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 in-
admissible, 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 consider-
ably 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 ! 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.

1 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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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 parti-
cular 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’s LOCUS STANDI IN JUDICIO ?

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

2 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 share-
holders, 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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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 3) 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.

5. The material and only pertinent question is who or what entity, if, any
is entitled to claimin respect of damage accruing to shareholders in conse-
quence 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 level*. Neglect of this precaution may result in an
opposite distortion,—namely that qualifications or mitigations of the

3 j.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).

4 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 in-
stitutions 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 Jaw 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

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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.

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 prineiple 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 >. 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 in-
fringing 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.

7. In neither case does it make any difference that the wrong done to
the company recoils or “repercusses” onto the shareholder °, e.g., by

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.

> 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.

$ Suppose that by the tortious negligence of a third party the company’s ware-
houses 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

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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 confisca-
ted without compensation, he has no legal right that they shall have,
or be maintained at, any particular market value,—and while the share-
holder 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 ’,—and again, while he has a right freely to dispose of his
shares 5, the law does not guarantee him either a buyer or a price.

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 inter-
national 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

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.

7 Except of course in the case of fixed interest securities of various kinds.

8 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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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 wili do so unless
there are cogent reasons why, in the interests of the company and, hence,
indirectly of the shareholders, it should refrain °,—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 !, 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.)

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 |! 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

9 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.

10 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.

11 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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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.”

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’ !2.

Such provisions of course differ from country to country but, without
attempting to particularize, their broad effect is either to enable share-
holders to bring an action in their own names against a third party, in a
variety of circumstances involving fraud, malfeasance, negligence or

12 Beckett, ‘“Diplomatic Claims in Respect of Injuries to Companies”, Trans-
actions 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 re-
solution 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 #bid.,
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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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 share-
holders 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 #.

12. The other type of possibility which private law affords to share-
holders (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 influen-
cing 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

13 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].”

“A61. 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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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 fea-
tures of municipal law, really does so only toa certain extent, departing
from it at precisely that point where, under municipal law the manage-
ment of the company can in certain circumstances be compelled by
the shareholders to act?

14. It seems that, actuaily, 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 ‘+ of the very State responsible for the acts or damage com-
plained 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 45. Clearly in this type of case no inter-
vention 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

# 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.

15 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
ET 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 inter-
vention of their government.

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authority as was cited in paragraph 11 above continues (translation) *:

.,, 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.”

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 jocal 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 nation-
ality 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 in-
corporation: 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

16 Loc. cit. in footnote 11 supra.

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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 examina-
tion 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 per-
sons. 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 do-
mestic 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 17:

“Tn 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

17 Loc. cit. in footnote 11 supra, at p. 477.

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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.

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 '* 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.

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 1°) that the Belgian Government would have been in a much
stronger position as regards the admissibility of its claim had the Com-
pany been Spanish rather than Canadian.

18 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.

19 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 under-
taking, 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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76 BARCELONA TRACTION (SEP. OP. FIFZMAURICE)

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 share-
holders notwithstanding that it is prima facie the company’s position,
rather than (directly) their own, that is in question,—then in correspond-
ing 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 govern-
ment, 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 ap-
parently 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

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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 gov-
ernment which refuses to intervene on behalf of, or support, the claim
of one of its nationals or national companies *,—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.

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 2—
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

20 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.

21 | 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.

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part 77, The law’s present attitude is based on predicating for the com-
pany’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.

25. International law must in consequence be regarded as deficient
and underdeveloped in this field because, while retaining the rule of
the “‘Shegemony”’ 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 how-
ever little reality there may be about this possibility), no other govern-
ment 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 73! Inter-
national law has of course to accept the fact that governments cannot

2 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.

23 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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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).

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 Jaw, 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 2)
that there was an absence of a sufficiently close link between the Canadian
Government and the Barcelona Company to give the former an action-
able 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—

24 Tn particular the decision of the Court in the Nottebohm case (merits)—JI.C.J.
Reports 1955, p. 4 et seq.; and the Report of the Commission of Arbitration in the
“Pm Alone” case (U.N. Reports of International ‘Arbitral Awards, Vol. Til, 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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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.

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 *°, 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 exis-
tence 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 interven-
tion of the Canadian Government under Article 62 of thé 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 claimif 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 my-
self 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.

