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Two Perspectives on the Barcelona Traction Case

Published online by Cambridge University Press:  28 March 2017

Richard B. Lillich
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Editorial Comment
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American Journal of International Law , Volume 65 , Issue 3 , July 1971 , pp. 522 - 532
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Copyright © American Society of International Law 1971

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References

1 Barcelona Traction, Light & Power Co., Ltd. Case, [1970] I.C.J. Rep. 3, 64 A.J.I.L. 653 (1970). It is assumed that readers are familiar with the facts and holding of the case.

2 376 U.S. 398 (1964); 58 A.J.I.L. 779 (1964). See Falk, “The Complexity of Sabbatino,” ibid. 935.

3 At a regional meeting of the American Society of International Law in March, 1969, on the topic “International Claims: Their Settlement by Lump Sum Agreements,” none of the discussants anticipated the outcome in the case. Note, Regional Meeting of the Society at Syracuse, 63 A.J.I.L. 550 (1969). Furthermore, at the annual meeting of the Society that year every speaker on a panel entitled “Nationality of Claims— Individuals, Corporations, Stockholders” agreed that the Court would ratify well-established past trends allowing shareholder claims. See 1969 Proceedings, Am. Soc. Int. Law 30-53.

4 See Briggs, “Barcelona Traction: The Jus Standi of Belgium,” 65 A. J. I. L. 327 (1971); Higgins, “Aspects of the Case Concerning the Barcelona Traction, Light and Power Company, Ltd.,” 11 Va. J. Int. Law 327 (1971); and Metzger, “Nationality of Corporate Investment under Investment Guaranty Schemes—The Relevance of Barcelona Traction,” this Journal, below, p. 532. See also Note, 5 J. Int. Law & Economic Development (Geo. Wash.) 239 (1971); Note, 3 N.Y.U.J. Int. Law & Politics 391 (1970); and Note, 38 Fordham Law Rev. 809 (1970).

5 See Flemming, “Case Concerning the Barcelona Traction, Light and Power Company Limited (New Application, 1962; Belgium v. Spain). Preliminary Objections,” 3 Canadian Yr. Bk. Int. Law 306, 312-313 (1965).

6 [1970] I. C. J. Rep. at 25-26.

7 Ibid, at 26.

8 Ibid, at 14.

9 Ibid.

10 The American Law Institute's Restatement, which adopted a rule permitting shareholder claims in Barcelona situations, acknowledged that “Where appear to be no decided cases dealing with the rule stated in this Section independently of international agreement.” Restatement (Second), Foreign Relations Law of the United States §173, Reporters’ Note at 525 (1965). See also Higgins, note 4 above at 341, and Metzger, below, at 534.

11 [1970] I. C. J. Rep. at 33.

12 In this regard, the Court is consistent with its past practice, which generally has failed to articulate criteria governing the formation of customary law. See text at note 21 below. As Parry has pointed out, beyond “a few scattered observations of the vaguest and most general sort the Court has said nothing else about customary law, and, in particular, about general as opposed to special custom.” C. Parry, The Sources and Evidences of International Law 59 (1965).

13 [1970] I. C. J. Rep. at 38. “As to the shareholder, while he has certain rights expressly provided for him by municipal law … , 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.” Ibid. See text accompanying note 19 below.

14 [1970] I. C. J. Rep. at 33-34 (Emphasis added).

15 “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.” Ibid, at 34 (Emphasis added).

16 ”.[T]here is seen a substantial body of evidence of State practice, treaty arrangements and arbitral decisions to warrant the affirmation of the inexplicit existence of a rule under international law recognizing such a right of protection on the part of any State of its nationals, shareholders in a foreign company, against another wrongdoing State, irrespective of whether that other State is the national State of the company or not, for injury sustained by them through the injury it has caused to the company.” Barcelona Traction, Light & Power Co., Ltd. case (Preliminary Objections), [1964] I. C. J. Rep. 6, 63 (separate opinion of Judge Koo). See text at notes 25-33 below.

