Defined: Barcelona Traction Case – LexForti

Defined: Barcelona Traction Case – LexForti

Barcelona Traction Case

Key phrases: Belgian, Spain, jurisdiction, shareholder, repayment


In 1911, the “Barcelona Traction, Mild and Energy Corporate, Restricted” used to be included in Canada. It has its head place of business in Toronto. It established its more than a few subsidiary firms in Spain for creating an “electrical energy manufacturing and distribution gadget” in Catalonia. A few of these subsidiary firms had their registered places of work in Canada whilst some had the similar it in Spain.

In 1936, the servicing of the Barcelona traction bonds, issued basically in Sterling used to be suspended by means of the Spanish executive because of the civil conflict in Spain. After the conflict ended, foreign currencies used to be had to restart the servicing of the sterling bonds. Alternatively, the Spanish trade regulate government denied from authorizing the switch of the wanted foreign money.

The Belgian Executive reported this incident to the Spanish Executive. The Spanish Executive mentioned that for the authorization of the switch may well be carried out simplest when “it used to be proven that the foreign currencies used to be for use to pay off money owed coming up from the real importation of international capital into Spain”. This used to be no longer established so the authorization of the switch used to be no longer made.

Then, on 12 February 1948, judging the petition filed by means of of 3 Spanish holders of Barcelona Traction sterling bonds, the Court docket of Reus declared the corporate bankrupt. After this judgment, Spanish administrators had been appointed within the two subsidiary firms. In a while after this, different subsidiary firms had been additionally introduced underneath the ambit of those measures.

In 1958, the Belgian Executive filed an Utility in opposition to the Spanish Executive. Alternatively, in 1961, Belgian executive made up our minds to discontinue the court cases.  It used to be made up our minds that negotiations might be held between the representatives of the regarding personal pursuits. Alternatively, the negotiations may no longer good fortune. Subsequently, on 19 June, 1962, the Belgian Executive filed a recent software within the Court docket. Within the software, it claimed repayment for the Belgian shareholders of the corporate losses who suffered losses as a result of the acts of the Spanish State which have been violative of the world legislation.

Initial objections:

It used to be contended by means of the Spain that the claims of Belgium aren’t admissible. Spain raised basically 4 objections ahead of the Court docket.

The primary two initial objections mentioned that the Court docket lacks the jurisdiction to listen to the introduced case. As Belgium discontinued the sooner continuing, it’s barred now to institute a brand new continuing.

The 3rd objection used to be that the Belgian executive didn’t have the “jus standi”. The fourth objection mentioned that the entire native treatments to be had in Spain weren’t used. Each those objections had been joined to benefit.


The Court docket basically handled one factor i.e. “Can a State prolong diplomatic coverage to its nationals who’re shareholders in an organization which is included in every other State if the pursuits of the shareholders are affected because of a fallacious dedicated in opposition to the corporate?”

First initial objection:

The Spanish executive supported its first initial rivalry that Belgium executive can’t institute the existing court cases as it had discontinued the sooner court cases in 1961 at the foundation of 5 arguments. They’re-

  • The act of discontinuing the preliminary court cases used to be a “purely procedural act”.  
  • Discontinuance of court cases itself presentations that no additional motion might be taken on that factor with the exception of when the birthday celebration expressly reserves the precise to start out new court cases.
  • When an effort used to be made by means of the representatives of the Belgian pursuits to barter once more with the representatives of the Spanish pursuits, they were given refusal from the later aspect. Additional, an figuring out used to be there between either side that the discontinuance of the applying would result in ultimate abolition of the declare. The applicant denied this rivalry declaring that their aim as simply to terminate that continuing and not anything else.
  • The respondent used to be misled by means of the applicant concerning the import of the discontinuance. On account of this, the Respondent made up our minds to barter and resultantly suffered prejudice.
  • The initiation of court cases used to be no longer as consistent with the spirit and economic system of the “Hispanic-Belgian Treaty of July 19, 1927”. As consistent with this treaty, ahead of filing a dispute for adjudication, one will have to undergo the entire imaginable initial phases. Within the preliminary continuing which used to be discontinued, these types of phases ere long past via. Alternatively, the similar had been repeated in reference to the existing continuing. This is able to no longer had been the aim of the Treaty. Subsequently, the brand new court cases are out of order.