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. Notte-
bohm were:

(i) that this Liechtenstein nationality—acquired by naturalization
just before the outbreak of war in 1939, he being then a German

25 See reference in footnote 24 above.

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national—was purely artificial, in the sense that he had not
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 Guatemala **;—or in other words
his claim was not “opposable” to Guatemala at the instance of Liech-
tenstein, which meant that Liechtenstein was in those particular circum-
stances disqualified.

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 ?’) should
automatically have entailed a recognition of Belgian capacity to claim

26 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.

27 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 of Public International Law (Oxford, 1966) at p. 328 (case heard before
the Italo-United States Claims Commission, International Law Reports, 25 (1958—D,
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

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on behalf of any person or entity who, at the material times, was both
of Belgian nationality and a shareholder in the Barcelona Company.

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 representa-
tions—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 proceed-
ings 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

applicable to corporate entities as well as to individuals. These questions, and others,
needed to be gone into.

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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 #. 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 owner-
ship 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 ©. 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.

34. I am of course aware that there are difficulties about this view

28 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.

29 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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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 alter-
native 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.

nl

EQUITABLE CONSIDERATIONS 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 satis-
factory. 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 correspond-
ing 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 share-
holders to act in certain kinds of cases where the action of the company
is unavailable or not forthcoming, or to influence or change the manage-
ment or its policy, or by taking account of this situation only to a some-
what limited extent, the present state of international law leads to the
inadmissible consequence that important interests may go wholly unpro-
tected, 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.”’

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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 *°, 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 essen-
tially 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.”

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 Shelf case U.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 *! 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

3° U.N. Reports of International Arbitral Awards, Vol. II, p. 729.
3. Snell’s Principles of Equity, 26th edition by R. L. Megarry and F. W. Baker,
1966, pp. 5-6.

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86 BARCELONA TRACTION (SEP. OP. FITZMAURICE)

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.”

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 SHAREHOLDING

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 abstrac-
tion 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 ampie 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.

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(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:

,,. itis the bond of nationality which alone confers upon the State
the right of diplomatic protection . . . 3?”

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 #3.”

A true question of capacity as such is here involved 3+, 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’’.

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) share-
holders 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-

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

33 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. ‘

34 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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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 tem 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 con-
troversial 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 Com-
pany, 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

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of reparation or damages recoverable if the claim should be made good“.
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 nation-
ality, 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.

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 * for short;
and finally the shares registered in the name of this same Sidro, a com-
pany the principal interest in which is owned by another Belgian registered
and incorporated company—Sofina 3’. 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 Barce-
lona 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

35 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.

36 Standing for ‘‘Société Internationale d’Energie Hydro-Electrique, S.A.”.

37 Standing for ‘‘Société Financière de Transports et d'Entreprises Industrielles,
S.A.”.

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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 shail 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?

(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 **. 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 /egal ownership—in fact ceased to be the actual share-
holders, 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 *°) 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).

*

38 Thus it seems that during the “Securitas” period (as to which see paragraphs 55-
59 infra) the nominees held for that Company, not Sidro-(Sofina).

39 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 para-
graph 75 of his separate Opinion.

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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 *, 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 in-
corporation, 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.

45. I do not find it necessary to consider this particular aspect of the
metter 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 Com-
pany, 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 #,—that is just what Spain has sought to
maintain in relation to Sidro-(Sofina),—but not Barcelona. On what
basis does this attempt proceed?

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 under-
lying 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

+0 See footnote 14 in part IJ, supra.
41 This, however, is only one of the many instances of “having it both ways” in
this most paradoxical of cases.

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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 behaif 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—rhen it would
become legitimate, on the “parallel right” basis, for yet other govern-
ments—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

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behalf of Sidro-(Sofina) as an entity of Belgian nationality by incorpora-
tion, 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 circum-
stances 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 ob-
jections, not as to the Belgian national character of these entities but as
to their character gua 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 nomirfees and/or trèstees of American
nationality. The fact is admitted. The effect, according to the Spanish
argument, was that Sidro-(Sofina) while retaining the beneficial owner-
ship, 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 neces-
sary to found a right to claim, did not exist so far as Belgium was con-
cerned, at least on the basis of this block of shares #2.

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

42 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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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 stand-
point 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 suf-
ficient 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.

6

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

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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 (para-
graphs 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 whigh 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”) # 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 prin cipal 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, becguse no change of
ownership was deemed to occur).

43 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 dis-
guising 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 posi-
tion 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

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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 deter-
mined 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 abso-
lutely 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, J 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.

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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 them-
selves 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 instru-
ments, 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

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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, what-
ever 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.

*
* *

(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 ** up to at least the date when the present proceedings were com-
menced. 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.

