267

SEPARATE OPINION OF JUDGE GROS

[Translation]

1. Although the force of res judicata does not extend to the reasoning
of a judgment, it is the practice of the Court, as of arbitral tribunals,
to stand by the reasoning set forth in previous decisions (cf. Judgment
No. 10: “The Court sees no reason to depart from a construction which
clearly flows from the previous judgments the reasoning of which it still
regards as sound”; P.C.LJ., Series A, No. 11, p. 18). Although I accept
the operative part of the present Judgment, my reasoning is entirely
different. Considering the importance of the case from the point of view
of its consequences on the law applicable to international economic
relations, I feel it my duty to set forth, as briefly as possible, the reasons
which lead me to accept only the operative part of the Court’s decision.

2. The separation of fact and law is for the international judge merely
a working-method in the first stage of considering a case; but to judge
is always to apply a rule of law to particular facts. What has therefore
to be done is to ascertain, taking account solely of the facts of the case,
what rules of international law are applicable to the treatment given in
Spain to a limited company, Barcelona Traction, as from the decision
rendered by the Reus judge on 12 February 1948, according to the terms
of the claim set forth in the Application dated 19 June 1962 and in the
final submissions of the Belgian Government on 9 July 1969. “Each
case must be considered on its individual merits” (P.C.I.J., Series A,
No. 7, p. 69).

3. If the question of the nationality of the claim is taken first, which
is the way the Court decided to proceed, the facts assume crucial im-
portance in the present case, and it was precisely the idea that the third
and fourth preliminary objections could not be decided without full
knowledge of the merits which served to justify the joinder effected by the
Judgment of 24 July 19641. This was thrown into particular relief, as
regards the third objection, i.e., the very point on which the present
Judgment is based, by the observation which the President made on the
Court’s behalf in opening the hearing of 13 March 1964.

What then are the facts of the case? Since Belgium is claiming to
protect Belgian nationals, it has to be verified that the persons in question

? I share the views on this joinder expressed by Judge Sir Gerald Fitzmaurice in
paragraphs 84-90 of his separate opinion.

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were Belgian at the time of the acts with which Spain is reproached and
were still Belgian at the moment when the Application was filed. Yet this
question of proof of the nationality of the claim has been left aside and
the Court has dealt in the first place and exclusively with Belgium’s
right to institute proceedings in behalf of the shareholders in Barcelona
Traction. Though the Court, in the reasoning it chose to follow, dealt
only with this point of law, I shall also have to refer to the question of
proof of the nationality of the claim.

4. In seeking to ascertain what are the persons whose case Belgium
has taken up, one must first and foremost pay attention to a fundamental
aspect of the case from which it is evident that any general theory on the
status of limited companies fails to take account of the particular facts
in the present case and ignores the legal problem with which the Court is
faced. In protecting shareholders in the company, Belgium claims to be
protecting a moderate number of natural persons and certain companies
that hold stock in Barcelona Traction; i.e., an important investment on
the part of the Belgian economy. This is not a simple situation, as if it
were a question of a limited company whose capital was shared among
a few hundred natural persons the list of whose names was readily
available (cf. on this point the role of shareholders’ protection associa-
tions, either national or ad hoc, in particular in the Certain Norwegian
Loans case, I.C.J. Pleadings, Vol.I, p. 86). Barcelona Traction is a company
heading 14 others in a group of its own (see A.M., Vol. I, Ann. 24; the
table shows the composition of the Barcelona Traction group of com-
panies as at 31 December 1947), while itself forming part of a group
which appears to be controlled by the Sofina company and, judging by the
Belgium-Luxembourg index in Who Owns Whom (Part I, B.E.13), involves
over 80 closely linked companies. One cannot simply ignore this fact
and argue as if the case concerned the diplomatic protection of an ordi-
nary limited company. The present case is a special one, firstly because
the principal shareholders in Barcelona Traction are companies and
secondly because Barcelona Traction itself is the holding company of a
group of 14 others which it controls either 100 per cent. (nine companies),
or nearly 100 per cent. (four) or 90 per cent. (one). These features have
several legal consequences for the question of diplomatic protection and
for that of the jurisdiction competent to pass judgment on the activities
of the group. The question that has been raised concerns the fate of a
large investment claimed to have been made by the Belgian economy in
Spain, and it is to this question that an answer must be given. When
the times are such that from 1954 to 1968 private investments of the
order of 30,000 million dollars were made, international law cannot
ignore the phenomenon of investment, and it can hardly be claimed that
it did not exist in the critical period of 1948-1952.

