5 February 1970

 

General List No. 50

 
     

international Court of Justice

     
 

Barcelona Traction

 
     

Belgium

 

v. 

Spain

     
     
 

Judgment

 
     
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BEFORE: President: Bustamante Y Rivero;
Vice-President: Koretsky;
Judges: Sir Gerald Fitzmaurice, Tanaka, Jessup, Morelli, Padilla Nervo, Forster, Gros, Ammoun, Bengzon, Petren, Lachs, Oneyama;
Judges Ad Hoc: Armand-Ugon, Riphagen
   
PermaLink: http://www.worldcourts.com/icj/eng/decisions/1970.02.05_barcelona_traction.htm
   
Citation: Barcelona Traction (Belg. v. Spain), 1970 I.C.J. 3 (Judgment of Feb. 5)
   
Represented By: Belgium: Chevalier Y. Devadder, Legal Adviser to the Ministry of Foreign Affairs and External Trade, as Agent;
Mr. H. Rolin, Professor emeritus of the Faculty of Law of the Free University of Brussels and Advocate at the Brussels Court of Appeal, as Co-Agent and Counsel.
Assisted By
Mrs. S. Bastid, Professor in the Faculty of Law of the University of Paris
Mr. J. Van Ryn, Professor in the Faculty of Law of the Free University of Brussels and Advocate at the Belgian Court of Cassation,
Mr. M. Gregoire, Advocate at the Brussels Court of Appeal,
Mr. F. A. Mann, Honorary Professor in the Faculty of Law of the University of Bonn, Solicitor of the Supreme Court, England,
Mr. M. Virally, Professor in the Faculties of Law of the Universities of Geneva and Strasbourg and at the Graduate Institute of International Studies in Geneva,
Mr. E. Lauterpacht, Lecturer in the University of Cambridge, Member of the English Bar,
Mr. A. S. Pattillo, Q.C., Member of the Ontario Bar (Canada),
Mr. M. Slusny, Lecturer in the Faculty of Law of the Free University of Brussels and Advocate at the Brussels Court of Appeal,
Mr. P. Van Ommeslaghe, Professeur extraordinaire in the Faculty of Law of the Free University of Brussels and Advocate at the Brussels Court of Appeal,
Mr. M. Waelbroeck, Professeur extraordinaire in the Faculty of Law of the Free University of Brussels,
Mr. J. Kirkpatrick, Lecturer in the Faculty of Law of the Free University of Brussels and Advocate at the Brussels Court of Appeal, as Counsel,
Mr. H. Bachrach, Member of the New York State and Federal Bars, as Assistant Counsel and Secretary,
Mr. L. Prieto-Castro, Professor in the Faculty of Law of the University of Madrid,
Mr. M. Olivencia Ruiz, Professor in the Faculty of Law of the University of Seville,
Mr. J. Girón Tena, Professor in the Faculty of Law of the University of Valladolid, as Expert-Counsel in Spanish Law;

Spain: Mr. J. M. Castro-Rial, Professor, Legal Adviser to the Ministry of Foreign Affairs, as Agent,
Assisted By
Mr. R. Ago, Professor of International Law in the Faculty of Law of the University of Rome,
Mr. M. Bos, Professor of International Law in the Faculty of Law of the University of Utrecht,
Mr. P. Cahier, Professor of International Law at the Graduate Institute of International Studies in Geneva,
Mr. J. Carreras Llansana, Professor in the Faculty of Law of the University of Navarre,
Mr. F. de Castro y Bravo, Professor, Legal Adviser to the Ministry of Foreign Affairs,
Mr. J. M. Gil-Robles Quiñones, Professor in the Faculty of Law of the University of Oviedo,
Mr. M. Gimeno Fernandez, Judge of the Supreme Court, Madrid,
Mr. P. Guggenheim, Professor of International Law at the Graduate Institute of International Studies in Geneva,
Mr. E. Jimenez de Arechaga, Professor of International Law in the Faculty of Law of the University of Montevideo,
Mr. A. Malintoppi, Professor of International Law in the Faculty of Political Science of the University of Florence,
Mr. F. Ramirez, Secretary-General of the Spanish Institute of Foreign Exchange, Madrid,
Mr. P. Reuter, Professor in the Faculty of Law of the University of Paris,
Mr. J. M. Rivas Fresnedo, Inspector and Expert, Ministry of Finance, Madrid,
Mr. J. L. Sureda Carrion, Professor in the Faculty of Law of the University of Barcelona,
Mr. D. Triay Moll, Inspector and Expert, Ministry of Finance, Madrid,
Mr. R. Uría Gonzalez, Professor in the Faculty of Law of the University of Madrid,
Sir Humphrey Waldock, C.M.G., O.B.E., Q.C., Chichele Professor of
Public International Law in the University of Oxford,
Mr. P. Weil, Professor in the Faculty of Law of the University of Paris, as Counsel or Advocates,
Mr. J. M. Lacleta y Munoz, Secretary of Embassy,
Mr. L. Martinez-Agullo, Secretary of Embassy, as Secretaries.
 
     
 
 
     
 

[p6]
The Court,
composed as above,
delivers the following Judgment:

1. In 1958 the Belgian Government filed with the International Court of Justice an Application against the Spanish Government seeking reparation for damage allegedly caused to the Barcelona Traction, Light and Power Company, Limited, on account of acts said to be contrary to international law committed by organs of the Spanish State. After the filing of the Belgian Memorial and the submission of preliminary objections by the Spanish Government, the Belgian Government gave notice of discontinuance of the proceedings, with a view to negotiations between the representatives of the private interests concerned. The case was removed from the Court's General List on 10 April 1961.

2. On 19 June 1962, the negotiations having failed, the Belgian Government submitted to the Court a new Application, claiming reparation for the damage allegedly sustained by Belgian nationals, shareholders in the Barcelona Traction company, on account of acts said to be contrary to international law committed in respect of the company by organs of the Spanish State. On 15 March 1963 the Spanish Government raised four preliminary objections to the Belgian Application.

3. By its Judgment of 24 July 1964, the Court rejected the first two preliminary objections. The first was to the effect that the discontinuance, under Article 69, paragraph 2, of the Court's Rules, of previous proceedings relative to the same events in Spain, disentitled the Belgian Government from bringing the present proceedings. The second was to the effect that even if this was not the case, the Court was not competent, because the necessary jurisdictional basis requiring Spain to submit to the jurisdiction of the Court did not exist. The Court joined the third and fourth objections to the merits. The third was to the effect that the claim is inadmissible because the Belgian Government lacks any jus standi to intervene or make a judicial claim on behalf of Belgian interests in a Canadian company, assuming that the Belgian character of such interests were established, which is denied by the Spanish Government. The fourth was to the effect that even if the Belgian Government has the necessary jus standi, the claim still remains inadmissible because local remedies in respect of the acts complained of were not exhausted.

4. Time-limits for the filing of the further pleadings were fixed or, at the request of the Parties, extended by Orders of 28 July 1964, 11 June 1965, 12 January 1966, 23 November 1966, 12 April 1967, 15 September 1967 and 24 May 1968, in the last-mentioned of which the Court noted with regret that the time-limits originally fixed by the Court for the filing of the pleadings had not been observed, whereby the written proceedings had been considerably prolonged. The written proceedings finally came to an end on 1 July 1968 with the filing of the Rejoinder of the Spanish Government. [p.7]

5. Pursuant to Article 31, paragraph 3, of the Statute, Mr. Willem Riphagen, Professor of International Law at the Rotterdam School of Economics, and Mr. Enrique C. Armand-Ugon, former President of the Supreme Court of Justice of Uruguay and a former Member of the International Court of Justice, were chosen by the Belgian and Spanish Governments respectively to sit as judges ad hoc.

6. Pursuant to Article 44, paragraph 2, of the Rules of Court, the pleadings and annexed documents were, after consultation of the Parties, made available to the Governments of Chile, Peru and the United States of America. Pursuant to paragraph 3 of the same Article, the pleadings and annexed documents were, with the consent of the Parties, made accessible to the public as from 10 April 1969.

7. At 64 public sittings held between 15 April and 22 July 1969 the Court heard oral arguments and replies by Chevalier Devadder, Agent, Mr. Rolin, co-Agent and Counsel, Mrs. Bastid, Mr. Van Ryn, Mr. Grégoire, Mr. Mann, Mr. Virally, Mr. Lauterpacht, and Mr. Pattillo, Counsel, on behalf of the Belgian Government and by Mr. Castro-Rial, Agent, Mr. Ago, Mr. Carreras Mr. Gil-Robles, Mr. Guggenheim, Mr. Jimenez de Aréchaga, Mr. Malintoppi, Mr. Reuter, Mr. Sureda, Mr. Uria, Sir Humphrey Waldock and Mr. Weil, Counsel or Advocates, on behalf of the Spanish Government.

***

8. The Barcelona Traction, Light and Power Company, Limited, is a holding company incorporated in 1911 in Toronto (Canada), where it has its head office. For the purpose of creating and developing an electric power production and distribution system in Catalonia (Spain), it formed a number of operating, financing and concession-holding subsidiary companies. Three of these companies, whose shares it owned wholly or almost wholly, were incorporated under Canadian law and had their registered offices in Canada (Ebro Irrigation and Power Company, Limited, Catalonian Land Company, Limited and International Utilities Finance Corporation, Limited); the others were incorporated under Spanish law and had their registered offices in Spain. At the time of the outbreak of the Spanish Civil War the group, through its operating subsidiaries, supplied the major part of Catalonia's electricity requirements.

9. According to the Belgian Government, some years after the First World War Barcelona Traction's share capital came to be very largely held by Belgian nationals—natural or juristic persons—and a very high percentage of the shares has since then continuously belonged to Belgian nationals, particularly the Société Internationale d'Energie Hydro-Electrique (Sidro), whose principal shareholder, the Société Financière de Transports et d'Entreprises Industrielles (Sofina), is itself a company in which Belgian interests are preponderant. The fact that large blocks of shares were for certain periods transferred to American nominees, to [p.8]protect these securities in the event of invasion of Belgian territory during the Second World War, is not, according to the Belgian contention, of any relevance in this connection, as it was Belgian nationals, particularly Sidro, who continued to be the real owners. For a time the shares were vested in a trustee, but the Belgian Government maintains that the trust terminated in 1946. The Spanish Government contends, on the contrary, that the Belgian nationality of the shareholders is not proven and that the trustee or the nominees must be regarded as the true shareholders in the case of the shares concerned.

10. Barcelona Traction issued several series of bonds, some in pesetas but principally in sterling. The issues were secured by trust deeds, with the National Trust Company, Limited, of Toronto as trustee of the sterling bonds, the security consisting essentially of a charge on bonds and shares of Ebro and other subsidiaries and of a mortgage executed by Ebro in favour of National Trust. The sterling bonds were serviced out of transfers to Barcelona Traction effected by the subsidiary companies operating in Spain.

11. In 1936 the servicing of the Barcelona Traction bonds was suspended on account of the Spanish civil war. In 1940 payment of interest on the peseta bonds was resumed with the authorization of the Spanish exchange control authorities (required because the debt was owed by a foreign company), but authorization for the transfer of. the foreign currency necessary for the servicing of the sterling bonds was refused and those interest payments were never resumed.

12. In 1945 Barcelona Traction proposed a plan of compromise which provided for the reimbursement of the sterling debt. When the Spanish authorities refused to authorize the transfer of the necessary foreign currency, this plan was twice modified. In its final form, the plan provided, inter alia, for an advance redemption by Ebro of Barcelona Traction peseta bonds, for which authorization was likewise required. Such authorization was refused by the Spanish authorities. Later, when the Belgian Government complained of the refusals to authorize foreign currency transfers, without which the debts on the bonds could not be honoured, the Spanish Government stated that the transfers could not be authorized unless it was shown that the foreign currency was to be used to repay debts arising from the genuine importation of foreign capital into Spain, and that this had not been established.

13. On 9 February 1948 three Spanish holders of recently acquired Barcelona Traction sterling bonds petitioned the court of Reus (Province of Tarragona) for a declaration adjudging the company bankrupt, on account of failure to pay the interest on the bonds. The petition was admitted by an order of 10 February 1948 and a judgment declaring the company bankrupt was given on 12 February. This judgment included provisions appointing a commissioner in bankruptcy and an interim [p.9] receiver and ordering the seizure of the assets of Barcelona Traction, Ebro and Compañía Barcelonesa de Electricidad, another subsidiary company.

14. The shares of Ebro and Barcelonesa had been deposited by Barcelona Traction and Ebro with the National Trust company of Toronto as security for their bond issues. All the Ebro and the Barcelonesa ordinary shares were held outside Spain, and the possession taken of them was characterized as "mediate and constructive civil possession", that is to say was not accompanied by physical possession. Pursuant to the bankruptcy judgment the commissioner in bankruptcy at once dismissed the principal management personnel of the two companies and during the ensuing weeks the interim receiver appointed Spanish directors and declared that the companies were thus "normalized". Shortly after the bankruptcy judgment the petitioners brought about the extension of the taking of possession and related measures to the other subsidiary companies.

15. Proceedings in Spain to contest the bankruptcy judgment and the related decisions were instituted by Barcelona Traction, National Trust, the subsidiary companies and their directors or management personnel. However, Barcelona Traction, which had not received a judicial notice of the bankruptcy proceedings, and was not represented before the Reus court in February, took no proceedings in the courts until 18 June 1948. In particular it did not enter a plea of opposition against the bankruptcy judgment within the time-limit of eight days from the date of publication of the judgment laid down in Spanish legislation. On the grounds that the notification and publication did not comply with the relevant legal requirements, the Belgian Government contends that the eight-day time-limit had never begun to run.

16. Motions contesting the jurisdiction of the Reus court and of the Spanish courts as a whole, in particular by certain bondholders, had a suspensive effect on the actions for redress; a decision on the question of jurisdiction was in turn delayed by lengthy proceedings brought by the Genora company, a creditor of Barcelona Traction, disputing Barcelona Traction's right to be a party to the proceedings on the jurisdictional issue. One of the motions contesting jurisdiction was not finally dismissed by the Barcelona court of appeal until 1963, after the Belgian Application had been filed with the International Court of Justice.

17. In June 1949, on an application by the Namel company, with the intervention of the Genora company, the Barcelona court of appeal gave a judgment making it possible for the meeting of creditors to be convened for the election of the trustees in bankruptcy, by excluding the necessary procedure from the suspensive effect of the motion contesting jurisdiction. Trustees were then elected, and procured decisions that new shares of the subsidiary companies should be created, cancelling the shares located outside Spain (December 1949), and that the head offices of Ebro and Catalonian Land should henceforth be at Barcelona and not [p.10]Toronto. Finally in August 1951 the trustees obtained court authorization to sell "the totality of the shares, with all the rights attaching to them, representing the corporate capital" of the subsidiary companies, in the form of the newly created share certificates. The sale took place by public auction on 4 January 1952 on the basis of a set of General Conditions and became effective on 17 June 1952. The purchaser was a newly formed company, Fuerzas Eléctricas de Cataluña, S.A. (Fecsa), which thereupon acquired complete control of the undertaking in Spain.

18. Proceedings before the court of Reus, various courts of Barcelona and the Spanish Supreme Court, to contest the sale and the operations which preceded or followed it, were taken by, among others, Barcelona Traction, National Trust and the Belgian company Sidro as a shareholder in Barcelona Traction, but without success. According to the Spanish Government, up to the filing of the Belgian Application, 2,736 orders had been made in the case and 494 judgments given by lower and 37 by higher courts. For the purposes of this Judgment it is not necessary to go into these orders and judgments.

19. After the bankruptcy declaration, representations were made to the Spanish Government by the British, Canadian, United States and Belgian Governments.

20. The British Government made representations to the Spanish Government on 23 February 1948 concerning the bankruptcy of Barcelona Traction and the seizure of its assets as well as those of Ebro and Barcelonesa, stating its interest in the situation of the bondholders resident in the United Kingdom. It subsequently supported the representations made by the Canadian Government.

21. The Canadian Government made representations to the Spanish Government in a series of diplomatic notes, the first being dated 27 March 1948 and the last 21 April 1952; in addition, approaches were made on a less official level in July 1954 and March 1955. The Canadian Government first complained of the denials of justice said to have been committed in Spain towards Barcelona Traction, Ebro and National Trust, but it subsequently based its complaints more particularly on conduct towards the Ebro company said to be in breach of certain treaty provisions applicable between Spain and Canada. The Spanish Government did not respond to a Canadian proposal for the submission of the dispute to arbitration and the Canadian Government subsequently confined itself, until the time when its interposition entirely ceased, to endeavouring to promote a settlement by agreement between the private groups concerned.

22. The United States Government made representations to the Spanish Government on behalf of Barcelona Traction in a note of 22 July 1949, in support of a note submitted by the Canadian Government the previous day. It subsequently continued its interposition through the diplomatic channel and by other means. Since references were made by the United States Government in these representations to the presence of [p.11] American interests in Barcelona Traction, the Spanish Government draws the conclusion that, in the light of the customary practice of the United States Government to protect only substantial American investments abroad, the existence must be presumed of such large American interests as to rule out a preponderance of Belgian interests. The Belgian Government considers that the United States Government was motivated by a more general concern to secure equitable treatment of foreign investments in Spain, and in this context cites, inter alia, a note of 5 June 1967 from the United States Government.

23. The Spanish Government having stated in a note of 26 September 1949 that Ebro had not furnished proof as to the origin and genuineness of the bond debts, which justified the refusal of foreign currency transfers, the Belgian and Canadian Governments considered proposing to the Spanish Government the establishment of a tripartite committee to study the question. Before this proposal was made, the Spanish Government suggested in March 1950 the creation of a committee on which, in addition to Spain, only Canada and the United Kingdom would be represented. This proposal was accepted by the United Kingdom and Canadian Governments. The work of the committee led to a joint statement of 11 June 1951 by the three Governments to the effect, inter alia, that the attitude of the Spanish administration in not authorizing the transfers of foreign currency was fully justified. The Belgian Government protested against the fact that it had not been invited to nominate an expert to take part in the enquiry, and reserved its rights; in the proceedings before the Court it contended that the joint statement of 1951, which was based on the work of the committee, could not be set up against it, being res inter alios acta.

24. The Belgian Government made representations to the Spanish Government on the same day as the Canadian Government, in a note of 27 March 1948. It continued its diplomatic intervention until the rejection by the Spanish Government of a Belgian proposal for submission to arbitration (end of 1951). After the admission of Spain to membership in the United Nations (1955), which, as found by the Court in 1964, rendered operative again the clause of compulsory jurisdiction contained in the 1927 Hispano-Belgian Treaty of Conciliation, Judicial Settlement and Arbitration, the Belgian Government attempted further representations. After the rejection of a proposal for a special agreement, it decided to refer the dispute unilaterally to this Court.

***

25. In the course of the written proceedings, the following submissions were presented by the Parties: [p. 12]

On behalf of the Belgian Government, the Application:

"May it please the Court

1. to adjudge and declare that the measures, acts, decisions and omissions of the organs of the Spanish State described in the present Application are contrary to international law and that the Spanish State is under an obligation towards Belgium to make reparation for the consequential damage suffered by Belgian nationals, natural and juristic persons, shareholders in Barcelona Traction;

2. to adjudge and declare that this reparation should, as far as possible, annul all the consequences which these acts contrary to international law have had for the said nationals, and that the Spanish State is therefore under an obligation to secure, if possible, the annulment of the adjudication in bankruptcy and of the judicial and other acts resulting therefrom, obtaining for the injured Belgian nationals all the legal effects which should result for them from this annulment; further, to determine the amount of the compensation to be paid by the Spanish State to the Belgian State by reason of all the incidental damage sustained by Belgian nationals as a result of the acts complained of, including the deprivation of enjoyment of rights and the expenses incurred in the defence of their rights;

3. to adjudge and declare, in the event of the annulment of the consequences of the acts complained of proving impossible, that the Spanish State shall be under an obligation to pay to the Belgian State, by way of compensation, a sum equivalent to 88 per cent of the net value of the business on 12 February 1948; this compensation to be increased by an amount corresponding to all the incidental damage suffered by the Belgian nationals as the result of the acts complained of, including the deprivation of enjoyment of rights and the expenses incurred in the defence of their rights";

the Memorial:

"May it please the Court

I. to adjudge and declare that the measures, acts, decisions and omissions of the organs of the Spanish State described in the present Memorial are contrary to international law and that the Spanish State is under an obligation towards Belgium to make reparation for the consequential damage suffered by Belgian nationals, natural and juristic persons, shareholders in Barcelona Traction;

II. to adjudge and declare that this reparation should, as far as possible, annul all the consequences which these acts contrary to international law have had for the said nationals, and that the Spanish State is therefore under an obligation to secure, if possible, the annulment by administrative means of the adjudication in bankruptcy and of the judicial and other acts resulting therefrom, obtaining for the said injured Belgian nationals all the legal effects which should result for them from this annulment; further, to determine the amount of the compensation to be paid by the Spanish State to the Belgian State by reason of all the incidental damage sustained by Belgian nationals as a result of the acts complained of, including the deprivation of enjoyment of rights and the expenses incurred in the defence of their rights; [p.13]

III. to adjudge and declare, in the event of the annulment of the consequences of the acts complained of proving impossible, that the Spanish State shall be under an obligation to pay to the Belgian State, by way of compensation, a sum equivalent to 88 per cent of the sum of $88,600,000 arrived at in paragraph 379 of the present Memorial, this compensation to be increased by an amount corresponding to all the incidental damage suffered by the said Belgian nationals as the result of the acts complained of, including the deprivation of enjoyment of rights, the expenses incurred in the defence of their rights and the equivalent in capital and interest of the amount of Barcelona Traction bonds held by Belgian nationals and of their other claims on the companies in the group which it was not possible to recover owing to the acts complained of";

in the Reply:

"May it please the Court, rejecting any other submissions of the Spanish State which are broader or to a contrary effect,
to adjuge and declare

(1) that the Application of the Belgian Government is admissible;

(2) that the Spanish State is responsible for the damage sustained by the Belgian State in the person of its nationals, shareholders in Barcelona Traction, as the result of the acts contrary to international law committed by its organs, which led to the total spoliation of the Barcelona Traction group;

(3) that the Spanish State is under an obligation to ensure reparation of the said damage;

(4) that this damage can be assessed at U.S. $78,000,000, representing 88 per cent. of the net value, on 12 February 1948, of the property of which the Barcelona Traction group was despoiled;

(5) that the Spanish State is, in addition, under an obligation to pay, as an all-embracing payment to cover loss of enjoyment, compensatory interest at the rate of 6 per cent. on the said sum of U.S. $78,000,000, from 12 February 1948 to the date of judgment;
(6) that the Spanish State must, in addition, pay a sum provisionally assessed at U.S. $3,800,000 to cover the expenses incurred by the Belgian nationals in defending their rights since 12 February 1948;

(7) that the Spanish State is also liable in the sum of £433,821 representing the amount, in principal and interest, on 4 January 1952, of the Barcelona Traction sterling bonds held by the said nationals, as well as in the sum of U.S. $1,623,127, representing a debt owed to one of the said nationals by a subsidiary company of Barcelona Traction, this sum including lump-sum compensation for loss of profits resulting from the premature termination of a contract;
that there will be due on those sums interest at the rate of 6 per cent, per annum, as from 4 January 1952 so far as concerns the sum of £433,821, and as from 12 February 1948 so far as concerns the sum of U.S. $1,623,127; both up to the date of judgment;

(8) that the Spanish State is also liable to pay interest, by way of interest on a sum due and outstanding, at a rate to be determined by [p.14] reference to the rates generally prevailing, on the amount of compensation awarded, from the date of the Court's decision fixing such compensation up to the date of payment;

(9) in the alternative to submissions (4) to (6) above, that the amount of the compensation due to the Belgian State shall be established by means of an expert enquiry to be ordered by the Court; and to place on record that the Belgian Government reserves its right to submit in the course of the proceedings such observations as it may deem advisable concerning the object and methods of such measure of investigation;

(10) and, should the Court consider that it cannot, without an expert enquiry, decide the final amount of the compensation due to the Belgian State, have regard to the considerable magnitude of the damage caused and make an immediate award of provisional compensation, on account of the compensation to be determined after receiving the expert opinion, the amount of such provisional compensation being left to the discretion of the Court."

On behalf of the Spanish Government, in the Counter-Memorial:

"May it please the Court to adjudge and declare

I. that the Belgian claim which, throughout the diplomatic correspondence and in the first Application submitted to the Court, has always been a claim with a view to the protection of the Barcelona Traction company, has not changed its character in the second Application, whatever the apparent modifications introduced into it;

that even if the true subject of the Belgian claim were, not the Barcelona Traction company, but those whom the Belgian Government characterizes on some occasions as 'Belgian shareholders' and on other occasions as 'Belgian interests' in that company, and the damage allegedly sustained by those 'shareholders' or 'interests', it would still remain true that the Belgian Government has not validly proved either that the shares of the company in question belonged on the material dates to 'Belgian shareholders', or, moreover, that there is in the end, in the case submitted to the Court, a preponderance of genuine 'Belgian interests';

that even if the Belgian claim effectively had as its beneficiaries alleged 'shareholders' of Barcelona Traction who were 'Belgian', or yet again alleged genuine 'Belgian interests' of the magnitude which is attributed to them, the general principles of international law governing this matter, confirmed by practice which knows of no exception, do not recognize that the national State of shareholders or 'interests', whatever their number or magnitude, may make a claim on their behalf in reliance on allegedly unlawful damage sustained by the company, which possesses the nationality of a third State;

that the Belgian Government therefore lacks jus standi in the present case;

II. that a rule of general international law, confirmed both by judicial precedents and the teachings of publicists, and reiterated in Article 3 of the Treaty of Conciliation, Judicial Settlement and Arbitration of 19 July 1927 between Spain and Belgium, requires that private persons [p.15] allegedly injured by a measure contrary to international law should have used and exhausted the remedies and means of redress provided by the internal legal order before diplomatic, and above all judicial, protection may be exercised on their behalf;

that the applicability of this rule to the present case has not been disputed and that the prior requirement which it lays down has not been satisfied;

III. that the organic machinery for financing the Barcelona Traction undertaking, as conceived from its creation and constantly applied thereafter, placed it in a permanent state of latent bankruptcy, and that the constitutional structure of the group and the relationship between its members were used as the instrument for manifold and ceaseless operations to the detriment both of the interests of the creditors and of the economy and law of Spain, the country in which the undertaking was to carry on all its business;

that these same facts led, on the part of the undertaking, to an attitude towards the Spanish authorities which could not but provoke a fully justified refusal to give effect to the currency applications made to the Spanish Government;

that the bankruptcy declaration of 12 February 1948, the natural outcome of the conduct of the undertaking, and the bankruptcy proceedings which ensued, were in all respects in conformity with the provisions of Spanish legislation on the matter; and that moreover these provisions are comparable with those of other statutory systems, in particular Bel-gian legislation itself;

that the complaint of usurpation of jurisdiction is not well founded where the bankruptcy of a foreign company is connected in any way with the territorial jurisdiction of the State, that being certainly so in the present case;

that the Spanish judicial authorities cannot be accused of either one or more denials of justice in the proper sense of the term, Barcelona Traction never having been denied access to the Spanish courts and the judicial decisions on its applications and appeals never having suffered unjustified or unreasonable delays; nor is it possible to detect in the conduct of the Spanish authorities the elements of some breach of international law other than a denial of justice;

that the claim for reparation, the very principle of which is disputed by the Spanish Government, is moreover, having regard to the circumstances of the case, an abuse of the right of diplomatic protection in connection with which the Spanish Government waives none of its possible rights;

IV. that, therefore, the Belgian claim is dismissed as inadmissible or, if not, as unfounded";

in the Rejoinder:

"May it please the Court to adjudge and declare

that the claim of the Belgian Government is declared inadmissible or, if not, unfounded."

In the course of the oral proceedings, the following text was presented as final submissions [p.16]

on behalf of the Belgian Government,

after the hearing of 9 July 1969:

"1. Whereas the Court stated on page 9 of its Judgment of 24 July 1964 that 'The Application of the Belgian Government of 19 June 1962 seeks reparation for damage claimed to have been caused to a number of Belgian nationals, said to be shareholders in the Barcelona Traction, Light and Power Company, Limited, a company under Canadian law, by the conduct, alleged to have been contrary to international law, of various organs of the Spanish State in relation to that company and to other companies of its group';
Whereas it was therefore manifestly wrong of the Spanish Government, in the submissions in the Counter-Memorial and in the oral arguments of its counsel, to persist in the contention that the object of the Belgian claim is to protect the Barcelona Traction company;

2. Whereas Barcelona Traction was adjudicated bankrupt in a judgment rendered by the court of Reus, in Spain, on 12 February 1948;

3. Whereas that holding company was on that date in a perfectly sound financial situation, as were its subsidiaries, Canadian or Spanish companies having their business in Spain;

4. Whereas, however, the Spanish Civil War and the Second World War had, from 1936 to 1944, prevented Barcelona Traction from being able to receive, from its subsidiaries operating in Spain, the foreign currency necessary for the service of the sterling loans issued by it for the financing of the group's investments in Spain;

5. Whereas, in order to remedy this situation, those in control of Barcelona Traction agreed with the bondholders in 1945, despite the opposition of the March group, to a plan of compromise, which was approved by the trustee and by the competent Canadian court; and whereas its implementation was rendered impossible as a result of the opposition of the Spanish exchange authorities, even though the method of financing finally proposed no longer involved any sacrifice of foreign currency whatever for the Spanish economy;

6. Whereas, using this situation as a pretext, the March group, which in the meantime had made further considerable purchases of bonds, sought and obtained the judgment adjudicating Barcelona Traction bankrupt;

7. Whereas the bankruptcy proceedings were conducted in such a manner as to lead to the sale to the March group, which took place on 4 January 1952, of all the assets of the bankrupt company, far exceeding in value its liabilities, in consideration of the assumption by the purchaser itself of solely the bonded debt, which, by new purchases, it had concentrated into its own hands to the extent of approximately 85 per cent., while the cash price paid to the trustees in bankruptcy, 10,000,000 pesetas— approximately $250,000—, being insufficient to cover the bankruptcy costs, did not allow them to pass anything to the bankrupt company or its shareholders, or even to pay its unsecured creditors;

8. Whereas the accusations of fraud made by the Spanish Government against the Barcelona Traction company and the allegation that that company was in a permanent state of latent bankruptcy are devoid of all [p.17]relevance to the case and, furthermore, are entirely unfounded;

9. Whereas the acts and omissions giving rise to the responsibility of the Spanish Government are attributed by the Belgian Government to certain administrative authorities, on the one hand,' and to certain judicial authorities, on the other hand;
Whereas it is apparent when those acts and omissions are examined as a whole that, apart from the defects proper to each, they converged towards one common result, namely the diversion of the bankruptcy procedure from its statutory purposes to the forced transfer, without compensation, of the undertakings of the Barcelona Traction group to the benefit of a private Spanish group, the March group;

I
Abuse of rights, arbitrary and discriminatory attitude of certain adminiustrative authorities

Considering that the Spanish administrative authorities behaved in an improper, arbitrary and discriminatory manner towards Barcelona Traction and its shareholders, in that, with the purpose of facilitating the transfer of control over the property of the Barcelona Traction group from Belgian hands into the hands of a private Spanish group, they in particular—

(a) frustrated, in October and December 1946, the implementation of the third method for financing the plan of compromise, by refusing to authorize Ebro, a Canadian company with residence in Spain, to pay 64,000,000 pesetas in the national currency to Spanish residents on behalf of Barcelona Traction, a non-resident company, so that the latter might redeem its peseta bonds circulating in Spain, despite the fact that Ebro continued uninterruptedly to be granted periodical authorization to pay the interest on those same bonds up to the time of the bankruptcy;

(b) on the other hand, accepted that Juan March, a Spanish citizen manifestly resident in Spain, should purchase considerable quantities of Barcelona Traction sterling bonds abroad;

(c) made improper use of an international enquiry, from which the Belgian Government was excluded, by gravely distorting the purport of the conclusions of the Committee of Experts, to whom they attributed the finding of irregularities of all kinds such as to entail severe penalties for the Barcelona Traction group, which enabled the trustees in bankruptcy, at March's instigation, to bring about the premature sale at a ridiculously low price of the assets of the Barcelona Traction group and their purchase by the March group thanks to the granting of all the necessary exchange authorizations;

II

Usurpation of jurisdiction

Considering that the Spanish courts, in agreeing to entertain the bankruptcy of Barcelona Traction, a company under Canadian law with its registered office in Toronto, having neither registered office nor commer [p.18]cial establishment in Spain, nor possessing any property or carrying on any business there, usurped a power of jurisdiction which was not theirs in international law;

Considering that the territorial limits of acts of sovereignty were patently disregarded in the measures of enforcement taken in respect of property situated outside Spanish territory without the concurrence of the competent foreign authorities;

Considering that there was, namely, conferred upon the bankruptcy authorities, through the artificial device of mediate and constructive civil possession, the power to exercise in Spain the rights attaching to the shares located in Canada of several subsidiary and sub-subsidiary com-panies on which, with the approval of the Spanish judicial authorities, they relied for the purpose of replacing the directors of those companies, modifying their terms of association, and cancelling their regularly issued shares and replacing them with others which they had printed in Spain and delivered to Fecsa at the time of the sale of the bankrupt company's property, without there having been any effort to obtain possession of the real shares in a regular way;
Considering that that disregard is the more flagrant in that three of the subsidiaries were companies under Canadian law with their registered offices in Canada and that the bankruptcy authorities purported, with the approval of the Spanish judicial authorities, to transform two of them into Spanish companies, whereas such alteration is not permitted by the law governing the status of those companies;

III


Denials of justice Lato Sensu

Considering that a large number of decisions of the Spanish courts are vitiated by gross and manifest error in the application of Spanish law, by arbitrariness or discrimination, constituting in international law denials of justice lato sensu;

Considering that in particular—

(1) The Spanish courts agreed to entertain the bankruptcy of Barcelona Traction in flagrant breach of the applicable provisions of Spanish law, which do not permit that a foreign debtor should be adjudged bankrupt if that debtor does not have his domicile, or at least an establishment, in Spanish territory;

(2) Those same courts adjudged Barcelona Traction bankrupt whereas that company was neither in a state of insolvency nor in a state of final, general and complete cessation of payments and had not ceased its payments in Spain, this being a manifest breach of the applicable statutory provisions of Spanish law, in particular Article 876 of the 1885 Commercial Code;

(3) The judgment of 12 February 1948 failed to order the publication of the bankruptcy by announcement in the place of domicile of the bankrupt, which constitutes a flagrant breach of Article 1044 (5) of the 1829 Commercial Code;

(4) The decisions failing to respect the separate estates of Barcelona Traction's subsidiaries and sub-subsidiaries, in that they extended to their property the attachment arising out of the bankruptcy of the parent [p.19] company, and thus disregarded their distinct legal personalities, on the sole ground that all their shares belonged to Barcelona Traction or one of its subsidiaries, had no legal basis in Spanish law, were purely arbitrary and in any event constitute a flagrant breach of Article 35 of the Civil Code, Articles 116 and 174 of the 1885 Commercial Code (so far as the Spanish companies are concerned) and Article 15 of the same Code (so far as the Canadian companies are concerned), as well as of Article 1334 of the Civil Procedure Code;

If the estates of the subsidiaries and sub-subsidiaries could have been included in that of Barcelona Traction—quod non—, it would have been necessary to apply to that company the special r!!!egime established by the imperative provisions of Articles 930 et seq. of the 1885 Commercial Code and the Acts of 9 April 1904 and 2 January 1915 for the event that public-utility companies cease payment, and this was not done;

(5) The judicial decisions which conferred on the bankruptcy authorities the fictitious possession (termed "mediate and constructive civil possession") of the shares of certain subsidiary and sub-subsidiary companies have no statutory basis in Spanish bankruptcy law and were purely arbitrary; they comprise moreover a flagrant breach not only of the general principle recognized in the Spanish as in the majority of other legal systems to the effect that no person may exercise the rights embodied in negotiable securities without having at his disposal the securities themselves but also of Articles 1334 and 1351 of the Civil Procedure Code and Article 1046 of the 1829 Commercial Code, which require the bankruptcy authorities to proceed to the material apprehension of the bankrupt's property;

(6) The bestowal on the commissioner by the bankruptcy judgment of power to proceed to the dismissal, removal or appointment of members of the staff, employees and management, of the companies all of whose shares belonged to Barcelona Traction or one of its subsidiaries had no statutory basis in Spanish law and constituted a gross violation of the statutory provisions referred to under (4), first sub-paragraph, above and also of Article 1045 of the 1829 Commercial Code;

(7) The Spanish courts approved or tolerated the action of the trustees in setting themselves up as a purported general meeting of the two Canadian subsidiaries and in transforming them, in that capacity, into companies under Spanish law, thus gravely disregarding the rule embodied in Article 15 of the 1885 Commercial Code to the effect that the status and internal functioning of foreign companies shall be governed in Spain by the law under which they were incorporated;

(8) The Spanish courts approved or tolerated the action of the trustees in setting themselves up as purported general meetings and modifying, in that capacity, the terms of association of the Ebro, Catalonian Land, Union Eléctrica de Cataluña, Electricista Catalana, Barcelonesa and Saltos del Segre companies, cancelling their shares and issuing new shares; they thus committed a manifest breach of Article 15 of the 1885 Commercial Code (so far as the two Canadian companies were concerned) and Articles 547 et seq. of the same code, which authorize the issue of duplicates only in the circumstances they specify; they also gravely disregarded the clauses of the trust deeds concerning voting-rights, in [p.20]flagrant contempt of the undisputed rule of Spanish law to the effect that acts performed and agreements concluded validly by the bankrupt before the date of the cessation of payments as determined in the judicial decisions shall retain their effects and their binding force in respect of the bankruptcy authorities (Articles 878 et seq. of the 1885 Commercial Code);

(9) The Spanish courts decided at one and the same time to ignore the separate legal personalities of the subsidiary and sub-subsidiary companies (so as to justify the attachment of their property in Spain and their inclusion in the bankrupt estate) and implicitly but indubitably to recognize those same personalities by the conferring of fictitious possession of their shares on the bankruptcy authorities, thus giving decisions which were vitiated by an obvious self-contradiction revealing their arbitrary and discriminatory nature;

(10) The general meeting of creditors of 19 September 1949 convened for the purpose of appointing the trustees was, with the approval of the Spanish judicial authorities, held in flagrant breach of Articles 300 and 1342 of the Civil Procedure Code, and 1044 (3), 1060, 1061 and 1063 of the 1829 Commercial Code, in that (a) it was not convened on cognizance of the list of creditors; (b). when that list was prepared, it was not drawn up on the basis of particulars from the balance-sheet or the books and documents of the bankrupt company, which books and documents were not, as the Spanish Government itself admits, in the possession of the commissioner on 8 October 1949, while the judicial authorities had not at any time sent letters rogatory to Toronto, Canada, with the request that they be put at his disposal ;

(11) By authorizing the sale of the property of the bankrupt company when the adjudication in bankruptcy had not acquired irrevocability and while the proceedings were suspended, the Spanish courts flagrantly violated Articles 919, 1167, 1319 and 1331 of the Civil Procedure Code and the general principles of the right of defence;

In so far as that authorization was based on the allegedly perishable nature of the property to be sold, it constituted a serious disregard of Article 1055 of the 1829 Commercial Code and Article 1354 of the Civil Procedure Code, which articles allow the sale only of movable property which cannot be kept without deteriorating or spoiling; even supposing that those provisions could be applied in general to the property of Barcelona Traction, its subsidiaries and sub-subsidiaries—quod non—, there would still have been a gross and flagrant violation of them, inasmuch as that property as a whole was obviously not in any imminent danger of serious depreciation ; indeed thé only dangers advanced by the trustees, namely those arising out of the threats' of prosecution contained in the Joint Statement, had not taken shape, either by the day on which authorization to sell was requested or by the day of the sale, in any proceedings or demand by the competent authorities and did not ever materialize, except to an insignificant extent;

The only penalty which the undertakings eventually had to bear, 15 months after the sale, was that relating to the currency offence, which had occasioned an embargo for a much higher sum as early as April 1948;

(12) The authorization to sell and the sale, in so far as they related to the shares of the subsidiary and sub-subsidiary companies without delivery of the certificates, constituted a flagrant violation of Articles [p.21] 1461 and 1462 of the Spanish Civil Code, which require delivery of the thing sold, seeing that the certificates delivered to the successful bidder had not been properly issued and were consequently without legal value; if the authorization to sell and the sale had applied, as the respondent Government wrongly maintains, to the rights attaching to the shares and bonds or to the bankrupt company's power of domination over its subsidiaries, those rights ought to have been the subject of a joint valuation, on pain of flagrant violation of Articles 1084 to 1089 of the 1829 Commercial Code and Article 1358 of the Civil Procedure Code: in any event, it was in flagrant violation of these last-named provisions that the commissioner fixed an exaggeratedly low reserve price on the basis of a unilateral expert opinion which, through the effect of the General Conditions of Sale, allowed the March group to acquire the auctioned property at that reserve price;

(13) By approving the General Conditions of Sale on the very day on which they were submitted to them and then dismissing the proceedings instituted to contest those conditions, the judicial authorities committed a flagrant violation of numerous ordre public provisions of Spanish law; thus, in particular, the General Conditions of Sale—

(a) provided for the payment of the bondholder creditors, an operation which, under Article 1322 of the Civil Procedure Code, falls under the fourth section of the bankruptcy, whereas that section was suspended as a result of the effects attributed to the Boter motion contesting jurisdiction, no exemption from that suspension having been applied for or obtained in pursuance of the second paragraph of Article 114 of the Civil Procedure Code;

(b) provided for the payment of the debts owing on the bonds before they had been approved and ranked by a general meeting of the creditors on the recommendation of the trustees, contrary to Articles 1101 to 1109 of the 1829 Commercial Code and to Articles 1266 to 1274, 1286 and 1378 of the Civil Procedure Code;

(c) in disregard of Articles 1236, 1240, 1512 and 1513 of the Civil Procedure Code, did not require the price to be lodged or deposited at the Court's disposal;

(d) conferred on the trustees power to recognize, determine and declare effective the rights attaching to the bonds, in disregard, on the one hand, of Articles 1101 to 1109 of the 1829 Commercial Code and of Articles 1266 to 1274 of the Civil Procedure Code, which reserve such rights for the general meeting of creditors under the supervision of the judge, and, on the other, of Articles 1445 and 1449 of the Civil Code, which lay down that the purchase price must be a definite sum and may not be left to the arbitrary decision of one of the contracting parties;

(e) in disregard of Articles 1291 to 1294 of the Civil Procedure Code, substituted the successful bidder for the trustees in respect of the payment of the debts owing on the bonds, whilst, in violation of the general principles applicable to novation, replacing the security for those debts, consisting, pursuant to the trust deeds, of shares and bonds issued by the subsidiary and sub-subsidiary companies, with the deposit of a certain sum with a bank or with a mere banker's guarantee limited to three years; [p.22]

(f) delegated to a third party the function of paying certain debts, in disregard of Articles 1291 and 1292 of the Civil Procedure Code, which define the functions of the trustees in this field and do not allow of any delegation;
(g) ordered the payment of the debts owing on the bonds in sterling, whereas a forced execution may only be carried out in local currency and in the case of bankruptcy the various operations which it includes require the conversion of the debts into local currency on the day of the judgment adjudicating bankruptcy, as is to be inferred from Articles 883 and 884 of the 1885 Commercial Code;

IV

Denials of justice Stricto Sensu

Considering that in the course of the bankruptcy proceedings the rights of the defence were seriously disregarded; that in particular—

(a) the Reus court, in adjudicating Barcelona Traction bankrupt on an ex parte petition, inserted in its judgment provisions which went far beyond finding the purported insolvency of or a general cessation of payments by the bankrupt company, the only finding, in addition to one on the capacity of the petitioners, that it was open to it to make in such proceedings;
This disregard of the rights of the defence was particularly flagrant in respect of the subsidiary companies, whose property was ordered by the court to be attached without their having been summonsed and without their having been adjudicated bankrupt;

(b) the subsidiary companies that were thus directly affected by the judgment of 12 February 1948 nevertheless had their applications to set aside the order for attachment which concerned them rejected as inadmissible on the grounds of lack of capacity;

(c) the pursuit of those remedies and the introduction of any other such proceedings were also made impossible for the subsidiary companies by the discontinuances effected each time by the solicitors appointed to replace the original solicitors by the new boards of directors directly or indirectly involved; these changes of solicitors and discontinuances were effected by the new boards of directors by virtue of authority conferred upon them by the interim receiver simultaneously with their appointment;

(d) the proceedings for relief brought by those in control of the subsidiary companies who had been dismissed by the commissioner were likewise held inadmissible by the Reus court when they sought to avail themselves of the specific provisions of Article 1363 of the Civil Procedure Code, which provide for proceedings to reverse decisions taken by the commissioner in bankruptcy;

(e) there was discrimination on the part of the first special judge when he refused to admit as a party to the bankruptcy the Canadian National Trust Company, Limited, trustee for the bankrupt company's two sterling loans, even though it relied upon the security of the mortgage which had been given to it by Ebro, whereas at the same time he admitted to the proceedings the Bondholders' Committee [p.23]appointed by Juan March, although National Trust and the Committee derived their powers from the same trust deeds;

(f) the complaints against the General Conditions of Sale could be neither amplified nor heard because the order which had approved the General Conditions of Sale was deemed to be one of mere routine; Considering that many years elapsed after the bankruptcy judgment and even after the ruinous sale of the property of the Barcelona Traction group without either the bankrupt company or those co-interested with it having had an opportunity to be heard on the numerous complaints put forward against the bankruptcy judgment and related decisions in the opposition of 18 June 1948 and in various other applications for relief;

Considering that those delays were caused by the motion contesting jurisdiction fraudulently lodged by a confederate of the petitioners in bankruptcy and by incidental proceedings instituted by other men of straw of the March group, which were, like the motion contesting jurisdiction, regularly admitted by the various courts;

Considering that both general international law and the Spanish-Belgian Treaty of 1927 regard such delays as equivalent to the denial of a hearing;

Considering that the manifest injustice resulting from the movement of the proceedings towards the sale, whilst the actions contesting the bankruptcy judgment and even the jurisdiction of the Spanish courts remained suspended, was brought about by two judgments delivered by the same chamber of the Barcelona court of appeal on the same day, 7 June 1949: in one of them it confirmed the admission, with two effects, of the Boter appeal from the judgment of the special judge rejecting his motion contesting jurisdiction, whereas in the other it reduced the suspensive effect granted to that same appeal by excluding from the suspension the calling of the general meeting of creditors for the purpose of appointing the trustees in bankruptcy;

V

Damage and Reparation

Considering that the acts and omissions contrary to international law attributed to the organs of the Spanish State had the effect of despoiling the Barcelona Traction company of the whole of its property and of depriving it of the very objects of its activity, and thus rendered it practically defunct;

Considering that Belgian nationals, natural and juristic persons, shareholders in Barcelona Traction, in which they occupied a majority and controlling position, and in particular the Sidro company, the owner of more than 75 per cent, of the registered capital, on this account suffered direct and immediate injury to their interests and rights, which were voided of all value and effectiveness;

Considering that the reparation due to the Belgian State from the Spanish State, as a result of the internationally unlawful acts for which the latter State is responsible, must be complete and must, so far as possible, reflect the damage suffered by its nationals whose case the Belgian State has taken up; and that, since restitutio in integrum is, in the circumstances [p.24]of the case, practically and legally impossible, the reparation of the damage suffered can only take place in the form of an all-embracing pecuniary idemnity, in accordance with the provisions of the Spanish-Belgian Treaty of 1927 and with the rules of general international law;

Considering that in the instant case the amount of the indemnity must be fixed by taking as a basis the net value of the Barcelona Traction company's property at the time of its adjudication in bankruptcy, expressed in a currency which has remained stable, namely the United States dollar;

Considering that the value of that property must be determined by the replacement cost of the subsidiary and sub-subsidiary companies' plant for the production and distribution of electricity at 12 February 1948, as that cost was calculated by the Ebro company's engineers in 1946;

Considering that, according to those calculations, and after deduction for depreciation through wear and tear, the value of the plant was at that date U.S. $116,220,000; from this amount there must be deducted the principal of Barcelona Traction's bonded debt and the interest that had fallen due thereon, that is to say, U.S. $27,619,018, which leaves a net value of about U.S. $88,600,000, this result being confirmed—

(1) by the study submitted on 5 February 1949 and on behalf of Ebro to the Special Technical Office for the Regulation and Distribution of Electricity (Catalonian region) (Belgian New Document No. 50);

(2) by capitalization of the 1947 profits;

(3) by the profits made by Fecsa in 1956—the first year after 1948 in which the position of electricity companies was fully stabilized and the last year before the changes made in the undertaking by Fecsa constituted an obstacle to any useful comparison;

(4) by the reports of the experts consulted by the Belgian Government;

Considering that the compensation due to the Belgian Government must be estimated, in the first place, at the percentage of such net value corresponding to the participation of Belgian nationals in the capital of the Barcelona Traction company, namely 88 per cent.;

Considering that on the critical dates of the bankruptcy judgment and the filing of the Application, the capital of Barcelona Traction was represented by 1,798,854 shares, partly bearer and partly registered; that on 12 February 1948 Sidro owned 1,012,688 registered shares and 349,905 bearer shares; that other Belgian nationals owned 420 registered shares and at least 244,832 bearer shares; that 1,607,845 shares, constituting 89.3 per cent. of the company's capital, were thus on that date in. Belgian hands; that on 14 June 1962 Sidro owned 1,354,514 registered shares and 31,228 bearer shares; that other Belgian nationals owned 2,388 registered shares and at least 200,000 bearer shares; and that 1,588,130 shares, constituting 88 per cent. of the company's capital, were thus on that date in Belgian hands;

Considering that the compensation claimed must in addition cover all incidental damage suffered by the said Belgian nationals as a result of the acts complained of, including the deprivation of enjoyment of rights, the expenses incurred in the defence of their rights and the equivalent, in capital and interest, of the amount of the Barcelona Traction bonds held by Belgian nationals, and of their other claims on the companies in the [p.25]group which it was not possible to recover owing to the acts complained of;

Considering that the amount of such compensation, due to the Belgian State on account of acts contrary to international law attributable to the Spanish State, cannot be affected by the latter's purported charges against the private persons involved, those charges furthermore not having formed the subject of any counterclaim before the Court;

VI

Objection derived from the alleged lack of Jus Standi of the Belgian Government

Considering that in its Judgment of 24 July 1964 the Court decided to join to the merits the third preliminary objection raised by the Spanish Government;

Considering that the respondent Government wrongly denies to the Belgian Government jus standi in the present proceedings;

Considering that the object of the Belgian Government's Application of 14 June 1962 is reparation for the damage caused to a certain number of its nationals, natural and juristic persons, in their capacity as shareholders in the Barcelona Traction, Light and Power Company, Limited, by the conduct contrary to international law of various organs of the Spanish State towards that company and various other companies in its group;

Considering that the Belgian Government has established that 88 per cent. of Barcelona Traction's capital was in Belgian hands on the critical dates of 12 February 1948 and 14 June 1962 and so remained continuously between those dates, that a single Belgian company, Sidro, possessed more than 75 per cent. of the shares; that the Belgian nationality of that company and the effectiveness of its nationality have not been challenged by the Spanish Government;

Considering that the fact that the Barcelona Traction registered shares possessed by Sidro were registered in Canada in the name of American nominees does not affect their Belgian character; that in this case, under the applicable systems of statutory law, the nominee could exercise the rights attaching to the shares entered in its name only as Sidro's agent;

Considering that the preponderence of Belgian interests in the Barcelona Traction company was well known to the Spanish authorities at the different periods in which the conduct complained of against them occurred, and has been explicitly admitted by them on more than one occasion;

Considering that the diplomatic protection from which the company benefited for a certain time on the part of its national Government ceased in 1952, well before the filing of the Belgian Application, and has never subsequently been resumed;

Considering that by depriving the organs appointed by the Barcelona Traction shareholders under the company's terms of association of their power of control in respect of its subsidiaries, which removed from the company the very objects of its activities, and by depriving it of the whole of its property, the acts and omissions contrary to international law attributed to the Spanish authorities rendered the company practically defunct and directly and immediately injured the rights and interests [p.26]attaching to the legal situation of shareholder as it is recognized by international law; that they thus caused serious damage to the company's Belgian shareholders and voided the rights which they possessed in that capacity of all useful content;

Considering that in the absence of reparation to the company for the damage inflicted on it, from which they would have benefited at the same time as itself, the Belgian shareholders of Barcelona Traction thus have separate and independent rights and interests to assert; that they did in fact have to take the initiative for and bear the cost of all the proceedings brought through the company's organs to seek relief in the Spanish courts; that Sidro and other Belgian shareholders, after the sale of Barcelona Traction's property, themselves brought actions the dismissal of which is complained of by the Belgian Government as constituting a denial of Justice;

Considering that under the general principles of international law in this field the Belgian Government has jus standi to claim through international judicial proceedings reparation for the damage thus caused to its nationals by the internationally unlawful acts and omissions attributed to the Spanish State;

VII

Objection of Non-Exhaustion of Local Remedies

Considering that no real difference has emerged between the Parties as to the scope and significance of the rule of international law embodied in Article 3 of the Treaty of Conciliation, Judicial Settlement and Arbitration concluded between Spain and Belgium on 19 July 1927, which makes resort to the procedures provided for in that Treaty dependant on the prior use, until a judgment with final effect has been pronounced, of the normal means of redress which are available and which offer genuine possibilities of effectiveness within the limitation of a reasonable time;

Considering that in this case the Respondent itself estimates at 2,736 the number of orders alone made in the case by the Spanish courts as of the date of the Belgian Application;

Considering that in addition the pleadings refer to more than 30 decisions by the Supreme Court;
Considering that it is not contended that the remedies as a whole of which Barcelona Traction and its co-interested parties availed themselves and which gave rise to those decisions were inadequate or were not pursued to the point of exhaustion;

Considering that this circumstance suffices as a bar to the possibility of the fourth objection being upheld as setting aside the Belgian claim;

Considering that the only complaints which could be set aside are those in respect of which the Spanish Government proved failure to make use of means of redress or the insufficiency of those used;
Considering that such proof has not been supplied;

1. With Respect to the Complaints Against the Acts of the Administrative Authorities

Considering that the Spanish Government is wrong in contending that the Belgian complaint concerning the decisions of October and [p.27] December 1946 referred to under I (a) above is not admissible on account of Barcelona Traction's failure to exercise against them the remedies of appeal to higher authority and contentious administrative proceedings;

Considering that the remedy of appeal to higher authority was inconceivable in this case, being by definition an appeal which may be made from a decision by one administrative authority to another hierarchically superior authority namely the Minister, whereas the decisions complained of were taken with the co-operation and approval of the Minister himself, and even brought to the knowledge of those concerned by the Minister at the same time as by the competent administrative authority;

Considering that it was likewise not possible to envisage contentious administrative proceedings against a decision which patently did not fall within the ambit of Article 1 of the Act of 22 June 1894, which recognizes such a remedy only against administrative decisions emanating from administrative authorities in the exercise of their regulated powers and "infringing a right of an administrative character previously established in favour of the applicant by an Act, a regulation or some other administrative provision", which requirements were patently not satisfied in this case;

2. With Respect to the Complaint concerning the Reus Court's Lack of Jurisdiction to Declare the Bankruptcy of Barcelona Traction

Considering that the Spanish Government is wrong in seeking to derive an argument from the fact that Barcelona Traction and its co-interested parties supposedly failed to challenge the jurisdiction of the Reus court by means of a motion contesting its competence, and allowed the time-limit for entering opposition to expire without having challenged that jurisdiction;

Considering that in fact a motion contesting jurisdiction is not at all the same thing as a motion contesting competence ratione materiae and may properly be presented cumulatively with the case on the merits;

Considering that the bankrupt company contested jurisdiction at the head of the complaints set out in its opposition plea of 18 June 1948;

Considering that it complained again of lack of jurisdiction in its application of 5 July 1948 for a declaration of nullity and in its pleading of 3 September 1948 in which it confirmed its opposition to the bankruptcy judgment;

Considering that National Trust submitted a formal motion contesting jurisdiction in its application of 27 November 1948 for admission to the bankruptcy proceedings;

Considering that Barcelona Traction, after having as early as 23 April 1949 entered an appearance in the proceedings concerning the Boter motion contesting jurisdiction, formally declared its adherence to that motion by a procedural document of 11 April 1953;

Considering that the question of jurisdiction being a matter of ordre public, as is the question of competence ratione materiae, the complaint of belatedness could not be upheld, even in the event of the expiry of the allegedly applicable time-limit for entering a plea of opposition;

3. With Respect to the Complaints concerning the Bankruptcy Judgment and Related Decisions

Considering that the Spanish Government is wrong in contending that the said decisions were not attacked by adequate remedies pursued to [p.28] the point of exhaustion or for a reasonable length of time;

Considering that in fact, as early as 16 February 1948, the bankruptcy judgment was attacked by an application for its setting aside on the part of the subsidiary companies, Ebro and Barcelonesa;
Considering that while those companies admittedly confined their applications for redress to the parts of the judgment which gave them grounds for complaint, the said remedies were nonetheless adequate and they were brought to nought in circumstances which are themselves the subject of a complaint which has been set out above;

Considering that, contrary to what is asserted by the Spanish Government, the bankrupt company itself entered a plea of opposition to the judgment by a procedural document of 18 June 1948, confirmed on 3 September 1948;

Considering that it is idle for the Spanish Government to criticize the summary character of this procedural document, while the suspension decreed by the special judge on account of the Boter motion contesting jurisdiction prevented the party entering opposition from filing, pursuant to Article 326 of the Civil Procedure Code, the additional pleading developing its case;

Considering that likewise there can be no question of belatedness, since only publication of the bankruptcy at the domicile of the bankrupt company could have caused the time-limit for entering opposition to begin to run, and no such publication took place;

Considering that the bankruptcy judgment and the related decisions were moreover also attacked in the incidental application for a declaration of nullity submitted by Barcelona Traction on 5 July 1948 and amplified on 31 July 1948;

4. With Respect to the Complaints concerning the Blocking of the Remedies

Considering that the various decisions which instituted and prolonged the suspension of the first section of the bankruptcy proceedings were attacked on various occasions by numerous proceedings taken by Barcelona Traction, beginning with the incidental application for a declaration of nullity which it submitted on 5 July 1948;

5. With Respect to the Complaint concerning the Dismissal of the Officers of the Subsidiary Companies by Order of the Commissioner

Considering that this measure was also attacked by applications for its setting aside on the part of the persons concerned, which were quite improperly declared inadmissible; and that the proceedings seeking redress against those decisions were adjourned until 1963;

6. With Respect to the Failure to Observe the No-Action Clause

Considering that this clause was explicitly referred to by National Trust in its application of 27 November 1948 for admission to the proceedings;

7. With Respect to the Measures Preparatory to the Sale and the Sale

Considering that the other side, while implicitly admitting that adequate proceedings were taken to attack the appointment of the trustees and the authorization to sell, is wrong in contending that this was supposedly not so in respect of—[p.29]

(1) The failure to draw up a list of creditors prior to the convening of the meeting of creditors for the appointment of the trustees, whereas this defect was complained of in the procedural document attacking the appointment of the trustees and in the application that the sale be declared null and void;

(2) Certain acts and omissions on the part of the trustees, whereas they were referred to in the proceedings taken to attack the authorization to sell and the decision approving the method of unilateral valuation of the assets;

(3) The conditions of sale, whereas they were attacked by Barcelona Traction in an application to set aside and on appeal, in the application of 27 December 1951 for a declaration of nullity containing a formal prayer that the order approving the conditions of sale be declared null and void, and in an application of 28 May 1955 (New Documents submitted by the Belgian Government, 1969, No. 30); the same challenge was expressed by Sidro in its action of 7 February 1953 (New Documents submitted by the Spanish Government, 1969) and by two other Belgian shareholders of Barcelona Traction, Mrs. Mathot and Mr. Duvi-vier, in their application of 26 May 1955 (New Documents submitted by the Belgian Government, 1969, No. 29);

8. With Respect to the Exceptional Remedies

Considering that the Spanish Government is wrong in raising as an objection to the Belgian claim the allegation that Barcelona Traction did not make use of certain exceptional remedies against the bankruptcy judgment, such as application for revision, action for civil liability and criminal proceedings against the judges, and application for a hearing by a party in default;

Considering that the first of these remedies could patently not be contemplated, not only on account of the nature of the bankruptcy judgment, but also because until 1963 there was an opposition outstanding against that Judgment and, superabundantly, because Barcelona Traction, its subsidiaries and co-interested parties would not have been in a position to prove the facts of subornation, violence or fraudulent machination which alone could have entitled such proceedings to be taken;

Considering that the remedies of an action for civil liability and criminal proceedings against the judges were not adequate, since they were not capable of bringing about the annulment or setting aside of the decisions constituting denials of justice;

Considering that similarly the remedy of application for a hearing accorded by Spanish law to a party in default was patently in this case neither available to Barcelona Traction nor adequate;

For These Reasons, and any others which have been adduced by the Belgian Government in the course of the proceedings,

May it please the Court, rejecting any other submissions of the Spanish State which are broader or to a contrary effect,

To uphold the claims of the Belgian Government expressed in the submissions [in] the Reply."[p.30]

The following final submissions were presented

on behalf of the Spanish Government,

at the hearing of 22 July 1969:

"Considering that the Belgian Government has no jus standi in the present case, either for the protection of the Canadian Barcelona Traction company or for the protection of alleged Belgian 'shareholders' of that company;

Considering that the requirements of the exhaustion of local remedies rule have not been satisfied either by the Barcelona Traction company or by its alleged 'shareholders';

Considering that as no violation of an international rule binding on Spain has been established, Spain has not incurred any responsibility vis-à-vis the applicant State on any account; and that, in particular—

(a) Spain is not responsible for any usurpation of jurisdiction on account of the action of its judicial organs;

(b) the Spanish judicial organs have not violated the rules of international law requiring that foreigners be given access to the courts, that a decision be given on their claims and that their proceedings for redress should not be subjected to unjustified delays;

(c) there have been no acts of the Spanish judiciary capable of giving rise to international responsibility on the part of Spain on account of the content of judicial decisions; and
(d) there has not been on the part of the Spanish administrative authorities any violation of an international obligation on account of abuse of rights or discriminatory acts;

Considering that for these reasons, and any others expounded in the written and oral proceedings, the Belgian claims must be deemed to be inadmissible or unfounded;

The Spanish Government presents to the Court its final submissions:

May it please the Court to adjudge and declare that the Belgian Government's claims are dismissed."

***

26. As has been indicated earlier, in opposition to the Belgian Application the Spanish Government advanced four objections of a preliminary nature. In its Judgment of 24 July 1964 the Court rejected the first and second of these (see paragraph 3 above), and decided to join the third and fourth to the merits. The latter were, briefly, to the effect that the Belgian Government lacked capacity to submit any claim in respect of wrongs done to a Canadian company, even if the shareholders were Belgian, and that local remedies available in Spain had not been exhausted.

27. In the subsequent written and oral proceedings the Parties supplied the Court with abundant material and information bearing both on the preliminary objections not decided in 1964 and on the merits of the case. In this connection the Court considers that reference should be made to the unusual length of the present proceedings, which has been due to the [p.31] very long time-limits requested by the Parties for the preparation of their written pleadings and in addition to their repeated requests for an extension of these limits. The Court did not find that it should refuse these requests and thus impose limitations on the Parties in the preparation and presentation of the arguments and evidence which they considered necessary. It nonetheless remains convinced of the fact that it is in the interest of the authority and proper functioning of international justice for cases to be decided without unwarranted delay.

*

28. For the sake of clarity, the Court will briefly recapitulate the claim and identify the entities concerned in it. The claim is presented on behalf of natural and juristic persons, alleged to be Belgian nationals and shareholders in the Barcelona Traction, Light and Power Company, Limited. The submissions of the Belgian Government make it clear that the object of its Application is reparation for damage allegedly caused to these persons by the conduct, said to be contrary to international law, of various organs of the Spanish State towards that company and various other companies in the same group.

29. In the first of its submissions, more specifically in the Counter-Memorial, the Spanish Government contends that the Belgian Application of 1962 seeks, though disguisedly, the same object as the Application of 1958, i.e., the protection of the Barcelona Traction company as such, as a separate corporate entity, and that the claim should in consequence be dismissed. However, in making its new Application, as it has chosen to frame it, the Belgian Government was only exercising the freedom of action of any State to formulate its claim in its own way. The Court is therefore bound to examine the claim in accordance with the explicit content imparted to it by the Belgian Government.

30. The States which the present case principally concerns are Belgium, the national State of the alleged shareholders, Spain, the State whose organs are alleged to have committed the unlawful acts complained of, and Canada, the State under whose laws Barcelona Traction was incorporated and in whose territory it has its registered office ("head office" in the terms of the by-laws of Barcelona Traction).

31. Thus the Court has to deal with a series of problems arising out of a triangular relationship involving the State whose nationals are shareholders in a company incorporated under the laws of another State, in whose territory it has its registered office; the State whose organs are alleged to have committed against the company unlawful acts prejudicial to both it and its shareholders; and the State under whose laws the company is incorporated, and in whose territory it has its registered office.

*[p.32]
32. In these circumstances it is logical that the Court should first address itself to what was originally presented as the subject-matter of the third preliminary objection: namely the question of the right of Belgium to exercise diplomatic protection of Belgian shareholders in a company which is a juristic entity incorporated in Canada, the measures complained of having been taken in relation not to any Belgian national but to the company itself.

33. When a State admits into its territory foreign investments or foreign nationals, whether natural or juristic persons, it is bound to extend to them the protection of the law and assumes obligations concerning the treatment to be afforded them. These obligations, however, are neither absolute nor unqualified. In particular, an essential distinction should be drawn between the obligations of a State towards the international community as a whole, and those arising vis-a-vis another State in the field of diplomatic protection. By their very nature the former are the concern of all States. In view of the importance of the rights involved, all States can be held to have a legal interest in their protection; they are obligations erga omnes.

34. Such obligations derive, for example, in contemporary international law, from the outlawing of acts of aggression, and of genocide, as also from the principles and rules concerning the basic rights of the human person, including protection from slavery and racial discrimination. Some of the corresponding rights of protection have entered into the body of general international law (Reservations to the Convention on the Prevention and Punishment of the Crime of Genocide, Advisory Opinion, I.C.J. Reports 1951, p. 23); others are conferred by international instruments of a universal or quasi-universal character.

35. Obligations the performance of which is the subject of diplomatic protection are not of the same category. It cannot be held, when one such obligation in particular is in question, in a specific case, that all States have a legal interest in its observance. In order to bring a claim in respect of the breach of such an obligation, a State must first establish its right to do so, for the rules on the subject rest on two suppositions:

"The first is that the defendant State has broken an obligation towards the national State in respect of its nationals. The second is that only the party to whom an international obligation is due can bring a claim in respect of its breach." (Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J. Reports 1949, pp. 181-182.)

In the present case it is therefore essential to establish whether the losses allegedly suffered by Belgian shareholders in Barcelona Traction were the consequence of the violation of obligations of which they were the beneficiaries. In other words: has a right of Belgium been violated on account [p.33] of its nationals' having suffered infringement of their rights as shareholders in a company not of Belgian nationality?

36. Thus it is the existence or absence of a right, belonging to Belgium and recognized as such by international law, which is decisive for the problem of Belgium's capacity.

"This right is necessarily limited to intervention [by a State] on behalf of its own nationals because, in the absence of a special agreement, it is the bond of nationality between the State and the individual which alone confers upon the State the right of diplomatic protection, and it is as a part of the function of diplomatic protection that the right to take up a claim and to ensure respect for the rules of international law must be envisaged." (Panevezys-Saldutiskis Railway, Judgment, 1939, P.C.I.J., Series A/B, No. 76, p. 16.)

It follows that the same question is determinant in respect of Spain's responsibility towards Belgium. Responsibility is the necessary corollary of a right. In the absence of any treaty on the subject between the Parties, this essential issue has to be decided in the light of the general rules of diplomatic protection.

*

37. In seeking to determine the law applicable to this case, the Court has to bear in mind the continuous evolution of international law. Diplomatic protection deals with a very sensitive area of international relations, since the interest of a foreign State in the protection of its nationals confronts the rights of the territorial sovereign, a fact of which the general law on the subject has had to take cognizance in order to prevent abuses and friction. From its origins closely linked with international commerce, diplomatic protection has sustained a particular impact from the growth of international economic relations, and at the same time from the profound transformations which have taken place in the economic life of nations. These latter changes have given birth to municipal institutions, which have transcended frontiers and have begun to exercise considerable influence on international relations. One of these phenomena which has a particular bearing on the present case is the corporate entity.

38. In this field international law is called upon to recognize institutions of municipal law that have an important and extensive role in the international field. This does not necessarily imply drawing any analogy between its own institutions and those of municipal law, nor does it amount to making rules of international law dependent upon categories of municipal law. All it means is that international law has had to recognize the corporate entity as an institution created by States in a domain essentially within their domestic jurisdiction. This in turn requires that, whenever legal issues arise concerning the rights of States with regard to the treat [p. 34] ment of companies and shareholders, as to which rights international law has not established its own rules, it has to refer to the relevant rules of municipal law. Consequently, in view of the relevance to the present case of the rights of the corporate entity and its shareholders under municipal law, the Court must devote attention to the nature and interrelation of those rights.

*

39. Seen in historical perspective, the corporate personality represents a development brought about by new and expanding requirements in the economic field, an entity which in particular allows of operation in circumstances which exceed the normal capacity of individuals. As such it has become a powerful factor in the economic life of nations. Of this, municipal law has had to take due account, whence the increasing volume of rules governing the creation and operation of corporate entities, endowed with a specific status. These entities have rights and obligations peculiar to themselves.

40. There is, however, no need to investigate the many different forms of legal entity provided for by the municipal laws of States, because the Court is concerned only with that exemplified by the company involved in the present case: Barcelona Traction—a limited liability company whose capital is represented by shares. There are, indeed, other associations, whatever the name attached to them by municipal legal systems, that do not enjoy independent corporate personality. The legal difference between the two kinds of entity is that for the limited liability company it is the overriding tie of legal personality which is determinant; for the other associations, the continuing autonomy of the several members.

41. Municipal law determines the legal situation not only of such limited liability companies but also of those persons who hold shares in them. Separated from the company by numerous barriers, the shareholder cannot be identified with it. The concept and structure of the company are founded on and determined by a firm distinction between the separate entity of the company and that of the shareholder, each with a distinct set of rights. The separation of property rights as between company and shareholder is an important manifestation of this distinction. So long as the company is in existence the shareholder has no right to the corporate assets.

42. It is a basic characteristic of the corporate structure that the company alone, through its directors or management acting in its name, can take action in respect of matters that are of a corporate character. The underlying justification for this is that, in seeking to serve its own best interests, the company will serve those of the shareholder too. Ordinarily, no individual shareholder can take legal steps, either in the[p.35] name of the company or in his own name. If the shareholders disagree with the decisions taken on behalf of the company they may, in accordance with its articles or the relevant provisions of the law, change them or replace its officers, or take such action as is provided by law. Thus to protect the company against abuse by its management or the majority of shareholders, several municipal legal systems have vested in shareholders (sometimes a particular number is specified) the right to bring an action for the defence of the company, and conferred upon the minority of shareholders certain rights to guard against decisions affecting the rights of the company vis-á-vis its management or controlling shareholders. Nonetheless the shareholders' rights in relation to the company and its assets remain limited, this being, moreover, a corollary of the limited nature of their liability.

43. At this point the Court would recall that in forming a company, its promoters are guided by all the various factors involved, the advantages and disadvantages of which they take into account. So equally does a shareholder, whether he is an original subscriber of capital or a subsequent purchaser of the company's shares from another shareholder. He may be seeking safety of investment, high dividends or capital appreciation— or a combination of two or more of these. Whichever it is, it does not alter the legal status of the corporate entity or affect the rights of the shareholder. In any event he is bound to take account of the risk of reduced dividends, capital depreciation or even loss, resulting from ordinary commercial hazards or from prejudice caused to the company by illegal treatment of some kind.

*

44. Notwithstanding the separate corporate personality, a wrong done to the company frequently causes prejudice to its shareholders. But the mere fact that damage is sustained by both company and shareholder does not imply that both are entitled to claim compensation. Thus no legal conclusion can be drawn from the fact that the same event caused damage simultaneously affecting several natural or juristic persons. Creditors do not have any right to claim compensation from a person who, by wronging their debtor, causes them loss. In such cases, no doubt, the interests of the aggrieved are affected, but not their rights. Thus whenever a shareholder's interests are harmed by an act done to the company, it is to the latter that he must look to institute appropriate action; for although two separate entities may have suffered from the same wrong, it is only one entity whose rights have been infringed.

45. However, it has been argued in the present case that a company represents purely a means of achieving the economic purpose of its members, namely the shareholders, while they themselves constitute in fact the reality behind it. It has furthermore been repeatedly emphasized [p.36] that there exists between a company and its shareholders a relationship describable as a community of destiny. The alleged acts may have been directed at the company and not the shareholders, but only in a formal sense: in reality, company and shareholders are so closely interconnected that prejudicial acts committed against the former necessarily wrong the latter; hence any acts directed against a company can be conceived as directed against its shareholders, because both can be considered in substance, i.e., from the economic viewpoint, identical. Yet even if a company is no more than a means for its shareholders to achieve their economic purpose, so long as it is in esse it enjoys an independent existence. Therefore the interests of the shareholders are both separable and indeed separated from those of the company, so that the possibility of their diverging cannot be denied.

46. It has also been contended that the measures complained of, although taken with respect to Barcelona Traction and causing it direct damage, constituted an unlawful act vis-à-vis Belgium, because they also, though indirectly, caused damage to the Belgian shareholders in Barcelona Traction. This again is merely a different way of presenting the distinction between injury in respect of a right and injury to a simple interest. But, as the Court has indicated, evidence that damage was suffered does not ipso facto justify a diplomatic claim. Persons suffer damage or harm in most varied circumstances. This in itself does not involve the obligation to make reparation. Not a mere interest affected, but solely a right infringed involves responsibility, so that an act directed against and infringing only the company's rights does not involve responsibility towards the shareholders, even if their interests are affected.

47. The situation is different if the act complained of is aimed at the direct rights of the shareholder as such. It is well known that there are rights which municipal law confers upon the latter distinct from those of the company, including the right to any declared dividend, the right to attend and vote at general meetings, the right to share in the residual assets of the company on liquidation. Whenever one of his direct rights is infringed, the shareholder has an independent right of action. On this there is no disagreement between the Parties. But a distinction must be drawn between a direct infringement of the shareholder's rights, and difficulties or financial losses to which he may be exposed as the result of the situation of the company.

48. The Belgian Government claims that shareholders of Belgian nationality suffered damage in consequence of unlawful acts of the Spanish authorities and, in particular, that the Barcelona Traction shares, though they did not cease to exist, were emptied of all real economic content. It accordingly contends that the shareholders had an [p.37] independent right to redress, notwithstanding the fact that the acts complained of were directed against the company as such. Thus the legal issue is reducible to the question of whether it is legitimate to identify an attack on company rights, resulting in damage to shareholders, with the violation of their direct rights.

49. The Court has noted from the Application, and from the reply given by Counsel on 8 July 1969, that the Belgian Government did not base its claim on an infringement of the direct rights of the shareholders. Thus it is not open to the Court to go beyond the claim as formulated by the Belgian Government and it will not pursue its examination of this point any further.

*

50. In turning now to the international legal aspects of the case, the Court must, as already indicated, start from the fact that the present case essentially involves factors derived from municipal law—the distinction and the community between the company and the shareholder—which the Parties, however widely their interpretations may differ, each take as the point of departure of their reasoning. If the Court were to decide the case in disregard of the relevant institutions of municipal law it would, without justification, invite serious legal difficulties. It would lose touch with reality, for there are no corresponding institutions of international law to which the Court could resort. Thus the Court has, as indicated, not only to take cognizance of municipal law but also to refer to it. It is to rules generally accepted by municipal legal systems which recognize the limited company whose capital is represented by shares, and not to the municipal law of a particular State, that international law refers. In referring to such rules, the Court cannot modify, still less deform them.

51. On the international plane, the Belgian Government has advanced the proposition that it is inadmissible to deny the shareholders' national State a right of diplomatic protection merely on the ground that another State possesses a corresponding right in respect of the company itself. In strict logic and law this formulation of the Belgian claim to jus standi assumes the existence of the very right that requires demonstration. In fact the Belgian Government has repeatedly stressed that there exists no rule of international law which would deny the national State of the shareholders the right of diplomatic protection for the purpose of seeking redress pursuant to unlawful acts committed by another State against the company in which they hold shares. This, by emphasizing the absence of any express denial of the right, conversely implies the admission that there is no rule of international law which expressly confers such a right on the shareholders' national State.[p.38]

52. International law may not, in some fields, provide specific rules in particular cases. In the concrete situation, the company against which allegedly unlawful acts were directed is expressly vested with a right, whereas no such right is specifically provided for the shareholder in respect of those acts. Thus the position of the company rests on a positive rule of both municipal and international law. As to the shareholder, while he has certain rights expressly provided for him by municipal law as referred to in paragraph 42 above, appeal can, in the circumstances of the present case, only be made to the silence of international law. Such silence scarcely admits of interpretation in favour of the shareholder.

53. It is quite true, as was recalled in the course of oral argument in the present case, that concurrent claims are not excluded in the case of a person who, having entered the service of an international organization and retained his nationality, enjoys simultaneously the right to be protected by his national State and the right to be protected by the organization to which he belongs. This however is a case of one person in possession of two separate bases of protection, each of which is valid (Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J. Reports 1949, p. 185). There is no analogy between such a situation and that of foreign shareholders in a company which has been the victim of a violation of international law which has caused them damage.

54. Part of the Belgian argument is founded on an attempt to assimilate interests to rights, relying on the use in many treaties and other instruments of such expressions as property, rights and interests. This is not, however, conclusive. Property is normally protected by law. Rights are ex hypothesi protected by law, otherwise they would not be rights. According to the Belgian Government, interests, although distinct from rights, are also protected by the aforementioned conventional rules. The Court is of the opinion that, for the purpose of interpreting the general rule of international law concerning diplomatic protection, which is its task, it has no need to determine the meaning of the term interests in the conventional rules, in other words to determine whether by this term the conventional rules refer to rights rather than simple interests.

*
55. The Court will now examine other grounds on which it is conceivable that the submission by the Belgian Government of a claim on behalf of shareholders in Barcelona Traction may be justified.

56. For the same reasons as before, the Court must here refer to municipal law. Forms of incorporation and their legal personality have[p.39] sometimes not been employed for the sole purposes they were originally intended to serve; sometimes the corporate entity has been unable to protect the rights of those who entrusted their financial resources to it; thus inevitably there have arisen dangers of abuse, as in the case of many other institutions of law. Here, then, as elsewhere, the law, confronted with economic realities, has had to provide protective measures and remedies in the interests of those within the corporate entity as well as of those outside who have dealings with it: the law has recognized that the independent existence of the legal entity cannot be treated as an absolute. It is in this context that the process of "lifting the corporate veil" or "disregarding the legal entity" has been found justified and equitable in certain circumstances or for certain purposes. The wealth of practice already accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to prevent the misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion of legal requirements or of obligations.

57. Hence the lifting of the veil is more frequently employed from without, in the interest of those dealing with the corporate entity. However, it has also been operated from within, in the interest of—among others—the shareholders, but only in exceptional circumstances.

58. In accordance with the principle expounded above, the process of lifting the veil, being an exceptional one admitted by municipal law in respect of an institution of its own making, is equally admissible to play a similar role in international law. It follows that on the international plane also there may in principle be special circumstances which justify the lifting of the veil in the interest of shareholders.

*

59. Before proceeding, however, to consider whether such circumstances exist in the present case, it will be advisable to refer to two specific cases involving encroachment upon the legal entity, instances of which have been cited by the Parties. These are: first, the treatment of enemy and allied property, during and after the First and Second World Wars, in peace treaties and other international instruments; secondly, the treatment of foreign property consequent upon the nationalizations carried out in recent years by many States.

60. With regard to the first, enemy-property legislation was an instrument of economic warfare, aimed at denying the enemy the advantages to be derived from the anonymity and separate personality of corporations. Hence the lifting of the veil was regarded as justified ex necessitate and was extended to all entities which were tainted with enemy character, even the nationals of the State enacting the legislation. The provisions of the peace treaties had a very specific function: to protect allied property, and to seize and pool enemy property with a view to covering reparation [p.40] claims. Such provisions are basically different in their rationale from those normally applicable.

61. Also distinct are the various arrangements made in respect of compensation for the nationalization of foreign property. Their rationale too, derived as it is from structural changes in a State's economy, differs from that of any normally applicable provisions. Specific agreements have been reached to meet specific situations, and the terms have varied from case to case. Far from evidencing any norm as to the classes of beneficiaries of compensation, such arrangements are sui generis and provide no guide in the present case.

62. Nevertheless, during the course of the proceedings both Parties relied on international instruments and judgments of international tribunals concerning these two specific areas. It should be clear that the developments in question have to be viewed as distinctive processes, arising out of circumstances peculiar to the respective situations. To seek to draw from them analogies or conclusions held to be valid in other fields is to ignore their specific character as lex specialis and hence to court error.

63. The Parties have also relied on the general arbitral jurisprudence which has accumulated in the last half-century. However, in most cases the decisions cited rested upon the terms of instruments establishing the jurisdiction of the tribunal or claims commission and determining what rights might enjoy protection; they cannot therefore give rise to generalization going beyond the special circumstances of each case. Other decisions, allowing or disallowing claims by way of exception, are not, in view of the particular facts concerned, directly relevant to the present case.

*

64. The Court will now consider whether there might not be, in the present case, other special circumstances for which the general rule might not take effect. In this connection two particular situations must be studied: the case of the company having ceased to exist and the case of the company's national State lacking capacity to take action on its behalf.

65. As regards the first of these possibilities the Court observes that the Parties have put forward conflicting interpretations of the present situation of Barcelona Traction. There can, however, be no question but that Barcelona Traction has lost all its assets in Spain, and was placed in receivership in Canada, a receiver and manager having been appointed. It is common ground that from the economic viewpoint the company has been entirely paralyzed. It has been deprived of all its Spanish sources of income, and the Belgian Government has asserted that the company [p.41] could no longer find the funds for its legal defence, so that these had to be supplied by the shareholders.

66. It cannot however, be contended that the corporate entity of the company has ceased to exist, or that it has lost its capacity to take corporate action. It was free to exercise such capacity in the Spanish courts and did in fact do so. It has not become incapable in law of defending its own rights and the interests of the shareholders. In particular, a precarious financial situation cannot be equated with the demise of the corporate entity, which is the hypothesis under consideration: the company's status in law is alone relevant, and not its economic condition, nor even the possibility of its being "practically defunct"—a description on which argument has been based but which lacks all legal precision. Only in the event of the legal demise of the company are the shareholders deprived of the possibility of a remedy available through the company; it is only if they became deprived of all such possibility that an independent right of action for them and their government could arise.

67. In the present case, Barcelona Traction is in receivership in the country of incorporation. Far from implying the demise of the entity or of its rights, this much rather denotes that those rights are preserved for so long as no liquidation has ensued. Though in receivership, the company continues to exist. Moreover, it is a matter of public record that the company's shares were quoted on the stock-market at a recent date.

68. The reason for the appointment in Canada not only of a receiver but also of a manager was explained as follows:

"In the Barcelona Traction case it was obvious, in view of the Spanish bankruptcy order of 12 February 1948, that the appointment of only a receiver would be useless, as positive steps would have to be taken if any assets seized in the bankruptcy in Spain were to be recovered." (Hearing of 2 July 1969.)

In brief, a manager was appointed in order to safeguard the company's rights; he has been in a position directly or indirectly to uphold them. Thus, even if the company is limited in its activity after being placed in receivership, there can be no doubt that it has retained its legal capacity and that the power to exercise it is vested in the manager appointed by the Canadian courts. The Court is thus not confronted with the first hypothesis contemplated in paragraph 64, and need not pronounce upon it.

*

69. The Court will now turn to the second possibility, that of the lack of capacity of the company's national State to act on its behalf. The first question which must be asked here is whether Canada—the third apex of [p.42] the triangular relationship—is, in law, the national State of Barcelona Traction.

70. In allocating corporate entities to States for purposes of diplomatic protection, international law is based, but only to a limited extent, on an analogy with the rules governing the nationality of individuals. The traditional rule attributes the right of diplomatic protection of a corporate entity to the State under the laws of which it is incorporated and in whose territory it has its registered office. These two criteria have been confirmed by long practice and by numerous international instruments. This notwithstanding, further or different links are at times said to be required in order that a right of diplomatic protection should exist. Indeed, it has been the practice of some States to give a company incorporated under their law diplomatic protection solely when it has its seat (siege social) or management or centre of control in their territory, or when a majority or a substantial proportion of the shares has been owned by nationals of the State concerned. Only then, it has been held, does there exist between the corporation and the State in question a genuine connection of the kind familiar from other branches of international law. However, in the particular field of the diplomatic protection of corporate entities, no absolute test of the "genuine connection" has found general acceptance. Such tests as have been applied are of a relative nature, and sometimes links with one State have had to be weighed against those with another. In this connection reference has been made to the Nottebohm case. In fact the Parties made frequent reference to it in the course of the proceedings. However, given both the legal and factual aspects of protection in the present case the Court is of the opinion that there can be no analogy with the issues raised or the decision given in that case.