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-

## 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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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 orga-
nization 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 * (though
unsuccessfully #), 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 *”7;—and the
position becomes even slightly absurd when the continuity rule is inter-
preted 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.

62. In his dissenting opinion in the Panevezys case #, 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 *°, should be eschewed where it would
work injustice, and this view has received support in recent writings con-
tending for a more eclectic application of the rule, so as not to “leave a

45 U.N. Reports of International Arbitral Awards, Vol. IX, p. 494.

46 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.

47 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.

# P.CL.J., Series A/B, No. 76 (1939) at pp. 33-35.

49 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.

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substantial body of... rights without a practical remedy... *”. 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 dif-
ferent nationality from that of the original claimant or owner. Or again,
why should the fact that a former dependent territory attains independ-
ence 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 pro-
tecting 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, gua what it now is, have suf-
fered any wrong in the person of its national *'. (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 dis-
cussion in O’Connell, State Succession in Municipal Law and International
Law (Cambridge, 1967), Vol. I; pp. 537-541).

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

50 O’Connell, International Law (Stevens-Oceana, 1965), Vol. IT, p. 1120;—and
Professor R. Y. Jennings in Hague Recueil (General Course of 1967), Vol. II, pp. 476-
477, 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 com-
missions 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.

5t 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 fata in my separate Opinion, for the reasons given
in Part V of it (1.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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anything relating to their merits, but because purely technical considera-
tions bring it about that no State is entitled to act 5%. 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.

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 Chorzéw Factory case, when it said that the damage suf-
fered by the individual could “only afford a convenient scale for the
calculation of the reparation due to the State’’—(my italics) . 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 pro-
perty, 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.

65. If these considerations are applied here, the conclusion would be
that, provided Belgian shareholding existed on 12 February 1948, the

52 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.

58 P.C.IJ., Series À, No. 17 (1928), p. 28.

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claim then became once and for ali 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 pre-
liminary 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 con-
sider 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.

(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 **, the declaration of bankruptcy made in respect of the Barcelona

54 The question whether there was jurisdiction under Spanish law, in the circum-
stances appertaining to the Barcelona Company, is irrelevant or inconclusive for

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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 pro-
perty or have a domicile or seat there °°. 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 %, 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 éxpress
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.

69. Clearly, if the real cbject had been to obtain payment of the ar-
rears 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

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. .

% 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.

56 Standing for “‘Ebro Irrigation and Power Co. Ltd.”

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which the petitioners automatitally 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. Inthese 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 juris-
diction 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 *, 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 with-
out Ebro’s consent or enforcement action in Canada, remained where
they were, and are still there today, not only in actuality but in law,

57 Standing for ‘‘Fuerzas Eléctricas de Catalufia, S.A.”

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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.

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 pro-
ceedings 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 bank-
ruptcy 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.

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75. In this connection a clear distinction must be drawn between
proceedings which, if invalid, are so ab initio, and proceedings the com-
plaint 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 Com-
- pany’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 dif-
ficult to see how the apparently admitted non-Spanish domicile of the
Company could possibly lead to the conclusion suggested in the bank-
ruptcy petition, and accepted by the judge, that in these circumstances it
would be” ‘necessary to limit publication to the Official Bulletin of Tar-
ragona”—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 conceal-
ment of the debtor’s assets, in such a way as to prejudice those rights. I

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therefore discount the natural reactions of a jurist trained in the com-
mon-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 °§, 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 difficuit to reconcile with the standards of the ad-
ministration 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.

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

58 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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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 long-
standing 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 Me-
morial, 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 themseives.

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, in-
stituted in another country. Local publication, or service by post, at least,

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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 pro-
ceedings 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 (/.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 ex-
plained 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 Joc. cit., pp. 44-45) whether the objection had an exclusively

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preliminary character, and did not at least in part appertain to the merits,
the Court could not, without hearing the merits, regard itself as adequate-
ly 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 (Z.C.J. Reports 1964, p. 44):

“Tt 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”

aad (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 inter-
national law.”

86. These observations no doubt indicated that there could be share-
holding 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 war-
ranted 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

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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 in-
terests 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 inter-
national 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 assump-
tion,—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 pro-
nounce 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. .

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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 inad-
missible.

POSTSCRIPTUM

I entirely approve of the initiative taken by the Court in paragraph 27
of the Judgment (and for the first time in a judgment *) of drawing at-
tention 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.

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 **.

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.

* A previous Order of the Court as to time-limits in the present proceedings drew -
attention to the matter.

** 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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