The Court docket used to be of the opinion that the primary and the second one contentions are contradictory to one another. Subsequently, the Court docket rejected each the arguments. Additional, on the subject of 3rd argument, it noticed that the exchanges, upon which the Respondent is depending, came about virtually completely between the involved representatives of the non-public pursuits. For binding the governments on each side, it will have to be proven that the representatives acted in this sort of approach as to bind their governments. The respondent didn’t end up this a because of which the Court docket rejected this argument as smartly. Speaking concerning the fourth argument, the Court docket mentioned that the Respondents didn’t face any lose by means of agreeing to the negotiations. Subsequently, the fourth rivalry can’t be authorized. Rejecting the final argument, the Court docket noticed that one can’t say that the entire treaty processes are exhausted till there exists a proper to start up new court cases or the case has been prosecuted to judgment. At the foundation of these types of observations, the Court docket rejected the First Initial Objection of the respondent.

2d initial objection:

For organising the jurisdiction of the Court docket, the Applicant trusted Article 37[i] of the Statute of the Court docket and Article 17[ii] of the Hispanic-Belgian Treaty of Conciliation, Judicial Agreement and Arbitration (1927). It used to be contended by means of the applicant that the treaty of 1927 continues to be in pressure and either side are events to the Statute of ICJ.

The Respondent contended that despite the fact that the 1927 Treaty continues to be in pressure, Article 17(4) has lapsed at the dissolution of the PCIJ in 1946. Along side this, Article 37 is simplest appropriate to the States who had been events of the Statute ahead of PCIJ used to be dissolved. Alternatively, Spain used to be admitted to the UN in 1955 i.e. after dissolution of PCIJ.

The Court docket noticed that the aim of the drafters of Article 37 used to be to keep most jurisdictional clauses from turning into inoperative because of dissolution of the PCIJ in potential approach.

Basically, 3 prerequisites are discussed in Article 37 which incorporates:

  1. “There will have to be a Treaty or Conference in pressure
  2. It will have to supply for the reference of an issue to the PCIJ
  3. The dispute will have to be between the States each or all of which might be events to the Statute”.

All 3 prerequisites are pleasing within the provide case; subsequently, referring the topic to the Global Court docket of Justice is imaginable. In accordance with those observations, the Court docket additionally rejected the 2d Initial Objection.

3rd and fourth initial objection:

The court docket had joined each those objections to the deserves. Whilst coping with the query of “jus standi”, it used to be noticed by means of the Court docket {that a} State is obliged to hide underneath the safety of legislation the “international investments and international nationals” that have been admitted to its territory. Alternatively, this legal responsibility isn’t absolute in nature. If the State breaches this legal responsibility, it will have to have a right kind reason why for doing so. If any query arises on the subject of an illegal act dedicated in opposition to an organization representing international capital, the nationwide State of that corporate is simplest approved underneath the overall rule of world legislation to workout diplomatic coverage for searching for redress. Alternatively, there are some particular instances wherein the overall rule won’t follow. They’re-

  • The case of an organization which doesn’t exist now
  • The case of the protective State of the corporate which lacks the capability of taking motion.

The Court docket noticed that despite the fact that the entire property of Barcelona Traction are misplaced, the corporate’s company entity continues to be in life. Whilst taking about the second one case, there is not any dispute in the truth that the corporate if of Canadian nationality.

The corporate has been safe by means of the Canadian executive for a few years. If Canadian executive has stopped to behave on behalf of the corporate, it’s not a justification for another executive to workout diplomatic coverage.


After allowing for more than a few documentaries and different evidences submitted by means of each the perimeters, the Court docket rejected the declare of the Belgium executive by means of 15 votes to one. The Court docket mentioned that “the ownership by means of the Belgian Executive of a proper of coverage used to be a prerequisite for the exam of such issues”. The court docket noticed that if they’d undertake “the idea of diplomatic coverage of the shareholders”, it could result in a large number of claims from other States which can pave a technique to an insecure environment within the area of world financial members of the family. Subsequently, the Court docket concluded that the Belgium executive didn’t have the “jus standi” on this case. Because of this, the Court docket used to be of the opinion that there is not any reason why to inspect closing facets of the case and pronounce choice at the identical. 12 votes of the bulk had been in response to this reasoning simplest.


The verdict of the Court docket to disregard this situation successfully presentations the variations between “states and people”. It additional demonstrates who is thought of as sovereign within the world area. The verdict of the Court docket used to be in favour of Spain as Belgium didn’t have jurisdiction to report an software and the shareholders who had been searching for repayment weren’t given diplomatic immunity. Subsequently, it’s not permissible for a person to carry a declare in opposition to a state. This example will end up to be a precedent for the circumstances coping with organizations and sovereign immunity claims and can display tips on how to care for them as it should be.

Supply hyperlink

Related Posts

Legal & Law