71. In the present case, it is not disputed that the company was incorporated in Canada and has its registered office in that country. The incorporation of the company under the law of Canada was an act of free choice. Not only did the founders of the company seek its incorporation under Canadian law but it has remained under that law for a period of over 50 years. It has maintained in Canada its registered office, its accounts and its share registers. Board meetings were held there for many years; it has been listed in the records of the Canadian tax authorities. Thus a close and permanent connection has been established, fortified by the passage of over half a century. This connection is in no way weakened by the fact that the company engaged from the very outset in commercial activities outside Canada, for that was its declared object. Barcelona Traction's links with Canada are thus manifold.

72. Furthermore, the Canadian nationality of the company has received general recognition. Prior to the institution of proceedings before the Court, three other governments apart from that of Canada (those of the United Kingdom, the United States and Belgium) made representa-[p.43]
tions concerning the treatment accorded to Barcelona Traction by the Spanish authorities. The United Kingdom Government intervened on behalf of bondholders and of shareholders. Several representations were also made by the United States Government, but not on behalf of the Barcelona Traction company as such.

73. Both Governments acted at certain stages in close co-operation with the Canadian Government. An agreement was reached in 1950 on the setting-up of an independent committee of experts. While the Belgian and Canadian Governments contemplated a committee composed of Belgian, Canadian and Spanish members, the Spanish Government suggested a committee composed of British, Canadian and Spanish members. This was agreed to by the Canadian and United Kingdom Governments, and the task of the committee was, in particular, to establish the monies imported into Spain by Barcelona Traction or any of its subsidiaries, to determine and appraise the materials and services brought into the country, to determine and appraise the amounts withdrawn from Spain by Barcelona Traction or any of its subsidiaries, and to compute the profits earned in Spain by Barcelona Traction or any of its subsidiaries and the amounts susceptible of being withdrawn from the country at 31 December 1949.

74. As to the Belgian Government, its earlier action was also undertaken in close co-operation with the Canadian Government. The Belgian Government admitted the Canadian character of the company in the course of the present proceedings. It explicitly stated that Barcelona Traction was a company of neither Spanish nor Belgian nationality but a Canadian company incorporated in Canada. The Belgian Government has even conceded that it was not concerned with the injury suffered by Barcelona Traction itself, since that was Canada's affair.

75. The Canadian Government itself, which never appears to have doubted its right to intervene on the company's behalf, exercised the protection of Barcelona Traction by diplomatic representation for a number of years, in particular by its note of 27 March 1948, in which it alleged that a denial of justice had been committed in respect of the Barcelona Traction, Ebro and National Trust companies, and requested that the bankruptcy judgment be cancelled. It later invoked the Anglo-Spanish treaty of 1922 and the agreement of 1924, which applied to Canada. Further Canadian notes were addressed to the Spanish Government in 1950, 1951 and 1952. Further approaches were made in 1954, and in 1955 the Canadian Government renewed the expression of its deep interest in the affair of Barcelona Traction and its Canadian subsidiaries.

76. In sum, the record shows that from 1948 onwards the Canadian Government made to the Spanish Government numerous representations which cannot be viewed otherwise than as the exercise of diplomatic [p.44] protection in respect of the Barcelona Traction company. Therefore this was not a case where diplomatic protection was refused or remained in the sphere of fiction. It is also clear that over the whole period of its diplomatic activity the Canadian Government proceeded in full knowledge of the Belgian attitude and activity.

*

77. It is true that at a certain point the Canadian Government ceased to act on behalf of Barcelona Traction, for reasons which have not been fully revealed, though a statement made in a letter of 19 July 1955 by the Canadian Secretary of State for External Affairs suggests that it felt the matter should be settled by means of private negotiations. The Canadian Government has nonetheless retained its capacity to exercise diplomatic protection; no legal impediment has prevented it from doing so: no fact has arisen to render this protection impossible. It has discontinued its action of its own free will.

78. The Court would here observe that, within the limits prescribed by international law, a State may exercise diplomatic protection by whatever means and to whatever extent it thinks fit, for it is its own right that the State is asserting. Should the natural or legal persons on whose behalf it is acting consider that their rights are not adequately protected, they have no remedy in international law. All they can do is to resort to municipal law, if means are available, with a view to furthering their cause or obtaining redress. The municipal legislator may lay upon the State an obligation to protect its citizens abroad, and may also confer upon the national a right to demand the performance of that obligation, and clothe the right with corresponding sanctions. However, all these questions remain within the province of municipal law and do not affect the position internationally.

79. The State must be viewed as the sole judge to decide whether its protection will be granted, to what extent it is granted, and when it will cease. It retains in this respect a discretionary power the exercise of which may be determined by considerations of a political or other nature, unrelated to the particular case. Since the claim of the State is not identical with that of the individual or corporate person whose cause is espoused, the State enjoys complete freedom of action. Whatever the reasons for any change of attitude, the fact cannot in itself constitute a justification for the exercise of diplomatic protection by another government, unless there is some independent and otherwise valid ground for that.

80. This cannot be regarded as amounting to a situation where a violation of law remains without remedy: in short, a legal vacuum.[p. 45]There is no obligation upon the possessors of rights to exercise them. Sometimes no remedy is sought, though rights are infringed. To equate this with the creation of a vacuum would be to equate a right with an obligation.

81. The cessation by the Canadian Government of the diplomatic protection of Barcelona Traction cannot, then, be interpreted to mean that there is no remedy against the Spanish Government for the damage done by the allegedly unlawful acts of the Spanish authorities. It is not a hypothetical right which was vested in Canada, for there is no legal impediment preventing the Canadian Government from protecting Barcelona Traction. Therefore there is no substance in the argument that for the Belgian Government to bring a claim before the Court represented the only possibility of obtaining redress for the damage suffered by Barcelona Traction and, through it, by its shareholders.

82. Nor can the Court agree with the view that the Canadian Government had of necessity to interrupt the protection it was giving to Barcelona Traction, and to refrain from pursuing it by means of other procedures, solely because there existed no link of compulsory jurisdiction between Spain and Canada. International judicial proceedings are but one of the means available to States in pursuit of their right to exercise diplomatic protection (Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J. Reports 1949, p. 178). The lack of a jurisdictional link cannot be regarded either in this or in other fields of international law as entailing the non-existence of a right.

83. The Canadian Government's right of protection in respect of the Barcelona Traction company remains unaffected by the present proceedings. The Spanish Government has never challenged the Canadian nationality of the company, either in the diplomatic correspondence with the Canadian Government or before the Court. Moreover it has unreservedly recognized Canada as the national State of Barcelona Traction in both written pleadings and oral statements made in the course of the present proceedings. Consequently, the Court considers that the Spanish Government has not questioned Canada's right to protect the company.

84. Though, having regard to the character of the case, the question of Canada's right has not been before it, the Court has considered it necessary to clarify this issue.

*

85. The Court will now examine the Belgian claim from a different point of view, disregarding municipal law and relying on the rule that in inter-State relations, whether claims are made on behalf of a State's national or on behalf of the State itself, they are always the claims of the [p.46]
State. As the Permanent Court said,

"The question, therefore, whether the . . . dispute originates in an injury to a private interest, which in point of fact is the case in many international disputes, is irrelevant from this standpoint." (Mavrom-matis Palestine Concessions, Judgment No. 2, 1924, P.C.I.J., Series A, No. 2, p. 12. See also Nottebohm, Second Phase, Judgment, I.C.J. Reports 1955, p. 24.)
86. Hence the Belgian Government would be entitled to bring a claim if it could show that one of its rights had been infringed and that the acts complained of involved the breach of an international obligation arising out of a treaty or a generalrule of law. The opinion has been expressed that a claim can accordingly be made when investments by a State's nationals abroad are thus prejudicially affected, and that since such investments are part of a State's national economic resources, any prejudice to them directly involves the economic interest of the State.

87. Governments have been known to intervene in such circumstances not only when their interests were affected, but also when they were threatened. However, it must be stressed that this type of action is quite different from and outside the field of diplomatic protection. When a State admits into its territory foreign investments or foreign nationals it is, as indicated in paragraph 33, bound to extend to them the protection of the law. However, it does not thereby become an insurer of that part of another State's wealth which these investments represent. Every investment of this kind carries certain risks. The real question is whether a right has been violated, which right could only be the right of the State to have its nationals enjoy a certain treatment guaranteed by general international law, in the absence of a treaty applicable to the particular case. On the other hand it has been stressed that it must be proved that the investment effectively belongs to a particular economy. This is, as it is admitted, sometimes very difficult, in particular where complex undertakings are involved. Thus the existing concrete test would be replaced by one which might lead to a situation in which no diplomatic protection could be exercised, with the consequence that an unlawful act by another State would remain without remedy.

88. It follows from what has already been stated above that, where it is a question of an unlawful act committed against a company representing foreign capital, the general rule of international law authorizes the national State of the company alone to make a claim.

89. Considering the important developments of the last half-century, the growth of foreign investments and the expansion of the international activities of corporations, in particular of holding companies, which are [p.47] often multinational, and considering the way in which the economic interests of States have proliferated, it may at first sight appear surprising that the evolution of law has not gone further and that no generally accepted rules in the matter have crystallized on the international plane. Nevertheless, a more thorough examination of the facts shows that the law on the subject has been formed in a period characterized by an intense conflict of systems and interests. It is essentially bilateral relations which have been concerned, relations in which the rights of both the State exercising diplomatic protection and the State in respect of which protection is sought have had to be safeguarded. Here as elsewhere, a body of rules could only have developed with the consent of those concerned. The difficulties encountered have been reflected in the evolution of the law on the subject.

90. Thus, in the present state of the law, the protection of shareholders requires that recourse be had to treaty stipulations or special agreements directly concluded between the private investor and the State in which the investment is placed. States ever more frequently provide for such protection, in both bilateral and multilateral relations, either by means of special instruments or within the framework of wider economic arrangements. Indeed, whether in the form of multilateral or bilateral treaties between States, or in that of agreements between States and companies, there has since the Second World War been considerable development in the protection of foreign investments. The instruments in question contain provisions as to jurisdiction and procedure in case of disputes concerning the treatment of investing companies by the States in which they invest capital. Sometimes companies are themselves vested with a direct right to defend their interests against States through prescribed procedures. No such instrument is in force between the Parties to the present case.

91. With regard more particularly to human rights, to which reference has already been made in paragraph 34 of this Judgment, it should be noted that these also include protection against denial of justice. However, on the universal level, the instruments which embody human rights do not confer on States the capacity to protect the victims of infringements of such rights irrespective of their nationality. It is therefore still on the regional level that a solution to this problem has had to be sought; thus, within the Council of Europe, of which Spain is not a member, the problem of admissibility encountered by the claim in the present case has been resolved by the European Convention on Human Rights, which entitles each State which is a party to the Convention to lodge a complaint against any other contracting State for violation of the Convention, irrespective of the nationality of the victim.

*[p.48]

92. Since the general rule on the subject does not entitle the Belgian Government to put forward a claim in this case, the question remains to be considered whether nonetheless, as the Belgian Government has contended during the proceedings, considerations of equity do not require that it be held to possess a right of protection. It is quite true that it has been maintained that, for reasons of equity, a State should be able, in certain cases, to take up the protection of its nationals, shareholders in a company which has been the victim of a violation of international law. Thus a theory has been developed to the effect that the State of the shareholders has a right of diplomatic protection when the State whose responsibility is invoked is the national State of the company. Whatever the validity of this theory may be, it is certainly not applicable to the present case, since Spain is not the national State of Barcelona Traction.

93. On the other hand, the Court considers that, in the field of diplomatic protection as in all other fields of international law, it is necessary that the law be applied reasonably. It has been suggested that if in a given case it is not possible to apply the general rule that the right of diplomatic protection of a company belongs to its national State, considerations of equity might call for the possibility of protection of the shareholders in question by their own national State. This hypothesis does not correspond to the circumstances of the present case.

94. In view, however, of the discretionary nature of diplomatic protection, considerations of equity cannot require more than the possibility for some protector State to intervene, whether it be the national State of the company, by virtue of the general rule mentioned above, or, in a secondary capacity, the national State of the shareholders who claim protection. In this connection, account should also be taken of the practical effects of deducing from considerations of equity any broader right of protection for the national State of the shareholders. It must first of all be observed that it would be difficult on an equitable basis to make distinctions according to any quantitative test: it would seem that the owner of 1 per cent. and the owner of 90 per cent. of the share-capital should have the same possibility of enjoying the benefit of diplomatic protection. The protector State may, of course, be disinclined to take up the case of the single small shareholder, but it could scarcely be denied the right to do so in the name of equitable considerations. In that field, protection by the national State of the shareholders can hardly be graduated according to the absolute or relative size of the shareholding involved.

95. The Belgian Government, it is true, has also contended that as high a proportion as 88 per cent. of the shares in Barcelona Traction belonged to natural or juristic persons of Belgian nationality, and it has used this as an argument for the purpose not only of determining the amount of the damages which it claims, but also of establishing its right of action on behalf of the Belgian shareholders. Nevertheless, this does[p.49] not alter the Belgian Government's position, as expounded in the course of the proceedings, which implies, in the last analysis, that it might be sufficient for one single share to belong to a national of a given State for the latter to be entitled to exercise its diplomatic protection.

96. The Court considers that the adoption of the theory of diplomatic protection of shareholders as such, by opening the door to competing diplomatic claims, could create an atmosphere of confusion and insecurity in international economic relations. The danger would be all the greater inasmuch as the shares of companies whose activity is international are widely scattered and frequently change hands. It might perhaps be claimed that, if the right of protection belonging to the national States of the shareholders were considered as only secondary to that of the national State of the company, there would be less danger of difficulties of the kind contemplated. However, the Court must state that the essence of a secondary right is that it only comes into existence at the time when the original right ceases to exist. As the right of protection vested in the national State of the company cannot be regarded as extinguished because it is not exercised, it is not possible to accept the proposition that in case of its non-exercise the national States of the shareholders have a right of protection secondary to that of the national State of the company. Furthermore, study of factual situations in which this theory might possibly be applied gives rise to the following observations.

97. The situations in which foreign shareholders in a company wish to have recourse to diplomatic protection by their own national State may vary. It may happen that the national State of the company simply refuses to grant it its diplomatic protection, or that it begins to exercise it (as in the present case) but does not pursue its action to the end. It may also happen that the national State of the company and the State which has committed a violation of international law with regard to the company arrive at a settlement of the matter, by agreeing on compensation for the company, but that the foreign shareholders find the compensation insufficient. Now, as a matter of principle, it would be difficult to draw a distinction between these three cases so far as the protection of foreign shareholders by their national State is concerned, since in each case they may have suffered real damage. Furthermore, the national State of the company is perfectly free to decide how far it is appropriate for it to protect the company, and is not bound to make public the reasons for its decision. To reconcile this discretionary power of the company's national State with a right of protection falling to the shareholders' national State would be particularly difficult when the former State has concluded, with the State which has contravened international law with regard to the company, an agreement granting the company compensation which the foreign shareholders find inadequate. If, after such a settlement, the national State of the foreign shareholders could in its turn put forward [p.50] a claim based on the same facts, this would be likely to introduce into the negotiation of this kind of agreement a lack of security which would be contrary to the stability which it is the object of international law to establish in international relations.

98. It is quite true, as recalled in paragraph 53, that international law recognizes parallel rights of protection in the case of a person in the service of an international organization. Nor is the possibility excluded of concurrent claims being made on behalf of persons having dual national-ity, although in that case lack of a genuine link with one of the two States may be set up against the exercise by that State of the right of protection. It must be observed, however, that in these two types of situation the number of possible protectors is necessarily very small, and their identity normally not difficult to determine. In this respect such cases of dual protection are markedly different from the claims to which recognition of a general right of protection of foreign shareholders by their various national States might give rise.

99. It should also be observed that the promoters of a company whose operations will be international must take into account the fact that States have, with regard to their nationals, a discretionary power to grant diplomatic protection or to refuse it. When establishing a company in a foreign country, its promoters are normally impelled by particular considerations; it is often a question of tax or other advantages offered by the host State. It does not seem to be in any way inequitable that the advantages thus obtained should be balanced by the risks arising from the fact that the protection of the company and hence of its shareholders is thus entrusted to a State other than the national State of the shareholders.

100. In the present case, it is clear from what has been said above that Barcelona Traction was never reduced to a position of impotence such that it could not have approached its national State, Canada, to ask for its diplomatic protection, and that, as far as appeared to the Court, there was nothing to prevent Canada from continuing to grant its diplomatic protection to Barcelona Traction if it had considered that it should do so.

101. For the above reasons, the Court is not of the opinion that, in the particular circumstances of the present case, jus standi is conferred on the Belgian Government by considerations of equity.

*

102. In the course of the proceedings, the Parties have submitted a great amount of documentary and other evidence intended to substantiate [p.51] their respective submissions. Of this evidence the Court has taken cognizance. It has been argued on one side that unlawful acts had been com-mitted by the Spanish judicial and administrative authorities, and that as a result of those acts Spain has incurred international responsibility. On the other side it has been argued that the activities of Barcelona Traction and its subsidiaries were conducted in violation of Spanish law and caused damage to the Spanish economy. If both contentions were substantiated, the truth of the latter would in no way provide justification in respect of the former. The Court fully appreciates the importance of the legal problems raised by the allegation, which is at the root of the Belgian claim for reparation, concerning the denials of justice allegedly committed by organs of the Spanish State. However, the possession by the Belgian Government of a right of protection is a prerequisite for the examination of these problems. Since no jus standi before the Court has been established, it is not for the Court in its Judgment to pronounce upon any other aspect of the case, on which it should take a decision only if the Belgian Government had a right of protection in respect of its nationals, shareholders in Barcelona Traction.

*****

103. Accordingly,

The Court

rejects the Belgian Government's claim by fifteen votes to one, twelve votes of the majority being based on the reasons set out in the present Judgment.

Done in French and in English, the French text being authoritative, at the Peace Palace, The Hague, this fifth day of February, one thousand nine hundred and seventy, in three copies, one of which will be placed in the Archives of the Court and the others transmitted to the Government of the Kingdom of Belgium and to the Government of the Spanish State, respectively.

(Signed) J.L. Bustamante Y Rivero,
President.

(Signed) S. Aquarone,
Registrar.
[p.52]


Judge Petren and Judge Onyeama make the following Joint Declaration:

We agree with the operative provision and the reasoning of the Judgment subject to the following declaration:

With regard to the nationality of Barcelona Traction, the Judgment refers to the existence of opinions to the effect that the absence of a genuine connection between a company and the State claiming the right of diplomatic protection of the company might be set up against the exercise of such a right. In this context the Judgment also mentions the decision in the Nottebohm case to the effect that the absence of a genuine connecting link between a State and a natural person who has acquired its nationality may be set up against the exercise by that State of diplomatic protection of the person concerned. The present Judgment then concludes that given the legal and factual aspects of protection in the present case there can be no analogy with the issues raised or the decision given in the Nottebohm case.

Now in the present case the Spanish Government has asserted and the Belgian Government has not disputed that, Barcelona Traction having been incorporated under Canadian law and having its registered office in Toronto, it is of Canadian nationality and Canada is qualified to protect it.
Canada's right of protection being thus recognized by both Parties to the proceedings, the first question which the Court has to answer within the framework of the third preliminary objection is simply whether, alongside the right of protection pertaining to the national State of a company, another State may have a right of protection of the shareholders of the company who are its nationals. This being so, the Court has not in this case to consider the question whether the genuine connection principle is applicable to the diplomatic protection of juristic persons, and, still less, to speculate whether, if it is, valid objections could have been raised against the exercise by Canada of diplomatic protection of Barcelona Traction.

Judge Lachs makes the following Declaration:

I am in full agreement with the reasoning and conclusions of the Judgment, but would wish to add the following observation:

The Court has found, in the light of the relevant elements of law and of fact, that the Applicant, the Belgian Government, has no capacity in the present case. At the same time it has stated that the Canadian Government's right of protection in respect of the Barcelona Traction company has remained unaffected by the proceedings now closed.[p.53]

I consider that the existence of this right is an essential premise of the Court's reasoning, and that its importance is emphasized by the seriousness of the claim and the particular nature of the unlawful acts with which it charges certain authorities of the respondent State.

President Bustamante Y Rivero, Judges Sir Gerald Fitzmaurice, Tanaka, Jessup, Morelli, Padilla Nervo, Gros and Ammoun append Separate Opinions to the Judgment of the Court.

Judge ad hoc Riphagen appends a Dissenting Opinion to the Judgment of the Court.

(Initialled) J. L. B.-R.
(Initialled) S. A.

[p.286]


Separate Opinion of Judge Ammoun

[Translation]

1. At the beginning of his separate opinion in the Corfu Channel case, Judge A. Alvarez, alluding to the fundamental changes which have taken place in every sphere of human activity in recent decades, and especially in international affairs and international law, wrote:

"It is therefore necessary to consider what is the present state of that law. We must examine it in connection with the questions raised by the dispute submitted to the Court. That does not mean that this Court should pronounce on all the legal issues which those questions connote; but it seems desirable that one of the judges, at least, should examine them, and that is the task I have set myself in this individual opinion." (I.C.J. Reports 1949, p. 39.)

I subscribe to this statement, the more so since the legal questions raised by the case which has been submitted to the Court cannot but feel the effects of the great renovating movement in international law which is evident in the relations between nations and in the activities of inter-national institutions. The development which the modern world is witnessing affects the very structures of international law—including the concept of sovereignty—and even its main sources, namely treaties, custom and the general principles of law recognized by the nations. More than one concept, principle or legal norm of the older classical law has been called into question anew since international co-operation has become common practice, since law has become imbued with morality, and—a point of particular importance—since a considerable number of States have acquired independence and sovereignty, or have siezed them by main force, and have entered into the world community of nations. Linked to this development, which it will be necessary to touch upon, to this dynamism of the law which, it has been said, is a continual creation, is the idea which must be formed of the international responsibility of States, and its corollary, diplomatic protection, upon which the Court is called upon to pronounce.

2. In order to make an exhaustive study of Belgium's jus standi in judicio which had been the subject of a preliminary objection, it was recognized by the Judgment of 24 July 1964 as indispensable to refer to certain points of fact and of law relating to the merits of the case, al-though jus standi does not thereby lose its character as an objection.

Belgium has however questioned whether, in view of the subject of the [p.287]dispute between the Parties, which it contends deals only with the conditions and limits of the international responsibility of a State towards the foreign shareholders in a commercial holding company, it is possible to speak of a preliminary objection on this point. In other words, what is being debated as a preliminary issue is, it is said, international responsibility, rather than diplomatic protection.

In order to reply to this question, it is sufficient to add to the arguments appearing in the aforementioned Judgment that the right of diplomatic protection, so far as it materializes in a legal action, is to be distinguished from the substantive right which the applicant State claims to have reestablished. The question thus involves the distinction between the subject-matter of the action and the subject-matter of the right claimed, a distinction about which legal writers are generally in agreement FN1. An objection, considered in opposition to the setting in motion of a legal action, should not be confused with a defence concerning the right at issue. There would in fact be an internal contradiction in the fact of confusing two different things in the concept of a claim, namely its admissibility and its validity. Proof that an applicant has the status required to exercise legal power, or that he has a right entitling him to bring the matter before a court, may, as in the present case, involve raising questions which are not unrelated to the merits, but it cannot have any influence on the nature of the action, or the nature of the objection to the exercise thereof.

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FN1 Solus and Perrot, Droit judiciaire privé, Vol. I, pp. 94-107, and the Italian and German writers on Continental law to whom they refer.
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At all events, the joinder of the objection to the merits justifies, so far as this may be necessary, extending the present study beyond diplomatic protection to include international responsibility.

3. That much having been said, the solution to the problem of jus standi, which calls in question the principle of international responsibility and the rules of diplomatic and judicial protection designed to give effect to that principle, is clearly linked to the overall problem of the development of modern international law in the face of recent transformations in international life. This is a burning question of today, the more complex in that it is conditioned by the essential needs of various peoples, ever since nations have emerged from dependence with inter-ests which are manifold and often difficult to reconcile among themselves or with those of the other nations of the world. This problem must therefore not be lost sight of throughout the present opinion.

***

The radical transformations which have occurred in economic affairs in the last half-century, the constantly increasing expansion which has marked the recent decades in a world undergoing rapid social and political development, and the new problems to which these changes have given rise, call for a corresponding development of juridical structures. The [p. 288] law, a rigid conservative kind of law, cannot adapt the emerging reality to sacrosanct rules rooted in the remote past. It must, on the contrary, adapt itself to the imperious needs of an international society which is moving towards universalism; it must adapt itself thereto in order to avoid confrontation between peoples, and lest it lose its footing in the upward march of progress towards better justice and the common aspiration towards the ideals of prosperity and peace.

It is well known that the established lead taken by facts and events over the law has had to be corrected more than once in the past FN2. In the sphere of international law, the adaptation of law to factual situations, rendered necessary by the political change which had world-wide repercussions in the middle of this century, was largely accomplished by the solemn enunciation of the principles and purposes of the United Nations. The implementation of these has however been more effective within the political organs of the world Organization than it has been in the domain of international tribunals where problems have arisen on the legal level as a result of the breach between law and social reality. Thus it is in the interests of justice and of law that these problems should be approached with a clear vision of the meaning of history and an overall picture of a world from which no-one should henceforth be excluded, no matter how late he has come on the scene.

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FN2 In Rome, by the intervention of the Praetor whose edict, idealistic in outlook, supplemented the formalistic quiritary law, which had lagged behind the development of the quasi-international structures of the Emipire; by the blossoming of Moslem law, freed from all outgrown formalism and all illusory symbolism, which set its seal on the basic transformation of legal concepts in most of the countries under its sway; and nearer to our own day, in the United Kingdom and those countries which adopted its law, with the institution of equity which plays an important part in making up for the insufficiencies of the common law; lastly, by the complete renewal of law in the Socialist countries in order to keep pace with the advent of a new ideology and a new way of life which have broken radically with the past.
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This situation could however not escape the foresight of the International Court of Justice. Thus the Advisory Opinion which it delivered in 1949, in connection with the reparation for injuries suffered in the service of the United Nations, must be given its full significance; it stated that: "Throughout its history, the development of international law has been influenced by the requirements of international life FN3”.

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FN3 I.C.J. Reports 1949, p. 178.
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This observation is more topical than ever. International life is being influenced by those States which have now rounded out the circle of the community of nations, increasing the number thereof almost threefold. International law cannot leave out of account the aspirations of the world in which henceforth it has its existence, and it is significant that these States are manifesting a certain amount of impatience tinged with apprehension.
We shall see later what their attitude has been with regard to the rules concerning the responsibility of States and diplomatic protection.[p.289]

4. The problems confronting the world, now that a large-scale political emancipation of the dependent peoples has been carried out, are those relating to the establishment of economic and social justice and to development. According to one of the great African leaders, President L. S. Senghor, "legal independence without economic independence is but a new form of dependency, worse than the first because it is less obvious" FN4. The Director-General of FAO recently warned the world about the dangers of a world-wide famine in the next 24 to 28 years, unless production is increased in the developing countries. And more recently the Symposium of African archbishops and bishops, which was brought to a close on 1 August 1969 by the Sovereign Pontiff, roundly denounced the increase in the riches of some through the exploitation of the poverty of others FN5.

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FN4 Extract from his address to the United Nations General Assembly in New York on 31 October 1961 (Official documents of the General Assembly, Plenary Meetings, Vol. II, p. 540).
See in this connection I. Brownlie, Principles of Public International Law, 1966, p. 485. He writes:
". . . The concept of self-determination has been applied in the different context of economic self-determination."

G. I. Tunkin considers that:

". . . respect for State sovereignty finds itself compatible with . .. a de facto dependence of the smaller States upon the bigger ones, since their economic dependence means that their sovereignty is merely formal". (Droit international public, published in co-operation with the Centre français de la recherche scientifique, p. 237 [Translation by the Registry].)

FN5 Le Monde, 2 August 1969.
Reference may also be made to the conclusions of E. McWhinney who writes:

"It becomes clear that the development and completion of a viable system of international ordre public in the last third of the century will depend to a considerable extent upon the efforts made to bridge the gap in prosperity that exists between on the one hand the countries of the Soviet bloc and the West, and the Third World on the other" (Latin America, Africa and Asia). Revue générale de droit international public, 1968, p. 341. [Translation by the Registry]).
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This problem arises particularly in connection with the great economic, commercial and financial undertakings which have multiplied and grown beyond the confines of their respective countries in such a way as to necessitate a parallel development of international law. International law should certainly avoid trying to fit their action into outworn forms; it should work to bring about a just protection of their interests in the bitter but beneficient struggle of international competition FN6.

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FN6 Cf. what was said by Mr. Haroldo Valladão, the then President of the Session of the Institut de droit international, referring to—

"the power of the international companies with investments in the developing countries, [which] has given rise to a special treatment for such investments". (Annuaire de l'Institut de droit international, 1967, II, p. 432 [Translation by the Registry].)
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On the other hand, the law should be no less concerned with the interests of the countries to which those powerful undertakings and the companies controlling them—trusts or holding companies of pyramidal structure—extend their activities, thereby certainly rendering appreciable [p.290] service to the economy of the host countries, but also exposing that weaker economy to dangers which it ought to be spared. The States of the Third World showed insight when they agreed to insert in the 1960 Declaration on the Grant of Independence the provision:

"affirming that peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit and international law". (UN Doc. A/4684, p. 66.)

One cannot help thinking, in this connection, of the large companies which continue to undertake the exploitation of the natural resources of the less developed countries, including their agricultural, timber and mineral wealth, their oil production, and also their transport and other public or municipal services. An equitable sharing of the profits is mandatory. The anxieties of the countries whose resources are being exploited by means of foreign technical and financial co-operation are deeply felt, as will be seen below in connection with the application of diplomatic protection and its possible extension, as in the present case, to new situations, with a view to the increased protection of foreign interests.

The development of international law cannot therefore have as its sole or principal object the protection of foreign nationals and of the international economic activities of the industrialized Powers. It must set itself an objective which is more comprehensive and more just, and a more equitable and more humanitarian ideal, in which the material and intangible interests of the weaker and deprived peoples are factors to be taken into account.

***

5. In this connection, it is essential to stress the trends of Latin-American law and that of Asia and Africa, and their undeniable influence on the development of traditional international law.

It seems indeed that among the principles and norms which have sprung from the regional law peculiar to Latin America are the norms and principles whose aim is to protect countries in that part of the world against the more powerful industrialized States of North America and Europe.

An Afro-Asian law also seems to be developing as a result of the same preoccupations, springing from the same causes. In the field of the responsibility of States and of diplomatic protection, the same points of view have been adopted in the countries of the three continents, thus initiating a form of co-operation which will not be of slight effect on the renewal of law FN6a.[p.291]

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FN6a This co-operation received an initial implementation, as regards the effect of economic facts on international law, at the United Nations Conference on Trade and Development held in Geneva in 1964, where 77 Latin American, African and Asian States resolved to meet and negotiate through the intermediary of common spokesmen.
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The first reaction to the rules of traditional law came however from the countries of Latin America; witness the vehement speech made by Mr. Seijas, a former Venezuelan minister, at the 1891 Session of the Institut de droit international at Hamburg, which was no mere display of bad temper. Evidence of this too is the appearance of the Calvo Clause, excluding recourse to international adjudication in favour of internal remedies, on which the jurists of Latin America have never compromised, because of their lack of confidence in diplomatic protection as conceived by traditional law and the practices of western nations. This reaction on the part of the Latin American States would, moreover, explain their opposition from 1948 onwards to the draft insurance guarantee agreement proposed by the United States, providing for the exercise of diplomatic protection by that power without local remedies having been exhausted FN7.

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FN7 Mexico had been forced to agree in the 1923 Convention with the United States not to avail itself of the condition of the prior exhaustion of local remedies.
See in this connection the relevant speeches to the Institut de droit international by Mr. Haroldo Valladáao and Mr. Kamil Yasseen and by Mr. Jiménez de Aréchaga, who rightly points to the discrimination which the exclusion of prior recourse to local remedies would entail (Annuaire de l'Institut de droit international, 1967, II pp. 431, 432, 435-436).
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This attitude on the part of the Hispanic States, which is shared by the Afro-Asian States, is the more readily understandable if the extra-legal forms and means to which diplomatic protection formerly had recourse are borne in mind. It will be recalled that the claims of great States and their nationals abroad often led, during the period preceding the renewal of the law consequent upon two world wars and the creation of a means of international adjudication, to acute conflicts and to acts of deliberate violence going so far as armed intervention and permanent occupation FN8, or to demonstrations of force FN9, against which the Drago doctrine, which was endorsed by the Pan-American Conference of 1906 and has since become one of the basic principles of Latin American international law, has, since 1926, reacted not without success. Recourse to force, subject to an offer of arbitration, was nevertheless tolerated by The Hague Peace Conference of 1907, which admitted intervention sub modo by virtue of the Porter Convention, against which Convention Drago and his Latin American colleagues vainly protested at the Conference. This was not the [p 292] least of the contradictions which attended it, contradictions which bespeak the still predominant influence of the colonialist era. Accordingly, one is entitled to suspect certain arbitral decisions of having been agreed to or accepted under duress, those decisions having been preceded by ultimata or menaces or by a deployment of force more or less in the spirit of the said Conference, which was struggling to free itself from a tyrannical tradition FN10.

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FN8 Occupation of China's western provinces—which brought on the Boxer Rebellion of 1900, of Tunisia from 1881 to 1956, of Egypt from 1882 to 1954 and of Mexico from 1859 to 1866, the conquest of which took the form of the installation of the ephemeral Mexican Empire (P. C. Jessup, A Modern Law of Nations, p. 113).
FN9 Against more than one Latin American State: Argentina, Paraguay, Mexico, Brazil, Cuba, Nicaragua, Colombia, Haiti, the Dominican Republic, Venezuela, etc. The Ottoman Empire was also an example (referred to in footnote 64 below).
FN10 Of the 44 States which took part in the 1907 Conference, there were only four Asian States and one African State.
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If the Drago doctrine has finally triumphed, and if the Porter Convention, on the insistence of Mexico, expressing Latin American opinion at the Chapultepec Conference in 1945, is now recognized as incompatible with the terms of Article 103 of the United Nations Charter, it is nevertheless the case that many decisions have not avoided all confusion between reparation sticto sensu, as in private municipal law, and the "satisfaction" demanded by powerful States, which gives reparation lato sensu the character of a measure aimed at deterrence or punishment FN10a. This right to punish, which is arrogated to themselves by certain States, and to which such eminent writers as Bluntschli, Liszt and Fau-chille, as well as a 1927 resolution of the Institut de droit international have lent their authority, seems to have been rejected by Anzilotti, who noted that in all forms of reaction against the unlawful act there were present ". .. an element of satisfaction and an element of reparation, the notion of punishment of the unlawful act and that of reparation for the wrong suffered"FN11. Thus, the opposition of Latin American or Afro-Asian jurists to the western conception of responsibility and diplomatic protection is founded not only on memories of a painful past, but also on serious apprehensions.

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FN10a See in this connection the report by Mr. Garcia Amador to the 13th Session of the International Law Commission. (Yearbook of the I.L.C., 1961, Vol. II, paras. 4 to 6, 17, 26, 53, 56, 75, 102, 140, 142 and 145.)
See also the dissenting opinion in the Corfu Channel case of Judge Azevedo, who regarded measures of satisfaction as reminiscent of ultimata of a "mediaeval" nature (I.C.J. Reports 1949, p. 114).
FN11 Cours de droit international [Translation by the Registry from] Fr. trans. by G. Gidel, 1929, p. 522.
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The development of Latin American thought concerning diplomatic protection and its limits must be particularly stressed in the present discussion, on account of the influence which it can have on the development of that institution. This thought is at present centred on the following aspects of the problem:

A. The 20 States of South and Central America all reject the rule laid down by Vatel and endorsed by the Permanent Court of International Justice, according to which the right of diplomatic protection is "to ensure, in the person of its subjects, respect for the rules of international law". They hold it to be a fiction, which one of their most eminent jurists,[p. 293]
Garcia Robles, has described as "a product of Hegelian influence, resulting from the expansionism of the nineteenth century"FN12. And all these States, at inter-American conferences, in the writings of publicists, in the positions adopted by governments, are united in their efforts for its elimination, on the understanding that the individual's status as a subject of the law is to be recognized, thus enabling him to seek legal redress himself, and not under the cloak of his national StateFN12a. But before what tribunal? Before an American regional tribunal. The resolution submitted to the Inter-American Conference at Buenos Aires and adopted almost unanimously reads: "American legal controversies should be decided by American judges . . . and a correct understanding of acts pertaining to the Americas is more readily to be obtained by Americans themselves".

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FN12 At the Third Session of the Inter-American Bar Association, Mr. Garcia Robles won over to the Latin American cause Mr. F. R. Coudert, the North American President of the Association, and all its members.

FN12a The status of the individual as a subject of the law, which has its supporters outside America, was to a certain extent recognized in the 1926 award by the Mexican-American Commission in the North American Dredging Company case.
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Since the same causes produce the same effects, the States of the Organization of African Unity wrote into the Addis Ababa Charter the same objective of the creation of a regional tribunal FN13.
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FN13 E. McWhinney has pointed out that—

"there has in the past been a notable reluctance on the part of numerous States, and, in particular, of the new States, to accept the compulsory jurisdiction of the International Court of Justice, because those States have felt that the Court would apply the old rules, in the elaboration and development of which they had not participated and a great number of which they regarded as unreasonable or unjust" (op. cit., p. 331 [Translation by the Registry]).
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The countries of Latin America have gone further still. In 1948 they unanimously adopted a resolution at Bogota whereby they undertook not to bring a claim before a court of international jurisdiction, not excluding the International Court of JusticeFN13a.

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FN13a"The High Contracting Parties bind themselves not to make diplomatic representations in order to protect their nationals, or to refer a controversy to a court of international jurisdiction for that purpose, when the said nationals have had available the means to place their case before competent domestic courts of the respective State." (Art. VII of the Pact of Bogota, 1948.)
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B. The States of Latin America remain firmly attached to the Calvo Clause, which they habitually insert in contracts entered into with foreign undertakings. Their constitutions and laws generally make it compulsory. Their doctrine with regard thereto, founded upon the two principles of equality between States and non-intervention, was forcefully expressed by Judge Guerrero, a former President of the Court, in the report which he submitted on behalf of the Subcommittee set up by the Committee of Experts of the League of Nations to study the responsibility of States. Several non-American countries were not hostile to this point of view. China, Holland and Finland were frankly favourable to it.[p294]

Finally, the United States, which had found in Borchard a vigorous defender of the thesis that the individual cannot dispose of a right which, according to Vatelian doctrine, is that of the State and not his own, allowed itself to be won over, with the inauguration of the "good neighbour" policy of F. D. Roosevelt, to the doctrine of its southern neighbours FN14.

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FN14 See also the important award in the North American Dredging Company case in 1926 between the United States and Mexico, which took a clear step in this direction and has since become an authoritative precedent. The Calvo Clause was unanimously upheld in order to dismiss the claim, notwithstanding the provisions of the 1923 Treaty exonerating the claimant from having to exhaust local remedies. The scope of the clause is, however, limited to the individual's right and leaves untouched that of the State in the event of a violation of international law.
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C. The Calvo clause, which on the other side of the Atlantic is regarded merely as a compromise, was destined to prepare the way for the adoption of the Calvo doctrine, which is aimed at nothing less than the abolition of unilateral diplomatic protection in order to substitute for it a protection exercised by the collectivity on the basis of human rights.

The path towards this unconcealed objective is certainly a long and arduous one; its success seems bound up with the progress of mankind towards an inter-American or international organization less removed than the United Nations from the concept of the Super-State.

It was the more necessary to recall these features of American law in that other States are treading the same path towards the limitation of diplomatic protection. The States of Africa and of Asia, since they too have come to participate in international life, share the same concerns,— as witness the proceedings of the International Law Commission. At its Ninth Session in 1957, Mr. Padilla Nervo stated that:

"... the history of the institution of State responsibility was the history of the obstacles placed in the way of the new Latin American countries—obstacles to the defence of their . . . independence, to the ownership and development of their resources, and to their social integration".

And he added:

"With State responsibility . . . international rules were established, not merely without reference to small States but against them FN15."

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FN15 Yearbook of the International Law Commission, 1957, Vol. I, p. 155.
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And Mr. El-Erian, of the United Arab Republic, stressed the twofold consequence of the privileged condition accorded to nationals of Western countries in their relations with the countries of Africa or Asia, which on[p295] the one hand had led to the system of capitulations and on the other afforded a pretext for intervention in the domestic affairs of States FN16.

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FN16 Ibid., p. 161. See also S. Prakash Sinha, New Nations and the Law of Nations, pp. 91-93 and 140.
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The similarity of the essential views and objectives of the States of the three continents of America, Africa and Asia, and the action they are able to take to develop a positive international law of world-wide ambit, will tend to direct them toward a universalist concept of law and bring them back to a system of international adjudication which will no longer be of an exclusive nature but will, through its effective composition, meet the wishes expressed in the United Nations Charter, which would have it represent the main legal systems and principal forms of civilization of the world.

It is in the light of these preliminary considerations that the connected problem of diplomatic protection and the jus standi of the applicant State should have been approached.

6. It is generally recognized that the attribution of nationality to a company, or the recognition of its legal allegiance, on the basis of its siege social or of the law of the place of formation or registration, confer upon the national State of the company, by virtue of a rule of law enshrined in jurisprudence and of a constant practice FN17, the right to take action for the reparation of damage resulting, to the prejudice of the company, from an international tort.

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FN17 This practice goes back to the beginning of the nineteenth century, when the United Kingdom intervened with the Kingdom of the Two Sicilies on behalf of 19 companies, and it was endorsed by the Committee of Experts of the League of Nations in 1927. With respect to the jurisprudence, in addition to a number of arbitral awards at the turn of the century, see the Panevezys-Saldutiskis Railway case, P.C.I.J., Series A/B, No. 76, p. 16.
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Is it, however, necessary in addition that there should exist between the national State and the company a link of effectiveness, consisting of a substantial participation in the company by national capital or of control of the company's management? Since intervention by a State in favour of its nationals is a discretionary act, the practice of States which take up a case for their nationals only on this condition does not give rise to a legal obligation. Furthermore, no less than a dozen arbitral awards reported by Mr. J. de Hochepied FN18 have held that the nationality of the company alone justified diplomatic intervention. As for those arbitral or judicial decisions that might be cited in support of the concept of effectiveness or connection (Canevaro, I'm Alone, Nottebohm cases), they do not amount to precedents affording any analogy based upon essential factors with the question of the nationality of companies in international law. It will be observed in particular that the Nottebohm Judgment had to determine a conflict of a particular kind, that of dual nationality. It was based upon concrete facts peculiar to the situation of the former German citizen Nottebohm and his endeavours to "substitute for his status as a national [p 296] of a belligerent State that of a national of a neutral State, with the sole aim of thus coming within the protection of Liechtenstein"FN18a. Does not this reasoning in the Judgment seem to fall into line with the practice of the courts or of the administration, taking into account the motive for the act, of ignoring changes of nationality effected for the purpose of obtaining, for example, a divorce, or changes of religion or belief in order to overcome an obstacle to a marriage or to an election, in a State where seats in the elected chambers are distributed between members of the country's various religions and beliefs.

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FN18 La protection diplomatique des sociétés et des actionnaires, pp. 95-101.

FN18a I.C.J. Reports 1955, p. 26.
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***

The right of protection of the company by its national State being the rule, does this right leave room, in appropriate circumstances, for an action by the national State of the shareholders?

This question relates, within the framework of the third preliminary objection, to the basic legal condition governing the exercise of international judicial protection, in other words, to the existence of a rule of law which would, in the instant case, authorize recourse to a judicial action. It is of a preliminary nature in relation to the fourth preliminary objection, concerning the exhaustion of local remedies, as well as to the other questions raised by the third objection, namely the nationality of the claim and the connected question of the continuity of the nationality and that of legal owners and nominees. It is in fact the legal rule which, in appropriate cases, gives access to the Court. In the absence of this rule, access to the judicial tribunal is denied the claimant, even if his claim be absolutely justified from the point of view of such other questions as might be raised at this preliminary stage of the proceedings.

Since, however, the Court has affirmed the preliminary character of the question of the possible existence of the legal rule, could it embark upon one or other of the subsidiary questions and yet manage to avoid, in the rigour of would-be logical reasoning, disregarding its first decision and, as it were, going back on itself? That decision had the unavoidable consequence of putting an end to the proceedings, and it is not open to anyone to restore it to life in order to embark upon a new discussion which would not only be obiter dicta, but would be reasoning based upon an hypothesis which the Court has already rejected, and which would introduce an internal contradiction into the judgment.

This being my point of view on the problem, my separate opinion will deal only with the legal question the solution of which has of itself, to my mind, led to the rejection of Belgium's Application.

7. The question occasions no difficulty if the members of the company or shareholders complain, ut singuli, of direct damage, as is generally the case in municipal law; if, in other words, he is injured with respect to his subjective interests, as distinct from those of the company: e.g., in
[p 297] the case of individual despoilment or discriminatory measures. He is then in the position of any individual claiming the diplomatic or jurisdictional protection of the State of which he is a national FN19.

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FN19 Cf. I. Brownlie, op. cit., p. 401.
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But what will be the position if the shareholder's claim relates to an indirect injury resulting from a measure which affects the company as such? The charges which may be expressed as denials of justice, abuse of right or misuse of power are those which, according to Belgium, affected the company, beginning with the refusal to allocate foreign currency and the bankruptcy judgment. It is no longer a question of the corporate action to be exercised on behalf of the company, but of proceedings limited to the right or legal interest of the shareholder, to the extent that he is indirectly injured as a result of a measure affecting the company.

***

Since the theory of the reality of the personality of companies has generally been abandoned in favour of the theory of artificial or juridical personality, it has seemed to certain writers that arbitral awards have taken a line which, whilst rejecting this fiction to the extent that it is absolute or excessive, has opened a fresh perspective which is in conformity with the international character assumed by numerous companies. As between the right and the fiction, which thus stand opposed to each other, which must give way? Are we not faced with one of those cases where the adjustment of law to the reality of human affairs and to the sense of justice must carry the day?

There is no doubt that the personality attributed to the group of corporate interests was so attributed with a view to giving to the elements contained therein and bonded together thereby, common means of action and effective protection. Accordingly, the moment that that protection proves insufficient, or even harmful, in the field of international relationships, should not legal personality give way, to the extent that this is necessary and possible, in favour of a more realistic concept and one which is more in accordance with the nature of things, that of corporate reality, in order to leave individuals and capital appropriately revealed, in the interest of the community and in their own interest?

Is there not ground for thinking that it is above all in the world of fiction that value-judgments, applied to the law, should be based upon teleological considerations? Jhering stated that: "The end in view is the creator of all law." Let us also recall the proposition of Saleilles, put forward half a century ago, and which is more mandatory than ever: "Nothing is important", he wrote, "other than the object to be attained; often our most learned constructions serve only to compromise the realization thereof." Curiously enough, one of those learned constructions is the legal fiction. A fiction is indeed "a representation which is contrary to the truth". P. Roubier, to whom I owe this formula, recommends[p 298]"direct enquiry as to what is the object of the legal rule which has thus been laid down in this dissimulated form FN20".

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FN20 P. Roubier, Théeorie générale du droit, p. 116. [Translation by the Registry.]
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It might therefore be considered that the fact of maintaining the fiction of juristic personality contrary to the avowed interest of its component parts would create a situation contrary to the object thereof.

And in fact, however stubborn the fiction of juristic personality may be, as fictions generally are, the diplomatic practice of the creditor Powers and of capital-exporting countries, as well as certain arbitral decisions, have not, after the hesitation prior to the First World War, been slow in accepting, though not without a certain amount of circumspection, the rule which permits the interests of members or shareholders to be dissociated from the abstract personality covering them and given independent consideration—though only where, since the company has the nationality of the respondent State, an action in the name of the company could naturally not be brought against the latter except by local means of redress.

8. However, this arbitral jurisprudence, upon which international courts have not yet had to pronounce, is neither unanimous nor decisive on all points.

In the first place, we must leave out of consideration awards given ex aequo et bono, which are not merely without relevance to the present case, but are clearly out of place in this discussion. Thus, it should be recalled that the Special Agreement between the United States and Chile in the Alsop case empowered the arbitrator to decide in equity and as amiable compositeur. The same was the case with the awards delivered on the basis of the 1923 General Convention between the United States and Mexico, which empowered the arbitral tribunals it set up to decide in accordance with justice and equity, a customary expression for authorizing decisions ex aequo et bono.

Nor can account be taken of awards dealing with partnerships, since the personality of the members is not absorbed into the corporate personality, as the personality of the shareholders would be in the case of a joint-stock company FN21; nor of awards dealing with companies described as "defunct", or which were obligatorily judged according to the terms of the Special Agreement FN22, nor, finally, of awards couched in uncertain or ambiguous terms, nor of awards—in particular those given by heads of State FN23—where the absence of reasons for the decision deprives such awards of any absolute relevance.[p 299]

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FN21 Thus, there must be excluded from this discussion the opinion expressed by Mr. Huber in the report of the Mohammed Ziat, Ben Kiran case, which related to a partnership.

FN22 The awards in the Delagoa Bay Railway Company, Standard Oil, Pierce Oil and Sun Oil cases.

FN23 The award of President Grover Cleveland of the United States in the Cerruti case and the award of King George V of Great Britain in the Alsop case
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The same should be the case for awards suspected of having been given under the influence of other than juridical motives, or which were preceded by a demonstration of power, or by threats on the part of a State which trusted in the force of its arms at least as much as in the force of its rights FN24.

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FN24 Supra, Section 5.
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***

In any case, arbitral precedents and diplomatic practice, supported by part of Western legal writing, do not amount to, as has been said, "a coherent body of doctrine", and consequently do not seem to constitute a custom to the effect that diplomatic protection, and its judicial sequel, might cover damage caused by the national State of a company to shareholders who were aliens in relation to the company. Thus it appears that it is in treaty law that the protection of foreign investments must be sought, whether it be a question of companies which have been obliged to adopt the nationality of the host country, or of nationalizations, "the scandal of the beginning of the century", which followed one another at a rapid rate ever since the First World War, on the part of almost all countries.

9. Be this first hypothesis as it may, namely that of the shareholders who have suffered from the activities of the national State of the company, the problem now to be approached is that of whether diplomatic protection of shareholders is capable of being extended to the situation where the damge is attributable to a third State, as in the present case.

It is of course necessary to exclude at the very outset the possibility of the national State of the shareholders substituting itself for the national State of the company for the defence of the latter, as Belgium claimed to do in its Application filed on 23 September 1958. A bond of legal alle-giance connecting the company to the protecting State is a sine qua non FN25, and this does not exist in this case. The problem must be kept confined within the field of protection of the shareholders themselves. International jurisprudence could not adopt the diplomatic practice by which Belgium seems first to have been inspired, which was that which has been tried more than once by certain Powers, and which may not be unconnected with the outdated theory of control: first by the United States in the Chilean Alsop Company, in which the award was given in 1911; then by the same Government in the Armes automatiques Lewis case, since from 1927 to 1933 Great Britain had untiringly opposed the action of the United States, which was the national State of the shareholders, acting for the protection of the company, which had been formed under Belgian law; then again by Germany when in 1935 it claimed the right to protect a Mexican company, and finally by France and Great Britain in the [p 300] dispute concerning the nationalization of the Suez Canal in 1956, when those two powers thought they could intervene, as national States of the shareholders, in defence of a company whose original regime attributed Egyptian nationality to it. In each of these cases, this was to disregard the essential condition of the bond of nationality or allegiance between the State intervening and the entity in whose name it was intervening. The concept of effectiveness, which is not legally required for attribution of nationality to a company, as a condition of diplomatic protection, cannot operate either to transfer to the national State of the shareholders the right of diplomatic protection of the company itself, which right is an attribute of the company's national State. It has of course been pointed out that it was with shareholders' representatives that the United Arab Republic negotiated an agreement concerning the Egyptian Suez Canal Company, as Mr. E. Lauterpacht reports. But those negotiations do not involve recognition of the right to bring an action at law; they amount to an ex gratia action, not implying any legal responsibility, as was the case of the provisions of the Agreement of 8 September 1923 between the United States and Mexico which set up the Special Claims Commission.

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FN25 Above Section 6 and note 17.
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Thus Belgium refrained, in its Application of 19 June 1962, from claiming to protect the Barcelona Traction company, contrary to what it had done in its first Application, already quoted, of 23 September 1958, and limited its claim from then on to the protection of the shareholders of its own nationality. Since this latter Application was deemed to have lapsed as a result of its withdrawal by the applicant Government, and that Government furthermore made no mention of it in its final submissions, the Court only has to deal with the new Application, in-dependently of the earlier one. This was the effect of the decision of the German-Mexican Commission when it accepted the fresh submissions presented by Germany on behalf of German shareholders, after the error which it had made by claiming the right to protect the Mexican company itself FN26.

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FN26 A. Feller, The Mexican Claims Commission, 1935, p. 118.

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10. Since the right of the State to protect its nationals who have been injured by acts, decisions, omissions or measures contrary to international law, and imputable to another State, is undeniable, it would be useful to seek to ascertain the nature or legal foundation thereof, in order to deduce from it the legal consequences and the extent of its application raised by the present case. The question upon which it would be useful to pronouce is that of whether diplomatic protection derives from a general principle of law recognized by the nations (Article 38, para. 1 (c), of the Court's Statute) or from an international custom (para. 1 (b) of that Article).

The Judgment of the Permanent Court of International Justice of 1924 in the Mavrommatis Palestine Concessions case FN27 does not seem to have [p 301] taken any stand on this point, when it stated, with some emphasis, in an axiomatic form that diplomatic protection "is an elementary principle of international law". One cannot hazard a guess as to the sense in which the expression "elementary principle" was taken, given as it is without any other qualification. And when other judgments have referred to this precedent, they do not seem to have been any more explicit. The terminology of the two international Courts does not permit of there being attributed to them, on this point, an opinion which they seem designedly to have kept in petto, following a prudent practice which has already been remarked on FN28.

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FN27 P.C.I.J., Series A, No. 2, p. 12.
FN28 Separate opinion of the writer, I.C.J. Reports 1969, p. 138. See also separate opinion of Judge Alvarez in the Fisheries case, I.C.J. Reports 1951, p. 148.
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It is true that a special tribunal, the Mixed Claims Commission (United States and Germany), set up as a result of the First World War, decided in more than one case—namely the Vinland, Standard Oil, Sun Oil and Pierce Oil cases—that the intervention of the national State of the shareholders "is based on a general principle which such State would have relied on even in the absence of preliminary agreement". However, that Commission did not explain whether it understood by "general principle" a general principle of law recognized by the nations, or a principle drawn directly from the idea of law. It is nonetheless the case that its jurisprudence, although approved by some authors, though not many, has not been corroborated by other jurisdictions. The opinions of legal writers are also divided. Nor was this the first nor the only time that a rule of international law has been considered by some to be a customary norm, and by others to be a general principle of law recognized by the nations, and by others again to be a principle drawn directly from the idea of law. The problem would obviously not be resolved were one to content oneself with the observation that the frontiers between these various concepts are still blurred or uncertain. This is the case of the rule of exhaustion of local remedies, which is the subject-matter of the fourth preliminary objection in the present case, and which is based now on the one, now on the other, of the first two concepts FN29. Furthermore, the principle of protection of human rights, which will be referred to below, has been considered to be capable of constituting a legal norm at one and the same time on the basis of the three principal sources of international law, namely: international conventions, international custom, and the general principles of law FN30.

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FN29 Cf. the report of Max Huber in the Mohammed Ziat, Ben Kiran case in 1924, and the decision of the French-Mexican Claims Commission in the Pinson case, of 18 October 1928.

FN30 Dissenting opinion of Judge Tanaka annexed to the Judgment of 18 July 1966, in the South West Africa cases, Second Phase, I.C.J. Reports 1966, p. 300.
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11. If my view is accepted, that diplomatic protection and the possible right of the shareholder do not derive from a principle of international law recognized by the nations, it remains to be considered whether the [p 302] international-law custom, upon which diplomatic protection would then, according to predominant opinion, be based, is called upon to extend to all interests which have been injured, in the present case those of the shareholders in a company attached to a third State.

Here we touch on the essence of the problem, the decisive, if not the only, question being that relating to the state of the custom, as it emerges from the conduct of the nations as a whole, and from their declared will.

To this end, it is necessary to re-examine treaty practice, international jurisprudence, the practice of States, and the trend of legal writing, which are the principal constitutive elements of custom.
I would observe, in addition, that the positions taken up by the delegates of States in international organizations and conferences, and in particular in the United Nations, naturally form part of State practice. It is true that some of the great Powers, five or six of which legislated for the whole world up to the beginning of the twentieth century, generally refuse nowadays to admit that resolutions voted in the United Nations framework by a majority of, or even by practical unanimity among, the member States, have any obligatory effect. An attempt at San Francisco by the Philippines to have conferred upon the Assembly, possibly with the concurrence of the Security Council, power to lay down binding legal norms, was rejected. Nonetheless a marked trend in legal writing is becoming apparent, reflecting the new aspects of international life, which is in favour of attributing to the resolutions, and in particular to the declarations of the United Nations General Assembly, the status of at least a subsidiary source of international law, to be added to the classic sources in Article 38 of the Court's Statute FN 31.

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FN31 See the views to this effect of Messrs. Lachs, Mohammed Sami Abdelhamid, Falk, Pechota, McWhinney, Asomoah.
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Certain writers, for their part, see in this an interpretation based upon an argument drawn from the actual text of the Charter, strengthened by a teleological interpretation of that international constitutional instrument, which presupposes the existence of rights and liberties of man which "are not only moral ones, [but].. . also have a legal character by the nature of the subject-matter313 ". They add that such an interpretation should take into account the functioning of the Charter in practice FN32. The General Assembly itself adopts this point of view, as appears from its resolution of 11 December 1963, in which it "confirms the interpretation of free self-determination which it gave in its resolution [p 303] of 1960 on the grant of independence". This is also the case of the 1969 Vienna Convention on the Law of Treaties, Article 31 of which provides that a treaty is to be interpreted "in the light of its object and purpose" and that for purposes of interpretation of a treaty, the context comprises "any subsequent practice".

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FN31a Dissenting opinion of Judge Tanaka, South West Africa cases, I.C.J. Reports 1966, pp. 289-290.
FN32 See to this effect the dissenting opinion of Judge Alvarez, Competence of the General Assembly, I.C.J. Reports 1950, p. 21; that of Judge De Visscher, International Status of South West Africa, I.C.J. Reports 1950, pp. 189-190; G. I. Tunkin, op. cit., pp. 106 and 111, who quotes the declaration of 14 December 1960 on the granting of independence as an example of interpretation of the principles of the Charter
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Others again deduce the authority of the principles of the Charter from the fact that they are, in their view, general principles of law in the sense of Article 38, paragraph 1 (c), of the Court's Statute, linked at once with the jus naturale of Roman law, and with world law, the common law of mankind according to Jenks, or transnational law according to Jessup, a term which has become standard in international law FN33.

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FN33 This view is developed in the dissenting opinion of Judge Tanaka annexed to the Judgment of 18 July 1966 in the South West Africa cases (I.C.J. Reports 1966, pp. 292-296).
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In any case, to return to State practice as manifested within international organizations and conferences, it cannot be denied, with regard to the resolutions which emerge therefrom, or better, with regard to the votes expressed therein in the name of States, that these amount to precedents contributing to the formation of custom. It is as it were an established fact of which legal writers take note FN34. What is more, those who hold the views which have just been expressed do not hesitate to accept this concept conjointly with their own views. It has also just been confirmed by Article 38 of the Convention on the Law of Treaties quoted above.

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FN34 This is what is observed by Professor Mohammed Sami Abdelhamid in the Revue égyptienne de droit international, 1968, pp. 127-128 of the Arabic text.
See also R. Higgins in The Development of International Law through the Political Organs of the United Nations, p. 5, who says :

"... the body of resolutions as a whole, taken as indications of a general customary law, undoubtedly provides a rich source of evidence."

Mr. Sørensen too, in his course of lectures at the Hague Academy of International Law, Recueil des cours 1960, p. 38, states as follows:

"If the international organization is made up of representatives of States, it is clear that the positions taken up by such representatives may, in principle, contribute to the formation of a custom. On this hypothesis, what is involved is acts attributable to the States, acting through their representatives, rather than acts attributable to the international organization as such." [Translation by the Registry.]
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Policy does of course crop up under the veil of resolutions or declarations in the United Nations Assembly. However, it will be conceded that to seek at all costs to erect a partition between policy and law is calculated to bring about this result which is contrary to reality: what is at stake is the attempt to isolate the rule from its social origins, and to snap the link of unity with its historic context. Policy, the policy of the great powers and the colonialist powers, dominated classic traditional law; it cannot be dissociated from law, today any more than yesterday; but it is a new policy, one which does not escape the influence of the [p 304] great principles which are destined to govern the relationships of modern nations. The 1969 Vienna Conference took this consideration fully into account when it adopted numerous solutions to meet the suggestions included in individual opinions and proposals by new members of the international community.

Thus, through an already lengthy practice of the United Nations, the concept of jus cogens obtains a greater degree of effectiveness, by ratifying, as an imperative norm of international law, the principles appearing in the preamble to the Charter. From the domain of theory or legal writing, in which some of these principles, and not the least important thereof, had as it were remained confined, they are passing into the domain of objective existence and practice FN35. Thus it was that U Thant could say, at the 1969 session of the Organization of African Unity, held at Addis Ababa in the presence of 17 African Heads of State, that the United Nations "had widened the concept of the right of self-determination and independence, so as to cover the recognition of the lawfulness of the struggle carried on by such nations for the exercise and enjoyment of that right in practice FN36 ". He might have quoted in addition the principle of equality and that of non-discrimination on racial grounds which follows therefrom, both of which principles, like the right of self-determination, are imperative rules of law FN37.

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FN35 See I. Brownlie, op. cit., pp. 483-486. For Mr. Brownlie, the following are imperative rules of law: the right of self-determination, racial equality, sovereignty of peoples over their natural resources, the Genocide Convention, the prohibition of aggressive war, of the slave trade, piracy, and all other crimes against humanity.

FN36 Le Figaro, 8 September 1969 [Translation by the Registry].
Cf. I. Brownlie, op. cit., pp. 417, 484 and 485, where one reads: "Intervention against a liberation movement may be unlawful, and assistance to the movement may be lawful."
Also R. A. Tuzmukhamedov, for whom the 1960 declaration of the United Nations General Assembly concerning the granting of independence is a de facto recognition of the movements for national liberation.
FN37 Racial equality is an imperative rule of law, particularly since the adoption by the United Nations General Assembly of the declaration of 20 November 1963 on racial non-discrimination (Resolution 1904 (XVIII)).
See in particular Mr. J. Spiropoulos, who upheld this point of view (Sixth Committee of the General Assembly, 7 December 1948).
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12. The documents of the greatest probative force in international treaty law are, in the present case, the Peace Treaties, signed by the Allied Powers and their associates with the Central Powers and their allies, in 1919 at Versailles, Saint-Germain, Neuilly and Trianon, in 1921 and 1922 at Vienna and Budapest, in 1923 at Lausanne; and finally the agreements of 1922 and 1924 to which the United States were parties.

According to the provisions of these Treaties, shareholders who were nationals of the allied countries, holding shares in companies of enemy allegiance, had the right to reparations, without any distinction being made between direct and indirect injury.[p 305]

A quarter of a century later, the provisions of these Treaties just quoted were adopted in the Peace Treaties which brought to an end the war of 1939-1945, which were signed in 1947, as well as in the State Treaty signed in 1955 with Austria.

What value as a customary law precedent may we attribute to these provisions?

It is legitimate to consider that the inclusion of an obligatory clause in a treaty indicates that that clause is not yet an integral part of positive law. In particular, this is what may be deduced from the Judgment of this Court in the Asylum case FN38. This reference does not of course relate to multilateral treaties of which the particular objective, as regards the majority of their provisions, is the codification of certain rules of international law, such as the 1958 Geneva Convention on the High Seas, and the Vienna Conventions of 1961 on Diplomatic Relations, of 1963 on Consular Relations, and of 1969 on the Law of Treaties.

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FN38 I.C.J. Reports 1950, pp. 276-277.
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Conventions which do not contemplate the codification of existing rules can nonetheless amount to elements of a nascent international custom, which is what may be said with fair certainty of the Conventions which resulted from the Hague Peace Conferences of 1897 and 1907, of the Treaty of London on Maritime Law of 1909, of the Protocol of 1925 prohibiting the use of asphyxiating gas FN39, and of the 1958 Geneva Convention on the Continental Shelf FN40.

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FN39 The 1899, 1907 and 1909 Conventions, and the 1925 Protocol, were so little declaratory of law that during two great world wars, and other comparatively minor wars, and despite their clear prohibitive terms, they were no obstacle to massive bombardments of open cities; deliberate "break up" of entire populations, attempts at genocide before the term was invented; attacks on merchant ships belonging to neutral countries as well as enemy countries, which were sunk with all hands.
FN40 Judgment of this Court of 1969, and separate and dissenting opinions annexed thereto.
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So far as the Peace Treaties more particularly are concerned, whether these be bilateral or multilateral, they are not such as to amount ipso facto to an element of custom. The clauses of these treaties, imposed upon the defeated States, must be respected by virtue of the rule pacta sunt servanda. But can the reasoning be pressed so far as to say that their provisions reflect the consent of, or the genuine and effective acceptance by, the defeated State, which acceptance or consent would, on this hypothesis, give rise to the opinio juris?.

It will be observed first of all that the clauses concerning war reparations only apply against one party, for the benefit of the party which imposed them. Of course it could not be otherwise in a treaty marking the end of a victorious war, even one which was waged for just cause. However, does this mean that such clauses are elements of a legal custom governing the relationships between free and sovereign States? In other words, can a practice amount to a customary precedent if it does not show a [p 306] conviction, a conviction of law, in the minds of the dominant parties, as well as in the minds of the servient parties, to the effect that they have each of them accepted the practice as a rule of law, the application whereof they will not thereafter be able to evade?

13. When replying in the negative to this question, one should also observe, it is true, that other treaties, quite unconnected with war or peace between nations, were concluded during the inter-war period, which recognize the same rights of the shareholders independently of the company. The object thereof was to resolve claims arising from revolutions or riots, or from nationalizations, which commenced in Latin America, and which were not long in extending to the West, to Eastern Europe, and to the economically weak countries or developing countries: agreements between Switzerland and socialist States, agreements between various States and Latin American States.

The multiplicity of these treaties, upon which the applicant State relies, is as it were a double-edged weapon. The Applicant argues therefrom in order to support its contention, and deduces, from the existence of this treaty-practice, the appearance of a rule of international law.

However it is a question of bilateral treaties the effect of which-—apart from the rights of the contracting parties—was only, at the most, to contribute to the eventual formation of custom.

Must it not also be stressed, from a logical point of view, that treaties are the less to be considered as declaratory law in that the States concerned have recourse thereto despite the existence of earlier treaties containing the same provisions? This would be the case, if this point of view is accepted, for the successive treaties concluded, despite treaty precedents, on the occasion of revolutions, riots or nationalizations, as well as for the Peace Treaties of the two world wars, which reproduce similar provisions. Consequently, the concept enunciated by all these treaties would be of no less transitory a nature than the control theory, established in the course of the two wars. In fact, it would appear to be related thereto, if it is observed that the provisions appearing in the Peace Treaties apply, as do those contained in laws and regulations setting up the control test, to nationals of so-called enemy States.

It is true that a certain body of opinion sees no objection to deducing lasting legal effects from the control theory. But what does that theory amount to, if not to exceptional measures born of the circumstances of first one and then a second war, which circumstances disappeared, reappeared, and then again disappeared: in short, measures which are an integral part of methods of economic warfare, or simply of warfare tout court. Is it the characteristic mark of a legal norm to be as unstable as this, or rather to be capable of taking up or laying down its life according to the demands of ephemeral events? It could not even amount to a customary-law precedent, unaccompanied as it is by the conditions of generality, continuity, or constancy which are postulated for a con-[p 307] stitutive element of custom. Thus recent agreements have specified that it is only by virtue of the agreement itself that a company is considered to be a non-national of the State to which it relates, because of the control exercised over it FN41.

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FN41 Inter alia, the Agreement signed by Mauritania and the Société des mines de Mauritanie, Article 50 of which provides: "The Company is considered, by agreement, to be a non-national of the Muslim Republic of Mauritania, because of the control exercised over it by foreign interests." [Translation by the Registry.]
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14. One last category of treaties deserves examination: this is that of agreements generally called treaties of friendship, establishment and commerce.

A certain number of these treaties, subsequent to the Second World War, touch on the problem, but from standpoints which are different from, and sometimes opposite to each other. Provisions may be gleaned from these which imply the right of protection of the national State of the shareholders. It will however not fail to be noticed that the formulae which these treaties use relate to very diverse concepts: that of majority interest or substantial interest of nationals, that of direct or indirect control by the shareholders, or mixed control; whereas provisions in no less recent treaties do not provide for either of these concepts.

No uniform tradition has therefore become established which permits of some of these bilateral treaty commitments being adopted as customary precedents.

In order to make an end of these treaties, I would observe that diplomatic protection of the shareholders was apparently included in some of them because of special political circumstances. The Treaty of 1955 between France and Switzerland is, according to Mr. Vignes, to be explained by the fact that Tunisia had not yet obtained political independence, and enjoyed merely a regime of autonomy. Furthermore, the 1936 Treaty between France and Germany had as its object the settlement of the thorny problem of the Saar. Finally, the 1946 Treaty between the United States and the Philippines was not unrelated to certain questions raised by the transitional period following the independence of the latter country.

15. From the foregoing it appears that the number of States which have been parties to one or the other of the treaties which have been in question, the provisions of which can be taken into account, so far as consistent with each other, is not such as to attain the degree of generality which is constitutive of custom as provided for in Article 38, paragraph 1 (b), of the Court's Statute. It must also be stressed that many States are in open opposition to obligations resulting from imposed, or unequal treaties FN42, or treaties concluded without their participation, [p 308]
before they were admitted into the international community FN 43. In particular they are hostile to the extension of diplomatic protection other than by way of agreement, and within the relationship of the contracting States alone. And it is sufficiently well known for it to be unnecessary to dwell on the point, what the consequences are, for the growth of a custom, of opposition which is not thought to need to be so massive.

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FN42 As to unequal treaties to which the Asian and African States are opposed, see the Asian-African Legal Consultative Committee, Eighth Session, Brief of Documents, Vol. IV, pp. 471-472, as well as the proposal, mentioned therein, of Burma, Czechoslovakia, India, Lebanon, Ghana, Madagascar, United Arab Republic, Nigeria, Syria and Yugoslavia, to the effect that such treaties should be considered as without validity.
FN43 The socialist view has been set out by Mr. G. I. Tunkin, who considers that one must avoid imposing on the socialist States and the new States certain norms which these States have never accepted and which are unacceptable to them (op. cit., p. 88).
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16. What in fact were many of these norms, and what complaints did they give rise to, and do still give rise to, so that one-half of the States of the world dispute essential stipulations thereof, including the scope of diplomatic protection?

It has become apparent that quite a number of States challenge the legitimacy of certain trends of this protection, sometimes going so far as to dispute the principle thereof FN44. This observation is of undeniable importance in connection with the development of custom in this matter. Consequently the advantage once again becomes apparent, in view of the circumstances of the case, of re-examining in some detail the reasons for this opposition, which cannot be dissociated from the problem of elaboration of custom in general, and its application to the present case in particular.

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FN44 Supra, Section 5.
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Among the treaties which have been in question FN45, it is necessary to go back to those which organized international society in the eighteenth and nineteenth centuries, and at the beginning of the twentieth century. It is well known that they were concluded at the instigation of certain great Powers which were considered by the law of the time to be sufficiently representative of the community of nations, or of its collective interests. Moreover, the same was the case in customary law: certain customs of wide scope became incorporated into positive law when in fact they were the work of five or six Powers. This was certainly an exercise open to criticism, and even to serious criticism. In addition, of the norms which had thus become established, and which survived the recent fundamental transformations of international society marked by the League of Nations Pact and the Charter of the United Nations, taking into account the liberal interpretation continually given to the latter instrument, some, as we have seen, are disputed by the States which did not take part in their elaboration, and which consider them to be contrary to their vital interests.

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FN45 Supra, Section 12.
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17. It will be recalled that the great European States of nationalist tendencies withdrew their support for the universalist theory of the first [p 309] internationalists, such as Vittoria and Suarez—that is, if they had ever recognized it. Thus, Mably was able to enlarge on the notion of a European public law, from the benefits of which other nations—free or independent—had been excluded since the sixteenth century. A closed community, as Sereni most conscientiously put it. The Treaty of Paris, signed at the conclusion of the 1856 Conference, stated for the first time in the history of international relations that one such nation, the Sublime Porte, was "admitted to participate in the advantages of the Public Law ... of Europe". This term was, however, to be displaced in subsequent treaties entered into by Western countries, in 1885, in 1904, in 1921 and in the Statute of the Permanent Court of International Justice by another no less discriminatory term, that of "civilized nations". The Statute of the International Court of Justice has adopted this last form of words, although the Charter of the United Nations abandoned it in favour of the sovereign equality of all the nations of the international community FN46. And N. Politis, who wrote just after the First World War that "the law . . . must, if it is to retain its value, be a faithful reflection of life, change with it, model itself unceasingly upon it . . .", still limited the area of application of this realistic conception of the relationship between life and the law to Europe and to Europe's interests, just as he restricted thereto the horizons of his penetrating study of international morality FN47. Politis was nevertheless inspired throughout his book by the Roman-Phoenician jurisconsult Ulpian, rightly regarding him as the founder of international law on account of his remarkable contribution to the development of jus gentium FN48, one of the ancient fields of development of this law.

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FN46 Until just before the San Francisco Conference in 1945, the Atlantic Charter of 1942 was regarded by most of its interpreters as intended for the use of Western countries.
FN47 The Harvard Law School understood the need to delete the word "civilized" from its revised draft concerning State responsibility. Sir Gerald Fitzmaurice approved the deletion of this word, opting, however, for a different form of words from that of the Harvard Draft (Yearbook of the International Law Commission 1960, I, p. 270, para. 56). See in addition the writer's separate opinion in I.C.J. Reports 1969, para. 33.
FN48 A third of Justinian's Digest is borrowed from the writings of Ulpian (Encyclopaedia Britannica, s.v. "Ulpian").
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18. Moreover, in the imposing mass of legal norms which make up the modern structure of international law, a number of rules have crept in which owe their origins to duress or illegality; in particular those rules— often enshrined in solemn treaties—justifying racial discrimination, slavery, and, until the middle of the twentieth century, conquest, annexation and colonization in all its forms: colonies of exploitation or of settlement, suzerainty, protectorates, mandates or trusteeships FN49, the two latter forms disguising, by means of a verbal fiction, a colonialist practice and doctrine, the unlawfulness of which has been stigmatized at the United Nations and condemned by that body. This attitude on the [p 310] part of the World Organization has been reflected, at the judicial level, in the proceedings on the Advisory Opinions of 1950, 1955 and 1956, requests for which were made to the International Court of Justice with regard to supervision of the implementation of the Mandate for Namibia.

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FN49 Dissenting opinion of Judge V. M. Koretsky in the South West Africa cases, I.C.J. Reports 1966, pp. 239 ff.
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19. It thus becomes easier to understand the fears of a broad range of new States in three continents, who dispute the legitimacy of certain rules of international law, not only because they were adopted without them, but also because they do not seem to them to correspond to their legitimate interests, to their essential needs on emerging from the colonialist epoch, nor, finally, to that ideal of justice and equity to which the international community, to which they have at long last been admitted, aspires. What the Third World wishes to substitute for certain legal norms now in force are other norms profoundly imbued with the sense of natural justice, morality and humane ideals FN50. It is, in short, a matter of a change of course towards natural law as at present understood, which is nothing other than the natural sense of justice FN51; a change of course towards a high ideal which sometimes is not clearly to be discerned in positive law, peculiarly preoccupied as it is with stability: the stability of treaties and the stability of vested rights. Thus, for example the notion of effectiveness—the usefulness of which in certain matters is not denied— gives a too unqualified support to the preservation of a status quo ante the unlawful origins of which are admitted when it is said: "time sometimes effaces illegality, so that only effectiveness remains" FN52. And this is relevant to the application of this notion to colonial acquisition, where we see the principle of sovereignty give way to the presumption of the so-called right of the first occupant FN53; so too with those treaties already [p 311] described in Roman law as leonine, imposed rather than concluded in a past era and capable of leaving much room for the implementation of the rebus sic stantibus clause. In short, these countries wish to take the heritage of the past only with beneficium inventarii: which lends significance to Westlake's observation: "The geography of international law has changed considerably." Nevertheless, although the old law has been pruned of many sequelae of a past of inequality and domination, in particular by the adoption of the principles of the San Francisco Charter and of those of Bogota and Addis Ababa, those same principles are not yet imposed without restriction or reservation, nor have any developed all their potentialities. While tribute should be paid to the promoters of declarations concerning great humane principles of a universal nature, from the Wilson Declaration in 1917 with its memorable Point 4, the Atlantic Charter of 1942 and the report of the Dumbarton Oaks Conference in 1944, up to the United Nations Charter, it must be admitted that enthusiasm for the principles proclaimed was not of long duration. There is a gap, which must be filled, between theory and practice. Thus, among these principles there is the right of self-determination—demanded for centuries by the nations which successively acquired their independence in the two Americas, beginning with the 13 Confederate States in North America, and in Central and Eastern Europe; many times proclaimed since the First World War; enshrined finally in the Charter of the United Nations FN54, added to and clarified by the General Assembly's resolution of 16 December 1952 on the right of self-determination and the historic Declaration by the Assembly on 14 December 1960 on the Granting of Independence to Colonial Countries and Peoples, the consequences of which have not yet fully unfolded. The international lawmaking nature of these declarations and resolutions cannot be denied, having regard to the fact that they reflect well-nigh universal public feeling FN55. They were, moreover, preceded by the similarly worded Pact of Bogota adopted by the American States in 1948 and the resolutions of the 1955 Bandung Conference, just as they were followed by the Addis Ababa Charter of African Unity of 1963 FN56 and the resolutions of the Belgrade Conference in 1961 and the Cairo Conference in 1964 of Non-Aligned Countries, the latter comprising the majority of the Members of the United Nations, and, finally, by the declaration of 21 December 1965 by the General Assembly on the inadmissibility of intervention in the domestic affairs of States and the protection of their independence and sovereignty. Notwithstanding this, uninterrupted sequence of precedents [p 312] in the life of nations, Western writers, with some few exceptions FN57, persist in refusing to concede to this right—though referred to as a "droit" in the French text of the Charter, and in the resolutions and declarations of the General Assembly—the attributes of an imperative juridical norm. The partisans of this doctrine seem to look back nostalgically to the era when it was still possible with impunity, and without infringing "European public law", to deny the right of self-determination to peoples seeking to free themselves from the yoke of the States which had subjected and colonized them. Against the defenders of the last bastions of traditional law, there thus stand arrayed, once again, with the support of a Western minority, the serried ranks of the jurists, thinkers and men of action of the Latin American and Afro-Asian countries, as well as of the socialist countries. For all of them self-determination is now definitely part of positive international law. As is known, furthermore, a majority of States, through their representatives at the 1969 Vienna Conference on the Law of Treaties, pronounced in favour of a solution to the problem of jus cogens capable of giving definitive sanction to the principles of the Charter, regarded by them as imperative juridical norms FN58. It thus seemed appropriate that those principles—not excepting those deriving originally from the spirit of the American or French Revolutions—the religious inspiration of which is not unknown, should be solemnly reaffirmed. They were so in the very heart of Africa by the head of the Catholic church. Addressing himself to the peoples of Africa and, beyond them, to the entire world, His Holiness Paul VI, resuming a tradition, on 2 August 1969, in Kampala, before five Heads of State, denounced racial discrimination, reaffirming the equality [p 313] of peoples and the rights of each of them to a free and decent life FN59.

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FN50 See the writer's separate opinion previously referred to, section 33, bottom of p. 134 and top of p. 135; section 35, bottom of p. 136; section 36, p. 137.
Was not Voltaire giving a definition of natural law when he said: "Morality is in nature"?
FN51 Sisnett, Chief Justice of British Honduras and arbitrator in the Shufeldt case, took the view that international law should be bound by nothing but natural justice.
See too the separate opinion of Judge Carneiro in the Minquiers and Ecrehos case, I.C.J. Reports 1953, p. 109.
FN52 The time factor, which has the attribute in private law of consolidating existing situations under certain conditions which generally do not exclude good faith, cannot purely and simply be transposed into international law. It ought not to prevail over manifest rights, whether those of indigenous peoples to their own territories, or those of the community of mankind to res communis or res nullius, such as the high seas, the sea-bed, the polar regions or outer space.
FN53 See the dissenting opinion of Judge H. Klaestad appended to the 1960 Judgment of this Court on the Right of Passage over Indian Territory case, a judgment still influenced by the static view of law. India, basing itself on the 1960 Declaration on the Granting of Independence to Colonial Countries and Peoples, maintained before the Security Council that in terms of that Declaration Portugal had lost all claim to sovereignty over Goa and, consequently, all right to protest against the reoccupation of that territory, which constituted an act of liberation, the Security Council preserving a significant silence.
FN54 Article 1 read with Articles 55 and 56.
FN55 See Section 11 above.
FN56 It should be noted that the Addis Ababa Charter accepted the "purposes" of the preamble to the San Francisco Charter as "principles" or rules of imperative law, leaving no further room for doubt that they definitely constitute jus cogens.
FN57 The whole problem was, however, already solved in an affirmative sense in 1950 by one of the precursors of the new concept, who wrote: "It is already the law, at least for Members of the United Nations, that respect for human dignity and fundamental human right is obligatory." (P. C. Jessup, A Modern Law of Nations, 1950, p. 91.)
Writing a few years later, Prof. G. I. Tunkin noted that: "The representatives of the colonial powers, despite lip-service to this principle, have done their utmost to pare it away to vanishing point, to water it down and to reduce its emancipating tendency to nothing. Sometimes they even deny its existence in international law." (Op. cit., p. 45 [Translation by the Registry].)
FN58 Such had been the opinion expressed in the report concerning State responsibility submitted to the International Law Commission (Yearbook of the International Law Commission 1957, Vol. II, pp. 113-114, paras. 2 to 7).
Furthermore, a joint proposal by Burma, Cameroon, Ghana, India, the Lebanon, Madagascar, Syria, the United Arab Republic and Yugoslavia provided that "Any treaty which is in conflict with the Charter of the United Nations shall be invalid, and no State shall invoke or benefit from such treaties" (Doc. UN A/AC. 125/L.35, para. 2). Article 64 of the 1969 Convention on the Law of Treaties endorsed the principle of this proposal by providing: "If a new peremptory norm of general international law emerges, any existing treaty which is in conflict with that norm becomes void and terminates."
FN59 Le Monde, 3 August 1969.
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20. To conclude this necessary digression, it should be recalled that the progress achieved in the effective application of the principles of the Charter is to a large extent due to the contribution of the representatives at the United Nations of the countries of the Third World, which have espoused a reasonable interpretation of Article 2, paragraph 7, of the Charter, concerning the reserved domain FN60.

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FN60 Cf. M. S. Rajan, United Nations and Domestic Jurisdiction, pp. 521-524.
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It is well known that the wording of that paragraph, despite the opposition of Belgium, departed from the strictness of Article 15, paragraph 8, of the Covenant of the League of Nations, and that it was given its present form on the insistence of the United States, no doubt in order to take account of that evolution in the law that was already perceptible to those attending the San Francisco conference. A consensus was then reached that it was for the organs of the United Nations themselves to interpret the provisions of the Charter they applied. And the application of this new text was subsequently to be adapted to the growing internationalization of the life of the peoples of the world, involving a corresponding constant loss of ground by the concept of absolute sovereignty FN61.

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FN61 See, among, other separate opinions of Judge A. Alvarez, all of which were orientated towards what he regarded as the inevitable future, his dissenting opinion appended to the Advisory Opinion on the Competence of the General Assembly delivered in 1950 by the International Court of Justice, in which he said:
"The psychology of peoples has undergone a great change; a new universal international conscience is emerging, which calls for reforms in the life of peoples. This circumstance, in conjunction with the crisis which classic international law has been traversing for some time past, has opened the way to a new international law." (I.CJ. Reports 1950, p. 12.)
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It is remarkable to note that the Permanent Court of International Justice was so well aware of this that it stated in its Advisory Opinion in 1923 with regard to The Nationality Decrees Issued in Tunis and Morocco:

"The question whether a certain matter is or is not solely within the jurisdiction of a State is an essentially relative question; it depends upon the development of international relations." (P.C.I.J., Series B, No. 4, p. 24.)

But the same Court nevertheless continued faithful to a certain positivism which culminated in the Judgment in 1927 in the Lotus case and constantly influenced its subsequent Judgments. It stated in its Judgment in 1932 in the case of The Free Zones of Upper Savoy and the District of Gex that "in case of doubt a limitation of sovereignty must be construed restrictively FN62".[p 314]

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FN62 P.C.I.J. Series A/B, No. 46, p. 167.
In his dissenting opinion in the Anglo-Iranian Oil Co. case, Judge Read, on the other hand, adopted an approach that took into account the already perceptible evolution in the concept of sovereignty. He wrote:

"The making of a declaration is an-exercise of State sovereignty, and not, in any sense, a limitation. It should therefore be construed in such a manner as to give effect to the intention of the State, as indicated by the words used; and not by a restrictive interpretation, designed to frustrate the invention of the State in exercising this sovereign power." (I.C.J. Reports 1952, p. 143.)
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It is in this field in particular that the organs of the United Nations, strengthened by the presence of the new countries yearning for a new law, outstripping judicial bodies apparently still attached to tradition, have blazed a trail towards renovation. The General Assembly and the Security Council, when dealing with questions of concern to the international community or touching upon the great principles of the Charter, have, after long debates, session after session, finally overridden the objection based on Article 2, paragraph 7, thanks to a reasonable and extensive interpretation—express or tacit—of its words FN63. The road was long and arduous between 1946, when Egypt was unsuccessful in obtaining a decision, against the occupying Power, of the Security Council, and the 1960 Declaration on the Granting of Independence to Colonial Countries and Peoples—a declaration upon which the peoples struggling for their liberation have, not without success, since relied, and which the Security Council decided to confirm by its resolution of 20 November 1965 endorsing Southern Rhodesia's right to independence and its right to decide its own future.