17 C. W. Jenks, The Prospects of International Adjudication 237-238 (1964).

18 Ibid, at 265.

19 Judge Koo, had he not found ample international practice supporting shareholder claims, nevertheless would have interpreted what the Court now considers “the silence of international law” to permit such claims. “In my view the evidence placed before the Court has not established the existence of any rule denying recognition of the existence of the interests of shareholders or beneficial owners of shares in a foreign company or prohibiting their protection by their national State or States by diplomatic intervention or recourse to international adjudication.” [1964] I. C. J. Rep. at 63. Compare the Court's view in the text at and accompanying note 13 above.

20 [1964] I.C.J. Rep. at 63 (Emphasis added). See text at and accompanying note 12 above.

21 Raman, “The Rô1e of the International Court of Justice in the Development of International Customary Law,” 1965 Proceedings, Am. Soc. Int. Law 169, 177.

22 “The task of identifying a prescriptive communication from amorphous and seemingly inconclusive manifestations of behavior is almost impossible if the decisionmaker does not clarify the fundamental goals of the community which he regards as relevant.” Ibid, at 174.

23 McDougal, discussing the law of the sea, adopts a more enlightened approach readily transferable to the law of state responsibility: “From the perspective of realistic description, the international law of [state responsibility] is not a mere static body of rules but is rather a whole decision-making process, a public order which includes a structure of authorized decision-makers as well as a body of highly flexible, inherited prescriptions. It is, in other words, a process of continuous interaction, of continuous demand and response, in which the decision-makers of particular nation states unilaterally put forward claims of the most diverse and conflicting character … , and in which other decision-makers, external to the demanding state and including both national and international officials, weigh and appraise these competing claims in terms of the interests of the world community and of the rival claimants, and ultimately accept or reject them. As such a process, it is a living, growing law, grounded in the practices and sanctioning expectations of nation-state officials, and changing as their demands and expectations are changed by the exigencies of new interests … and by other continually evolving conditions in the world arena.” McDougal, “The Hydrogen Bomb Tests and the International Law of the Sea,” 49 A. J. I. L. 356, 356- 357 (1955). This approach has been taken by the author of a recent book on France's postwar experience in the state responsibility field. See B. Weston, International Claims: Postwar French Practice (1971).

24 The Court takes only eight lines to dismiss “the general arbitral jurisprudence which has accumulated in the last half-century,” giving as its reason the fact that “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.” [1970]) I. C. J. Rep. at 40. See also the separate opinion of Judge Padilla Nervo, in which he categorically concludes, with nocomprocitation of authority, that “arbitral decisions rendered on the basis of special bilateral conventions are not norm-creating, nor have [they] constituted the foundation of, or generated a rule of customary international law which is now accepted as such by the opinio juris.” Ibid, at 261. As a notewriter has remarked, “[i]t can be inferred that the Court's lack of reliance upon Delagoa Railway is a manifestation of its general distrust of international claims arbitrations as a source of international law.” Note, 3 N.Y.U.J Int. Law & Politics 391, 395, note 25 (1970). Since international arbitrations traditionally have been the fountainhead of the customary law of state responsibility, this distrust comes as something of a surprise. The ample jurisprudence available in the reports of arbitral tribunals is a prime reason why this area of international law has been considered ripe for codification. See Baxter, “Reflections on Codification in Light of the International Law of State Responsibility for Injuries to Aliens,” 16 Syracuse Law Rev. 745, 756-758 (1965).

25 G. White, Nationalisation of Foreign Property 183 (1961). Accord, van Hecke, “Nationality of Companies Analyzed,” 8 Netherlands Int. Law Rev. 223, 236 (1961). The present writer remarked several years ago that “it is just not possible to study stockholder claims realistically without examining recent lump sum settlement practice.” Lillich, “International Claims: Their Settlement by Lump Sum Agreements,” in International Arbitration: Liber Amicorum for Martin Domke 143, 154, note 40 (P. Sanders ed., 1967). He still holds this opinion. See generally Lillich, “Eligible Claimants Under Lump Sum Agreements,” 43 Indiana Law J. 816 (1968). See also text accompanying note 34 below.

