to the Belgium Nation and they have indirect interest in the Company.
4. Spain further argued that the decision of the Canada Nation not to pursue the claim doesn’t give the right to the Belgium nation to pursue; there are always discretion powers for the State to get diplomatic protection.
5.Spain further argues that the company name is Barcelona Traction Co. and its shareholder has not used all the local remedies properly and they fail to exhaust all the local remedies therefore they have no right to take this dispute to International Court of Justice (ICJ).
6.Spain further argues that the bankruptcy of the Company was lawful as the Company could not pay his debts and the bankruptcy was according to the law of Spanish which doesn’t oppose the rule of Natural justice.
Verdict
1.The ICJ rejected the the claim of the Belgium on the grounds that they lack locus Standi.
2. According to the Statute of International Court of Justice Article 34(1) only the Nation where the Comapny registered and incorporated has the right to bring the dispute to the ICJ and claim the Diplomatic Protection.
3.The shareholder of the Company faces only a mere financial injury not a direct infringement of there legal rights.
Ratio Decidendi
1.The harm Of the Shareholder of the Company only gives rise to the voilation of there injury financial interest not there legal rights.
2. The general international law states that the nation where the Company is incorporated or registered has only to enforce there claim of diplomatic protection.
3. The Shareholders of the Company claims of Diplomatic protection lacks Jus standi according to the Statute of International Court of Justice.
Perspective
The judgment that was delivered on the dated 5 February, 1970 shows the flaws of the International law that need to be strictly interpreted. The Court relying on the the rule of Jus Standi completely ingnore that Belgium nationals holds a massive shares in that company approximately 88% which held to a massive financial ruin of the Shareholders.
The use of law of Jus Standi by the Spain make them evade from the scrutiny of serious allegation of fraudulent and arbitrary decisions by the Spain nation on the Barcelona Traction Company limited. The Canada refusing to take the dispute to the local laws of Spain as a mere discretion leds the Shareholder defenseless which create a Legal Vacuum. This decision made to discover customary flaw in the International law and need to brinng the bilateral Treaties on Investments.
REFERENCES
1. STATUTE OF INTERNATIONAL COURT OF JUSTICE
2. BARCELONA TRACTION LIGHT AND POWER COMPANY LIMITED JUDGMENT (SPAIN VS BELGIUM) 15 February, 1970 Second phase.pdf
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