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FN63 This was the case with respect to the demand of Tunisia and Morocco for independence from 1951, that of Cyprus and of West Irian from 1954, of Algeria from 1955, of Angola from 1960, of Rhodesia from 1961, and, finally, in 1963, of all the countries occupied by Portugal. The same is the case with respect to the human rights of persons of Indian origin in South Africa since 1946, and with respect to apartheid since 1948.

It will be noticed, however, that those Powers which firmly opposed United Nations intervention in the foregoing cases rejected the objection based on Article 2, para. 7, in respect of interventions in Spain in 1946, in the case of Greece v. Albania, Bulgaria and Yugoslavia in 1948, in Czechoslovakia in 1948 and in Hungary in 1956. In this connection, Mr. B. Rajan has stressed the fact that political considerations and the effects of the cold war exercised an undesirable influence in these cases (United Nations and Domestic Jurisdiction, pp. 177-178).
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***

It has been necessary to mention this long series of facts in order to elucidate a new aspect of the evolution of international law in general and of its two great sources in particular. That which has been admitted in respect of treaties since the condemnation of the theory of representativity and the increased efficacity of the principles of the Charter—thanks to the ever less strict interpretation of Article 2, paragraph 7—, must probably be admitted in respect of international custom and its application in the present case. [p 315]

It is by taking into consideration the foregoing and the conclusions that emerge therefrom that it will be seen to what extent the custom of diplomatic protection is capable of receiving a sufficient number of adherences to cover new hypotheses such as that which is now submitted for the consideration of this Court.

21. After this indispensable excursion in to the argument raised by the new aspects of the development of custom, and turning now to international case-law, it will be seen that it provides but few precedents which support the right of diplomatic protection in the case of shareholders who complain of indirect injury.

International case-law is itself only an auxiliary source of law and does not take the place of the principal sources, which are treaties and custom. But, considered as an element of the latter, it seems that it does not in the instant case fulfil the conditions necessary for it to be regarded as a precedent establishing a custom.

In point of fact, those precedents which relate more or less directly to the question under consideration have so far, it is hardly necessary to reiterate, only been the work of arbitral tribunals. Judicial tribunals have not been called upon to pronounce upon this matter until the present case. Furthermore, arbitral tribunals, because of the cases submitted to them, have up to the present considered only cases where action was brought in favour of the members or shareholders of a company to which its own national state had caused the damage. Decided cases thus do not, any more than does treaty practice, assist the argument that diplomatic protection extends to shareholders indirectly injured by a State other than the national State of the company.

22. So far as concerns the practice of States, it cannot be denied that numerous positions have been adopted which denote an intention to include within the framework of diplomatic protection the claims of shareholders in a company of a third nationality.

To what extent can the positions thus adopted contribute to the formation of a custom?

In the first place, it is plain that such attitudes can only be counted as precedents creating international custom if those who adopt them do not depart therefrom after having relied thereon. Now, in the analysis of such precedents, more than one State can be found against which there can be levelled the criticism that it has adopted attitudes which are self-contradictory, and thus deprived of any legal effect. The constancy of French practice and, since the turn of the century, of that of the United States, does not suffice to establish a custom supposed to be universal. And this is still more so in that a practice only contributes to the for-mation of a customary rule if, as has already been said, both the State which avails itself thereof or seeks to impose it and the State which submits to or undergoes it regard such practice as expressing a legal obligation which neither may evade.

An expression of a State's will which is contested by the other party [p 316] remains an isolated act without effect. And how often the attitudes of States have met with resistance from opposing parties! This happened, merely by way of example, to France in the following cases: Société des quais, docks et entrepôts de Constantinople FN64; Société Limanova; Société du chemin de fer de Tirnovo; Compagnie royale des chemins de fer portugais; Société lettone de chemins de fer; and, finally, various companies in Mozambique. So too, the United States, in the following cases: Kunhardt; Alsop; Ruden; Delagoa Bay Railway Company; Vacuum Oil Company of Hungary; Romano-Americana and Tlahualilo. The United Kingdom in the cases already referred to of the Delagoa Bay Railway Company and Tlahualilo, and in the Mexican Eagle Co. case. Switzerland, in the cases of the Compañía Argentina de Electricidad and of the Compañía Italo-Argentina de Electricidad. The Netherlands in the Baasch and Römer case and in that of Mexican Eagle Co. Finally, Italy in the Cane-varo and Cerutti cases.

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FN64 The opposition of the Sublime Porte was so firm that the French Government threatened to seize the Customs of Mitylene, to administer them and to retain the net revenue until complete satisfaction had been obtained (Documents diplomatiques français, Second Series, Vol. I, Nos. 349, 364, 455 and 497, and also the statement by M. Delcassé, Minister for Foreign Affairs, in the Chamber of Deputies on 4 November 1901).
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It is not without interest, moreover, to remark that opposition to such diplomatic protection came, in almost 90 per cent. of the cases, from developing countries.

23. It remains to be seen, with regard to the development of custom, what are the current teachings in respect of the questions which arise.

The views there expressed do not consist solely of proposals de lege ferenda. They often constitute a statement of the rules of positive law. They are even sometimes one of the auxiliary factors in its formation, as, following a centuries-old practice, Article 38, paragraph 1 (d), of the Statute of the Court confirms. One cannot but refer in this regard to the lasting influence on the development of international law of many of the doctrines advanced in the past by Ulpian, and, in modern times, by Vittoria and Suarez, by Bodin, Grotius, Vatel, Calvo, Anzilotti and Politis, to mention only some of the best-known publicists.

I hasten to add that legal teaching is not represented solely by the writings of the publicists. Such teaching is also expressed, as we know, in the works of legal conferences and of institutions, institutes or associations of international law. Nor must we neglect to seek such teaching— and I would stress this—in the separate opinions of judges, to which I have so frequently felt bound to refer. I must emphasize in the first place that the authority of the precedents of the two international courts derives, inter alia, from the very fact that their judgments include the dissenting or separate opinions of their members. This is no paradox; for, in order to assess the value of a judicial decision, it is necessary to [p 317] be able to ascertain the extent to which it expresses the opinion of the Court, and what objections judges no less qualified than those who supported it were able to bring against it. Such would seem to be the case with the judgments of the superior courts in the Anglo-American system, where the value of dissenting opinions is not greatly outweighed by the recognized authority of case-law. It is probably this which led Charles Evans Hughes, a former judge of the Permanent Court and subsequently Chief Justice of the United States, as Judge Jessup recalled in his well-reasoned dissenting opinion appended to this Court's Judgment of 18 July 1966, to say:

"A dissent in a court of last resort is an appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the error into which the dissenting judge believes the court to have been betrayed." (I.C.J. Reports 1966, p. 323.)

And do not the opinions of the judges of the two International Courts derive increased authority from the fact that those judges were elected, according to Article 9 of the Statute of both Courts, so as to assure "in the body as a whole the representation of the main forms of civilization and of the principal legal systems of the world"?

This authority is nothing other than that of particularly well-qualified jurists and takes its place in the general context of legal teaching. Thus, Mr. St. Korowicz, in a study of the opinion of the seven dissenting judges in the Customs Regime between Germany and Austria case, places it under the head of "the teachings of publicists", which are regarded in Article 38, paragraph 1 (d), of the Statute of the Court as "subsidiary means for the determination of rules of law".

And, it is hardly necessary to add, what authority as teaching must be enjoyed by the concordant opinions of the dissenting judges when the judgment has been delivered by an equally divided number of votes, thanks to the President's casting vote—in other words, with all the respect due to it, by a "technical or statutory" majority, as Judge Padilla Nervo emphasized in his dissenting opinion appended to the aforementioned Judgment of 18 July 1966.

To come back to the question under discussion concerning the present position of legal teachings regarding the formation of custom in connection with the points raised in the present case, it goes without saying that the teachings invoked must represent, if not a fairly general consensus, at least a predominant current of opinion. Now, in the case of the diplomatic protection of shareholders injured by a third State, teachings are strongly divided, as are also, as to its legal basis, those writers who. admit such protection, as has been observed FN65.

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FN65 See section 10 above.
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24. I would add, solely for the purposes of discussion, that if it were [p 318] possible to follow the opinion which sees in the diplomatic protection of shareholders a departure from and a tempering of the rule of respect for the juristic personality of a company, it would still be necessary to enquire whether that exception to the rule could be extended by analogy to the case with which we are concerned.

It is a well-known fact that where the company is of the nationality of the respondent State, corporate action can only be brought against that State in its domestic courts, international action on the claim of the company itself against the State of which it possesses the nationality being ruled out. There can be no assimilation, in the absence of specific provision to that effect, to the law of the European Community. It is consequently the legal impossibility of bringing an international action against the State of the company's nationality that is said to have opened the way to suppletory action by the shareholders indirectly injured, and to have made its exercise lawful.

These circumstances are not present in the case of injury caused by a State of a third nationality. For since the exercise of diplomatic protection is a matter of unfettered competence, the absence of action by the national State of the company is not the consequence of a legal obstacle and may be only temporary. That State, e.g., Canada, enjoys in this connection a discretionary power. There is consequently no ground for enquiring why it refrained from seising the Court concurrently with Belgium, not whether its abstention is final. Whatever its attitude may have been or may possibly be, this does not affect the question whether or not the national State of the shareholders enjoys the right to take up their claim on account of harm which the company itself is alleged to have suffered. This question is a purely legal one, on which the possible wishes of the company's national State would not have any effect.

One should furthermore consider, from a practical point of view, the consequences that the subsequent exercise by the national State of the company of its manifest right as the latter's protecting State would involve. If it decided to seise an international tribunal after the national State of the shareholders had done so, it is not likely that it could in its turn obtain compensation for the injury caused to the company, the compensation that would be due to it having already been awarded to the other State. Not only would the analogy not be logically justified, having regard to the essential difference between the two hypotheses, but its consequences would in addition run counter to the proper administration of justice.

25. The exception which authorizes action by the national State of the shareholders might, however, be extended to cases where the company has ceased to exist. The impossibility of action on its behalf by its national State is again present, though for a different reason, as it is in the case where it has the nationality of the State to which the damage is attributed. There would furthermore be no risk of a conflict between the compensation that could be claimed, in respect of the same complaint, [p 319] by the national State of the company and by that of the shareholders. The shareholder's claim would then be justified by a right of his own since, after payment of the shareholders and other creditors, the residue of the company's assets goes directly to the shareholders.

These circumstances would not, however, apply in the present case. A bankruptcy adjudication, like an order for judicial administration or for a receivership, has not the immediate effect of putting an end to the life of the company, at any rate in most legal systems, including those of the two Parties to the case, Spain and Belgium. A bankruptcy judgment, whilst involving immediate effects with respect to the dispossession of the bankrupt and the administration of the company, the collation of debts owing to and owed by the company, and the fact that such debts become immediately payable, may nevertheless finally result in a composition, under the terms of which the company, which has not ceased to exist, resumes the course of its normal life.

Since Barcelona Traction's bankruptcy had no legal effects other than those just mentioned, it consequently does not authorize an action ut singuli by that company's shareholders.

26. The Applicant nevertheless maintains that Barcelona Traction ceased to exist in consequence of certain measures taken by the Spanish judicial authorities, which it describes as denials of justice, usurpation of jurisdiction, abuse of right or misuse of power. The company is said to be "practically defunct", to use the words employed in the arbitral award in the Delagoa Bay Railway Company case and subsequently adopted in the El Triunfo case. It is thus no longer a question of the legal effects of the bankruptcy adjudication, but of an event pertaining to the merits, which can be considered at this stage of the proceedings in consequence of the joinder to the merits of the preliminary objection relating to jus standi.

It is first of all necessary to exclude these two precedents from the discussion; for in both the Delagoa Bay Railway Company case and in the El Triunfo case it was held that the company had ceased to exist in consequence of the cancellation of the concession which constituted its object. This is not so in the case of Barcelona Traction, the activities of which have not ceased.

But if that company has not ceased to exist for lack of an object, can it reasonably be alleged that the measures referred to have in fact resulted in its disappearance? It does not seem so.

Those measures are said to be the following, in particular:

The declaration of the bankruptcy of a foreign company having no real domicile in Spain, and the dismissal of proceedings to oppose the judgment declaring the bankruptcy notwithstanding the fact that the time-limit therefore had not yet expired; the extension of the effects of the bankruptcy of the holding company to the subsidiary companies, in disregard of their separate legal personalities, on the pretext of their unipersonal nature; the attachment of the shares of the subsidiary [p 320] company Ebro and the extension of that attachment to shares that were in a foreign country, in violation of the sovereignty of that country and without regard for the rights of the company holding the above-mentioned shares as security; the powers conferred by the Reus judge on the bankruptcy authorities for the purpose of dismissing the directors of the subsidiary companies and appointing new ones: all these measures, according to the Applicant, constituting a prelude to the realization of the objective in view, which is alleged to have been the transfer at a derisory price to a Spanish group, Fuerzas Eléctricas de Cataluña, of the shares belonging to Barcelona Traction's shareholders. This transfer is alleged to have been effected by the trustees in bankruptcy, who, constituting themselves a general meeting of Ebro, are alleged to have decided:

(a) that the share register kept at Toronto should thenceforward be kept and retained at Ebro's new corporate domicile, transferred from Toronto to Barcelona;

(b) that the said company would recognize as shareholders only those mentioned in the said share register created in June 1951:

(c) the creation of new shares in substitution for the former ones and their entry in the register kept at Barcelona;

(d) the transfer by judicial decision of the new shares to the Spanish group represented by Fuerzas Eléctricas de Cataluña.

If such were the measures of which the applicant State complains, effected for the purposes of the said transfer, can it be alleged that they involved the extinction of the Barcelona Traction company?

The forced transfer of shares, like a voluntary or amicable transfer, is by no means something calculated to affect the company's existence. The shares of a limited company, such as Barcelona Traction, whether such shares be bearer or registered shares, are specifically designed by law to be transferable during the company's life. A transfer of the litres which is void or illegal may, as appropriate, give rise to judicial proceedings to establish that the transfer was void or to have it set aside, but it cannot have any effect on the existence of the company the shares of which have passed into other hands.

Thus, Barcelona Traction was so far from being "practically defunct" that it was able, without losing its juristic personality in consequence of the bankruptcy adjudication, or of the other measures taken against it, to seek and to obtain the diplomatic protection of Canada, of the United States, of the United Kingdom and of Belgium, as well as the judicial protection of the last-named country on the basis of its first Application, that of 1958.

27. In short, since the right claimed by the national State of the shareholder, that of taking up his claim against a third country, does not constitute an exception to a legal rule, the extension of which to a new case is asked for, but such right can derive from the possible existence of [p 321]
an international custom, it is to be concluded that the elements which constitute the latter, to be drawn in various degrees from treaty or State practice, from international decisions or from legal literature, are not of such a nature as to lend support to this new case.

28. While it appears that diplomatic protection depends not on a general principle of law recognized by nations but on international customary law, it would nevertheless be permissible, in considering the possibility of extending this protection to the shareholders of a company, to have recourse to the analogy which the problem might present in the framework of the relationships for which municipal law and international law make provision. In doing so it would not be a matter of abstracting from municipal legal systems a general principle of law, but of seeking, in accordance with the rules of legal logic, to ascertain the consequences of those relationships on the formation of custom in its various elements.

29. It should be noted at this stage of the discussion that the applicability of categories of municipal law to international law raises the important question of determining whether a State is only obliged to grant aliens those rights which it guarantees to its own nationals or whether it must ensure for them a minimum treatment in accordance with an "international standard of justice", which may, in certain cases or in certain countries, be more advantageous than that enjoyed by nationals themselves FN66.

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FN66 As we know, there are those who also envisage the possibility of granting mostfavoured-nation treatment, or merely fair compensation, or equitable or reasonable treatment, or, finally, of adopting a compromise solution based on the enjoyment of individual rights and guarantees identical with those enjoyed by nationals and which must not "be less than the 'fundamental human rights' recognized and defined in contemporary instruments". (Yearbook of the International Law Commission, 1957, II, p. 113.)
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It is well known that in Latin American public international law, equality of treatment is linked with the Latin American jurists' conception of the responsibility of States and diplomatic protection. Those jurists, who regard it as one of the pillars of their concept of international law, argued in favour of it at the 1930 Hague Conference, basing it upon equality between States and the need for their countries to protect themselves against the interference of powers which were strong politically, militarily and economically. Seventeen jurists of various nationalities supported this doctrine. But the upholders of traditional law, who formed the majority at the Conference, carried the day, and the failure of the Latin American States only reinforces their attachment to their own doctrine. Thus, at the 9th session of the International Law Commission, Mr. Padilla Nervo came forward as its authorized spokesman, and concluded that "[the] international rules [on the point] were based almost entirely on the unequal relations between great Powers and small States"FN66a. [p 322]


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FN66a Yearbook of the International Law Commission, 1957, I, p. 155.
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This was also the conception of the African and Asian countries. The Chinese delegate to the 1930 Hague Conference was one of the leading spokesmen therefor, following the jurists of Latin America. And at the same session of the International Law Commission mentioned above, Mr. Matine-Daftary, of Iran, supported "the . .. Latin American theory of the equality of nationals and aliens"FN66b. Finally, the representatives of the States of Africa and Asia who were called upon to participate in the legal conferences supported the same conception.

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FN66b Ibid., p. 160.
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***

The question is no doubt a fairly complex one. In principle, if a State is bound only to establish equality between its nationals and aliens its municipal law must be considered and its benefits extended to aliens. But it should be noticed right away that the rights to be granted them on the basis of equality are substantive rights. The solution would be quite different with respect to jurisdictional rights, according to which every State is bound to secure domestic judicial remedies to foreigners by adequate laws and an adequate judicial structure in conformity with international standards, failing which international proceedings would be possible.

Now this is indeed the solution that prevails in respect of substantive rights, particularly from the view-point of new or economically handicapped States. It rests upon the principle of the equality of nations proclaimed in the Charter of the United Nations and upon the resolution adopted by the General Assembly on 21 December 1952 concerning the right of peoples freely to exploit their natural wealth and resourcesFN67.

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FN67 See S. Prakash Sinha, op. cit., pp. 94-96, and the speeches in the International Law Commission by the representatives of India, Iran, the United Arab Republic, Syria and Thailand referred to by him.
See too Article 12 of the draft principles concerning the treatment of aliens drawn up by the Asian-African Legal Consultative Committee, quoted by Doctor Mustafa Kamil Yasseen, in Annuaire français de droit international, 1964, p. 665.
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30. Mention of this solution leads one to wonder whether it is not established, in the legal systems of the generality of nations, that a shareholder—in addition to his own right of action for reparation for a direct injury suffered ut singuli which damages his legally protected interests— possesses a right of action which he can exercise in all circumstances, concurrently with the organs of the company, in consequence of an injury suffered by the latter that affects him only indirectly or in mediate fashion.

Ought not international law, following the same reasoning as that just invoked in the preceding section, to align itself on this point with the generality of systems of municipal law, from which, in addition to the legal institutions of the commercial-law system, there derive the concept of juristic personality and the limits assigned thereto? It is true that those [p 323] systems sometimes differ from one country to another. What would however be both necessary and sufficient would be to prove the existence of a common fund, as between these systems, of such essential rights, not excluding those on which Belgium in particular can rely, namely:

(a) the right to address claims and applications to the authorities on behalf of the company;

(b) the right to seek judicial or administrative remedies in substitution for and in place of the company, or to defend proceedings brought against it;

(c) the right to claim compensation on the grounds of a denial of justice or an abuse of right suffered by the company.

Do these different rights appear among those constituting the common fund of the generality of municipal legal systems? Or, on the contrary, do they go beyond the rights generally assigned to the shareholder by those legal systems—and, in particular, the legal systems of Canada, of Belgium and of Spain—these being:

(a) the right to vote at general meetings, either in respect of decisions affecting the company, or for the appointment of directors and the control of their conduct of the company's affairs and, in appropriate cases, in order to bring action against those same directors in consequence of alleged wrongful conduct by them in the exercise of their powers;

(b) the right to dispose of the shares owned by them;

(c) the right to dividends and to a proportionate share in the assets in the event of the company's liquidation;

(d) that of benefiting from any offers of shares, and of receiving duplicates in the event of loss of their share certificates FN68.

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FN68 The decision of the Arbitral Commission in 1965 in the Brincard case referred to most, if not all, of these rights. The new Lebanese Commercial Code, Article 105, gives a more complete list, including in particular the right to transfer the share.
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I am inclined to answer in the negative. Subject to one reservation, however, which is that the company should not have been dissolved. This reservation has already been dealt with FN69, and it does not apply in the case of Barcelona Traction.

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FN69 Section 25 above.
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A further conclusion emerges from this discussion, which can be expressed in interrogative form as follows: since the shareholder does not have, according to local legislation, any possibility of taking action before the courts in order to put forward rights which are peculiar to the company, the objection of non-exhaustion of local remedies cannot be set up against him. If he were nevertheless permitted to exercise such rights before an international tribunal, would he not have been granted greater right than the company itself? [p 324]

31. The Applicant nevertheless maintains that the specific legal nature of rights and interests of the private parties who have suffered injury is of no importance from the point of view of the right of protection by their national State.

There is no doubt that in international proceedings the applicant State is "asserting its own right". It is not intervening in favorem tertii. But is it any less true that that right is "to ensure, in the person of its subjects, respect for the rules of international law"? Both these phrases are to be found in the oft-cited judgment of the Permanent Court of International Justice in 1924 in the Mavrommatis case FN70. Is not this tantamount to saying that the right of the applicant State is measured according to the individual right violated and, consequently, subject to the same conditions for its exercise?

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FN70 P.C.I.J., Series A, No. 2, p. 12.
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It is hardly necessary to add that the responsibility of a State is of course not necessarily restricted to the hypothesis of an injury caused to its nationals. But where an injury lies at the origin of such responsibility, the individual injury cannot be without its effect on the exercise of that responsibility.

32. Is it possible, in order to grant the national State of the shareholders the right to institute judicial proceedings, to have recourse, as the Applicant also argues, if not to a formal right, at least to the notion of interest?

Belgium's charges against Spain, as set forth in the course of the oral argument on the merits, are some of them classified by the Applicant as denials of justice, the others as abuses of right. Abuse of right, like denial of justice, is an international tort, contrary to the opinion which the Spanish Government seems to espouse. This is enshrined in a general principle of law which emerges from the legal systems of all nations FN71. The Applicant further sees in certain of these manifestations a misuse of power (détournement de pouvoir), of which international law should take account, on the ground that the rights the abuse of which is condemned by international case-law are, as in municipal administrative law, powers or competences. This doctrine cannot but be endorsed. But does it follow that in the international field the institution of abuse of right is aimed, as is misuse of power in municipal law, at protecting a right or an objective interest distinct from the right or subjective interest of the State considered individually FN72? As complete as possible a study of the notion of an interest is necessary for the solution of this question, and in order to determine, in so doing, the respective fields in international law of the two concepts of objective interest and subjective interest. [ p 325]

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FN71 See the writer's separate opinion previously referred to, para. 35, bottom of p. 136.
FN72 Cf., the reference by Professor Rolin in his oral argument on 16 April 1969 to the course delivered by Professor Guggenheim in 1949 at the Academy of International Law.
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33. In private law, the old adage is relied on: "no interest, no action", though there is attributed to it a meaning somewhat different from that which the institution of actiones legis gave to it in Roman quiritary law. More correctly, it is asserted that "the interest is the measure of the action". But whatever formula be invoked, this does not of course mean to say that the fate of the action is so intimately bound up with the interest of the plaintiff that it can be deduced therefrom that any interest is capable of giving rise to an action. On the contrary, at the international level as in municipal law, is it not the case that, in order for an action to lie, the interest must, as Jhering puts it, be an interest protected by the law, or, more correctly, as it has been put in the most recent decisions under municipal law, a legally protected lawful interest?

Furthermore, if in private law the interest must, in principle, be direct and personal, must it also be so in international law in order to authorize a judicial action?

This would amount to saying that diplomatic protection is subject to two conditions: that the claimant's interest be a legally protected lawful interest and that, at the same time, it be direct and personal.

34. In order to answer these two questions and clear the way for a solution of the case of shareholders, it seems that it is necessary to recall the various actions to which a right or interest may give rise, namely:

(a) an individual action exercised on the basis of a subjective interest or right;

(b) a corporate action, on behalf of a company endowed with juristic personality, similarly exercised on the basis of a subjective interest or right—that of the company itself;

(c) an action brought in defence of a collective or general interest, the objective being to safeguard legality or the respect due to principles of an international or humane nature, translated into imperative legal norms (jus cogens).

This distinction has seemed to me essential for the purposes of this discussion, in particular in order to avoid the confusion between individual interest and general interest, to which the Respondent has pointed, in the award in the El Triunfo case and in the judgment relating to the Northern Cameroons.

***

It is generally recognized that the existence of a legally protected right or interest is a condition for the exercise of any of the above actions. The question is not open to doubt in private law, whether with respect to a natural person or to a juristic person. It will consequently be agreed that it would be paradoxical for international law, one of the functions of [p 326] which, when appropriate, is to make up, in the relations between States, for the weaknesses of their municipal laws, to be able to give a State which takes up the claim of its nationals access to international tribunals on the ground of an interest which is not legally protected under the lex fori. And by an undoubted analogy, a State which acts proprio motu for the defence of a personal interest or of a collective interest, must nevertheless prove the existence of a lawful interest which is legally protected.

There is consequently an identity of views to be noticed on this point— that of a legally protected lawful interest—between the national and the international legal order, dealing respectively with the subjective and the objective aspects of the notion of interest.

The question that remains to be discussed is thus that of proof that the interest on which Belgium relies is a legally protected lawful interest. No such proof can be produced in the present case since it is necessary to go back to the lex fori, which does not afford legal protection to such an interest.

35. Does the identity of views noticed above also exist so far as concerns the necessity of a personal and direct interest?

Were it a question of the third action referred to above—that based on a general interest, or an international or humane interest of an objective nature—the fulfilment of this condition would not be demanded, as is clear from the aforesaid Judgment of 21 December 1962 and the opinions of the dissenting judges in the Judgment of 18 July 1966. That 1962 Judgment constituted a definitive judgment, as was amply demonstrated by the dissenting judges, and it might also be regarded as a judgment on a point of principle, which lays down the concept of the general or collective interest which justifies the action that a member State of an international organization, such as in former times the League of Nations and today the United Nations, may bring in defence of the purposes of that Organization which concern its members, as a whole, whose interests are often one with those of all mankind FN73. The principle which that Judgment enshrines, which underlies many conventions, from Article 22 of the Treaty of Versailles and the instruments of mandate, to the treaties concerning minorities and the Convention on the Prevention and Punishment of Genocide, and is expressly confirmed by the practice of the United Nations FN74, is also to be found in the Advisory Opinion delivered by this Court in 1951 with regard to reservations to that Convention, when it stated: "the contracting States do not have any interests of their own; they merely have, one and all, a common interest FN75." Thus Judge Forster was able to protest vigorously against the idea that "legal interest [p 327] can be straight-jacketed into the narrow classical concept of the individual legal interest of the applicant State FN76".

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FN73 In his dissenting opinion referred to above, Judge Forster rightly describes as an abuse of power South Africa's actions contrary to the purpose of the Mandate for South West Africa or Namibia. (I.C.J. Reports 1966, p. 481.)
FN74 See Section 20 above.
FN75 I.C.J. Reports 1951, p. 23.
FN76 Dissenting opinion annexed to the Judgment of 18 July 1966, cited above, I.C.J. Reports 1966, p. 478.
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36. If, on the other hand, the applicant State is not acting to protect a collective interest, but is complaining of an injury it has suffered as an individual subject of law, it goes without saying that it will only have access to an international tribunal to claim a subjective right on the basis of a personal and direct interest.

To this hypothesis must be assimilated that where a State has taken up the claim of a national, as this Court, following the Permanent Court of International Justice, stated in its Judgment of 6 April 1955 in the Nottebohm case, declaring:

"... by taking up the case of one of its subjects and by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own rights—its right to ensure, in the person of its subjects, respect for the rules of international law FN77".

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FN77 I.C.J. Reports 1955, p. 24.
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In other words, it is on the basis of a subjective right or interest that the State acts when taking up the claim of one of its nationals, even if that national be a juristic person such as a commercial company. For the corporate action of the latter is not in any way to be assimilated to the action based on a collective interest. Whilst the company represents a bundle of individual interests the State is nevertheless acting as an individual subject of the law in taking up its case. Where, on the other hand, it purposes to take up the defence of the general interests of the international community or of humanity as a collectivity, it intervenes in the capacity of a member of that community or of that collectivity.

37. It has been said that Belgium's action must be founded on a lawful interest which is legally protected FN78, just like an action on behalf of the collectivity. But, unlike the latter, it must be based on a personal and direct interest.

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FN78 See Section 34 above.
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Neither of these conditions is met by Belgium's request for authorization to extend judicial protection to the shareholders in Barcelona Traction.

According to the lex fori to which it is necessary to have reference in this matter—i.e., the law of the commercial legal order—a shareholder in a joint-stock company has, as we know, no personal and direct right of action instead of and in place of the corporate action ut universi if the alleged injury has been inflicted on the company as such. What interest might be substituted for this purported right, if not the shareholder's interest in having the undertaking run in such fashion as to ensure its prosperity, and in the safeguarding of the economic value embodied in [p 328] the shares. Does it follow that he would have the right to act on behalf of the company where the latter has itself suffered damage or loss through unfortunate management? Such is not the case in municipal law FN79, and it ought not to be otherwise in international law. The interest of the shareholder and, consequently, that of the State which takes up his claim, no matter how personal and direct it may be, is nevertheless, as has just been seen, not legally protected. The Permanent Court of International Justice has endorsed this view FN80.

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FN79 See, to this effect, the writings of French publicists and French case-law, where the bringing of judicial proceedings on account of the depreciation of shares as a result of a diminution in the company's assets is only allowed in the case of faute by the directors, as was emphasized in Section 27 above.
Cf. G. Ripert, Droit commercial, 5th edition, by R. Roblot, Vol. I, paras. 1327 and 1328; and Solus and Perrot, op. cit., para. 227, and the decisions to which they refer.
And, in respect of Anglo-American law, E. Beckett, "Diplomatic Claims in Respect of Injuries to Companies", published in Transactions of the Grotius Society, Vol. XVII, pp. 192 and 193, who points to the exceptional case of misconduct by directors as a rule to be found in the laws of most States.
Finally, so far as treaty-law is concerned, mention may be made of the convention between the Malagasy Republic and the Ugine company, under which the parties "will not regard as contrary to their mutual obligations any reduction in activity resulting from chance technical breakdowns of a serious nature or from the development of the general economic situation". [Translation by the Registry.]
FN80 Judgment in the Oscar Chinn case, P.C.I.J., Series A/B, No. 63, p. 88: "No enterprise—least of all a commercial or transport enterprise, the success of which is dependent on the fluctuating level of prices and rates—can escape from the chances and hazards resulting from general economic conditions. Some industries may be able to make large profits during a period of general prosperity, or else by taking advantage of a treaty of commerce or of an alteration in customs duties; but they are also exposed to the danger of ruin of extinction if circumstances change."
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38. Turning to the argument which postulates the cumulative use of the corporate action and the individual action of the shareholders, which is advanced by Belgium, I can only remark the lack of relevance of the examples put forward to support it, namely that drawn from the Advisory Opinion of this Court concerning Reparation for Injuries Suffered in the Service of the United Nations, and that of a motor car or aeroplane accident. In the instant case, both these examples encounter the objection raised by the existence, in terms of municipal legislation, of the company's legal personality, which covers the interests of the shareholders and ensures their representation.

So far as the Advisory Opinion is concerned, it is true that a claim by the International Organization for reparation for injuries constitutes no obstacle to a claim by the State of which the United Nations official is a national. It has been rightly said that a single action is capable of involving international responsibility on the part of its author towards various legal personae if it simultaneously injures their respective rights. But the doctrine enunciated in the Advisory Opinion is essentially different from the argument advanced by the Applicant concerning the [p 329] claim of a shareholder concurrently with that which a commercial company might submit in respect of an injury of which it itself has suffered the consequences. Any analogy is ruled out by an essential difference between the two cases, resulting from the existence of the juristic person-ality of the company, which personifies the interests of the shareholders; so that the injury which it suffers is the very same one as that of which the shareholders might complain.

Can it in point of fact be deduced from the consideration that two legal personae, the United Nations and the national State of an official of that organization, have simultaneously been affected by the injury which the latter suffered, that, according to the meaning of the Advisory Opinion, there was only one single head of damage? It would appear not. The same act caused two distinct heads of damage, reparation for which can be cumulative, as in the case of the accident already mentioned. It is however a single injury which affects the company, which can only give rise to a single reparation, which can be claimed either by the company, or by a partner or shareholder under the conditions already dealt with.

Is there any need to add that Article 62 of the Court's Statute, which provides for intervention, is irrelevant. What is in question in the present case is not a rule of procedure, but the right of action on the basis of one and the same internationally unlawful act.

39. At the end of this discussion, everything goes to show that the diplomatic protection of shareholders injured by a third State does not constitute an international custom that is unequivocally and unambiguously demonstrated by the web of precedents which form the material element, and definitively established by the conjunction of that element with the psychological element of opinio juris.

This conclusion is reinforced by the opinion, already mentioned, held by a multitude of States—new States and other, very numerous, developing States—with regard to the application of diplomatic protection, the rules of which are only accepted by them to the extent that they take account of their state of underdevelopment, economic subordination and social and cultural stagnation, in which the colonial powers left them and in which they are in danger of remaining for a long time, in the face of Powers strong in industry, know-how and culture.

This opinion was expressed at one and the same time by the representatives of the States of the Third World in the General Assembly of the United Nations (Sixth Committee), in the International Law Commission, in the Asian-African Legal Consultative Committee, in the Institute of International Law, and in the works of legal authors FN81. [p 330]

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FN81 S. Prakash Sinha, op. cit., pp. 92-94; and J. N. Hazard in American Journal of International Law, Vol. 55, 1961, at p. 118, where he writes: ". . . Some of the states where investment has long existed have come to relate these investments in their minds with conditions now politically abhorred."
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Thus the Asian-African Legal Consultative Committee, when it met in 1966 in Bangkok, stressed the importance of this problem by recalling the remarks of a number of delegates to the Sixth Committee of the General Assembly in 1964, to the effect that—
"The rules relating to state responsibility and to the protection of foreign investments, profoundly affected the situation of the new or economically weak States and had been established, in part, contrary to their interests FN82."

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FN82 Brief of Documents, Vol. IV, p. 269.
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As for the Institut de droit international, at its Nice session in 1967 it had to study the problem of investment in developing countries. The jurists of the Afro-Asian group who took part in the proceedings of that session expressed the opinion of their group by replying in the negative to the question whether "shareholders are entitled to ask for diplomatic protection of their State in cases in which the company in which they have invested cannot or will not ask for it itself, as against the developing country FN83".

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FN83 Annuaire de l'Institut de droit international, 1967, I, pp. 464, 471, 519 and 526, with the opinions of India (Mr. Nagendra Singh), Iraq (Mr. Kami! Yasseen) and Turkey (Mr. Nihat Erim).

The following observation of Professor Rolin at the same session of the Institut should be noted :

"Thus what the Institut should aim at is not the protection of capital as such, but it is bound to encourage investments for the benefit of developing countries, by giving guarantees on both sides, both to those countries themselves in order to avoid a form of economic neo-colonialism, which would bring about their subjection to the rich countries, and in order to put investors out of reach of certain risks" (ibid., p. 414 [Translation by the Registry]).
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40. It seems definitively established that the precedents that can be prayed in aid to support the attempt to extend diplomatic protection to shareholders indirectly injured by a third State are manifestly insufficient. It is of course clear from the explicit terms of Article 38, paragraph 1 (b), of the Statute of the Court, that the practice from which it is possible to deduce a general custom is that of the generality of States and not of all of them; but we are far from even this, having regard to the abstentions or opposition referred to above when analysing diplomatic or treaty practice or discussing teachings FN84. It certainly does not appear that the generality of States have already accepted such a custom. A fortiori is this so if account be taken, as it should, of the massive opposition of the new or developing States, which constitute the majority of the members of the international community. A general custom, I am persuaded, can henceforward no longer be received into international law without taking strict account of the opinion or attitude of the States of the Third World. FN84 [p 331]

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FN84 Supra, Sections 12 to 20, 22 and 23.
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41. Two other questions have been discussed:

A. That whether the national State of the shareholders may take action to defend its national wealth, of which shares in companies form an element.

B. Whether it can do so in the sphere of the legal protection of the interests which the State has in international trade.

In each of these cases, the State would enjoy a twofold right of action: that resulting from the fiction, conceived by legal authors and accepted by case-law, to the effect that the State which takes up the case of its nationals exercises its own right; and that which would be attributed to it inasmuch as it is protecting its national wealth or the interests of international trade.

Does this twofold action postulate two heads of damage, for which the State would present cumulative claims, or a single head of damage, for which the State would be claiming reparation on a twofold ground?

Since shares in a company belonging to nationals are among the elements making up the national wealth, the action of the State to protect the rights of its nationals, and that aimed at the protection of the national wealth, would be motivated by a single head of damage, affecting the same subject-matter envisaged from two different standpoints, i.e., the part or the whole.

On the basis of this observation, the State could not claim two different heads of reparation, one for the injury caused to its nationals, the other in favour of the nation—the body made up of those same nationals— whose economy had been affected. It is a case for saying, as before FN85, that cumulative actions which would grant, for one and the same injury, first one and then another head of reparation, would be inconceivable.

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FN85 Supra, Section 38.
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Furthermore, this alleged right of action would give rise to the same objections as mentioned above, concerning the alleged right of action in the name of shareholders injured by a third State, namely the nonexistence of a received rule of international law authorizing it.

The opposition of the new or developing States, whose determinant influence on the development of international law and on the formation of its rules is already well-known, would in addition be much stronger as to the admission of a legal rule which would authorize the extension of diplomatic protection, beyond the interests of shareholders who have suffered injury by the act of a third State, to the interest of the general economy of the national State of the latter, or to the interest it has in international trade.

It is well-known that J. L. Brierly, without venturing so far as G. Scelle, or as the Latin American jurists, was in favour of recognition, in certain cases, of the international personality of the individual. He said that—

"The orthodox doctrine, by insisting that only States can have [p 332] international rights or duties, leads one to think that injury caused to an individual citizen in a foreign State is an injury caused to his own country .. . and that mysterious, though powerful, abstraction, 'national honour' is easily involved therein FN86."

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FN86 J. L. Brierly, Recueil des cours de l'Académie de droit international, 1928, Vol. III, p. 531 [Translation by the Registry].
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And Mr. P. C. Jessup adopted Mr. Brierly's conclusion, observing that the recognition of the rights of the individual would also tend to check "the grave menace of the promotion by States of private economic interests with which they identify national interests FN87". And indeed it seems that this identification and the concept of national honour were in the background, if they were not the governing motive, of the armed interventions which have taken place in the course of history in Latin America, Africa and Asia.

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FN87 P. C. Jessup, A Modem Law of Nations, p. 99.
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Would not the menace be still more grave if the State, while supporting the individual interests of its nationals, were to put forward their claim cumulatively with that attributed to the nation for the defence of its economic interests, or its general interests in international trade?

42. Failing a rule of positive law validating Belgium's jus standi, the latter State turns to equity to seek therein a justification for its claim.

The applicant Party is mistaken in thinking that in the awards made in application of the General Convention of 1923 between the United States and Mexico, there may be discerned a reference to equity comparable to that mentioned in the Judgment of this Court in 1969 concerning the North Sea Continental Shelf. The Convention just referred to called upon the arbitral tribunals which it set up to base themselves upon justice and equity. This expression, justice and equity, which has appeared in numerous general and special arbitration agreements, has always been considered to imply an authorization to decide ex aequo et bono; whereas obviously the reference to equity contained in the Judgment of the Court mentioned above should only be understood, and this is explained in one of the separate opinions annexed thereto FN88, as meaning equity praeter legem in the sense which Papinian, the author of that expression, gave to it; in other words, not an extra-judicial activity, as is the settlement of a dispute ex aequo et bono according to the terms of Article 38, in fine, of the Court's Statute, with a view to filling a social gap in law, but a subsidiary source of international law taken, as a general principle of law, from paragraph 1 (c) of that Article, appeal to which is made in order to remedy the insufficiencies of international law and fill in its logical lacunae.

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FN88 See the writer's separate opinion, I.C.J. Reports 1969, para. 37, p. 139.
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If the study of the facts of the present case had shown a logical lacuna [p 333] in the law, the Court would have been called upon to remedy this in the interest of justice. The solution would probably have been to have recourse, as has just been stated, to equity praeter legem and a general principle of law emerging from national legal systems. But the Court is not faced with a logical lacuna in the law, since international legal systems do not provide for a right granted, on the facts, to the shareholders to be rendered licit. The lacuna which the argument of the applicant Party would be calculated to fill would be no more than a social insufficiency, which only a special agreement conferring jurisdiction ex aequo et bono, which does not exist in the present case, could have remedied.

The system of Equity of the common-law countries has also been referred to in the present case.

It goes without saying that there is no question of identifying Equity of English origin with l'réquité or aequitas of Romano-Mediterranean origin. But if a parallel may be drawn between these two institutions, as to their respective effects, it is with equity contra legem or infra legem that it may be drawn. In fact, it is said in Snell's Equity that equity may be defined as a portion of natural justice FN89. This conception of Equity, which really consists of a possible derogation from general law in a particular case, has never been applied in international law. An international court which conferred such jurisdiction upon itself would appoint itself a legislator. Its decision would create an atmosphere of uncertainty which would drive States away from a tribunal as to which they could not foresee, with any degree of probability, what law would be applied by it. Furthermore, who is better placed to judge of this than the British Government, which wrote to the United States Government to the effect that: "... No shareholder has any right to any item of property owned by the company, for he has no legal or equitable interests therein . ..FN90." In fact, Equity, like equity contra legem or infra legem, cannot serve as basis for a judicial solution which is contrary to the rules of law which it seeks to modify, unless it be by agreement of the parties to accept a decision ex aequo et bono.

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FN89"It is possible to define equity as a portion of natural justice ..." Snell's Principles of Equity, 4th edition by R. E. Megarry and P. V. Baker, p. 9.
FN90 Note of 5 July 1928 concerning the Romano-Americana case, Hackworth, Digest, V, p. 843.
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***

While I subscribe to the Court's Judgment, such are the supplementary remarks which I have thought I should add to the grounds thereof.

(Signed) Fouad Ammoun.

[p 334]

Dissenting Opinion of Judge Riphagen

[Translation]

1. To my great regret I find myself unable to concur in the decision of the Court, and I wish to avail myself of my right under Article 57 of the Statute to state the reasons for my dissent.

2. In my opinion the legal reasoning followed by the Court fails to appreciate the very nature of the rules of customary public international law applicable in the instant case.

The Belgian State has asserted that the Spanish State is internationally responsible for the treatment which the administrative and judicial authorities of Spain afforded to a private non-Spanish company, the Barcelona Traction, Light and Power Company, Limited. The Court has recognized that:

"When a State admits into its territory foreign investments or foreign nationals, whether natural or juristic persons, it is bound to extend to them the protection of the law and assumes obligations concerning the treatment to be afforded them." (Paragraph 33.)

Nevertheless, the Court has refused to examine whether the treatment afforded to Barcelona Traction by the administrative and judicial authorities of Spain was or was not in conformity with Spain's international obligations, since:

". . . the possession by the Belgian Government of a right of protection is a prerequisite for the examination of these problems. Since no jus standi before the Court has been established . .." (paragraph 102).

In other words, Spain does indeed have international obligations with respect to the treatment afforded to Barcelona Traction, but those obligations are, it is said, not obligations towards Belgium.

Throughout its Judgment, the Court has in view the hypothesis that a greater or lesser part of Barcelona Traction's shares was, during the whole of the relevant period, in the hands of Belgian nationals, whether natural or juristic persons. This hypothesis is contested; the question, which is not dealt with in the Judgment, will be reverted to below.

On the basis of this hypothesis, and without drawing any distinction according to the size and nature of this participation by Belgian natural or juristic persons in the capital and management of the Barcelona Traction Company, the outcome for the Court is that the Belgian [p 335] State has no right at the international level capable of being infringed by the conduct of the Spanish authorities towards the Barcelona Traction Company.

This conclusion is based solely on considerations concerning what the Court calls (paragraph 38) the nature and interrelation of the rights of the company and the rights of the shareholders under municipal law. It is by examining rules of municipal law which are to a great extent common to those legislative systems which recognize the institution of companies limited by shares that the Court reaches the conclusion that, under municipal law, the rights of the shareholders are not affected by measures taken against the company. It follows, according to the Judgment, that the State of which the shareholders in a company are nationals has also no right that might be injured on the international plane by measures taken by another State against the said company.

3. It is in making the rights and obligations of States under customary public international law depend purely and simply on the rules of municipal law concerning the rights and obligations of private persons in their relations inter se, that the Judgment seems to me to fail to appreciate the nature of the rules of customary international law, including the rules of international law concerning the rights and obligations of States in the field known as "the treatment of aliens".

It is, however, well established that international responsibility is a responsibility of State to State, and that consequently, the conditions under which the international responsibility of a State arises, as well as the conditions under which another State is entitled to require reparation for an injury caused to it, are in principle completely independent of the content of the municipal law of the States in question.

"Diplomatic protection and protection by means of international judicial proceedings constitute measures for the defence of the rights of the State. As the Permanent Court of International Justice has said and has repeated, 'by taking up the case of one of its subjects and by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own rights— its right to ensure, in the person of its subjects, respect for the rules of international law' (P.C.I.J., Series A, No. 2, p. 12, and Series A/B, Nos. 20-21, p. 17)." (Nottebohm (Second Phase), Judgment, I.C.J. Reports 1955, p. 24) [my italics].

"It is a principle of international law that the reparation of a wrong may consist in an indemnity corresponding to the damage which the nationals of the injured State have suffered as a result of the act which is contrary to international law. This is even the most usual form of reparation; it is the form selected by Germany in this case and the admissibility of it has not been disputed. The reparation due by one State to another does not however change its character by reason of the fact that it takes the form of an indemnity for the [p 336] calculation of which the damage suffered by a private person is taken as the measure. The rules of law governing the reparation are the rules of international law in force between the two States concerned, and not the law governing relations between the State which has committed a wrongful act and the individual who has suffered damage. Rights or interests of an individual the violation of which rights causes damage are always in a different plane to rights belonging to a State, which rights may also be infringed by the same act. The damage suffered by an individual is never therefore identical in kind with that which will be suffered by a State; it can only afford a convenient scale for the calculation of the reparation due to the State." (Judgment No. 13 of the P.C.I.J., Series A, No. 17, pp. 27-28) (my italics).

4. This complete separation between the rules of customary international law concerning responsibility for the treatment of aliens, and the rules and principles of municipal law, is much more than a mere legal construct permitting of the substitution of legal relations between States for the legal relations between the government and the private citizen or between private citizens inter se.

It reflects a reality of international life: it determines the very content of the rights and obligations of States on the international plane.

It is in fact indisputable that the State has a real interest in the development of its international commerce, of which investment in foreign undertakings and the establishment of undertakings in foreign countries constitute manifestations. Thus, apart from countries which practise the system of State trading, international economic relations are in general heavily controlled by the public authorities. Furthermore, this international commercial activity of a State necessarily affects the economy, and thus the public interest, of the receiving State; it normally also involves contacts with the municipal legal system and with the public authorities of that State. It is thus genuinely a matter of ensuring a proper balance between the interests of States, a traditional task of the rules of public international law.

This task is fundamentally different from that laid upon the rules of municipal law, and in particular municipal private law. The considerations which determine the choice of a particular system of municipal private law With respect to what the Court has called "the nature and interrelation" of "the rights of the corporate entity and its shareholders" are completely foreign to the problems which are the concern of the rules of public international law relating to responsibility for the treatment of aliens.

5. It is true that international commercial activities are to a very large extent carried on under municipal law forms (acquisition of ownership, contracts, concessions, collection of rates and taxes). But it is not the legal relationships of municipal law resulting therefrom—the relationships between private persons inter se or between a public authority and a [p 337] private person—-with which customary international law is concerned. The latter does not tend in any way to unify the different municipal legal orders, even partially or indirectly, into a common legal order applicable to cases of diversity of citizenship.

The international responsibility of a State is not based upon rules of any such common legal order; nor is the right of the State which asserts such responsibility derived from the rights which a private person would obtain under such a common legal order. The approach of the rules of customary international law is completely different; they are concerned rather with the activity, as such, of the persons carrying on the international commerce of a State, on the one hand, and the public authorities of the receiving State, on the other, as well as with the interrelation of those activities. That is why international responsibility for the treatment of aliens is essentially a responsibility for "denial of justice" lato sensu. That is also why the State which relies upon such responsibility does not represent the injured person but is asserting its own interest in that person's activities in international commerce. That is why, finally, it is indispensable, for the determination of the existence or inexistence of international responsibility on the part of one State towards another State in a specific case, to take into consideration all the activities, as a whole, of the public authorities of the State whose responsibility has been alleged, as well as all the injured private person's activities, as a whole, in international commerce.

6. The notion of "international commerce" must not be given a purely economic interpretation. In actual fact, customary international law protects the interest which a State has in its international commerce because international commerce in the broad sense of the term is of interest to the entire international community. As Sohn and Baxter rightly remark in their commentary on the Draft Convention on the International Responsibility of States for Injuries to Aliens: "The law of State responsibility is directed to the maintenance of freedom of communications and of movement between nations."

On the same lines, customary international law recognizes—in particular since the Second World War—respect for fundamental human freedoms as an interest of the international community. In fact, even before and between the two World Wars the idea of the protection of "human rights" by public international law was never absent from international decisions concerning the responsibility of States for the treatment of aliens. Here, as in the protection of international commerce, it is not a matter of creating a common legal order determining the legal relationships between the public authorities and private persons or between private persons inter se, but of "checking" the application of the municipal legal order in order to sanction the unlawful use of force, arbitrary discrimination and usurpation of jurisdiction, which violate a human being's "right to existence". Here, as in the protection of inter [p 338] national commerce, the different methods adopted by the municipal law of different countries are irrelevant to the attainment of the objectives of the rules of customary international law.

7. At this point I must make a digression. The Judgment seems to be based on the idea of a "reference" by the rules of international law to the rules of municipal law. It is stated, in particular, in paragraph 38 of the Judgment that "international law has had to recognize the corporate entity as an institution created by States in a domain essentially within their domestic jurisdiction. This in turn requires that, whenever legal issues arise concerning the rights of States with regard to the treatment of companies and shareholders, as to which rights international law has not established its own rules, it has to refer to the relevant rules of municipal law". The legislative technique of reference or renvoi from one rule of law to another rule of law, or to the results of its application, is an operation well known in legal science. So far as international law in particular is concerned, this technique is of frequent application in the written rules of law, i.e., in treaties. Thus, several treaties, when defining the obligations of the Contracting Parties, contain a reference to the municipal law of a specific State. This is, for example, the case with treaties concerning conflict of laws and reciprocal judicial assistance, including the recognition and execution of foreign judgments. But this kind of renvoi is wholly unrelated to the situation with which the present case is concerned.

In the first place, in the Barcelona Traction case it is a matter of applying the rules of general customary international law. A renvoi by such rules to the municipal law of a specific State would seem a priori to be improbable. Furthermore, the present case does not concern the recognition of, or the effect to be given to, the decisions, judicial and otherwise, of the Spanish authorities, within the framework of the legal system of another State. On the contrary, it is a matter of determining whether those decisions constitute a denial of justice in the broad meaning of the term, i.e., unlawful use of force, arbitrary discrimination, or a usurpation of jurisdiction, amounting to infringement of the rights of another State. In this domain there cannot be a "renvoi" to the rules of municipal law of the State whose international responsibility is alleged, nor, moreover, to the municipal law of any other State, nor to any "common rules" that might be derived from a comparative law study of different national legislations.

8. The distinction of principle drawn by the present Judgment between—

(a) the obligations of a State "when [it] admits into its territory foreign investments or foreign nationals, whether natural or juristic persons" (paragraph 33), obligations "arising ... in the field of diplomatic protection" (ibid.);[p 339]

(b) the obligations of a State resulting from "the outlawing of acts of aggression" (paragraph 34);

(c) the obligations of a State resulting "from the principles and rules concerning the basic rights of the human person" (paragraph 34); and

(d) the protection of the economic interests resulting from investments made by a foreigner (paragraph 87);

seems very artificial and cannot in any case justify the essential legal consequences which the Judgment attaches to this distinction.

In the first place, it seems impossible to make any distinction between categories (a) and (d). The present Judgment even observes (paragraph 37), and rightly, that the institution known as the diplomatic protection of foreigners has "from its origins [been] closely linked with international commerce". How then can it on the one hand recognize that "when a State admits into its territory foreign investments . . . it . . . assumes obligations concerning the treatment to be afforded them" (paragraph 33 of the Judgment) and, on the other, deny to the State whose nationals have made such investments all protection at the international level apart from "treaty stipulations" (paragraph 90 of the Judgment)? It is true, as the Court says (paragraph 87), that "when a State admits into its territory foreign investments . . . it . . . does not thereby become an insurer of that part of another State's wealth which those investments represent". No one has ever employed such a formula to define the obligations of the receiving State. It is in any event not the basis upon which Belgium bases its claims against Spain in the present case! The problem of the extent of the protection which the rules of international law give to the interest of a State is one question, the determination of the State or States whose interest is protected is another.

Nor is this all. In all the cases enumerated above, general public international law protects the rights of States by imposing obligations on other States, for the good reason that it is an essential interest of the international community as a whole that such rights should be respected.

It is true, from the moral point of view, that it is difficult to compare the gravity of an infringement of the territorial integrity and political independence of a State with that of an infringement of the fundamental freedoms of the human person, or with that of an injury to international commerce lato sensu.

Nevertheless, from the legal point of view, in each of these three cases it is a matter of State interests protected by the imposition of obligations on other States. Obviously, the details of the protection are different in each of the three cases, both with respect to the definition of the in-fringements prohibited—i.e., the extent of the protection—and with respect to the designation of the State or States entitled to apply, or demand the application of, sanctions in the event of such conduct.[p 340]

It is to this latter context that the question of the jus standi of a State relates.

The Judgment seems to draw a distinction between obligations of a State erga omnes, obligations of a State which exist towards certain other States under general international law, and obligations of a State which only exist towards a State with which it has entered into "treaty stipulations". This distinction can of course be drawn. But it is still difficult to hold that this distinction would necessarily correspond to an a priori classification in accordance with the nature of the interests protected by such obligations, a classification which is already in itself a fairly doubtful one.

In other words, it seems impossible to say a priori that the economic interests of a State can be protected through obligations on other States only by virtue of "treaty stipulations", just as it would obviously have been incorrect to say that every State has jus standi in cases where the territorial integrity or the political independence of another State is infringed, otherwise than by armed attack, or in cases where the national of another State is the victim of a violation of his individual freedoms.

9. No one denies, moreover, that a State's jus standi under the rules of customary international law concerning the treatment of aliens depends on the existence of a link between such State and the situation that has been adversely affected in the case in question by the conduct of another State.

In this connection it should be noted that in those matters governed by customary public international law it is a priori improbable that there will be watertight divisions between the solutions adopted for the various theoretically separate elements of which this legal rule is made up. It is the interrelation between the conduct imputed to a State and the conduct imputed to another State which is the subject of the rules of customary international law, manifesting itself in the creation of "obligations" and "rights" of States in their mutual relations. In these circumstances, it is impossible, in particular, totally to disregard the nature and effect of this interrelation in the actual case in question when determining the "responsibility" of the one State and the "jus standi" of the other.

10. This is one more reason for not attaching too much importance to the highly abstract and theoretical distinction between "rights" and "mere interests" which seems to form the sole basis of the reasoning in the Judgment.

This distinction is only meaningful within the framework of a concrete body of known and undisputed rules of law.

When such a body of rules is under analysis, it can be observed, a posteriori, that a failure to comply with an obligation may entail certain injurious consequences for certain interests, without the possessor of those interests being empowered by this body of rules of law to demand reparation from the party which has failed to fulfil this obligation. The [p 341] conclusion can then be drawn therefrom that the victim had indeed a "mere interest" but not a "right" that was violated.

This is in fact the conclusion which the Judgment draws when analysing the rules of municipal private law with respect to the legal situation of shareholders with regard to acts directed against the company.

But in the case decided by the Judgment it is a matter neither of the obligations of the Spanish authorities on the level of municipal law nor of the legal opportunities which the shareholders might have of asserting that responsibility, by asking for the cancellation of the measures taken, or for compensation.

It concerns, on the contrary, quite another body of rules, namely the rules of customary public international law concerning the obligations and the rights of States in their mutual relations.

Now these two bodies of rules answer quite different requirements; their objects and purposes are different; they have developed in different contexts.

The body of rules of customary public international law concerning the treatment of aliens draws its inspiration, as we have seen, from the interest of the international community in respect for the fundamental freedoms of the human person as well as in respect for the freedom of international commerce.

It is in relation to these two principles that both the obligations and the rights of States in their mutual relations fall to be determined. In the instant case it is above all the second of these two principles that is involved.

11. In order to be able to describe a concrete activity in international commerce as forming part of the international commerce of a specific State, it is obviously necessary that there be a link between that activity and that State. That link can only be established through the medium of one or more of three elements of the State: its nationals, its territory and its government. Where the international commercial activity takes the form of a natural person's establishing himself abroad, it is traditionally the nationality of that natural person which determines the link between that activity and a specific State. Furthermore, right from the beginning of the development of international commerce it will be found that the State has concerned itself with the treatment accorded by other States to "its" products, i.e., products originating in its territory, as well as to "its" ships, i.e., ships upon which its government has conferred the right to fly the national flag. (Sometimes the various manifestations of international commercial activity were not clearly distinguished. A typical example of this is afforded by the treaties the interpretation of which was in question in the Court's Judgment of 27 July 1952 (Rights of Nationals of the United States of America in Morocco, Judgment, I.C.J. Reports 1952, p. 176.) Those treaties, dating from the turn of the century, were aimed primarily at preventing any differential treatment by a State of the nationals of the other States parties to the said treaties. But the[p 342] Court did not hesitate to interpret the treaties as also prohibiting any discrimination in favour of the importation of goods coming from the territory of one of those States (I.C.J. Reports 1952, pp. 183-186), thus recognizing that the treaties in question had as their object the protection of all the international commercial activities of each Contracting State.)

The techniques of international commerce have developed since then, in particular with the entry on the scene of limited companies as a legal form for the organization of private economic activities.

For purposes of the determination of the link between an international commercial activity and a particular State, this development poses two distinct problems, the one relating to the relationship between the activity and a person, and the other relating to the relationship between that person and a State.

In fact, in "classic" cases of diplomatic protection the interest of a State in "its" international commerce merges with its interest in the welfare of its nationals, natural persons, both in respect of their personal safety and fundamental freedoms and in respect of their power to administer their property and their right to draw profits therefrom.

The elements of "the undertaking" are thus united in one single indivisible natural person, and that person's appurtenance to a specific State does not normally pose any problems.

The employment of the legal form of the limited company (with its own legal personality, in private municipal law) complicates the situation.

12. In the first place, it is hard to recognize that a limited company as such can have personal safety or fundamental freedoms. (We may leave aside the question of whether under municipal law the company as such might complain of an infringement of the personal safety or fundamental freedoms of the natural persons which "represent" it.) It is thus solely a matter of the undertaking's "economic" interests: its activities and its property. Now in reality the legal form of the limited company lends itself to fairly varied kinds of organization of the economic interests of the undertaking. There is the type of company in which legal personality corresponds to economic independence of the undertaking; the administration of the undertaking is in the hands of independent directors and the profits are in principle appropriated to the undertaking itself, i.e., generally re-invested (after the deduction, in suitable cases, of a certain remuneration for the capital already invested). But there is also the type of company which is in reality a form of organization for co-operation in an undertaking by shareholders who not only furnish the capital but also effectively administer the undertaking and draw the profits themselves. Finally, there is a third type of company, in which the undertaking is integrated into another more extensive undertaking, belonging to another company which dominates it. Obviously these are types of companies (corresponding to different types of [p 343] shareholders), and not categories separated by water-tight divisions. Of course, the municipal private law applicable to these three types of company is generally the same. On the other hand, in the field of municipal tax law, several countries recognize the fundamental difference between these three types by affording them different treatment.

On the plane of customary international law, i.e., both in order to determine what is affected by the conduct of a State towards a limited company, and in order to determine the link between what is affected and another State, it seems a priori necessary to take account of the reality of the differences between these three types of companies. As has already been pointed out, international law is concerned with the rights and obligations of States in their mutual relations and not with the municipal law relations between the company and other private persons, nor even with the municipal law relations between the company, its shareholders and officers, and the public authorities of a State.

The nature of rights, like that of obligations, is different in international law, because such obligations and rights correspond to the specific requirements of the international community. It is consequently not possible to regard the company's legal personality under municipal law as an exclusive touchstone.

One can neither regard the company as always being the only entity affected by any measure whatsoever directed—on the plane of municipal law—against the company, nor always equate the company, purely and simply, with a natural person so far as concerns its "nationality", i.e., its link with a specific State.

Both these matters are moreover recognized in international jurisprudence and practice.

Of course this jurisprudence and practice are not uniform. On the one hand, they are often inspired by ad hoc considerations; on the other, they do not take sufficient account of the variety of cases that can arise.

Nevertheless, they do show a sufficient degree of recognition of the inapplicabilty of the legal fiction of municipal private law on the plane of public international law. The company's juristic personality is not by any means the last word either on the obligations or on the rights of States in the matter of the "treatment of aliens".

The Judgment recognizes this, moreover, when examining "... other grounds on which it is conceivable that the submission by the Belgian Government of a claim . . . may be justified" (paragraph 55). However, the Judgment seems to persist in regarding such other grounds as the application of transposition on to the plane of international law of the rules of municipal law concerning the status of a company and its shareholders (paragraph 56).

It has already been explained above why this approach seems contrary to the very nature and function of the rules of customary public international law. It is not the rights and the obligations of the shareholders [p 344] that are in issue in the present case, but the obligations and the rights of States; it is not only a question of different legal personae but also of a different subject-matter.

13. That is also why it does not seem justifiable to disregard as irrelevant the international practice and jurisprudence which relate to measures taken with respect to enemy property and nationalizations (paragraphs 59 to 62 of the Judgment). On the contrary, these are two phenomena at the international level which directly concern international commerce as well as the links between an international commercial activity and a specific State. The measures taken with regard to enemy property have the twofold purpose of excluding enemy control of management from the national economy, and of confiscating enemy property by way of reparations. It is highly significant that in connection with this twofold objective the distinct personality of the company does not constitute an obstacle to the recognition of the true state of affairs. But how then can the link between an activity, and private property, and a State be accepted when it is a matter of measures to be taken against that State, and the existence of such a link be disregarded, as a matter of principle, when it is a matter of the rights of that State?

In the case of the nationalization of undertakings belonging to a company it is obviously a question of measures of another nature. Nevertheless, here again many international agreements concluded in order to resolve the consequences of those measures recognize that such measures —which put an end to an international commercial activity—do not affect only the State whose "nationality" the company as a distinct person is deemed to possess.

In both cases—measures against enemy property and measures of nationalization—it is a question of an interference—for different reasons —with an international commercial activity taken as a whole; the object and the purpose of such measures concern the undertaking as such, even though they obviously affect the ownership of, and other rights over, individual items of property.

14. It is from this point of view—an interference with the foreign undertaking rather than with an isolated right belonging to a foreign private person—that one must also consider the cases in which international jurisprudence and practice have recognized a State other than the one under whose municipal law the company was formed as having an interest which is legally protected by the rules of international law. Such cases are in particular those in which the company had gone into liquidation, or was "practically defunct", in consequence of measures taken by the State whose international responsibility was in question. Thus they were cases in which the company had been forced to suspend or to cease its activities: in other words, in which the undertaking as such was affected. Writers have sometimes attempted to explain such cases by seeing in them an application of the notion of municipal private law to the effect that on liquidation of a company the shareholders take back their [p 345] share of the company's property (see, for example, Reuter, Droit international public, 1958, p. 166).

But this explanation is unsatisfactory. On the level of municipal private law, it is not the company's going into liquidation which causes a right to arise for each shareholder, namely a right to a part of the company's property: it is only at the end of the liquidation that any surplus there may be is distributed among the shareholders. Furthermore, the liquidation was always subsequent to the measures taken by the State which was held responsible on the international plane, so that those measures could not have infringed the rights of the shareholders on the municipal private law plane.
These two arguments remain valid a fortiori in cases in which the company, without having gone into liquidation, was "dormant", "practically defunct" or "destroyed". The Judgment (paragraphs 64-68), while recognizing "special circumstances for which the general rule" [i.e., the rule that only the State under the municipal law of which the company was formed would have jus standi] "might not take effect" (paragraph 64) admits the existence of a special circumstance in the present context only where "the corporate entity of the company has ceased to exist" and has "become incapable in law of defending its own rights and the interests of the shareholders" (paragraph 66). In so doing, the Judgment consequently rejects any exception based upon the company's going into liquidation or becoming entirely paralysed (paragraph 65) on account of the measures with respect to which the international responsibility of a State is asserted.

The Judgment thus once again makes the extent of the international obligations and rights of States dependent on the rules of municipal private law concerning the status of companies. The Judgment observes (paragraph 66) that "only in the event of the legal demise of the company are the shareholders deprived of the possibility of a remedy available through the company". The Judgment does not explain how in such a case, after the legal demise of the company, the action of a government other than "the company's government" might be compatible with the rule of continuity! In reality, the legally protected interest of such other State, and consequently also the obligations towards it of the State which took the measures of which complaint is made must exist on the international plane before and independently of the company's demise on the plane of municipal law, a demise which is but one of the possible subsequent consequences of those measures.

15. The Judgment observes (paragraph 65) ". . . that from the economic viewpoint the company [i.e., Barcelona Traction] has been entirely paralyzed" and that it "has been deprived of all its Spanish sources of income".

It is indisputable that the measures taken by the Spanish authorities affected the undertaking as such. The essential point is thus the existence or non-existence of a link between the undertaking and the Belgian State sufficient for it to be considered on the international plane that the inter [p 346] national commerce of the latter State is affected by those measures. It is thus the second question referred to above which is raised by the entry upon the scene of limited companies in international commerce: that of the link between what is affected by the conduct of a State, and another State. In this connection too it seems impossible to disregard the difference between the three types of companies and shareholders referred to above.

16. So far as concerns the international commerce of a State which takes place through the medium of natural persons, it is undisputed, as the Judgment recalls (paragraph 36), that in principle it is the bond of nationality between the State and the individual which counts. There are, however, exceptions to this general rule. On the one hand, as the Court recalled in its Advisory Opinion of 11 April 1949 (I.C.J. Reports 1949, p. 181):

". . . there are important exceptions to the rule, for there are cases in which protection may be exercised by a State on behalf of persons not having its nationality".

These are, in particular, cases of "functional" protection (members of the crew of a vessel flying the flag of the State; members of the armed forces of a State; agent of the United Nations); the protection of the activity as a whole, linked as such with a State, extends to persons who participate in that whole, irrespective of their nationality.

On the other hand, the bond of nationality between the State and the individual is not always sufficient. In the Nottebohm case the Court held that Liechtenstein was not entitled to extend its protection to Nottebohm as against Guatemala, on the basis of a negative answer to the question—

". . . whether the factual connection between Nottebohm and Liechtenstein in the period preceding, contemporaneous with and following his naturalization appears to be sufficiently close, so preponderant in relation to any connection which may have existed between him and any other State, that it is possible to regard the nationality conferred upon him as real and effective . . ." (I.C.J. Reports 1955, p. 24).

Here again a "functional" approach may be observed. Mr. Notte-bohm's naturalization not having in any way altered his activities as a whole (what the Court calls his "manner of life", ibid., p. 26), Guatemala's alleged injury to this "undertaking" was not regarded as affecting, on the international plane, a legally protected interest of Liechtenstein.

17. A true bond of nationality, such as exists between a State and its nationals who are natural persons, is obviously inconceivable for juristic persons as such. In order to assimilate a limited company to a national who is a natural person it is consequently necessary to have recourse to [p 347] other connecting factors. In this connection, from an abstract point of view, three courses are open:

(a) to take account of the nationality of the natural persons to whom the company "belongs";

(b) to take account of the fact that juristic personality was "conferred" on the company by the authorities of a particular State;

(c) to take account of the fact that the company, as an economic entity, is "implanted" in the territory of a particular State.

In the practice of States, including treaties concluded between two or more States, and in international jurisprudence, sometimes one and sometimes another of these courses is adopted, or the connecting factors deriving from two or all three of these approaches are combined or balanced against one another.

18. This is explained by the fact that the three solutions correspond more or less to the three different types of companies and shareholders. If, for example, it is a matter of a company all of whose shares are held by two or three natural persons, who have thus combined their capital in an undertaking which they manage themselves, it seems quite natural to refer to the well-known views expressed by Max Huber in his Report of 1 May 1925 in the case concerning British Property in Spanish Morocco:

". . . the protection of individuals covers all their legitimate interests. The fact that those interests happen to be more or less closely connected with those of a corporate legal entity cannot ipso facto deprive them of the protection which they would otherwise be given by virtue of belonging to a protected person" (U.N.R.I.A.A., Vol. II, p. 661).
"International law which, in this field, draws its inspiration essentially from the principles of equity, has not laid down any formal criterion for the granting or refusing diplomatic protection to national interests linked to interests belonging to persons of different nation-alities" (ibid., p. 729).

These considerations apply also in cases in which corporate personality has been conferred on a company by the municipal law of the State whose responsibility is asserted, even though the company has been implanted in the territory of that State.

Moreover, the connecting factor under (b) above (the fact that the company was granted juristic personality by the authorities of a particular State) corresponds rather to the type of company whose undertaking is independent, and whose shares are scattered among persons who have nothing to do with the management of the undertaking, but simply receive such dividends as are declared, or make profits by the purchase and sale of those shares on the market.

In reality this connecting factor is, in a certain sense, comparable to the [ p 348] link between a State and a ship to which that State has granted the right to fly its national flag. It loses much of its meaning when the incorporation of a company under the municipal law of a State is effected without any active intervention by the public authorities of that State and does not require the establishment of any real bond between the company and the territory or nationals of that State.

Thus it is understandable that in State practice and in international jurisprudence this connecting factor does not play a preponderant part unless there are other links between the company and the State in which it has been incorporated, as, for example, the fact that the administrative control of the company is actually exercised in the territory of that State. (In certain treaties even the nationality of the natural persons who manage a company is a factor in determining the link between a State and that company. According to information given by Foighel in Nationalization and Compensation, 1963, p. 235, this is the case in a treaty, with an attached aide-memoire, of 27 September 1948 between Switzerland and Yugoslavia.)

Finally, the connecting factor mentioned in (c) above (the fact that the company, as an economic entity, has been implanted in the territory of a particular State) reflects the recognition of the growing importance of the economy—and therefore of its undertakings—for the very existence of the State. From this point of view the State in whose territory a company has been implanted is necessarily interested in the expansion of that company's business abroad, whether through isolated activities, or through the establishment of subsidiary companies, or through holdings in other companies which it controls and whose business activity forms an integral part of its own.
In sum, this connecting factor has its application most particularly in cases involving the third type of shareholder and company mentioned above.
19. In the context of the application of the rules of customary international law relating to responsibility as regards the treatment of aliens, the relative importance of the three connecting factors should be judged not only by taking into account the type of company and shareholders in question in the given case, but also in relation to the nature of the injury which the conduct complained of on the part of the State whose responsibility is alleged is said to have done to the international commercial activity. It is clear that in this respect injury to an isolated piece of pro-perty belonging to a company cannot be put on the same plane as an injury to the very personality of the company or an injury to the whole of the activity of that company in the State whose responsibility is alleged.

The present Judgment seems to deny the relevance, so far as the jus standi of an applicant State is concerned, of the distinctions drawn above concerning the nature of the injury, the type of company and shareholders in question, and the nature and relative importance of the possible forms of connection between a State and a company. Only the dis- [p 349] tinction in private municipal law between the rights of a company and the direct rights of the shareholder, as well as the separate corporate personality of the company under the municipal law of the State in which it was incorporated, are recognized as relevant in the Judgment. It is true that the Judgment does—though without laying down the conditions under which a given State, other than the one according to whose municipal law the company was incorporated, may have jus standi—examine various "special circumstances" and possible "grounds" which might lead to the non-application of the simple and strict rule which it lays down. But in point of fact those special circumstances and reasons are always expressed by the Judgment in relation to the separate personality of the company under municipal law. Thus the Judgment considers "the case of the company having ceased to exist" (paragraphs 64-68) solely from the point of view of legal existence under municipal law, without taking any account of the object of the company, which is the under-taking.

The other possibility dealt with in the Judgment (paragraphs 69-84) is "that of the lack of capacity of the company's national State to act on its behalf".

Here again the Judgment reaches the conclusion that the creation of a corporate entity by the municipal law of a particular State is alone relevant, without however explaining how such a formality can of itself give rise, on the plane of international law, to a legally protected interest of that State in the business of the company.

The Judgment does of course mention (paragraph 71) certain other factors, but in the first place those factors are partly formalities which necessarily follow from the incorporation of the company in accordance with the rules of the relevant private municipal law, and in the second place they do not carry much weight in comparison with the relationship of the company with other States. Furthermore, it appears from paragraph 70 of the Judgment that the Court does not in any way consider them to be legally relevant.

20. The reasoning followed in the Judgment logically leads to the theory that a State whose nationals make investments abroad in the legal form of the incorporation of a company according to the rules of the municipal law of a foreign State, or in the form of holdings in the capital of such a company, loses its interest in the treatment given to those investments.
This theory, based on the distinction between the "rights" of the company and the "mere interests" of the shareholders, is necessarily applicable also in cases where it is a question of the treatment given by the State under whose municipal law the company was incorporated.

The reasoning set forth in paragraphs 85-90 of the Judgment does not admit of any exception.

21. The following paragraphs of the Judgment do however seem to envisage the possibility of appeal being made to "considerations of [p 350] equity" so as to permit international law to "be applied reasonably". These considerations seem to be that in the case of a foreign investment some foreign government ought to exist which can exercise diplomatic protection. Such a consideration seems, however, contrary to the very nature of the rules of customary international law, according to which in exercising diplomatic protection a State is asserting its own rights. There is thus no question of finding some government or other which can act as the shareholder's "claims agent".

Such a system would, moreover, not ensure any improvement in the shareholder's position, having regard to the complete freedom of every government to accede or to refuse the shareholder's request for protection, as well as to pass on or not to pass on to him any compensation it may receive.

If then international practice and jurisprudence admit action by the State whose nationals have invested their capital in a company formed under the municipal law of another State in the event of unlawful conduct by that latter State, it is because they recognize the existence of a legally protected interest of the first State in that company's activities, an interest which is by no means destroyed by the formation of the company or participation therein, and which also does not devolve upon the State where the company was formed.

22. It follows from the foregoing that conduct by a State which, on the plane of municipal law, affects a company's property, personality or undertaking can, on the plane of international law, infringe a legally protected interest of a State other than that under the municipal law of which the company was incorporated. This also means that, in certain circumstances, the same conduct by a State may affect the legally protected interests of two or more States.

Such a legal situation is by no means excluded by the rules of international law. It suffices in this connection to refer to the Advisory Opinion of 11 April 1949 (Reparation for Injuries Suffered in the Service of the United Nations, I.C.J. Reports 1949, p. 174).

The present Judgment (paragraphs 96 and 97) seems, however, to seek to exclude the possibility of concurrent diplomatic claims on account of the complications to which this gives rise.

In this connection it should be noticed, first that one must not exaggerate the number of cases in which a company is truly international, in the sense that connecting factors of equal importance exist with several States.

In a very great number of cases the three connecting factors mentioned above connect the company with one State only. That is precisely why international practice has generally accepted diplomatic protection on the part of the State under whose municipal law the company was in-corporated.

Furthermore, concurrent claims, even though emanating from different [p 351] States, always have the same object, that is to say, to prevent, bring to and end, or have corrected by restitutio in integrum the unlawful acts of another State.

It is only at the stage of monetary compensation in lieu of restitutio in integrum that it is necessary to determine the amount to be paid to each State. In its Advisory Opinion referred to above, the Court observed in this connection:

"International tribunals are already familiar with the problem of a claim in which two or more national States are interested, and they know how to protect the defendant State in such a case." (I.C.J. Reports 1949, p. 186.)

Consequently it does not seem that the possibility of concurrent claims—which, moreover, occurred at the diplomatic stage of the present case—creates that "atmosphere of confusion and insecurity" to which reference is made in paragraph 96 of the Judgment. If there are com-plications they are not insurmountable; they are moreover the consequence of the ever-increasing interdependence of States in the modern world, a fact to which no international tribunal can close its eyes.

The same observation holds good for the complications that would result from a settlement reached between the State responsible and one of the other interested States (paragraph 97 of the Judgment). Such a settlement, like any other treaty, could bind only those States which con-cluded it. In international practice governments are well aware of how to accommodate themselves to this legal rule! In any event, if the State under whose municipal law a company was incorporated concluded a settlement with the State responsible for an unlawful act towards that company, providing for a set-off against the indemnity of any claims which the latter State might have against the former, it would manifestly be unjust to regard such a settlement of the affair as excluding a claim on account of the same unlawful act on the part of a third State which had a legal interest in the company's activities by virtue of other connecting factors.

The rule of res inter alios acta, and the rule that a State by taking up the case of one of its nationals is asserting its own rights, both follow from the very structure of customary public international law.

*

23. Barcelona Traction clearly belongs to the third type of company described above, i.e., the type of company whose undertaking is integrated into another undertaking, that of the Sidro company, the chief shareholder in which is a further company, Sofina.

The links between Sidro and Sofina have not been made completely clear (it appears that Sidro was also a shareholder in Sofina).

Nevertheless, throughout the relevant period, the connecting factors [p 352] between both these companies and Belgium were such that it can hardly be denied that a sufficient bond exists between the undertaking of these companies and the Belgian State. It is true that the Parties to the dispute disagree as to the precise percentages of Sofina shares that were held by natural or juristic persons of various nationalities. But it does not appear to be contested that Sofina always had a number of Belgian shareholders and that the company's other shares were scattered among persons of various nationalities. (One of the counsel for Spain spoke of ". . . American, British, French, Dutch, Spanish, Swiss and other holdings" (hearing of 22 July 1969).) There is not sufficient evidence for it to be supposed that Sidro and Sofina were companies whose undertaking was integrated into another undertaking having links with a State other than Belgium, nor, moreover, for it to be supposed that those companies belonged to the first type, that of companies effectively run by their shareholders, natural persons of a nationality other than Belgian. In these circumstances, the connecting factors of the incorporation of these companies under Belgian law, and their implantation within Belgian territory, are sufficient to create the bond between these companies and Belgium which is necessary to justify a legally protected interest on the part of the Belgian State in Barcelona Traction's undertaking.

24. It has nevertheless been contended that this bond, an essential element in which is Sidro's controlling holding in Barcelona Traction, acquired a few years after the First World War, was broken by the fact that the Barcelona Traction shares belonging to Sidro were the subject of certain contracts entered into on the approach and at the outbreak of the Second World War.

During that period, Sidro formed in the United States a company called Securitas Ltd., as well as the partnership of Charles Gordon & Co. Contracts were entered into between Sidro and Securitas and between Securitas and Charles Gordon & Co. It is not disputed that Securitas Limited, as well as the firm of Charles Gordon & Co., were in reality mere alter egos of Sidro-Sofina, nor that the whole purpose of the operat-ation was precisely to ensure that Sidro's effective share in the capital and management of Barcelona Traction might continue despite the occupation of Belgian territory by the German armed forces, and without being hampered by such measures as the allied States might take in the context of their wartime legislation with respect to property belonging to companies resident in enemy-occupied territory. Nor is it disputed that this objective was in fact attained. This type of operation is well known in those European countries which were occupied by German forces during the Second World War, as well as in Allied countries, such as the United States and Canada, where the principal officers of companies in the European countries in question found a refuge which enabled them to continue to run those companies' affairs. The authorities of the Allied host-countries, moreover, generally afforded the co-operation necessary [p 353] for the achievement of the operation's purpose. In these circumstances, the events summarized above cannot be regarded, on the plane of inter-national law, as having broken the bond between the Belgian State and the Barcelona Traction undertaking. Once again, this conclusion is independent of the relationships of municipal private law.

It consequently applies both to the period during which Securitas acted as custodian of the shares belonging to Sidro, and to the period during which it was trustee. In both capacities Securitas was, in the words of Spanish counsel, nothing but an "American version of Sidro". Securitas was formed, and the trust relationship between Sidro and Securitas was created, in order to escape the consequences of the occupation of Belgian territory. The trust relationship came to an end after the war, just as, for that matter, Securitas disappeared. The precise date of the end of this period does not seem to be of crucial importance in the present context, since the trust relationship was never intended to have and never had the effect of transferring to someone else the position which Sidro occupied in Barcelona Traction.

25. So far as concerns the registration of the Barcelona Traction shares belonging to Sidro in the name of Charles Gordon & Co. (subsequently Newman & Co.), it is sufficient to note that these two firms were never more than nominees of Sidro and Securitas. Even on the level of the applicable municipal private law, it is recognized that such nominees are no more than agents for the true shareholders. On the international level, the fact that a nominee is registered as a shareholder in the company's official register is of no relevance to the question of who is affected by measures taken by a State against the company.

26. It has been observed above that in the context of the application of the rules of customary international law concerning international responsibility for the treatment of aliens there are no water-tight divisions between the legal problems raised by such application. In ascertaining whether in a specific case the conduct of State A injures a legally protected interest of State B, one cannot wholly separate the considerations relating to the four elements of the question, namely: (1) the character of State A's conduct; (2) the nature of the injury; (3) the nature of the interest injured; and (4) the link between that interest and State B.

27. In this connection it is important to notice that in the present case it is not only a question of an injury to property belonging to the company, nor again of a limitation placed upon the free conduct of the company's affairs by its principal officers, but of an injury to the undertaking as such, which has passed in its entirety into the hands of a Spanish group. One cannot ignore this fact in determining the jus standi of Belgium, whose interest is founded on the very fact that the Barcelona Traction undertaking is integrated into that of companies having important connecting factors with that State.

28. Furthermore, the character of the conduct of the Spanish State of [p 354] which Belgium complains is also not unrelated to the question of Belgium's jus standi. An essential element in the Belgian claim is its contention that in the circumstances of the case the injury to the undertaking was the result of Spanish measures which necessarily exceeded the limits which international law imposes on the jurisdiction of any State. The character of such conduct is such as to influence the determination of the States entitled to demand reparation for the damage suffered by them in consequence of such measures.

It is certainly not merely bilateral relations that are in issue in such a case, since a State's obligation to keep within the limits of its jurisdiction on the international plane is, without any doubt, an obligation erga omnes.

So far as this aspect of the case is concerned, two observations are relevant.

In the first place, it is indisputable that in the present case it is not a matter of a nationalization of the electricity producing and distributing undertakings in Spain.
It is not the Spanish legislative or executive authorities which have placed Barcelona Traction's subsidiary companies' public utility undertaking in the hands of the State; it is the Spanish judicial authorities which, through a bankruptcy adjudication followed by a forced sale, have placed the property of the parent company, Barcelona Traction, in the hands of other private persons.

In the second place, it is also not a matter in the present case of a judgment by a municipal court deciding a dispute between two private persons, or ordering a simple measure of forced execution. It emerges clearly from the facts that the bankruptcy petition and everything which followed it had as their purpose and their effect the reorganization of the Barcelona Traction undertaking in such a way that that undertaking passed from the control of Barcelona Traction's Belgian shareholders into the control of a group of Spanish persons who had for that purpose acquired a number of bonds issued by that company.

This purpose was attained and this effect achieved by means of a threefold operation, intended, as it were, to remove Barcelona Traction, its property and its relations with its bondholders, into Spain. First, on the non-payment of debts of the Barcelona Traction Company was based the taking of possession of the property and the "normalization" of the subsidiary companies in Spain (see paragraphs 13 and 14 of the Judgment). Secondly, new share certificates in the subsidiary companies were created in Spain, cancelling the certificates which belonged to Barcelona Traction and were situated outside Spain, and it was decided that the head office of Ebro and of Catalonian Land (two subsidiary companies of Barcelona Traction, incorporated under Canadian law) should thenceforth be at Barcelona and no longer at Toronto. (See paragraph 17 of the Judgment.) Thirdly, the bankruptcy decree was [p 355] made on a petition by certain holders of Barcelona Traction bonds on the grounds of the non-payment of interest (see paragraph 13 of the Judgment). Now, Barcelona Traction, the parent company, was a company incorporated and having its head office—under its byelaws—in Canada. All its property, consisting essentially of shares in subsidiary companies, was in Canada, deposited with National Trust of Toronto as security for outstanding bonds. The bonds which were in question in the bankruptcy proceedings were expressed in pounds sterling, and had from the time of their issue been subject to a trust (containing a "no-action clause") administered in Canada by National Trust, a company incorporated in Canada. The non-payment of the interest on the said bonds had, moreover, led to compromises being effected, before the petition in bankruptcy, and under the supervision of the Canadian courts, between Barcelona Traction, the trustee, and the general body of bondholders.