26 [1970] I. C. J. Rep. at 40. This view previously found but limited support among the commentators. See Bagge, “Intervention on the Ground of Damage Caused to Nationals, with Particular Reference to Exhaustion of Local Remedies and the Rights of Shareholders,” 34 Brit. Yr. Bk. Int. Law 162, 174 (1958): “To draw any conclusions concerning the present state of international law from political inter-state treaties … is not possible before it can be stated that the stipulations there found have been accepted also by a sufficient number of other ‘civilized’ nations or are otherwise to be considered as international law under the rules in Article 38 in the Statute of the International Court of Justice. In the present matter this can hardly be said to be the case.” Compare text at note 35 below. Since the publication of the above article in 1958, it should be noted, at least 60 additional lump-sum settlements have been concluded between 30 or more different states. See note 34 below.

27 Dawson & Weston, ‘“Prompt, Adequate and Effective': A Universal Standard of Compensation?” 30 Fordham Law Rev. 727, 750 (1962). Cf. Harris, “The Protection of Companies in International Law in the Light of the Nottebohm Case,” 18 Int. and Comp. Law Q. 275, 281-282 (1969).

28 Individual espousal and international arbitration are the other methods most frequently used. See Department of State Memorandum entitled “Nationalization, Intervention or Other Taking of Property of American Nationals,” March 1, 1961, reprinted in 56 A.J.I.L. 166 (1962).

29 Indeed, they date back to the commencement of modern international arbitration. When one of the three international claims commissions under the Jay Treaty of 1794 broke down, the United States paid a lump sum to Great Britain, which thereupon established its first national claims commission to distribute the fund. See III Moore, International Adjudications: Modern Series 349-433 (1931).

30 Starke, “Treaties as a ‘Source’ of International Law,” 23 Brit. Yr. Bk. Int. Law 341, 344 (1946). He adds that the operation of treaties “in the creation of rules of international law is generically part of the process whereby usage and practice crystallize into custom, and because of the peculiar authority of treaties the process is invested with additional value and weight. For this reason, apart from their constitutive effect, these treaties may often be of considerable evidential importance.” Ibid, at 346.

31 “What has been called the positive or practical law of nations may also be inferred from treaties; for though one or two treaties, varying from the general usage and custom of nations, cannot alter the international law, yet an almost perpetual succession of treaties, establishing a particular rule, will go very far towards proving what that law is on a disputed point. Some of the most important modifications and improvements in the modern law of nations have thus originated in treaties.” H. Wheaton, Elements of International Law 21 (Classics of International Law, 1936 ed.).

32 “Bilateral treaties may provide evidence of customary rules, and indeed there is no” clear and dogmatic distinction between ‘lawmaking’ treaties and others. If bilateral treaties … are habitually framed in the same way, a court may regard the usual form as the law even in the absence of a treaty obligation.” I. Brownlie, Principles of Public International Law 11 (1966).

33 “This function treaties share with state practice, with diplomatic declarations, judicial decisions of municipal prize courts, and instructions issued by states to their diplomatic representatives and military commanders.” Starke, note 30 above, at 345. Cf. R. Lillich, International Claims: Their Adjudication by National Commissions 118 (1962).

34 They are the subject of a two-volume work by the present writer and Weston entitled International Claims: Their Settlement by Lump Sum Agreements, to be published by the Syracuse University Press in the Procedural Aspects of International Law Series. Interestingly enough, of the one obtainable lump-sum settlement concluded by Spain and the six such settlements negotiated by Belgium, several agreements specifically compensate claimants for share interests they had held in third-state corporations. See, e.g., the Protocol-Annex to the Agreement Between Belgium/Luxembourg and Czechoslovakia, Sept. 30, 1952, [1966] Moniteur Beige 9296.