These circumstances, which are relevant to the limits on the jurisdiction of the Spanish State, cannot be ignored when it comes to the question of whether the Belgian State has jus standi in the present case, and this essentially for two reasons. The rules of customary public international law regarding international responsibility for the "treatment of aliens" have developed precisely in consequence of the fact that the "aliens" in question find themselves within the jurisdiction of another State; a fortiori then, they give legal protection against measures which exceed the limits of the jurisdiction of such a State. In addition, it must be recognized that in the instant case the measures taken by the Spanish judicial authorities against Barcelona Traction were only able to achieve their desired effect as a result of the fact that Barcelona Traction's subsidiary companies possessed important installations within Spanish territory. In these circumstances, it seems obvious that account must also be taken of the fact that Barcelona Traction itself is, as it were, only a "subsidiary company" of Sidro/Sofina, companies which can be assimilated to Belgian nationals.

29. The limits which international law imposes on the jurisdiction of a State are also relevant to another aspect of the case, namely the question known as "the exhaustion of local remedies". Here again it appears to be inadmissible to separate completely the different elements of the question of the international responsibility of a State towards another State. The Court, moreover, recognized this, it would seem, in its Judgment of 24 July 1964 on the preliminary objections raised by Spain. Everything which took place within the Spanish municipal legal system, including the remedies sought and those which were not sought, pertains to the facts relevant to the weighing-up of Spain's obligations as well as of Belgium's rights.

The right of a State, on the international plane, to respect for its international commerce implies an obligation on the part of its national by whose interposition such international commerce is carried on to accept the jurisdiction of the host State by making proper use of the [p 356] means for defending his interests which the municipal legal system of that State places at his disposal. Even then, it is necessary that such jurisdiction should exist on the international plane! Here again the fundamental difference emerges between the rights and obligations of the individual on the plane of municipal law and the rights of the State on the international plane.

Finally, the limits which international law imposes on the jurisdiction of the State are also of vital importance for the context within which the responsibility of the State for the acts of its judicial authorities should be assessed. When it is a question of acts overstepping such limits, it is the result of the act, rather than the intention, or the error of the court in the application of the rules of its municipal law, which is to be taken into account.

30. In its Judgment of 24 July 1964, the Court decided the questions relating to its jurisdiction. From this point of view, there was consequently nothing to prevent the Court's examining the merits of the case, that is to say, the rights and obligations of the States parties to the dispute by virtue of the rules of customary international law.

It is true that the legal notion of the conditions for the admissibility of a claim also finds a place in the rules of law relating to the procedure before an international tribunal. Nevertheless, an extensive application of this notion has a tendency to reduce the efficacity of international adjudication, as well as to confer on the norms of international law a rigidity which is incompatible with their function in the community of States.

The 1964 Judgment, which joined the preliminary objections relating to jus standi and the exhaustion of local remedies to the merits, did so for reasons which laid stress first on the legal ties between the questions raised and the actual rights and obligations of States in the matter of the treatment of foreigners, and secondly on the need to elucidate certain questions of fact. Accordingly, the 1964 Judgment seems to be based on the considerations set forth above.

The present Judgment, on the other hand, confines itself to rejecting the Belgian Government's claim on the sole basis that "no jus standi before the Court has been established" (paragraph 102 of the Judgment), a conclusion which, in its turn, seems to be derived exclusively from legal considerations regarding the distinct personality of companies in municipal private law, all of which considerations might have been put forward in 1964.

I have in this dissenting opinion set forth the legal reasons which have led me to the conclusion that the Court ought to examine and pronounce upon what it calls the other aspects of the case, and in particular on the question of whether or not the conduct of the Spanish authorities was unlawful.

Since, on the one hand, the Court, for the reasons stated in the Judgment, has not wished to examine those questions of law, and, on the [p 357] other, the questions of fact in dispute between the Parties to the case have not been subjected to examination by the Court, it does not seem to me that a dissenting opinion ought by itself to accomplish a task which, according to that opinion itself, is incumbent on the Court.

(Signed) W. Riphagen.

[p 54]


Separate Opinion of President Bustamante Y Rivero

[Translation]

I subscribe to the reasons on which the Court has based its Judgment in the Barcelona Traction case. Nevertheless, certain very special aspects of this case have prompted me to certain additional reflections concerning the question of the law applicable, and I feel it right that I should communicate them as concerning matters of doctrine. I consider, moreover, that the question of the exhaustion of local remedies, which was raised in the fourth preliminary objection during the first phase of the proceedings, could have been taken into consideration in the reasons for judgment and mentioned in the Court's decision. I consequently propose to examine these two points succinctly in the paragraphs which follow.

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1. The Application in the present case stands on the principle of international law which recognizes that each State has the power, subject to certain conditions, to exercise diplomatic protection of its nationals who, in a foreign country, have suffered an injury affecting their persons or their rights in violation of international law. Relying on this principle, the Belgian Government's Application, filed on 19 June 1962 in behalf of certain Belgian nationals holding shares in Barcelona Traction, treated of certain responsibilities which, according to the Applicant, should be imputed to the Spanish Government. These responsibilities were said to arise, on the one hand, from the bankruptcy adjudication made by the Reus judge on 12 February 1948 against the holding company Barcelona Traction, Light and Power Co., Limited, of Canadian nationality, which carried on activities in Spain through the medium of various subsidiary companies. They were said to relate, on the other hand, to the allegedly improper treatment afforded this group of companies by the Spanish administrative and judicial authorities before and after the bankruptcy adjudication.

That Barcelona Traction has the character of a holding company has been recognized by both Parties; it is established in particular by the documents printed in Appendices 1 and 2 to Annex 22 and in Annex 23 of the Belgian Memorial.

Accordingly, the Application gives rise to the necessity of investigating, among other cardinal points, the question of whether the fact of Barcelona Traction's being a holding company has any particular bearing on [p 55] the conditions for the diplomatic protection of that company or even on the extent of the responsibility of the respondent State. Such investigation reveals an almost total absence of specific rules of general international law or treaty law applicable to transnational holding companies and shows why, in consequence, judges tend to encounter difficulty in ascertaining the law applicable in each case and may even be forced to fall back on debatable analogies drawn from municipal law or on private international law norms of questionable relevance. A brief analysis of the way holding companies belie the legally established mechanism of the limited company will doubtless facilitate appreciation of the problem.

2. The institution of the limited company, which was destined to displace the old partnership, was a creation of municipal law devised within the purely national domain for the purpose of expanding the financial potentialities and scope of activities of business associations. Each legal system consequently laid down the rules governing the structure and working of commercial companies within the national territory, but always with the end in view of endowing them with the character of autonomous legal personae distinct from the personae of their shareholders. At a certain moment, however, world-wide economic expansion, under the twofold stimulus of increasing needs and the abundance of investment capital, multiplied the phenomena of financial interdependence between States, thereby revealing that the purely national field of action of the classic commercial company had become insufficient. The holding company then appeared, as a manifestation of the new transnational character of the company. Thus it was that the centre of gravity of commercial and stock-exchange business not infrequently shifted from the field of private law into the international domain.

Nevertheless, this practical evolution in contemporary economic life was not matched on the legislative plane by the appearance of any new form of juridical institution. In order to achieve it, the already familiar appearance of the limited company was quite simply borrowed, though the holding company introduced into that institution a heterogeneous element, one contrary to its very nature, by denying a truly independent legal personality to the subsidiary companies of the constituent group and placing them entirely under the authority of the parent or chief company of the group, the holder of all or a majority of their shares. In fact, this situation arose without any visible alteration in the structure and functioning of the subsidiary companies being perceptible from outside: what unites the constituent group is generally only an invisible bond, a network of hidden links consisting in the decisions of the central organs of control, which "radiate" to the directors of the subsidiaries who are charged with their implementation. It is a further advantage of this system that the central entity of the holding company does not necessarily have to be registered or be seen to carry on business in the country where the capital is invested: all that is required is that the subsidiaries may ap-[p 56] pear there in the guise of independent legal entities. The result is a certain possibility of evading responsibilities.

3. This de facto reality of the conduct of holding companies—which represents the most usual case—does not, in my opinion, answer the normal requirements of a de jure situation. The foregoing historical outline shows that (for the reasons indicated) the concept of the holding company corresponded to a unilateral intention or concern on the part of investors who, engrossed with their own interests, relegated to the background the legal situation of the subsidiary companies and the laws of the country of investment. However, the diplomatic protection of foreigners doing business in the territory of a given State must be regarded as establishing a bilateral relationship in which a duality of reciprocal rights and obligations comes into play: those of the protecting State in relation to those of the State in which the investment was made. It is hard to see how the terms of this relationship could be defined if no legal bond has first been established between the holding company which forms the subject of diplomatic protection and the State whose acts are the subject of complaint. As soon as the holding company crosses a frontier and penetrates the territory of another State, it is ipso facto transformed into an institution of private international law, to ensure the equitable functioning of which would require the formulation of principles and rules defining the reciprocal interests of the subsidiary companies and the central entity of the group, as well as the parent company's relations with and duties towards the States in which the subsidiaries have their domicile and in which they carry on their business. Any other system of organization must run counter to the principles of the equality of juristic persons and of a State's power of imperium over its territory. It is true that a few legal norms may be found here and there on this subject, but, despite the importance of the problem, it can be said that neither the legal systems of States nor the law-making organs of the international community have yet succeeded in grasping this elusive reality of holding companies so as to bring it within the framework of a sufficiently explicit and precise body of law. In municipal law, certain precautionary and, moreover, fairly sporadic measures have been taken, such as obliging parent companies to submit consolidated balance-sheets that summarize the individual balance-sheets of the subsidiary companies. The exportation of earnings has also been made the occasion for measures of control, so as to preclude the evasion of fiscal requirements by those who do not fulfil the role of either investor or taxpayer. Finally, certain legal systems require that foreign limited companies be entered in the national commercial register before engaging in activity within the territory of the State where the investment is made. But none of these provisions has ever been more than partially effective, and their sporadic nature stands in the way of any systemization. With the advent of transnationality, the question of the law applicable involves problems of a particularly thorny and controversial nature: for example, that of the apportionment of jurisdictional[p 57] competence among the States in whose territories the various companies of the group are established. Other, still graver questions can be posed, moreover, and it may be wondered, for example, whether a holding company neither registered nor domiciled in the country of its operations can avail itself of the right of diplomatic protection; and whether, in such a case, the principle of the responsibility of the State charged with wrongdoing operates undiminished or only for the benefit of certain subsidiaries. In short, the whole subject is bedevilled, on the international plane, with the existence of gaps in the law which it would be desirable to close either by way of treaties (bilateral or multilateral agreements) or through the possible emergence—hardly likely in the circumstances—of customary law.

4. Meanwhile, in the face of this reality, the only way to try and resolve disputes resulting from the insufficient development of the law in its present stage of evolution is to submit them to the appreciation of municipal courts. But as the number of gaps in legislation increases, so the task of the judge grows more difficult and more and more resembles a work of legislation, something which is always dangerous and out of place on his part. It is no doubt for this reason that in the present case the Barcelona Traction bankruptcy proceedings in Spain have given rise to numerous controversial episodes in which scathing criticism has been met with apologetics of a questionable kind. Having regard to the orientation the Court has given to the Judgment it is delivering, it is not possible to broach the merits of the dispute in order to examine the charges relating to the denial of justice of which Belgium complains; in my opinion, however, this does not absolve the international judge of his obligation to lay stress on the objective position of the question of prin-ciple, i.e., the existing disparity between the development of certain phenomena in international economics, such as the grouping of limited companies under what are known as holding companies, and the evolution of the law applicable. This evolution has lagged behind; and it is possible that the legal lacunae which have in consequence made their appearance may hamper the proper working of justice.

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5. The preliminary question of the exhaustion of the remedies of Spanish municipal law, though it was joined to the merits by the Judgment delivered by the Court in 1964, did not on that account lose its character of being a preliminary question. The relevant rule of international law in fact lays it down that a claim based on the principle of the diplomatic protection of foreign nationals is only amenable to decision if it is shown that the remedies provided by municipal law have been exhausted. For this reason, I think the Court might have included an examination of this question in its Judgment, since, properly speaking, this matter merely complements the other, concerning Belgium's jus standi. Even supposing [p 58] that that State had proved its capacity to institute proceedings in behalf of the shareholders in Barcelona Traction, the essential charges advanced in its Application could only have been examined by the Court if the exhaustion of local means of complaint had first been proved.

Due note must at all events be taken of the fact that, even though the question of the various procedural remedies to be employed is closely bound up with the merits of the Belgian claim, the Court has decided that, since the Belgian Government has not been shown to have jus standi, it must refrain from considering in the Judgment the merits of the dispute. Nevertheless, while respecting this decision, it is still permissible, where the exhaustion of local remedies rule is concerned, to reason, while drawing the distinction which is essential in order to preclude, when the time comes to decide the purely procedural problem, any obtrusion of elements implying a decision on the merits.

6. The first question to consider in this connection is that of the ascertainment of the persons obliged to exhaust local remedies in the present case. In principle, this obligation lies upon those who put forward a complaint on the grounds of damage allegedly caused in respect of their rights or interests. In 1958 Belgium submitted a first Application in behalf of Barcelona Traction; but after its discontinuance of proceedings in 1961 that same State filed a fresh Application in 1962, in behalf, this time, of the company's shareholders. As from that moment, the burden of the obligation to exhaust local remedies fell without any doubt on the shareholders concerned. Nevertheless, in my opinion all the remedies sought by the bankrupt company before the date of the second Application must, for good legal reasons, be regarded as having been sought for the benefit of the shareholders. The unlawful acts with which the Spanish judicial authorities are charged are the same in both Applications. If the obligation to give the Spanish courts an opportunity to rectify those acts —which is the underlying intention of the rule—had already once been complied with by the injured company, it seems clear that the seeking of those same remedies by the claimants under the second Application would not still be necessary, indeed would be impossible if the time-limits for doing so had lapsed with the passing of time. In accordance with the logic of this reasoning, the omissions of the bankrupt company during the first period are opposable to the shareholders protected by the terms of the second Application.

7. My general impression is as follows: it is beyond doubt that, in the course of the judicial proceedings which took place in Spain, Barcelona Traction and other persons and entities which made common cause with it availed themselves of a considerable number of remedies with a view to having the decisions of the Spanish authorities which they considered unjust reversed. It is no less true that, on the one hand, those interested parties did not in all circumstances respect certain general principles which form the essence of the rule of the exhaustion of local remedies, and that, on the other, they neglected to seek certain available remedies or [p 59] did not pursue to the very end other remedies which they had sought but which they did not take as far as the highest court open to them, and, finally, that certain natural or juristic persons who had sought various remedies had in law no chance of succeeding since under Spanish law they were not empowered to bring such actions. For example: as is well known, in bankruptcy proceedings only the bankrupt and his creditors have jus standi in judicio, yet persons who did not possess or did not claim these capacities nevertheless sought certain remedies.

On another point, the law is clear that it is for the judge alone and not for the interested party to decide whether a remedy provided by law must in practice be sought or not. In order to be entitled to refrain from doing so, it does not suffice for such a party to prejudge the result and to regard success as improbable either because there are adverse precedents or because the courts are presumed partial. It seems to me that the defence, on the Belgian side, placed much reliance in certain circumstances on its own judgment in evaluating the relevance or viability of certain remedies, without leaving such decision to the courts, as ought to have been done.

8. Having recalled these questions of principle, I feel it worthwhile to consider the chief remedies failure to seek which must, in my opinion, be regarded as an omission for which the Belgian side would be responsible.

So far as administrative remedies are concerned, those that were omitted concern in particular the decisions by which the Spanish Institute of Foreign Exchange refused to grant currency that would have made it possible to implement the various plans of compromise contemplated between Barcelona Traction and its bondholders, and, more particularly, its refusal to approve the last plan of compromise, which provided—at the cost of a considerable loss—for the conversion into Spanish currency of certain bonds expressed in foreign currency. The regulations then in force in Spain allowed private parties to apply to the competent authorities for the necessary authorizations: it is consequently evident, in accordance with well-established principles relating to administrative hierarchies, that all refusals of authorization of such a nature could form the subject of an appeal to a higher authority. The refusals of the Spanish Institute of Foreign Exchange ought consequently to have led to complaints by the interested party to the Minister of Commerce, to whom the Institute was directly responsible. Furthermore, this type of appeal, known as a hierarchic appeal, is indispensable if it is desired that it should subsequently be possible for a contentious-administrative appeal to be admitted.

It has been alleged that no remedy is available against certain administrative decisions if they fall within the discretionary power of the authority which takes them, since that power, by virtue of its very nature, excludes all possibility of their reversal. But the proceedings have shown that precedents are to be found in Spanish administrative jurisprudence of remedies sought and granted against decisions of this kind, [p 60] for a discretionary power by no means implies an arbitrary one and only a higher authority is able to discern whether a subordinate official has exceeded the limits of a reasonable discretion and ventured into the unlawful domain of arbitrariness or unjust discrimination.

So far as the remedy of a contentious-administrative appeal is concerned, it can be said to constitute the culminating point of purely administrative procedure. When appeals to the administrative authorities have been totally exhausted, the way of contentious-administrative proceedings remains open and has the advantage that this matter falls within the purview of the Supreme Court. It is true that in order to have access to this new remedy it would have been necessary in the present instance for the party concerned first to appeal to the Minister against the decisions of the Spanish Institute of Foreign Exchange, in order to obtain a decision from the highest administrative authority, that is to say, an irrevocable decision. This remedy was not sought; and it ought to have been, in particular, in connection with the refusal to authorize the implementation of the last plan of compromise, which provided for the payment of the bonds in pesetas, for the subsidiary company Ebro maintained in relation thereto that it had been the subject of unjust discrimination on the part of the administrative authorities, when compared with other entities.

9. With respect to judicial remedies, I must refer in the first place to the remedy of "opposition" to the bankruptcy judgment (auto de quiebra), for which provision is made in Article 1028 of the Spanish Commercial Code and in Article 1326 of the Code of Civil Procedure. The former article lays down a time-limit of eight days as from the publication of the bankruptcy judgment within which this remedy may be sought. On 17 March 1948, no plea of opposition having been entered, the Reus judge gave a decision declaring the bankruptcy judgment delivered with respect to Barcelona Traction on 12 February 1948 to be final and res judicata. The pleadings show that, by extra-judicial means, this Toronto company had knowledge of the bankruptcy adjudication in Spain two days after the Reus judgment was delivered; that the newspapers of Toronto, of Montreal and of London published information on this subject as from 14 February; that representatives of or shareholders in the company made statements to the press in Toronto and Madrid during the month of February alluding to the bankruptcy adjudication; that on 1 March the president of the company, on behalf of the board of directors, addressed to bondholders a circular letter concerning the bankruptcy adjudication; and that the company on 9 March gave a power of attorney to enter judicial appearance in Spain (see Annex 81 to the Preliminary Objections). There is thus no doubt that from an extra-judicial or factual point of view Barcelona Traction would have been in a position to take legal action and enter a plea of opposition to the bankruptcy judgment well before the decision taken by the Reus judge on 17 March. However, the bankruptcy proceedings gave rise to a controversy between the Parties with respect to two points of law: the non-notification of the judgment of 12 February to [p 61] the bankrupt at its domicile in Toronto (Article 260 of the Code of Civil Procedure), and the positive irregularity which, according to Belgium, characterized the mode of publication of the said judgment, which took place only in Spain and never at Toronto where the bankrupt company had its domicile. The Belgian Government maintains that in these circumstances the legal time-limit for making use of the remedy of "opposition" did not begin to run. In fact, Barcelona Traction did not enter a plea of opposition to the bankruptcy until June 1948. The Spanish Government takes the view that, since Barcelona Traction's subsidiaries were domiciled and carried on their activities in Spain, publication abroad was not warranted. The Court could only have decided these disputed points by examining the relevant decisions of the municipal courts which upheld the Spanish position, in order to establish whether or not a denial of justice from the point of view of international law can be imputed to them: which would have meant deciding the merits of the case. Since such a pronouncement has been ruled out by the Judgment, I must refrain from taking up a position on the question of whether the Belgian side did or did not seek the local remedy of "opposition" to the bankruptcy judgment in proper fashion and in good time.
10. The judicial order of 17 March 1948, which finally confirmed the effects of the bankruptcy judgment of 12 February, was no doubt of a very serious nature, for it opened the way for the sale of the bankrupt's property. The remedies sought by the subsidiaries against this order were paralysed, in accordance with the law, in consequence of the Boter declinatoria; it consequently became necessary to seek a different sort of remedy in order to avoid or postpone the sale. One of the few remedies capable of having this effect was the remedy of revisión (Articles 1796 et seq. of the Code of Civil Procedure). According to the law, this remedy may be sought if a judgment which has become final was delivered "as a result of subornation, violence or other fraudulent means" (paragraph 4 of the article referred to). In this connection, the Application speaks of arbitrariness, partiality, contempt for the principle of the equality of parties, and, in short, of a "deliberate intention" on the part of certain Spanish judicial authorities "of favouring" the personal "plans" of the enemies of Barcelona Traction. These defects, in Belgium's opinion, go beyond mere negligence, flagrant errors or imperfections in the law applicable. Referring more specifically to the bankruptcy judgment pronounced by the Reus judge, Belgium has spoken in the Reply of "flagrant connivance" between that judge and the petitioners in bankruptcy (para-graph 26) and in oral argument of the court's lack of scruples. It has thus unequivocally maintained that there was dolus or fraud.

Belgium has raised various objections with regard to the appropriateness and effectiveness of the remedy of revisión.

In the first place, it contends that under Spanish law revisión is only available against a sentencia firme, i.e., against a judgment finally pronouncing upon an action or claim, and that in Spanish terminology itself [p 62] a bankruptcy judgment is only an auto, i.e., a decision which puts an end not to the dispute, as a sentencia or judgment proper does, but only to an incidental issue or partial aspect of the case.

This assertion might appear justified from a strictly terminological point of view, but in fact bankruptcy proceedings have in substance a structure all their own, which differs from that of ordinary proceedings with their three classic stages of statement of claim and answer thereto, production of evidence and judgment. In bankruptcy, the proceedings are divided into five "sections", dealt with in separate "files" (Articles 1321 and 1322 of the Code of Civil Procedure). The first section concerns the bankruptcy judgment, ancillary provisions concerning its execution, and compositions; the second deals with the administration of the bankruptcy; the third with the retroactive effects of the bankruptcy; the fourth with the proving and ranking of debts; and the fifth with the classification of the bankruptcy and the discharge of the bankrupt. The subject-matter of each of these sections, each with its separate file, is kept clearly distinct, and in each of them independent decisions having the force of res judicata can be delivered. In this sense, it is sound doctrine that a bankruptcy judgment (auto) can be assimilated to a sentencia, in particular when that judgment has become final (firme) by express judicial decision, either through no plea of opposition to it having been entered or through such opposition's having failed. It is consequently correct to say that in such a case the fate or final direction of the action is settled. A bankruptcy judgment, once it has become res judicata, automatically sets in motion all the measures of execution which must carry the proceedings through to their conclusion: liquidation of the assets, payment of the liabilities and distribution of the surplus if any. The effects of such a judgment are those of a true sentencia. Lastly (and this is decisive) an examination of Title XIII, Book II, of the Code of Civil Procedure enables it to be seen that Article 1330, with Article 755, gives the name of sentencia to the judge's pronouncement deciding, after the presentation of evidence, the incidental proceedings of opposition to the bankruptcy judgment. In terms of the law, a decision which, in the absence of an entry of opposition, recognizes such judgment to have the authority of res judicata, has exactly the same character and weight as a sentencia (see Article 408).

It is consequently my belief that the remedy of revisión is available against an auto adjudicating bankruptcy, since the latter possesses the characteristics of a true sentencia. In any event, should any doubt have remained, the rule of exhaustion required that the remedy be sought by the interested party, for solely a judge can pronounce upon its admissibility.

Still other reservations have been expressed by Belgium with regard to the possibility of relying on the ground for revisión to do with the employment of fraudulent means in the proceedings. Although in the last stage of oral argument counsel for Belgium attenuated noticeably the accusa-[p 63] tions made in the pleadings against certain Spanish judicial authorities, there was no formal withdrawal of them. Those accusations consequently stand and, for the purposes of the rule of the exhaustion of local remedies, evidence would have had to be supplied for it to be possible to establish whether the proceedings were or were not vitiated by such irregularities. It was the more indispensable in the present case in that proof of the facts alleged would have had as its immediate consequence the annulment of the tainted procedural acts: in other words, that very correction of the legal position which is the object of the rule. It will consequently be seen how, from the international point of view, the results of the remedy of revisión are of capital importance when it subsequently comes to establishing the existence or non-existence of the responsibility of the State.

The Belgian side nevertheless foresaw difficulty in obtaining tangible proof of the accusations of dishonesty. But it always had at its disposal against the authorities accused the prior remedy of proceedings to establish civil liability (Code of Civil Procedure, Articles 903 et seq.), which would have made it possible to establish whether criminal liability was involved or not (Article 918 of the same Code). In the event of an affirmative answer, the appropriateness of the remedy of revisión would have been beyond dispute. In short, the omission of this remedy created a legal vacuity for which the applicant Party must bear the responsibility. The rule of exhaustion was not complied with.

11. It would also be possible to consider the case of other remedies that were not sought, or which were sought improperly or out of time, by Barcelona Traction, Sidro and Sofina, or other entities defending the interests of the bankrupt company. In this connection an analysis might be made of certain remedies aimed, for example, at challenging the jurisdiction of the courts or calling in question certain aspects of the Conditions of the judicial sale. It seems to me, moreover, to have been proved by the pleadings and oral arguments that some of the remedies sought on behalf of Barcelona Traction were not pursued to the end, that is to say, so far as the obtaining of a final decision from the highest court. Others were only exhausted after the commencement of the international proceedings in this Court. I nevertheless do not consider it indispensable to enter into detail in this connection: I would merely stress that the remedies I have just examined were considered simply as examples, without there being any intention of exhaustively enumerating them; since this question has in fact been excluded from the Judgment, any more thorough study of its many aspects would, indeed, serve no practical purpose. The essential point is that, certain of the local remedies available not having been sought or duly pursued to the end, the conditions for the continuation of diplomatic protection by judicial means have not been satisfied.

(Signed) J.L. Bustamante Y Rivero.

[p 64]


Separate Opinion of Judge Sir Gerald Fitzmaurice

I

Introductory

1. Although (if with some reluctance) I agree and have voted with the majority of the Court in finding the Belgian claim in this case to be inadmissible, and broadly for the principal reason on which the Judgment is based—namely that in respect of an injury done to a company, prima facie the company's government alone can sustain an international claim—I have a somewhat different attitude on various aspects of the matter, which I wish to indicate. In particular (a) I would go considerably further than does the Judgment in accepting limitations on the principle of the "hegemony" of the company and its government;— furthermore (b), though I have felt bound to vote as I have, I nevertheless hold it to be an unsatisfactory state of the law that obliges the Court to refrain from pronouncing on the substantive merits of the Belgian claim, on the basis of what is really—at least in the actual circumstances of this case—somewhat of a technicality.
2. In addition, there are a number of particular matters, not dealt with or only touched upon in the Judgment of the Court, which I should like to comment on. Although these comments can only be in the nature of obiter dicta, and cannot have the authority of a judgment, yet since specific legislative action with direct binding effect is not at present possible in the international legal field, judicial pronouncements of one kind or another constitute the principal method by which the law can find some concrete measure of clarification and development. I agree with the late Judge Sir Hersch Lauterpacht FN1 that it is incumbent on international tribunals to bear in mind this consideration, which places them in a different position from domestic tribunals as regards dealing with—or at least commenting on—points that lie outside the strict ratio decidendi of the case.

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FN1 The necessary references and citations are given in the opening paragraphs of the separate Opinion of my colleague Judge Jessup in the present case (q.v.),—and I associate myself with the views he expresses in this connection.
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*
[p 65]

3. In the next part (II) of this opinion (paragraphs 4-34) I propose to indicate the criteria on the basis of which I have felt obliged to concur in the main conclusion reached by the Court, but I shall do so in the light of my view that certain of the considerations of law which compel that conclusion prove, in the international field, to be unserviceable as soon as they are applied to any situation which is out of the ordinary. In the succeeding part (III—paragraphs 35 and 36), I state the conclusions which I believe ought to be drawn from part II as to the place of equitable considerations in the international legal field, and the growing need there for a system of Equity. In the next two parts (IV and V) I propose, as indicated supra in paragraph 2, to comment on a certain number of matters (also of a more or less preliminary character) which, though not relevant to the particular point on which the Court's decision turns, formed part of the long series of questions debated by the Parties in the course of their arguments, and which accounted, or could have accounted, for individual rejections of the Belgian claim by certain Members of the Court. Part IV (paragraphs 37-65) will deal with matters affecting the nationality of the Barcelona Traction Company's shareholders, and Part V (paragraphs 66-83) with certain other matters having a preliminary character,—viz. the question of jurisdiction in bankruptcy, and a particular aspect of the local remedies rule. Finally, in the concluding part (VI—paragraphs 84-90)—since the subject has evidently given rise to some misunderstanding—I discuss the philosophy of the joinder of preliminary objections to the merits. There is finally a Postscript on the question of the length of the proceedings in this and other cases, and certain related matters.

II

The Question of Belgium Locus Standi in Judicio FN2

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FN2 Although I now agree with my colleague Judge Morelli's view that the question of Belgium's right to claim on behalf of the Barcelona Traction Company's shareholders, in so far as Belgian, is really a question of substance not of capacity (because the underlying issue is what rights do the shareholders themselves have), it is convenient for immediate purposes to treat the matter as one of Belgian Government standing.
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4. Although, as I have said, I reach the same final conclusion as in the Judgment of the Court, my approach is different. In particular I do not base myself as does the Judgment to some extent (vide its paragraphs 33-36), and as figured fairly prominently in the arguments of the Parties, on any consideration turning on the question of to whom, or to what entity, was the obligation owed in this case, not to act in a manner [p 66] contrary to international law. This does not seem to me to be the right question to ask where the issue involved is not one of treaty or other particular obligations, but of general international law obligations in the sphere of the treatment of foreigners. If in the latter area a State, either directly or through its agencies or authorities, acts illicitly, it stands in breach of international law irrespective of whether any other State is qualified to take the matter up. For instance if an individual were concerned, he might be stateless. If in the present case there have been contraventions of international law, they are in no way legitimized, nor do they become any the less illicit, because Canada has not (or even possibly could not FN3) pursue the matter, and because Belgium is held to possess no locus standi in judicio for doing so. Nor is the question of the entity to which the obligation is due helpful even for the purpose of identifying the party entitled to claim, for such entity would itself previously need to be identified, and the discussion would turn in a circle.

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FN3 i.e., if it were held that no "genuine link" existed between Canada and the Barcelona Traction Company on the basis of the principle of the Nottebohm case (vide infra, paragraphs 26-32).
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5. The material and only pertinent question is who or what entity, if, any is entitled to claim in respect of damage accruing to shareholders in consequence of illicit treatment of the company;—and in order to answer this since the matter concerns a company and its shareholders—it is above all necessary to have regard to the concept and structure of companies according to the systems of their origin, which are systems of private or domestic law,—and furthermore to insist on the principle that when private law concepts are utilized, or private law institutions are dealt with in the international legal field, they should not there be distorted or handled in a manner not in conformity with their true character, as it exists under the system or systems of their creation. But, although this is so, it is scarcely less important to bear in mind that conditions in the international field are sometimes very different from what they are in the domestic, and that rules which these latter conditions fully justify may be less capable of vindication if strictly applied when transposed onto the international levelFN4. Neglect of this precaution may result in an opposite distortion,—namely that qualifications or mitigations of the [p 67] rule, provided for on the internal plane, may fail to be adequately reflected on the international,—leading to a resulting situation of paradox, anomaly and injustice.

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FN4 In this respect I fully associate myself with the views expressed by Lord McNair in his South West Africa case (1950) Opinion when, speaking of the United Nations Trusteeship System, he said (I.C.J. Reports 1950, at p. 148) that private law institutions could not be imported into the international field "lock, stock and barrel", just as they were, and that private law rules could only serve as indications of principle and not as rigid injunctions in the international domain. However, in the present case there is no question of international law setting up a new international institution analogous to the private law institution of the limited liability company. The latter remains a purely private law creation, which international law must take as it finds it. The complaint I am making in this Opinion is that international law has indeed taken it as it has found it over part of the ground, but not over the rest, thereby introducing an unjustified distortion.
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6. This is what seems to have occurred in the field of the corporate entity at the international level. Since the limited liability company with share capital is exclusively a creation of private law, international law is obviously bound in principle to deal with companies as they are,—that is to say by recognizing and giving effect to their basic structure as it exists according to the applicable private law concepts FN5. Fundamental to the structure of the company is the ascription to it, qua corporate entity, of a separate personality over and above that of its component parts, viz. the shareholders, with resulting carefully drawn distinctions between the sphere, functions and rights of the company as such, acting through its management or board, and those of the shareholder. These distinctions must obviously be maintained at the international level: indeed to do otherwise would be completely to travesty the notion of a company as a corporate entity. Thus it is that, just as in domestic courts no shareholder could take proceedings in respect of a tort or breach of contract committed in respect of the company, but only the latter could do so, through the action of its management with whom the decision would lie—a decision which, broadly speaking, the shareholder must accept,—so also if an illicit act injurious to the company or infringing its rights takes place on the international plane, it is not the government of the shareholder but, in principle, that of the company alone, which can make an international claim or bring international proceedings;—the decision whether to do so or not lying with the latter government—a decision which again the foreign shareholder must accept, in the sense that neither he nor his government can require (still less compel) the company's government to take action.

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FN5 It is inevitable that these concepts should be referred to herein in very broad and general terms. The details vary from country to country, and some things may not be true or may need considerable qualification for certain countries.
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7. In neither case does it make any difference that the wrong done to the company recoils or "repercusses" onto the shareholder FN6, e.g., by [p 68] causing the market value of his shares to fall or the profits of the company to be diminished—whence lower dividends; or by causing difficulty as to disposing of the shares—(for want of ready buyers),—for while the shareholder has a legal right not to have his shares cancelled or confiscated without compensation, he has no legal right that they shall have, or be maintained at, any particular market value,—and while the shareholder has a right to receive a dividend if a dividend is declared, he has no right that it shall be declared, or (if declared) be for any particular amount FN7,—and again, while he has a right freely to dispose of his shares FN8, the law does not guarantee him either a buyer or a price.

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FN6 Suppose that by the tortious negligence of a third party the company's warehouses are burned down,—the shareholder may indirectly be seriously affected, but he can have no right of action: the property was not his but the company's. It is the same if his interest is affected by the failure of a third party to carry out a contract with the company, for he himself is not a party to the contract. It is quite another matter if the act complained of is directed against, or directly infringes, his specific rights as a shareholder,—if for instance his right freely to dispose of his shares were illicitly interfered with, or if resolutions duly passed at the general meeting of shareholders were declared null and void, etc.
FN7 Except of course in the case of fixed interest securities of various kinds.
FN8 As a general rule, that is. Under wartime or other emergency conditions, owners of certain kinds of securities (e.g., those expressed in foreign currency) might be required to dispose of them to, or only to, the government or central bank.
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8. But at this point it becomes clear that something has gone wrong,— that the analogy has broken down,—because certain qualifications or modifications, it might be said mitigations, which, in the domestic field, affect and as it were alleviate the situation just described, are not, in the present state of the law, reflected, or not adequately so, in the international domain;—for whereas at that level this situation is one which, as the law now seems to stand, may leave the shareholder powerless to protect his interests, this is not the case on the domestic plane, where the principle of the "hegemony" of the company is accompanied by certain balancing elements, acting as a counterweight, which are only up to a point reflected in the present condition of international law— (vide infra, paragraph 11 and the footnotes thereto).

*

9. In order to understand this matter, it is necessary to have regard to the underlying rationale of the "hegemony principle". This resides in something more than the purely juridical situation resulting from the separate legal personality of the company, and the fact that, in the type of case now in question, the rights infringed are those of the company, not of the shareholder—though his pocket may be affected, actually or potentially—(vide supra, paragraph 7 and footnote 6). Nor does it reside in the practical considerations which, on the domestic plane, at least, must in all normal circumstances rule out the possibility of separate and independent action by shareholders in respect of the treatment of the company, as such, by third parties.

10. The true rationale (outside but underlying the law) of denying to [p 69] the shareholder the possibility of action in respect of infringements of company rights is that, normally, he does not need this. The company will act and, by so doing, will automatically protect not only its own interests but those of the shareholders also. That is the assumption;— namely that the company is both capable of acting and will do so unless there are cogent reasons why, in the interests of the company and, hence, indirectly of the shareholders, it should refrain FN9,—the decision involved being one of policy, prima facie for the determination of the management. (It is precisely here, however, that the beginnings of a profound difference between the domestic and the international situations can be discerned, for if and when a government declines or fails to intervene on behalf of a company of its nationality detrimentally affected by illicit foreign action, the reasons will be the government's not the company's FN10, and will normally have nothing to do with the company's interests, which indeed are likely to be adversely affected still further by the government's refusal or failure, so that no contingent or long-term advantage, or avoidance of disadvantage, will result, as might be expected if the decision were the company's. The motivations involved are quite distinct. But all this is to anticipate.)

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FN9 Because, e.g., too expensive, or likely to have undesirable repercussions, to offend some powerful interest, interfere with some other objective, involve some awkward revelation, etc.
FN10 These may, but just as probably may not, have to do with the actual merits of the claim. For instance a government may well not wish to press a private claim against another government with which it is conducting difficult negotiations on a matter of overriding national importance. Many other instances could be given.
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11. The assumption that the company will act, or will have good reasons for not doing so—(reasons which will be in the eventual interests of the shareholders also)—underlies equally the variously expressed axiom, on the presumed truth of which so much of the applicable law is based—namely that the fate of the shareholder is bound up with that of the company; that his fortunes follow the latter's; that having elected to throw in his lot with the company, he must abide by the consequences, be they good or bad, so long as he maintains his connection with it, etc., etc. The idea has been well expressed in a recent work FN11 as follows (my translation):—

"If, in principle, the shareholders must suffer the fate of the company, this is because the corporate entity is a legal person capable by its corporate action of protecting the interests which the shareholders have entrusted to it . . . transferring to the corporate [p 70]entity a part of their personality and rights, with the object of thereby obtaining a better return and a more effective safeguard. But on that account, if such is the justification for the indivisibility of the corporate entity, such is also its limit."

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FN11 Paul De Visscher, "La Protection Diplomatique des Personnes Morales"— (Diplomatic Protection of Corporate Entities)—Recueil [i.e., Collected Courses] of the Hague Academy of International Law, 1961, Vol. I, at p. 465.
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The nature and extent of this limit on the international plane will be considered later. In the domestic sphere it takes two main forms, the external and the internal—the latter being action within the company itself by means of its own processes and procedures (vide infra, paragraph 12). As to the former, most developed systems of law contain provisions which have been described in very general terms as being

"intended to protect the interests of shareholders if the company's officers are considering their own interests rather than the interests of the company, and also to protect the interests of minorities of shareholders" FN12.

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FN12 Beckett, "Diplomatic Claims in Respect of Injuries to Companies", Transactions of the Grotius Society, Vol. 17 (1932), at p. 193, footnote (7), citing (and see also at p. 192) Dutch, English, French and German law. Beckett also cites a passage from Halsbury's Laws of England. The same passage as it figures in the later (1954) edition, after stating that normally only the company not shareholders can sue third parties, continues as follows:

"Where, however, the persons against whom relief is sought hold and control the majority of the shares, and will not permit an action to be brought in the company's name, shareholders complaining may bring an action in their own names and on behalf of the others and they may do so also where the effect of preventing them so suing would be to enable a company by an ordinary resolution to ratify an improperly passed special resolution."

See also Mervyn Jones, "Claims on behalf of Nationals who are Shareholders in Foreign Companies" in British Year Book of International Law, Vol. XXVI (1949), at pp. 232-234, citing American, Austrian, Belgian, English, French, Italian, Norwegian, Swedish and Swiss law.

See further as to German law in "La Personnalité Morale et ses Limites"— (The Corporate Entity and its Limits), published by Pichon & Durand-Auzias for the Institute of Comparative Law of the University of Paris in Librairie Générale de Droit et de Jurisprudence, 1960, at pp. 43-44 (per Dr. Ulrich Drobnig); and, in ibid., at p. 150, the following statement of Swiss law (per Prof. J. M. Grossen—my translation): "There are fortunately other [sanctions] which enable [the shareholders] to compel the corporate entity—or more exactly its management—to change its attitude."
For analogous provisions of French law see paragraph 11 of my colleague Judge Gros' separate Opinion.
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Such provisions of course differ from country to country but, without attempting to particularize, their broad effect is either to enable shareholders to bring an action in their own names against a third party, in a variety of circumstances involving fraud, malfeasance, negligence or [p 71] other improper refusal or failure on the part of the management to act for the protection of the company's interests, or else to enable shareholders to bring proceedings against the management itself to compel it so to act. In short, generally speaking, domestic law makes at least some provision for the case where the basic assumption of action by the company, rendering action by the shareholders unnecessary, ceases to hold good FN13.

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FN13 In addition to the passage from Halsbury's Laws of England cited in the first paragraph of footnote 12 supra, the following sections from the same work also indicate the position under English law (loc. cit., pp. 222-223, omitting references to footnotes):

"458. Statutory right of members collectively. The members of a company collectively have statutory rights, some of which are exercisable by a bare majority, as, for instance, a resolution at the statutory meeting; others by a particular majority, as in the case of a reconstruction; and others by a minority, as in the case of a requisition for a meeting of shareholders, or of an application to the Board of Trade to appoint an inspector to investigate the company's affairs, or of an application by an oppressed minority to the court for relief.

Statutory rights cannot be taken away or modified by any provisions of the memorandum or articles [i.e., of the company]."

"461. Rights under the general law. The rights of a member under the general law include his right... to restrain directors from acting ultra vires the company or in excess of their own powers or acting unfairly to the members."
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12. The other type of possibility which private law affords to shareholders (or at least to a majority of them; and often even to a minority) if dissatisfied with the policies of the company—including therefore such a thing as a failure to proceed against a third party in the protection of the company's interests—is to take action on the internal plane within the confines of the company itself, and through its normal procedures (shareholders' meetings, voting of resolutions, etc.), directed to influencing and if necessary changing, those policies or even, in the last resort, modifying or changing the management itself. In certain circumstances, reconstructions constitute another possibility.

*
13. The question that now has to be asked is how far these domestic law limitations on the exclusive power of the management, allowing of independent action by the shareholders, are reflected at the international level, so as correspondingly to qualify the principle of the exclusive right of the government of the company to intervene, and admitting the possibility of intervention by that of the shareholders, even though the injury is to the company as such, rather than to any independent stricto sensu shareholding right. This question has to be asked because, if it is [p 72] not right that international law should distort the structure of the company (an essentially private law concept) by failing to give all due effect to the logic of its separate personality, distinct from that of the shareholders,—it is no less wrong, and an equal distortion, if international law fails to give due effect to the limitations on this principle recognized by the very system which, mutatis mutandis, it is sought to apply on the international plane. In short, such application should be integral, not partial. But is it?—or is it not rather the case that international law, while purporting to base itself on, and to be guided by the relevant features of municipal law, really does so only to a certain extent, departing from it at precisely that point where, under municipal law the management of the company can in certain circumstances be compelled by the shareholders to act?

14. It seems that, actually, in only one category of situation is it more or less definitely admitted that intervention by the government of foreign shareholders is allowable, namely where the company concerned has the nationality FN14 of the very State responsible for the acts or damage complained of, and these, or the resulting circumstances, are such as to render the company incapable de facto of protecting its interests and hence those of the shareholders FN15. Clearly in this type of case no intervention or claim on behalf of the company as such can, in the nature of things, be possible at the international level, since the company has local not foreign nationality, and since also the very authority to which the company should be able to look for support or protection is itself the author of the damage. Consequently, the normal rule of intervention only on behalf of the company by the company's government becomes not so much inapplicable as irrelevant or meaningless in the context. The efficacity of the corporate entity and its capability of useful action has broken down, and the shareholders become as it were substituted for the management to protect the company's interests by any method legally open to them. If some of them have foreign nationality, one such way is to invoke the intervention of their government, and in the circumstances this must be regarded as admissible. Thus the same [p 73] authority as was cited in paragraph 11 above continues (translation): FN16

". .. From this it necessarily results that if the rational justification for the mechanism of the corporate entity is brought to a collapse by the act of the very State whose law governs the status and allegiance of the corporate entity, its personality is no longer anything but a fiction void of all meaning, in which there can now be seen nothing but a bundle of individual rights."

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FN14 For present purposes I am taking the nationality of a company to be that of the country of incorporation, the laws of which govern the company's constitution and functioning. However, vide infra paras. 33 and 34.
FN15 If the wrong done to the company, or breach of contract with it, comes not from another private party but from the authorities of the country, it is again in principle only the company which can take legal action, to the extent that the local law allows the government to be sued. If however, as happened for instance in the El Triunfo case (United Nations Reports of International Arbitral Awards, Vol. XV, p. 464), the action taken against the company by the authorities has the effect of completely paralyzing it, then the shareholders can act and, if they are unable to obtain redress locally, but have foreign nationality, can, according to the view here discussed as being now more or less generally recognized, invoke the aid and intervention of their government.
FN16 Loc. cit. in footnote 11 supra.
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15. Notwithstanding these cogent considerations of principle, the validity of this exception to or limitation on the rule of non-intervention by the government of the shareholders in respect of wrongs done to the company, is contested on a variety of grounds. It is said for instance that this type of intervention on behalf of foreign shareholders ought only to be permissible where the company itself is also essentially foreign as to its management and control, and the nature of the interests it covers, and where its local nationality did not result from voluntary incorporation locally, but was imposed on it by the government of the country or by a provision of its local law as a condition of operating there, or of receiving a concession. In such cases, it is said, the company's nationality is an artificial one that does not correspond with the underlying realities, and for this reason (but for this reason only) the local government should not be able to avail itself of the obstacle of its nationality which it has designedly insisted on interposing between itself and those realities— possibly for the express purpose of preventing foreign intervention. Where however the local nationality was deliberately assumed by the company as a matter of choice, then, so it is said, there is no reason for making any such departure from the basic rule of the company screen.

16. It is doubtless true that it is in the case of such "enforced" local nationality that situations leading to foreign shareholders in the company invoking the intervention of their government are most liable to arise. Nevertheless, there does not seem to be any sufficient reason of principle for drawing the distinction involved. The fact of local incorporation, but with foreign shareholding, remains the same in both types of case, whatever the motivations or processes that brought it about. Nor are the motivations which lead foreign interests to seek or not seek local nationality always easy to assess: they may be very mixed. Nor again is it always the case that companies with a large foreign shareholding, and mainly controlled from abroad, do not voluntarily obtain local incorporation: they often do, and there may be sound business reasons for it. Yet they are just as liable in practice to be regarded locally as [p 74] basically foreign, and to suffer from action which may prevent them, as companies, from acting for themselves.

17. Another objection to be urged was that in so far as the doctrine of a right of intervention on behalf of foreign shareholders in a locally incorporated company unable to act for itself, or rendered incapable of so doing, may depend on a number of precedents deriving from cases decided by international tribunals, it will be found on a careful examination of those cases that the "company" that was concerned was usually more in the nature of a firm, partnership, or other similar association of persons, than of a true separate corporate entity distinct from those persons. Hence, it is objected, in so far as the latter were admitted, to claim and their governments to support their claims, they were acting in respect of damage to specific stricto sensu rights of their own in the association concerned, and not of the rights of the association as such. Where on the other hand, so it is said, a corporate entity really was involved, the capacity to claim on behalf of shareholders resulted from the express terms of the treaty, convention or "compromis" submitting the case to the tribunal,—consequently these cases cannot be cited as implying recognition of any general principle of law allowing of such claims.

18. It may be true that the exact rationale of a number of the decisions concerned is not very easy to determine precisely, and lends itself to much controversy, as the course of the written and oral proceedings in both phases of the present case have amply demonstrated. Any thorough determination would however take up a disproportionate amount of space here: nor is it necessary,—for the considerations of principle invoked in previous paragraphs of this Opinion, based on domestic law analogies, are quite sufficient in themselves to justify the doctrine of a right of intervention on behalf of shareholders "substituted" for a moribund or incapable company of local nationality, in order to protect its interests and their own.

19. It is my view therefore, that the legal position is correctly stated in the following two paragraphs from the same source as was previously cited FN17:

"In sum, in order to weigh the admissibility of the protection of shareholders, it is necessary to adhere essentially to the idea of the effectiveness of the corporate entity. It matters little whether, according to internal law criteria, the corporal personality subsists or not. Even where it does, an international tribunal can admit the [p 75] diplomatic protection of shareholders from the moment when it finds as a fact that the damage caused to the corporate entity has had the effect of paralysing or sterilising the usefulness that the mechanism of corporate personality ought normally to bring about for the benefit of the shareholders.

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FN17 Loc. cit. in footnote 11 supra, at p. 477.
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In that case, an international tribunal, not being bound by internal law criteria, 'pierces the corporate veil', as it is said, [but] it would be more accurate to say that it registers the absence of all effective personality, of any effectual intermediary between the shareholders and the rights infringed."

These two paragraphs moreover, even if only in general terms, almost exactly describe the situation of the Barcelona Company which, though still subsisting and formally in existence FN18 has, as to its functioning in Spain, been entirely paralyzed and rendered incapable of further useful action—a situation not only admitted but, for their own purposes, considerably insisted upon by the Spanish side. The Company was indeed crippled to the point where, deprived of all its Spanish assets and sources of income, it could no longer find the funds for its legal defence, these having to be supplied by the very same shareholders whose right to invoke the diplomatic protection of their Government, Spain denies.

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FN18 I share the view expressed in the passage just cited that the formal keeping alive of the company does not affect the realities of the matter. However, the Belgian position would (ironically) have been stronger if the Spanish events had resulted not merely in the "hispanicization" of the undertaking in Spain, but in forcing the liquidation or winding up of Barcelona Traction itself,—for it would then have been much more difficult to maintain, through the fiction of the Company's continued existence, that only the Canadian Government could claim.
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20. In consequence, had the Company been Spanish by incorporation, instead of Canadian, I should have had no hesitation in holding that a claim by Belgium on behalf of the Belgian shareholders in the Company was admissible;—and it is indeed one of the ironies of this case (but not the only one FN19) that the Belgian Government would have been in a much stronger position as regards the admissibility of its claim had the Company been Spanish rather than Canadian.

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FN19 See previous footnote. It may also be thought (see the separate Opinion of my colleague Judge Gros, paragraph 12) that the Company would have fared better through an open and avowed nationalisation or expropriation of its Spanish undertaking, accompanied by the payment of adequate compensation, than it did through the process of the bankruptcy. But this would have depended on the nature and amount of the compensation.
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*[p 76]


21. Must the Canadian nationality of the Company then rule out the Belgian claim? In the present state of the law it would seem that it must. In connection with this conclusion, however, a number of points have to be considered in order to show why, although it is correct on the basis of extant law, this law itself, as it now stands, is in this respect unsatisfactory.

22. The first of these points is that, as required by the logic of the considerations indicated in paragraphs 5 to 13 supra, if on the domestic plane there are circumstances in which some action is open to the shareholders notwithstanding that it is prima facie the company's position, rather than (directly) their own, that is in question,—then in corresponding circumstances the government of the shareholders should, on the international plane, be entitled to intervene and claim. One such case has already been discussed supra in paragraphs 14-20: the company is defunct or paralyzed and there can be no question of intervention or claim by its government, for the latter is itself the tortfeasor government, if wrong there has been. Similarly, if international law is to remain faithful to the concept of the company and, in dealing with the latter on the international plane, is to give due effect to its essential elements, then it must provide for the case where the company's government— not being the tortfeasor government (but also not being the government of the majority of the shareholders)—for reasons of its own that have nothing to do with the interests of the company (see supra paragraph 10) refuses or fails to intervene, even though there may be a good, or apparently good case in law for doing so, and the interests of the company require it. Just as on the domestic plane an analogous failure or refusal on the part of the management of the company would normally enable the shareholders to act, either (if the element of dolus or culpa were present) by legal action against the management, or against the tortfeasor or contract-breaking third party,—or else through the internal processes of the company;—so also, on the international plane, ought the inaction of the company's government enable that of the shareholders to act— (and obviously there would be ways of resolving the practical difficulties of the company's government subsequently changing its mind—if the servants of the law cared to work them out;—I think that in this respect paragraphs 94-98 of the Court's Judgment make too much of this matter).

23. In fact, international law does not at present allow of this— except possibly in the one case of the company's government being actually disqualified at law from acting (as to which see infra, paragraphs 26-32). The reasons for this insufficiency—for such it is—may be perfectly understandable, but this does not alter the fact that international law is in this respect an under-developed system as compared with private law, and that it fails to provide the recourses necessary for protecting [p 77] on the international plane the interests not merely of the shareholders but of the company itself. What are these reasons? They are of course that a government is not in the same position as a company and cannot be made subject to the same constraints. The management of a company owes a duty, not only to the company but to the shareholders, and is bound to act in the best interests of the company, and hence of the shareholders, basing itself on an informed and well-weighed estimate of what these are. A government is under no such duty. It is perfectly free on policy grounds to ignore the interests of the company or even to act in a manner it knows to be contrary to these; and if it does this, there are no international means of recourse against it, such as there would be against the management of a company so acting on the internal plane. There is no means, internationally, of proceeding against a government which refuses to intervene on behalf of, or support, the claim of one of its nationals or national companies FN20,—nor could such a refusal conceivably entail the breach of any general international law obligation. Still less of course is there any means of changing or replacing a government which refuses or fails to act as, internally, the shareholders may be able to do as regards the company's management.

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FN20 Theoretically, the internal law of the country concerned might provide a means of recourse against the government in such circumstances: and political action might be possible. But in neither case would the essential point be affected.
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24. All this at present provides an excuse for saying, as the law now does, that if the company's government does not act no other one can. Instead, it should constitute a reason for coming to precisely the opposite conclusion. An enlightened rule, while recognizing that the national government of the company can never be required to intervene, and that its reasons for not doing so cannot be questioned even though they may have nothing to do with the merits of the claim, would simply provide that in such event the government of the shareholders may do so FN21— particularly if, as is frequently the case, it is just because the shareholding is mainly foreign that the government of the company feels that no sufficient national interest exists to warrant intervention on its own [p 78] part FN22. The law's present attitude is based on predicating for the company's government not merely a prima facie right (which would be understandable) but an exclusive one (which is not). There is no reason of principle why, if the law so wills, failure to utilize a right of action by the party prima facie entitled to do so should not sanction its exercise by another party whose material interest in the matter may actually be greater. Practical difficulties there might be; but this is not a serious objection where no inherent necessity of the law stands in the way. That such a situation of primary and secondary (or latent) entitlement to act can work, if properly regulated, seems to be indicated by the shareholders' possibilities of action on the domestic plane, as earlier described.

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FN21 I am not greatly impressed by the point which comes up in several connections that the Belgian position, with a big block of majority shareholding, is peculiar, and that in other cases there might be foreign shareholders of several nationalities and a consequent multiplicity of claims. This would only go to the quantum of reparation recoverable by the various governments,—and once the principle of claims on behalf of shareholders had been admitted for such circumstances, it would not be difficult to work out ways of avoiding a multiplicity of proceedings, which is what would really matter.
FN22 This is or has been the settled policy of a number of governments. I am not impressed by the argument that those who acquire shares in companies not of their own nationality must be deemed to know that this risk exists. That does not seem to me to affect the principle of the matter.
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*

25. International law must in consequence be regarded as deficient and underdeveloped in this field because, while retaining the rule of the "hegemony" of the company and its government, it fails to provide those safeguards and alternatives which private law has instituted for preventing the hegemony of the company's management leading to abuse. More exactly, what the law enjoins, and the Judgment of the Court therefore inevitably endorses (see its paragraphs 66-68, 77-83 and 93), is the by-passing of the difficulty by a sort of "ostrich-act"—a hiding of the face in the sands of the fiction that so long as it remains theoretically possible for the company's government to act (and however little reality there may be about this possibility), no other government can do so. Thus the law allows the company's government eternally to dangle before the foreign shareholder the carrot of a hypothetical protection that will never be exercised, and tells the hungry fellow that he must be satisfied with this because, although he will never be allowed to eat that carrot, it will always remain there to be looked at FN23! International law has of course to accept the fact that governments cannot[p 79] be compelled to act or be changed. But it does not have to accept (and even positively decree) that nevertheless no other government can ever act—that the carrot must be eternally dangled but never eaten—the maiden ever pursued but never attained!—(see footnote 23 above).

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FN23 Or, like the nymph pursued by the ephebus, as depicted in the timeless stasis of the attic vase that inspired the poet Keats' celebrated Ode on a Grecian Urn (verse 2, lines 7-10):
"Bold Lover, never, never canst thou kiss,
Though winning near the goal—yet, do not grieve;
She cannot fade, though thou hast not thy bliss,
Forever wilt thou love, and she be fair!"
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***

The Nottebohm case

26. There remains however a quite different order of point, which is in my view by far the most important to arise on the question of Belgian locus standi, namely what the situation would be if Canada, instead of having merely failed to pursue the case, were actually to be unable to do so because of a legal disability created by international law itself, disqualifying Canada from acting. It is one thing for the law to predicate, on the basis of an exclusive right of action for one government, that even in the event of its not being exercised, no other government may exercise it. Such a position may be regrettable, for the reasons I have indicated, but is at least tenable. What would be totally inadmissible would be for the law simultaneously to confer a right, yet disqualify the indicated government from exercising it in certain circumstances, and then, when these arise and the disqualification operates, continue to maintain the rule of exclusivity and the consequent incapacity of the governments of other parties whose interest in the matter is undeniable. Implicitly the Judgment takes the same view because an important part of it (see preceding paragraph) rests on the basis that so long as it is possible for the company's government to claim (whether it chooses to do so or not) the shareholders are not, at least in law, deprived of all chance of protection.

27. These aspects are particularly important if consideration is given to what the ground of Canada's possible disqualification would be, namely (on the basis of certain previous decisions and other elements FN24) that there was an absence of a sufficiently close link between the Canadian Government and the Barcelona Company to give the former an actionable interest at law. Moreover, a major factor would precisely be the absence of any Canadian shareholding or share capital in the Company and the fact that most of it was Belgian. In my view, a disqualification—[p 80] at least if it takes place on those grounds—must in logic and in law ipso facto imply legal capacity for the government of the shareholders whose non-Canadian status has brought the disqualification about.

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FN24 In particular the decision of the Court in the Nottebohm case (merits)—I.C.J. Reports 1955, p. 4 et seq.; and the Report of the Commission of Arbitration in the "I'm Alone" case (U.N. Reports of International Arbitral Awards, Vol. III, p. 1614). The same sort of questions also arise over the use of flags of convenience; supposed head-offices that are no more than an address and a letter-box; etc.
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28. Having regard to the importance of this issue and, consequently, of the possible applicability to the situation of Canada of the Court's decision in the Nottebohm case FN25, which obviously could affect the whole outcome of this part of the case, I consider that it should not have been side-tracked on the basis that neither of the Parties contested the existence of a Canadian right of intervention and claim. In my view they should have been asked, in the exercise of the Court's power to act proprio motu, to present full argument on the matter; and the intervention of the Canadian Government under Article 62 of the Court's Statute should have been sought, in order that its views might be made known. If for various reasons, it would not have been practicable to do this during the normal course of the oral hearing, I consider that the Parties should have been recalled later for the purpose, after such interval as might have been thought appropriate for any necessary written exchanges on the subject. This was not done: yet the Court's Judgment (see paragraph 70 and, generally, paragraphs 70-76) not only touches on the matter, but gives the reasons why the Court did not believe that it need consider the Nottebohm case, viz. that there was no true analogy between the situation in that case and this one. At the same time, the Court does in fact find affirmatively that there is a sufficient link between Canada and the Barcelona Company to qualify Canada to sustain a claim if it chooses to do so,—and the Court does so without going into the counter arguments to be derived from the Nottebohm case. In these circumstances, and without myself attempting to pronounce on the substance of the matter, I feel obliged to indicate why the Nottebohm decision unquestionably does have a bearing on this—one of the main issues dealt with in the Judgment of the Court; and why indeed there is a strikingly close analogy between the two cases, so that the principle of the Nottebohm decision could well be regarded as very neatly applying to the situation obtaining in the present case.

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FN25 See reference in footnote 24 above.
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29. In the Nottebohm case, in which Liechtenstein was claiming against Guatemala, the three main grounds on which the Court found against Liechtenstein's capacity to put forward the claim of Mr. Nottebohm were:

(i) that this Liechtenstein nationality—acquired by naturalization just before the outbreak of war in 1939, he being then a German [p 81]national—was purely artificial, in the sense that he had no,t acted from any real desire to identify himself with Liechtenstein and its fortunes, but with the ulterior object of endeavouring to divest himself of enemy character by acquiring neutral status;

(ii) that his true connection by residence, domicile and business interests was Guatemalan; and

(iii) that it was precisely against Guatemala that the claim was being brought.

In these circumstances the Court held that although Mr. Nottebohm was undoubtedly of Liechtenstein nationality under the law of that State, such nationality could not be regarded as entitling Liechtenstein to make a claim on his behalf against GuatemalaFN26;—or in other words his claim was not "opposable" to Guatemala at the instance of Liechtenstein, which meant that Liechtenstein was in those particular circumstances disqualified.

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FN26 The Court was extremely careful to limit its finding to the case of a claim against Guatemala. It did not postulate a general incapacity for Liechtenstein to claim on behalf of Nottebohm—i.e., against some other country. To have done so would have been virtually to relegate Nottebohm to the category of a stateless person so far as international claims were concerned.
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30. If these tests were now to be applied to the case of the Barcelona Company, it could very cogently be contended that a similar, if not almost identical pattern emerged: that the Company obtained Canadian incorporation not in order to do business in Canada (on the contrary), but on account of certain particular advantages, fiscal and other, that this might bring;—that the Company's entire undertaking was in Spain where, through its subsidiaries, it carried on its sole business, none being transacted anywhere else;—and finally that it would be precisely against Spain that the Canadian Government would be claiming if it decided to intervene. The analogy is clearly striking,—and if to this is added the shareholding situation in the Barcelona Company's case—namely that it was not Canadian, thus rendering the link with Canada still weaker—it becomes manifest that there was here something that required to be gone into,—all the more so if it is correct to say that a finding of Canadian disqualification (if such had been the outcome FN27) should automatically have entailed a recognition of Belgian capacity to claim [p 82] on behalf of any person or entity who, at the material times, was both of Belgian nationality and a shareholder in the Barcelona Company.

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FN27 There are of course arguments contra,—but this only underlines the need for a full consideration of the matter. It could be asked for instance whether the Nottebohm case itself was rightly decided, exchanging as it does the certainties of nationality for the uncertainties of less well-defined criteria?—see Brownlie on the Flegenheimer case in The Principles ofPublic International Law (Oxford, 1966) at p. 328 (case heard before the Italo-United States Claims Commission, International Law Reports, 25 (1958—I), p. 91;—and see Brownlie's whole discussion of the Nottebohm decision in loc. cit., pp. 334-347. It can also be queried whether that decision is in any event properly applicable to corporate entities as well as to individuals. These questions, and others, needed to be gone into.
--------------------------------------------------------------------------------------------------------------------

*

31. I have already indicated (paragraph 28 above) that the Court was not in my opinion absolved from going into these very fundamental issues merely because the Parties did not raise them, and did not for the purposes of these particular proceedings challenge the ius standi of the Canadian Government. It is true that in the Nottebohm case the Court relied to some extent on the fact that Guatemala had never, admitted Liechtenstein's right of intervention,—whereas it can be argued that Spain has admitted that of Canada, and would now be precluded from denying it. This may be correct, but the notion does not appear to be self-evidently well-founded. In the first place it rests on mere Spanish non-objection to diplomatic representations made by Canada on behalf of Barcelona Traction some 20 years ago,—whereas it must be at least doubtful how far this could operate as a positive admission of a Canadian right now to present a diplomatic claim on behalf of the Company (if that occurred), in such a way as formally to preclude any Spanish right of objection under this head. In this context, diplomatic representations—which need not necessarily be based on or imply a claim of right, but are often admitted or received in the absence of any such claim or pretension to it—belong to a different order of international act from the presentation of a formal claim before an international tribunal.

32. More important is the fact that, if any preclusion operated as a result of past Spanish non-objection to Canadian intervention (as it quite possibly might), it could only operate as against Spain in proceedings brought by Canada against the former. It could not possibly operate against Belgium in proceedings brought by the latter against Spain. In contrast to the case of Belgium, Spanish non-objection was at least significant, for Spain at all times had an interest in objecting to Canada's intervention, if there were possible legal grounds for so doing. Belgium did not have any such interest; on the contrary, the true interest of the Belgian shareholders at all times lay in Canadian intervention on behalf of the Company: it is precisely the lack of such intervention since about 1952 that has placed the Belgian shareholders in the position in which [p 83] they now find themselves. Consequently no inference adverse to Belgium can be drawn from the Belgian non-objection to Canada's ius standi, for this could not be expected in the circumstances, and was not called for in proceedings in which the Belgian position essentially was (see paragraph 46 infra) that irrespective of any Canadian right, Belgium had a right of claim. It was for the Court, acting proprio motu, as it has the power to do, to go into this cardinal issue, the silence of the Parties notwithstanding.

**

33. While on this part of the case, another question which in my opinion needed to be considered was whether, in all the circumstances, the very "nationality" of the Barcelona Company itself should not be held to be Belgian rather than Canadian. There has, doctrinally, been much discussion and controversy as to what is the correct test to apply in order to determine the national status of corporate entities; and although the better view is that (at least for public as opposed to private international law and some other purposes) the correct test is that of the State of incorporation, there is equally no doubt that different tests have been applied for different purposes, and that an element of fluidity is still present in this field FN28. This being so, it is surely a highly tenable proposition that the very circumstances which might lead to the State of incorporation being held to be disqualified from claiming,— because of the absence of a "genuine link" due to the company's ownership and control and main business interests being elsewhere,—might equally tend to suggest that in such a case a different test of nationality should be applied FN29. There are also certain other aspects of the matter considered in the opening paragraphs of my colleague Judge Gros' separate Opinion which are highly pertinent to the question of the national status of companies.

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FN28 See the discussions in Beckett, "Diplomatic Claims in respect of Injuries to Companies", Transactions of the Grotius Society, Vol. 17 (1932), at pp. 180-188; Paul De Visscher in Hague Recueil, 1961, Vol. I, pp. 446-462; van Hecke, "The Nationality of Companies Analysed" in Netherlands International Law Review, 1961, Issue 3, pp. 223-239; and Ginther, "Nationality of Corporations" in the Austrian Public International Law Review, 1966, Vol. XVI 1-2, pp. 27-83.
FN29 Or else that the proper test of the right to claim internationally should be that of where the real weight of interest lies. On this matter I associate myself (de lege ferenda however) with much that is contained in paragraphs 57-70 of my colleague Judge Jessup's Opinion.
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34. I am of course aware that there are difficulties about this view [p 84] which would doubtless have been brought out had the matter been properly argued. My purpose here is to indicate that this is what I think should have occurred. The Parties should have been requested to present a full argument on the subject. It was not enough, in my opinion, to proceed on the basis that since neither Party had contested the Canadian nationality of the Barcelona Company, and both had proceeded on the assumption that the Company was Canadian, the Court was not called upon to speculate otherwise. Such an attitude may be quite in order in domestic courts where, normally, appeals or alternative procedures exist. It is not appropriate to international proceedings in which, almost always, there are no possibilities of appeals or other recourses. In this field the principle of caveat actor can be carried too far, when the point involved is not at all merely incidental but could be of major importance for the outcome of the case.

III
Equitable Consideration and Equity as a system

35. The general conclusion to be drawn from the considerations set out in part II supra, is that in cases of this kind, the results to which a strict view of the law leads—as it stands de lege lata—are not satisfactory. By means of a partial application of domestic law principles connected with the inherent structure of the corporate entity, necessary and correct so far as it goes, but one-sided, international law may give rise to situations that cannot, or at any rate do not occur in corresponding circumstances on the domestic plane; or which, if they did, would certainly result in remedial legislative action. By failing to take account of various other domestic law principles directed to enabling the shareholders to act in certain kinds of cases where the action of the company is unavailable or not forthcoming, or to influence or change the management or its policy, or by taking account of this situation only to a somewhat limited extent, the present state of international law leads to the inadmissible consequence that important interests may go wholly unprotected, and that what may possibly be grave wrongs will, as a result not be susceptible even of investigation. As my colleague Judge Jessup reminded me, it was stated in the award in the Cayuga Indians case (U.N. Reports of International Arbitral Awards, Vol. VI, at p. 179) that:

"The same considerations of equity that have repeatedly been invoked by the courts where strict regard to the personality of a corporation would lead to inequitable results . . . may be invoked here. In such cases courts have not hesitated to look behind the legal person and consider . . . who were the real beneficiaries." [p 85]

This is consequently surely a situation that calls for the application of the well-known dictum of President Huber in the much cited Ziat, Ben Kiran case FN30, where what was involved was an entity of the nationality of the defendant State—a type of case in which the idea of admitting foreign intervention is really much more startling, conceptually, than it is in the present type of case. Yet there is a resemblance, and Huber's dictum is equally apt (my translation):

"International law which, in this field, draws its inspiration essentially from the principles of equity, has not laid down any formal criterion for granting or refusing diplomatic protection to national interests linked to interests belonging to persons of different na-tionality."

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FN30 U.N. Reports of International Arbitral Awards, Vol. II, p. 729.
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In the present context the equitable considerations to which the Court refers in paragraphs 92-101 of the Judgment, stress the need for a less inelastic treatment of certain of the issues of admissibility involved.

36. The matter can however be put on a broader basis than that merely of the requirements that may exist in this particular field. As an old authority (Ménignhac) said in terms even more applicable today— "international law is to be applied with equity". There have been a number of recent indications of the need in the domain of international law, of a body of rules or principles which can play the same sort of part internationally as the English system of Equity does, or at least originally did, in the Common Law countries that have adopted it. Deciding a case on the basis of rules of equity, that are part of the general system of law applicable, is something quite different from giving a decision ex aequo et bono, as was indicated by the Court in paragraph 88 of its Judgment in the North Sea Continental Shelfca.se (I.C.J. Reports 1969, at p. 48), when introducing the considerations which led it to found its decision in part on equitable considerations, as it might well have done in the present case also. Be that as it may, I should like to take this opportunity of placing on record in a volume of the Court's Reports a classic short statement of the way in which, historically, the need for a system of Equity makes itself felt,—taken from a standard work FN31 current in the country in which Equity as a juridical system originated,—and in language moreover that might almost have been devised for the case of international law:

"Equity is that body of rules or principles which form[s] an appendage or gloss to the general rules of law. It represents the [p 86]attempt... of the ... legal system to meet a problem which confronts all legal systems reaching a certain stage of development. To ensure the smooth running of society it is necessary to formulate general, rules which work well enough in the majority of cases. Sooner or later, however, cases arise in which, in some unforeseen set of facts the general rules produce substantial unfairness. When this occurs, justice requires either an amendment of the rule or, if ... the rule is not freely changeable, a further rule or body of rules to mitigate the severity of the rules of law."

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FN31 Snell's Principles of Equity, 26th edition by R. L. Megarry and F. W. Baker, 1966, pp. 5-6.
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It would be difficult to find words more apt to describe the sort of impasse that arises in circumstances such as those of the present case, which a system of Equity should be employed to resolve: and, as the author of the passage cited points out subsequently, equity is not distinguishable from law "because it seeks a different end, for both aim at justice But, it might be added, they can achieve it only if they are allowed to complement one another.


IV
Nationality of the Shareholders and Continuity of Shareholders

37. Since in this and the next part (V) of this Opinion, I shall be discussing certain matters (described in the second half of paragraph 3 supra) which, having regard to the particular basis of the Judgment of the Court, did not arise for decision by it, I should like to state what effect I am intending to give to my observations concerning these matters. Evidently it would be impossible to comment on them in total abstraction from the facts and surrounding circumstances of the case itself. But although I shall be expressing a judicial view on the points of law involved, and possibly also on some points of fact, I do not wish to be understood (even though I may use the language of it) as making any judicial pronouncements or findings on them. These were matters which, although the Court considered them, it did not need for the particular purposes of the Judgment to go into fully. Had a more ample collegiate discussion taken place I might have been led to form a different opinion on some points, and therefore it is by way of analysis that I now give my views.
***
[p 87]

(A) Nationality of Shareholding Claims

38. The third preliminary objection, really had two aspects. The first, namely whether, in the particular circumstances of this case, a claim is sustainable at all on behalf of shareholders, whatever their nationality may be, has been answered in the negative by the Judgment, and this accordingly disposes of the whole claim. Had the answer been in the affirmative, however, it would still have been necessary, before the third preliminary objection could be dismissed and the claim be held to be admissible (so far as this ground of objection was concerned), that its national character should be established as being that of the claimant State. The two classic dicta of the Permanent Court may be recalled:

"... it is the bond of nationality which alone confers upon the State the right of diplomatic protection . . .FN32"

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FN32 Panevezys-Saldutiskis Railway case (P.C.I.J., Series A/B, No. 76 (1939), at p. 16).

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and

"By taking up the case of one of its subjects and by resorting to diplomatic action or international proceedings on his behalf, a State is in reality asserting its own right, the right to ensure in the person of its subjects respect for the rules of international law FN33."

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FN33 Mavrommatis Palestine Concessions case (P.C.I.J., Series A, No. 2 (1924), at p. 12). The passage quoted was repeated in almost identical language in the Panevezys decision, q.v., loc. cit.
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A true question of capacity as such is here involved FN34, for without the "bond of nationality" and what it entails, the claimant State would lack the necessary qualification for intervention and claim, since it could not then be "taking up the case of one of its subjects", in whose person alone it could be "asserting its own right... to ensure . . . respect for the rules of international law".

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FN34 As was observed in footnote 2 supra (part I), the aspect of the third preliminary objection dealt with in the Judgment of the Court is not really one of the capacity of the claimant State, but of substance: have shareholders any substantive rights at all where the injury is to the company as such? But veritable questions of capacity and admissibility are involved where the nationality, and the status as shareholders, of the private parties concerned are in issue.
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39. In terms of the present case, this means establishing in respect of the private parties concerned that, at all the material dates, and with the necessary degree of continuity, they were both (a) Belgian and (b) shareholders in the Barcelona Traction Company. Implied in this, there figured in the present case such questions as (i) whether it sufficed for a shareholder to be a company having Belgian nationality by incorpora-[p 88] tion, or must it also be shown that the individual shareholding in that company was equally Belgian, or at least predominantly so?—also (ii) whether a beneficial owner of shares actually vested in nominees or trustees of non-Belgian nationality, with whom pro tern lies the legal ownership, still ranks as a "shareholder" while that situation continues; and, if not, whether this does not entail such a break in the "ownership of the claim" as to disqualify the private party concerned, and hence his government;—and finally (iii) what are the material times at which the necessary shareholding status and nationality must exist, and did the latter in fact do so at these times? Clearly, however, the present discussion must be confined only to those points that were of especial prominence in the case.

**

(1) Onus of proof, question of quantum, etc.

40. It was naturally maintained on the Spanish side that presumptions of share-ownership, even if in themselves strong, do not suffice, and that affirmative proof is required. This is doubtless true in principle, but requires some qualification in the light of the particular circumstances. There was never any real doubt about the existence over the years, and probably since at least 1920, of a substantial Belgian shareholding, or at least interest of some kind, in the Barcelona Company. What was controversial was, rather, such matters as (a) was the interest concerned strictly one of shareholding as such, or was it more a mere beneficial interest in shares the legal ownership of which was vested in non-Belgian hands?—(b) how big an interest was it,—did it amount to the 88 per cent, claimed on the Belgian side?—(c) did it exist at the two crucial dates of the original Spanish declaration in bankruptcy of the Barcelona Company, and the date when proceedings were started before the Court,—and not merely before or after each or either of these dates?

41. Much of the argument was rendered irrelevant by a failure to distinguish clearly between whether, on the one hand, a basis of claim existed in principle, and, on the other hand, what would be the quantum of damage or reparation recoverable by the claimant State if such a basis did exist and the claim was shown to be good. In theory, if it appeared that there was even one single private party or entity which, at the material times, both was a shareholder in the Company and had the nationality of the claimant State, then that State would, in principle, be entitled to claim, since the validity of the claim—its legal merits in itself—could not depend on the size of it in terms of the numbers of shareholders, or of the financial values involved. The latter could, in law, only affect the quantum [p 89] of reparation or damages recoverable if the claim should be made good FN35. This situation, while it does not exactly shift the burden of proof entirely, does place it in a different light by suggesting that in some circumstances, in claims of this kind, the defendant State could only validly contest the standing of the claimant party if it could show that there was no evidence of the existence of even one indubitable shareholder of the latter's nationality, and no reasonable presumption of there being any. This is just the sort of situation which arises where, as in the present case, the claimant Party has, over a long period of years, possessed what might be called a "historic interest" in a case, the existence of which is and always has been a matter of common knowledge, constantly acted upon by both parties, implicitly recognized, and scarcely contested, at least formally, until international legal proceedings are started. In such circumstances there is an almost irresistible inference that a substantial body of private interests exists belonging to the State concerned. But as will be seen in a moment (infra, paragraph 43) the matter does not in any way depend on inferences or presumptions.

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FN35 Clearly the fact that in practice a government would not normally put forward a claim in this class of case unless the interests involved were substantial, has no relevance to the merits of the argument here stated.
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42. In the present case the attempt to maintain that the Belgian nationality of the shares had not been established, took a particular form, which involved not so much denying the existence—or proved existence— of any Belgian shareholding at all,—as maintaining that the apparent, or ostensible, Belgian shareholding did not have the requisite character. Here it is material to note that the shares in the Barcelona Company fall into three main categories,—the bearer shares; the registered (i.e., non-bearer) shares standing in the names of various private persons and entities other than a Belgian incorporated company known as Sidro FN36 for short; and finally the shares registered in the name of this same Sidro, a company the principal interest in which is owned by another Belgian registered and incorporated company—Sofina FN37. Since this last category, which it will be convenient to designate as the Sidro-(Sofina) interest, comprised not far short of two-thirds of the entire issued share capital of the Barcelona Company, and about five-eighths of the shares allegedly in Belgian hands,—then, on the basis of the principle of the sufficiency of "even a single shareholder", the only practical issue becomes that of deciding on the character and status of the Sidro-(Sofina) holding;—whereas, the status of the other shares—the bearer shares and the non-Sidro registered [p 90] shares—would be a secondary matter which, except as to quantum of damage, would become important only if the Sidro-(Sofina) holding could be shown to lack the necessary status and character adequate in itself to sustain a Belgian claim. It is therefore to this question that I shall now address myself. It has two aspects, first what was and is the true national character of Sidro-(Sofina)?—and secondly, was this entity at the material dates the actual shareholder?

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FN36 Standing for "Société Internationale d'Energie Hydro-Electrique, S.A.".
FN37 Standing for "Société Financière de Transports et d'Entreprises Industrielles, S.A."
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(2) Status of Sidro-(Sofina)

43. Even if it could not otherwise be established, Sidro-(Sofina's) original ownership of over 1 million of the Barcelona registered shares (this block was registered in the name of Sidro), constituting a more than majority holding of the entire Barcelona share issue, is conclusively proved by the fact that in 1939, in expectation of the outbreak of war, Sidro transferred the entire block first to an American firm of brokers as nominees, then to an American Trustee Company known as "Securitas Ltd." and, after the end of the war, to another American nominee firm, by whom they were eventually re-transferred to Sidro FN38. Since "nemo dare potest quod non habet", and the. validity of these transfers has never been questioned—(indeed the assumption of such validity was basic to the Spanish argument on this part of the case)—it follows that Sidro-(Sofina) must, at least originally, have been Barcelona shareholders. The allegation is, however, that by these transfers Sidro-(Sofina), though retaining as a matter of law the beneficial interest in the shares, divested themselves of the legal ownership—in fact ceased to be the actual shareholders, so that thenceforth, and until the eventual re-transfer to Sidro (which however is alleged to have come only after the main critical date in the case FN39) the shareholding in the Barcelona Company was non-Belgian so far as this block of shares was concerned; and so no Belgian claim could now be based on them. This matter I consider infra in paragraphs 48-59, and in the meantime turn to the first question indicated at the end of paragraph 42 supra—that of the true national character of Sidro-(Sofina).

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FN38 Thus it seems that during the "Securitas" period (as to which see paragraphs 5559 infra) the nominees held for that Company, not Sidro-(Sofina).
FN39 This was 12 February 1948, the date of the original declaration by a Spanish court of the bankruptcy of the Barcelona Traction Company. There is a certain difficulty as to the date at which the damage to the Company occurred as it took several years to complete. However I agree with what Judge Jessup says in paragraph 75 of his separate Opinion.
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*[p 91]

44. It was never at any time contended that Sidro and Sofina were other than Belgian entities in the sense that they were companies incorporated under Belgian law, having their registered head offices in Belgium, and therefore that, according to the most generally received canons FN40, not disputed by either Party, they were companies invested with Belgian nationality. The objection advanced—a curious one to receive Spanish sponsorship—was that although Sidro-(Sofina) were Belgian by incorporation, yet if the corporate veil was lifted, it would be found that the shareholding interest in Sidro-(Sofina) itself was largely non-Belgian. The relevance of this contention was maintained as existing on two levels, one of these being that it revealed as being quite unfounded the Belgian contention that the savings of numerous humble Belgian individuals, channelled into the Barcelona Company via Sidro-(Sofina), had been detrimentally affected by the Spanish treatment of the Company,—for, so it was alleged on the Spanish side, the ultimate interests in Sidro-(Sofina) were not Belgian, or at least it had not been established that they were.

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FN40 See footnote 14 in part I, supra.
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45. I do not find it necessary to consider this particular aspect of the matter since the Belgian contention that the savings of hundreds of small Belgian shareholders were injuriously affected through their interest in Sidro-(Sofina) goes largely to the moralities rather than the legalities of the issue. The essential legal question is different—namely whether (the Belgian status by incorporation of Sidro-(Sofina) itself, being established and not contested)—there are nevertheless grounds upon which it can be maintained that the corporate veil must be lifted in order to see what is the character of the ultimate interests lying behind this veil. It would certainly seem that whoever else can adopt such an attitude it cannot be Spain,—that Spain is indeed precluded from doing so,—because it is precisely Spain which, in relation to the Barcelona Traction Company maintains that the Canadian nationality of the Company, by incorporation, is conclusive, and that its corporate veil cannot be lifted in order to take account of the non-Canadian shareholding lying behind it. Yet, paradoxically FN41,—that is just what Spain has sought to maintain in relation to Sidro-(Sofina),—but not Barcelona. On what basis does this attempt proceed?

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FN41 This, however, is only one of the many instances of "having it both ways" in this most paradoxical of cases.
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46. The argument was that it was Belgium which was precluded from contesting the lifting of the Sidro-(Sofina) veil, since it was precisely Belgium which maintained, in relation to the Barcelona Company, that the veil must be lifted in order to reveal the true Belgian interests underlying the Company. But at this point it becomes clear that the rival positions, like two mathematical negatives that make a positive, cancel each other out and leave the objective question of the legitimacy, and [p92] occasions, of lifting the veil still to be determined. Let it be assumed, notwithstanding, that a purely "tu quoque" argument might have some validity on a sort of preclusive basis. Accordingly, it is said, the Belgian case must concede what it claims: just as it claims that the Canadian nationality of the Barcelona Company is not conclusive, so must it also concede that the ostensibly Belgian nationality of Sidro-(Sofina) is not conclusive as to that entity's true character, which must in consequence be established by reference to the underlying shareholding interests in it. This seems to me to involve a misunderstanding of the Belgian position, which does not imply any denial of the Canadian nationality of the Barcelona Company or the right of the Company and its Government to claim, but merely asserts (failing such a claim) a "parallel" right of Belgium also to claim on behalf of any shareholders who are Belgian. If amongst these shareholders there are companies of Belgian nationality by incorporation, then Belgium asserts a right to claim on their behalf as Barcelona shareholders. According to this "parallel right" position, what would have to be conceded by Belgium is something quite different from what the Spanish argument maintains. Belgium does not have to concede that, if it appears that most of the shareholding in Sidro-(Sofina) itself is non-Belgian, then Belgium is disqualified from claiming on behalf of Sidro-(Sofina) as an entity,—for she makes no such assertion as regards Canada's right to claim on behalf of the Barcelona Company, despite its non-Canadian shareholding. What Belgium would have to concede, and presumably would have difficulty in conceding, is that if Belgium refused to claim on behalf of Sidro-(Sofina)—it might be because of non-Belgian interests in that entity, just as it may be that Canada does not claim on behalf of Barcelona because of the non-Canadian interest—then it would become legitimate, on the "parallel right" basis, for yet other governments—those of the non-Belgian shareholders in Sidro-(Sofina)—to make a claim on behalf of those shareholders, in the absence of any Belgian claim on behalf of Sidro-(Sofina) as such. This is the true analogy, and only in this sense, and in such circumstances, would Belgium's position over Barcelona oblige her to concede a lifting of the veil of Sidro-(Sofina).

47. It is of course an entirely different question whether Belgium's "parallel right" position is good in law. According to the Judgment of the Court (which, de lege lata I agree), it is not. But within the four corners of its premisses, the argument is entirely logical, and it operates to absolve Belgium from the charge of inconsistency in asserting a right to claim on [p 93] behalf of Sidro-(Sofina) as an entity of Belgian nationality by incorporation, irrespective of its detailed composition. In consequence, the result is the same whichever way the matter is looked at: namely if a claim on behalf of shareholders is permissible at all, a Belgian claim on behalf of Sidro-(Sofina) is permissible;—for according to the basic Spanish position the veil of a company can never be lifted save in exceptional circumstances not here admitted to exist,—while according to Belgium the veil can be lifted if the company's government refuses to claim on its behalf,— but Belgium, as the Government of Sidro-(Sofina), is not refusing to claim on that entity's behalf, so here also there is no occasion to go behind the corporate facade.

(3) Question of nominees, trustees, etc.

48. The second main challenge to the standing of Sidro-(Sofina) as owners of the greater part of the Barcelona Traction shares, was based on objections, not as to the Belgian national character of these entities but as to their character qua Barcelona shareholders. Over certain periods, it was pointed out, covering dates material to the validity of the Belgian claim, the Sidro-(Sofina) shares were vested in nominees and/or trustees of American nationality. The fact is admitted. The effect, according to the Spanish argument, was that Sidro-(Sofina) while retaining the beneficial ownership, or the beneficial interest, ceased to be the legal owners of the shares, or rather, ceased to be the actual shareholders. Consequently, at the time when the Belgian claim arose—that is to say at the date when the alleged injury to the Barcelona Company was inflicted—the shareholders were not Belgian, but American, and therefore the "bond of nationality" postulated by the Permanent Court (supra, paragraph 38) as being necessary to found a right to claim, did not exist so far as Belgium was concerned, at least on the basis of this block of shares FN42.

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FN42 And as regards all the other shares—i.e., the bearer shares and non-Sidro-(Sofina) registered shares, the Spanish position was that their alleged Belgian ownership rested on presumptions and had not been proved
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49. This Spanish contention is in part related to the "continuity" question: the transfer of the shares to non-Belgian nominees or trustees caused a break, covering a material date, in the Belgian ownership or status. In the next section (B) below certain comments are made on the continuity requirement for international claims, namely the requirement that the claim must be "owned" by a national of the claimant State[p 94] both at the time when the act complained of occurred, and continuously up to the date when an international claim is put forward and proceedings are commenced—(and indeed, strictly, according to one view, up to the date of judgment or award). At this moment I shall only discuss what, in relation to a claim of the present kind, is the correct effect to be attributed to the transfer of shares to foreign nominees, or to foreign trustees, as the case may be. In either case, does it deprive the transferor of his status as shareholder in relation to the claim, and hence deprive his government of the right (if right otherwise exists) to make the claim on his behalf?

50. It should be noted in the first place that from the Belgian standpoint in the case—which was throughout that the realities must be looked to rather than the form—the whole question of the nature of the interest acquired by the American nominees or trustees was irrelevant, since in any event (and this was common ground between the Parties) the beneficial ownership of or interest in the shares remained with Sidro-(Sofina) and, according to the Belgian contention, this was sufficient per se to found a Belgian claim. However, it was also maintained on the Belgian side that in any event the effect of the transfers was not to divest Sidro-(Sofina) of the status of shareholder, and it is this aspect of the matter that I wish to consider here.

*

51. I need not set out the facts concerning the vesting of the Sidro registered shares in American nominees and in the trustee company "Securitas Ltd.", except to say that the object was of course (in view of war and probable enemy occupation) to avoid their falling into enemy hands. The details of the various transactions are fully set out in paragraphs 90 et seq. of Judge Jessup's separate Opinion,—and although I do not draw the same conclusion as he does on the question of the effect of the "Securitas" transaction, I can associate myself with his statement of the facts. I will however start with the question of the effect of the nominee transactions.

(a) Nominees

52. The Spanish contention was that the effect of putting the shares into the names of nominees was to vest in the latter the legal ownership, and moreover that this result was not affected by the special juridical position of a nominee, whereby his ownership is, in law, conditioned in various ways—so that he cannot deal with the shares except by direction[p 95] of the "real" owner; but equally, must do so upon such direction, etc. This, it was said, did not alter the fact that it is the nominee who appears on the books of the company as the registered owner of the shares, and therefore, if he is thus the registered shareholder, how can someone else also be the shareholder? Insistence that the real question at issue was not who "owned" or was the "owner" of the shares, but who was, or was registered as, the "shareholder", became increasingly prominent during the course of the oral hearing; but I share Judge Jessup's view (paragraphs 99 et seq. of his Opinion) that the distinction is unreal. If a nominee shareholder were in truth "the shareholder", he would be entitled to exercise the normal rights of a shareholder,—but in fact he is not so entitled: he is even, by law, expressly forbidden from doing so. His is in fact merely a sort of "twilight" status, according to which he is no more than a pipe-line through which the supposedly merely beneficial owner continues to exercise all the rights of legal ownership. In this context the following propositions of Anglo-American-Canadian law (which is the system constitutive of the nominee position), and which have not been disputed—have indeed been admitted on the Spanish side—are pertinent:

(i) a shareholder can freely dispose of his shares: a nominee can do so only with the consent of the beneficial owner (in effect his "principal")FN43 and at his direction;
(ii) a shareholder can exercise his voting rights at General Meetings according to his own views: a nominee is obliged to vote as directed by his principal;
(iii) a shareholder has the right to receive any dividends that are declared: a nominee must pass these on to the principal, who also pays the tax on them;
(iv) shares held by a nominee, as nominee, do not figure in any statement of his assets;
(v) the principal can direct the nominee to take any steps necessary for the protection of the shares and, under some systems of law, can himself initiate proceedings for that purpose;
(vi) the principal can at any time replace or eliminate the nominee, by directing the latter to have the necessary changes made in the company's register of shareholders (add to this that, in the case of the transfers made by Sidro, no transfer fee was payable under the relevant law, because no change of ownership was deemed to occur).[p96]

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FN43 There is not of course in the formal sense a relationship of principal and agent, but the use here of the term "principal" is convenient and seems justified by the realities of the situation.
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53. The only possible conclusion must be that even if, as was contended, the matter is to be considered not on the basis of who "owns" the shares but of who is the shareholder, the true shareholder throughout is the principal, the nominee being shareholder in name only, i.e., as the very term "nominee" implies, his shareholding is nominal only. He has no real control over the shares, this remaining with the principal at whose direction the nominee is bound to act. It follows that apart from disguising the identity of the real owner (which is one of the main purposes of the nominee device), a nominee is the shareholder only for the purpose of carrying out his principal's directions,—so that what alters upon transfer to a nominee is not the control over the shares, but the manner of its exercise. It is little more than a question of mechanics. It equally follows that, if for any purpose the nominee had to establish the existence of a "genuine link" between himself and the shares—i.e., of something going beyond the bare fact that the shares are registered in his name, he would, according to all the cannons accepted in other fields as to what constitutes a genuine link, be unable to do so.

54. Furthermore, the comparison sometimes made between the position of a nominee and that of a trustee is quite illusory, but is for that reason illuminating,—for a trustee has real rights over the trust property, which he can assert even against the beneficiary of the trust. Subject to any specific term of the trust, and of the general law of trusts, not only is the trustee under no obligation to carry out the instructions or conform to the directions of the cestui que trust (beneficiary): it is often his legal duty not to, and to act in a manner quite different from what the latter wants. The cestui que trust can take legal steps to compel the trustee to conform to the terms of the trust but, within the scope of those terms, and of the relevant provisions of trust law, the trustee is completely independent, and free to act at his own discretion.

*

(b) "Securitas" Ltd.

55. This brings me to the question of the vesting of the Sidro-(Sofina) shares in "Securitas" under the various trust deeds described in Judge Jessup's Opinion. According to the logic of the view just expressed supra in paragraph 54, I ought to hold (as he does) that the vesting in "Securitas" did indeed transfer the legal ownership, Sidro-(Sofina) retaining merely the beneficial interest; especially as the object of the whole transaction was to put "Securitas" in a position of being legally [p 97] entitled to refuse to comply with Sidro-(Sofina's) own instructions if they judged that these were given under enemy pressure. Furthermore, as Judge Jessup points out, no positive evidence (despite several requests for it) was produced to show that the trust relationship was determined before the crucial date of 12 February 1948 (when the first step that led to the eviction of the Barcelona Company from its Spanish interests was taken),—although it appears that the relationship was duly determined only two or three months later when (acting on a request from Sidro) "Securitas" sent the share certificates that had been deposited with them to the New Jersey firm of nominees henceforth holding for Sidro-(Sofina). On this basis therefore the shares would, in the absence of the necessary evidence to the contrary, have to be presumed still to have been American, not Belgian owned, at the crucial date of 12 February 1948.

56. It seems to me however that, even if one accepts the view (which, for reasons to be stated later, I do not) that the effect of the "Securitas" transaction was to deprive Sidro-(Sofina) pro tem of the status of being a Barcelona shareholder, a radical change came over the situation about, or shortly after the middle of 1946, when the war in Europe had been over for somewhat more than a year. Although the trust deeds entered into with "Securitas" were, as Judge Jessup describes, never produced during the case, they were preceded in time, or at least in operative effect, by something that was produced, namely a "custodian" agreement between Sidro and "Securitas" dated 6 September 1939 (the war having then broken out, but Belgium not yet being involved), which figures as Appendix 2 to Annex 3 of the Belgian Memorial in the case. It is absolutely clear from the terms of this agreement that its object was merely to get the securities it covered physically out of harm's way, and that it had no effect whatever on Sidro's status as shareholder. This came later with the two Trust Deeds,—one also dated 6 September 1939, but evidently with suspensive effect pending Belgium's actual involvement in the war; and the other dated February 1940. Because of its inherent probability, I see no reason to doubt the Belgian affirmation that these Trust Deeds were not to become operative unless and until the Brussels area should pass into enemy occupation, for only then would the danger of enemy pressure to surrender or procure the surrender of the shares arise. It is also I think unimportant that the modifications effected in the first Trust Deed by the second have never been revealed. I see no reason to doubt the Belgian assurance that they were technical in character, intended to take account of certain contemporary Belgian war legislation, which again seems to me inherently probable. But it does not really matter, because for present purposes one is in any case "assuming the worst", viz. that between them these two Deeds did transfer the legal ownership of the shares to "Securitas", for the duration of the war so to speak.[p 98]

57. This brings me to the third of the inherent probabilities affecting this matter, namely that the Trust Deeds would (as Belgium asserts they did) have contained a clause providing for the termination of the situation they created, so soon as an agreed period after the end of the war had elapsed,—for it is hardly credible that Sidro-(Sofina) would, even to avoid enemy seizure, have signed away all future control over their shares without some such guarantee of eventual retrocession. That there was such a clause, and that it duly operated in the second half of 1946, seems to me indeed, even apart from inherent probabilities, to be an inference that can reasonably be drawn from the facts given in Judge Jessup's paragraph 92. The result was the change in the situation to which I referred at the beginning of paragraph 56 supra,—namely that "Securitas"—who in a letter of 14 April 1947 to Sidro described themselves as having from 31 December 1946 held the shares "in custody for your account" (not the language of a Trustee)—now reverted to their original status of being merely custodians, and Sidro-(Sofina) reverted to being the legal owners and actual shareholders—(that the shares were still in the name of nominees is immaterial for the reasons given in paragraphs 52-54 supra). Accordingly, if this view is correct, the shares were again Belgian owned on the crucial date of 12 February 1948. There would have been a break in the continuity of their status as such, from 1939-1946,. but as this occurred before the earliest possible crucial date, it would not signify.

58. It has to be admitted that in the absence of the relevant instruments, the foregoing conclusion can only be conjectural. But it is I believe a reasonable conjecture, warranted by those facts that are known, and by the probabilities involved. Of course the Trust Deeds would, if produced, constitute what is known in Common Law parlance as the "best" evidence, and unless they could be shown to have been lost or destroyed, it is unlikely that a municipal court would admit secondary evidence of their contents. International tribunals are not tied by such firm rules, however, many of which are not appropriate to litigation between governments. It is by no means in the nature of an inescapable inference that the reason why the Deeds were not produced was because they contained material that would have been prejudicial to the Belgian case. Documents drawn up in contemplation of war, and in the situation which confronted countries such as Belgium at that time, may well have contained provisons, or phraseology, which after the lapse of nearly 30 years—or for other reasons—a government would be reluctant to make public. In my opinion, weighing the whole matter up, and having regard to what seems to be a very reasonable presumption as to what [p 99] occurred, Belgium should be given the benefit of the doubt.


*

59. And this brings me to a point which I consider more important than any yet mentioned on this particular matter. It is not in my opinion possible to regard instruments drawn up in emergency circumstances, for the protection of property in contemplation of war, and of a singularly predatory enemy (I am of course speaking of the nazified Reich, not of Germany or Germans under any normal circumstances) in the same light as instruments entered into at other times and in the ordinary way of business. Certainly an international tribunal should not do so. In my opinion such transactions in shares as those now in question, whatever the effect that would be given to them in municipal courts for internal or private law purposes, must, on the international plane, be regarded as creating between the parties a relationship of a special character, neither divesting the shares of their pre-existing national character, nor debarring the transferor's government from sustaining a claim in respect of them in subsequent international proceedings. Outside of a mediaeval disputation, if ever there was a case for having regard to the reality rather than the form, this is surely it.

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(B) The "Continuity" of Claim Requirement

60. I do not propose to consider here whether it was in fact established that there were Barcelona shares which were continuously in Belgian hands FN44 up to at least the date when the present proceedings were commenced. As Judge Jessup, who goes into the matter in some detail, says, the case rests largely on a series of presumptions, even though it may be difficult to believe that no shares at all were continuously Belgian held; and according to the view propounded earlier (supra paragraph 41) even one such share would, as far as the theory of the matter goes, suffice to constitute a basis of claim. I want rather to comment on the continuity doctrine itself.

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FN44 It is generally accepted that this requirement does not involve continuity in the same individual person or entity, but only in successive persons or entities of the same nationality.
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61. Clearly the "bond of nationality" between the claimant State and the private party for whom the claim is brought (see supra, paragraph 38) must be in existence at the time when the acts complained of occurred, or it would not be possible for the claimant State to maintain that it had suf-[p 100] fered a violation of international law "in the person of its national",— and although this doctrine has been called the "Vatellian fiction", it nevertheless seems to constitute an indispensable foundation for the right of international claim on behalf of private parties (unless there is some alternative, e.g., functional, foundation—as when an international organization claims in respect of a member of its staff). It is however less clear why, as a matter of principle, if the private claimant is duly a national of the claimant State at the date of the injury, he must remain so, or the property concerned must do so, or the claim must not pass into the hands of a national of another State, even after that date,—for the wrong done to the State in the person of its national arises, and the consequent right "to ensure . . . respect for the rules of international law" accrues, at the moment of injury, so that, as was pleaded in the Stevenson case FN45 (though unsuccessfully FN46), the claim then becomes indelibly impressed ab initio with the national character concerned: in short, the injury to the claimant State is not, so to speak, "de-inflicted" by the fact that the individual claimant or company ceases to have its nationality, or that the property involved passes into the hands of a national of another State FN47;—and the position becomes even slightly absurd when the continuity rule is interpreted as even excluding such claims though they subsequently return to their nationality of origin after a comparatively short interval, as might well be the case with, precisely, shares.

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FN45 U.N. Reports of International Arbitral Awards, Vol. IX, p. 494.
FN46 But in this case the beneficiaries resulting from the change in the nationality of the claim, not only had ex hypothesi a different nationality from that of the original claimant, but had the nationality of the defendant State—which, created a special situation. In other ways also the Umpire's finding did not constitute an outright rejection of the "ab initio" thesis.
FN47 If value was received in respect of the transfer concerned, the question might arise whether the "damage" had not been made good—but this is another matter.
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62. In his dissenting opinion in the Panevezys case FN48, Judge van Eysinga clearly thought that the continuity rule, though a reasonable stipulation to be inserted by agreement in treaties about claims—(or to be read into them in consequence of provisions limiting their application to persons having the nationality of the claimant State at the treaty date)— was not a rule of customary international law, in which sphere it could lead to unreasonable results. Thus a rigid application of it, though justified where necessary to prevent abuses FN49, should be eschewed where it would work injustice, and this view has received support in recent writings contending for a more eclectic application of the rule, so as not to "leave a [p 101] substantial body of. . . rights without a practical remedy . . .FN50". A clear case of this would be where the change in nationality was involuntary, e.g., because of a re-alignment of State boundaries, or because the successor in title to the affected property, e.g., under a will, happened to have a different nationality from that of the original claimant or owner. Or again, why should the fact that a former dependent territory attains independence and becomes a separate State deprive whole categories of claimants in that State of all possibility of redress? Such would however be the effect of the continuity rule, for there would technically have been a change in the claimant's nationality, and the former sovereign or protecting State could no longer sustain the claim, while the new one also could not or, according to the doctrines involved, should not be able to do so, because the private claimant was not, at the time of the injury, its national,—or alternatively because, since the latter State did not then exist as a separate State, it could not itself, qua what it now is, have suffered any wrong in the person of its national FN51 . (This was in fact more or less the situation that arose in the Panevezys case. The matter ought of course to be provided for by a rule of the law of State Succession, but it is somewhat doubtful whether this is yet the case—see the detailed discussion in O'Connell, State Succession in Municipal Law and International Law (Cambridge, 1967), Vol. I, pp. 537-541).

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FN48 P.C.I.J., Series A/B, No. 76 (1939) at pp. 33-35.
FN49 For instance, if, as suggested by Judge van Eysinga, the object were to found compulsory jurisdiction, where none would otherwise have existed, by seeking out a State able to invoke a treaty clause to that effect.
FN50 O'Connell, International Law (Stevens-Oceana, 1965), Vol. II, p. 1120;—and Professor R. Y. Jennings in Hague Recueil (General Course of 1967), Vol. II, pp. 476477, citing Sinclair, British Year Book for 1950, at p. 127 says, that Judge van Eysinga's view "is in accord with what Mr. Sinclair has shown to be the history of the development of the rule of nationality of claims: that it was evolved in the 19th century in the context of the interpretation of treaties setting up claims commissions and was a product of the ordinary rule that such treaties must be interpreted strictly"—i.e., it was not really a rule of customary international law.
FN51 This last point is essentially the same as the one which arose in the Cameroons case (I.C.J. Reports 1963) under the head of the "objection ratione temporis" which I felt obliged to uphold de lege lata in my separate Opinion, for the reasons given in Part V of it (I.C.J. Reports 1963, pp. 127-130). The particular point material in the present context is dealt with in the first paragraph on p. 129 of the Volume. But I failed then to take account of the possibility that the matter might be regarded as covered by the law of State Succession, though this is still uncertain—see end of paragraph 62 supra.
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63. In short, too rigid and sweeping an application of the continuity rule can lead to situations in which important interests go unprotected, claimants unsupported and injuries unredressed, not on account of [p 102] anything relating to their merits, but because purely technical considerations bring it about that no State is entitled to act FN52. This situation is the less defensible at the present date in that what was always regarded as the other main justification for the continuity rule (and even sometimes thought to be its real fons et origo), namely the need to prevent the abuses that would result if claims could be assigned for value to nationals of powerful States whose governments would compel acceptance of them by the defendant State, has largely lost its validity. Even powerful States are not now in a position to act in this way: indeed, for reasons that need not be gone into here, they are in these days at a positive disadvantage in such matters.

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FN52 This would be a situation even worse than the present one regarding the Barcelona Company, for that Company has a government which did formerly act, could have continued to act, and still could in theory act : whereas according to the continuity rule, it may result that no government can act.
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64. Nor can it plausibly be contended that, if the continuity rule were not strictly applied, legal objections would arise because, if the claim were successful, the damages or compensation would be payable to the claimant State, although the private party concerned was no longer its national, or the affected property no longer belonged to one of its nationals;—for on the basis that the State is asserting its own right in making the claim, it is always the position, and it is well recognized internationally, that any compensation due is paid to the claimant State, and belongs to it, for use at its discretion. This was implicit in the view expressed by the Permanent Court in the Chorzów Factory case, when it said that the damage suffered by the individual could "only afford a convenient scale for the calculation of the reparation due to the State"—(my italics)FN53. If there are any fetters on the State's discretion as to what it does with the com-pensation awarded, they are imposed by the domestic law concerned. So far as international law goes, the claimant State can use this compensation as it pleases: it can keep it for itself (though this naturally is not normally done) or it can pay it to the private party who was injured, whether (as it will usually be the case) he is still its national, or has since become the national of another State, or to the national owner of the affected property, or to a foreign owner who may have bought it, or the claim, off the former, etc. There is, internationally, neither legal nor practical difficulty here.

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FN53 P.C.I.J., Series A, No. 17 (1928), p. 28.
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65. If these considerations are applied here, the conclusion would be that, provided Belgian shareholding existed on 12 February 1948, the[p 103]claim then became once and for all indelibly impressed with Belgian national character, and that any subsequent dealings in the shares were immaterial, affecting only the quantum of the damages eventually payable if Belgium were successful, or affecting only the identity of the actual persons or entities whom the Belgian Government would eventually select to become the recipients of a due share of any damages recovered.

V

Issues Connected with the Fourth Preliminary objection

66. The Judgment of the Court does not deal with the fourth preliminary objection that had been advanced on the Spanish side and which, together with the third, was joined to the merits by the Judgment which the Court gave in the preliminary (1964) phase of the case—namely the question of the exhaustion of local remedies. On the other hand, this question has had its importance for certain Members of the Court, and it was always possible that individual rejections of the Belgian claim might be based not on Belgium's lack of ius standi but on the view that the Barcelona Company did not adequately avail itself of the means of recourse open to it in the Spanish courts. In these circumstances, without attempting to discuss the fourth preliminary objection generally, I consider it legitimate to make certain limited comments on one or two aspects of the matter to which I attach special importance (and which are also of importance for the clarification of the law—see paragraph 2 supra,— recalling however, as being equally, if not even more applicable here, what I said in paragraph 37 above.

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(1) The issue of jurisdiction

67. While the question of Spanish jurisdiction to conduct bankruptcy proceedings in respect of Barcelona Traction, a Canadian company, is not technically part of the fourth preliminary objection, which concerns the exhaustion of local remedies, it is related to it in an important way, as will be seen; and since it too has a certain preliminary character, it may properly receive some consideration here.

68. It appears to me probable that, considered at the international level FN54, the declaration of bankruptcy made in respect of the Barcelona [p 104] Company did involve an excess of legitimate, or at least normal, Spanish jurisdiction—internationally. This view is not of course based on the non-Spanish nationality of the Company,—still less because of doubts (though these certainly subsist) as to whether the Company did, in the proper sense of these notions, carry on business in Spain, or own property or have a domicile or seat there FN55. It is based on the nature of the alleged default on which the petition in bankruptcy was based, and acceded to by the court. The point may be illustrated by reference to Barcelona's subsidiary, Ebro FN56, which, although equally a Canadian company, did undoubtedly carry on business in Spain, owning property, occupying offices, etc., there. Consequently, had it been Ebro that was bankrupted, and for non-payment of commercial debts arising out of its local activities, no question of any excess of jurisdiction could have arisen despite Ebro's Canadian nationality—for such matters would have been legitimately of Spanish concern. (It was indeed noticeable that it was expressly admitted on the Belgian side that the bankrupting of Ebro (had that occurred) would have been quite proper, jurisdictionally) But Barcelona was not bankrupted for anything of that kind, as is clear from the bankruptcy judgment itself. It was bankrupted exclusively for the non-payment of the interest on its sterling bonds, issued outside Spain, and also held outside Spain except in so far as certain private Spanish parties had recently acquired a few of them, apparently for the express purpose of bringing the bankruptcy proceedings. Yet in respect of these same bonds, issued under Canadian law, all the necessary machinery for the guaranteeing and enforcement of the obligation, through a well-known Canadian institution, the National Trust, had been set up, and existed for utilization in Canada, where also, in the last resort, the Company could have been made the subject of proceedings for the appointment of a receiver.

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FN54 The question whether there was jurisdiction under Spanish law, in the circumstances appertaining to the Barcelona Company, is irrelevant or inconclusive for international purposes, since the very question at issue in international proceedings is whether the jurisdiction which a State confers upon its own courts, or otherwise assumes, is internationally valid.
FN55 Barcelona was a holding company, and a holding company is by definition not an operating company. This has been brought out in several decided cases, but is too often lost sight of.
FN56 Standing for "Ebro Irrigation and Power Co. Ltd."
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69. Clearly, if the real object had been to obtain payment of the arrears of interest on the bonds, action would have been taken in Canada,— and not merely would but should, for the step taken by the Spanish bankruptcy petitioners was in clear breach of the important "no action" provisions of both the trust deeds—(clauses 44 of the Prior Lien deed and 35 of the First Mortgage deed—Annex 28 to the Memorial, Vol. I). These provisions were of course conditions of the bond obligation, by [p 105] which the petitioners automatically became bound on acquiring the bonds. They provided that no proceedings to obtain payment should be taken by any bondholder until after the (Canadian) Trustee had, upon a request to act, refused or neglected to do so.

70. In these circumstances the primary jurisdiction was clearly Canadian, and the Spanish courts should have declined jurisdiction,—at least in the first instance and until the remedies available through the Canadian National Trust had been invoked. It is true that, under present conditions, international law does not impose hard and fast rules on States delimiting spheres of national jurisdiction in such matters (and there are of course others—for instance in the fields of shipping, "anti-trust" legislation, etc.), but leaves to States a wide discretion in the matter. It does however (a) postulate the existence of limits—though in any given case it may be for the tribunal to indicate what these are for the purposes of that case; and (b) involve for every State an obligation to exercise moderation and restraint as to the extent of the jurisdiction assumed by its courts in cases having a foreign element, and to avoid undue encroachment on a jurisdiction more properly appertaining to, or more appropriately exercisable by, another State.

*

71. These considerations apply equally, not only to the initial Spanish assumption of jurisdiction in bankruptcy, but to various later stages of the bankruptcy proceedings themselves, and in particular (as part of the process of finally disposing of the Barcelona Company's Spanish under-taking) to the purported cancellation of its shares in Ebro (a Canadian company)—these being at the time under the control of the Canadian National Trust or of a receiver appointed by the Canadian courts—and the "replacement" of these by scrip issued in Spain, and subsequently sold to the new and specially formed Spanish company, Fecsa FN57, without any reference to the competent Canadian authorities or any action to procure the enforcement of these measures in Canada, so that there (and everywhere outside Spain) the original scrip remained and remains perfectly valid. The same observations apply to the purported transfer of Ebro's Canadian share register, its Canadian registered offices, and its very seat itself (also Canadian), to the city of Barcelona,—in disregard of the fact that these things, which could not physically be transferred without Ebro's consent or enforcement action in Canada, remained where they were, and are still there today, not only in actuality but in law, [p 106] seeing that Ebro is a Canadian company whose status, seat and location of share register and registered offices are all governed by Canadian law. In short what really took place appears to have had the character of a disguised expropriation of the undertaking.

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FN57 Standing for "Fuerzas Eléctricas de Cataluña, S.A."
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72. If therefore it were necessary to reach a conclusion on this matter, it could in my view only be in the sense that the whole bankruptcy proceedings were, for excess of jurisdiction, internationally null and void ab initio, and without effect on the international plane.

**

(2) Exhaustion of local remedies: the question of notification

73. The conclusion just indicated would also be of importance as regards the question of exhausting local remedies, in so far as it might tend to suggest that, strictly, this question did not arise at all,—for there should be no necessity to exhaust such remedies in respect of proceedings which, for excess of jurisdiction were, internationally, a nullity and void ab initio. At least, in respect of the substance of the proceedings, there could be no such obligation if—internationally—the proceedings were vitiated from the start.

74. Be that as it may, there are other considerations which suggest that the whole issue of the exhaustion of local remedies may be irrelevant in such circumstances as those of the present case;—for if it is the fact (as to which, vide infra) that the Barcelona Company was never, according to the applicable international standards, properly notified of the original bankruptcy declaration, so that, on the international plane, the bankruptcy procedure never began to run against it, the correct conclusion might well be that no obligation to exhaust local remedies could ever have been generated;—in much the same way that (even if the case is not entirely on the same plane) a person entitled to diplomatic immunity does not lose that immunity through ignoring proceedings brought against him in the local courts,—nor is it a condition of his government's right to complain that he should have exhausted local means of recourse in the assertion or defence of his immunity. Again, the possibility, and even probability, that the management of the Company did de facto become aware of the proceedings, in sufficient time to put in an opposition within the prescribed period, is clearly irrelevant;—for if a certain kind of notification is required by law, and this is not given, then any time-limits dependent on it simply do not, as a matter of law, begin to run,—and once again the whole procedure is vitiated and rendered void. [p 107]

75. In this connection a clear distinction must be drawn between proceedings which, if invalid, are so ab initio, and proceedings the complaint as to which concerns their outcome, e.g., that they resulted in a denial of justice. As regards the latter kind of proceedings, it is evident that, in principle at least, local remedies must be exhausted. The case is different, at any rate as regards the substance of the issues involved, where the alleged vice relates not to the outcome but to the very inception of the proceedings.

76. In considering what kind and, so to speak, degree of notification is legally requisite, it is clearly not sufficient, in cases involving a foreign element, merely to apply domestic law standards, or to rely on, or rest content with, the fact that the requirements of the local law concerned were duly complied with,—if such was indeed the case. Internationally, it is necessary to consider whether—objectively—in the case of a foreign company having its seat and management abroad—a "notice" which takes the form of nothing more than a simple press publication of the adjudication in bankruptcy, suffices,—particularly if this publication is local only, and not effected in the country of the company's management and seat. There is here a direct connection with the question of excess of jurisdiction already discussed above; and it is important to remember (see paragraph 68) that it was not anything to do with the conduct of the Barcelona Company's Spanish undertaking that was in question in the bankruptcy proceedings, or which formed the basis of the bankruptcy adjudication, but a primarily extra-Spanish matter, the servicing of the sterling bonds—which was directly the concern of the Company in Canada, and of the bondholders' trustee, the Canadian National Trust. The very fact that, as was expressly recognized in relation to the Company's domicile, by the bankruptcy petition itself, namely that "it [the Company] does not have [a domicile] in Spain, any more than it has any specific commercial establishment there", must logically lead to the conclusion that, on the international plane, a notification effected in Canada, or by Canadian means of some kind, was called for. It is difficult to see how the apparently admitted non-Spanish domicile of the Company could possibly lead to the conclusion suggested in the bankruptcy petition, and accepted by the judge, that in these circumstances it would be "necessary to limit publication to the Official Bulletin of Tarragona"—which the judge extended to the Official Bulletin of the province of Barcelona, but no further.

77. I fully appreciate that Spanish law, like certain other historic and highly developed legal systems, approaches the subject of bankruptcy mainly from the standpoint of the creditors, and with the object above all or at any rate in the first instance, of safeguarding their rights, and hence of avoiding so far as possible any premature disposal, dispersal or concealment of the debtor's assets, in such a way as to prejudice those rights. I [p 108] therefore discount the natural reactions of a jurist trained in the common-law school when confronted with a situation in which a debtor can be declared bankrupt, or a company liquidated or wound-up, on the basis of proceedings, of which no previous notice has been or will be given, and at which the debtor is not represented or afforded an opportunity to appear—and this although the declaration takes immediate effect, and that effect involves for the bankrupt a complete loss of commercial status and of legal capacity to act. I also accept the fact that according to the philosophy of this point of view, only a very short interval is allowed in which the bankruptcy can be challenged with a view to its cancellation and the reversal of its effects.

78. But for these very reasons, it appears to me to be an essential counterpart of the considerable stringency of such a system that, at the very least, the debtor, having been declared bankrupt, should receive actual notice—judicial notice—of the declaration of bankruptcy, and should do so in a form which must ensure that it is brought directly to the attention of the person or entity concerned FN58. Unless this is done, the process, viewed as a whole, comes very near to constituting, if not a species of concealment, at least a serious obstacle to the possibility of a timely challenge to the bankruptcy;—so that a procedure already highly favourable to the creditor interest, becomes loaded against that of the debtor to an extent difficult to reconcile with the standards of the administration of justice required by international law. More especially is this the case when the only period within which the bankruptcy can be challenged is a period of eight days running not from the date of notice but from that of the press publication of the bankruptcy declaration itself, and failure to observe it apparently has, thenceforth, a permanently preclusive effect.

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FN58 Under English law—to cite the system I am most familiar with—in the case of the winding-up of a company on the basis of a petition, not only must the existence of the petition be advertised (and not merely in the official London Gazette but in one of the ordinary daily newspapers also) at least seven clear days before the petition is due to be heard,—but, in addition, notice of it must be served on the company at its registered head office, equally before the hearing of the petition, at which of course the company is entitled to be represented (Halsbury's Laws of England, loc. cit., in notes 12 and 13 supra, pp. 544-549). In the case of foreign companies, notice must no less be served, and, if this cannot be effected at an address for service or place of business in England leave will be given to effect service abroad (ibid., pp. 842-843).
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79. The pertinence and force of these considerations is of course greatly increased where, as in the present case, a foreign element is involved,—where the bankrupt is a foreign entity, with its seat and management abroad, and where the occasion of the bankruptcy is not the local commercial activities of that entity, but one affecting its (chiefly non-local) bondholders. In such circumstances, mere publication in the local press, and then not in the ordinary newspapers but in journals of a highly specialized kind, normally little read except by persons having a [p 109] particular reason to do so, can not be regarded as sufficient. It is in fact doubtful whether press publication suffices at all, if it is the only measure taken. But it should at least be effected not only in the local press but also in that of the country or city where the bankrupt resides or (if a company) has its seat;—and, although the point was never finally resolved, there is some reason to think that this was in fact what Spanish law itself really required.

80. However, in my opinion, in the circumstances of cases such as the present one, even publication of the latter kind is hardly adequate. Something in the nature of judicial notice is necessary and, as mentioned in the statement of facts given in the early part of the Court's Judgment (paragraph 15), no such notice was given at the time: indeed it was not until 15 years later, in June 1963, that the Barcelona Company's longstanding request for an official copy of the bankruptcy judgment was acceded to. The reason given in that judgment for publication in the official bulletins of Tarragona and Barcelona only, namely that the domicile of the Company was "unknown", is difficult to reconcile with the fact that the seat of the company was shown as "Head Office, 25 King Street West, Toronto, Canada" on one of the most important documents which, together with a translation into Spanish, was furnished to the bankruptcy judge by the petitioners, as Nos. 3 and 3bis in the dossier of the case, namely the report of the council of administration (Board of Directors) of the Company, covering its balance sheet for 1946, the figures of which were cited in support of the bankruptcy petition (Annexes to the Memorial, Vol. II, p. 258).

81. Even if Spanish law did not require action to be taken in Toronto in such a case (see end of paragraph 79 above), it certainly in no way prohibited this. Indeed, such action would have been entirely consistent with the relevant provisions of that law, and it had been taken by the Spanish courts in other cases, particularly the Moncayo and Niel-on-Rupel cases, and was to be taken again in an analogous context in the Namel case a year later by the actual judge who was then in charge of the Barcelona bankruptcy. There existed at least three or four ways of doing this: by publication in the Toronto newspapers; through the registered letter post, with postal certificate of delivery; by personal service through a Spanish consulate in Canada, if Canadian law so allowed; or in the last resort by service effected through the Canadian authorities themselves.

82. It was contended that service or publication in Canada would have constituted an internationally impermissible act of imperium carried out in foreign territory. But in fact such acts take place every day, and constitute indeed the usual ways in which persons resident or domiciled in one country are formally apprised of proceedings affecting them, instituted in another country. Local publication, or service by post, at least, [p 110] can involve no act of imperium; and the other forms of service mentioned above have the actual concurrence, general or specific, of the local authorities. The Spanish cases cited in the preceding paragraph show that the Spanish courts themselves, in other cases, made use of the method of publication in foreign papers. The truth is that in the present case no attempt to notify the Barcelona Company in Canada was made.


83. In my opinion this omission—and even if it could have been the result only of inadvertence or oversight—was of such a character as to vitiate the whole proceedings on the international plane, and to render them void or inoperative ab initio. Relative to the Company, the proceedings were never properly initiated at all. Consequently (recalling the observations made in paragraph 75 above)—in the presence of a nullity, the question of exhausting legal remedies did not arise.

VI

The philosophy of Joinder to the Merits

84. When, in the earlier (1964) phase of the present case, the Court joined the third and fourth preliminary objections to the merits, it made a number of observations both on the general philosophy of joinder as a judicial act, and also as regards the particular reasons for effecting it on that occasion (I.C.J. Reports 1964, pp. 41-46). On the present occasion the Court has not thought it necessary to supplement these observations. But I believe there are certain additional points that can usefully be made—except however as regards the fourth preliminary objection, for it was always clear that this objection, relating to the exhaustion of local remedies, was intimately connected with the ultimate issues of substance involved by the claim, and could not even be considered except in relation to these,—and so could not be pronounced upon without in large measure prejudging the merits—a situation that has generally been viewed as eminently calling for a joinder.

*

85. As regards the third preliminary objection, on which the Court's present Judgment is mainly founded, the situation—though fully explained on pages 44-46 of the Report of the Court's earlier Judgment-was perhaps not so obviously clear although, as was pointed out in that Judgment, matters relating to the merits had been discussed in the written and oral proceedings in that phase of the case, in connection with this objection. It may therefore be desirable to point out that, apart from the doubt (see loc. cit., pp. 44-45) whether the objection had an exclusively [P111] preliminary character, and did not at least in part appertain to the merits, the Court could not, without hearing the merits, regard itself as adequately informed on what was evidently one of the key questions in the case,— namely whether, in addition to the alleged infringements of the Barcelona, Traction Company's rights, there had not also been infringements of the specific rights, stricto sensu, of the shareholders, caused either by the same acts as had affected the Company, or by separate acts affecting only shareholding rights as such. It was indeed this very point which, inter alia, the Court had in mind in the two following passages from its earlier Judgment, more than once cited or referred to in the course of the oral pleadings in the present phase of the case, but which appear to have been misunderstood to a certain extent, namely (I.C.J. Reports 1964, p. 44):

"It can be asked whether international law recognizes for the shareholders in a company a separate and independent right or interest in respect of damage done to the company by a foreign government; and if so to what extent and in what circumstances and, in particular, whether those circumstances (if they exist) would include those of the present case"

and (ibid., p. 45):

"In short, the question of the jus standi of a government to protect the interests of shareholders as such, is itself merely a reflection, or consequence, of the antecedent question of what is the juridical situation in respect of shareholding interests, as recognized by international law."

86. These observations no doubt indicated that there could be shareholding interests recognized and protected by law, which therefore amounted to rights, and that there might be circumstances in which an infringement of the company's rights would also infringe the separate rights of the shareholders. But what the Court said in no sense warranted the view that prejudice caused to the shareholders through illicit damage done to the company, necessarily and of itself gave the former a basis of claim which their government could legitimately put forward on the international plane—this being, broadly speaking, the proposition advanced on behalf of Belgium.

87. This matter was not the only one in respect of which a hearing of the merits was necessary in order to enable the Court to deal with the third preliminary objection,—for in addition to the question of the legal status of shareholders and the nature of their rights and interests, this objection also involved that of the nationality of those concerned. It was contended by Spain, not only that in principle no claim at all could be made on behalf of shareholding interests in respect of damage caused, not [p 112] to those interests as such, but to the company,—but also that, even if such a claim could be made, these particular shareholding interests were not really Belgian, or were not in Belgian hands at the material times. The Court felt it necessary to hear the merits in order to ensure that it was sufficiently informed as to the character and relative weight of the interests involved in the Barcelona Traction Company and its affiliates: indeed it was not until the merits were reached (even if then) that all the facts were fully brought out regarding this matter; and it was in this context, rather than that of the status of shareholders, that, according to one current of opinion in the Court, the Belgian claim should be regarded as inadmissible.


*
88. There are other ways in which the implications of a joinder are liable to be misunderstood—particularly if, as in the present case, the objection is eventually upheld and the merits, though heard, are not pronounced upon. There may be a tendency to assume that an international tribunal which effects a joinder is already half-way to dismissing the objection and will eventually do so and give a decision on the merits. Even if the present case, and others before it, did not demonstrate the unwarranted nature of such an assumption, this would result as a matter of principle from the fact that if the assumption were correct, the whole process of joining preliminary objections to the merits would be rendered meaningless—a mere futile (and unjustified) postponement, not a genuine suspension, of judgment on the objection.

89. Equally unjustified, as other cases show, is the opposite assumption,—that a joinder indicates a favourable attitude to the objection on the part of the tribunal concerned—a theory that only needs to be stated for its implausibility to be manifest. There may indeed be cases in which, on various grounds that seem good to it, a tribunal will hesitate to take, at the preliminary stage of a case, a decision the effect of which would be permanently to shut out, then and there, all possibility of a hearing and decision on the merits. But, although the task of evaluating the factors involved must be left to the tribunal concerned, adequate grounds for the joinder must always exist,—for the process is one that can never be other than a simple suspension of judgment on the objection, effected because the tribunal, for one reason or another, considers that it cannot pronounce upon it at that stage, consistently with giving their due weight to all the various aspects of the case, and to holding the scales of justice even between the parties. A joinder can never be interpreted as foreshadowing a conclusion already half arrived at.


*[p113]

90. No less unwarranted would be any attempt to draw from the upholding of a preliminary objection inferences as to what the attitude of the tribunal was, or would have been, in regard to the substantive merits of the claim. No such inferences—in whatever sense—could possibly be justified by reason of the fact that, on the basis simply of a preliminary objection as such, the tribunal holds the claim to be inadmissible.

*****

Postscriptum

I entirely approve of the initiative taken by the Court in paragraph 27 of the Judgment (and for the first time in a judgmentFN *) of drawing attention to the length of the proceedings in the present case,—so as to indicate where the responsibility for this lies. If the parties in a litigation before the Court think it necessary to take several years to prepare and deliver their written and oral arguments, that is their affair,—and, having myself formerly, on a number of occasions, been in the same position, I can understand the reasons for it.

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FN* A previous Order of the Court as to time-limits in the present proceedings drew attention to the matter.
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Strong objection exists however when the blame for such delays is publicly ascribed to the supposed dilatoriness or procrastination of the Court itself,—in evident ignorance, or else heedlessness, of the true facts FN**.

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FN** Some indication of the real facts will be found, for instance, in footnote 14 on p. 447 of a review article contributed by me to the Kansas Law Review, Vol. 13, No. 3, March, 1965. Since this was written, periods requested by the parties have grown to 4-5 years for the written proceedings, and 3-6 months for the oral hearing. See also for a much more complete statement, Professor Leo Gross, "The Time Element in Contentious Proceedings in the International Court of Justice", American Journal of International Law, 1969, Vol. 63, p. 74.

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Nor is this by any means the only way in which the Court has been misrepresented in a manner detrimental to the dignity and good order of its functioning as an independent judicial institution.

(Signed) G.G.Fitzmaurice


[p114]

Separate Opinion of Judge Tanaka

I

Although I subscribe to the Court's conclusion in dismissing the Belgian claim that Spain violated an international obligation and incurred responsibility vis-a-vis Belgium, I regret to have to say that my view differs from that of the Court in its reasoning. The majority opinion reached its conclusion by deciding the question of the jus standi of Belgium in the negative, i.e., by upholding the third preliminary objection of the Spanish Government, whereas my position would be to proceed to examine the question of the merits after the third and fourth (non-exhaustion of local remedies) preliminary objections. An examination of the merits, however, leads to the same result as that reached by the majority opinion, namely the dismissal of the Belgian claim.

Such preliminary remarks are made necessary in order to determine the scope and limit of individual, separate or dissenting opinions. By reason of the complexity of the instant case, we are confronted with a need to make judges' rights, as provided by Article 57 of the Statute, clearer.

A question may arise as to whether judges' opinions should be limited to those matters which have been dealt with in the majority opinion or whether they are not subject to some limitation.

Here, I do not go deeper into the study of this question. I simply wish to say that my view favours a liberal attitude which would not allow any limitation to be imposed on judges' statements, other than considerations of decency.

That this issue was taken up in some of the opinions of judges in the Judgment of the South West Africa case (South West Africa, Second Phase, Judgment, I.C.J. Reports 1966) is still vivid in our memory. So far as the detail is concerned I should like to refer to a declaration of President Sir Percy Spender (ibid., pp. 51 ff.) representing a restrictive theory and my contrary view on this issue as stated in my opinion (ibid., pp. 262-263), appended to that Judgment.

For the above-mentioned reason my following statement is not obliged to remain within the framework of the majority opinion. I feel that I must follow a logical process of my own which, according to my conscience, I believe to be just. If the question of Belgium's jus standi is resolved in the affirmative, the question of the exhaustion of local remedies will remain to be examined. If given an affirmative answer, then the question on the [p 115] merits, namely the denial of justice allegedly committed by the Spanish authorities vis-a-vis the Barcelona Traction Company and its subsidiaries should be taken up. This logical process cannot be interrupted in the middle.

***

The Judgment of 24 July 1964 rejected the first and second preliminary objections and joined the third and fourth preliminary objections to the merits.

Considering that the joinder of these two preliminary objections would not cause them to lose their preliminary character, we must first deal with these objections before examining questions relating to the merits, though bearing the latter in mind.

We shall begin with the third preliminary objection.

The object of the Belgian Government's Application of 14 June 1962 is reparation for the damage allegedly caused to a certain number of its nationals, including juridical persons, in their capacity as shareholders of the Barcelona Traction Company, by the conduct, allegedly contrary to international law, of various organs of the Spanish State toward that company and various other companies in its group.

The Spanish Government, on the other hand, denies by the third preliminary objection that the Belgian Government possesses jus standi either for the protection of the Barcelona Traction Company of Canadian nationality (Application filed on 23 September 1958) or for the protection of alleged Belgian "shareholders" of that company (present case).

The third preliminary objection involves questions of both law and fact. The question of law, which is a most important one in deciding this case, is concerned with whether a State has a right to protect its nationals who are shareholders in a company of a nationality other than that of the protecting State. More concretely, the question may be formulated as follows: has the Belgian Government jus standi to protect its nationals, namely Sidro and others, who are shareholders in the Canadian Barcelona Traction Company?

Within the framework of diplomatic protection, the third preliminary objection involves other issues concerning proteges, in particular the question of the nationality of shareholders, their identification and the question concerning the separation of legal and beneficial owner—which of them is to be treated as the true shareholder from the viewpoint of diplomatic protection?—in shareholding, which also involves a legal question.

First, let us deal with the question concerning the diplomatic protection of shareholders in a company of a nationality other than that of the protecting State. Assuredly it constitutes a most fundamental question underlying the third preliminary objection and is logically prior to other ques-[p 116]tions, so that a decision on the former in the negative would make a decision on the latter unnecessary. Therefore the question of diplomatic protection of shareholders may be recognized as constituting the core of the third preliminary objection.

Here, it is not necessary to emphasize the spirit of a universally recognized rule of customary international law concerning every State's right of diplomatic protection over its nationals abroad, that is, a right to require that another State observe a certain standard of decent treatment to aliens in its territory. The spirit of the institution of diplomatic protection is clearly declared by a Judgment of the Permanent Court of International Justice:
". . . in taking up the case of one of its nationals, by resorting to diplomatic action or international judicial proceedings on his behalf, a State is in reality asserting its own right, the right to ensure in the person of its nationals respect for the rules of international law. This right is necessarily limited to intervention on behalf of its own nationals because, ... it is the bond of nationality between the State and the individual which alone confers upon the State the right of diplomatic protection, and it is as a part of the function of diplomatic protection that the right to take up a claim and to ensure respect for the rules of international law must be envisaged." (Panevezys-Saldutiskis Railway case, P.C.I.J., Series A/B, No. 76, p. 16.)

Briefly, the idea of diplomatic protection does not seem to be a blind extension of the sovereign power of a State to the territory of other countries; the spirit of this institution signifies the collaboration of the protecting State for the cause of the rule of law and justice.

Now, in the present case, we are confronted with concrete questions of whether a national who is a shareholder in a company other than that of the protecting State, is covered by diplomatic protection and whether the interest involved in the shares is susceptible of being protected by the national State of the shareholders. In other words, can the rule of diplomatic protection be extended to a shareholder in a company of a nationality which is not that of the protecting State, and to an interest which is characterized by many corporative particularities? This is a question of interpretation of customary international law regarding the diplomatic protection of the nationals of a State.

To solve these questions, we shall start from the examination of the nature and characteristics of a shareholder in a corporation (joint-stock company). For that purpose we shall consider the concept of a corporation, legal relations between a corporation and its shareholders, and more particularly the legal significance of the juridical personality of a corporation. We can easily understand the importance of the consideration of [p 117] this last issue, if we see that many questions discussed in the course of the proceedings on the preliminary objections and on the merits appear to be centred round the question of the juridical personality of a corporation, especially the question of whether in particular matters an interpretation of the "piercing of the veil of the corporate personality" is to be admitted or not.

***

We shall first make some observations on the characteristics of corporations.

The corporation, which is a product par excellence of the capitalistic economic system, possesses in many points remarkable characteristics compared with other forms of commercial entities such as partnership and limited partnership which are called in continental countries "société de personnes" or "Personalgesellschaft", as distinguished from the corporation, designated as "société de capitaux" or "Kapitalgesellschaft". As these nomenclatures indicate, the partnership is an association which presents itself as a combination of individuals who have personal con-fidence in one another in moral as well as in economic aspects and who, in many cases, as the name "société en nom collectif" indicates, are united usually on the basis of a family tie, whereas the corporation is nothing other than an aggregation of strangers, passers-by, who become united only from an economic motive, namely the desire for possible increased dividends.

In a partnership the members of a partnership retain their own legal and economic individuality. In internal relations, they are bound by a contractual nexus (between the members qua individuals and between the members and the partnership) and in external relations they have an unlimited liability toward the creditors of the partnership. On the contrary, in the case of a corporation, its members, the shareholders, stand in no legal relationship either to one another or to outsiders, i.e., the creditors of the corporation. The shareholders, different in that from partners whose entire personality and individuality is absorbed into the business of the partnership, do not and cannot participate in the activities of the corporation save by way of exercising their voting rights in the general meeting. Even this kind of participation of the shareholders in the corporate business is reduced to a minimum by the natural tendency to indifference and "absenteeism" on the part of shareholders. Their only obligation consists in the payment of a sum of money for the shares subscribed by them and their only risk is the impossibility of reimbursement of their invested sum in case of liquidation or bankruptcy of the corporation.

Thus the legal position of shareholders lacks the individuality which is [p 118]found in the case of partners. It is characterized by its abstractness and makes the existence of shareholders something passive.

The typical corporation, considered from the point of view of those characteristics in which it differs from the partnership, is designated as a "société anonyme". This term is used in contrast with the "société en nom collectif". The anonymity relates of course to the corporation itself, but we may assert that this character is derived from the anonymity of each shareholder in the corporation. The anonymity can be said to be a characteristic not only of a bearer share but of a registered share as well.

The anonymity of corporations as well as of shareholders makes possible and facilitates the establishment among several corporations of dependent relationships and concentrations of diverse kinds and degrees such as the cartel, the "Interessengemeinschaft", "concerns", mergers (fusion), etc. Particularly, it tends to produce at the national and international levels the phenomenon of the mammoth pyramidal structure in which innumerable enterprises, crowned by a controlling holding company at the top, are affiliated with one another in links of parent-and-child relationships, by means of holding, subsidiary and sub-subsidiary companies.

The concentration due to the aforesaid anonymity disregards national frontiers and may cover many countries. In this way international investments are facilitated. The case of the Barcelona Traction Company offers an excellent example of the concentration of enterprises and international investment.

The relationship existing among innumerable companies possessing separate juridical personality is commonly called a "group".

The anonymity of shareholders manifests itself in the recent tendency to separate power or management from the ownership by mechanisms such as life insurance companies, pension trusts, and mutual funds, as pointed out by Professor Adolf A. Berle Jr. (Power Without Property, 1959, pp. 160 ff.). The separation of nominee and beneficial owner of shares, one of the issues with which the third preliminary objection in the present case is concerned, may be considered an example of the manifestation of this tendency.

Anonymity of shareholders and separation of control from ownership in corporative life necessarily exercise a profound influence upon the character of a corporation as a juridical entity. In contrast with the partnership, where autonomy among members or contractual freedom largely prevails and consequently the corporative regulation by the articles of incorporation is limited to a minimum, matters concerning corporations are, even in regard to their internal relations, minutely prescribed by jus cogens in company law and a very narrow sphere is left to the autonomy of the general meeting as the highest organ of the corporation. The degree of the rule of law in commercial societies is in [p 119] inverse proportion to the importance which law attaches to the individual member. In the partnership it is minimal; in the corporation maximal.

From what has been stated above, we may conclude that the tie of the juridical personality is, in the case of a corporation, far stronger than in the case of a partnership. In a corporation juridical personality plays the role of holding together incoherent individuals by a compact legal frame, while in the case of a partnership, even under some legal systems recognizing its juridical personality, the partners are directly liable to creditors of the partnership in the event of its insolvency and accordingly the function played by its juridical personality is extremely limited.

The above-mentioned characteristics of a corporation are very succinctly indicated by the following description :

"Dans les sociétés de capitaux ... le lien de la société avec la personne de ses membres est moins marqué; le concept de personnalité morale est donc pour elles plus nécessaire. Les associés ne sont pas normalement responsables des dettes de la société; l'actif social seul en répond. La durée de la société ne dépend pas de la vie des associés, qui ne se connaissent souvent pas, et ont réuni leurs capitaux, non leurs personnes; les actions, qui représentent les parts sociales, sont, en principe, librement négociables et ainsi appelées à changer continuellement de mains." (Professeurs Henri et Léon Mazeaud et Conseiller Jean Mazeaud, Leçons de droit civil, tome I, 3e éd., 1963, pp. 602, 603.)

If we recognize these observations as right, the natural conclusion therefrom would be that the object of diplomatic protection in the case of a corporation should be the corporation itself and not its shareholders.

From the viewpoint of emphasizing the significance of the juridical personality of the corporation, it appears that it must be the company as juridical person which is capable of enjoying the protection and not the shareholders, since they are excluded from the protection by the screen of juridical personality of the company.

The traditional doctrine on this matter has been based on the theory of the juridical personality of a corporation, which holds that "a corporation is a juridical person distinct from its members". J. Mervyn Jones stated :
"Assuming, therefore, that corporations may be nationals, it follows that only the state of which they are nationals may intervene on their behalf, and this notwithstanding the fact that most of the members may be nationals of another state." ("Claims on behalf of nationals who are shareholders in foreign companies", British Year Book of International Law, 1949, p. 227.)[p 120]

The argument of the Spanish Government which denies the right of diplomatic protection of shareholders in favour of the national State of the Barcelona Traction Company, namely Canada, is precisely based on the above-mentioned theory of a juridical personality recognized as being distinct from its members.

The Belgian Government on the contrary, wishes to advocate its position by arguing from a fundamental theory concerning the juridical person. It intends to defend its viewpoint on the strength of the doctrine of fiction, which denies the real existence of the juridical person by reducing it to a simple conglomeration of its constituent members and minimizing the juridical person as being a mere legal technique that makes it possible for plural individuals to own property or conclude a transaction.

In order to assert its view, the Belgian Government has repeatedly referred to a figurative concept of "piercing the veil" of corporate personality. So far as this slogan is concerned, however, it simply means that the shareholders must be protected by their national State regardless of the juridical personality of the corporation. It is a petitio principii and nothing more.

The Belgian Government, basing itself on the fiction theory, insists that the real existence of a corporation is its shareholders and that accordingly the subject to be protected is not limited to the Barcelona Traction Company, but includes its shareholders who are Belgian nationals.

The argument developed by the Spanish Government to deny the protection of shareholders is, as indicated above, based on the role attributed to the juridical personality of corporation.

The viewpoint of the Spanish Government is not in itself wrong. As we have seen, in a corporation the role of the juridical personality is at a maximum and that of shareholders is reduced to a minimum. Never can the shareholders come in contact with a third person through the wall of the corporate personality. This wall seems too solid to be penetrated. It appears that diplomatic protection cannot reach to shareholders, consequently the Spanish view on this point seems to be well founded.

In short, both Governments, the Belgian and the Spanish as well, appear to base their respective positions on a theory of juridical personality: either on the theory of fiction or on the realistic theory, either disregarding or emphasizing the functional importance of juridical personality.

***

However, we must approach the issue in question from a different angle. The question should be considered on quite another plane. What we have seen above and what the Spanish Government has put forward are arguments concerned with the juridical concept of corporation in the [p 121]
meaning of municipal law, private law and particularly commercial law, and they deal with this concept only.

Law relating to corporations is concerned with matters of private law, namely private interests, relationships between corporation, shareholders and third parties. Company law in respect of incorporation, formation, ultra vires, capital, its increase and reduction, organs, the rights and duties of shareholders (particularly limited liability), the transfer of shares, accounts, the issuing of bonds, dissolution, liquidation, etc., is above all related to internal matters of corporations, or business transactions with outsiders and belongs to the plane of municipal law. The principles prevailing in these matters are directed, on the one hand, to the protection of third parties, namely the creditors of a company, and on the other hand, to the protection of the shareholders in the company itself. These principles are not in themselves connected in any way with international law. The protection of shareholders is intended to be guaranteed in corporation law mainly by provisions concerning the limited liability of shareholders, the maintenance of enterprises, the principle of publicity, liability of corporate organs, etc. ; it belongs to an entirely different plane of law the prevailing principle of which is quite extraneous to that of diplomatic protection.

The Spanish concept of the impenetrability of a company's wall of juridical personality is based on a principle of private law, and therefore it cannot be applied to the question of diplomatic protection of shareholders.

Since the matter of diplomatic protection of shareholders belongs to an entirely different plane, namely to the field of international law, the juridical personality created from the necessity of the viewpoint of private law or commercial law cannot be recognized as an obstacle for the protection of shareholders on the plane of international law.

For this reason the fact that a corporation has juridical personality under the law of a State does not necessarily justify diplomatic protection by that State only.

This conclusion is based on recognition of the relativity of the validity of each legal principle and concept.

Every branch of law, for example, private law, procedural law, administrative law, fiscal law, private international law, law concerning enemy character in wartime, etc., has its own purpose and accordingly, the sphere which it governs is necessarily limited. Certain legal principles and concepts may have a relative validity in the specific sphere to which they belong. Each legal system or institution has its own objective; to attain this objective, a system of norms, i.e., principles, rules and provisions, is developed. The system is teleologically constructed. The meaning of the norms and concepts included in it will be relative to the objective of the system itself and limited by it, although the existence of [p 122] common principles and concepts underlying diverse systems cannot be denied. To give an example: we cannot help recognizing the difference between the legal position of seller and purchaser and that of parties each playing a specific role with regard to a bill of exchange, although both cases belong to the law of obligations. We may cite another example, namely the difference between the legal relationship governing a company and its shareholders and that involved in an ordinary commercial trans-action.

What we want to emphasize is that each branch of law, each system and institution, each provision belonging to it, possesses a specific character from the viewpoint of its objective and is susceptible of or requires a different interpretation. This phenomenon is what a distinguished commercialist, Rudolf Müller-Erzbach more than 55 years ago ingeniously pointed out in an article ("Relativität der Rechtsbegriffe und ihre Begrenzung durch den Zweck des Gesetzes", Jherings Jahrbücher für die Dogmatik des heutigen Römischen und Deutschen Privatrechts, Bd. 61, 1912, ss. 343-384).

On the matters we are interested in, a concept such as nationality, which is concerned with both municipal and international law, may have a different content according to the objective of each branch of law and its interpretation and application may be relative. Even if the nationality of an individual is established by municipal law, it may not necessarily have validity in international law. It is possible that one may not be entitled to diplomatic protection from one's national State by reason of lack of effectiveness, as the Nottebohm case indicates (I.C.J. Reports 1955, p. 23). The fact that the effectiveness is questioned, implies that the concept of nationality may vary in meaning according to whether it is interpreted by municipal law or by international law.

The viewpoint mentioned above may be stressed further with regard to the question of the nationality of a corporation in relation to its juridical personality. To begin with, the concept of nationality as applied to a physical person differs from that applied to a juridical person. In regard to the latter, the relationship of allegiance originating from the natural tie between physical persons and their national State may be lacking. Furthermore, the meaning implied in the nationality of corporations may not be identical according to different branches of law, for example, law concerning the treatment of foreign corporations, conflict of laws, diplomatic protection of nationals, law on enemy character, etc. (Prof. Paul Reuter, Droit international public, 1958, pp. 164, 165.)

Hypothetically, a corporation obtains juridical personality by being incorporated in a State under the law of that State and acquires the nationality of that State, but the corporation may possess a foreign [p 123] character in other respects: preponderance of foreign participation in the capital stock, nationality of members of boards of directors, place of control, place of business activities, etc. In such cases it may become controversial whether the national State of the corporation can claim diplomatic protection on its behalf solely because the corporation has its nationality; in any event, the national State of the corporation, even if it is entitled to diplomatic protection, may hesitate to exercise its right.

It is not without reason that Rabel renounced his attempt to seek a uniform content for the concept of nationality of corporations and declared that each rule should be interpreted separately (Ernst Rabel, The Conflict of Laws, 1947, Vol. II, p. 21).

***
We may quote an example for the purpose of demonstrating the non-application of a rule of municipal law to a matter of international law.

The so-called principle of equal treatment of shareholders, we believe, is considered one of the most fundamental principles governing the law of corporations. According to this principle, all shares in a corporation— or, if several categories of shares exist, all shares in the same category— are, from the viewpoint of the rights and duties incorporated in them, equal (with the exception of quantative differences proportionate to the degree of participation), and therefore shareholders are to be treated equally. This principle is perhaps derived from the fact of anonymity or lack of individuality where the position of shareholders is concerned, in contrast with that of partners ; the idea may go back to canon law and, further, to the Aristotelian notion of justifia distributiva.

The principle of equal treatment of shareholders, however important it may be, nevertheless has its limitation. The limitation may come from municipal law, but in any case it comes from outside commercial law. It may take the form of a restriction of the rights of foreign shareholders in public law. Or it may be based on international law where the latter recognizes the protection of shareholders in a foreign company who are nationals of the protecting State. Unequal treatment arising as the result of a discretionary exercise of diplomatic protection cannot be avoided when there are shareholders of different nationalities. A situation wherein some of the shareholders enjoy effective protection and the rest do not is inevitable. Whether such situation is desirable or not is a different matter.

What we meant above is that a principle such as equal treatment of shareholders, being of municipal law character, is not ipso jure applicable to matters belonging to the plane of international law, including matters concerning diplomatic protection of shareholders. The shareholders who have been excluded from diplomatic protection cannot protest against [p 124]
diplomatic protection of other shareholders by their respective national States by referring to the principle of equal treatment of shareholders, which is valid only in municipal law and not in the matter of international law to which the rule of diplomatic protection belongs.

What has been said concerning the principle of the equality of shareholders can be applied mutatis mutandis to the question of the juridical personality of a corporation. Juridical personality is, as stated above, conferred on a corporation primarily for the purposes of maintaining the enterprise, owning property, concluding transactions with outsiders and limiting or denying the liability of shareholders in regard to creditors of the company. Accordingly, juridical personality possesses meaning only as a legal technique to serve and guarantee the corporate existence in respect of private and commercial law. Its validity is relative and therefore limited.

The Spanish Government conceives the juridical personality of a corporation as an impenetrable wall lying between corporation and shareholders as far as diplomatic protection is concerned, so that it can prevent protection of the shareholders and monopolize it in favour of the corporation itself. In other words, the framework of juridical personality should involve in itself the susceptibility of diplomatic protection of the company and at the same time the exclusion of shareholders from the protection. The question of diplomatic protection could not be distin-guished from the conclusion of ordinary transactions, where the corporation itself was represented and the shareholders excluded.

Such a construction, however, would fall into the error of conceiving the juridical personality of a corporation as an aim in itself, whereas it is nothing but a means in the interest of its constituent members.

Professor (at that time Judge) Charles De Visscher said:

"L'intérêt de l'individu, l'intérêt de l'homme est toujours le but du droit et sa fin suprême. Il en est ainsi alors même que la poursuite de cet intérêt s'effectue sous le couvert du régime de la personnalité civile." ("De la protection diplomatique des actionnaires d'une société contre l'Etat sous la législation duquel cette société s'est constituée": Revue de droit international et de législation comparée, Vol. 61, 1934, p. 639.)

***

By what is set forth above, we have tried negatively to remove an important obstacle to the recognition of diplomatic protection in favour of shareholders. Next, we shall demonstrate positively the necessity and raison d'être of protection of shareholders and establish the reason why the shareholders should be protected independently of the company to which they belong.

We shall solve the question of whether the shareholders' rights and interests are included in the subject-matter of diplomatic protection [p 125] according to the universally recognized customary rule of international law, the existence of which does not admit of any doubt; we are confronted with the interpretation of this customary rule of international law, i.e., whether diplomatic protection covers the position, namely rights and interests, of shareholders in a corporation or not.

Roughly speaking, international law places no qualification on "property", "rights" and "interests", and consequently it seems that the position of shareholders can be recognized as involving property, rights or interests, and is able to be covered by diplomatic protection. Before we reach a definite conclusion, however, we must examine the nature of the shareholders' legal position and their rights and interests, because some aspects of the legal position of shareholders have appeared to be an obstacle to the recognition of its diplomatic protection and, therefore, much discussion has taken place between both Parties concerning this issue.

Let us examine what are usually indicated as shareholders' rights in books on corporation law of many countries: the right to dividends, the right to surplus assets in case of liquidation, the right to vote in general meetings, the right of minority shareholders to sue for the liability of directors, the right to transfer shares, the right to request certificates, etc.


Examining these so-called shareholders' rights we can distinguish two categories of rights: the one includes those rights which are enjoyed by shareholders themselves, namely the right to dividends, the right to surplus assets and the right to transfer shares; and the other includes the right of voting and all those rights the aim of which constitutes the common interest of the corporation itself and not the individual interest of the shareholders. Some German scholars of corporation law call the rights in the first category eigennützige Rechte (rights for self-interest) and the rights in the second category gemeinnützige Rechte (rights for common purpose). The latter category constitutes rights of shareholders sensu lato; however they are not exercised by them as shareholders but as an organ composing the general meeting, and therefore this kind of right cannot be classified in a category of rights of shareholders in sensu stricto. Of course a preponderant shareholding in the general meeting would confer on the shareholder right of control, but this so-called right cannot be said to be a "right" in the proper sense, but mere "interest".

As to the rights of shareholders to request dividends or surplus assets, we cannot deny them the nature of a right sensu stricto; nor do we hesitate to classify shares in the categories of "property", "rights" or "interests" which may be covered by diplomatic protection.

This conclusion, we consider, cannot be denied on the ground that the realization of the right to dividends or surplus assets presupposes the [p 126] existence of profits or surplus assets on the balance sheet, and is therefore conditioned by the future financial circumstances of the company. It is true that the position of shareholders is, in this respect, more uncertain than the position of creditors and bondholders, but a conditional right cannot be excluded from diplomatic protection simply because it involves uncertainty; nor can the fact that shareholders do not possess any right as regards corporate property—its formal owner being the company itself— be used to deny diplomatic protection.

In short, whatever construction may be put on the rights of shareholders each constituent element of a share can be characterized as a "right" or "interest". Furthermore, we can conceive rights and interests as a whole, as a conglomeration of diverse rights, duties and interests. Perhaps we can consider them as Mitgliedschaft or Mitgliedschaftsrecht, which is nothing else but a kind of legal position possessed by a shareholder. That this legal position can be and will be considered an object of diplomatic protection, is easily understood by the fact that the legal position as a whole, being incorporated in the share certificate, becomes negotiable as a movable and quoted in stock-exchange operations.

In this context, we shall clarify the distinction between protection of shareholders from the viewpoint of the material content of shares and protection of shareholders as owners of the share certificates. What we are concerned with is only the former case in which alleged wrongful acts vis-à-vis the company are involved and consequently the intrinsic value of shares is affected, while in the latter case the question of protection is concerned with an owner or possessor of a particular share certificate as a titre-valeur as in the case of rei vindicatio, where a share certificate has been stolen or damaged; the latter case therefore, is not concerned with the protection of shareholders which is what we are dealing with here.

In sum, the legal position of shareholders can itself be considered to be the object of diplomatic protection by their national State. From the viewpoint of diplomatic protection it does not matter whether this position can be conceived as "property", "a right" or "interests". Even if it cannot be recognized as property or a right, it constitutes "interest".
The share can be said to be a new type of property which is a product of modern capitalism; although, unlike copyright, patents and trademarks, it has its origin in municipal law, it has acquired a highly international character owing to its anonymity and transferability. There is no other movable property comparable with the share which is furnished with the highest degree of negotiability through the mechanism, of international exchange markets.[p 127]

Parallel with the development of international investment, the necessity of its protection becomes acute. It will be recognized that absence of a uniform law relative to companies and the highly imperfect state of private international law on this matter increasingly require diplomatic protec-tion of shareholders in a way that supplements the measures provided by municipal law.

Briefly, we should approach the customary rule of diplomatic protection from a teleological angle, namely from the spirit and purpose of diplomatic protection, without being bound by municipal law and private law concepts, recognizing its relative validity according to different fields and institutions. The concept of juridical personality mainly governs private law relationships. It cannot be made an obstacle to diplomatic protection of shareholders. Concerning diplomatic protection, international law looks into the substance of matters instead of the legal form or technique; it pays more consideration to ascertaining where real interest exists, disregarding legal concepts. International law in this respect is realistic and therefore flexible.

Judge Wellington Koo in his separate opinion appended to the 1964 Judgment concerning the third preliminary objection in the present case says:

"International law, being primarily based upon the general principles of law and justice, is unfettered by technicalities and formalistic considerations which are often given importance in municipal law ... It is the reality which counts more than the appearance. It is the equitable interest which matters rather than the legal interest. In other words it is the substance which carried weight on the international plane rather than the form." (Barcelona Traction, Light and Power Company, Limited, Preliminary Objections, Judgment, I.C.J. Reports 1964, pp. 62 and 63.)

***

Even if the existence of an interest (in a broad sense) in diplomatic protection is recognized, however, the State concerned would have the discretion to exercise the power of diplomatic protection on certain matters. Here, we must distinguish two questions: the one is whether diplo-matic protection is, from the viewpoint of the nature of the object of protection, legally possible or not; the other is whether, in a specific case, intervention for the purpose of diplomatic protection by a State on behalf of its national, is appropriate or not. The former question is of a legal nature, to be distinguished from the latter which constitutes nothing else but the political evaluation of the fact from various aspects (above all, economic considerations). The two questions should not be confused.[p 128]

These two questions arise from the existence of the two kinds of interest pertaining to the diplomatic protection of shareholders: one is the original interest of shareholders which requires the protection of their national State, the other is the interest which the national State of the shareholders possesses and which may become a deciding factor in the exercise of a discretionary power of intervention. These two interests must not be confused either.

In this respect, we shall consider the meaning of the percentage of participation of shareholders to be protected in the capital stock of a company. This matter has been repeatedly discussed between the Parties in the present case relative to the preponderance of percentage of Sidro's participation in the capital stock of Barcelona Traction. It has been claimed that this preponderance constitutes an essential condition for the existence or exercise of the right of diplomatic protection of shareholders. But we consider that the preponderance of percentage does not appear to constitute a condition of diplomatic protection. It seems that the percentage itself possesses no relevance to the legal possibility of diplomatic protection. Even the holding of one share would jusify—theoretically— the right of diplomatic protection. Whether this right will be exercised or not, is a matter belonging to the discretion of the national State. What is essential is the existence of an interest worthy of protection by the shareholders' national State. In this sense the total value of the shares to be protected should be considered objectively without regard to the percentage which it occupies in the total capital stock. A holding of 25 per cent. in a big company may be sufficient for the exercise of diplomatic protection; contrariwise, a 99 per cent. holding in an insignificant company may be excluded from the consideration of diplomatic protection. Of course other factors may come into consideration. This is a matter of political expediency, belonging to the discretion of the protecting State, which presupposes the possibility of protection, and not a matter of law which is concerned with the legal possibility of protection.

We presume that the discussion concerning the percentage of the participation of Sidro in the capital stock of Barcelona Traction is motivated by the idea of protection of the Barcelona Traction Company itself, on which viewpoint the Belgian Application of 1958 stood. Con-troversy around the percentage of participation, so far as the third preliminary objection is concerned, may be understood as a residuum of the viewpoint of protection of the company represented by the initial Application; therefore, it seems that it is not relevant to the question with which we are dealing now.

The question of whether a State is entitled to exercise a right of diplomatic protection of a foreign corporation is entirely another matter. It seems that it must be decided in the negative sense, by reason of the fact that the corporation itself does not possess the nationality of the protecting State. However, some State practice recognizes the protection of a foreign corporation, if substantial interest in the corporation [p 129] is owned by its nationals (see Edwin M. Borchard, The Diplomatic Protection of Citizens Abroad, 1915, p. 622). This is not the case which we are now considering. Here we are concerned with the issue of the protection of shareholders and not the company itself. But much progress has been made such that through protection of a foreign company the protection of shareholders is attained. It is quite natural that, so long as the standpoint of protection of a company itself is defended, the percentage of the participation of the protected shareholders does come into consideration. However, since we refuse to recognize an obstacle to diplomatic protection in the juridical personality of a company and attribute to shareholders an independent status which may be an object of diplomatic protection, the fact of Sidro's holding a certain fairly large percentage of the Barcelona Traction Company must be deemed to be one of the factors to be taken into consideration in exercising diplomatic protection but not one legally required as a condition for the right of protection.

***

It is true that the internationally wrongful acts allegedly committed by the Spanish administrative or judicial State organs, such as refusal of the transfer of foreign currency, the bankruptcy judgment of 12 February 1948, etc., are directed to the Barcelona Traction Company, which possesses Canadian nationality. Accordingly, the Spanish Government argues that only Canada, the national State of the company, is entitled to exercise its diplomatic protection. This argument is based on the municipal law concept of the corporation on which we made observations above and according to which only the corporate personality prevails regarding external matters. According to this concept, since only the company could be the victim of a wrongful act, the damage suffered by the shareholders should be indemnified through the company indirectly. In short, only the national State of the company would be entitled to exercise diplomatic protection and not the national State of the shareholders.

It is also true that the national State of a company is entitled to take measures of diplomatic protection on behalf of the company, assuming that the bond of nationality is effective, and that the national State is materially interested in the protection of the company. But there are many cases where the nationality of the company is not effective, where the bond between the national State of the company and the shareholders is lacking and, accordingly, the national State is not inclined to exercise the right of protection. There may exist another circumstance for the national State of the company, such as the fact that between this State and the State responsible for the wrongful acts a nexus of compulsory jurisdiction is lacking; or the former State, for some political or other reasons may not wish to pursue diplomatic protection against the latter[p 130]
State; or diplomatic protection by the former State might not bring a satisfactory result, etc. Under these circumstances there remains no other remedy than that the national State of the shareholders should take the initiative for the purpose of the protection of its nationals. A vacuum with respect to protection should not be tolerated: otherwise shareholders would be left in an entirely helpless condition and the result would be injustice and inequity which would be harmful for the healthy development of international investment.

As one of the objections raised to the above-mentioned argument in favour of diplomatic protection of a national State of shareholders, we may point out the difficulty which would be produced by the cumulative existence or competitive concurrence of rights of several States concerning the same object of diplomatic protection. It follows that in the case of multinational composition of capital, more than one national State of shareholders might intervene on the condition that the jurisdictional basis exists, either by the way of intervention as provided for in Articles 62 and 63 of the Statute or by special agreement or application (Article 40 of the Statute). Each of those entitled to diplomatic protection would be able to exercise its right of protection according to its discretion without prejudicing the rights of protection of other States concerned.

Such competitive existence of rights of diplomatic protection of diverse States appears an extraordinary phenomenon, but we consider that the same kind of legal phenomenon can be found in contractual or delictual matters where the same contract or wrongful act gives rise to a claim for compensation by diverse persons concerned. In such a case, concurrent plural claims may serve a common purpose; if one of them were exercised and satisfied, the remaining rights would be extinguished, having attained their purpose.

Accordingly, in the present case, there does not exist any contradiction between, on the one hand, the right of diplomatic protection of the Barcelona Traction Company by its national State, namely Canada and, on the other hand, the right of diplomatic protection of its shareholders by their national State, namely Belgium. The existence of the former right does not exclude either the existence of the latter right or its exercise.

Since the two rights of diplomatic protection—that of Canda and that of Belgium—co-exist in parallel but independently, it is not a necessity for Belgium's right of diplomatic protection that Canada should finally waive its right of protection in regard to the Barcelona Traction Company. Such a fact is not relevant to the existence of the right of diplomatic protection of Belgium in favour of its shareholders.

We cannot deny the possibility of a cumulative existence of rights of diplomatic protection in the case of a company just as a natural person may have dual nationality. If a claim of one State is realized, [p 131] the claim of the other State will be extinguished to this extent by losing its object. Accordingly, the defendant State cannot be compelled to pay the damage twice over.

Of course, we recognize that the fear of complication which would be caused by plural or multiple interventions of several governments has some justification. But if we deny them, the legitimate interests of shareholders might be left without protection by their national States. These phenomena would represent some of the defects inherent in the present institution of diplomatic protection, which might be related to the non-acceptability of individuals to international tribunals. Practically complication and confusion might be avoided to a considerable degree by negotiations and "solutions inspired by goodwill and common sense ..." (Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, I.C.J. Reports 1949, p. 186) between the States concerned. Or it would be a task of international legislative policy to provide means to guarantee the protection of private investments and to find appropriate solutions in order to overcome the difficulties arising from the multiple intervention of several governments. We should not refuse the necessary remedies to protect legitimate shareholders by conjecturing extreme cases.

It is true that there is no rule of international law which allows two kinds of diplomatic protection to a company and its shareholders respectively, but there is no rule of international law either which prohibits double protection. It seems that a lacuna of law exists here; it must be filled by an interpretation which emanates from the spirit of the institution of diplomatic protection itself.

***

From what is stated above, we can conclude that whether Canada is entitled to diplomatic protection of the Barcelona Traction Company as its national State or whether the Canadian Government once wanted to intervene in the dispute but finally gave up the original intention, is not legally relevant to solve the question of the right of diplomatic protection of shareholders by their national State. This right exists independently of the right of the national State of the company. The history of the comparatively short-lived Canadian intervention (1948-1952 or 1955), however, would prove the raison d'étre of the right of diplomatic protection of shareholders by their national State.

The above-mentioned protection of the shareholders themselves is based on the concept which characterizes relationships between the company and its members, namely the shareholders. Although an inde- [p 132]pendent juridical personality is conferred on a company, this personality does not present itself as an end, but simply as a means to achieve an economic purpose, namely a maximum degree of pecuniary interest by a limited sum of investment.

A company in the sociological sense belongs to the category of the "Gesellschaft", and presents itself as a pure means to achieve the economic purpose of its members, namely the shareholders; the shareholders constitute the substance of its existence; they are the sovereign of the company like the citizens in a democratic State. Who require, in the material sense, diplomatic protection in the case of a company? No-one other than the shareholders in the company, although in some cases the company itself, may appear as a formal protege on the scene, having its cause espoused by its national State. Therefore in a company, the shareholders, as being its real substance, and the subject of interests, must be considered as the object of diplomatic protection; not the company itself which has nothing but a Active existence and can only play the role of a technique for the purpose of protection of the shareholders who are the real owners of the corporate property and enterprise.

From what has been said above, we can conclude that there exists between a company and its shareholders a relationship of community of destiny which has been repeatedly emphasized, particularly in the oral arguments by the Belgian Government, in order to justify its right of diplomatic protection on behalf of its shareholders in the present case. The alleged internationally wrongful acts, it is true, are directed against the company itself and not against the shareholders, but only in a formal sense; in reality both are inseparably connected to each other in such a way that prejudicial acts committed against a company necessarily produce an effect detrimental to its shareholders by reduction of the sum of dividends or surplus assets. In a company, we can recognize the existence of unity between company and shareholders in the sense that profit and loss are in the final instance attributed to the shareholders —of course under the condition that the liability of each shareholder is limited to the sum of shares which he has subscribed.

Therefore, the alleged internationally wrongful acts directed against a company can be conceived as directed against its shareholders themselves, because both can be considered, in substance, i.e., economically, identical.

Accordingly, one cannot deny to the national State of shareholders the right of diplomatic protection of its nationals on the ground that another State may possess or exercise the same right on behalf of the company itself. Consequently, in the present case, the recognition of the right of diplomatic protection of Canada, which is the national State of the Barcelona Traction Company, does not exclude the same right of Belgium, the national State of the shareholders of that company on their behalf; hence Belgium may be entitled to exercise its original [p 133] right of protection of her shareholders independently of the protection of the company itself by Canada. Therefore, the Belgian Government cannot be regarded as substituting the Canadian claim to the protection of the company.

It might be said in passing that by this assertion we do not go so far as to maintain that the interest of the company coincides perfectly with the totality of the shareholders' interests. We must recognize that originally a company is no more than a means for its shareholders to achieve their lucrative purpose; but so long as the company continues as a going concern it would enjoy in some measure an independent existence free from the arbitrary decision of the shareholders. So long as a company exists for a considerable space of time and fulfils its corporate purpose it acquires an objective existence (the idea of so-called "Unternehmen an sich" of Walther Rathenau) which, owing to its important social role the shareholders would not dare dissolve arbitrarily, even if it were legally possible, by the prescribed majority vote. We know that many contemporary big and influential corporations are extending their activities to fields of an educational, scientific and philanthropic nature and are contributing to the solution of social and cultural problems for the welfare of humanity (A. A. Berle, The 20th Century Capitalist Revolution, 1954, pp. 164, 188). Accordingly, even in the case of a corporation created for the egoistic purposes of shareholders, there may exist a common interest of the company distinct from the individual interest of the shareholders, and therefore we cannot deny the possibility of conflict between these two interests.

However, the possibility of common interest does not preclude the fact that between the company and the shareholders a relationship of community normally exists and wrongful acts done to and damage inflicted on the former can be considered also as being directed against the latter.

We recognize that an adequate connection of cause and effect may exist between the wrongful acts done to the company and the damage inflicted on the shareholders, but we can explain this fact, as is mentioned above, by the existence of a community of destiny or a substantial economic identity between them.

***

From what has been stated above, we consider that we can demonstrate the raison d'étre of the right of diplomatic protection by a State of its nationals who are shareholders in a company of a nationality other than that of the protecting State.

The Parties have argued by quoting international arbitral precedents, the practice of States and the writings of authoritative publicists to defend their standpoints. Although cases concerning the protection of shareholders exactly analogous to the present case cannot be found, [p 134] international practice and doctrine do not seem to deny the protection of shareholders by their national State to which the company itself does not belong.

The Spanish Government admits the protection of shareholders by their national State (1) where, following the general tendency of international practice and doctrine, the company possesses the nationality of the State responsible for the damage, and (2) where the foreign company has been dissolved or is practically defunct. In these cases there exists the circumstance that the protection of the shareholders by the national State of the company cannot be expected, either factually or legally. This is why in these cases the protection of shareholders directly by their national State is justified. The question is whether these two instances are to be considered as a manifestation of a more general principle in favour of the protection of shareholders or as an exception to the main principle which does not admit their protection.

The principle of customary international law concerning diplomatic protection by the State of its nationals, however general and vague it may be, does not prohibit the rights or the legal position of shareholders being included in "property, rights and interests" as an object of protection. This conclusion can be justified as a correct interpretation of customary international law concerning diplomatic protection, particularly taking into account the above-mentioned necessity of international investment in the past as well as in the future. The nature of the interest of shareholders is to be interpreted as a legitimate one worthy of protection by their national State.

Next, customary international law does not prohibit protection of shareholders by their national State even when the national State of the company possesses the right of protection in respect of the latter.

The Spanish Government denies the right of protection of shareholders by their national State. It admits diplomatic protection of shareholders only in the two above-mentioned exceptional cases. Protection of shareholders from this viewpoint is considered only as a substitute for the protection of the company itself which has become impracticable through the circumstances indicated above. From our viewpoint, the protection of the shareholders possesses a meaning independently of the protection of the company itself. Accordingly, it can exist regardless of circumstances which might make the exercise of the right of protection of a company and the intervention of its national government impossible or difficult. There does not appear to exist in international law any restriction to the effect that the protection of shareholders in a foreign company by their national State must be limited to the above-mentioned two cases. The national State of shareholders, in the present case Belgium, is entitled to protect them just as in the cases where a company possesses the nationality of the responsible State, or a company has been dissolved or is practically defunct.

In short, the contention of the Spanish Government is based on the [p 135] municipal law concept of corporate personality and that of shareholders which is its corollary. The two protections, we consider—protection of the company and that of the shareholders—may co-exist and on equal terms; the latter is not supplementary to the former.

For the foregoing reasons, we conclude that Belgium has an independent right to protect the Belgian shareholders in Barcelona Traction in conformity with the interpretation of customary international law concerning the diplomatic protection of nationals.

II
So far we have been concerned with the question of the legal, that is to say, the theoretical basis for the jus standi of the Belgian Government: the question whether a State has a right to protect its nationals who are shareholders in a company of a nationality other than that of the protecting State. This question having been answered in the affirmative, we must now consider some questions from the viewpoint of the identification of individual shareholders with reference to the present case.

These questions are concerned of course with the existence of shareholders who are entitled to receive diplomatic protection by their home State. Not all so-called "shareholders", but only those who are qualified from the functional and temporal viewpoint to receive protection. (It goes without saying that proof of their status as shareholders must be furnished as a matter of principle either by the register in the case of registered shares or by possession in the case of bearer shares.)