35 Starke, note 30 above, at 345.

36 [1970] I.C.J. Rep. at 277-278.

37 Agreement Between Switzerland and Yugoslavia, Sept. 27, 1948, [1948] Recueil Officiel des Lois Fédérales 995. As did Judge Riphagen in his dissenting opinion, [1970] I.C.J. Rep. at 348.

38 Ibid, at 197. Judge Ammoun, in a prolix separate opinion, refused to infer “a rule of international law” from lump-sum settlements. At the most, he thought they might “contribute to the eventual formation of custom.” Ibid, at 306.

39 E.g., enemy property provisions in peace treaties and other international instruments. Ibid, at 39-40.

40 See text at and accompanying notes 14 and 15 above.

41 [1970] I.C.J. Rep. at 37 (Emphasis added).

42 I.C.J. Statute, Art. 38, par. 1(c).

43 [1970] I.C.J. Rep. at 343 (separate opinion of Judge Riphagen).

44 Much of the international law of state responsibility, of course, has been borrowed from municipal law. See H. Lauterpacht, Private Law Sources and Analogies of International Law 134-143 (1927). This borrowing process is common and of itself not subject to criticism. Indeed, the present writer is somewhat hesitant to criticize the municipally derived rules of Barcelona in view of Lauterpacht's warning that “[i]t has become a custom with publicists writing on certain disputed questions of international law to base their argument on the assertion that the opinion with which they happen to disagree is nothing else than a misleading analogy to a conception of private law.” Ibid, at vii. What has overcome his hesitation is the fact that the analogy here is misleading, and that the Court nevertheless considered itself powerless even to “modify,” much less “deform,” the borrowed rules.

45 See text at note 14 above.

46 Higgins, note 4 above, at 331.

47 The parallel to the Sabbatino decision is striking. There, in McDougal's sprightly phraseology, the majority opinion “forsook the historic, creative role of the Supreme Court for the expression of timid and suicidal conceptions.” McDougal, Comments, 1964 Proceedings, Am. Soc. Int. Law 49. For the present writer's views on Sabbatino, see R. Lillich, The Protection of Foreign Investment: Six Procedural Studies 45-113 (1965).

48 In the only dissenting opinion, Judge Riphagen categorically repudiated “the idea of a ‘reference’ by the rules of international law to the rules of municipal law.” [1970] I.C.J. Rep. at 338. “It is in making the rights and obligations of States under customary 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'.” Ibid, at 335.

49 Ibid, at 127. See also ibid, at 121: “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 protection by that State only.“

50 Ibid, at 277.

51 Ibid, at 272.

52 Ibid.

53 Ibid, at 66.

54 Ibid, at 84. Despite the quoted passage, he nevertheless supported the outcome of the Judgment, albeit grudgingly. For an excellent critique of his opinion showing the hobbling effect of the artificial distinction between lex lata and lex ferenda, see Higgins, note 4 above, at 340-341. “It need not be Emphasized that this sharp distinction between lex lata and lex ferenda, while natural to an international lawyer of the classical school, would not commend itself to those who adopt a policy-science approach to international law. For such lawyers, the ambiguity of the trend of past decisions would indicate that considerable weight should be given to policy factors in the formulation of the law in this area.” Ibid, at 341-342. See text accompanying note 23 above.

55 [1970] I.C.J. Rep. at 46.

56 Metzger, below, at 541.

57 South West Africa Cases, [1966] I.C.J. Rep. 6.

58 “The judicial function surely includes developing and applying international law to hitherto untested situations in order to obtain socially desirable and enlightened results. International law can never develop beyond the rudimentary state if the Court feels that the distinction between lex lata and lex ferenda forever prevents it from applying international law in a progressive manner in hitherto untested situations.” Higgins, note 4 above at 341.

59 Jenks, note 17 above, at 225.