From the viewpoint of functional differentiation a question arises when shares are owned by two persons: the one, a nominee, whose name is entered in the share register and who exercises rights as alter ego of the real owner; the other, the beneficial owner, who enjoys rights as the real or economic owner of the shares. By what criterion shall it be decided which of those two is entitled as shareholder to be the object of protection : the nominee or the beneficial owner?

In the present case, the register of the shareholders of the Barcelona Traction Company kept by the National Trust Company of Toronto gives successively as from 7 November 1939 the names of the Charles Gordon Company, a partnership of New Jersey and Newman & Company, a partnership of New York—the two are of American nationality— and does not give the name of Sidro which is of Belgian nationality. It is contended by the Belgian Government that a contractual nominee-beneficial-owner relationship exists between the two American partnerships and Sidro. The purpose of the establishment of such a relationship [p 136] seems to have been a wartime necessity of German-occupied Belgium to protect Sidro's participation in the capital and management of Barcelona Traction against an enemy power. Under such relationships a question arises: which of the nationalities—American or Belgian—prevails, in deciding the national character of Sidro's shares?

The Spanish Government denies the effect of the Belgian nationality of Sidro by regarding the nominees, who are of American nationality, as the true shareholders. We consider that the beneficial ownership, and, accordingly, in the present case, Sidro's position as beneficial owner, must be the criterion for deciding this question. The reason therefor is as follows: diplomatic protection depends upon where the real interest resides; it is not concerned with a legal mechanism of private law such as corporate personality, nominee relationship, etc. As we have seen in another context, just as the rule of diplomatic protection should disregard the legal veil of the corporate personality of the company in favour of its real substance, namely the shareholders, so it should disregard the legal veil of the nominee in favour of the beneficial owner. The existence of a nominee relationship does not exercise any influence upon the diplomatic protection of shareholders. Sidro loses neither its shareholding in the Barcelona Traction Company nor its Belgian nationality. It is quite unthinkable that the conclusion of the nominee contract which was motivated by a wartime necessity could exercise any influence upon the status of Sidro as a shareholder of the Barcelona Traction Company.
In short, the fact that the two above-mentioned partnerships are of American nationality has no relevance for the purpose of establishing the jus standi of the Belgian Government. What is relevant for the jus standi of Belgium is the fact that Sidro is the beneficial, that is to say, the real owner of Barcelona Traction's shares in respect of which the American partnerships are nominees.

***

Next, we shall consider the question of the existence of a bond of nationality between the shareholders and the protecting State as a condition of protection in the present case.

The object of the Belgian Government's Application of 14 June 1962 is reparation for the damage allegedly caused to a certain number of its nationals in their capacity as shareholders of the Barcelona Traction, Light and Power Company. In the shareholders are included both natural and juridical persons.

The contention of the Belgian Government concerning its jus standi is based on the preponderance of the Belgian interest in the Barcelona Traction Company. The preponderance of the Belgian interest is evident, the Belgian Government argues, from the fact that the majority of the shareholders in that company are of Belgian, nationality and that it [p 137] amounted to 88 per cent. of Barcelona Traction's capital stock. The most important shareholder in the Barcelona Traction Company, according to the Belgian Government, is admitted to be Sidro, S.A. (Société Internationale d'Energie Hydro-Electrique), whose holding is said to amount to 75 per cent. of the shares of the Belgian holding.

The preponderance of the Belgian participation in Barcelona Traction at the time of its adjudication in bankruptcy is indicated by the Belgian Government (Memorial, paragraphs 1-10) by the following figures:

Registered shares issued............ 1,080,446
Bearer shares issued ............. 718,408
Total shares issued.............. 1,798,854

Shares owned by Belgian nationals (minimum) . . 1,607,845

Shares not owned by Belgian nationals (maximum) 191,009

Belgian participation in the capital of Barcelona Traction at the date of the adjudication in bankruptcy of that company therefore amounted to not less than 89.3 per cent. of the capital issued.

Of this figure of 89.3 per cent., 75.75 per cent. belonged to Sidro, so that 13.55 per cent. at least of the capital of Barcelona Traction belonged to other Belgian nationals.

The figures given above come from three main sources of information, namely :

1. Information derived from the register of Barcelona Traction registered shares.

A statement drawn up by the National Trust Company of Toronto, which keeps the register of the shares of Barcelona Traction,
gives the following figures:

Total issued shares.............. 1,798,854
Registered shares............... 1,080,446
Registered shares owned by Sidro........ 1,012,688
Registered shares owned by shareholders other than
Sidro................... 67,758
1,080,446

The total number of registered shares in Belgian hands was 1,013,108 in which 420 shares belonging to Belgian shareholders other than Sidro are included.

The shares mentioned above as belonging to the Sidro Company had been entered in the list of registered shares since 7 November 1939 in the name of Charles Gordon & Company as nominee.[p 138]

2. Information derived from the accounts of Sidro.

The above information is confirmed and supplemented by the accounts of Sidro, for the certificate drawn up by the firm of chartered accountants, Deloitte, Plender, Giffiths & Co., dated 6 May 1959 shows that, as at 12 February 1948, Sidro owned 1,012,688 Barcelona Traction registered shares and 349,905 bearer shares, i.e., in all 1,362,593 shares out of a total of 1,798,854 shares issued, which represented 75.75 per cent. of the capital of the company.

3. Facts derived from the information gathered by the Institut belgo-luxembourgeois du change (Belgo-Luxembourg Exchange Institute).

At the time of adjudication in bankruptcy of Barcelona Traction, this company had issued 1,798,854 shares, of which at least 1,607,845 were owned by Belgian nationals; that is to say, 1,362,593 shares owned by Sidro (1,012,688 registered and 349,905 bearer shares), and at least 245,252 shares (420 registered and 244,832 bearer shares) owned by other Belgian nationals.

Belgian participation amounted therefore to at least 89.3 per cent. of the capital of the company.
Next, we shall see Belgian interests in Barcelona Traction at the time of the institution of international proceedings (14 June 1962) (Memorial, paras. 11-19). This is shown by the following figures:

Registered shares issued..........… 1,472,310
Bearer shares issued.............. 326,544
Total shares issued.............. 1,798,854
Shares owned by Belgian nationals....... 1,588,130
Shares not owned by Belgian nationals..... 210,724
Proof of the preponderance of Belgian participation at that date will be given with the help of information furnished by:

1. The register of registered shares of Barcelona Traction. The statement drawn up by the National Trust Company of Toronto gives the following facts :
2.
Total issued shares.............. 1,798,854
Registered shares............... 1,472,310
Registered shares owned by Sidro ....... 1,354,514
Registered shares owned by shareholders other than
Sidro................... 117,796
Total .... 1,472,310 [p 139]

The total number of registered shares in Belgian hands was therefore 1,356,902 in which 2,388 shares belonging to Belgian shareholders other than Sidro are included.

As to the registered shares owned by Sidro, the nominee this time was the firm of Newman & Co., New York, which had succeeded Charles Gordon & Co.

2. Information derived from the accounts of Sidro.

A certificate drawn up by the firm of Deloitte, Plender, Griffiths & Co., dated 23 August 1962, shows that on 14 June 1962 Sidro owned 1,354,514 Barcelona Traction registered shares, and 31,228 bearer shares, that is to say, a total of 1,385,742 shares out of 1,798,854 shares issued, which represented 77 per cent. of the total capital of Barcelona Traction.

3. Information concerning bearer shares owned by Belgian nationals.

As at 1 April 1962 there were in circulation 326,554 Barcelona Traction bearer shares of which 31,228 shares were owned by Sidro.

When the proceedings were instituted the number of Barcelona Traction shares in circulation was 1,798,854 of which at least 1,588,130 were owned by Belgian nationals. Of these 1,385,742 shares were owned by Sidro (1,354,514 registered and 31,228 bearer shares) and at least 202,388 (2,388 registered and 200,000 bearer shares) were owned by other Belgian nationals.

From the facts given above, it can be concluded that more than 88 per cent. of the Barcelona Traction shares were in Belgian hands both at the time of the adjudication in bankruptcy of that company and at the time the present proceedings were instituted.

This Belgian participation is made up as follows: 10 to 15 percent. of the capital of Barcelona Traction is owned by the general public in Belgium, whilst 75 to 77 per cent. of the capital is owned by Sidro, a company under Belgian law.

The foregoing is the demonstration on the part of the Belgian Government concerning the preponderance of the Belgian participation in the capital of Barcelona Traction.
Are the figures of 88 per cent. of the Belgian participation and 75 per cent. of Sidro's participation at a critical date in Barcelona Traction correct? It depends on the reliability of information furnished by the National Trust Company of Toronto, the firm of chartered accountants, Deloitte, Plender, Griffiths & Company, and the Institut belgo-luxem-bourgeois du change.

It is argued that these three main sources being on the Belgian side, one cannot therefore expect unprejudiced information from them. But it is also not just to deny absolutely their evidential value in such circumstances. Each case should be valued according to its own merits. [p 140]

Particularly, the matter in question is that of degree. The figure for Belgian participation may not be correct to the last digit. It may be 90 or 80 per cent. instead of 88 per cent. But one cannot deny the evidential value of a statement simply because it may involve some minor incorrectness or mistake. Whether the percentage is 80 or 10 per cent. the question of the jus standi of the Belgian Government is entirely the same.

***

Next, we are confronted with the question as to whether Sidro can be said to have Belgian character. It is quite a different question from that of whether the 75 per cent. participation of Sidro in the Barcelona Traction's capital stock really existed. It is concerned with the constitution of Sidro as a corporate body which may include natural and juridical persons as its constituent elements. In the case where a shareholder of Sidro is a company, the Belgian character of Sidro might depend on the nationality of individual shareholders of that company. If a shareholder of this latter company is a company the same process should be repeated, and would go on ad infinitum. Under such circumstances the national character of Sidro could only be decided by the nationality of ultimate individual shareholders who were natural persons.

The Spanish Government denies the Belgian character of Sidro by contending that Sofina, the principal shareholder of Sidro, is very limited in its Belgian holding. However, to establish the Belgian character of Sidro, which is required for its protection, we need not go to such excessive lengths of logical formalism.

The fact that Sidro is of Belgian nationality can be recognized without the slightest doubt. This company was formed under Belgian law and it has its seat (siege social) in Belgian territory, namely in Brussels. Its Belgian nationality has never been denied by the Spanish Government. Sidro, accordingly, is entitled to receive diplomatic protection from the Belgian Government, being qualified therefor by the facts of its formation and seat. These facts are sufficient to justify the connecting link between Sidro and Belgium. Just as the Barcelona Traction Company can enjoy the diplomatic protection of the Canadian Government by reason of similar factors, so Sidro is entitled to receive diplomatic protection from the Belgian Government by reason of its Belgian nationality.

It is possible that Sidro may be susceptible of two protections which are compatible with each other: on the one hand, it might be protected indirectly by the Canadian Government as a shareholder of a Canadian company, Barcelona Traction, on the other hand, it might be protected directly by the Belgian Government owing to its Belgian nationality. In this latter respect Sidro is subject to Belgian protection as a shareholder of Barcelona Traction, by virtue of having Belgian nationality and as a company as such.[p 141]

In this context we must add a few words concerning a Judgment of the International Court of Justice in the Nottebohm case (Second Phase, I.C.J. Reports 1955, pp. 16, 17, 25, 26). This Judgment denied the extension of the right of diplomatic protection of Liechtenstein to Mr. Nottebohm vis-à-vis Guatemala on the ground that his nationality of Liechtenstein lacked effectiveness. That Judgment was concerned with the effectiveness of nationality of a natural person and not that of a company. That Judgment is not germane to the present case, however, because here the nationality of Sidro is undoubtedly established.

In short, the jus standi of the Belgian Government can be founded on the Belgian nationality of Sidro, even if the Belgian nationality of the majority of the shareholders ultimately cannot be proved.

The percentage of Sidro and other Belgian holdings in the whole capital stock of the Barcelona Traction Company has no particular relevance for the question of the jus standi of the Belgian Government, but it would become an important factor for the assessment of damage allegedly incurred by Belgian shareholders.

The question of continuity of nationality, that is, identification of shareholders from the temporal viewpoint, can be decided in the affirmative. Sidro's continued existence since 1923, covering the two critical dates, is sufficient to prove this continuity.

As to the question of bearer shares, this does not seem relevant to a decision concerning jus standi and continuity.

For the above-mentioned reasons the third preliminary objection raised by the Spanish Government should be rejected.

We shall proceed to examine the fourth preliminary objection raised by the Spanish Government against the Belgian Application.

III

In the fourth preliminary objection the Spanish Government holds that the Belgian Application of 14 June 1962 is inadmissible by reason of the non-exhaustion of local remedies by the Barcelona Traction Company and those concerned, as required by international law.

The Spanish Government invokes not only the rule of customary international law on local remedies, but Article 3 to the Treaty of Conciliation, Judicial Settlement and Arbitration of 19 July 1927, which provides as follows:

"In the case of a dispute the occasion of which, according to the municipal law of one of the Parties, falls within the competence of the national courts, such Party may require that the dispute shall not be submitted to the procedure laid down in the present Treaty until a judgment with final effect has been pronounced within a [p 142] reasonable time by the competent judicial authority." [English text from League of Nations Treaty Series, Vol. LXXX, pp. 28 ff. Note by the Registry.]

That the local remedies rule constitutes "a well-established rule of customary international law" and that "the rule has been generally observed in cases in which a State has adopted the cause of its national whose rights are claimed to have been disregarded in another State in violation of international law", is clearly declared by the International Court of Justice (Interhandel, Judgment, I.C.J. Reports 1959, p. 27).

The International Court of Justice continues:

"Before resort may be had to an international court in such a situation, it has been considered necessary that the State where the violation occurred should have an opportunity to redress it by its own means, within the framework of its own domestic legal system." (Ibid., p. 27.)

The provision of Article 3 of the said Treaty is nothing else but the recapitulation of this already existing rule, the spirit and principle of which are found amplified in the Court's decision and implemented in conventions providing for the compulsory jurisdiction of international tribunals.

Before examining the well-foundedness or otherwise of the fourth preliminary objection, we must consider the relationship between two concepts, namely exhaustion of local remedies in detail and denial of justice, which is regarded as the main or central issue arising from the alleged internationally wrongful acts imputed by the Belgian Government to the Spanish authorities.

We cannot understand the position of the Court, which ordered the joinder of the fourth preliminary objection to the merits, without considering the relationship of the exhaustion of local remedies to denial of Justice.

The Court decided as follows:

"As regards the fourth Preliminary Objection, the foregoing considerations apply a fortiori for the purpose of requiring it to be joined to the merits; for this is not a case where the allegation of failure to exhaust local remedies stands out as a clear-cut issue of a preliminary character that can be determined on its own. It is inextricably interwoven with the issues of denial of justice which constitute the major part of the merits. The objection of the Respondent that local remedies were not exhausted is met all along the line by the Applicant's contention that it was, inter alia, precisely in the attempt to exhaust local remedies that the alleged denials of justice were suffered." (Barcelona Traction, Light and Power Company Limited, Preliminary Objections, Judgment, I.C.J. Reports 1964, p. 46.)[p 143]
Therefore, before deciding whether the fourth preliminary objection is to be upheld or not, we shall make some observations on the complicated relationship existing between the exhaustion of local remedies and the denial of justice.

There can be no doubt that the local remedies rule possesses a procedural character in that it requires the person who is to be protected by his government to exhaust local remedies which are available to him in the State concerned, before his government espouses the claim before an international tribunal.

What is the raison d'être of this rule?

In the first place, the consecutive existence of two procedures—municipal and international—would guarantee and promote the justness of a decision. (It goes without saying that the procedure of an international tribunal is not comparable to that of, for instance, the Cour de Cassation.)

Secondly, so long as local remedies are not exhausted, and some other remedies remain, the condition is not fulfilled. The exhaustion means the existence of a "judgment with final effect" or analogous circumstances. In such situation recourse to international remedies will be justified.

Thirdly, this procedural rule appears to express a higher conception of equilibrium or harmony between national and international requirements in the world community. The intention of this rule is explained as follows by Professor Charles De Visscher: "Il s'agit donc ici avant tout d'une règle de procédure propre a réaliser un certain équilibre entre la souveraineté de l'Etat recherché et, d'autre part, les exigences supérieures du droit international ..." ("Le déni de justice en droit international", 52 Académie de droit international, Recueil des cours, 1935, II, p. 423), or, as Judge Córdova said:

"The main reason for its existence lies in the indispensable necessity to harmonize the international and the national jurisdictions— assuring in this way the respect due to the sovereign jurisdiction of States—by which nationals and foreigners have to abide and to the diplomatic protection of the Governments to which only foreigners are entitled" (separate opinion, Interhandel, Judgment, I.C.J. Reports 1959, p. 45).

The procedural requirement of the exhaustion of local remedies presupposes the existence of a high degree of confidence by the claimant in the judicial system and in its application, and this constitutes one of the fundamental conditions to be fulfilled in the matter of the exhaustion of remedies in the State concerned.

***[p 144]

Next, we shall consider the concept of denial of justice.

Although the exhaustion of local remedies belongs to the plane of procedural law, denial of justice belongs to the plane of substantive law. In the present case, the latter constitutes the fundamental concept applied to all the allegedly internationally wrongful acts imputed by the Belgian Government to the Spanish authorities. The former, on the contrary, is nothing other than a condition for the obtaining of reparation for the damage suffered by the Barcelona Traction Company's shareholders through denial of justice.

We shall examine, in the first place, the concept of denial of justice, and next the logical relationship between this latter and the local remedies rule.

The term "denial of justice" in its loose sense means any international delinquency towards an alien for which a State is liable to make reparation. It denotes in its ordinary meaning an injury involving the responsibility of the State committed by a court of justice. As far as acts of a court which would involve the State in responsibility are concerned, a very narrow interpretation practically does not admit the existence of a denial where decisions of any kind given by a court are involved, but seeks to limit the application of this institution to the case of the denial to foreigners of access to the courts. This view would virtually mean by denial the exclusion of foreigners from all actions instituted in courts of law; therefore this concept cannot be accepted. Another more moderate and generally approved view which can be considered as acceptable is that denial of justice occurs in the case of such acts as—

"corruption, threats, unwarrantable delay, flagrant abuse of judicial procedure, a judgment dictated by the executive, or so manifestly unjust that no court which was both competent and honest could have given it, ... But no merely erroneous or even unjust judgment of a court will constitute a denial of justice, ...". (Brierly-Waldock, The Law of Nations, 6th ed., 1963, p. 287; see also Sir Gerald Fitzmaurice, "The meaning of the term 'denial of justice' ", British Year Book of International Law, 1932, p. 93.)

***

Now we shall consider the logical relationship between the two concepts: exhaustion of local remedies and denial of justice, and proceed to examine the admissibility of the fourth preliminary objection.

As we have seen above, the exhaustion of local remedies is a condition of a procedural nature, which is imposed on an individual whose interests his national State wants to protect by international proceedings. But to be able to fulfil this condition there must exist in the State concerned a judicial situation such as to make the realization of exhaustion possible. Consequently, we must recognize that some cases constitute exceptions [p 145] in regard to the application of the local remedies rule. Instances of such cases are given in the following passage:

"La réclamation internationale n'est pas subordonnée à l'épuisement préalable des recours quand ceux-ci sont absents, inadéquats ou a priori inefficaces. Il en est ainsi quand l'organisation judiciaire de l'Etat ne fournit aucune voie légalement organisée, quand les voies légales n'ouvrent aux intéressés aucune perspective raisonnable de succès, ou enfin quand, au cours même de la procédure, le plaideur étranger est victime de lenteurs ou d'obstructions équivalant à un refus de statuer et qui l'autorisent à abandonner une voie qui se révèle sans issue." (Charles De Visscher, op. cit., pp. 423-424.)
Under these circumstances respect for and confidence in the sovereign jurisdiction of States which, as indicated above, constitute the raison d'être of the local remedies rule, do not exist. The rule does not seem to require from those concerned a clearly futile and pointless activity, or a repetition of what has been done in vain.

It is said that "a claimant cannot be required to exhaust justice in a State when there is no justice to exhaust" (Charles De Visscher, op. cit., p. 424); and again "A claimant in a foreign State is not required to exhaust justice in such State when there is no justice to exhaust". (Statement by Mr. Fish, Secretary of State, quoted in Moore, International Law Digest, Vol. VI, 1906, p. 677.) If a state of denial of justice prevails in the country concerned, there can be no possibility of exhausting local remedies. In the above-mentioned extreme cases, it is impossible for the interested parties to comply with the condition concerning the exhaustion of local remedies; accordingly this condition must be dispensed with for them.

We must limit the application of the local remedies rule to cases and circumstances where its fulfilment is possible. Thus it may be said that this rule is not of an absolute character in its application.

In the light of the above considerations, we shall examine whether the exhaustion of local remedies can be required from the Belgian Government and whether in the case of an affirmative answer it has been observed or not.

It is clear that the claim put forward by the Belgian Government is based on the alleged internationally wrongful acts imputed to the Spanish Government and that these acts are characterized globally as a denial of justice.

According to the Belgian Application (paragraph 43) they—

"relate to a whole series of positive measures, acts or omissions which are often contradictory, which overlap and are interrelated, and of which the unlawful character from the point of view of the law of nations is seen particularly in the final result to which they have led". [p 146]

The Belgian Government classifies these measures, acts and omissions into administrative measures manifestly arbitrary or discriminatory, and conduct on the part of the courts revealing a lack of impartiality, contempt for the principle of the equality of parties before the court, and other defects amounting to a denial of justice from the point of view of international law. As to the conduct of the courts, the Belgian Government contends that a large number of decisions of the Spanish courts are vitiated by gross and manifest error in the application of Spanish law, arbitrariness or discrimination in international law, denials of justice lato sensu. Furthermore, the Belgian Government contends that in the course of the bankruptcy proceedings the rights of the defence were seriously disregarded (denials of justice stricto sensu). (Final submissions of the Government of Belgium filed on 14 July 1969.)

In sum, the claim of the Belgian Government is based on the alleged denials of justice, sensu stricto as well as sensu lato, committed by the Spanish authorities in regard to the Barcelona Traction Company and others concerned. In the circumstances of the present case, however, we cannot recognize that so serious a situation of denial of justice has in general prevailed that the interested party should be exempted from the obligation to exhaust local remedies. But concerning this particular case it is conceivable that, from the Applicant's viewpoint, the conten-tion of the alleged denial of justice would imply the uselessness of the exhaustion of local remedies.

If the facts of collusion and connivance of the Spanish courts or judges with the March group really existed in dealing with the proceedings of the Barcelona Traction bankruptcy case, as contended by the Belgian Government in the written and oral pleadings, we can conclude with reason that, under such circumstances, to expect a successful outcome of the exhaustion of local remedies by those concerned would be simple nonsense.

The two concepts—exhaustion of local remedies and a denial of justice—are in contradiction so far as the latter is meant in sensu stricto. The former is based on a positive viewpoint, namely the expectation of the realization of a certain result by the courts; the latter on a negative viewpoint, namely its renouncement.

Hypothetically, if a denial of justice really existed, there would be justification for believing that the local remedies rule would have become useless to that extent, as in the case of lack of an appropriate legal and judicial system and organization.

Briefly, in the concept of a denial of justice there seems to be inherent the contradiction of denying the possibility of the fulfilment of the exhaustion of local remedies. It seems that, in a case where the "original wrong" consists in a denial of justice, the fulfilment of the exhaustion [p 147] of local remedies cannot be expected, unlike the case of other internationally wrongful acts (for instance, murder, confiscation of property, etc.) where independent fulfilment of the exhaustion rule can be required.

If there is an element in the denial of justice which makes the fulfilment of the exhaustion rule impossible, then the Belgian Government would be dispensed to that extent from the observance of this rule. Despite the contentions by the Belgian Government concerning alleged facts of a denial of justice in the bankruptcy proceedings against the Barcelona Traction Company, the Belgian Government does not insist that "there is no justice to exhaust" in Spain and that Belgium should exceptionally be exempt from the obligation to exhaust local remedies. The Belgian Government does not contend that the Spanish judiciary as a whole is paralyzed and corrupt or that the fulfilment of the exhaustion rule is impossible; its complaints are concerned only with some of the judges and courts.

***

Now let us see whether the obligation of exhaustion of local remedies was fulfilled by the Barcelona Traction Company and those concerned.

First, we must consider what kind of remedies should be exercised and to what degree these remedies have been pursued. Owing to the highly complicated structure and proceedings of this dispute, it is extremely difficult to answer these questions. Everything depends on the circumstances of the case and the issues and, in particular, on the effectiveness of the available remedies (such as revision by the supreme court). Sometimes, complication arises from a difference of interpretation of law between the Parties. For instance, the Spanish Government insists that, as a result of the Barcelona Traction Company's failure to observe the time-limit of eight days for a plea of opposition to the Reus judgment of 12 February 1948, the case became res judicata and, consequently, all actions of the Barcelona Traction Company and its subsidiaries should be null and void. The Belgian Government, on the contrary, basing itself on the nullity of the publication in Spain of the judgment, argues that the time-limit of eight days did not begin to run and therefore it did not expire. If the former argument is right, the Barcelona Traction Company and its subsidiaries would lose the means of redress by becoming unable to exhaust local remedies, the result of which would be highly inequitable.

We are led to the conclusion that in the matter of the exhaustion of local remedies the same spirit of flexibility should exist which, as indicated in another context, prevails in matters of diplomatic protection in general. If we interpreted the provision of Article 3 of the Treaty of Conciliation,[p 148] Judicial Settlement and Arbitration of 1927 and the customary international rule on the matter of local remedies too strictly, possible minor errors in the technical sense would cause those concerned to be deprived of the benefit of diplomatic protection, particularly in such an affair as the Barcelona Traction case the complexity and extensiveness of which, from the substantive and procedural viewpoints, appear to be extremely rare in the annals of judicial history.

The guiding principle for resolving the questions concerning exhaustion of local remedies should be the spirit of diplomatic protection according to which, in addition to a juristic, technical construction, practical considerations led by common sense should prevail. The decision as to whether legal measures offer any reasonable perspective of success or not, should be flexible in accordance with the spirit of diplomatic protection. Even if, for instance, institutionally an administrative or judicial remedy exists whereby an appeal may be made to higher authority, this remedy may be ignored without being detrimental to the right of diplomatic protection, if such an appeal would be ineffective from the point of view of common sense.

From what has been said above, "exhaustion" can be seen to be a matter of degree. Minor omissions should not be imputed to the negligence of those concerned. It is sufficient that the main means of redress be taken into consideration. The rule of exhaustion does not demand from those concerned what is impossible or ineffective but only what is required by common sense, namely "the diligence of a bonus paterfamilias".

***

Next, let us enumerate some of the main measures alleged to have been taken by the Barcelona Traction Company and those concerned (according to the final submissions filed on 14 July 1969 by the Government of Belgium, Section VII).

(1) Concerning the Reus court's lack of jurisdiction to declare the bankruptcy of Barcelona Traction:
opposition proceeding of 18 June 1948;
application of 5 July 1948 (for a declaration of nullity); its pleading of 3 September 1948;
a formal motion of National Trust in its application of 27 November 1948;
Barcelona Traction Company entered an appearance (23 April 1949) in the proceedings concerning the Boter declinatoria; its formal adherence to that declinatoria (11 April 1953).[p 149]

(2) Concerning the bankruptcy judgment and the related decisions: application of 16 February 1948 on the part of the subsidiary companies, Ebro and Barcelonesa to have the bankruptcy judgment set aside;
the bankrupt company itself entered opposition to the judgment by a procedural document of 18 June 1948, confirmed on 3 September 1948;
incidental application for a declaration of nullity submitted by the Barcelona Traction Company (5 July 1948).

(3) Concerning the blocking of the remedies:
numerous proceedings taken by the Barcelona Traction Company, beginning with the incidental application for a declaration of nullity (5 July 1948).

(4) Concerning the failure to observe the no-action clause:
clause referred to by National Trust in its application for admission to the proceedings (27 November 1948).

(5) Concerning the conditions of sale:

the conditions of sale were attacked by Barcelona Traction in an application to set aside and on appeal, in an application of 27 December 1951 for a declaration of nullity containing a formal prayer that the order approving the conditions of sale be declared null and void, and in an application of 28 May 1955;
the same challenge was expressed by Sidro in its action of 7 February 1953 and by other Belgian shareholders of the Barcelona Traction Company in their application of 26 May 1955.

These facts which have not been contested by the Spanish Government and whose existence may be considered as being of judicial notice, prove that the case was effectively pursued before the Spanish courts or judges and that local remedies were exhausted as a condition for diplomatic protection by the Belgian Government.

Whether local remedies have been exhausted or not must be decided from a consideration of whether the most fundamental spirit of this institution has been observed or not. Now, this spirit, as is indicated above, constitutes a means of ensuring the respect and confidence due to the sovereign jurisdiction of a State. The important point is that this spirit has been respected.

The aim of the rule of exhaustion of local remedies is a practical one and its application should therefore be elastic. Each situation, being different, requires different treatment. We must beware of the danger to which this rule is exposed because of its procedural and technical nature, lest it make necessary diplomatic protection futile by an excessive raising of the objection of non-exhaustion.

Moreover, the fact that in this case, which was pending for more than [p 150] 14 years, from 12 February 1948 (date of the bankruptcy judgment against the Barcelona Traction Company by the Reus judge) to 14 June 1962 (date of the Application by the Belgian Government), 2,736 orders and 494 judgments by lower courts and 37 by higher courts had been delivered, according to the Spanish Government. Even if these figures are not correct in every detail, we can none the less recognize from them as a whole the fact that the condition of exhaustion of local remedies was indeed satisfied by the Barcelona Traction Company or its subsidiary companies. Accordingly, the argument contrary thereto by the Spanish Government is unfounded.

Therefore, the fourth preliminary objection raised by the Spanish Government must be rejected.

IV

The third and fourth preliminary objections having been decided in favour of Belgium, we must now consider a basic question on the merits, namely whether Spain is responsible for internationally wrongful acts allegedly committed by Spain which constitute "a denial of justice".

First it must be made clear that the charge of a denial of justice imputed to Spain by the Belgian Government does not denote a very narrow interpretation, namely the denial to foreigners of access to the courts. What the Belgian Government contends is not only not limited to a denial in such a formal sense, but includes a denial of justice in a wider material sense, in which, generally speaking, gross injustice, irregularities, partiality, flagrant abuse of judicial powers, unwarranted delay, etc., are included, as we indicated in another context.

The judgment of the Reus judge of 12 February 1948 declaring the bankruptcy of Barcelona Traction, its consequences and the successive acts of the Spanish courts constitute the main complaints of the Belgian Government. But the complaints include acts not only of a judicial nature but also of an administrative nature, since it is alleged that some acts and omissions of the Spanish administrative authorities, particularly of the Institute of Foreign Exchange, had caused the adjudication in bankruptcy of the Barcelona Traction Company.

From the lengthy arguments in the written and oral proceedings, we can guess the existence of antagonism between the two economic and financial groups: the one, the Mr. Juan March group and the other, the Barcelona Traction group. While the Belgian Government emphasizes the financial and political ambition and the collusion with the Spanish administrative and juridical authorities of the former group, the Spanish Government contends that there was abuse of the pyramidal structure of the latter group and stresses the tax evasion and financial irregularities [p 151] committed by that group, such as the creation of fictitious debts and the sacrifice of creditors by means of auto-contracts between Barcelona Traction and its subsidiaries.

The Spanish Government contends that the Barcelona Traction Company had been constantly in a state of "latent bankruptcy" owing to its financial methods detrimental to creditors and bondholders; the Belgian Government on the contrary insists that the financial situation of Barce-lona Traction had been normal or even prosperous except in the period of the Spanish Civil War and the Second World War.

The Belgian Government also contends that individual judicial and administrative measures which constitute separate subjects of complaint, were combined into an integral whole to bring about the "hispanicization" of a prosperous foreign enterprise. According to the Belgian Government, the adjudication in bankruptcy of Barcelona Traction is nothing other than the result of the machinations of Juan March in collusion with Spanish judicial and administrative authorities. This is the reason why the Belgian Government, alongside of individual complaints, advanced an overall complaint which unites and integrates numerous separate complaints.

The main complaints put forward by the Belgian Government focus on the irregularities allegedly committed by the Spanish courts in the bankruptcy judgment and the judicial acts following this judgment. These alleged irregularities are included in the concept of denial of justice lato sensu. The usurpation of jurisdiction may come within denial of justice in this sense.
The usurpation of jurisdiction by the Spanish courts is alleged on the ground that Barcelona Traction was a company under Canadian law with its company seat in Canada, having neither company seat nor commercial establishment in Spain, nor possessing any property or carrying on any business there.

Also, disregard for the territorial limits of acts of sovereignty is pointed out in the measures of enforcement taken in respect of property situated outside Spanish territory, without the concurrence of foreign authorities. Furthermore, irregularities are said to have been committed by conferring upon the bankruptcy authorities, through the device of "mediate and constructive civil possession"—not physical possession—the power of exercising in Spain the rights which attached to the shares located in Canada of several subsidiary and sub-subsidiary companies and on which, with the approval of the Spanish judicial authorities, they relied for the purpose of replacing the directors of those companies, modifying their articles of association, etc.

It is to be noted that Canada did not protest against the Spanish Government's usurpation of Canadian jurisdiction which was alleged by the Belgian Government.

As denials of justice lato sensu the Belgian Government complains that a large number of decisions made by the Spanish courts are vitiated by [p 152] gross and manifest error in the application of Spanish law, by arbitrariness or discrimination, in particular:

(1) flagrant breach of the provisions of Spanish law which do not permit that a foreign debtor should be adjudged bankrupt if that debtor does not have his domicile, or at least an establishment, in Spanish territory;

(2) adjudication in bankruptcy when the company was not in a state of insolvency, was not in a state of final, general and complete cessation of payment either, and had not ceased its payments in Spain;
(3) the judgment of 12 February 1948 failed to order the publication of the bankruptcy by announcement in the place of domicile of the bankrupt, which constitutes a flagrant breach of Article 1044 (5) of the 1829 Commercial Code;

(4) the decisions failing to respect the separate estates of Barcelona Traction's subsidiaries and sub-subsidiaries, in that they extended to their property the attachment arising out of the bankruptcy of the parent company, and thus disregarded their distinct juridical per-sonalities;

(5) the judicial decisions which conferred on the bankruptcy authorities the fictitious possession (termed "mediate and constructive civil possession") of securities of certain subsidiary and sub-subsidiary companies have no legal basis in Spanish bankruptcy law and were purely arbitrary.
(Final Submissions filed on 14 July 1969 by the Agent of the Belgian Government, Section III.)

There are other items which are concerned with the alleged violation of the provisions on bankruptcy and which include among others: the bestowal on the commissioner of power to proceed to the dismissal, removal or appointment of members of the staff, employees and management, of the companies all of whose shares belonged to Barcelona Traction or one of its subsidiaries; ignoring the separate legal personalities of the subsidiary and sub-subsidiary companies in the matter of the attachment of their property in Spain; irregularities concerning the convening of the general meeting of creditors of 19 September 1949; violation of the provisions concerning the sale of the property of the bankrupt company; authorization of the sale based on the allegedly perishable nature of the property to be sold; in violation of the legal provisions the commissioner fixed an exaggeratedly low upset price on the basis of an expert's opinion submitted by one side only; numerous irregularities in the General Conditions of Sale.

Next, the Belgian Government alleges that various denials of justice stricto sensu (Final Submissions, Section IV) were committed by the Reus court in the course of the bankruptcy proceedings, the Spanish [p 153] courts disregarding the rights of the defence; in particular: insertion by the Reus court in its judgment on an ex parte petition of provisions which went far beyond finding the purported insolvency of or a general cessation of payments by the bankrupt company (particularly in respect of the attachment of the property of the subsidiary companies without their having been summonsed and without their having been adjudicated bankrupt); the applications for relief presented by subsidiary companies directly affected by the judgment of 12 February 1948 were rejected as inadmissible on the grounds of lack of jus standi; it was impossible to develop or argue the complaints against the General Conditions of Sale because the order which had approved the General Conditions of Sale was regarded as a matter of mere routine.

The Belgian Government considers that "many years elapsed after the bankruptcy judgment and even after the ruinous sale of the property of the Barcelona Traction group without either the bankrupt company or those co-interested with it having had an opportunity to be heard on the numerous complaints put forward against the bankruptcy judgment and related decisions in the opposition of 18 June 1948 and in various other applications for relief". It continues that "those delays were caused by the motion to decline jurisdiction fraudulently lodged by a confederate of the petitioners in bankruptcy and by incidental proceedings instituted by other men of straw of the March group . . .". Furthermore, it concludes: "that both general international law and the Spanish-Belgian Treaty of 1927 regard such delays as equivalent to the denial of a hearing".

***

From what we have seen above, we can recognize that the alleged ground for complaint on the merits consists essentially of a denial of justice for which the Belgian Government blamed the Spanish State. It is one of the cases in which a State may incur responsibility through the act or omission of any of its organs (legislative, administrative, or judicial). But whether a State incurs responsibility or not depends on the concrete circumstances of each case; in particular, the characteristics of the three kinds of State activities—legislative, administrative and judicial—must be taken into consideration. Mechanical, uniform treatment must be avoided.

The case before the Court is concerned mainly with the acts and omissions of some judicial organs, particularly of the Spanish judges and courts, which, the Belgian Government alleges, constitute denials of justice.

Whether the above-mentioned acts and omissions allegedly constituting denials of justice would entail international responsibilities as constituting infringements of international law, must of course be decided from the nature of each act and omission in question; but we must consider also [p 154] the characteristics of the judicial function of a State as a whole and the judiciary in relation to the executive in particular.

One of the most important political and legal characteristics of a modern State is the principle of judicial independence. The independence of the judiciary in a formal sense means the guarantee of the position of judges, and in a material sense it means that judges are not bound except by their conscience.

Although judges possess the status of civil servants, they do not belong to the ordinary hierarchy of government officials with superior-subordinate relationships. They are not submitted to ordinary disciplinary rules, but to rules sui generis.

As to the institutional independence of courts as a whole, differences exist among various countries. In the first category of countries a system is adopted whereby the highest court or the lower courts, or both, have conferred upon them the power of judicial review, namely the power to pass judgment on the constitutionality of laws, ordinances and official acts. In these countries, as a corollary of this system, the independence of courts and judges vis-à-vis the government is outstanding. But in other countries where the whole body of courts and judges is under the authority of the Minister of Justice who is a member of the Cabinet, this does not seem to create much difference, so far as judicial independence is concerned, from the former group of countries. What is required from judges by judicial ethics does not differ in the two systems.

The judicial independence of courts and judges must be safeguarded not only from other branches of the government, that is to say, the political and administrative power, but also from any other external power, for instance, political parties, trade unions, mass media and public opinion. Furthermore, independence must be defended as against various courts and as between judges. Courts of higher instance and judges of these courts do not function as superiors exercising the power of supervision and control in the ordinary sense of the term vis-à-vis courts of lower instance and their judges.

This is a particularity which distinguishes the judiciary from other branches of government. This distinction, we consider, seems to be derived, on the one hand, from consideration of the social significance of the judiciary for the settlement of conflicts of vital interest as an impartial third party and, on the other hand, from the extremely scientific and technical nature of judicial questions, the solution of which requires the most highly conscientious activities of specially educated and trained experts. The independence of the judiciary, therefore, despite the existence of differences in degree between various legal systems, may be considered as a universally recognized principle in most of the municipal and international legal systems of the world. It may be admitted to be a [p 155] "general principle of law recognized by civilized nations" (Article 38, paragraph 1 (c), of the Statute).

The above-mentioned principle of judicial independence has important repercussions in dealing with the question of the responsibility of States for acts of their organs internally as well as internationally.

In the field of municipal law, we have, in the matter of responsibility of States for acts of their judiciary, the following information furnished by the Max-Planck Institute in Haftung des Staates für rechtswidriges Verhalten seiner Organe, 1967. So far as the judiciary is concerned, it concludes:

"In the overwhelming majority of the legal systems investigated, the State is not liable for the conduct of its judicial organs." (Op. cit., p. 773.)

In addition, it must be pointed out that those countries exceptionally recognizing State responsibility limit its application to criminal matters under specific circumstances (in particular, the compensation of innocent persons who have been held in custody).

As to the international sphere, an analogous principle exists. Unlike internationally injurious acts committed by administrative officials, a State is, in principle, not responsible for those acts committed by judicial functionaries (mainly judges) in their official capacity. The reason for this is found in the fact that in modern civilized countries they are almost entirely independent of their government.

We shall take into account the above-mentioned characteristics of the judiciary to resolve the question of whether the Spanish State incurs responsibility by reason of alleged internationally wrongful acts and omissions of the Spanish courts and judges, because their activities constitute the main grounds for the complaints which are presented as charges of denials of justice.

The question may be whether the acts and omissions mentioned here (in the final submissions) really constitute an international wrong for which the Spanish State is responsible for reparation in respect of the damage.

If judicial organs function quite independently of the government, it may be impossible for a State to incur responsibility by reason of any judicial act or omission on the municipal as well as on the international plane. But, in the case of some serious mistakes injudicial actions, a State is made responsible, by special legislative measures, for the reparation of damage; grave irregularities committed by the municipal judiciary may involve a State's responsibility on the plane of international law.

In short, on the one hand, a State by reason of the independence of the [p 156] judiciary, in principle, is immune from responsibility concerning the activities of judicial organs; this immunity, on the other hand, is not of an absolute nature. In certain cases the State is responsible for the acts and omissions of judicial organs, namely in cases where grave circumstances exist. That is the reason why denial of justice is discussed by writers as a matter involving a State's responsibility.

The concept of a denial of justice, understood in the proper sense, is that of an injury committed by a court of justice involving the responsibility of the State. A difference of views—narrower and broader interpretations—exists concerning acts of this kind, as we have seen in other contexts. The view which we consider as acceptable is the broader one, which covers cases of denial of justice, such as "corruption, threats, unwarrantable delay, flagrant abuse of judicial procedure, a judgment dictated by the executive, or so manifestly unjust that no court which was both competent and honest could have given it". But from the latter viewpoint, as a principle, no erroneous or even unjust judgment of a court will constitute a denial of justice.

Justification for this interpretation can be found in the independence of the judiciary (Oppenheim-Lauterpacht, International Law, Vol. I, 8th ed., 1955, p. 360). Brierly-Waldock says:

"It will be observed that even on the wider interpretation of the term 'denial of justice' which is here adopted, the misconduct must be extremely gross. The justification of this strictness is that the independence of courts is an accepted canon of decent government, and the law therefore does not lightly hold a state responsible for their faults. It follows that an allegation of a denial of justice is a serious step which states. . . are reluctant to take-when a claim can be based on other grounds." (Op. cit., p. 287.)

***

Next, we shall consider the content and character of a denial of justice allegedly committed by the Spanish judicial authorities.

It is to be noted that the various complaints raised by the Belgian Government are mainly concerned with the interpretation of municipal law, namely provisions of the Spanish commercial code and civil procedure code in the matter of bankruptcy, and provisions of Spanish private international law on the jurisdiction of Spanish Courts concerning bankruptcy. Questions relating to these matters are of an extremely complicated and technical nature: they are highly controversial and it is not easy to decide which solution is right and which wrong. Even if one correct solution could be reached, and if other contrary solutions could be decided to be wrong, we cannot assert that incorrect decisions constitute in themselves a denial of justice and involve international responsibility.

For instance, the attachment of the property of the subsidiary com-[p 157]panies by the Reus judge in disregard of their juridical personalities and relying on the doctrine of "piercing the veil", even if it might be deemed illegal, could not be recognized as a denial of justice. As a legal question, this issue involves an element similar to the question of whether the Belgian Government can base its jus standi for the purpose of the diplomatic protection of Belgian shareholders on the doctrine of "piercing the veil". The controversies concerning the alleged failure to order the publication of the bankruptcy in the place of domicile of the bankrupt and the validity of decisions failing to respect the separate estates of Barcelona Traction's subsidiary and sub-subsidiary companies or conferring on the bankruptcy authorities the fictitious possession (termed "mediate and constructive civil possession") of securities of certain subsidiary and sub-subsidiary companies, should be considered in themselves irrelevant to the question of the existence of a denial of justice also.

These questions which are concerned with the interpretation of the positive law of a State and which are of a technical nature, cannot in themselves involve an important element which constitutes a denial of justice. Questions of the kind mentioned above may constitute at least "erroneous or unjust judgment" but cannot come within the scope of a charge of denial of justice.
The same can be said concerning the validity of the bankruptcy judgment from the viewpoint of the existence or non-existence of a cessation of payments or a state of insolvency. Even if any error in fact-finding or in the interpretation and application of provisions concerning bankruptcy exists, it would not constitute in itself a denial of justice.

The question of valuation of the property of the Barcelona Traction Company as a going concern is a very complicated matter; various methods are conceivable, diverse proposals have been made and experts' opinions are divided. It is difficult to conclude that one method is absolutely right and the other wrong and, therefore, that a judge by adopting one alternative instead of the other would commit a denial of justice.

Arguments developed on the question as to whether the rights incorporated in negotiable securities may be exercised without possession of the securities, in other words on the question of the temporal separability or non-separability of right and instrument as regards the share may be considered to have no relevance to the question of a denial of justice.

The innumerable controversies concerning the details of the bankruptcy proceedings may also be considered as possessing no relevance from this point of view.

In short, since these issues are of a technical nature, the possible error committed by judges in their decisions cannot involve the responsibility of a State. That the above-mentioned doctrine precludes such an error from being a constituent element in a denial of justice as an internationally wrongful act is not difficult to understand from the other viewpoints also. The reason for this is that these issues are of a municipal law nature and [p 158] therefore their interpretation does not belong to the realm of international law. If an international tribunal were to take up these issues and examine the regularity of the decisions of municipal courts, the international tribunal would turn out to be a "cour de cassation", the highest court in the municipal law system. An international tribunal, on the contrary, belongs to quite a different order; it is called upon to deal with international affairs, not municipal affairs. Now, as we have seen above, the actions and omissions complained of by the Belgian Government, so far as they are concerned with incorrectness of interpretation and application of municipal law, cannot constitute a denial of justice. This means that in itself the incorrectness of a judgment of a municipal court does not have an international character.

A judgment of a municipal court which gives rise to the responsibility of a State by a denial of justice does have an international character when, for instance, a court, having occasion to apply some rule of international law, gives an incorrect interpretation of that law or applies a rule of domestic law which is itself contrary to international law (Brierly-Waldock, op. cit., p. 287). Apart from such exceptionally serious cases, erroneous and unjust decisions of a court, in general, must be excluded from the concept of a denial of justice.

***

Now, excluding allegedly erroneous or unjust decisions of the Spanish judiciary as constituent elements of a denial of justice, it remains to examine whether behind the alleged errors and irregularities of the Spanish judiciary some grave circumstances do not exist which may justify the charge of a denial of justice. Conspicuous examples thereof would be "corruption, threats, unwarrantable delay, flagrant abuse of judicial procedure, a judgment dictated by the executive, or so manifestly unjust that no court which was both competent and honest could have given it", which were quoted above. We may sum up these circumstances under the single head of "bad faith".

Two questions arise. Does the Belgian Government contend that there existed such circumstances as bad faith in order to justify its complaints based on a denial of justice? If this question is answered in the affirmative, has the existence of aggravating facts been sufficiently proved?

Here we must be aware that we are confronted with questions belonging to a dimension entirely different to the one which we have dealt with above: it is not a municipal or legal-technical, but an international and moral dimension. An ethical valuation of the conduct of national judicial organs has been introduced. It is not the correctness or incorrectness of the interpretation or application of the positive law of a country which is in question, but the conduct of judicial organs as a whole which must be evaluated from supra-positive, transnational viewpoints (Philip C. Jessup, Transnational Law, 1956). We would say that we should consider the [p 159] matter from the viewpoint of natural law which is supra-national and universal. An ethical valuation such as a condemnation for bad faith, abuse of powers or rights, etc., would become a connecting link between municipal and international law and the two jurisdictions—municipal and international—in respect of a denial of justice, and would cause the alleged acts to involve responsibility on the plane of international law.

It is true that the Belgian Government maintains the existence of bad faith in actions and omissions of the Spanish judiciary. However, most of its arguments concentrate on pointing out the simple irregularities in each measure. As stated above, this does not differ very much from controversies concerning the interpretation and application of Spanish bankruptcy law—matters which in themselves cannot justify the existence of bad faith on the part of the Spanish judiciary.
Although the Belgian Government insists on the existence of bad faith on the part of the Spanish judiciary and puts forward some evidence concerning the personal relationship of Mr. Juan March and his group with some governmental personalities, the use of henchmen in instituting and promoting bankruptcy proceedings, etc., we remain unconvinced of the existence of bad faith on the part of Spanish administrative and judicial authorities. What the Belgian Government alleges for the purpose of evidencing the bad faith of the Spanish judges concerned does not go very much beyond surrounding circumstances; it does not rely on objective facts constituting collusion, corruption, flagrant abuse of judicial procedure by the Spanish judiciary, etc. If corruption of a judge were considered to have been committed, the Barcelona Traction Company and its group should have had recourse to the measure of revision and, if it was upheld, the fact of proving a denial of justice in the present case could have been established.

Despite this, the Belgian Government did not choose this measure. Instead of producing concrete objective facts to evidence the bad faith of the Spanish authorities, the Belgian Government put forward an "overall complaint" consisting of art agglomeration of circumstances which do not appear to be relevant to the issue. The relying upon such an "overall complaint" would mean in itself a weakness in the standpoint of the Belgian side, and it would have no reinforcing or supplementing effect on the cause of the latter.

We consider that aggravating facts, namely those of bad faith, have not been sufficiently proved.
It is not an easy matter to prove the existence of bad faith, because it is concerned with a matter belonging to the inner psychological process, particularly in a case concerning a decision by a State organ.

Bad faith cannot be presumed.[p 160]

It is an extremely serious matter to make a charge of a denial of justice vis-a-vis a State. It involves not only the imputation of a lower international standard to the judiciary of the State concerned but a moral condemnation of that judiciary. As a result, the allegation of a denial of justice is considered to be a grave charge which States are not inclined to make if some other formulation is possible.

In short, for the reasons indicated above, the Belgian allegation that Spain violated an international obligation and incurred responsibility vis-à-vis Belgium is without foundation. Therefore, the Belgian Government's claims must be dismissed.

(Signed) Kotaro Tanaka.

[p 161]


Separate Opinion of Judge Jessup

1. I agree with the majority of the Court that the Belgian claim must be dismissed, but since I reach that conclusion by different lines of reasoning, I feel it is incumbent on me to explain what my reasons are.

2. I regret that the Court has not considered it appropriate to include in its Judgment a wider range of legal considerations. For my part, I share the view of the late Judge Sir Hersch Lauterpacht, "that there are compelling considerations of international justice and of development of international law which favour a full measure of exhaustiveness of judicial pronouncements of international tribunals" (Lauterpacht, The Development of International Law by the International Court, Revised Edition, 1958, Chapter 3, p. 37). Sir Hersch went on to say (at p. 39):

"The administration of justice within the State can afford to rely on purely formal and procedural grounds. It can also afford to disregard the susceptibilities of either of the parties by ignoring such of its arguments as are not indispensable to the decision. This cannot properly be done in international relations, where the parties are sovereign States, upon whose will the jurisdiction of the Court depends in the long run, and where it is of importance that justice should not only be done but that it should also appear to have been done."

3. Six months after he wrote the Preface to that important book, Judge Lauterpacht put his preachment into practice in his separate opinion in the Certain Norwegian Loans case, wherein he wrote (I.C.J. Reports 1957, p. 9 at p. 36):

"In my opinion, a Party to proceedings before the Court is entitled to expect that its Judgment shall give as accurate a picture as possible of the basic aspects of the legal position adopted by that Party. Moreover, I believe that it is in accordance with the true function of the Court to give an answer to the two principal jurisdictional questions which have divided the Parties over a long period of years and which are of considerable interest for international law. There may be force and attraction in the view that among a number of possible solutions a court of law ought to select that which is most simple, most concise and most expeditious. However, in my opinion such considerations are not, for this Court, the only legitimate factor in the situation." [p 162]

4. In Interhandel (I.C.J. Reports 1959, p. 6), the Court had before it four preliminary objections advanced by the United States. (One notes in passing that Interhandel, like Barcelona Traction, was a case involving a holding company and complicated corporate stock interests.) In its Judgment, the Court found it appropriate to record its view on all four preliminary objections. By nine votes to six, the Court upheld the third preliminary objection to the effect that Switzerland had not exhausted the local remedies available to it in the United States. Since the case was disposed of on this ground, it could be argued that the Court should not have ruled in its Judgment on the other three preliminary objections. However, the Court held: by ten votes to five, that it rejected the first preliminary objection; unanimously, that it rejected the second pre-liminary objection; by ten votes to five, that it was not necessary to adjudicate on part (a) of the fourth preliminary objection; by fourteen votes to one, that it rejected part (b) of the fourth preliminary objection.

Judge Sir Percy Spender, in his separate opinion, and President Klaestad and Judge Sir Hersch Lauterpacht in their dissenting opinions, felt it necessary also to deal with part (a) of the fourth preliminary objection on which the Court declined to rule, because that objection dealt with the important issue of the self-serving or automatic reservation of the United States to its declaration accepting the jurisdiction of the Court.

5. In the Arbitral Award Made by the King of Spain on 23 December 1906 (I.C.J. Reports 1960, p. 192), Judge Moreno Quintana in his declaration (p. 217) stated that while he was in agreement with the decision, he believed that a number of "legal questions which are of particular concern . .. should have been dealt with in the first place". He listed the questions which he had in mind and on which the judgment failed to pronounce.

6. In the Temple of Preah Vihear case (I.C.J. Reports 1961, p. 17), the Court in its Judgment said that the reasons it gave for upholding its jurisdiction made it unnecessary to consider Cambodia's other basis for asserting jurisdiction or Thailand's objection to that basis. In the joint declaration of Judges Sir Gerald Fitzmaurice and Tanaka (pp. 36, 38), one reads:

"As regards the second preliminary objection of Thailand— whilst we are fully in agreement with the view expressed by Sir Hersch Lauterpacht in the South West Africa—Voting Procedure case (I.C.J. Reports 1955, at pp. 90-93) to the effect that the Court ought not to refrain from pronouncing on issues that a party has argued as central to its case, merely on the ground that these are not essential to the substantive decision of the Court—yet we feel that this view is scarcely applicable to issues of jurisdiction (nor did Sir Hersch imply otherwise). In the present case, Thailand's second [p 163]preliminary objection was of course fully argued by the Parties. But once the Court, by rejecting the first preliminary objection, has found that it has jurisdiction to go into the merits of the dispute . .. the matter is, strictly, concluded, and a finding, whether for or against Thailand, on her second preliminary objection, could add nothing material to the conclusion, already arrived at, that the Court is competent."

7. In Barcelona Traction, Light and Power Company, Limited, Preliminary Objections, I.C.J. Reports 1964, p. 4, Judge Tanaka in his separate opinion said (at p. 65):


"The more important function of the Court as the principal judicial organ of the United Nations is to be found not only in the settlement of concrete disputes, but also in its reasoning, through which it may contribute to the development of international law."

8. One of the great jurists of the Permanent Court of International Justice, Judge Anzilotti, also shared the Lauterpacht philosophy of the nature of the international judicial process, as is shown in his dissenting opinion in Diversion of Water from the Meuse (P.C.I.J., Series A/B, No. 70, p. 4 at 45):
"The operative clause of the judgment merely rejects the submissions of the principal claim and of the Counter-claim. In my opinion, in a suit the main object of which was to obtain the interpretation of a treaty with reference to certain concrete facts, and in which both the Applicant and the Respondent presented submissions indicating, in regard to each point, the interpretation which they respectively wished to see adopted by the Court, the latter should not have confined itself to a mere rejection of the submissions of the Applicant: it should also have expressed its opinion on the submissions of the Respondent; and, in any case, it should have declared what it considered to be the correct interpretation of the Treaty.

It is from the standpoint of this conception of the functions of the Court in the present suit that the following observations have been drawn up."

9. The specific situations in each of the cases cited can be distinguished from the situation in the instant case, but all of the quoted extracts are pervaded by a certain "conception of the functions of the Court" which I share but which the Court does not accept. Article 59 of the Statute indeed provides: "The decision of the Court has no binding force except between the parties and in respect of that particular case." But the influence of the Court's decisions is wider than their binding force.

The instant case, however, presents its own particularity. In its decision in 1964 the Court joined to the merits two of Spain's preliminary objec-[p164]tions. Whatever the legal interpretation of the character of those preliminary objections at this stage of the proceedings, it remains true that the Belgian claim must be dismissed if either of the objections is well founded. Since one of them is sustained by the Court (and on different grounds in this opinion), it can be said that the Court would reach out too far if it made a judicial finding on the basic question of the existence of a denial of justice—an issue which it has decided Belgium has no right to bring before the Court. Under these circumstances, I agree that it would be excessive for a separate opinion to analyse and pass upon the voluminous proceedings before the Spanish administrative and judicial authorities. There are situations in which the logical must yield to the practical; this is such a situation.

I associate myself with Judge Gros' allusion, in paragraph 28 of his separate opinion, to the problem of the exhaustion of local remedies.

I would also observe that the procedural processes of the Court happily facilitate an informal but nonetheless fruitful division of labour when some judges feel obliged to file separate opinions. Having had the benefit of a preview of the separate opinions of Judges Sir Gerald Fitzmaurice and Gros, I feel content to leave to their opinions, and to other separate opinions as well, the amplification of certain juridical considerations which I do not treat, even as they have been willing to rely on some of my factual summaries. In neither case does it necessarily follow that I or they reach the same conclusions on each point of law or fact.

***

10. In adjudicating upon the Barcelona Traction case the Court must apply rules from one of the most controversial branches of international law. The subject of the responsibility of States for injuries to aliens (otherwise referred to as the diplomatic protection of nationals), evokes in many current writings recollections of political abuses in past eras.FN1. The Court is not involved here in any conflict between great capital-exporting States and States in course of development. Belgium and Spain are States which, in those terms, belong in the same grouping. I do not agree with the Spanish contention on 20 May 1969 that Belgium was merely trying to get the Court to internationalize a private litigation, but it is true that basically the conflict was between a powerful Spanish financial group and a comparable non-Spanish group. This case cannot be said to evoke problems of "neo-colonialism".

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FN1 The writer may be excused for mentioning that he described and deplored such abuses, more than two decades ago: A Modern Law of Nations, 1947, Chapter V. Happily, the days of "gun-boat diplomacy" are now lost in limbo.
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[p 165]

Moreover, the Court is not here in the least concerned with such provocative problems as State sovereignty over natural resources or the rules applicable to compensation in case of nationalizations or expropriations. Professor F. V. García Amador, in his sixth report as Special Rapporteur of the International Law Commission on State responsibility (Yearbook of the International Law Commission, 1961, Vol. II, p. 2 at p. 46), set forth an admirable attitude:

". . . his purpose was to take into account the profound changes which are occurring in international law, in so far as they are capable of affecting the traditional ideas and principles relating to responsibility. The only reason why, in this endeavour, he rejected notions or opinions for which acceptance is being sought in our time, is that he firmly believes that any notion or opinion which postulates extreme positions—whatever may be the underlying purpose or motive —is incompatible and irreconcilable with the idea of securing the recognition and adequate legal protection of all the legitimate interests involved. That has been the policy followed by the Commission hitherto and no doubt will continue to be its policy in the future."

11. The institution "of the right to give diplomatic protection to nationals abroad was recognized in . . . the Vienna Convention on Diplomatic Relations, 1961", as Mr. Gros (as he then was) reminded the sub-committee of the International Law Commission (Yearbook of the International Law Commission, 1963, Vol. II, p. 230). The institution of the right to give diplomatic protection is surely not obsolete although new procedures are emerging.

With reference to diplomatic protection of corporate interests, the customary international law began to change in the latter half of the nineteenth century FN1. As Jennings writes, in somewhat picturesque and Kiplingesque language :


"It is small wonder that difficulties arise when 19th century precedents about outrageous behaviour towards aliens residing in outlandish parts are sought to be pressed into service to yield principles apposite to sophisticated programmes of international investment." (121 Hague Recueil 1967, II, p. 473.)

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FN1 Paul De Visscher sees the change developing after the decision in the Ruden case in 1870; 102 Hague Recueil 1961, II, at pp. 467-468.
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Since the critical date in this case is 1948, developments in the law [p 166] and procedures during the ensuing last two decades are not controlling.

12. Any court's application of a rule of law to a particular case, involves an interpretation of the rule. Historical and logical and tele-ological tools may be used by the judge, consciously or unconsciously. If the Court in the instant case had decided to include more factors in its Judgment, it could have clarified the traditional system in the light of clearer understandings of business practices and forms of corporate organization, as these were already well developed two decades ago when the events called into question in this case transpired. Legal norms applicable to those events should not be swept aside on the assumption that they have already become mere cobwebs in the attics of legal history. Corporations today and tomorrow may well utilize other methods of financing and controlling foreign enterprises, and governments will have adapted or will adapt their own laws and practices to meet the realities of the economic factors which affect the general interests of the State. The "law of international economic development" will mature. Thus joint business ventures, State guarantees of foreign investment, the use of international organizations such as the IBRD and UNDP, may in the course of time relegate the case of Barcelona Traction to the status now occupied by Delagoa Bay—a precedent to be cited by advocates if helpful to the pleading of a cause, but not a guiding element in the life of the international business community.

Nevertheless, the Court has the duty to settle a specific dispute between Belgium and Spain which arose out of Spain's exercising jurisdiction over a complex of foreign corporate enterprises.

13. There is a trend in the direction of extending the jurisdictional power of the State to deal with foreign enterprises which have contact with the State's territorial domain; ". . . all that can be required of a State is that it should not overstep the limits which international law places upon its jurisdiction; within these limits, its title to exercise jurisdiction rests in its sovereignty[FN1]. But what are the limits placed by international law? Do the courts of the United States, for example, go too far in applying its anti-trust laws to foreign enterprises, following the statement of principle by Judge Hand in Alcoa [FN2]? But that principle is accepted in at least six other countries [FN3]. Are the jurisdictional limits on national jurisdiction exceeded in the cases dealing with product liability of a [p 167]"giant octopus corporation" with multiple subsidiaries abroad? Rules valid enough for inter-state conflicts within the constitutional system of the United States, may be improper when placing a burden on international commerce FN1. The Committee on International Law of the Association of the Bar of the City of New York concluded that ". . . the extension of the regulatory and penal provisions of the Securities Ex-change Act of 1934 ... to foreign corporations which have neither listed securities in the United States nor publicly offered securities within the United States is a violation of international law FN2".

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[FN1] Lotus, Judgment No. 9, 1927, P.C.I. J., Series A, No. 10, p. 19.
[FN2] 148 Fed. 2d 416 (1946). Cf. Jessup, Transnational Law, 1956, pp. 73 ff.
[FN3] Drachsler, "American Parent and Alien Subsidiary: International Anti-trust Problems of the Multinational Corporation", Bulletin of the Section of International
FN1 Mecsas, "Personal Jurisdiction over Foreign Corporations in Product Liability Actions: Forum Non Conveniens and Due Process Limitations on In Personam Jurisdiction over Foreign Corporations", 50 Cornell Law Quarterly, p. 551 at p. 563 (1965). Cf. American Law Institute, Restatement of the Law, Second,— Conflict of Laws, Title C (1967 ed.).
FN2 The Record of the Association, Vol. 21, No. 4, April 1966, p. 240 at p. 252.
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14. In States having different types of economic and financial problems, international law has become increasingly permissive of actions involving nationalizations. In place of what used to be denounced as illegal expropriation, the issues now turn largely on the measure of compensation, since even the famous General Assembly Resolution on Permanent Sovereignty Over Natural Resources FN3, provides that compensation is due.

To whom, in such cases is compensation due? If in the anti-trust, product-liability and other situations, the corporate veil is freely pierced to assert the State's jurisdictional power, why should it not also be pierced to determine the State's responsibility to the interests actually injured by action damaging to a foreign enterprise? In the instant case, Spain asserted its power to deal with Barcelona Traction's subsidiaries in Spain, disregarding the Canadian nationality of Ebro and others. The equitable balance of legal interests permits Belgium to pierce the veil of the Canadian "charter of convenience" and to assert the real interests of the shareholders—assuming of course that their continuous Belgian character is established. In so far as there has been an increase in the permissible limits of the exercise of State authority over foreign corporate enterprises, there must be an accompanying realistic liberalisation of rules identifying the State or States which may, in case of abuse, invoke the right of diplomatic protection.

15. The legal rights which are vindicated through the international [p 168] procedure of diplomatic protection, are not identical with rights derived from the applicable municipal law; the rights are on different planes. There are situations in which no right under municipal law exists because that law does not provide or permit legal action to enforce the claim, but international law does afford a remedy. The obvious cases are those where an injury is inflicted by a State instrumentality or agent which is immune from suit. If, for example, a naval vessel of State A negligently rams and sinks a merchant vessel of State B, and the law of State A does not permit any legal action against the State or its instrumentality, State B, on the international plane, may press a claim for damages on behalf of the vessel which possesses its nationality FN1. Of course if there are no local remedies, the international rule for exhaustion of such remedies is not applicable and a State may incur international liability for the very reason that there is no local remedy FN2. Although statutes now provide in many countries a cause of action for damages caused by the death of a person, no such cause of action existed at common law. The subject was discussed by Umpire Parker in the Lusitania cases ((1923) VII U.N.R.I.A.A., pp. 32, 34 ff.), in holding that international law and practice support the presentation of claims of heirs and widows (where the nationality requirements are met), irrespective of the question whether under the law of the State charged with responsibility for wrongful death, the heir or widow has a right to damages.

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FN1 Under the British-United States Claims Convention of 1853, the umpire awarded damages to the owners of the British collier Confidence, which had been run down by the United States frigate Constitution;III Moore, International Arbitrations, 3063. Cf. The Lindisfarne, in the United States-Great Britain Claims Commission under the 1910 Treaty, VI U.N.R.I.A.A., 21.
FN2 So in Ruden's case and in Johnson's case, in the United States-Peruvian Claims Commission 1870, awards were made to the claimants when a circular of the Minister of Justice forbade the judges to receive suits of the type in question. Moore, International Arbitrations, Vol. III, pp. 1653 and 1656.
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16. In connection with the instant case, the question arises from the argument that there can be no international right to damages for shareholders indirectly injured by damage to the company in which they hold shares, since no such right is generally established in municipal law. Much reliance is placed upon the proposition that under most systems of municipal law, shareholders have no rights in or to the assets of the corporation until after it is dissolved or wound up. Shareholders' suits are indeed provided by law in the United States and somwhat less extensively in Great Britain. In the United States "The derivative stockholder-plaintiff is not only a nominal plaintiff, but at the same time a real [p 169] party in interest. He sues not solely upon a corporate cause of action but also upon his own cause of action". See Koessler, "The Stockholder's Suit: A Comparative View", 46 Columbia Law Review 1946, pages 238 and 242. The provisions for shareholder suits in the European countries seem to be somewhat less favourable to the shareholder. But the trend in France is toward more protection of shareholders, as Judge Gros points out in paragraph 11 of his separate opinion.

17. Although the concept of corporate personality is a creature of municipal law, none of the theories evolved in that frame of reference can be relied on universally to explain the legal relations surrounding that "technical legal device".

"Gierke's theory was based upon Germanic village communities, medieval guilds and similar truly corporate entities. But such a theory hardly fits the modern holding company. . . The result is that those who administer the law, whether as judges, revenue authorities, or as administrators, in civilian and common law systems alike [and I would add in the international law system] have had to discard all known theories of corporate personality, and to relativise the conception of juristic personality, respecting it for some purposes FN[1], disregarding it for others, in accordance with the nature of the problem before them." (Friedmann, Legal Theory, 5th ed. 1967, pp. 522-523. See also p. 571.)

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FN1 Thus, for example, where a corporation carries on a purely commercial activity, international law does not "pierce the veil" to grant it the sovereign immunity attaching to the State by which it is wholly owned and managed; see Harvard Research in International Law, Report on Competence of Courts in Regard to Foreign States, 1932, Art. 12, p. 641.
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I would paraphrase and adapt a dictum from a recent decision of the Supreme Court of the United States in an anti-trust case: the International Court of Justice in the instant case is "not bound by formal conceptions of" corporation law. "We must look at the economic reality of the relevant transactions" and identify "the overwhelmingly dominant feature" [FN2]. The overwhelmingly dominant feature in the affairs of Barcelona Traction was not the fact of incorporation in Canada, but the controlling influence [p 170] of far-flung international financial interests manifested in the Sofina grouping.

It may well be that the new structures of international enterprise will be increasingly important FN1, but any glance at the world-wide picture today shows that non-governmental corporations still have a major role to play FN2. That is why so many new States, and the United Nations itself, encourage the investment of private capital FN3.

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[FN2] Mr. Justice Marshall delivering the opinion of the Court in United States v. The Concentrated Phosphate Export Assn. Inc. et al., 89 S. Ct. p. 361 at pp. 366-367, 1968. Cf. the statement of a leading member of the New York Bar: "To give any degree of reality to the treatment, in legal terms, of the means for the settlement of international economic disputes, one must examine the international community, its emerging organizations, its dynamics, and relationships among its greatly expanded membership." (Spofford, "Third Party Judgment and International Economic Transactions", 113 Hague Recueil 1964, III, pp. 121-123.)
FN1 See Friedmann et al., International Financial Aid, 1966; Kirdar, The Structure of United Nations Economic Aid to Underdeveloped Countries, 1966.
FN2 See Friedmann, The Changing Structure of International Law, 1964, Chap. 14; Hyde, "Economic Development Agreements", 105 Hague Recueil 1962, I, p. 271.
FN3 Blough, "The Furtherance of Economic Development", International Organization, 1965, Vol. XIX, p. 562, and especially, Dirk Stikker's report to UNCTAD on "The Role of private enterprise in investment and promotion of exports in developing countries" (1968), UN Doc. TD/35/Rev.l, and "Panel on Foreign Investment in Developing Countries", Amsterdam, 16-20 February, 1969, E/4654, ST/ECA/117.
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***

The Right to Extend Diplomatic Protection to Corporate Enterprises

18. The decision of the Court, in this case, is based on the legal conclusion that only Canada had a right to present a diplomatic claim on behalf of Barcelona Traction which was a company of Canadian nationality. My own conclusion is that, for reasons which I shall explain, Canada did not have, in this case, a right to claim on behalf of Barcelona Traction. As a matter of general international law, it is also my conclusion that a State, under certain circumstances, has a right to present a diplomatic claim on behalf of shareholders who are its nationals. As a matter of proof of fact, I find that Belgium did not succeed in proving the Belgian nationality, between the critical dates, of those natural and juristic persons on whose behalf it sought to claim. The Belgian claim must therefore be rejected.

The Record of Actual Diplomatic Representations

19. If a State extends its diplomatic protection to a corporation to which it has granted a "charter of convenience" while at the same time [p 171] similar diplomatic assistance is being extended by another State whose nationals hold 100 per cent, of the shares, the situation might be considered analogous to cases of dual nationality of natural persons FN1. In those cases, international jurisprudence supports the principle that preference should be given to the "real and effective nationality", as was held by this Court in the Nottebohm, Second Phase, Judgment (I.C.J. Reports 1955, pp. 4, 22), which will be discussed later in this opinion.

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FN1 The analogy may be drawn even though the nationality of shareholders is not the test of the nationality of a corporation for purposes of international law.
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If Canada could be considered the State of the "real and effective nationality" of Barcelona Traction and if Canada assumed and maintained the role of Barcelona Traction's diplomatic protector, such facts would militate against the Belgian posture that Belgium was the State entitled to press the claim. The arguments of the Parties followed some such theory; Counsel for Spain called it an "essential point" and examined at length the record of Canadian diplomatic activity in the case (20 June 1969). The lack or failure of Canadian diplomatic protection is distinctly relevant to an analysis of the so-called "exceptions" to the alleged general rule that only the State of which the company has the nationality is entitled to claim on its behalf. Such "exceptions" will be discussed later. The facts relative to the positions as claimant Governments of Canada and Belgium—and of Great Britain and the United States as well—must accordingly be taken into account. The record throws light on the nature and extent of the several national interests.

In the instant case, Spain was at one time confronted by diplomatic representations of Great Britain, Canada, the United States and Belgium. But at that stage of multiple diplomatic activity, specific claims for damages were not being advanced; Spain was being asked to take steps to halt what were considered to be destructive actions against Barcelona Traction. Spain's replies in the early stages rested on the proposition that the Government could not interfere with the normal functioning of the Spanish courts.

Great Britain

20. The first British Note was dated 23 February 1948 and asserted an interest due to the dismissal of high-ranking British officers in the Barcelona Traction company and to the position of bondholders "resident in the United Kingdom". (A.P.O. (1960), Vol. III, pp. 193 ff. for this and subsequent demarches, except as otherwise noted.) In the next British Note, of 27 March, there was support for the Canadian representations [p 172] "on behalf of the United Kingdom bondholders". On 28 September 1951, the British Note speaks on behalf of the protection of (unidentified) "shareholders and bondholders". Thereafter, aside from correspondence about the failure of Spain to reply to the British Notes and about the committee of experts and its report in 1951, the British position seemed to be merely one of supporting Canada. Throughout this period, Canada had no embassy in Madrid and its notes were transmitted through the British Embassy. But the Receiver and Manager of Barcelona Traction, in a memorandum submitted to the Supreme Court of Ontario, on 24 December 1951, reported a conference with British Treasury officials in London on the preceding 25 July, during which Mr. Eggers, a representative of the Treasury, "stated that Great Britain had taken no action independent of Canada. He insinuated that the British had merely followed the Canadian lead which we know to be untrue". (Emphasis supplied.) (Receivership Docs., Vol. 5, p. 772.) The basis for this last conclusion is not clear.

Canada

21. The aid of the Canadian Government was originally requested by National Trust, as trustee for certain Barcelona bond issues, which made representations to the Canadian Government when it learned of the developments in Spain following the bankruptcy judgment of 12 February 1948. Counsel for National Trust informed the Supreme Court of Ontario that:

"The Government of Canada as a result of such representations made a demarche to the Government of Spain through appropriate diplomatic channels with regard to the matter . . . FN1" (Receivership Docs., Vol. 1, p. 16. A memorandum in ibid., Vol. 4, p. 585, indicates that Barcelona Traction joined National Trust in its representations.)

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FN1 This statement was made by Counsel on 9 July 1948 in connection with National Trust's application for the appointment of a receiver and manager, an application which was granted by the Court on 15 July 1948.
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22. The first Canadian Note—like the first Belgian Note and the second British Note—was dated 27 March 1948. (The Belgian Note will be cited later to A.M., Vol. IV, Annex 250.) Canada made an official protest, alleging a denial of justice to Barcelona Traction, Ebro and National Trust, because of a lack of proper notice and an absence of jurisdiction under the principles of private international law. Passing over some of the Canadian notes, one finds that on 21 July 1949 a long [p 173] note of protest alleges discrimination against Canadian interests and against "foreign investments in Spain"; the emphasis is on Ebro, a Canadian corporation.

23. In February of 1950, there was close collaboration between the Canadian and Belgian Governments; they proposed to urge the Spanish Government to agree to the appointment of a committee of experts composed of representatives of Spain, Canada and Belgium to study certain financial aspects of the Barcelona case. The Governments of Great Britain and of the United States were also consulted by Canada and it was planned that those governments would support the démarche. Canadian drafts of the proposed note to Spain were submitted to the three other Governments. Throughout, Canada stressed its appreciation of the large financial interest of Belgian nationals in Barcelona Traction. A text provisionally approved, stated that the Governments of the United Kingdom and of the United States "are interested in this matter as it relates to the security of foreign investments generally". The phrasing of the quoted clause was suggested by the United States. Before the final text could be co-ordinated with all the four Governments, the Spanish Government took the initiative by a Note of 16 March 1950 to the British Embassy in Madrid, proposing a similar commission, but composed of Spanish, Canadian and British representatives; Belgium was omitted FN1.

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FN1 The documentation is in A.R., Annexes 37 and 38. Mr. Heineman, the directing personality of Barcelona Traction, on 24 February 1950, was apparently confident that the Canadian Note was about to be delivered with the support of the other three Governments; telegram Heineman to Brosens in Buenos Aires, 24 February 1950, O. & S., New Docs. 1964, App. 8.
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24. There is some question whether the Canadian and British participation in the Tripartite Committee of Experts in 1950-1951 should be considered as an aspect of diplomatic protection. The Receiver and Manager on 16 November 1950 sent a memorandum to the Ontario Court informing him that the Canadian Department of External Affairs had asked him to put up $20,000 to cover the fees and expenses of Mr. Norman, the Canadian member of the Commission. The Receiver and Manager asked for authority to pay that amount and said:

"It is my opinion that the intervention of the Government of Canada in this matter has been of the utmost importance and that the continued support of the Government of Canada is essential if the integrity of the portfolio held by the plaintiff [National Trust] is to be restored and the properties presently under seizure in Spain are to be recovered." (Receivership Docs., Vol. 4, p. 585.)[p 174]

In its pleading, Spain took the position, on 20 June 1969, that when the Canadian and British members of the Committee joined in signing an Agreed Minute which supported the Spanish contention that foreign exchange had been denied to Barcelona Traction because the company refused to furnish the information demanded by the Spanish authorities, this was an indication that the Canadian Government was satisfied that there was no basis for Barcelona's complaints. However, Mr. Glassco, the Receiver and Manager, informed the Ontario Court through his memorandum of 24 December 1951 that he had attended a conference in the Department of External Affairs in Ottawa together with representatives of National Trust and Barcelona Traction. He said they—

". . . were advised that the Canadian and British Governments had signed the Agreed Minute in order to prevent the issuance of a much stronger unilateral statement by the Spanish Government; that the statements in the Agreed Minute with respect to foreign exchange had been agreed with a view to saving the face of the Spanish Government as regards the non-provision of foreign exchange to the subsidiaries of the defendant [Barcelona Traction] in the past; and that the Canadian and British Governments hoped that the atmosphere created by the Agreed Minute would be such that the private interests concerned could work out a settlement of their differences in the expectation that a suitable modus operandi for the future could be achieved with the Spanish Government". (Ibid., Vol. 5, p. 756.)

25. The next Canadian Note of 26 July 1951 reflects a continuing Canadian interest since it objects to the issuance of new share certificates of the subsidiaries which "would be to render valueless the previously issued shares". Ebro, National Trust and Barcelona Traction bondholders are mentioned. The Canadian Note of 28 September 1951 stresses both Ebro and Barcelona Traction and says Canada "feels bound to renew its representations .. . for the protection of the interests of these companies". A long Note of 22 December 1951 invokes Canadian rights under a treaty between the United Kingdom and Spain concerning respect for corporate personality and offers to arbitrate that issue. The Note reserves the "right to make any claim under international law which may be open to it if the sale of the assets takes place on the 4th January, 1952, since it is advised that this would constitute a denial of justice". In this Note, Barcelona Traction, Ebro, Catalonian Land, International Utilities and National Trust as trustee for the bonds, are all mentioned. (A.C.M., Vol. VI, Annex 1, No. 28 FN1) [p 175]

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FN1 Consequent upon certain enquiries and observations from the Bench, Belgium produced additional documentation in 1964 and in 1969: see e.g., Distr. 64/72 and 64/74 and 1969 New Docs. 42-45.
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26. On 12 February 1952, the Belgian Ambassador in Madrid reported a conversation with the Spanish Minister for Foreign Affairs, Mr. Artajo, in which the latter told him that the Spanish Consul in Ottawa had talked about the Barcelona case with the Canadian Secretary of State for External Affairs who said: (tr.) "The Canadian interests in this case are so small that it interests us very little." Such a view does not seem to be quite in line with the Canadian Note of 21 April 1952 which was produced as a new document by Belgium in May 1964. The Note repeats the Canadian view of the mistreatment of the companies in Spain, especially Ebro; invokes again the treaty of 1922 and willingness to resort to arbitration ; but concludes that no further exchange of Notes was apt to help reach a settlement and that private negotiations might be the best way to a solution. In sending a copy of this Note to the Belgian Ambassador in Ottawa, the Canadian Government noted that it was much shorter than a draft which had previously been shown to the Belgian Government— there was no use reiterating legal arguments. (K. J. Burbridge to Vicomte du Parc, 7 May 1952.) It was not until 10 May 1969 that Mr. Artajo, in a letter in reply to an enquiry from the Spanish Agent in the Barcelona Traction case before this Court, flatly denied the accuracy of the Belgian Ambassador's report. (Spanish New Docs., 16 May 1969, Vol. III, p. 181.) The lapse of time in securing such a denial was not explained.

27. Canada's further activity in the case was moderate. On 15 February 1955, Mr. Arthur Dean, American attorney for Sidro, suggested to Wilmers in Brussels that it would be helpful if Canada would join in a demarche in Madrid, although he doubted whether Canada could be convinced that they had sufficient interest other than in the rights of the Canadian trustee for the bonds. (O. & S., New Docs., 1964, App. 13.) Canada had by this time established its own embassy in Madrid and it appears that the Canadian Secretary of State for External Affairs had paid a personal call on the Foreign Office in Madrid in connection with the Barcelona case in 1954 (A.C.M., Vol. VI, p. 109). On 21 March 1955 the Canadian Government had commended Mr. Dean's visit, saying that Canada "continues, of course, to be deeply interested in the affair of Barcelona Traction". (A.C.M., Chap. II, Ann. 1, Doc. No. 30.) On 1 July 1955, Mr. Dean wrote at length to Mr. Pearson, Canadian Secretary of State for External Affairs, reporting on his visit in Madrid. He hoped Canadian Ambassador Pope would be instructed to join in energetic representations [p 176] to Foreign Minister Artajo. (New Docs., 1964.) Mr. Pearson replied on 19 July that Canada believed that the best hope lay in private negotiations.

"The Canadian Government has not been prepared actually to intervene in this matter or to make representations to the Spanish Government as to the measures which ought to be taken toward a settlement."

The requested instructions to Ambassador Pope would not be sent. (Ibid.) In 1957, Belgium informed Canada that they intended to resort to the International Court of Justice. The Canadian official merely expressed his appreciation for the courtesy of keeping him informed. Belgium similarly notified Ottawa in 1964 and 1965. (Belgian New Docs., Nos. 42 et seq.)

Finally, further questions from the Bench were conveyed by the Belgian Ambassador in Ottawa on 23 June 1969, to the Canadian Secretary of State for External Affairs, who replied on the following day that the correspondence which had passed between the Canadian and Spanish Governments was in the dossier before the Court and was self-explanatory.

"As was suggested in a communication of 21 April 1952, the Government of Canada was of the opinion that there was little chance of settling this dispute by means of additional diplomatic representations. The Government of Canada has acted accordingly." (My trans., New Docs. Nos. 44-45.)

It is a fair conclusion that Canadian diplomatic protection of Barcelona Traction ceased in April 1952.

United States

28. Apparently the first diplomatic demarche by the United States Government on behalf of Barcelona Traction was a Note from the Charge in Madrid to Foreign Minister Artajo on 22 July 1949. The Note stated that:

". . . the Government of the United States lends its support to and is in concurrence with the Note of 21 July 1949, submitted to your Ministry by the British Embassy on behalf of the Canadian Government, the Note in question relating to the treatment which has been and is currently being accorded to the Canadian company, Barcelona Traction, Light and Power Company Limited, a company in which American citizens have interests ... The treatment which had been accorded this company, in which [p 177] foreign capital is so heavily invested, has had an adverse effect in foreign banking and investment circles . . ." (A.P.O., 1960, Vol. III, p. 247.)

Attention has already been called to the co-operation of the United States with Canada in February 1950, where American interests were described as arising from "the security of foreign investments generally".

In June and July 1951, the United States Embassy requested complete copies of the reports of the Spanish experts on the international tripartite committee and "reiterates its deep interest in the issues involved in the case of the Barcelona Traction Company . .." (ibid., pp. 249 and 251). It seems that the United States Secretary of Commerce, when in Madrid in October 1954, brought up with some officials of the Spanish Government the possibility of that Government's intervention in the judicial proceedings; he was told this was hardly possible. (Spanish New Docs., 1969, Vol. III, p. 174.)

29. In 1955, United States Ambassador John Lodge in Madrid lent his assistance to Mr. Arthur Dean in connection with his efforts on behalf of Sidro. An office memorandum of the Spanish Ministry of Foreign Affairs, 30 March 1955, recorded that Ambassador Lodge had phoned to support Mr. Dean's request for an interview with Minister for Foreign Affairs Artajo.

"The United States Ambassador stressed the extraordinary interest —he insisted that it be put that way—which the State Department attributes to a rapid and satisfactory solution of that matter about which the aforesaid Department continues to be concerned. He suggests the opportuneness of a solution by direct negotiations between the parties." (Loc. cit.)

The interview was granted—the request having been supported by the Canadian Embassy also—and Mr. Dean in writing to Mr. Artajo to express his thanks, stated:

"Our inability to arrive at an appropriate settlement of this matter is naturally a matter of very great concern to the management and shareholders of Sofina, in which there is now a substantial American interest. . ." (Spanish New Docs., 1969, Vol. III, p. 178.)

Mr. Dean informed Mr. Lester Pearson, the Canadian Secretary of State for External Affairs, about his visits as already noted.

30. But despite the warmth of Ambassador Lodge's message to the Spanish Foreign Office, it is clear that the interest of the United States was of a general nature and that its support did not amount to diplomatic protection of the Barcelona Traction company or of any identified [p 178]
shareholders in that company or in Sidro or in Sofina. In a cable of 15 February 1955, before the visits to Madrid which have just been described, Mr. Dean advised Wilmers, President of Barcelona Traction and then in Brussels, that he had—

". . . received request from our Department [sc. Department of State] suggesting they have never considered operating company in question [sc. Barcelona Traction] American and have treated this matter not as a protection case but on more general grounds of principle regarding treatment and encouragement of international investment and would appreciate extent to which U.S. capital now participating in company". (O. & S., New Docs. 1964, App. 13.)

It is not known what information was given to the State Department concerning the extent of the United States capital participation at that time FN1. It seems clear from the record that the placing of Barcelona Traction shares in the names of American nominees did not require any investment of United States capital. But Mr. Dean apparently represented both Sidro and Sofina and on 1 February 1955 he informed the Spanish Ambassador in Washington that Sofina was "the majority common shareholder" in Barcelona Traction, and informed the Spanish Foreign Minister that there was a "substantial American interest" in Sofina. (The letter to the Ambassador is in the New Documents presented by Spain on 16 March 1964.)

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FN1 As indicated elsewhere, the evidence offered concerning certifications and payments of coupons does not seem persuasive despite the argument of counsel for Belgium on 8 July 1969 citing A.M., Vol. I, Annexes 18 and 20, pp. 133 and 142.
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31. There were references by Spain to Amitas, a Delaware corporation which financed the National Trust receivership, as if it represented a United States interest, but the real interest there seems to have been Belgian. The Canadian Receiver and Manager of National Trust borrowed at least $980,000 from Amitas by selling to Amitas Receiver's 5 per cent. certificates. In his request to the Ontario Court for authorization to borrow the first $100,000 on 25 August 1949, the Receiver and Manager referred to this—

"American Intercontinental Trade & Service Company (Amitas) Inc., a Delaware corporation which is understood to be associated or affiliated with a Belgian corporation which holds bonds and the majority of the outstanding shares"

of Barcelona Traction. (Receivership Docs., Vol. 2, p. 273.) On 3 August he had written to the Canadian Foreign Exchange Control Board about [p 179]the anticipated dollar transaction, and made a more definite statement. He stated that Amitas is—

"controlled, I believe wholly owned, by the Belgian interests, commonly referred to as 'Sofina', who are the majority owners of the equity stock of the Barcelona company and who also hold a substantial quantity of its bonds".

He explains that if his receivership is successful, he will have plenty of United States dollars to repay the loan but:

"Looking at the darkest side of the picture, should the portfolio prove unsaleable, the position would simply be that Amitas would be unable to collect anything upon the Receiver's certificates as there is no personal liability attached thereto." (Ibid., p. 277. The last receiver's request to the Court for authority to borrow, which is recorded in the Receivership Documents filed with this Court by Spain, was on 19 March 1963; Vol. 8, p. 1356.)

This evidence supports the Belgian assertion that the Receiver was financed by Sofina, but of course there were American interests in Sofina. The Receiver in his numerous requests did not refer to nominees or to the trust agreement of Sidro with Securitas which will be discussed later in this opinion.

32. On 25 May 1967, the Belgian Embassy in Washington enquired of the United States Department of State whether the first United States Note of 22 July 1949, concerning American interests in Barcelona Traction, had in mind Americans interested as owners or beneficial owners of shares or whether it included also American citizens acting as trustees or nominees for third persons not having American nationality. The State Department's reply of 5 June 1967 stated that the 1949 Note was inspired by questions of principle relative to the equitable treatment of foreign investments in order to preserve the confidence of foreign investors in the security of their investments in Spain. The interests of American citizens which were mentioned in the 1949 Note, referred only to those who had rights of property or beneficial ownership in the company. (Belgian New Doc. 5 presented 7 April 1969.)

Belgium

33. The first Belgian Note concerning the Barcelona Traction case is dated 27 March 1948 (A.M., Vol. IV, Annex 250). The Note stresses the importance of Belgian interests in Barcelona Traction by asserting that Sidro owns more than 70 per cent. of the shares of Barcelona Traction and other Belgian individuals own enough to bring the total to 80 per [p 180] cent. In addition, the Belgian State had 50,000 shares of Sidro received as a capital tax, and 40 to 45 per cent. of the First Mortgage bonds of Barcelona Traction were also held by Belgians. Like the British Government, the Belgian Government notes that some of the higher ranks of the personnel of the companies have been discharged, especially Mr. William Menschaert, a Belgian national, President and sole legal representative of Ebro in Spain. The proceedings in Spain are summarized and declared improper or illegal. The note concludes with the statement that there has been a series of denials of justice which cannot help but gravely injure legitimate Belgian interests in the companies involved. The Spanish reply as usual indicated that the Government could not interfere with the courts.

The next Belgian Note on 22 July 1949 touched on the refusal of foreign exchange, reviewed the further steps in the Spanish proceedings and repeated that the denial of justice continued to injure very important Belgian interests (ibid., Annex 252). Spain sent a reasoned rebuttal on 26 September 1949 but did not challenge Belgium's right to speak for the Belgian interests (ibid., Annex 253).

34. As already noted, in February 1950 Belgium was actively cooperating with Canada on the project for establishing a tripartite committee of experts. When this demarche was frustrated by the Spanish proposal, Belgium vigorously objected to being left off the Committee of Experts. Belgium's next diplomatic protest was on 13 July 1951 (ibid., Annex 254). Stress was laid on the effect of the measures in Spain on the Belgian investors. It was said that in equity, note should be taken of the interest of Barcelona Traction in Ebro and of the interest of Sidro in Barcelona; the interest of the Belgian investors in Sidro was given at 40 to 45 per cent., without counting the participation of Sofina which was 35 per cent. After there had been some conversations on the subject, the Belgian Note of 7 November 1951 again stressed their concern in the protection of very important Belgian interests and enclosed a memorandum on Spanish law (ibid., Annex 256).

35. The Spanish reply of 14 November 1951 now insisted that diplomatic intervention in the Barcelona Traction case was the exclusive function of the Canadian and British Governments, whose representatives had been asked to join in the expert committee to examine the question of the refusal of foreign exchange (ibid., Annex 257). Belgium replied on 6 December, discussing the merits of the matter and asserting that the importance of the Belgian interests in the capital of Barcelona Traction justified Belgium being represented on the Committee of Experts. On the same date, Belgium proposed arbitration under the treaty of 19 July 1927; [p 181] the issue would be the damage to Belgian interests caused by the bankruptcy of Barcelona (ibid., Annex 258). The Spanish reply of 22 December 1951 argued that Belgium had not complied with the 1927 treaty since it had not presented a formal claim, had not proved the Belgian nationality of the shareholders in a Canadian company, and had not shown that Belgian interests had been injured by an illegal act on the part of Spain (ibid., Annex 259). Belgium replied in rebuttal on 31 December 1951, and Spain countered on 3 January 1952 (ibid., Annexes 260 and 261). At this stage the issue concerning the right of Belgium to interpose in connection with a Canadian company, comes sharply into focus.

36. A Belgian Note of 21 March 1955, indicating the possibility of private negotiations which were then in train, and mentioning the visits of Mr. Dean, is not printed in the Annexes to the Belgian Memorial but as Annex 66, Document No. 2, of the 1963 Preliminary Objections. Then, on 31 December 1956, Belgium sent a long Note summarizing the whole affair (A.M., Vol. IV, Annex 262). On 16 May 1957, a further Belgian Note refers to certain personal conversations of their Ambassador in Madrid and broaches the possibility of a judicial settlement (ibid., Annex 263). The Spanish Note of 10 June 1957 and the Belgian Note of 8 July deal extensively with the question of the right of Belgium to act in this case (ibid., Annexes 264 and 265). The last Note puts more stress on the 50,000 shares held by the Belgian State and summarizes again the extent of the interests of Sidro. It seems unnecessary to follow the ensuing correspondence which involves the actual Application to this Court, the discontinuance and the new Application of 1962.

37. It is hard to explain the apparent reluctance of the applicant Government to place this entire record before the Court in a composite and coherent form especially in view of their recent initiative in eliciting the information from the Government of the United States as noted above. But the conclusion emerges that although in 1948 the Canadian Government, like the other three Governments involved, was disturbed by the judicial proceedings which overtook Barcelona Traction in Spain, the chief Canadian interest was in the securities of which National Trust was trustee and that when the bonds were paid off after the assets were sold in Spain, Canadian interest declined. This was the conclusion reached by counsel for Belgium in his pleading in 1964. (Oral Proceedings, 13 May 1964.) It must be borne in mind that the securities pledged under the Barcelona Traction Prior Lien and First Mortgage bonds held by National Trust Co., Ltd., as trustee, included bonds and shares of Ebro and of Catalonian Land Co., Ltd., and other subsidiaries. Of Ebro, for example, there were some £11 million face value, of bonds and some 300,000 shares of stock. (In another connection, it is interesting that many of the shares had blank powers of attorney attached to the certificates. [p 182]

See Receivership Documents, Vol. 1, p. 54.) But Canada apparently had no deep abiding interest either in Canadian shareholdings in Barcelona Traction, for they were not large, or in the company itself which (at least after the payment of the bonds) was linked to Canada only by the "charter of convenience" and the receivership proceedings FN1. The latter were not of a nature to stimulate Canadian diplomatic action, although, under the supervision of the Ontario court, the Receiver and Manager took an active part in trying to promote a settlement through negotiations of the private interests involved. (See Receivership Documents, Vol. 5, p. 774.) I do not find it credible that Canada can be considered to be competing with Belgium in diplomatic protection of the interests clustered around Barcelona Traction.

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FN1 Belgian counsel's argument on 30 June 1969 about the "violation of Canadian sovereignty" and interference with the functions of the receiver as a Canadian "public authority" does not seem to reflect the actual thinking of the Canadian Government.
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The interests of the United States and Great Britain were those of governments of States which contain great financial capitals—New York and London. Neither of them pressed claims on behalf of specific persons whether natural or juristic. Both Governments have a general interest in the welfare of international "banking and investment circles" which are closely linked with their national economies.

Belgium remains the only identifiable claimant against Spain in connection with the bankruptcy of the Barcelona Traction Company.

If, under international law, a State is not entitled to extend its diplomatic protection to large shareholder interests of its nationals in circumstances such as those in the instant case, none of the equity interests in the Barcelona Traction enterprise would be entitled to diplomatic pro-tection. I do not believe international law requires that such a conclusion be reached.

***

38. There is no question that, under international law, a State has in general a right to extend its diplomatic protection to a corporation which has its nationality, or national character as it is more properly called. The proposition raises two questions :

(1) What are the tests to determine the national character of a corporation?

(2) Assuming the appropriate tests are met, must that national char [p 183]acter be "real and effective" as shown by the "link" between the corporation and the State, just as, in the Nottebohm case, this Court decided that a certain claim to nationality is not enough in all situations to justify a State in extending its diplomatic protection to a natural person?

39. There are two standard tests of the "nationality" of a corporation. The place of incorporation is the test generally favoured in the legal systems of the common law, while the siège social is more generally accepted in the civil law systems. (See Kronstein, "The Nationality of International Enterprises", 52 Columbia Law Review (1952), p. 983.) There is respectable authority for requiring that both tests be met FN1.

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FN1 There is ample coverage of the literature in the excellent study by Ginther, op. cit., infra.
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It is not possible to speak of a single rule for all purposes. The tests used in private international law have their own character, as well brought out by Caflisch, "La nationalité des sociétés commerciales en droit international privé", Annuaire suisse de droit international, Vol. XXIV, 1967, page 119.

Commercial treaties and claims conventions often contain their own definitions of which companies shall be considered to have the nationality of a State for purposes of the treaty. (Cf. Walker, "Provisions on Companies in United States Commercial Treaties", 50 American Journal of International Law, 1956, p. 373; Wilson, United States Commercial Treaties and International Law, 1960; and, for a more comprehensive survey, Ginther, "Nationality of Corporations", Österreichische Zeitschrift für Öffentliches Recht, Vol. XVI, 1966, p. 28 at pp. 31-59.) The tests used for such purposes may be quite different—even in the practice of the same State—from the tests used for other purposes. For example, the "control" test was widely used to determine the enemy character of property during war, but it is not established in international law as a general test of the nationality of a corporation FN2. On the other hand, control may constitute the essential link which, when joined to nationality, gives the State the right to extend diplomatic protection to the corporation. It is a familiar fact that the laws of certain States provide favourable conditions for companies incorporating therein, especially in relation to taxation. Canada is one such State, Liechtenstein is another. In the United States, many companies find it advantageous, for various reasons, to incorporate in Delaware or New Jersey FN3. Charters secured for such reasons may be called "charters of convenience".

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FN2 See the observations of the Permanent Court of International Justice on the control test in Certain German Interests in Polish Upper Silesia (Series A, No. 7, at p. 70).
FN3 Cf. Cahill, "Jurisdiction over Foreign Corporations and Individuals who Carry on Business within the Territory", 30 Harvard Law Review, 1917, p. 676.
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40. The Judgment of the Court in Nottebohm, Second Phase, in 1955 [p 184](I.C.J. Reports 1955, p. 4), has been widely discussed in the subsequent literature of international law, particularly with reference to the so-called "link theory" by which the effectiveness of nationality may be tested FN1.

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FN1 The wide range of unfavourable comments is reflected in the text and citations in Grossen, "Nationalité et protection diplomatique", Ius et Lex, Festgabe zum 70. Geburtstag von Max Gutzwiller, 1959, p. 489. Brownlie, Principles of Public International Law, 1966, has a full treatment at pp. 323 ff. His position is generally favourable to the Court's judgment.
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It has been argued that the doctrine is equally applicable in the case of ships flying "flags of convenience" and in relation to the diplomatic protection of corporations. I have maintained the view that it should apply in both those situations FN2.

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FN2 Jessup, "The United Nations Conference on the Law of the Sea", 59 Columbia Law Review, 1959, pp. 234, 256. Meyers, The Nationality of Ships, 1967, fully covers the question of flags of convenience, and the applicability of the rule to corporations is treated in Harris, "The Protection of Companies in International Law in the Light of the Nottebohm Case", 18 International and Comparative Law Quarterly, April 1969, p. 275.
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41. In the instant case the Parties did not debate the applicability of the link principle to the Barcelona Traction Company, but they were certainly aware of the question. The Spanish side stated:

". . . the Spanish Government never disputed the effective character of Barcelona Traction's Canadian nationality, because a number of factors were present which were sufficient proof of the existence of a real link between the company and the economic life of Canada". (P.O., 1963, p. 190.)

Counsel for Belgium argued on 4 July 1969 that "if the Canadian Government had been able to espouse in international judicial proceedings the cause of Barcelona Traction, its action could have been challenged on the ground of the lack of sufficient true Canadian interest". Counsel for Spain responded directly to this remark on 21 July.

42. I am in full agreement with the proposition that the decisions of the International Court of Justice should not be based upon a legal rule or principle which has not been considered by the parties [FN3]—indeed, I believe that the failure to heed that proposition is the only criticism which can properly be directed at the Court's decision in Nottebohm. When, however, both Parties have revealed a full awareness of the fact that the "link" principle might be applied to test the national quality of Barcelona Traction, the fact that they did not choose to develop their arguments on the ground of legal principle, rather than of fact, cannot operate to prevent the Court from dealing with the principle. Of course [p 185] the question whether the link principle does apply to juristic persons is a question of international law and jura novit curia. The implication in the pleading of Belgian counsel just cited, intimated a conclusion that the link principle does apply to juristic persons.

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[FN3] The proposition has been admirably expounded in Carsten Smith, The Relation Between Proceedings and Premises, a Study in International Law, 1962.
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It is indeed true that since Spain admitted that Canada had a right to extend diplomatic protection to Barcelona Traction, it may be argued that Spain is estopped to deny such a right although the elements of true estoppel may be lacking and such estoppel could be claimed (if at all) by Canada and not by Belgium. Aside from the fact that I believe the jurisprudence of the Court has tended to rely too heavily on estoppel or preclusion, the question posed here is in the first place a question of the Court's finding a rule of law. The Court in its Judgment does not accept the application of the link theory to juristic persons. Since I have reached the conclusion that the existence of a link between a corporation holding a "charter of convenience" and the State granting the charter, is the key to the diplomatic protection of multinational corporate interests, I cannot avoid the problems of law and fact on any such basis as the application of the doctrine of estoppel in this particular case.

43. It has also been argued that the Court should not pass judgment on the question whether there existed the necessary link between Canada and Barcelona Traction without hearing argument on behalf of Canada. Canada might have sought to intervene in the instant case under Article 62 of the Statute, but it did not do so. It is said that after judgment is pronounced in this case of Belgium v. Spain, Canada might find some jurisdictional ground to found an application to institute a case of Canada v. Spain. It is known that no such jurisdictional ground now exists. It seems quite unreal to suppose that Spain would now agree with Canada upon a compromis submitting to the Court a Canadian claim on behalf of Barcelona Traction, thus exposing Spain to the new hazard of being required to pay some two hundred millions of dollars of damages. But if the Court were properly seised of an application by Canada, it would have to take cognizance of the fact that following Article 59 of the Statute, "The decision of the Court has no binding force except between the parties and in respect of that particular case". Had the Court endorsed the application of the link principle to juristic persons, in its present decision in Belgium v. Spain, Canada could have argued against that conclusion in the hypothetical case of Canada v. Spain, or might have relied on Spanish admissions that Canada was entitled to protect the company. [p 186]

The "Link" Concept

44. It seems to be widely thought that the "link" concept in connection with the nationality of claims, originated in the International Court of Justice's Judgment in Nottebohm. I do not agree that in that instance the Court created a new rule of law. Indeed the underlying principle was already well established in connection with diplomatic claims on behalf of corporations. To look for the link between a corporation and a State is merely another example of what is now the familiar practice of "lifting the veil". See, for example Cohn and Simitis "'Lifting the Veil' in the Company Laws of the European Continent", 12 International and Comparative Law Quarterly (1963), page 189; Drachsler in Report of the Section of International and Comparative Law of the American Bar Association, July 1964, page 29. The practice of such States as the United States and Switzerland had already given weight to the proposition that a corporation would not be protected solely because it was incorporated in the State, i.e., had the State's nationality; some other link was required and that link usually was related to the ownership of shares. Such abstention, being as it were "against interest", has special probative value FN1.

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FN1 State practice is noted infra, paras. 60 et seq.
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Three years after the decision in Nottebohm, the Italian-United States Conciliation Commission, under the presidence of the late Professor Sauser Hall, in the Flegenheimer case stated:

"The right of challenge of the international court, authorizing it to determine whether, behind the nationality certificate or the acts of naturalisation produced, the right to citizenship was regularly acquired, is in conformity with the very broad rule of effectivity which dominates the law of nationals entirely and allows the court to fulfill its legal function and remove the inconveniences specified." (Emphasis supplied.) (53 American Journal of International Law, 1959, p. 944.)

That the link concept represents a general principle of law and not merely an ad hoc rule for the decision of a particular case, is indicated also by its applicability to the test of the nationality of ships which fly "flags of convenience". These maritime situations are comparable to the corporate situations just discussed since they involve corporate decisions to register their ships under the flags of States which offer special advantages in connection with tax, labour and other laws.

45. The Judgment in Nottebohm, Second Phase, was pronounced on 6 April 1955. At that time, the International Law Commission, which was preparing its projects on the law of the sea, had not yet developed [p 187] the concept of a "genuine link" as a requisite for the recognition of the nationality of a ship. But the link theory was thereafter actively argued in the Commission and at length in the Geneva Conference of 1958 on the Law of the Sea. Article 5 of the Convention on the High Seas was adopted in the following terms:

"Each State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship; in particular, the State must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag." (Emphasis supplied.)

46. In 1959, governments were submitting to the International Court of Justice views on the Constitution of the Maritime Safety Committee of the Inter-Governmental Maritime Consultative Organization case. The influence of the link concept was apparent. (Meyers, The Nationality of Ships, 1967, pp. 227 ff.) When the Court gave its Advisory Opinion on the above case in 1960, it clearly confined itself to a particular question of treaty interpretation and declined to examine general customary law on "a genuine link". (I.C.J. Reports 1960, p. 171.) It made a passing reference to Article 5 of the "unratified Geneva Convention on the High Seas". In his dissenting opinion, Judge Moreno Quintana said that the provision in Article 5—

".. . by which international law establishes an obligation binding in national law, constitutes at the present time the opinio juris gentium on the matter". (Ibid., p. 178.)

The Nottebohm case itself was not discussed at length in connection with the law of the sea in the International Law Commission but Dr. Garcia Amador, Special Reporter for the International Law Commission on State Responsibility, in his Sixth Report, noted that he had added a paragraph to his earlier draft "in order to incorporate the rule laid down by the International Court of Justice in the Nottebohm case". (Yearbook of the International Law Commission, 1961, Vol. II, p. 53; see Article 23 of his revised draft at p. 49.) Although the "link" concept was much discussed at the Geneva Conference, only a few governments or delegates referred to the Nottebohm case (Meyers, op. cit., pp. 269 ff.). Four States—Netherlands, Norway, Liberia and the United Kingdom—in their pleadings in the Constitution of the Maritime Safety Committee of the Inter-Governmental Maritime Consultative Organization case made some reference to the Court's statements in Nottebohm, Second Phase, about "unilateral acts" of States. (I.C.J. Pleadings, pp. 357-359; 365-366; 374; [p 188] 404-405.) The important point is that there was growing recognition of the rule that if a State wishes to have its "unilateral acts" recognized and given effect by other States, those acts must conform to the principles and rules of international law. If a State confers its nationality on a person who has no genuine link with it, another State may not need to recognize the person as such national. Such nationality has been styled "a citizenship of convenience" FN1. If a State purports to confer its nationality on ships by allowing them to fly its flag, without assuring that they meet such tests as management, ownership, jurisdiction and control, other States are not bound to recognize the asserted nationality of the ship FN2. As a matter of principle and logic—supported by State practice—a comparable rule is applicable to corporations. A State may, by extending diplomatic protection to a corporation, hold out that corporation as having its "nationality", because the State had granted it its charter of incorporation. But if in fact there is no "genuine link" between the corporation and the State in question, the State to which diplomatic representations are made may, on that ground reject them. Perhaps one makes here an analogy to stateless persons but the stateless individual has nothing behind him and cannot be protected until the present imperfect law of human rights is fully developed FN3. On the other hand, the corporation which has a nominal connection with a State of incorporation but whose shares are all owned by nationals of another State in which latter State the actual management and control of the company are carried on, has behind it the shareholders who represent the real interest. No rule of law, no principle, forbids that latter State to extend its diplomatic protection to those interests.

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FN1 Uebersee Finanz-Korporation A.G., Liestal, Switzerland, Plaintiff, Fritz von Opel, Intervener-Plaintiff v. Herbert Brownell, Jr., Attorney General, et al., 133 F. Supp. 615, 619 (1955), affd. 244 F. 2d 789 (1957). This case, decided by the United States District Court, District of Columbia, in the same year as the decision of the International Court of Justice in Nottebohm, also involved a consideration of the validity of the naturalization of a German in Liechtenstein during the Second World War. The question was in part whether the intervener was an innocent stockholder in a company vested by the Alien Property Custodian as enemy alien property. The United States Court did not cite the Nottebohm case.
FN2 There are, however, situations in which national courts still find it appropriate to recognize "the law of the flag"; see McCulloch v. Sociedad Nacional de Marineros de Honduras, 83 S. Ct. (U.S.) 671 (1963).
EN3 And query whether the term "man" in "The Rights of Man" includes a corporation!
The Court's decision in Nottebohm, Second Phase, has been criticized as creating a new group of apatrides; see Bindschedler-Robert, "La protection diplomatique des sociétés et des actionnaires", Revue de la Société des juristes bernois, Vol. 100, 1964, p. 141.
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47. It is true that the Court in the Constitution of the Maritime Safety[p 189] Committee of the Inter-Governmental Maritime Consultative Organization case, as a matter of treaty interpretation, and taking into account the travaux préparatoires, stated that:

".. .it is unlikely that it was contemplated [in drafting the Convention which established IMCO] that the test should be the nationality of stock-holders and of others having beneficial interests in every merchant ship; facts which would be difficult to catalogue, to ascertain and to measure. To take into account the names and nationalities of the owners or shareholders of shipping companies would . . . 'introduce an unnecessarily complicated criterion'... On the other hand, the criterion of registered tonnage is practical, certain and capable of easy application." (I.C.J. Reports I960, p. 169.)

It would be unsound to transpose some of these words from their context, where persuasive reasons are set out for the particular issue before the Court, to support an argument that it is not practical to ascertain the existence of preponderant, majority or substantial stock interests in corporations. In particular it will be shown that in at least certain cases, international law does not exclude the protection of shareholders on the ground that it is difficult to identify them, e.g., in the case where international law permits the protection of foreign shareholders in a corporation which is the victim of unlawful destructive acts performed by the State of incorporation. Nor can the rule which permits the protection of shareholders in certain circumstances be discarded because company management may sometimes find it inconvenient to reveal the exact position in regard to the ultimate ownership of the shares.

48. One of the reasons for the rule on continuity of nationality of claims is the avoidance of assignments of claims by nationals of a small State to nationals of a powerful State. If a powerful State should seek to attract corporations to incorporate under its laws so that it could claim them as its nationals even though the corporations had no further connection with that State, this Court should not "regard itself as bound by the unilateral act" of that State. The same conclusion must be reached when less powerful States attract the incorporation of companies or the registration of ships by providing "charters of convenience" or "flags of convenience".

It has been noted that Canada is one of the States which attracts the incorporation of companies through favourable tax laws, etc. Counsel for Spain called attention to the fact that a corporation called the San Antonio Land Company was incorporated in Toronto in the same year— 1911—as Barcelona Traction by Mr. Pearson, "the promoter and first president of Barcelona Traction". The identity of some of the personalities in the two companies, as well as their London agents, was stressed. The [p 190] business of the Land Company was carried on in Texas. Counsel quoted from the report of the Special Master of the Federal District Court in New York FN1:

"It is perfectly clear that the Toronto office, the Board of Directors, etc., was maintained only in pursuance of the requirements of the statutory existence of the corporation under the laws of the Dominion of Canada. The effective control of the affairs of the corporation plainly was lodged elsewhere than in Toronto and followed the peregrinations of Dr. Pearson, the master mind FN2." (Hearing of 27 May 1969.)

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FN1 The nature of the litigation in question is not relevant to the point being discussed here.
FN2 The rebuttal of counsel for Belgium, on 27 June 1969, while correctly pointing to some errors in the Spanish analysis of the San Antonio Land Co. case, did not affect the point here under consideration.
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49. The evidence shows that counsel for Spain was correct in asserting that the situation in Barcelona Traction was parallel. Throughout, one finds that the important decisions, the vital planning, was done by such persons as Heineman, Wilmers, Speciael, Hubbard and Lawton, whose instructions issued from Great Britain, the United States and Belgium and Spain itself, but rarely if ever from Canada. The general meetings of shareholders held in Toronto seem to have been pro forma affairs. It is true that in 1948 a "Receiver and Manager" of Barcelona Traction was appointed in Canada and operated out of Toronto, but since the operating companies in Spain had passed into the control of the bankruptcy officials there, the Receiver and Manager could merely try to encourage a settlement; he did not have the power to make a settlement.

Counsel for Belgium, in the same pleading in which he rebutted some of the Spanish contentions about the San Antonio Land Co. case, quoted from a judgment of Mr. Justice Roxburgh in the English High Court of Justice, the following passage which strongly confirms the fact that Barcelona Traction's management was not centred in Toronto:

"Barcelona was a holding and not an operating Company. Sterling was its life blood. It also borrowed pesetas but it had little interest in Canadian dollars. London was its financial seat.... There were in Canada, so far as I know, or rather so far as I have been told, nothing but a registered office of undisclosed size with a staff of undisclosed dimensions, and share registers." [p 191]

Counsel noted that on the final point the judge had not had discovery, but counsel did not deny the truth of the judge's comment.

It is true that Roxburgh J. was dealing with a period of time anterior to the bankruptcy proceedings in Spain, but I find nothing in the record to suggest that there was later a material change whereby the principal power centre of Barcelona Traction was located in Toronto FN1.
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FN1 In the same court proceeding, the testimony of Mr. Hubbard, Chairman or President of Barcelona Traction during several years, is not wholly clear. He testified that all meetings of the Directors of the Company were held in Canada; that he attended some but not all such meetings; that neither he nor his predecessor or successor as President or Chairman was resident in Canada; that Mr. Speciael, as President may have gone to Canada from New York to attend some directors' meetings; it was not necessary for the President or Chairman of the Board to preside over directors' meetings. (According to the company law of Canada, it seems that the directors present may elect a chairman of the meeting if neither the President nor vice-president is present; Fraser and Stewart, Handbook on Canadian Company Law, Fifth Ed. 1960, p. 134.) Mr. Hubbard indicated that some decisions were made in London, with notice to the office in Toronto and that in other cases "instructions came from Canada". Mr. Hubbard testified that "There was a very strong Board in Canada" but of the directors listed as residing in Canada (according to a list submitted to the Court in the same proceeding) the only one appearing in the list of registered shareholders in 1948 (A.M., Ann. 2) held one share. (The records of the Court proceedings are in A.C.M., Vol. I, Annex 13, especially Document No. 6.) This was a Mr. Merry who is listed as Secretary of the Company (but not a director) in 1918. (A.P.O., Ann. 22, Doc. No. 2. This is the only extract from minutes of directors' meetings which lists those present, so far as I have been able to ascertain; three directors were present.)
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***

50. There are three situations in which there is wide agreement that a State may extend its diplomatic protection to shareholders who are its nationals, although the company whose shares they hold has the nationality of another State. These three situations are sometimes considered "exceptions" to a general rule allowing protection of the corporation itself.

51. The first of these situations is where the corporation has been incorporated in the State which inflicts the injury on it without legal justification, and where the shareholders are of another nationality.

It is in such situations that one finds the widest agreement that a State may extend diplomatic protection to shareholders who are its nationals [FN2]. The rationale seems to be based largely on equitable considerations and the result is so reasonable it has been accepted in State practice. Judge Charles De Visscher says this result is required by "des considérations impérieuses de justice". ("De la protection diplomatique des actionnaires d'une société contre l'Etat sous la législation duquel cette société s'est constituée", 61 Revue de droit international et de législation comparée, 1934, p. 624.) By hypothesis, the respondent State has committed an unlawful act from which injury results. The corporation itself cannot seek redress and therefore the State whose nationals own the shares may protect them ut singuli. The equities are particularly striking when the respondent State admits foreign investment only on condition that the investors form a corporation under its law. These points are clearly made by Petrén, 109 Hague Recueil, 1963, II, pages 506 and 510.Petrén refers with approval to the earlier lectures by Paul De Visscher, 102 Hague Recueil, 1961, I, page 399; see especially pages 478-479.

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[FN2] The Respondent here shares in this agreement. Bindschedler-Robert (op. cit., p. 174), writing in 1964, considered that this view was being accepted in international law. She cites the well-reasoned and well-documented study by Kiss, "La protection diplomatique des actionnaires dans la jurisprudence et la pratique internationale", in La personalité morale et ses limites (1960), p. 179. Kiss indeed cites abundant authority for even broader rights to protect shareholders; he refers to Borchard, Ch. De Visscher, Sibert, Ralston, Fitzmaurice, Pinto, Paul De Visscher, Perry, Séfériades, Jones, Guggenheim, Battagliani, Bindschedler, but query whether all these carry their conclusion as far as does Kiss. See also in support of the broader rule allowing protection of shareholders, Agrawala, "State Protection of Shareholders' Interests in Foreign Corporations", The Solicitor's Quarterly, 1962, p. 13; Nial, "Problems of Private International Law", 101 Hague Recueil, 1960, III, p. 259.
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Judge Wellington Koo, in his separate opinion in this Barcelona case in 1964 asserted emphatically:

". . . the original simple rule of protection of a company by its national State has been found inadequate and State practice, treaty regulation and international arbitral decisions have come to recognize the right of a State to intervene on behalf of its nationals, shareholders of a company which has been injured by the State of its own nationality, that is to say, a State where it has been incorporated according to its laws and therefore is regarded as having assumed its nationality" (I.C.J. Reports 1964, p. 58).

Judge Wellington Koo considered it immaterial whether this rule should or should not be considered as an "exception".

52. It is curious that this "exception" should have been so widely accepted since it ignores the traditional rule that a State is not guilty of a breach of international law for injuring one of its own nationals. It rebuts also the notion that an injury to a corporation is not a direct [p 193] injury to the shareholders. Moreover, if the foreign shareholders may be protected in such a situation, it is also necessary to choose one horn of a dilemma: either one admits that the right of the shareholders existed at the moment when the injury was done to the corporation, which means that the rights of shareholders may be damaged by an injury to the corporation, or, if that right came into existence subsequently, then one ignores the rule of international law that a claim must be national in origin. Moreover, the admission of this "exception" negates the argument, sometimes advanced against the diplomatic protection of shareholders, to the effect that such claims expose an accused State to a vast variety of claims on behalf of persons of whose existence it was ignorant. Since customary practice has, however, accepted this "exception", other arguments against protection of shareholders are correspondingly weakened, especially since the doctrine in question generally does not insist that the life of the corporation must have been extinguished so that it could be said the shareholders had acquired a direct right to the assets.

53. The second situation in which it is widely agreed that a State may claim on behalf of its shareholders in a foreign corporation, is where the State of incorporation has liquidated or wound up the corporation after the injury was inflicted by some third State.

This situation differs from that just considered in that the respondent State has committed its unlawful act (let us say total confiscation) against a foreign corporation. Here some doctrine would say that ordinarily State A, the State of incorporation, should be the one to extend diplomatic protection. But by hypothesis the corporate life has been extinguished by State A, so that—just as in the first situation—a claim can not be pressed for the corporation. Brownlie states the situation as follows:

"Where the State under the law of which the company is incorporated terminates the existence of the company in law, or other circumstances make the company practically defunct, the shareholders remain as the interests affected by government act: intervention on their behalf would seem to be justified in such a case." (Brownlie, Principles of Public International Law, 1966, p. 401.)

Here it may be said that after liquidation and payment of creditors, the shareholders—under an applicable system of municipal law—have a property interest in the assets and for that reason may be protected. But at the time of the unlawful act ("confiscation") they did not have such a property interest and therefore under the rule of continuity the claim did not have in origin the appropriate nationality on that basis. [p 194]

54. But Brownlie equates the case of the termination of the existence of the company with the case where it is "practically defunct". This is a term which was used by the British Government in the Delagoa Bay case and used a good deal by the Parties in their pleading in the instant case. Its exact meaning is not clear but Barcelona Traction did have some life in Canada even after the practical annihilation in Spain. From 1948 on it was under a receivership, but the "appointment of a receiver and manager over the assets and business of a company does not dissolve or annihilate the company . . ." (Kerr, On the Law and Practice as to Receivers, 13th ed. by Walton, 1963, p. 232). As already noted, the Receiver and Manager of Barcelona Traction concerned himself only with promoting negotiations for a settlement between the private parties; none of the public utility enterprises in Spain were under his direction or within his control; and he had to borrow the money for his operations from an affiliate or subsidiary of the Belgian company, Sidro.

It is true that after 1948 there was some trading in Barcelona Traction shares on the Brussels Bourse (Verbatim Record for 7 July 1969), and according to Moody's Manual of Investments, for years ranging from 1952 to 1967, there were sales in New York, Canada and London. No infor-mation is available to make it possible to say whether the transactions were merely speculative, but it may be noted that in 1961, when the first Belgian application was withdrawn from this Court in expectation of a private negotiated settlement, the quoted price was somewhat higher.

55. It is true that so far as Canadian law is concerned, the shareholders had not yet acquired a direct right to the assets but since I do not base my conclusion on this factor, I do not pursue it further.
56. I also find it unnecessary to consider in detail what is considered the third "exception" where shareholders may admittedly be protected, namely where the injury is inflicted directly on the shareholders and not indirectly through damage to the company.

***

57. It is now possible to turn to the question which is crucial for the instant case, namely whether the three situations just mentioned are the only ones in which international law permits a State to extend diplomatic protection to shareholders who are its nationals.

I find no evidence or reasoning which precludes such protection in other situations, but the question can be answered only by analysing the fundamental principles underlying the right of diplomatic protection. [p 195]

The Basic Principle of State "Interest"

58. In this opinion traditional language has been used, for example in speaking of injuries to a corporation as such, but this is really a bit of anthropomorphism since, as Sir Edward Coke remarked, corporations "have no souls" (case of Sutton's Hospital, 10 Rep. 32) and as stated by more recent jurists, the corporation "is not a thing. It is a method." (Douglas and Shanks, "Insulation from Liability through Subsidiary Corporations", 39 Yale Law Journal, 1929, pp. 193, 194.) That corporations have a nationality, is a legal fiction FN1. In legal principle and practice, the situation is that in relations with other States, a State is entitled to treat a corporation as if it were one of its nationals, provided the corporation is connected with it by certain links.

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FN1"Legal fiction", according to Morris Cohen, "is the mask that progress must wear to pass the faithful but blear-eyed watchers of our ancient legal treasures. But though legal fictions are useful in thus mitigating or absorbing the shock of innovation, they work havoc in the form of intellectual confusion." Quoted in Transnational Law, p. 70.
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"Indeed, it is at least arguable that all cases of apparent protection of corporations are in reality cases of protection of the shareholding interest of nationals of the protecting State." (Clive Parry, "Some Considerations upon the Protection of Individuals in International Law", 90 Hague Recueil, 1956, II, p. 657 at p. 704.)

It is customary also to speak about "claims of individuals" or "of natural persons" and about "corporate claims" or "claims of corporations". Such language is convenient, but it conceals the fact that in international relations, the claims in question are always the claims of a State, not of a natural or juristic person. A citizen has no right to diplomatic protection; it is wholly within the discretion of the government whether it will or will not extend its diplomatic protection.

59. A State takes up a claim against another State when it considers that its own interests have been affected. As the Court said in Nottebohm, Second Phase (p. 24) "Diplomatic protection and protection by means of international judicial proceedings constitute measures for the defence of the rights of the State". In Mavrommatis Palestine Concessions (P.C.I.J., Series A, No. 2, p. 12) the Court identified the State's "own rights" as "its right to ensure in the person of its subject respect for the rules of international law". Almost the identical words were repeated by the Court in Panevezys-Saldutiskis Railway (P.C.I.J., Series A/B, No. 76, p. 16), although in this latter case the Court went on to elaborate the importance of "the bond of nationality". [p 196]

In explaining the basis for a State's right to give diplomatic protection, the rather simplistic notion that a State was injured when an injury was inflicted abroad upon the least of its nationals, has come to be superseded by the realization of the national economic importance of foreign invest-ments as State interests.

This is one reason why it is not now pertinent to stress the difference in municipal law between private "rights" and "interests", as Judge Gros shows so clearly in his separate opinion.

". .. States protect their corporations chiefly on the basis of the real national interest and not, in fact, on the basis of nationality. In such a situation, it seems necessary to allow the State of the nationality of these shareholders to present their claims to the limit of their interest in the corporation. ...
Since the protection of national interest in foreign corporations is based on protecting an economic or pecuniary interest, it matters little whether the party in whose behalf the protection is exercised is a shareholder or a bondholder, or even if the national interest is held indirectly; e.g., if a national corporation controls another corporation which holds bonds or shares in a third corporation sustaining an injury." (Khalid A. Al-Shawi, The Role of the Corporate Entity in International Law, 1957, pp. 55 and 59.)

"In three countries—Italy, Britain and France—all proposals for foreign investment must clear government agencies before they can be carried out, whether or not government sources of credit are used . . . The Government of Japan, through the Ministry of Finance (and when required, through such additional agencies as the Ministry of International Trade and Investment and the Ministry of Agriculture), must approve all foreign investments . . ." (Friedmann and Kalmanoff, Joint International Business Ventures, 1961, pp. 188 and 190.)

60. No survey of State practice can, strictly speaking, be comprehensive and the practice of a single State may vary from time to time— perhaps depending on whether it is in the position of plaintiff or defendant. However, I am not seeking to marshal all the evidence necessary to establish a rule of customary international law. Having indicated the underlying principles and the bases of the international law regarding diplomatic protection of nationals and national interests, I need only cite some examples to show that these conclusions are not unsupported by State practice and doctrine.

61. The primacy of the general economic interests of the State in protecting private investments abroad, and the minimizing of any one es-[p 197] sential test justifying diplomatic protection, are strikingly brought out in the message of the Swiss Conseil federal of 29 October 1948 to the As-semblée f!!!edérale, concerning the negotiation of agreements with Yugoslavia on trade, payments, and a global settlement of Swiss claims for nationalized property:

"Article 5 indicates what must be considered as Swiss assets, holdings or claims. This question presents no difficulty when the assets belong to natural persons; in that case the nationality of the owner or creditor serves as the criterion. So far as corporate persons and companies are concerned, the seat, which must be in Switzerland, has not been made the only test, but the question is also raised as to whether there is a substantial Swiss interest in the corporate person or company. In most cases the substantial Swiss interest will be shown to exist when the effective majority of the capital is in Swiss hands. If there is no such majority, it is the minority exerting a decisive influence on the company which is to be taken into account; this is particularly easy to discern when there is a compact minority on one side and a scattered majority on the other. The composition of the board of directors and senior management may also be a determining factor when it belongs to them to shape the will of the corporate person and decide on its behalf. Lastly, in certain cases the creditors ought not to be overlooked either, for they too may exert a certain influence on the undertaking. But it is always necessary to consider the real circumstances and not trust in purely legal constructions, whose sole aim may be to dissimulate the true facts." (Feuille fédérale de la Confédération suisse, 100 année 1948, Vol. III, p. 672 at 686. [Translation from French by the Registry.])

62. In its note of 20 April 1938 to the Mexican Government, in regard to the case of Mexican Eagle Oil Company, a Mexican corporation, the British Government said:

"But the fact remains that the majority of shareholders who are the ultimate sufferers from the action of the Mexican Government are British, and the undertaking in question is essentially a British interest.
For this reason alone His Majesty's Government have the right ... to protest against an action which they regard as unjustified." (8 Whiteman Digest of International Law, p. 1273.)

In a section of the British Digest of International Law, entitled "Protection of British Interests in Foreign-Incorporated Companies", one finds a number of passages in which the stress is on the British "interests" rather than on the nationality of the company. (See Vol. 5, Part VI, pp. 535 ff.)
[p 198]

63. In regard to the practice of the United States, it has already been noted that that Government maintains that it is entitled under international law to protect substantial American shareholder-interests in foreign corporations and that it declines to protect American companies in which the substantial interest is alien-owned. Thus, in 1912, the Department of State declined to make representations on behalf of an American company in which Americans owned only $100 worth of shares out of a total of $450,000. (V. Hackworth, Digest of International Law, p. 845.) In 1965, the same Department informed an American embassy: ". . . the Government of the United States has the right under principles of international law to intervene or espouse a claim on behalf of nationals of the United States who own a substantial interest in a corporation organized under the laws of... [a foreign country]". (8 Whiteman Digest, p. 1272.)

The Restatement of Foreign Relations Law of the American Law Institute (1965) in Section 173 provides that a State is liable for damage to alien stockholder interests in a corporation of a third State if "a significant portion of the stock" is alien-owned, the corporation fails to obtain reparation, for reasons which the shareholders can not control, and the corporation has not waived or settled its claim.

"In international law, as in the domestic law of the United States, there has been a gradually increasing tendency to disregard the separate corporate entity when necessary to avoid injustice. Originally the United States, like Great Britain, refused to intervene on behalf of its national shareholders in a foreign corporation . .. Since late in the 19th century, a number of such claims have been presented to and allowed by international tribunals. In most of these, the international responsibility of the State with respect to the injury to the alien shareholder as such was not squarely presented as a question of international law, since this point was settled by the terms of the international agreement establishing the tribunal or by the compromis under which the case was submitted to it. . . [citing Delagoa Bay]. However, the practice of providing for such cases in international arbitration agreements has apparently come to be regarded as a reflection of customary international law, and it now seems to be recognized that, at least under some circumstances, the State is responsible for the injury to alien shareholders owning a significant interest in the injured corporation." (Reporter's Notes to S. 172; cf. II, Hyde, p. 904.)

64. In the Hannevig case, Norway espoused against the United States, the claim of Hannevig, a Norwegian national, on the ground that he had a [p 199] substantial interest in certain American corporations alleged to have been damaged by action of the United States Government. (The case is described in 32 American Journal of International Law, 1938, p. 142.) The United States did not assert the American character of the corporations as a basis for resisting the claim.

65. This section of the opinion may close with the words of Judge Huber in the familiar Ziat, Ben Kiran claim:

"International law, which in this field, is in the main based on principles of equity, has laid down no formal criterion for granting or refusing diplomatic protection to national interests bound up with interests belonging to persons of different nationalities." (8 Whiteman Digest, p. 1283.)

***

The Question of Double or Multiple Protection

66. Counsel for the Respondent made numerous statements to the effect that diplomatic protection could never be extended by more than one State in any one case. Such an argument is advanced against the possibility that more than one large shareholding interest might be protected, it being alleged that if the State of which the company has the nationality is the only State entitled to extend diplomatic protection, impermissible double protection would be avoided. That position is not correct since there are various situations in which international law recognizes the right of more than one State to interpose in connection with the same allegedly wrongful act.

67. In an ordinary case of dual nationality, both of those States of which claimant is a national may extend protection although in case of conflict an international tribunal may apply the doctrine of effective nationality. This Court said in the Reparation for Injuries Suffered in the Service of the United Nations case: "International Tribunals are already familiar with the problem of a claim in which two or more national States are interested, and they know how to protect the defendant State in such a case." (I.C.J. Reports 1949, pp. 174, 186.) In that case, the Court was asked by the General Assembly to consider, and it did consider, whether a claim might be brought both by the State of which the injured person was a national and by the United Nations. The Court said that "there is no rule of law . . . which compels either the State or the Or-ganization to refrain from bringing an international claim". The General Assembly thereafter recognized that two claims might be presented, and authorized the Secretary-General to negotiate agreements to reconcile action by the United Nations with the rights of the State of which the victim was a national. (UN General Assembly Res. 365 (IV), 1 Dec. 1949, para. 2.) [p 200]

68. The situation is not so simple when one considers the condition of artificial or juristic persons. International law has not developed a clear rule of dual nationality for such entities although different criteria are employed for determining nationality. Respondent indicated that a company may have dual nationality because both criteria are acceptable (Preliminary Objections, 1963, p. 191), but it insisted only one of the two States may make a claim. Yet in cases which are now very common in the commercial life of the world, the corporation may have various links with more than one State—links just as real as those which may connect a natural person with two different States whose nationality he possesses. International law cannot be oblivious to these corporate links. As already indicated above, they include the place of incorporation, the place of management, the place of operation (probably including employment of labour and payment of taxes), the nationality of the persons (natural or artificial) who exercise control, whether through the board of directors and management, or through stock interests, which not infrequently may exercise control even when a relatively small minority.

69. I shall not go over all the cases but merely note the double or joint diplomatic interposition in Delagoa, Mexican Eagle and Tlahualilo. (Cf. Paul De Visscher, 102 Hague Recueil, 1961,1, pp. 477-478.) In the case of Barcelona Traction, diplomatic representations, some perhaps only in the nature of good offices, were made by Canada, the United Kingdom, United States of America and Belgium.

In the case of two different but simultaneous justifiable diplomatic interpositions regarding the same alleged wrongful act, the Respondent can eliminate one claimant by showing that a full settlement had been reached with the other. If, in this case, Spain made a settlement with Canada for Barcelona Traction, the Belgian claim for the shareholders might be considered moot.

70. With all respect to the Court, I must point out the irrational results of applying a rule which would provide that only the State in which a company is incorporated may extend diplomatic protection in case of damage inflicted under circumstances in which the State inflicting the damage incurs liability under international law, as illustrated by the organization of the Iranian Oil Consortium. In September 1954 an agreement was concluded between eight oil companies on the one side and, on the other side, the Government of Iran and the Government-owned National Iranian Oil Company; it was ratified by the Iranian Parliament. [p 201]

The agreement gives to the Consortium the exclusive rights in a defined area for the production, refining and processing of crude oil and natural gas, together with other facilities. The eight participating oil companies include the former Anglo-Iranian Oil Company, now British Petroleum Company, which participates to the extent of 40 per cent.; five American oil companies also having 40 per cent.; the one Dutch company having 14 per cent. and the French company having 6 per cent. To carry out the operations, the Consortium caused to be incorporated in the Netherlands, two Dutch companies, one a Producing company and the other a Refining company. All the shares of the Dutch Producing company and of the Refining company are owned by an English holding company, Iranian Oil Participants Limited, with offices in London. The shares of the "Holding Company" are owned by the members of the Consortium in the percentages indicated aboveFN1. The two operating companies were incorporated in the Netherlands because of the liberal provisions of its commercial code which permit the companies to have their head offices and board of directors and management overseas, in this case, in Iran. The code also permits "one-man" companies, which makes it possible for all their shares to be held by the "Holding Company" in London. Fortunately, the Iranian Oil Consortium agreement was so skilfully drawn in a co-operative spirit, that one does not anticipate the likelihood of any diplomatic claims, quite aside from the fact that the agreement includes notable arrangements for arbitration of any disputes FN2. But should there be any question in the future of representations by any government, it would be absurd to maintain that the Netherlands Government would be the sole government entitled to make such representations. Nor would it seem rational to assign an exclusive role to the British Government on the ground that the Holding Company was incorporated in Great Britain and has its office in London. Perhaps a stronger link between the enterprise and Great Britain would be the extent of British Government participation in holding shares in British Petroleum.

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FN1 Actually, in 1955 nine independent American companies were admitted to participate and each of the original American participating companies surrendered 1 per cent. of their shareholdings to the new group. For the purposes of this illustrative example, it is not necessary to explain further the position of another British company, Iranian Oil Services Ltd. This account of the organization of the companies is based upon "History and Constitution of Iranian Oil Participants and Iranian Oil Services", a talk by Mr. J. Addison, General Manager of Iranian Oil Participants Ltd. to Staff Information Meeting, Tehran, 21 August 1961.

FN2 See "The Oil Agreement Between Iran and the International Oil Consortium: The Law Controlling", by Abolbashar Farmanfarma, of the Tehran Bar, in 34 Texas Law Review, 1955, p. 259.
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***[p 202]

71. The Court could logically have begun its analysis of the case by examining the proof of the nationality of the physical or juristic persons whom Belgium asserts the right to protect. If it found that such nationality was not proved, the Belgian claim must be dismissed without regard to the rule concerning the diplomatic protection of shareholders in a corporation chartered in a third State.

72. The burden of proof was clearly on the Applicant to prove the Belgian nationality of the shareholders on whose behalf Belgium claims. The Belgian argument (7 May 1969) that Spain was estopped or precluded from contesting the Belgian character of Sidro and Sofina, is not per-suasive.

The Continuity Rule

73. The two dates on which the nationality had to be proved, are determined by the rule of continuity. As the term implies, the rule requires that the nationality remain unchanged between those two dates. Sir Gerald Fitzmaurice makes a forceful argument against any "too rigid and sweeping" application of the continuity rule, but I believe his illustrative situation in paragraph 62 of his separate opinion may be covered by another rule deriving from the law of State succession, and on that basis would escape the application of the continuity rule for international claims which I consider to be generally binding—specialia generalibus derogant.

74. Although the phraseology varies, there is general agreement on the principle that the claim must be national in origin, that is to say that the person or persons alleged to have been injured must have had the nationality of the claimant State on the date when the wrongful injury was inflicted. One might well admit that there is a certain artificiality in the whole notion since it rests basically on the Vatelian fiction, but I do not think the Court can change a long established practice on this matter. (But cf. 1932 Annuaire de l'Institut de droit international, Vol. 37, pp. 479 ff., and Jessup, A Modern Law of Nations, 1947, p. 116.)

75. There was a fleeting attempt by Belgium to identify the origin of the claim as the refusal of foreign exchange, which indeed started the toboggan down the slide in terms of the Belgian contentions. (See especially the statement by counsel for Belgium on 18 April 1969: "Belgium rests its case on the illegality in international law of Mr. Suanzes's rulings in October and December 1946 and the circumstances surrounding them.")

This position was abandoned (it would have weakened the Belgian case in terms of the continuity rule), and throughout much of the written pleadings and oral argument it seems to have been taken for granted [p 203] that the critical date, when the injury complained of was inflicted, was that of the Reus decree declaring Barcelona Traction bankrupt, namely 12 February 1948 FN1. I think the Court is entitled to accept that date, at least to the extent of saying that if the claim was not Belgian on that date, the claim must be dismissed.

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FN1 In its final submissions on 15 July 1969 under heading VI, Belgium asserted:
"that the Belgian Government has established that 88 per cent. of Barcelona Traction's capital was in Belgian hands on the critical dates of 12 February 1948 and 14 June 1962 and so remained continuously between those dates. . ." (Emphasis supplied.) The same assertion was amplified under heading V.
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76. The terminal date under the continuity rule is more controversial. Historically, many international claims have been settled through the diplomatic channel and never were presented to an international tribunal. In many mixed claims commissions, claims were heard long after the events complained of because the commissions were established ad hoc after a certain number of claims had accumulated. For a moderate example, the British-American Mixed Claims Commissions established under a treaty concluded in 1910, decided in 1920 a claim based on events which took place in 1898. (VI, U.N.R.I.A.A., p. 42.) This diplomatic practice supported the view that the nationality of the claim had to be proved up to the time when it was espoused by the State. Thereafter, it was argued, the claim could be regarded as statal and, for the purposes of the continuity rule, the status of the individual on whose behalf the claim was made, became immaterial.

Now the first Belgian representation in regard to the bankruptcy proceedings involving Barcelona Traction, was dated 27 March 1948 (A.M., Vol. IV, Annex 250). But in its Note of 22 December 1951 (ibid., Annex 259), Spain maintained that Belgium had not then as yet made a formal claim. This was denied by Belgium (Annex 260), which insisted that its diplomatic protest of March 1948 should be considered a formal claim. In any event, at that period Belgium seems to have claimed on behalf of the Barcelona Traction company and not the Belgian shareholders.

77. However, when a case is brought before a permanent tribunal such as the International Court of Justice, the date of the application takes the place of the first diplomatic representation [FN2]. Counsel for Belgium on 4 July 1969 made a persuasive argument in favour of choosing that as the date required by the continuity rule although I do not agree that the Court is driven to making new law no matter what terminal date it selects. Counsel for Spain on the other hand, insisted on 21 July 1969 that the critical moment for the terminal date should be when the terms of the dispute were clearly defined which could only be after the respondent State had indicated its position. I find slight precedent for this view and see no logic in it FN1. I therefore conclude that the terminal date for compliance with the continuity rule is 19 June 1962, the date of the "new" Application.

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[FN2] See Institut de droit international, Annuaire, 1965, Vol. II, p. 270
[FN1] Nevertheless, there is some support for the view that nationality must be continuous to the date of the Court's judgment; see the convenient summary in Ro!!!ed, "Bankruptcy and the Espousal of Private Claims under International Law" in Legal Essays—A Tribute to Frede Castberg, 1963, pp. 307-309.
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Piercing the Veil of Sidro and Sofina

78. Belgium conceded that to prove the nationality of Sidro and Sofina it should go, and had gone, beyond the simple facts of State of corporation and séige social. It stated that in strict law it was not necessary to go beyond that but—

"it has always admitted—basing itself on the constant practice of States—that a government is only justified in taking up the claim of a company [FN2] if the latter's nationality be real and effective. For this reason, the Belgian Government has made a point, from its very first pleadings, of showing that three-quarters of Sidro's shares belonged to Belgian shareholders on the two crucial dates (1948 and 1962). On account of the size of the participation in Sidro's capital of another Belgian company, Sofina, the Belgian Government has taken a further step; it has shown that on the same dates Belgian shareholders had an even larger holding in Sofina than in Sidro." (Reply, Part III, Sec. 1013, p. 738.)

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[FN2] The "company" in question is Sidro as shareholder in Barcelona Traction. Mr. Arthur Dean, in his letter of 1 February 1955 to the Spanish Ambassador in Washington, stated that he represented "Sofina, the majority common shareholder" in Barcelona Traction. [Footnote added.]
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In the next section Belgium states that it is not obliged to show that Sidro's shares are, for the major part, Belgian owned but has nevertheless done so particularly in Annex 133 to the Reply.

79. In the light of this statement in its written pleading, the Court is justified in deciding whether Belgium succeeded in its attempt to prove the nationality of the alleged Belgian shareholders in Sidro and Sofina, in other words, to pierce the corporate veils of these two Belgian companies. I repeat that share-ownership is not a test of corporate nationality [p 205] in the broad sense, but, as Belgium states, a test of whether the nationality is "real and effective". Belgium in effect thus accepts the application to corporations of the Nottebohm link principle. But there are other Belgian statements in the oral argument which seem to modify that position and which object to the Spanish demand for proof of Belgian shareholding in the two Belgian companies.

80. If, as I maintain, Canada was not legally competent to protect Barcelona Traction because of the absence of a link (such absence being in part proved by the extent of foreign shareholding) [FN1], then Belgium by the same token would not be legally competent to protect Sidro unless the presence of a link is established. This is the challenge which Belgium seems to have accepted. Apparently Belgium was willing to have the link tested entirely by the extent of shareholdings and not by other factors. This may be due to inability to prove that the international controlling group was associated with or operated out of Belgium. Here again there is an illustration of the fact that the rule which permits claims to be submitted on behalf of shareholders places a heavy burden of proof on the claimant State, especially in the case of great international holding companies whose focus of power can not easily be proved especially over a period of years. There is added difficulty in time of war when many steps, some of them devious, but quite justifiable, need to be taken to avoid enemy appropriation or exploitation and also characterization as enemy by allied or friendly States. As Berle has abundantly demonstrated, the centre or focus of power is not necessarily to be identified by the location of the largest number of shares [FN2]. Counsel for Belgium recognized this fact in stating, on 13 May 1969, that Sofina was, at one period, controlled by about 8 per cent. of the shareholdings. The place of in-corporation, whence the promoters of an enterprise secure a "charter of convenience", has lost its significance as evidence of the real identification [p 206] of a holding company. Moreover, the siege social in terms of an office, etc., can be merely a facade.

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[FN1] In all the analyses of the nationality of shareholders, very little emphasis is put on any Canadian holdings. On 1 April 1962, out of 1,798,854 issued shares of Barcelona Traction 41,294 were held in Canada. The Canadian shareholders included 57 individuals (of whom 20 held less than 5 shares each) and 43 Canadian companies of which one, Houston & Co., held 30,225 shares. In the "U.S.A. Section", 11, not counting Newman & Co., held over 1,000 shares each. 15 shareholders holding a total of 2,387 shares, had addresses in Belgium. Of these, 7 held only 1 share each; in at least some of these cases they seem to have been simply qualifying shares (A.M., Annex 10).
[FN2] "... it is just possible that in talking the language of 'ownership' in relation to the flow of national capital, we are talking the language of history rather than the language of reality" (Berle, Power Without Property (Eng. ed. 1960), p. 45).
This is true because, as Judge Tanaka has pointed out, anonymity brings about the separation of management from the ownership. (Cf. Morphologie des groupes financiers, Centre de recherche et d'information socio-politiques, 1962, pp. 9 and 60, and Meyssan, Les droits des actionnaires et des autres porteurs de titres dans les sociétés anonymes, 1962, pp. 9-10.)
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81. There is, to be sure, a certain logic in taking the position that if international law permits a State to protect a shareholder interest, the State should be able to protect a single shareholder and would not have to prove that a substantial percentage of the shares were held by its nationals. This seems to be the Swiss practice but not that of the United States and there is very little support in the doctrine for pushing logic to such extremes. Nor does the claimant State in the instant case rely on any such principle—quite the contrary. Law is constantly balancing conflicting interests. The British-American Claims Commission, under the Presidency of Henri Fromageot, in 1923 in the Eastern Extension case, declared that "the function of jurisprudence is to resolve the conflict of opposing rights and interests by applying ... the corollaries of general principles". (VI, U.N.R.I.A.A., pp. 112, 114.) It is such reasoning which supports Dunn's allocation of risk theory in the law of State responsibility. I have elsewhere pointed out as a transnational illustration, the power of a single shareholder to induce a great corporation to change its policies. But the international protection of broad State interests of an economic and financial character does not require permitting a State to protect, let us say, a holder of just one of the hundreds of millions of shares of a company like A.T. & T.

82. It must be realized how different in character are various corporations. Holding companies like Barcelona Traction are very different from, let us say, the Ford Motor Company or the Du Pont Company. In these two examples, regardless of foreign holdings or interests of the companies, and regardless of the number of their shares which may be held by foreign interests, the location of plant, the employment of labour and the payment of taxes are all factors, in addition to place of incorporation and of policy making, identifying the companies as "American". Generalizations clustered around the word "corporation" or "company" are therefore dangerous.

83. If one looks at the link of management-brains, the citizenship of an individual is not conclusive. If a "Nottebohm" were the sole managing and controlling personality in a company, this would not prove that the company was identified with Liechtenstein, for purposes of the application of rules of international law. Nor is apparent residence conclusive; compare the arguments of the Parties about the residence of Juan March at [p 207] certain periods, and the challenges to evidence produced to prove residence. From the point of view of explaining the reasons for diplomatic protection, it may be significant that the controlling power group has, for one reason or another, strong political influence with a certain government. Spain's invocation of old press reports of scandalous connections between Belgian Government officials and personalities connected with Sidro or Sofina, suggested this element.


84. There are, of course, abundant precedents for protection of bondholders—I refer to the holders of corporate bonds and not the holders of government bonds which raise entirely different legal (and political) problems, as Drago clearly showed. In the instant case, there was at certain times, as already noted, stress by Great Britain and by Canada upon the interests of bondholders. As a characterization of the claim as Belgian, bondholding does not seem to be significant.

Proof by Presumptions

85. In the attempt by Belgium to prove that Sofina's shares were held by Belgians, at least in large part, there is a very extended analysis of Belgian wartime legislation. The subject is covered in greatest detail in Annex 133 of the Reply and in counsel's pleading on 13 May 1969. In this line of argument it is explained that under the legislation in question, various rules were laid down concerning certifications and the declarations of ownership of types of shares, whether held in Belgium or abroad. The argument is to say the least devious and rests on a pyramid of presumptions. In Annex 133 to the Reply at page 769, it is said that the proof adduced "rests on presumptions, but presumptions represent a mode of proof recognized by all legislative systems . . .". Yet counsel for Belgium on 17 April wisely admonished the Court: "The Court will, I trust, here as elsewhere, reject any attempt to substitute allegations for proof or insinuations for fact." It must also be noted that Belgian counsel admitted on 4 July 1969 that the certificates did not purport to establish continuity of Belgian ownership. Moreover, there are facile transitions as from broad categories such as "non-enemy", which included "allied", to the particularity of "Belgian". I do not find the evidence at all convincing.

In the pleading of Belgian counsel in 1964, it was stated on 15 April that there is a presumption "that when a company is established in a [p 208] particular State and enjoys the national character of that State, the company is also owned and controlled by shareholders of the same nationality". By this token, the controlling shareholders of Barcelona Traction would have been Canadian. Counsel offered a further presumption that since the shares of Sidro and Sofina "are traded principally in the Brussels stock market", Belgian nationals own the shares in those companies. [Ibid., p. 14.] It was further suggested that if shareholders give an address in Belgium, they must be presumed to be Belgians. [Ibid., pp. 9-10.]

86. The Belgian Memorial filed in 1959 after the first Application, was more realistic in its appraisal of a submitted classification of ownership of Barcelona Traction shares. The Memorial stated (at p. 19):
"It should be noted that the foregoing classification was, in almost all cases, established on the basis of the place of residence of the person in whose name the shares were registered at that time. Having regard to the Anglo-Saxon custom of resorting to nominees who are merely custodians of the securities, such a classification does not necessarily correspond to the place of residence of the real owners of the securities. Sidro itself had its Barcelona Traction shares registered in the name of an American nominee.
Furthermore, the place of residence may not correspond to the nationality of the person concerned, but this is of no great importance in view of the small number of shares considered as Belgian apart from those held by the Sidro company."

On 13 May 1969, Belgian counsel presented a long detailed list of presumptions, largely based on the time and place of declaration and certification under the Belgian wartime legislation. The information does not seem, as claimed by counsel, to be "both exact and consistent".

On 7 May counsel for Belgium had argued from certain reports of trading in Barcelona Traction bearer shares on the bourse in both Paris and Brussels during 1961-1962. (The reports are in A.R., Annexes 131 and 132.) In Paris the shares were apparently unlisted and there was no record of the number of shares bought and sold. In Brussels 44,264 shares were traded and counsel remarked: "True it cannot be said that all the purchasers were necessarily Belgian but the likelihood is that they were." [Emphasis supplied.]

87. The actual Belgian position seemed to fall back on that taken by counsel on 7 May 1969 in the following statement:

"After all, and this is a point of some importance, it is not necessary for the Government of Belgium to satisfy the Court regarding [p 209] the identity and Belgian nationality of every individual shareholder whose rights and interests underlie the Belgian claim. According to the doctrine recognized by this Court and generally accepted by States, Belgium is presenting a claim for injury done to the State of Belgium through wrongs inflicted upon its nationals. The Court therefore, need do no more than estimate in proximate terms the number of Belgian shareholders in Barcelona Traction."

Although he argued that the evidence is enough for the Court to find that as of 14 June 1962 "at least 200,000 bearer shares in Barcelona Traction were owned by Belgians other than Sidro", it was actually left to the Court to make an approximate estimate. All of these presentations and others not noted here, do not suffice to discharge the burden of proof which rested on the Applicant.

88. One cannot deny that it is far from easy to trace the ownership of bearer shares. In the Certain German Interests in Polish Upper Silesia case, the Polish Government argued that "no importance can be attached to the possession of bearer securities, since it is impossible to ascertain in whose hands they may be at a given moment". (P.C.I.J., Series A, No. 7, p. 67.) The Court did not find it necessary to pursue this point. In the instant case, Belgium said that Spain was seeking to drive them with their backs to the wall by demanding a probatio diabolica for identification of holders of bearer shares. But Belgium insisted that in this instance it was able to accomplish this almost impossible task. (Memorial, 1959, p. 17; Reply, Part III, p. 156, and C.R. for 13 May 1969.) I am not convinced that it succeeded FN1

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FN1 The Belgian State in 1946 or 1947 possessed 10,000 shares of Sofina and 50,000 shares of Sidro. The shares were acquired in payment of a capital levy in 1946 but were apparently held by the State only briefly and probably not after 31 December 1947. See A.O.S., Ann. 30, App. 3, pp. 368 and 381 and Sub-App. 3, p. 388. It was in another context that Belgian counsel spoke, on 4 July 1969, of "the overall claim, here put forward by the Belgian Government, in respect of the injury done to the Belgian State by the unlawful acts for which Spain is responsible".
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Apparently 341,326 bearer shares were in the trust account with Securitas (to be discussed later herein), after being deposited 31 December 1939 (O.S., p. 203). Then 8,525 more bearer shares were deposited by Sidro with Securitas—7,925 on 12 December 1939 and 600 on 22 February 1940—while 2,075 bearer shares were, for some reason, left in Brussels. (Ibid., pp. 203-204.)
When on 19 April 1948, Sidro asked Securitas to send to Newman & Co. various securities, it included in the lot to be sent 6,025 bearer shares and the coupons of 341,326 bearer shares, but not the latter certificates themselves. (App. 2 to Annex 11 of the Anexes to the Memorial.) In January 1952, Sidro converted the 341,326 bearer shares then in its [p 210] possession to registered shares; they were registered in the name of Newman & Co. (See ibid., Annexes 11 and 4.) I have not been able to establish that none of these 341,326 bearer shares changed hands be-tween 12 February 1948 and January 1952.

It is alleged that 244,832 additional bearer shares were owned by other Belgians in February 1948. (M., Sec. 10.) It was claimed that on 14 June 1962, 200,000 bearer shares were held by Belgians other than Sidro. (O.S., p. 206). I find no proof that these bearer shares were continuously Belgian-owned (assuming the above allegations to be correct) between 1948 and 1962.

89. In reply to a question from the Bench concerning the possible effect on continuity if shares were transferred during the period 1948-1962, counsel for Belgium said, on 4 July 1969, that if shares were sold to other Belgians and then repurchased by Sidro, "the continuity requirement would be satisfied". But "if the shares had been sold to, and then repurchased from, non-Belgian nationals, other than Spanish nationals, the requirement might possibly not have been satisfied . . .". The Spanish side challenged this statement, and properly so, because one does not see why this situation would differ from counsel's third case. The third case he put was where the shares had been sold to, and then repurchased from, Spanish nationals; here he agreed the continuity requirement would not have been satisfied. Counsel sought to justify his answer to his own second case by various quotations to the effect that the continuity rule is artificial and should be re-examined. But he merely says that Belgium "feels it right that the existence of this body of critical opinion should be drawn to the attention of the Court". He did not, however, deny the existence of the rule. When later he analysed his evidence of Belgian holdings in 1948, he did not try to adduce proof that the shares did not change hands between 1948 and 1962. It was in this context that he rejected the Spanish suggestion that Belgium should prove in regard to each shareholder that he was a Belgian and that he was a shareholder during the critical period. Counsel said:

"It is a lengthy and expensive procedure to carry out the investigation proposed by the Government of Spain. It is justifiable if there is something to be distributed. [Sc. an award in this case.] It is not justifiable otherwise."

He felt this was the more true because he considered that Belgium had proved that there was at all material times Belgian ownership of at least 200,000 shares aside from the Sidro holdings. None the less, the statement is a damaging admission of Belgium's inability to identify the [p 211] shareholders it sought to protect. The exhaustive effort to trace the bearer shares would hardly have been necessary if Belgium had been confident that the Court would be convinced that Sidro was the real owner of the 1,012,688 registered Barcelona shares throughout the critical period since so large a holding would presumably satisfy the demand that Sidro be identified with Belgian interests. This may be another slight indication that Belgian counsel were aware that they were, for one reason or another, not in a position to prove when the Securitas trust arrangement terminated. (See paragraph 96 below.)

***

Securitas as Trustee for Sidro

90. On 6 September 1939 Sidro concluded a "custodian" contract with Securitas Ltd. which was a United States corporation formed under the laws of Delaware. (P. 722 of the Chayes Opinion, A.R., Ann. 125; so stated also in A.O.S., Ann. 11, p. 206. Other statements of fact here are taken from the recital in Annex 3 of the Memorial unless otherwise stated.) It is said that this contract was concluded "foreseeing the danger of war".. (The contract is in A.M., Ann. 3, App. 2.) Such a custodian contract did not transfer the "real ownership" which was vested in Sidro.

91. The recitals in Annex 3 of the Memorial do not mention the fact (revealed later in A.O.S., Ann. 11, p. 207) that on the same date, 6 September 1939, Sidro made with Securitas a second contract which was a trust agreement. It was further revealed that this trust agreement of 6 September 1939 was replaced by another trust agreement on 27 February 1940, but it is said that the differences between the two trust agreements are without relevance for this case! It is said that the second agreement merely took advantage of some new Belgian war legislation. The texts of the trust agreements have never been revealed throughout the pleadings. But the existence of the trust agreement of 27 February is recorded in Annex 3, page 36, to the Memorial, where it is described as completing the measures for protection during the war. It is said that this trust agreement was to enter into force when the Brussels area was occupied by the enemy or when any other critical situation developed threatening the normal operations of Sidro. It is further recited that the period of the application of the trust agreement was indicated by a "suspense period" which would cease six months after the end of the critical period. Turning again to Annex 11 of the Observations and Submissions, at pages 207 and 208, it is stated that when one of the "Operative Events" occurred, [p 212] Securitas automatically became a trustee of Sidro's property outside Belgium and especially of 341,326 bearer shares of Barcelona Traction. The 1,012,688 registered shares were also already on deposit with Securitas and its possession was transformed into "legal ownership" when Securitas became trustee FN1. Securitas became the trustee in May 1940 (ibid., p. 209).

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FN1 Securitas held for Sidro many securities other than and in addition to those of Barcelona Traction. For example, of Mexican Light & Power Co. 6 per cent. cumulative income debenture stock, they held shares to par value of $2,254,250, registered in the name of the Midland Bank of London as nominees, and to the value of $I,958,000 registered in the name of the Schroder Bank in London as nominees, the nominees in both instances holding for the account of Charles Gordon & Co. (A.O.S., Ann. 14, p. 219).
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Curiously enough, Mr. Mockridge, Belgium's Canadian expert, refers to the agreement of 6 September 1939 as the "trust agreement" under which Securitas "became Trustee rather than Custodian". (A.R., Ann. 126, p. 8). On the other hand, Professor Chayes, Belgium's American expert, bases the trust on the agreement of 27 February 1940 and does not reveal a familiarity with the earlier trust agreement of 6 September 1939.

92. Annex 17 to the Observations and Submissions is a certificate without date signed by members of the committee named in application of clause 9 of the trust deed of 27 February 1940, certifying, in conformity with clause 4 (III) of the trust deed, that the state of danger which threatened Sidro (citing clause 3 of the trust deed) had ceased to exist on 14 February 1946 (p. 230). (I note that the Belgian Government had returned to Brussels on 8 September 1944 and Germany surrendered on 7 May 1945.) According to the report of Securitas to Sidro dated 24 September 1946 (op. cit., Ann. 18, p. 231; photocopy in A.R., Ann. 123), the "suspense period" ended 14 August 1946, which was six months after the certified date of the end of the danger; this is said to be according to Article 4 (III) of the trust deed. Securitas reports an inventory of what they held in trust on that date. The letter says they hold the securities subject to future instructions from Sidro. There is no flat statement that they ceased at that moment to be trustee although this is implied. A further letter of 17 April 1947 (A.M., Ann. 3, App. 8) encloses a statement of securities held for Sidro "in custody for your account" as of 31 December 1946. It was not until 19 April 1948 that Sidro instructed Securitas to send the securities to Newman & Co. On 3 May 1948 Securitas wrote that they had delivered the securities and that this operation closed Sidro's deposit account with them (A.O.S., Anns. 19 and 20). The lists showed 1,012,688 shares registered in the name of Charles Gordon & Co., and certificates (presumably of bearer shares?) 6,025. On 7 June 1948, Newman & Co. wrote that the shares in the former [P 213] group had been registered in their name and were in the Chase Safe Deposit Co. in New York (ibid., Ann. 22).

93. Securitas was dissolved by legal action in Delaware, 16 September 1948 (ibid., Annex 25, p. 258). An affidavit by Duncan, Alley and Newman, all directors or officers of Securitas, 30 October 1958, attesting this fact, says they examined the books of Securitas and that it had held (in addition to the registered shares) 341,326 bearer shares at Winchester House, London, and 7,925 plus 600 bearer shares in Chase National Bank, New York. Further, on 20 January 1947 Securitas "delivered" to Sidro 1,400 of these bearer shares and on 25 February 1947, 1,100 of the same. On 16 January 1947, the safe deposit box at Winchester House, with contents, was "assigned" to Sofina. On 3 December 1947, in accordance with request of Sidro, the 341,326 bearer shares were credited by Sofina to Sidro's account (ibid., Annex 26).

94. Now title to bearer shares may be considered to pass by delivery of the certificates, unless the transferee is a nominee or other depositary, for the trustee. It is not clear to me from the documents whether Securitas, as trustee, did actually divest itself of title to these bearer shares through these transactions. It should be noted that the communications in question were originally in English and the words quoted above—"delivered" and "assigned"—are the actual terms used, which might or might not indicate passage of title from the trustee. (See A.O.S., Ann. 25.)

95. It is a vital matter to know when the trust ceased to exist. Professor Chayes, Belgium's American expert, clearly points out why this is so; he says that during the German occupation of Belgium—

"... Securitas acted as trustee of the property. As such, Securitas held legal title to the property and could manage the property in its own discretion, without regard to any instructions from Sidro. Indeed, the whole point of the arrangement was to free Securitas from the control of Sidro, since during the German occupation, instructions might come from Belgium with respect to the shares that were inimical to Sidro's true interests and to the allied cause. Securitas was of course, bound to use its discretion for the benefit of Sidro, the beneficiary under the trust instrument. The trustee would be liable if it abused its discretion or used its position to take advantage of Sidro. And it had to account to Sidro, ultimately, for dividends and other profits. But subject to these general limitations, [P 214]as trustee during the war Securitas had full authority over the property" (A.R., Ann. 125, p. 707)FN1

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FN1 Securitas evidently was not a "passive trustee" in the sense described by Judge Augustus Hand in the San Antonio Land and Irrigation Co. case to which the Spanish side attached such importance. (New Documents, Vol. III, p. 114.)
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Chayes concludes that the trust had been terminated by 12 February 1948, but in proof of this statement he merely cites Annex 3 to the Memorial, paragraph (g), where it is asserted that the trust ended on 14 August 1946. It is apparent that he either never saw the trust deeds or was not at liberty to disclose their exact terms.

96. Spain, in its Preliminary Objections in March 1963, pages 61-62, remarked on the failure to produce the trust deeds. It also noted the fragile character of the "proof" that the trust ended on 14 August 1946. It noted other documentary omissions by Belgium, some of which at least were later supplied—but the trust deeds were not supplied. The Belgian omission is especially remarkable in Annex 11 to the Observations and Submissions, page 208, where it discusses the two trust agreements of 6 September 1939 and 27 February 1940 and, as already noted, blandly remarks that the differences between the two contracts are irrelevant for the purposes of this case! The content of the trust agreements is described but the text is not produced. In the Rejoinder (p. 951) Spain hammers the point that, with all its documentation, Belgium has not produced the text of the trust agreements, adding a footnote that it was again calling attention to this abnormality. The Rejoinder cites the Chayes opinion along the lines noted above. It makes the sound point that since the personalities acting for Sidro, Securitas and Sofina are essentially the same, their assertions supporting each other are equivalent to self-serving declarations which have little probative value.

In his pleading on 7 May 1969, counsel for Belgium dealt with the question of nominees but did not discuss the trust. On 4 July, he brushed aside the trust issue which had again been raised by counsel for Spain on 18 June. Nor do I find elsewhere in the Belgian oral arguments an attempt to meet the Spanish criticism of the failure to produce the text of the trust agreements.

In his final pleading of 21 July, counsel for Spain stressed the non-production of the trust agreements, calling attention to the whole record on this matter, ending with a reference to the opinion of Professor Chayes. In particular he remarked that the only transfer of shares which Securitas made was that of 3 May 1948 to Newman & Co.—two-and-a [p 215] half months after the critical date of the declaration of bankruptcy. (This is in accord with A.M., Ann. 11, App. 2).

97. I fully agree with Sir Gerald Fitzmaurice (in paragraph 58 of his separate opinion) that this Court does not have any fully developed practice on rules of evidence, but I believe that in the circumstances which have been described it is proper to apply the common law rule which is to the effect that if a party fails to produce on demand a relevant document which is in its possession, there may be an inference that the document "if brought, would have exposed facts unfavourable to the party .. ." FN1. Although it is true, as Sir Gerald Fitzmaurice emphasizes, that one should give due weight to the pressures engendered by the situation in the Second World War, international law has long taken cognizance of practices designed to thwart belligerents by concealing the truth; the history of the law of neutral rights and duties, is full of examples. If disclosure of the text of the trust deeds would have prejudiced some governmental interest, Belgium could have pleaded this fact, as the United Kingdom successfully pleaded "naval secrecy" in the Corfu Channel case, I.C.J. Reports 1949, pages 4, 32.

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FN1 Wigmore, Evidence, 3rd ed. 1940, Vol. 2, sees. 285 and 291. Wigmore traces the rule back to the beginning of the seventeenth century.
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Article 48 of the Rules of Court concerning documents submitted after the close of the written proceedings, requires consent of the other party or a special decision of the Court; in this instance, the other party asked for the production of the trust document. Nor was the Court strict in the instant case about applying the rule—witness the fact that over 4,000 pages of "new" documents were introduced by the two Parties during the oral proceedings between 21 April and 8 July 1969.

98. The legal aspect of the trust situation which is important is the one which distinguishes it from the nominee situation. As Chayes points out, during the trust, Securitas had not only legal title but full control, even though the beneficial title was in Sidro. Accordingly Belgian character of the claim did not exist during the trust. But in the nominee situations, the nominee is in the position of an agent and the legal title coincides with the beneficial title in the principal even though he is not a registered shareholder.

***[p 216]

The Status of "Nominees"

99. The requirements of linguistic simplicity necessitate the constant use of the term "shareholder". The danger is that the reality behind the term will be lost to sight through semantic insistence upon the term itself FN1. To my mind, this defect faults the Spanish arguments concerning nominees. The Spanish argument identifies in all situations, the real "shareholders" with the names inscribed on the stock registers. See the Counter-Memorial, Chapter VI, Sections 47 ff. and Rejoinder, Part III, Chapter II, especially Subsection 2. The legal situation of nominees reveals the fallacy of this approach, quite aside from the fact that the names of holders of bearer shares do not appear on the register although they are certainly "shareholders".

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FN1 On this point counsel for Belgium, speaking on 4 July 1969, was absolutely correct: "The question is not who has the right to term himself 'shareholder' but, in Professor Ago's own words, 'who in the last resort has a proper claim to the economic content of the ownership of a share'... so as to enjoy the protection of international law."
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100. Under principles of private international law, the legal nature of the right, title, or interest of nominees in whose names Barcelona Traction shares were registered, must be determined by either New York or Canadian law. Counsel for Belgium properly noted on 7 May 1969 that the principles governing the choice of law are not unfamiliar to the Court in view of the Permanent Court's decisions in the Serbian and Brazilian Loans cases, P.C.I.J., Series A, Nos. 20 and 21. Since according to the unrebutted expert opinions of Chayes and Mockridge there is no material difference between the two legal systems in the matters here involved, they need not be analyzed separately.

Annex 125 of the Reply is the opinion of Professor Chayes, and Annex 126 is the opinion of Mr. Mockridge on the Canadian law. I think it is clear that under both New York and Canadian law, the nominee does not have "real title", is not the "real owner" and that the one for whom the nominee acts has all the real elements of ownership [FN2]. The limitations on this statement are only those which relate to the rights of the corporation, as for example, its right to deal with the registered owner in the payment of dividends, etc. As has been shown, where shares are held by a trustee under a trust instrument, the same conclusion cannot be drawn. The distinction is clear in both opinions although Mockridge lays more stress on cases where there is a "bare trust". There can be situations in which the legal owner of even 97 per cent. of the shares may own something [p 217] worthless because, for example, of the beneficial interests of a usufruct under German law—but this is not such a case. (Cf. the decision of the United States District Court in the Uebersee case cited above, at p. 13 of that Court's opinion.)

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[FN2] In opposition to the Belgian position on nominees, Spain invokes an opinion from an eminent New York law firm—Davis, Polk, Wardwell, Sunderland & Kiendl. (See C.M., Chap. VI, p. 675, and the text of the firm's letter of 28 February 1963 in Annex 65, Appendix 2, Preliminary Objections 1963). In my view, this opinion does not controvert the essentials of the Chayes opinion.
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101. Chayes in his conclusion on page 722 (loc. cit.) says "I have the honor to conclude that neither Securitas, Ltd., Charles Gordon & Company, Newman & Company ever had any property interest in the Barcelona Traction shares, except for the period of the German oc-cupation of Belgium during World War II, when Securitas, Ltd., held them as Trustee". Mockridge (A.R., p. 732) agrees with Chayes except he adds the period during which the shares were vested in the Canadian Custodian of Enemy Property which period he says terminated before the commencement of the bankruptcy proceedings. According to the Observations and Submissions (p. 204), they were deblocked 29 April 1947; this fact is confirmed in the Reply, paragraph 994. When the shares were first transferred to Charles Gordon & Co., there was attached (in accordance with cabled instructions by Wilmers) a notice reading:

"We hereby certify that the within transfer does not involve a change of ownership of the shares represented by the annexed certificates as it is being made to Charles Gordon & Co. as nominee of our depositary therefore no transfer tax is exigible." (A.M., Vol. I, Ann. 3, App. 5, p. 50.)

This was on 11 September 1939 and Chayes stresses that there was nothing inconsistent with the Securitas arrangement in the fact that Sidro transferred direct to Gordon & Co. (A.R., Vol. II, Ann. 125, p. 5). Chayes states on the same page that Sidro listed the shares registered in Gordon's name with the United States authorities before the United States entered the war but there is no documentary record of this listing. But he says that Sidro reported the trust agreement with Securitas and did not report Gordon as holding any interest.

102. I find that it is of no legal consequence that the agents in whose names the shares were registered were not listed publicly as professional nominees. (So also in Canada; Mockridge, A.R., p. 729.) The practice of registering shares in the names of nominees is very common in the United States as Chayes shows (ibid., pp. 708-709). Although nominees were much used in time of war to cloak the identity of the real owner, they are generally used in the United States—where bearer shares are not issued— simply to facilitate transactions in shares FN1. Somewhat comparably, when shares are pledged with a bank as collateral for a loan, a stock power endorsed in blank will be attached. [p 218]

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FN1 Under the name of "share warrants" bearer shares may be issued in Canada as in England, but they are not extensively used; Schlesinger, Comparative Law, 2nd ed., 1960, p. 442
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103. Chayes noted (ibid., pp. 714 and 715) that unregistered owners of shares may bring a shareholder's derivative suit, or under Delaware and New York law, in case of voting against a merger, may demand an appraisal of their shares and cash payment of the appraised value. In an appraisal case the New York court said there was no justification for interpreting the word "stockholder" in the statute as meaning "registered stockholder" (ibid., p. 720). Mockridge shows that Canadian courts interpreted the word "shareholder" in agreements, as being broader than and not limited to "registered shareholders" FN1.

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FN1 Cf. Henn, Corporations, 1961, sec. 179: "Statutory references to shareholders are not always clear as to whether they refer only to shareholders of record or also to the beneficial owners of shares. A substantial amount of stock is held by brokers in their own names (known as 'street names') in behalf of their customers."
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Mockridge (ibid., p. 730) indicates that shares registered in Charles Gordon & Co.'s name were vested in Canada although Charles Gordon & Co. had United States nationality, because Sidro as beneficial owner was "enemy" during the German occupation. He does not mention Securitas in this context. In the Observations and Submissions (p. 199), it is said that while the trust was still in force, Sidro declared the Barcelona Traction shares under Belgian law, although they were registered in the name of Charles Gordon & Co.

104. The jurisprudence of the Foreign Claims Settlement Commission of the United States is of interest, notwithstanding the fact that this is a national body, operating in accordance with its statutory terms of reference and with the terms of agreements with various governments FN2. For example, the Commission "denied recovery to a domestic [i.e., United States] corporation with more than eighty per cent, of its stock registered in the names of American citizens but beneficially owned by aliens. (Claim of Westhold Corporation . . .)" (Foreign Claims Settlement Commission of the United States, Decisions and Annotations, 1968, p. 20). Thus neither place of incorporation nor majority of shares registered in the names of American nominees, sufficed to make the claim "American".

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FN2 For the contrary Spanish view on the interest of this jurisprudence, see C.M., Chap. VI, Section 55.
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In the Annotations one reads (at pp. 39-41):
"Beneficial interest.—Occasionally legal title is vested in one person while the true owner is another. Normally such an arrange-[p 219]ment is unnecessary; but as the Arndt decision indicates, a 'cloaking' of title was sometimes imperative in view of the discriminatory measures that were practiced during World War II. Applying settled rules of international law, the Commission held that beneficial interest, as opposed to nominal or bare legal title, was controlling in deciding the question of ownership. [Emphasis supplied.]

A more common example of beneficial ownership is the case of an agent who acquires title to property on behalf of his principal.. .

The technical, legal form in which title to property is held, and the legal capacity to sue, constituting the so-called 'indicia of title,' must be considered of secondary importance to the question whether the interest for which espousal is sought is truly that of a United States national....

A claim concerned an interest in a family fund or 'syndicate', that owned shares of stock in a Swiss corporation, which assertedly owned all the outstanding shares of stock in a Yugoslav corporation. It was stated that 18,949 shares of stock held by the 'syndicate' in Switzerland had been transferred to claimant in 1942, in recognition of her undivided fractional interest in the family fund ... It appeared that the various record entries of the transactions were designed merely to cloak the shares of stock with ownership by a national of the United States, a device which was then considered best calculated to safeguard the family interests. The Commission held that on the date of loss claimant was not the owner of the 18,949 shares of stock, but was the beneficial owner of only a 5.29 % interest in the family fund. (Claim of Antonia Hatvany, Docket No. Y-1063, Dec. No. Y-910, Final Decision.)"

***

105. Belgium not having established the Belgian character of any substantial number of shares throughout the critical period which the continuity rule defines, might rely, and at times seemed to rely, on the Belgian nationality of the group which shaped the will of the corporate person and dictated its policies. This also may be a difficult task in the case of great holding companies with many cross-holdings of shares, which cross-holdings, Belgium stated, were permissible under Belgian law. The centre of power may be deliberately concealed, not only in time of war, but for reasons of avoidance of taxation or of the application of anti-trust laws, or otherwise. The individuals who give instructions—for [p 220] example, in this case, Mr. Heineman and Mr. Wilmers—may be acting for unidentified financial interests, although I have no reason to suggest that this was actually the case. Belgium in the Reply (Ann. 127, Vol. II) quotes from the report of the Spanish members of the International Committee of Experts in 1950, passages attesting that Sidro controlled Barcelona Traction and that Sofina controlled Sidro; and counsel stated on 13 May 1969 that at least in a certain period, Sofina "était contrôlée par des filiales". The Spanish arguments and Belgian explanations about the alleged "Belgianization" and take-over bids in 1964 do not prove what the situation was on 19 June 1962. But whatever is the alleged basis for the State interests which justify protection, that basis must be proved just as much as if the justification were to be found solely in the continued nationality of shareholders.

***

106. The influence of the Court's judgments is great, even though Article 59 of the Statute declares that the decision "has no binding force except between the parties and in respect of that particular case". It may be said that the new methods and institutions for foreign investments which have been referred to earlier in this opinion, will overtake the possible consequences of the rule which the Court now holds to be the law. But not all of the older business practices have been abandoned and the managerial community of the commercial world might have to meet the announced rule by new devices. If, for example, it is agreed that when the company has been wound up and has ceased to exist, the shareholders, now having a direct right to the assets, may benefit from the diplomatic protection of the State of which they are nationals, it would be quite feasible to secure the cancellation of the "charter of convenience" which the corporation had obtained. But surely no economic, social or political advantage would be gained if in a situation like that in the instant case, the life of the Barcelona Traction Company had to be officially ended in Canada so that the principal shareholders, who are the real parties in interest, could be protected diplomatically. And could it be reasonably argued in such circumstances, that the United States would be the State entitled to extend diplomatic protection because a majority of the shares were found to be registered in the name of American nominees? One is entitled to test the soundness of a principle by the consequences which would flow from its application; the consequences here would clearly be undesirable. With deference to the opinion of the Court, I cannot agree that international law imposes such a solution of [p 221] the problem which the Barcelona Traction case has laid before the International Court of Justice FN*.

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FN* Since I have personally had occasion to correct misconceptions about the "law's delays" as a feature of the procedure in the International Court of Justice, I, like Sir Gerald Fitzmaurice, welcome the inclusion in this Judgment of the Court of an indication of the fact that the fault lies with governments of States and not with the Court or its Registry. The Court has never been asked to treat a contested case or a request for an advisory opinion by summary procedure, quite apart from the possible use of the standing Chamber of Summary Procedure, but if the governments concerned desired a prompt decision, the Court could meet their request.
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(Signed) Philip C. Jessup.


[p 222]

Separate Opinion of Judge Morelli

[Translation ]

I

Subject of the dispute and object of the claim

1. It will be advisable to begin by defining, on the one hand, the subject of the dispute between the Belgian State and the Spanish State and, on the other, the object of the claim submitted to the Court by Belgium in its Application of 19 June 1962. This Application has been compared, particularly from the Spanish side, with the other Application submitted by Belgium on 23 September 1958, and the question has been raised as to whether what is involved is the same claim or two different claims.

Having regard to the circumstances of the case, comparison of the two Applications is useful only for the purpose of a precise determination of the object of the claim submitted by the 1962 Application, the only one on which the Court had to give a decision in the present Judgment. The proceedings instituted by the 1958 Application having been closed pursuant to the discontinuance, there was no litispendance obstacle to prevent Belgium from again submitting the same claim to the Court. On the other hand there can be no doubt that Belgium was completely free to refer a different claim to the Court.

2. As regards the subject of the dispute between Belgium and Spain, that dispute has from the outset been characterized, in the first place, by the complaint put forward by Belgium on account of the measures taken by the Spanish authorities in respect of Barcelona Traction and, in the second place, by Belgium's claim to reparation of some kind for the damage sustained as a result of those measures, regarded as contrary to international law. Now these elements (and the resulting dispute) remained unchanged even after the discontinuance, which did not affect the dispute in any way. It may also be said that the subject of the dispute remained unchanged, for that subject can only be the product of the component elements of the dispute.

3. Is it possible, despite the continuance of the same dispute, to consider that in its 1962 Application Belgium referred to the Court a claim having a different object from that submitted to the Court in 1958? I am of the opinion that this question must be answered in the negative.
When a State is said to be exercising, as against another State, diplomatic protection of a particular person, to be protecting that person, to be [p 223] taking up his case, what is meant by these expressions is that a State is exercising as against another State a right of its own conferred on it by the international legal order, concerning a particular treatment due to the person concerned. The national State of the person is entitled to demand that that person be accorded the treatment required by the relevant rules of international law and, should such treatment not be accorded, may claim reparation in the form of either restitutio in integrum or compensation. International reparation is always owed to the State and not to the private person, even in the case of compensation and despite the fact that the amount of compensation must be determined on the basis of the damage suffered by the private person.

These very elementary notions explain quite simply why in the present case the two claims successively referred to the Court by Belgium, that of 1958 and that of 1962, must be regarded as completely identical.

4. In the first as in the second Application Belgium asked the Court to adjudge and declare that the Spanish State was under an obligation towards Belgium to make a certain form of reparation for an alleged international wrong. Naturally the international wrong, as such, could have been done by the Spanish State only to the Belgian State and not to the injured persons.

The wrong complained of by Belgium is described in the same way in both Applications: according to both it consists of the same conduct on the part of the Spanish authorities. The principal claim for reparation as expressed in both Applications has restitutio in integrum as its object and seeks the annulment by the Spanish State of the measures complained of against it in the same way in both Applications. As regards the alternative claim for compensation, it is perfectly true that in the 1962 Application the amount of compensation was reduced to 88 per cent. of Barcelona Traction's net assets and that, in conformity with the new presentation of the case, the justification for this alternative claim was changed, so that reference is no longer made to the damage suffered by Barcelona Traction, but to the damage suffered by the company's Belgian shareholders. However, neither the reduction of the amount claimed nor the alteration of the argument in support of the claim for compensation in any way changes the object of that claim as to its substance.

5. Between the two claims there is identity not only of petitum but also of causa petendi.

In this case the causa petendi is the allegedly unlawful character where Belgium is concerned of a particular course of conduct on the part of the Spanish authorities composed, according to both Applications, of the same acts and omissions. Thus the identical nature of the causa petendi is not affected by the fact that there is, as between the two Applications, a difference in the way in which they set out to prove that a right of [p 224] Belgium's was indeed infringed by the measures complained of. The fact that in the first Application Belgium complained of the damage suffered, as a result of those measures, by a company in which there was asserted to be a preponderance of Belgian interests, whereas in the second Application Belgium complained of the damage indirectly suffered as a result of the same measures by Belgian nationals in their capacity as shareholders in the company, is merely a change of argument which has nothing to do with the object of the claim.

Whenever, as in the present case, there is a claim for reparation on account of the breach, through a particular course of conduct, of the rules of international law concerning the treatment of foreigners, the specifying of such and such a person as the one in respect of whom diplomatic protection is exercised is not a matter which is at all relevant to the object of the claim, for the claim has no other object than the reparation sought by the State for itself. This is so of course only if the description of the allegedly unlawful conduct of the other State remains unchanged throughout, otherwise there would be a change of claim because of a change in the causa petendi.

Matters are otherwise when diplomatic protection is exercised not in the form of a claim for reparation on account of a wrong asserted to have been done but, on the contrary, in the form of a claim to a particular sort of treatment due by the other State to a private person. In this case the specifying of the private person in respect of whom diplomatic protection is exercised is an integral part of the specification of the conduct which the State exercising diplomatic protection calls for on the part of the other State. Consequently, in the case of such a claim submitted in judicial proceedings, the substitution of one protected person for another entails a change in the object of the claim. In such a case there is indeed a change of petitum.

6. The reasons why I am of the opinion that both claims submitted by Belgium to the Court must be regarded as objectively identical are not the same as those advanced by the Spanish Government in reaching the same conclusion.

The Spanish Government appears to start from the idea that in order to determine the object of the claim (or of the case, as it sometimes puts it) regard must be had to the identity of the protected person. In the argument and submissions of the Counter-Memorial it reaches, by the use of a perhaps elliptic form of words, the point of envisaging either the Barcelona Traction Company or the Belgian shareholders as themselves constituting the possible "objet" of the Belgian "claim". Thus in that pleading a case involving company protection is contrasted with a case involving shareholder protection.

Now if the idea is accepted that the protected person himself constitutes the objet of the claim, or at least the decisive element for determining the object of the claim, it would have to be inferred as a logical conclusion that the claim submitted by Belgium in 1962 is different from [p225] that submitted to the Court in 1958, because Belgium now states that it is protecting not Barcelona Traction but its Belgian shareholders.

However, according to the Spanish Government, this conclusion must be rejected, because, it alleges, Belgium sought in its 1962 Application to disguise, under the appearance of a case concerning Belgian shareholders in Barcelona Traction, a case which really concerns the company as such. This is purported to be proved by, on the one hand, the complaints advanced (relating to the measures taken by the Spanish authorities in respect of the company) and, on the other, the form of reparation claimed (in the first place restitutio in integrum of the undertaking).

7. I am of the opinion that, in submitting its new claim in the way it considered most suitable, Belgium was only exercising a freedom which —as the Court has observed in the Judgment—it undoubtedly possessed. The claim had therefore to be examined and judged in accordance with the content which Belgium had imparted to it. It would have been quite arbitrary, on the pretext of bringing to light what was alleged to be hidden behind a disguise, to substitute for the actual claim as formulated by Belgium a different, purely hypothetical claim.

If, then, the 1962 claim is to be compared with that submitted to the Court in 1958 (the only useful purpose to be served thereby, as already said, being the better to define the content of the new claim), both claims must be regarded as objectively identical. But the reason for this is not, as alleged by the Spanish Government, that the new claim also concerns, despite its outward appearance, diplomatic protection of the Barcelona Traction Company as such, but rather that in both claims there is identity of petitum (the reparation sought) and of causa petendi (the allegedly unlawful conduct of the Spanish authorities).

This having been established, it must however be observed that as between the two claims there is a difference in respect of the way in which Belgium seeks to prove that the measures complained of constitute a wrong done by Spain to Belgium. In its endeavour to prove this (and hence its right to reparation) Belgium ceased relying on the contention of damage suffered by a company in which there were allegedly preponderant Belgian interests and, on the contrary, based its claim on the purported fact that the measures complained of, although taken in respect of the company, indirectly injured the Belgian shareholders in it. But this new argument could not be rejected out of hand on the ground that it was only a means of disguising a different claim. It was the actual argument put forward by Belgium in its 1962 Application which had to be considered on its own merits in order to judge whether or not it was well-founded. [p 226]

II

The Order of the Questions

1. Belgium claims reparation from Spain for the measures taken by the Spanish authorities in respect of Barcelona Traction, which are considered by Belgium as internationally unlawful. The unlawfulness here concerned must naturally be unlawfulness vis-à-vis Belgium resulting from the infringement of a right pertaining to Belgium, or in other words from the breach by Spain of an obligation it owed to Belgium. For the international rules concerning the treatment of foreigners, although they are rules of general international law and, as such, are binding on every State with regard to every other State, take concrete form in the shape of bilateral legal relationships, so that a State's obligation to accord the required treatment to a particular person exists solely towards the national State of that person and not towards other States.

In order to prove that it was indeed a right pertaining to Belgium which was infringed by the measures complained of, the Belgian Government contends that those measures, although taken in respect of a Canadian Company, indirectly injured Belgian nationals as shareholders in the company. The Spanish Government challenges this argument from several standpoints, thus posing, inter alia, a problem as to Belgium's capacity.

2. It is necessary to be clear as to the sense in which it is possible in this connection properly to speak of capacity; in particular because the Parties have used terms which are open to misunderstanding: "qualité pour agir" or "jus standi". These terms would appear to indicate a form of procedural capacity relating to the right to apply to court. But that right is not now in issue, since the 1964 Judgment upheld the Court's jurisdiction in the present case and thereby Belgium's corresponding power to seise the Court, that is to say, Belgium's power to institute proceedings.

At the present stage it is possible to speak of capacity only in the sense of substantive and not procedural capacity, that is to say in the sense of the vesting in one State rather than in another of the substantive right invoked in the case. The hypothesis of the existence of a certain obligation on the part of a given State (the respondent State) is assumed, and the question is which State possesses the corresponding hypothetical right; in particular whether or not that right pertains to the applicant State.

As I said in my dissenting opinion attached to the Judgment on the Preliminary Objections (I.C.J. Reports 1964, pp. 1ll f), the question of capacity, understood in this way, is one concerning a substantive right with regard to the actual merits of the case. A judgment declaring that the applicant State is devoid of capacity in respect of the right of diplo-[p 227] matic protection which it invokes is not a judgment declaring the claim inadmissible, but one dismissing the claim on the merits. A judgment of this kind has the effect of res judicata in the material sense.

3. In my dissenting opinion (pp. 112 ff.; see also pp. 98 ff.) I also explained that the question of capacity, as a question concerning the possession by the applicant State of the substantive right invoked by it as the basis for its claim, does not have any preliminary character, in the sense that there is no logical necessity to resolve the question of capacity before going on to examine the other questions that likewise concern the merits.

It follows that it rests with the judge to determine the most suitable order, taking convenience and economy as his criteria. It is open to him to begin with an examination of the question of capacity, assuming as a hypothesis the existence of the obligation relied on as the basis for the claim. But he may also find it simpler, without going into the question of capacity at all, to find that the claim should be dismissed on the ground that the obligation asserted by the Applicant is not one which exists on the part of the Respondent vis-à-vis any State at all. For this it might be sufficient to resolve a question of pure law, either by showing the nonexistence of the legal rule invoked as the basis for the claim, or by ascertaining its true content FN1.

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FN1 See, in my separate opinion on the cases concerning South West Africa, Second Phase, J.C.J. Reports 1966, pp. 65 f., the observations as to the relationship between the question of capacity (standing) and that of the existence of obligation, and as to the hypothetical nature of the former question when raised before the obligation has been shown to exist.
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4. Now the Spanish Government opposes the Belgian claim by raising, among others, questions which are undoubtedly questions of capacity. For it denies the existence of major Belgian shareholdings in Barcelona Traction by disputing the possibility of regarding certain persons, in respect of whom Belgium claims to exercise diplomatic protection, as Belgian shareholders in the company; and it does this from two different standpoints. In the first place the Spanish Government denies that certain persons described by Belgium as Belgian nationals can really be regarded and treated as Belgian. In the second place the Spanish Government denies that certain persons protected by Belgium can be regarded as shareholders in Barcelona Traction.

There is thus raised from two different standpoints a problem which is undoubtedly one of capacity, relating as such to the direction of the obligation assumed to exist on the part of Spain. In the first instance the question is whether the right corresponding to the hypothetical obligation pertains to Belgium or to some other State which must be considered to be the national State of the person concerned. Similarly, in the second [p 228] instance, the question is whether the right of diplomatic protection pertains to Belgium or to some other State as the putative national State of the real shareholder. In short, it is what is known as the nationality of the claim which is the issue in both instances.

5. As will have been noted, all this assumes the existence with regard to the treatment of Barcelona Traction of an obligation on the part of Spain toward the national State or States of the shareholders. But the existence of any such obligation is denied in another argument put forward by the Spanish Government. That argument does not raise a problem of capacity at all; it raises no problem concerning the nationality of the claim. It raises on the contrary a problem concerning the very existence of the rule of law invoked by Belgium as the basis for its claim; and it is possible to pose this problem even if it is assumed that the protected persons really are Barcelona Traction shareholders and also Belgian nationals.

It is not possible to maintain that this issue is none the less one concerning the direction of the obligation (hence one of capacity in relation to the corresponding right) on the ground that regard must also be had to the right of diplomatic protection pertaining to Canada as the national State of the company, and therefore seek to resolve the question of whether it is not Canada rather than Belgium which has the capacity to claim reparation. This is so because Canada's right is derived from a rule different from that invoked by Belgium, the latter concerning not diplomatic protection of the company as such, but diplomatic protection of the shareholders in connection with measures taken in respect of the company. If it is decided that no such rule exists, no problem of capacity arises at all.

6. The point is that any question of capacity can only be raised in relation to a rule of law which is either undisputed or assumed to exist. The question is then as follows: which is the entity, as between the various entities to which that rule is directed, on which, in the actual case, that rule confers the right invoked? More particularly, is it in fact on the Applicant that such a right is conferred? If the very existence of the rule is negated, any possibility of raising a problem of capacity is excluded.

Consequently, to say that there is no rule which authorizes diplomatic protection of shareholders on account of measures taken in respect of the company is to exclude the existence of any obligation of Spain in this connection, vis-a-vis any other States. Belgium's right is thereby denied, not because such a right might hypothetically belong to a State other than Belgium (in other words, not for lack of capacity on the part of Belgium), but rather because no such right can be invoked by any State, since no rule exists from which it could derive. [p 229]

On the other hand, the other question, that of the nationality of the claim, does concern capacity. The possible existence is postulated of a rule authorizing each State to exercise diplomatic protection of its nationals holding shares in a company, in respect of the treatment given to the company by another State; and the question is whether, on the basis of this hypothetical rule, it is to Belgium that the right to protect certain private persons would belong, on the ground of their being, according to Belgium's assertion, both Belgian nationals and shareholders in Barcelona Traction. Thus, as will be seen, a true problem of capacity is raised, the problem, in other words, of the attribution of the right deriving from a certain rule which is assumed to exist. A negative answer to this question would also have brought about the dismissal of the Belgian claim on the merits.

7. Nevertheless, the fact that this problem is one of capacity does not mean that it ought to have been examined and settled in the affirmative before the Court had any possibility of going on to examine the other problem, that of the existence of an obligation owed by Spain to the national States of the shareholders in Barcelona Traction with regard to the treatment of that company. I said above that the problem of capacity also concerned the merits and that there was, on that account, no logical necessity to solve it before the others likewise concerning the merits. The order to be followed could only be dictated by considerations of economy.

As it happens, the Court gave priority to examining the problem of pure international law relative to the diplomatic protection of shareholders in a company by their national State, in respect of measures taken vis-a-vis the company. This choice appeared in itself the most apt; that it was so was subsequently borne out by the result to which it led.

For, having settled that problem in the negative—having, in other words, denied the existence, as regards the treatment accorded by a State to a given company, of any obligation owed by that State to the national States of the shareholders—, the Court was thereby enabled to leave aside any problem of capacity, that is to say, the problem as to whether the persons that Belgium claims to protect are or are not shareholders in the company and at the same time Belgian nationals. In that way many very delicate problems of fact and of municipal law, the solution of which was not necessary for the disposal of the case, have been avoided.

8. And so the Court has been able to bestow a very simple logical structure on its decision, which in substance consists in negating the major premise of the syllogism or, in other words, in denying the existence of the rule relied upon by Belgium. In this way the Court has given a final, concrete solution to the fundamental problem at issue between the Parties, which lay in the very question whether the rule of international law invoked by Belgium existed or not. The negative answer to this question implies that none of the national States of the shareholders, [p 230]
irrespective of the quantity of shares possessed by its nationals, could exercise diplomatic protection. In consequence, the Belgian claim had to be dismissed on that basis, even if it had been proved that the whole or nearly the whole of the shares in Barcelona Traction were in the hands of Belgian nationals.

If, on the other hand, the Court had begun by examining the problem of capacity, its reasoning and the logical structure of its decision would have been, at all events, much more complex. As I have already said, any question of capacity can only be raised in relation to a given rule, which, if it is disputed, as in the present case, must be supposed to exist for the purposes of the argument. Thus the Court would have set out from the hypothesis that a certain rule, constituting the major premise of the syllogism, existed; assuming that premise to be true, the Court would have examined and settled the various questions of fact which went to make up the minor premise (it being borne in mind that, in the eyes of an international tribunal, questions of municipal law also are questions of fact).

Now the problem of capacity raised in this hypothetical way would have had to be settled either in the affirmative or in the negative.

In the first event, once the Court had decided that Belgium would have capacity on the basis of a rule of law supposed for the sake of argument to exist, it would have been obliged to examine and solve the problem as to whether that rule really existed or not: that is to say, the very problem to which the Court did in fact give priority and the negative solution of which has been sufficient in itself to dispose of the case without there being any need to tackle the highly complex question of capacity.

It was only in the event of replying in the negative to the question of capacity that the Court could, on that basis, have dismissed the Belgian claim without troubling to see whether the hypothesis on which it had been based corresponded or not to the real state of affairs in international law. But the hypothetical character of the reasoning would have appeared somewhat strange. Faced with a very important problem of international law, one basic to the respective arguments of the Parties, the Court would have evaded the task of solving it because, instead of setting about that problem, it had started from a mere hypothesis, that of the solution of the same problem in the affirmative.

9. It must further be observed that the solution either way of a problem of capacity is dependent on the particular rule in relation to which the problem is raised. If for example the postulate consisted of a hypothetical rule whereby each State had the right to protect its nationals holding shares in a company, irrespective of the quantity of shares possessed by those nationals, there would be no difficulty in the present case in finding that Belgium had capacity, considering that Spain does not dispute the existence in the hands of Belgian nationals of a certain number of shares in Barcelona Traction, whether that number be large or small. The [p 231] question of capacity would, on the other hand, appear very delicate if, in accordance with the Belgian position, one were to posit the existence of a different and, in a sense, more restricted rule, one bestowing a monopoly of the diplomatic protection of the shareholders in a company affected by a certain measure on the State whose nationals possessed the largest proportion of the shares, or of a rule confining diplomatic protection to the various States whose nationals possessed a substantial quantity of shares.

Furthermore, the very usefulness of any preliminary, hypothetical solution of the capacity problem depends on the choice of the assumed rule in relation to which the problem is raised. It need only in this connection be pointed out, for example, that an affirmative solution of the capacity problem would be absolutely useless unless the rule whose existence was assumed for the sake of argument coincided with a rule subsequently shown to exist.

Ill

The problem of the diplomatic protection of shareholders

1. I shall now turn to the problem of whether a State has the right to exercise diplomatic protection over those of its nationals who, as shareholders in a company of a different nationality, have suffered damage on account of measures taken with regard to the company by a foreign State. To solve this problem correctly it is in my opinion necessary to begin with a few very general observations on the rules of international law governing the treatment of foreigners.

These rules are invariably concerned to ensure the protection of certain interests proper to individuals or collective entities. These interests, although contemplated by rules of international law, remain simple interests for the purposes of the international legal order. For it would be contrary to the present structure of the international community and of the international legal order to consider that the latter might either bestow or simply predicate rights upon individuals or upon any collective entities other than those, such as States, which qualify as subjects of inter-national law. It is only within the State legal order that the interests of foreign nationals may acquire protection by means of the attribution to the latter either of rights or of other personal legal situations in their favour (faculties, legal powers or expectations).

However, the fact that this possibility is open to the legal order of the State may in one way or another be taken into account in such rules of international law as are framed with a view to imposing certain obligations upon States in the treatment of foreigners.[p 232]

The rules of international law in this matter, although they all seek to protect interests, as such, of individuals or collective entities, may employ different means to attain their ends and refer in different ways to the systems of municipal law.

2. In the first place there are rules of international law concerning the treatment of foreigners which directly specify the interests they seek to protect, regardless of the prevailing attitude of the municipal legal order in that respect. The interests contemplated by the rules in this category are always interests personal to individuals and never interests of collective entities. Moreover, the rules in question always concern those interests of individual foreign nationals which are of fundamental importance, such as their interest in life or liberty, and never interests of a purely economic nature.

In such cases the international rule refers to the legal order of the State solely in the sense that it is addressed to the State with a view to laying upon it an obligation to observe a given line of conduct in its own internal legal order; which conduct may consist in conferring, within that legal order, certain rights or other personal legal situations on foreign nationals.

The international rules in this category are somewhat analogous to the rules of international law concerning the protection of human rights. For the latter rules also are concerned not with the protection of such rights as may already have been conferred by the internal legal system but with the actual predication, binding upon States, of rights within the municipal order. While it is true that, in this context, it is to human "rights" that reference is made as being the subject of the protection sought by the rule of international law, the term is here employed in the sense of natural rights. In this case also international law envisages the protection of certain individual interests and not of rights already resulting from any positive legal order.
3. Those international rules regarding the treatment of foreigners which belong to the category I have just described may be contrasted, having regard to their structure, with the rules in a second category. These have a much wider area of applicability, because, on the one hand they concern not only foreign individuals but also foreign collective, entities, while they are, on the other hand, for that very reason, designed not to protect a small number of interests of fundamental importance to the human person but rather to protect other, more numerous interests which more often than not possess a purely economic character.

Like the rules in the first category, those in the second are also intended for the protection of interests, to which end they enjoin upon the States to which they are directed a certain line of conduct which they place those States under an obligation to observe in their municipal legal orders. But [p 233] before referring in this way to the internal legal order, the international rules of which I now speak refer to that same legal order for the purpose of performing a preliminary task, that of determining what interests are to be the subject of the protection envisaged. This is so in that the international rule postulates a certain attitude on the part of the State legal order, inasmuch as it has regard solely to interests which, within that legal order, have already received some degree of protection through the attribution of rights or other advantageous personal legal situations (faculties, legal powers or expectations): an attitude on the part of the State legal order which in itself is not obligatory in international law.

It is on the hypothesis that this state of affairs has arisen in the municipal legal order that the international rule lays upon the State the obligation to observe a certain line of conduct with regard to the interests in question : with regard, one might thenceforward say, to the rights whereby the interests in question stand protected in the municipal legal order. I should explain that it is only for the sake of brevity that in this connection I speak of rights, because instead of a right some other advantageous legal situation may be involved: a faculty, legal power or expectation.

The conduct which international law renders incumbent upon a State with regard to the rights which the same State confers on foreign nationals within its own municipal order consists, in the first place, in the judicial protection of those rights. Any State which, having attributed certain rights to foreign nationals, prevents them from gaining access to the courts for the purpose of asserting those rights is guilty, in international law, of a denial of justice. In addition, international law lays upon a State, within certain limits and on certain conditions, the obligation to respect, in the conduct of its administrative or even legislative organs, the rights which the municipal legal order of the same State confers on foreign nationals. This is what is known as respecting the acquired rights of foreigners.

As will be observed, the fact that the rules of international law in question envisage solely such interests of foreigners as already constitute rights in the municipal order is but the necessary consequence of the very content of the obligations imposed by those rules; obligations which, precisely, presuppose rights conferred on foreigners by the legal order of the State in question.
Both the obligation to afford rights judicial protection and the obligation to respect them apply, then, to rights as conferred by the municipal legal order. This provides an indirect way of determining what interests the international rule is intended to protect, given that this rule only protects the interests of foreign individuals or foreign collective entities if those interests already enjoy a certain degree of protection within the municipal legal system. This means that the international rule refers to the municipal legal order in that, to impose upon a State a particular [p 234] obligation, it presupposes a certain freely adopted attitude on the part of the legal order of that State.

4. There is nothing abnormal in this reference of an international rule to the law of a given State. It is wholly untenable to object, as the Belgian Government has done, that in this way the international responsibility of the State is made to depend upon categories of municipal law, thus enabling a State to set up the provisions of its own legal order as a means of evading the international consequences of its acts. In reality, no subordination of international responsibility, as such, to the provisions of municipal law is involved; the point is rather that the very existence of the international obligation depends on a state of affairs created in municipal law, though this is so not by virtue of municipal law but, on the contrary, by virtue of the international rule itself, which to that end refers to the law of the State.

Nor is it possible to invoke against this, as has also been done, the alleged basic principle of the supremacy of international law. Despite what the Belgian Government has asserted to the contrary, this principle has never been affirmed, as such, by the International Court and, so far as the Permanent Court is concerned, it stands in clear contradiction to the idea, by which that Court was always guided, of the separateness of international and municipal law.

Quite another principle underlay the Permanent Court's statement to the effect that municipal laws were simply facts from the standpoint of international law (P.C.I.J., Series A, No. 7, p. 19). This was a reference not to any supposed principle of the supremacy of international law but rather to the exclusive character of the international legal order, as of any non-derivative legal system. But this principle does not by any means rule out the possibility that a rule of international law may refer to municipal law in some way or another: for example, for the very purpose of rendering an obligation laid upon a State subject to a certain point of fact within the province of that State's municipal law. Very clear illustrations of that possibility are to be found in treaties dealing with extradition or with the recognition of foreign judgments.

5. In the present instance, the interests concerned are either interests of collective entities, or more precisely companies, such as Barcelona Traction and the companies holding shares in it, or interests of individuals, such as the individual shareholders in Barcelona Traction. But, either way, we are dealing with interests of a purely economic nature.

It follows that the international rules which may be invoked for the sake of protecting those interests are exclusively rules entering into the second of the two categories I have described. But, as has been seen, these rules postulate that, if those same interests are to be protected, certain rights must already have been bestowed by the municipal legal order. It is on the hypothesis that the municipal order has adopted this attitude, op-[p 235] tional in international law, that the international rule imposes certain obligations on the State.

From the considerations I have set forth it needs must follow that, in terms of general international law at least, a State is free even to deny companies—or certain companies—legal personality. For it is only in respect of individuals that the State is under an obligation in international law to recognize personality, or in other words to confer a set of rights. The rights in question are precisely those which the State, by virtue of the rules of international law entering into the first category, has an obligation to confer upon individuals so as to protect certain of their interests which are fundamental in nature. It is only in the event that certain rights and, consequently, legal personality are conferred on a company within the municipal order that the State is bound by certain international obligations with regard to the judicial protection of those rights and respect for the same.

Where the municipal legal order denies a company legal personality, this signifies that the municipal order in question considers the corporate property as the subject-matter of rights pertaining to the members. In that event it is in relation to these rights, freely conferred on the members by the municipal order, that there is incumbent upon the State an international obligation of protection and respect.

If, on the other hand, the municipal legal order allows the company legal personality, it can but treat the members' rights accordingly. Consistently with the attribution of the corporate property to the company, considered as a juristic person, the members will in this case enjoy no more than limited rights, the subject-matter of which will not be the corporate property. Needless to say, in this case too, the rights accorded to the members, whatever they may be, enjoy the international protection which is appropriate to them.

In other words, there is on the one hand a set of rights conferred by the municipal order on the company and, on the other hand, within the same legal order, another, quite distinct set of rights conferred on the members. Each set of rights is entitled to its own, distinct international protection.

As has been seen, both these protections afforded by the international legal order presuppose a certain attitude on the part of municipal law, namely a certain manner in which it deals with the rights of the company, on the one hand, and those of the members on the other. In the present case, the State legal order to be considered is the Spanish legal system, that is to say the legal order of the State whose international obligations have to be determined.

So far as the members of the company are concerned, to say that the international legal order affords protection only to their rights, such as recognized by the municipal order of the State whose international obligation is in question, is not in any way to deny that the subject of inter-national protection is, in the upshot, in this case as always, interests.[p 236]

The reference to the legal order of the State and to the rights which it confers constitutes merely the means whereby international law establishes what interests it is concerned to protect. International law protects, by laying certain obligations upon a State, solely such interests of the members as already enjoy protection within the municipal legal order of that State on account of the attribution to those members of rights or other personal legal situations.

If that condition is not satisfied or if, in other words, what is at stake is interests which do not, within the municipal order, constitute rights conferred on the members, those interests are not subject to any specific protection in international law. They may however be interests of the members which coincide with interests of the company. In that event, if the interests of the company are legally protected within the municipal order, it is to these interests (constituting rights of the company) that the international obligations apply.

6. The application to the present case of the principles I have just mentioned does not occasion any difficulty.

There is no disagreement between the Parties with regard to the attitude of the Spanish municipal order so far as concerns the way in which it deals with the legal situation of a limited-liability company, on the one hand, and the rights of its shareholders on the other. No-one denies that Barcelona Traction, like any such company, enjoyed legal personality in the legal order of Spain and that it had consequently to be regarded as the owner of the rights over the corporate property. Accordingly, the shareholders in Barcelona Traction were not recognized to possess any rights over the corporate property; they enjoyed only those rights proper to shareholders in a limited-liability company, such as the right to dividend and certain rights relating to the conduct of the company's business.

However, Belgium does not complain of any damage that might have been suffered by Barcelona Traction shareholders in respect of their own rights as shareholders on account of the measures taken by the Spanish authorities. On the contrary, Belgium complains of the fact that those measures, although (or rather, precisely because) they were taken vis-a-vis the company, were detrimental to the interests of the shareholders. But these were simple interests, not interests constituting rights in the Spanish legal order.

It follows, in accordance with the principles I have stated, that, so far as such shareholders' interests are concerned, Spain was under no obligation in international law; which rules out any international responsibility on the part of Spain for such damage as the measures taken by its authorities may have caused to the interests of foreign shareholders. If simple interests are (as they must be) disregarded, and only rights considered, such as they arise out of the Spanish legal order, it is only to the rights of the company that the measures of which complaint is made could have caused harm. But damage caused in respect of the rights of Barcelona Traction, a Canadian company, could, if internationally un-[p 237] lawful, have constituted an international wrong only vis-a-vis Canada, not vis-à-vis Belgium or any other State. In this connection it can properly be said that it is the Canadian State alone which, on account of the nationality of the injured private party, has capacity to claim reparation.

7. Mention must now be made of another way in which the Parties put the question of whether the measures taken by the Spanish authorities were of an unlawful nature vis-a-vis Belgium. In place of reference to the distinction between rights and simple interests, a distinction was drawn between direct damage and indirect damage, and it was asked whether the measures complained of, although taken with respect to Barcelona Traction and, as such, causing it direct damage, constituted an internationally unlawful act vis-a-vis Belgium because they also, albeit indirectly, caused damage to the Belgian shareholders in Barcelona Traction.
On the basis of what I have said with regard to the different attitudes evinced by the international rules on the treatment of foreigners with respect to simple interests on the one hand and rights on the other, I find that the distinction between direct damage and indirect damage serves no useful purpose.

For, to consider that very limited category of international rules on the treatment of foreigners which is concerned to protect certain interests independently of whether or not they constitute rights in the municipal legal order, an injury to such an interest is, of itself, an internationally unlawful act. No importance could be attached in this connection to the relationship in which such an injury might stand towards an injury to another interest, more especially in the sense of its having to be regarded as the latter's indirect consequence.

Similarly, to consider the other category of international rules, concerned to protect solely rights recognized by the municipal legal order, what matters in a given instance is of course to establish whether or not there was an injury in infringement of such a right. If this is not the case or if, that is to say, there was only an injury to a simple interest, such injury will not constitute an international wrong even if it stands in some relationship to an injury in respect of a right which might, as such, constitute an unlawful act vis-a-vis the national State of the injured party.

It would appear, moreover, that the distinction between direct damage and indirect damage is, in substance, merely a different way of stating the distinction between injury in respect of a right and injury to a simple interest. For, supposing a measure to have been taken with respect to a private party who, as a result of that measure, has directly suffered damage, if it be enquired, in a concrete case, who is the private party with respect to whom the measure can be regarded as having been taken, the only way of answering this question is to consider the legal effects of the measure. A measure can only be regarded as having been taken with respect to a particular party if it produces legal effects for that party; if, [p 238] in other words, it involves the rights of that party. All that other parties could suffer from such a measure would be consequences affecting their simple interests. To term such consequences indirect is in fact merely an imprecise way of describing the injury of a particular party's simple interest, an injury standing in a certain relationship to the injury suffered by another party in respect of his right.

8. From this I conclude that an international obligation on the part of Spain with respect to the treatment of Barcelona Traction and, in consequence, international responsibility on the part of Spain for any breach of that obligation, could only be held to exist vis-à-vis Canada, the company's national State. Neither an obligation nor responsibility on the part of Spain could be held to exist vis-à-vis Belgium, or vis-à-vis any other State of which Barcelona Traction shareholders might be nationals.

The absence of any responsibility on the part of Spain vis-à-vis Belgium in respect of the measures taken by the Spanish authorities with regard to Barcelona Traction is simply a consequence of the absence of any obligation owed in this respect by Spain to Belgium; this, in its turn, results from the fact that there is no rule of international law from which such an obligation might be derived.

In sum, therefore, Belgium has no possibility of exercising diplomatic protection with respect to the Belgian shareholders in Barcelona Traction, since, as has already been said, a State which exercises diplomatic protection with respect to one of its nationals is merely demanding for such national the treatment required by the international rules governing the matter or else claiming reparation for the violation of those rules.

9. No importance can be attached in this connection to the facts that the Belgian shareholders in Barcelona Traction might have benefited indirectly, so far as their own interests were concerned, from the exercise by Canada of diplomatic protection of the company and that such protection was not pursued.

We have seen that the interests of shareholders, as simple interests not constituting rights within the municipal legal order, enjoy no protection under the international rules governing the treatment of foreigners. This obviously does not rule out the possibility that those interests might benefit indirectly from the protection which those same rules afford the company's interests in so far as these constitute rights under the municipal legal order. It is therefore possible that the exercise of diplomatic protection of the company by its national State may eventually lead, through the retrieval of the interests of the company, to the indirect retrieval of the shareholders' interests too.

But this in no way influences the attitude evinced toward the interests of shareholders by the international rules governing the treatment of foreigners. The mere possibility of an indirect protection of shareholders' interests, in the sense indicated above, does not warrant any inference
[p 239] that whenever such indirect protection is lacking it must be replaced by direct protection. There could be no question of such direct protection unless a State owed an obligation and happened to have incurred responsibility toward the national State of the shareholders. And I cannot see where any basis for such an obligation or such responsibility is to be found.

Actually the very idea of the diplomatic protection of shareholders by their national State, it being conceived as a second line of protection that may be brought into play if protection of the company by its own national State should be lacking, is strictly bound up with a way of thinking that misconceives the very basis of diplomatic protection in general, regarding it not as a State's mere exercise of a right bestowed upon it by the rules of international law concerning the treatment of foreigners, but rather as a procedure entirely independent of the existence of a right.
Only by taking such a standpoint could it be possible, where the treatment afforded a company is concerned, to envisage diplomatic protection of the shareholders by their national State as a second line of protection, that is to say as a protection subordinated to the condition that diplomatic protection is not exercised, or not pursued, by the national State of the company. This view, on the contrary, would be utterly inconceivable on the correct premise that an act of diplomatic protection is simply the exercise of an international right, and is consequently con-ditional on the existence of such a right.

10. Neither is it possible, with a view to demonstrating the admissibility of a second-line diplomatic protection of shareholders in the event that diplomatic protection of the company is lacking, to rely on a supposed analogy or rather parallel between that alleged second-line diplo-matic protection and such possibility as may be afforded shareholders in municipal law of taking action against the organs of the company, or in their stead, should they remain inactive.

It is the very idea behind such reasoning which, in my opinion, is unacceptable: the idea that international law must necessarily offer some kind of protection to shareholders' interests. There is nothing necessary about such protection; it exists only within the limits and on the conditions which are fixed by international law itself. Furthermore the requirements which municipal law is concerned to satisfy are not necessarily requirements that ought also to be the concern of international law.

Needless to say, if the municipal legal order does, in the event of the inactivity of the organs of a company, confer certain rights on the shareholders, those rights, like any other rights peculiar to shareholders, will as such enjoy the protection which international law affords in general to rights conferred on individuals by a municipal legal order.[p 240]

11. The lack, in a given case, of any exercise of diplomatic protection in respect of the company might result from the actual impossibility, in that case, of exercising such protection.

As an example of a case where it would be impossible for the national State of the company to exercise diplomatic protection in its respect, the hypothesis has been adduced of the company's being dissolved, or being in a state of legal or simply material incapacity to act.

With regard to the extreme case, that of dissolution, this must naturally be taken to mean a dissolution which took place after the measure complained of, whether as a result or independently of that measure. For if the company were already dissolved at the time when the measure complained of was taken, it would obviously be impossible to speak of a measure taken with regard to the company; one would on the contrary have to speak of a measure taken directly with regard to the members of the company, which would ipso facto authorize the national States of the members to exercise diplomatic protection of them.

Furthermore the logic of the argument implies that the dissolution in question must be an extinction which is effective from the standpoint of the legal order of the company's national State. Such an extinction is not necessarily the automatic consequence of an extinction occurring in the legal order of the State that had taken the measure complained of.

Now it is quite obvious that if a company is dissolved from the standpoint of the legal order of its national State, there is no possibility of its applying to that State for diplomatic protection. However, the ability of persons to request diplomatic protection of their national State is one thing, and entirely depends on the internal legal system of the State in question; but the exercise of diplomatic protection on the international plane is quite another matter. Diplomatic protection, as the exercise of a right arising out of the international legal order, belongs exclusively to the State, which has entire discretion in its respect. A State is free not to exercise diplomatic protection even if the national concerned requests it. Conversely, a State may exercise diplomatic protection even if there is no request from its national. It follows that the dissolution of a company does not prevent its national State from exercising diplomatic protection in its respect and that, consequently, the hypothesis envisaged cannot arise at all.

12. On the other hand it must be recognized that diplomatic protection of a company really may be impossible when there is no foreign State to exercise it. This would be so in the case of a company which had the nationality of the very State whose international obligation was in ques-tion.

Nevertheless, to say that in such a case the national States of the shareholders are entitled to protect the latter's interests because there is no possibility of their benefiting indirectly from any protection afforded the company would be to make havoc with the system of international [p 241] rules regarding the treatment of foreigners. It would, furthermore, be a wholly illogical and arbitrary deduction.

For to envisage the possibility of indirect protection in certain eventualities is tantamount to recognizing the absence, so far as shareholders are concerned, of any direct protection on the part of international law— to recognizing, in other words, that international law does not consider the interests of shareholders, as simple interests, worthy of its protection and that it consequently refrains from imposing upon a State, in this connection, any obligations toward shareholders' national States. This negative attitude on the part of international law cannot be reversed on the ground that the interests of shareholders might, in other circumstances, benefit from a purely indirect protection. Such artificial and illogical reasoning would lead to the creation, for the interests of shareholders, of a direct protection such as their national States might take up: the very protection which is refused by international law.

13. A fortiori, the diplomatic protection of shareholders by their national States must be ruled out where, as in the present case, the diplomatic protection of the company by its national State is possible but, for some reason or other, is not exercised or not pursued.

To my general remarks on the notion of a second line of diplomatic protection for shareholders, and to those I have just made regarding the hypothesis of the impossibility of the company's receiving diplomatic protection, remarks which remain no less valid for the hypothesis now under consideration, I would add certain other observations of specific application to the latter.
According to this latter hypothesis, the possibility of a State's exercising diplomatic protection of those shareholders in a company who are its nationals would not be absolute, but contingent on a certain attitude which a third State, i.e., the national State of the company, is free to adopt or not: an attitude consisting either in refraining from exercising diplomatic protection of the company or in not pursuing diplomatic protection once exercised. It would not be easy to establish at what moment the requisite condition might be regarded as fulfilled. In any event, there would be a point in time before which the diplomatic protection of the shareholders would not be admitted; as from that moment, on the other hand, the possibility of exercising such protection would exist.

But any diplomatic protection presupposes that the State approached by the protector owes an obligation or, it may be, has incurred a debt of responsibility, because it is precisely such obligation or responsibility that diplomatic protection relies on and asserts. Consequently, to say that the national State of the shareholders cannot exercise diplomatic protection for so long as it is not possible to affirm that the national State of the company is refraining from exercising diplomatic protection of the [p 242] latter amounts to excluding the existence, until then, of any obligation or responsibility vis-à-vis the national State of the shareholders. It is only later that such an obligation and, it may be, such responsibility (indeed the very unlawfulness of the measure taken vis-à-vis the company) would arise, necessarily with retroactive effect, owing to the conduct of a third State, the national State of the company, in abstaining—for some motive the appraisal of which would be a matter for its own discretion—from the exercise of diplomatic protection in respect of the company.

Simply to propound such a theory is to expose its absurdity. Generally speaking, it is hard to see how a State's non-exercise of its right could have any influence on the possibility of exercising, let alone the very existence of, another State's right. I have already pointed out that the international rules governing the treatment of foreigners take concrete shape in bilateral relationships. Now each of these relationships, between clearly circumscribed subjects, is absolutely independent of any other relationship which, though deriving from those same rules, might exist between other, or partly other, subjects. Hence no such relationship could, through its own existence or merely through its activation, exert any influence on the very existence of another. Consequently, if the view be taken that a State is not, vis-à-vis the national State of shareholders in a limited company, under any obligation whatever concerning the treatment of that company, it is impossible to see how such an obligation could arise retroactively out of the fact that the national State of the company does not, for whatever reason, exercise its own right.

(Signed) Gaetano Morelli

[p 243]

Separate Opinion of Judge Padilla Nervo

In its Judgment of 24 July 1964 the Court joined to the merits the third preliminary objection raised by the Spanish Government to the Application of Belgium.

The Court then stated that:

"the third objection involves a number of closely interwoven strands of mixed law, fact and status, to a degree such that the Court could not pronounce upon it at this stage in full confidence that it was in possession of all the elements that might have a bearing on its decision" (I.C.J. Reports 1964, p. 46).

In the present proceedings the Parties have dealt fully with questions of merits, in the course of their written and oral pleadings.

The Spanish Government contests the Belgian Government's capacity to act, its jus standi, its right to intervene on behalf of Belgian nationals (natural or artificial persons) whom the Belgian Government claims to have been injured by a breach of international law, for which liability is attributed to the Spanish authorities.

The Belgian Government asserts that it is exercising protection exclusively and directly on behalf of persons of Belgian nationality and contends that the legal question which arises when examining its jus standi in the present case is that of the diplomatic judicial protection, "not of foreign trading companies, but of natural and artificial persons" who, having invested their funds in the said companies, suffered losses as shareholders in these companies, as a result of illegal actions committed against the companies.

The respondent Government contends that—

"international law does not recognize, in respect of injury caused by a State to a foreign company, any diplomatic protection of shareholders exercised by a State other than the national State of the company".

The applicant Government asserts its right to intervene on behalf of Belgian nationals, shareholders in the company, and contends that such right is conferred on it in respect of its nationals by the rules of international law concerning the treatment of foreigners.

The real issue is whether international law recognizes for the shareholders in a company "a separate and independent right or interest in respect of damage done to the company by a foreign government".[p 244]

The Belgian Government, in its first submission, asked the Court to adjudge and declare that the Spanish State is under an obligation towards Belgium to make reparation for the damage caused to "Belgian nationals, individual or legal persons, being shareholders of Barcelona Traction".
In the second submission, it asks that the Court will—

"adjudge and declare that this reparation should, as far as possible, annul all the consequences which these acts, contrary to international law, have had for the said nationals, and that the Spanish State is therefore under an obligation to secure, if possible, the annulment by administrative means of adjudication in bankruptcy and of the judicial and other acts resulting therefrom, obtaining for the said injured Belgian nationals, all the legal effects which should result from this annulment.. .". (Application filed 19 June 1962, second submission.)

What is then the real meaning and scope of the present Belgian claim? The new Application presents as the object of Belgium's protection, not the Canadian commercial company of Barcelona Traction but Belgian nationals who are said to be shareholders of Barcelona Traction.

The Spanish Government disputes the Belgian Government's capacity to act—

"in view of the fact that the Barcelona Traction Company does not possess Belgian nationality and that, in the case in point, it is not possible to allow diplomatic action or international judicial proceedings on behalf of the alleged Belgian shareholders of the company on account of the damage which the company asserts it has suffered". (P.O., submissions on third objection.)

I do concur in the view that, in the present case, diplomatic action or international judicial proceedings on behalf of the shareholders in the company on account of damage which the company alleges it has suffered, could not be allowed.

It has not been proved that there exists a special customary rule which, by derogation of the basic principles of international law with regard to the status of aliens, would have helped the Belgian contention.

Nor has it been demonstrated that there exists an alleged general rule establishing, in all circumstances, the lawfulness of the protection of shareholders following damage caused to the company.

I believe it is right to say that international law does not recognize the right of diplomatic protection of shareholders as such if their rights stricto sensu have not been violated.

Nor does any rule of international law give support to the admissibility of a double diplomatic protection, one for the corporation and another for the shareholders in that corporation.[p 245]

To say that the corporation and the shareholders have parallel interests does not make admissible a concurrent diplomatic intervention.

No State could be safe from the pressure and danger of a plurality of diplomatic interventions by States protecting their nationals, shareholders in a given corporation, if the right of diplomatic protection of shareholders were recognized.
For the time being, the principle which recognizes the capacity of a State to intervene, by way of diplomatic protection of a company of its own nationality, has proved to be a fair and well-balanced safeguard or insurance, both for the investor and for the State, where foreign companies operate.

This regime, whose consequences are well known, has no surprises and establishes a legal order which, so far, has proved to be generally adequate and satisfactory.

There seems to be no fundamental reason or essential need to depart from it. If a door is open to the intervention, by way of diplomatic protection of shareholders, of a plurality of States—as many as could claim to have shareholders of their nationality—a chaotic situation of the gravest international consequences would, in time, develop.

Private investments, needed for economic development, will be encouraged if the States receiving them are convinced that the national State of the investor will not use the so-called right of diplomatic protection as a pretext for political or economic pressure, dangerous to the sovereignty and independence of weaker or less developed States, who cherish more their national dignity than the speed of their development. In the relation between the investor and the State where the investment takes place, a just balance should be aimed at, for it is good for the international community that capital which goes abroad in search of gain should not be a potential threat to the essential values and dignity of States.

The lessons of history and past experience are, after all, the source of the law and of judicial precedents and must have place and weight in the conscience of the judge.

Mervyn Jones, in his work Claims on behalf of nationals who are shareholders in foreign companies, makes the following historic remarks by way of introduction:

"The era of foreign investment on a large scale reached its height during the fifty years or so preceding the First World War, when British and American capital poured into all parts of the world, financing railway and harbour construction, exploitation of mineral deposits and innumerable other projects in undeveloped countries. At the same time the institution of the joint-stock company with limited liability (which was of recent growth) made it possible for [p 246]small capitalists to invest their money in remote countries for a better yield than was obtainable at home. There is little doubt that, at first, those countries welcomed foreign capital, which was badly needed, and were not strict as to conditions of investment. It was but rarely, during these early days, that any necessity arose for diplomatic intervention by foreign powers on behalf of their nationals. With the turn of the nineteenth century, however, nationalist movements became directed against 'economic exploitation' by the foreigner. These movements emphasized economic, as well as political, sovereignty, and, as time went on, began to interfere more and more with the projects of foreign capital. The decay of liberal capitalism and laisser-faire, accompanied by the spread of socialist doctrine throughout the world, caused governments everywhere to assume greater control of the economic assets and resources of the nation: in certain countries foreign capital came to be regarded as an emblem of subordination, and not merely as a means of developing the country. Much, of course, had happened to justify such an attitude; the extent to which foreign capital held a grip on the economic life of many countries was considerable. Against this background the revolutions of 1911-20 in Mexico transformed the political and social outlook of the nation, as did the later revolutions in central Europe after the First World War, and those in eastern Europe after the Second. These revolutions were accompanied by measures of expropriation, which inevitably raised the question of the position under international law of individuals who had invested in companies carrying on business in the countries concerned." (British Year Book of International Law, 1949, p. 225.)

The history of the responsibility of States in respect to the treatment of foreign nationals is the history of abuses, illegal interference in the domestic jurisdiction of weaker States, unjust claims, threats and even military aggression under the flag of exercising rights of protection, and the imposing of sanctions in order to oblige a government to make the reparations demanded.

Special agreements to establish arbitral tribunals were on many occasions concluded under pressure, by political, economic or military threats.

The protecting States, in many instances, are more concerned with obtaining financial settlements than with preserving principles. Against the pressure of diplomatic protection, weaker States could do no more than to preserve and defend a principle of international law, while giving way under the guise of accepting friendly settlements, either giving the compensation demanded or by establishing claims commissions which [p 247] had as a point of departure the acceptance of responsibility for acts or omissions, where the government was, neither in fact nor in law, really responsible.

In the written and in the oral pleadings the Applicant has made reference, in support of his thesis, to arbitral decisions of claims commissions—among others those between Mexico and the United States, 1923.

"These decisions do not necessarily give expression to rules of customary international law, as. . . the Commissions were authorized to decide these claims 'in accordance with principles of international law, justice and equity' and, therefore, may have been influenced by other than strictly legal considerations." (Schwarzenberger, International Law, Vol. I, p. 201.)

In the Special Claims Commission: Mexico-United States, established by the convention of 10 September 1923, Article II states:

". . . each member of the Commission . . .shall make and subscribe a solemn declaration stating that he will. .. examine and decide, according to the best of his judgment and in accordance with the principles of justice and equity, all claims presented for decision . . .". (Italics are mine.)

The second paragraph of the same Article II reads as follows:

"The Mexican Government desires that the claims shall be so decided because Mexico wishes that her responsibility shall not be fixed according to the generally accepted rules and principles of international law, but ex gratia feels morally bound to make full indemnification and agrees, therefore. . ." {U.N.R.I.A.A., Vol. IV, p. 780.)

Article VI of the same convention makes another exception to the accepted general rules, when it states:

". . . the Mexican Government agrees that the Commission shall not disallow or reject any claim by the application of the general principle of international law that the legal remedies must be exhausted as a condition precedent to the validity or allowance of any claim". (Ibid., p. 781.)

Some of the decisions of claims commissions invoked during the pleadings are not, in my view, relevant precedents in respect to this case.

Now the evolution of international law has other horizons and its progressive development is more promising, as Rosenne wrote:

"There is prevalent in the world today a widespread questioning of the contemporary international law. This feeling is based on the [p 248] view that for the greater part international law is the product of European imperialism and colonialism and does not take sufficient account of the completely changed pattern of international relations which now exists. . . .

Careful scrutiny of the record of the Court may lead to the conclusion that it has been remarkably perceptive of the changing currents of internationalist thought. In this respect it has performed a major service to the international community as a whole, because the need to bring international law into line with present-day requirements and conditions is real and urgent." (Rosenne, The Law and Practice of the International Court, 1965, Vol. I, pp. 17-18.)

The law, in all its aspects, the jurisprudence and the practice of States change, as the world and the everyday requirements of international life change, but those responsible for its progressive evolution should take care that their decisions do, in the long run, contribute to the maintenance of peace and security and to the betterment of the majority of mankind.

In considering the needs and the good of the international community in our changing world, one must realize that there are more important aspects than those concerned with economic interests and profit making; other legitimate interests of a political and moral nature are at stake and should be considered in judging the behaviour and operation of the complex international scope of modern commercial enterprises.

It is not the shareholders in those huge corporations who are in need of diplomatic protection; it is rather the poorer or weaker States, where the investments take place, who need to be protected against encroachment by powerful financial groups, or against unwarranted diplomatic pressure from governments who appear to be always ready to back at any rate their national shareholders, even when they are legally obliged to share the risk of their corporation and follow its fate, or even in case of shareholders who are not or have never been under the limited jurisdiction of the State of residence accused of having violated in respect of them certain fundamental rights concerning the treatment of foreigners. It can be said that, by the mere fact of the existence of certain rules concerning the treatment of foreigners, these have certain fundamental rights that the State of residence cannot violate without incurring international responsibility; but this is not the case of foreign shareholders as such, who may be scattered all over the world and have never been or need not be residents of the respondent State or under its jurisdiction.

In the case of the Rosa Gelbtrunk claim between Salvador and the United States, the President of the arbitration commission expressed a [p 249] view which may summarize the position of foreigners in a country where they are resident. This view was expressed as follows:

"A citizen or subject of one nation who, in the pursuit of commercial enterprise, carries on trade within the territory and under the protection of the sovereignty of a nation other than his own, is to be considered as having cast in his lot with the subjects or citizens of the State in which he resides and carried on business." (Italics added.)

"In this case", Schwarzenberger remarks, "the rule was applied to the loss of foreign property in the course of a civil war. The decision touches, however, one aspect of a much wider problem: the existence of international minimum standards, by which, regarding foreigners, territorial jurisdiction is limited."

As the Permanent Court of International Justice said in the Lotus case in 1927 (P.C.I.J., Series A, No. 10, p. 19)—

"all that can be required of a State is that it should not overstep the limits which international law places upon its jurisdiction; within these limits, its title to exercise jurisdiction rests in its sovereignty".

The rules concerning the treatment of foreigners are a limitation of a State's jurisdiction ratione personae. Schwarzenberger says in this respect:

"States generally exercise exclusive jurisdiction over their nationals within their territory, concurrent jurisdiction over their nationals abroad, and limited jurisdiction over, for example, individuals and groups within their territory who are protected by international customary or treaty law." (Italics added.)

"While, in principle, territorial sovereignty applies to nationals and foreigners alike, the home State retains a concurrent jurisdiction over its nationals abroad. .. . Furthermore, the unrestricted exercise of territorial jurisdiction over foreigners on the part of the State of residence may be limited by rules of international customary law or treaties. If such exercise of territorial jurisdiction happens to come into conflict with international law, the question turns into an issue between the subjects of international law concerned. The home State is entitled to demand respect for international limitations of territorial jurisdiction, and the State of residence may have to answer for its interference 'with the rights which each State may claim for its national in foreign territory'. As the World Court laid down in the case of the Mavrommatis Palestine Concessions (1924), 'it is an elementary principle of international law that a State is entitled to protect its subjects, when injured by acts contrary to [p 250] international law committed by another State, from whom they have been unable to obtain satisfaction through the ordinary channels'." (Schwarzenberger, International Law, Vol. I, pp. 189-190.)

Much has been said about the justification for not leaving the shareholders in those enterprises without protection.

Perhaps modern international business practice has a tendency to be soft and partial towards the powerful and the rich, but no rule of law could be built on such flimsy bases.

Investors who go abroad in search of profits take a risk and go there for better or for worse, not only for better. They should respect the institutions and abide by the national laws of the country where they chose to go.

***

The main preliminary question on the merits in the present proceedings is that of the international diplomatic and legal protection of natural and artificial persons who, having invested funds in foreign trading companies, have suffered losses in their capacity as shareholders of those companies, as a result of acts contrary to international law of which a State has been guilty towards those companies.

This problem is of capital importance in the modern world, and preoccupies the governments, economists and businessmen of numerous countries which are anxious to ensure the security of investments made abroad. Jurists, for their part, are actively concerned with it and are constantly examining it.

A necessary foundation of a valid international claim is that the national of the plaintiff State would have been directly injured in his rights by an act contrary to international law done by the State to whom the claim is addressed.

It is indispensable that the protected person be himself the possessor of a right which would entitle him to formulate a claim for damages in the internal judicial order.

If a debtor of a foreign creditor is affected in his rights by an act which violates international law, the national State of the foreign creditor is not authorized, by that fact, to the diplomatic protection of such creditor. This question has been submitted and decided in various instances by arbitral tribunals in the sense that "creditors do not have legal bases to plead for damages inflicted on their debtors".

In U.S.A. (W. C. Greenstreet, Receiver) v. United Mexican States, General Claims Commission, it was held that the nationality of the creditors of an insolvent corporation need not be shown, "the nationality [p 251] of the creditors being just as immaterial as is that of the stockholders of an insolvent company".

The case of Société civile des porteurs d'obligations du Crédit foncier mexicain, before the French-Mexican Commission involved a claim on behalf of the shareholders of a bank. The bank held mortgages on rural property and damages were claimed because the security had been dam-aged by depredations of revolutionary forces. The Commission held that only the owners of the property might claim. (Feller, The Mexican Claims Commission, p. 122.) Arbitral jurisprudence confirms the thesis that international law does not authorize the protection of affected economic interests, but only of rights really violated.

The following arguments were made by counsel for the applicant State:

"The problem of the diplomatic protection of the shareholders practically only arises when the shareholders are of a different nationality from that of the company. Indeed, an infringement of the interests and rights of the company and of its shareholders might then in this case affect the rights possessed by two or even several States, and might consequently give rise to two or more rights to claim, in so far as the rules relating to the treatment of foreigners have not been respected.. ..
Indeed, if one disregards the fact that the shareholders are foreigners, if one admits that these foreign shareholders have no rights or interests distinct and independent from those of the company, that they are totally inseparable from the latter vis-a-vis the outside world, that they are entirely covered by the veil of the juristic personality, one must then conclude that, in this event too, the case is entirely outside the scope of international law."

That line of argument leads up to saying that therefore:

"The national State of the shareholders cannot exercise any right conferred on it in favour of its nationals by the rules of international law concerning the treatment of foreigners." (Hearing of 9 May 1969.)

I disagree with the above statements; of course, any State can exercise such rights in favour of its nationals abroad, but not because they happen to be in possession of bearer shares, but because and only if they have been injured in their own specific rights by the State of residence which has a duty to respect the rights of foreigners under its jurisdiction, according to the relevant rules of international law concerning the treatment of foreigners. [p 252]

It is claimed by the Belgian side that the Spanish Government admitted "that there were certain cases in which diplomatic protection of the shareholders in the event of damage done to the company was allowed under international law", and quotes the Spanish admission as saying that such protection is allowed "solely in cases where the company possesses the nationality of the State against which the claim is made, so that diplomatic protection of the company as such is excluded".

The Spanish Government, in its Rejoinder, contends that in all the cases in which the protection of the shareholders was admitted, the complaints raised concerned damage done exclusively to the shareholders' "own rights", that is to say not affecting the company itself.
In the present case, for Belgium to be able to intervene, it would thus be necessary that there had been a violation of the rights of the Belgian shareholders.

Such a violation is excluded, if what is complained of is steps which were ostensibly directed against the company. It was admitted by the Applicant, during the oral proceedings, that the Belgian claim did not include damage resulting from an infringement of any of the recognized direct rights of a shareholder as such.

International law goes no further than imposing on States certain obligations towards other States, including the obligation to afford aliens certain treatment, for example, to give them access to their courts and to enable them to have their lawsuits impartially judged within reasonable time limits and without discrimination.

A careful distinction should be drawn, contends the Spanish Government, between two hypotheses which are mutually exclusive. Either there is a wrongful injury to the rights of the shareholders, in which case diplomatic protection of the latter is permissible and indeed is the only protection permissible, or else there is a wrongful injury to the rights of the company and only the company may be the subject of such protection. The contention is that it is utterly impossible to escape from this option.

To this contention the Belgian answer was:

"The Spanish Government really wishes to demonstrate by this argument that in cases of multiple claims, no one may bring action by relying on the right of another party. But is it necessary to take this extraordinary detour to reach a conclusion which nobody contests? Belgium is not concerned with the injury suffered by Barcelona Traction itself—that would be Canada's business; it is concerned with the damage suffered by its own nationals who held shares in the company."

***

If the owner of the right or rights which have suffered injury is the company and not the shareholder, it is beyond all doubt that the case is[p 253] one which falls entirely outside the sphere in which the diplomatic protection of shareholders by their national State can be admissible, or even conceivable. The Respondent in its Rejoinder states:

"The international society of today is certainly not asking for a further reinforcement of the protection of certain capitalist groups already too powerful and only too capable of securing support for themselves, a reinforcement which would take the shape of the possibility of increased pressure on the weaker nations." (Rejoinder, Part III, Chapter II, Section II, para. 43.)

It adds:

"Contemporary international law tends to concern itself more with the need to protect countries with a weak economy than to favour, as the Belgian Government would wish, 'the financial needs of great modern undertakings'." (Ibid.)

"Very many States insist, for very good reasons, that foreign capital must be invested in national companies. This is the case, in particular, in many countries in the course of development, but a certain number of highly industrialized countries impose similar con-ditions either de facto or de jure. What is more, foreign investors themselves frequently and spontaneously chose this legal formula which may in their view offer certain advantages."


***

There is a case to which the Belgian side ascribe importance. This is the case of the American national, McPherson, who laid a claim before the U.S.-Mexican Commission in 1923 against the Mexican Government, which had refused to honour the postal money-orders which McPherson had bought through an agent from illegal authorities and which the latter had issued in the name of the agent. The decision in that case was delivered on the basis of a convention which, in several essential aspects and by its very spirit, manifestly derogated from general international law.

Which are the applicable principles of international law and what are the consequences of their application to the present case?

What follows expresses my views on the matter:

International law lays upon every State in whose territory foreign natural or juristic persons reside, remain, operate or even simply possess property, an obligation towards the State of which such persons are nationals: the obligation to afford them certain treatment. That treatment, which is defined most usually and in greater detail by the rules of treaty law, nevertheless has its minimum requirements laid down by cus-[p 254] tomary international law. Those minimum requirements consist essentially in the respect, within given limits and conditions, of certain rights of a personal or corporate nature, and in the granting, at the same time, of the possibility of making use, if necessary, of appropriate judicial or administrative remedies.

Correlative with that obligation, the State of which such persons are nationals has, at the international level, a right to require the State which is bound by the obligation to act in conformity therewith, and it has a right, if occasion arises, to submit a claim in proper form and through accepted channels, should that obligation fail to be discharged. That is precisely what is known as the exercising of diplomatic protection. It also includes protection by means of recourse to international jurisdiction.


The rights attributed to a State by international legal rules concerning the treatment of foreigners, on the one hand, and, on the other hand, the rights granted to individuals by the rules of municipal law, are situated at different legal levels.

The existence of the individual's right at the municipal level is the condition whereby a State is authorized, at the international level, to require that that right be not infringed. All that a State can require of another State for its own nationals is the respect of those rights which are accorded to them under the national legal system, as they are defined by that legal system.

When the foreigner in question is a juristic person, the case is no different, theoretically, from a case in which a natural person is involved. All legal systems agree in considering joint-stock companies (sociétés de capitaux) as independent legal entities. The latter represent autonomous beings to which rights and obligations may be ascribed; they are, in short, of themselves subjects in law.

International law, both customary and treaty law, recognizes precisely in respect of the treatment of foreigners, the existence of companies as entities which are separate from their members.

For juridical persons as for natural persons, "nationality" expresses a link of legally belonging to a specific State. The requirement for juridical persons as for natural persons, is that the existence of the link of legally belonging to a specific country must, if it is to serve as a plea at the inter-national level, be accompanied by that of a "real" link with the same country. In general international law, a State is not entitled to require a specific treatment for a person who has not its nationality and it can thus not complain that such treatment has not been accorded to that person.


A State may present a claim on behalf of its national if it becomes apparent that there has been a breach of a right belonging to the latter; but no State may present a claim on behalf of a person of its nationality [p 255] on the ground that there was failure to respect a right belonging to another person, possessing another nationality.

The national State of the company can present a claim for the breach of a right of the company as such; the national State of the shareholder can present a claim for the breach of a right "stricto sensu" of the shareholder as such. The fact that there are relationships and links between different persons does not imply that they merge into a single person.

A claim by a State under the head of diplomatic protection of a national who is a shareholder of a commercial company is only admissible subject to a two-fold condition: the applicant State must be able to claim violation of a right of the shareholder as such; and it must be established that the State which was the author of the alleged violation was under an international obligation to the applicant State to ensure respect for the right in question. The receivability of a claim under that head is ruled out if it appears, firstly, that the right which is said to have been violated is a right of the company and not of the shareholder, and, secondly, that the international obligation to ensure respect for the said right was incumbent on the respondent State in respect of the national State of the company and not in respect of the national State of the shareholder.
It follows from the principles of international law that in order for a State to be able to submit a claim in behalf of a national, it must be able to claim that its national has suffered an infringement of his own rights by a foreign State, and that rights have been infringed for which the latter State was bound to ensure respect by virtue of an international obligation binding on it in respect of the claimant State.

There is nothing to prevent a State's submitting a claim in behalf of a national which relates to that national's position in his capacity as a shareholder in a company; but, in such a case, it must prove that the person in question has been injured in the rights conferred upon him himself precisely on account of his capacity of being a shareholder: that he has been injured in rights which are inherent in that capacity.

It is by no means sufficient that the claimant State rely upon an injury to the rights of the company as such, for no State may submit a claim in behalf of a person on the ground that there has been a failure to respect a right which belongs to another person, whether such latter person be a natural or a juristic person.

International law only authorizes a State to intervene by way of diplomatic protection if such State relies upon a complaint which is its own complaint: that is to say, if it complains of the infringement of a right of one of its nationals, committed in violation of an international obligation which binds to it the State which has committed the infringement.

If there has not been in the case at issue any infringement of any right of a shareholder, that fact cannot be altered simply by referring to interests as well as rights.[p 256]

The situation of the shareholder as defined by the various legal systems, covers the rights which are defined in the decision on the Brincart case. No system of positive law confers on a shareholder in a limited company other subjective legal situations and, in particular, no system attributes to him any legal interest in the property of the company, as has been expressly acknowledged by both sides.

One cannot accept the transformation of a shareholder's hope for the prosperity of the company into a right or a legal interest, nor any possibility for a shareholder to claim that an infringement of the rights of the company constitutes an infringement of his own legal situation.

The rules of international law concerning the responsibility of the State regarding the treatment of foreigners would not make it possible to impute to a State an internationally unlawful act even in a case where the said State had only harmed an interest which was not protected by the municipal legal system of that State.

There has not been established, in respect of the alleged Belgian shareholders of Barcelona Traction, the existence of any juridical situation whatsoever attaching to their status as shareholders which suffered any internationally unlawful attack on the part of the Spanish administrative or judicial authorities.

***
Barcelona Traction is said to have been a "practically defunct" company.

Shareholders are not entitled to take the place of the company in defending the latter's own rights when it is these rights which have been affected, for so long at least as the company has not yet been dissolved and liquidated and the shareholders therefore have ho right to its property and assets.

It is only when a company has been dissolved and consequently ceases to exist as a separate legal entity that the shareholders take its place and are entitled to receive the balance of its property, after the corporate debt has been deducted. Thus it is only the "legal death" of the corporate person that may give rise to new rights appertaining to the shareholders as successors to the company.

In 1925 the United States claimed the right, as against the Government of the United Kingdom, to intervene on behalf of American interests in a non-American corporation (the Romano-Americana).

In the United Kingdom answer to the American contention, it was said: ". . . it is not until a Company has ceased to have an active existence or has gone into liquidation that the interest of its shareholders ceases to be merely the right to share in the Company's profits and becomes
[p 257] a right to share in its actual surplus assets" (Hackworth, Digest of International Law, Vol. V (1943), p. 843).

In the case of the Mexican Eagle, a company incorporated in Mexico, in which the shareholdings were 70 per cent. British and Dutch, 25 per cent. French and the remainder Swiss, Danish and other interests (as the shares were in bearer form it was impossible to state the exact proportion of each national interest), a dispute arose between the Mexican Government and the United Kingdom Government regarding claims by British shareholders arising from the expropriation of the properties of the Mexican Eagle Company.

The Mexican Government in a Note of 26 April 1938, maintained the view that a shareholder was not a co-owner of the property of the undertaking but "merely the possessor of a right in equity to represent a part of the liquid assets at the moment of the dissolution or liquidation of the company".

It was not until the moment of dissolution that it was possible to establish the damage and injuries sustained by shareholders as distinct from the company (Mervyn Jones, British Year Book of International Law, 1949, p. 241).

On that occasion the Mexican Government stated: "Mexico cannot admit that any State, on the pretext of protecting the interests of the shareholders of a Mexican company, may deny the existence of the legal entity of companies organised in Mexico in accordance with our laws."

I do not concur with the view that the national State of the shareholders may exercise diplomatic protection when the act complained of was done by the national State of the company, for this would be equivalent to admitting that any State, on the pretext of protecting the interests of the shareholders in a foreign company, may deny the existence of the legal entity of companies organized in accordance with the laws of the national State of such companies.

I have reservations about paragraph 92 of the Judgment. For the reasons stated above I am of the opinion that the so-called theory to which the paragraph refers does not have any validity. The fact that the Judgment ends the paragraph with the sentence: " Whatever the validity of this theory may be, it is certainly not applicable to the present case, since Spain is not the national State of Barcelona Traction" should not be interpreted as an admission that such "theory" might be applicable in other cases where the State whose responsibility is invoked is the national State of the company.

This is a fundamental point in the field of intervention on behalf of nationals who are shareholders in foreign companies of limited liability.

Regardless of the numerous cases of protection which took place in the past—outside international law or contrary to it—by the use of economic, political or military pressure, it is worth recalling that—also in the past—[p 258] in other cases when a stand was taken within a legal point of view and respect for the sovereignty of other States, there has been a historical recognition of the separate entity of corporations of limited liability, and the opinions given in such instances did stress the independent existence of a company as juridical person.

For example, when the Government of the United States was approached in 1875 with a request that it should intervene on behalf of American stockholders in Chilean corporations, it refused to do so. It adhered to the view that a corporation formed under local law should have recourse to the local courts and that although the good offices of the Government might with propriety be exercised on behalf of American interests, there could be no official intervention FN1 (Moore, Digest of International Law (1906), Vol. VI, p. 644). The practice of the United Kingdom followed similar lines. Thus Sir Robert Phillimore advised that the British Minister to Mexico should be instructed to limit himself to "good offices" on behalf of a British shareholder in a Mexican railway siezed by the Mexican Government and that the British subject should be told that he must rely principally on local remedies. Years later both Governments found reason to depart from this practice.

---------------------------------------------------------------------------------------------------------------------
FN1 The Secretary of State of the United States in a dispatch to the (American) Minister to Colombia, dated 27 April 1866, wrote as follows:

"It may well be that subjects of Great Britain, France and Russia are stockholders in our national banks. Such persons may own all the shares except a few necessary for the directors whom they select.

Is it to be thought that each of those Governments shall intervene when their subjects consider the bank aggrieved by the operations of this Government? If it were tolerated, suppose England were to agree to one mode of adjustment, or one measure of damages, while France should insist upon another, what end is conceivable to the complications that might ensue?

It is argued that there is no policy which requires us to encourage the employment of American capital abroad by extending to it any protection beyond what is due the strictest obligation. There is no wise policy in enlarging the capacity of our citizens domiciled abroad for purposes of mere pleasure, ease or profit to involve this Government in controversy with foreign powers." (Loc. cit., pp. 645-646.)

---------------------------------------------------------------------------------------------------------------------

I therefore cannot accept that this situation—which is not the one before the Court—should be considered as a limitation or exception to the strict application of the rule of international law, according to which the shareholders cannot be protected by their national State except in two instances: (a) when the company has been liquidated, and (b) when a right of the shareholder as such (right stricto sensu) has been violated by an illicit act entailing international responsibility.
The scope and increasing activities of powerful international corporations have had as their field of operation the exploitation of the natural [p 259] resources of many countries in the process of development and have controlled the functioning of many of their public services over which the territorial States have come to be, notwithstanding their sovereignty, in a subordinated position, and their right to demand compliance with the prescription of their municipal law on the matter has in many cases been challenged and put in jeopardy. Faced with the structure and practice of capitalist society in regard to foreign investment, many countries have imposed the requirement on foreign capital of taking the legal form prescribed by local legislation. The exercise of the sovereignty of States in this matter cannot be legally construed as a device to deprive the even-tual shareholders in corporations of limited liability (sociétés anonymes) of the diplomatic action of their national State. Nationalization and expropriation, in accordance with the law on the matter, have been the result of the essential need not to have public utilities and national resources subordinated to the private interests of foreign corporations.

I am also of the opinion that neither is a limitation to the rule— according to which it is the national State of the company who has the right of protection—the fact that the protecting State does not exercise its right or ceases to do it. The right of protection is a discretionary one and the national State of the company is not under a duty to protect.

In respect to paragraph 93 I must make the following observations.

The paragraph begins with the consideration that "in the field of diplomatic protection of shareholders as in all other fields ... it is necessary that the law be applied reasonably".

The phrase immediately following refers to a suggestion which might be interpreted as an example of reasonableness on the matter. The suggestion, or hypothesis, is to the effect that, "if in a given case it is not possible to apply the general rule" . . . then, "considerations of equity might call for the possibility of protection of the shareholders in question by their own national State". The last sentence in this paragraph states: "This hypothesis does not correspond to the circumstances of the present case."
I am of the opinion that there is no need for the Judgment to include reference to an irrelevant hypothesis. It is difficult to imagine a case in which it would be impossible to apply the general rule that the right of diplomatic protection of a company belongs to its national State.

It might be argued that in case the company is liquidated and therefore ceases legally to exist its national State loses the subject of its right and the general rule cannot be applied. In such eventuality the shareholders can undertake the defence of their interest before the courts of the State whose responsibility is invoked and exhaust the local legal remedies open to them. If a denial of justice is claimed, then the national State of the person whose rights are violated may intervene according to the rules concerning the protection of foreigners, but in such hypothesis the State of the shareholders exercises a right of its own (whether or not such right [p 260] is qualified as "secondary") and if so its action is not based on "considerations of equity".

The whole Judgment is based on the ground that according to international law the national State of the company, and only and exclusively it, has the right of diplomatic and judicial protection of such company. Therefore it is a contradiction of a legal nature to state even as an irrelevant hypothesis that there might be a circumstance when that State which, by definition, has the legal capacity to act could be legally or juridically incapacitated—the State concerned is free to exercise its right or not but its abstention to pursue an action does not affect its right to take it. It cannot lose its legal capacity and a hypothesis based on the impossibility to apply the general rule is a juridical contradiction and has no reasonable explanation even as a whimsical hypothesis. It is also inconceivable that if Canada does not exercise its discretionary right of protection then this fact gives birth to the right of the shareholders' State.

***

Therefore on those hypothetical limitations it is not possible to build a Belgian ius standi.

In respect of the attitude in this case of the national State of Barcelona Traction, the Respondent describes as follows the three successive phases of the Canadian Government's action, resulting from the examination of the diplomatic correspondence and relevant documents:

"The first, going up to the time of the Tripartite Statement, was the phase in which, misinformed by the interested parties, it accused Spain of having violated obligations in general international law with regard to the treatment of foreigners and, on that ground, requested the Spanish Government to intervene with a view to the annulment of the acts of the judicial authorities.
The second phase, which followed upon the Tripartite Statement and did not last long, was characterized by the definite abandonment of that request and of any allegation of a breach by Spain of obligations under general international law. The Canadian Government, on the other hand, raised the particular complaint that certain clauses of the treaties in force between the two countries had been broken. It proposed the settlement of the differences on that point by arbitration.
In the third phase, after expressing regret that the Spanish Government had not accepted the proposal to submit the specific point about the treaties to arbitration, the Canadian Government, which had meanwhile become better acquainted with the facts, definitely [p 261] opted for endeavouring to get the dispute settled on an amicable basis through direct negotiations between the private parties concerned.

It is thus once again clearly confirmed that the famous exceptional circumstances of 'the absence of protection by the national government of the company', which the Belgian Government has relied on so often and in so many forms in order to justify its claim to have jus standi in the case to act under the head of the protection of the Belgian 'shareholders' in Barcelona Traction, quite apart from the fact that even theoretically it cannot constitute any valid justification, is not in fact by any means present in the case."


***

In my view the right of diplomatic protection of shareholders in a company of a nationality other than that of the protecting State, is not in accordance with the principles of international law in force, i.e., the rule of the diplomatic protection of companies by the State of which they are nationals.

Nor is such protection recognized by any special customary rule in international practice. The arbitral decisions rendered on the basis of special bilateral conventions are not norm-creating, nor have constituted the foundation of, or generated a rule of customary international law which is now accepted as such by the opinio juris.

There are not, in the present case, exceptional circumstances justifying any departure from the strict application of the general rule of international law on the matter.

The right of diplomatic protection, like any other right, has to be understood as a right which a particular State has against another particular State. To which State does that right pertain in the present case? Does it pertain to the Applicant? Is Spain under an international obligation towards Belgium?

Has the respondent State committed a breach of an international obligation owed to the applicant State by the measures taken in respect to Barcelona Traction? Is the person affected by the measures of which Spain is accused linked to the applicant State by a bond of nationality?

In my opinion all those questions ought to be answered in the negative and, if so, the international liability alleged by the Applicant does not exist.

Towards the eventual and sporadic possessor of a bearer share there is not a direct and immediate obligation from the State accused of having violated the rights of a private foreign national (natural or juristic person) by an unlawful act damaging the corporation (société anonyme) which has issued the bearer shares.

The fact that theoretically there is not (or there need not be) continuity [p 262] of ownership of a bearer share, the nationality of the eventual possessor does not give to his State a right towards the Respondent, who is not under an international obligation owed to every State which might have, or has, at a given date, some nationals in the possession of bearer shares in the corporation alleged to be injured by an illicit international act, unless specific rights of the shareholders as such were violated.

It is not justifiable to create an ad hoc rule in disregard of existing and generally accepted ones to fit a particular case which could and should be decided by the application of the rules of general international law governing the matter.

The claim in the present case and its characteristics are in the nature of a request to go around or avoid the strict application of the relevant rules of international law which "does not recognize, in respect of injury caused by a State to a foriegn company, any diplomatic protection of shareholders exercised by a State other than the national State of the company".

The shareholders in commercial limited liability companies (sociétés anonymes) do not have a separate and independent right in respect to damage done to the company by a foreign government.

The rules of international law concerning the treatment of foreigners are not rightly invoked in respect of shareholders as such.

This question ought to be considered in relation to the protection of citizens abroad and taking into account the jurisdiction of the State where the foreigner resides.

The following concepts contained in Borchard's Diplomatic Protection of Citizens Abroad are relevant in this respect:

"The bond of citizenship implies that the State watches over its citizens abroad, and reserves the right to interpose actively in their behalf in an appropriate case. Too severe an assertion of territorial control over them by the State of residence will be met by the emergence of the protective right of the national State, and the potential force of this phenomenon has largely shaped the rights assumed by States over resident aliens."

"The principles of territorial jurisdiction and personal sovereignty are mutually corrective forces. An excessive application of the territorial principle is limited by the custom which grants foreign States certain rights over their citizens abroad, sometimes merely the application of foreign law by the local courts, sometimes, in acknowledgment of the principle of protection, a certain amount of jurisdiction."[p 263]

"Each State in the international community is presumed to extend complete protection to the life, liberty and property of all individuals within its jurisdiction."
"Not every injury warrants immediate interposition by the State. In the first place, reparation is demanded only for such injuries as the State in its discretion deems a justification for diplomatic protection. Factors which enter into consideration in determining the State's interposition are the seriousness of the offence, the indignity to the nation, and the political expediency of regarding the private injury as a public wrong to be repaired by national action—in short, the interests of the people as a whole, as against those of the citizen, receive first consideration before State action is initiated."

"The individual has in fact sustained no injury in international law, until the State of residence or its authorities have in some way connected themselves with the original act or have declined to afford him legal means of redress."

***

In the present case, it is not Belgium but Canada who is the one entitled to protect its national, Barcelona Traction, in accordance with the existing recognized rule of protection of a company only by its national State.

Regarding the question: ". . . whether international law recognizes the right of a State to protect its nationals, natural or juristic persons, as shareholders in a foreign company, for the damage they might have suffered as a consequence of an internationally illicit act done to the company by a third State", the answer, as a matter of law, should be in the negative.

As regards the facts and circumstances of the parti