5. To facilitate this exposé and simplify its presentation, one funda-

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mental observation is called for with respect to the right of protection
in international law. When the Court defined such protection in the
Nottebohm case, it was in these terms:

“Diplomatic protection and protection by means of international
judicial proceedings constitute measures for the defence of the
rights of the State. As the Permanent Court of International Justice
has said and has repeated, ‘by taking up the case of one of its
subjects and by resorting to diplomatic action or international
judicial proceedings on his behalf, a State is in reality asserting
its own rights—its right to ensure, in the person of its subjects,
respect for the rules of international law...” (Z.C.J. Reports 1955,
p. 24.)

This classic formula is usually held to be an explanation of the role
of the State when acting on the international plane, in relation to the
position of the individual. This view of matters might well originally
have been that called for by the comity of nations as it appeared in the
nineteenth century and, already with evident attenuations, during the
first third of the twentieth century. But since then, and particularly
at the present day, the formula that in defending its nationals a State is
asserting “its own rights” at the international level has acquired a
reality which goes further than the procedural justification of its origin.
Leaving aside the position of the socialist States where the question of
private investments cannot arise and the security of public investments
is obtained by other methods +, and confining our consideration of the
legal nature of international judicial action to States with a liberal
economic system, the economic world today exhibits phenomena of
State intervention in and responsibility for the economic activity of the
subject within the national territory or abroad which are so frequent
and thoroughgoing that the separation of the interest of the individual
from that of the State no longer corresponds to reality.

A few brief illustrations will suffice, since this situation is well known.
To remain in the field of limited companies, the scale on which many
States have acted to preserve the national character of such companies
or regulate the labour problem, the direct aid granted by the State to
encourage investment, and the system of State guarantees against the
risks incurred in foreign countries by domestic companies, are examples
of the way in which the State asserts its “own right” to control the
growth of the national economy, ranging over the whole of the activities
of private undertakings, the results of which enter into the gross national
product. Thus when, in consequence of a risk covered by an export-
credit guarantee, a State undertakes to make good to a domestic com-

1 See ‘‘Observations sur les méthodes de protection des intérêts privés à l’étranger”’
in Mélanges Rolin, 1964, pp. 125-133.

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BARCELONA TRACTION (SEP. OP. GROS) 270

pany any damage caused it by another State within the latter's territory,
it is a financial effort on the part of the national community which
enables this liability to be assumed, through a solidarity based on the
idea that certain exports are necessary for the prosperity of the nation !.
(Cf. likewise the United States legislation providing for the protection
of domestic industries against “actual or potential” threats; the provi-
sions prohibiting the subsidiaries of American companies, wherever
they may be, from trading with certain countries when 50 per cent. or
more of their capital belongs to American shareholders; the Japanese
law of 10 May 1950 authorizing foreign investment “which contributes
to a healthy and independent expansion of the Japanese economy and
to the improvement of the country’s balance of payments ...”.) The
Luxembourg Agreement of 29 January 1966 between the six member-
States of the European Economic Community contains a recognition
of the national character of the “very important” economic interests
of a State (one of the signatories declared that no majority could force
a member-State to take measures which it regarded as contrary to its
national interests). It is clear from all these examples, which are merely
illustrations of a planned industrial society, that it is nowadays out of
touch with the facts of economics to represent the relations between
private investors and the State—whether that of the investor or the
State where the investment is made—as mere relations of municipal law.
Private investment is no longer an isolated operation but a factor in the
national economic growth policy.

6. For the examination of the present case, however, there is no need
to expound the classic theory of planned economies: it will be sufficient
to recall the situation of the Parties at the material time, i.e., in 1948-1952.
In a period when Belgium and Spain were endeavouring to restore their
economies, devastated by the world war or the civil war, a true account
of the economic facts shows that all their resources, like those of other
European States, were at that time mobilized for reconstruction; imports,
exports and transport were State-controlled. Any harm done to essential
elements of the national economy constituted, indeed, harm to the ef-
forts at reconstructing that economy. If, as has been maintained, the
Belgian investment in the Barcelona Traction undertaking in Spain was
so considerable, it formed an element on which the Belgian Government
was entitled to count in its plans for reconstruction (in its final submis-
sions the 1948 value is estimated at 116 million dollars). The effects of
two world wars on the foreign investments of nationals of the belligerent
States are well known: each time funds invested abroad have had to be
liquidated and repatriated.

1 See “‘A Note on Recent Developments and Problems of Export-Credit Gua-
rantees” in Economic Bulletin of U.N. Economic Commission for Europe, Vol. 12,
1960, No. 2, pp. 51 ff.

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BARCELONA TRACTION (SEP. OP. GROS) 271

7. In respect of a period when the economic life of Belgium was ordered
by planning, it is an academic view of the facts that would construe
them in terms of the classic legal relationships which obtained between
individuals and limited companies in a world of liberal economics
that had disappeared by the advent of the world war.

If the economic situation of the Parties at the time of the dispute
be taken into account, the distinction between rights and interests upon
which the Judgment bases its explanation of the position of the share-
holders does not correspond to the facts of the case.

8. The position adopted by the Court is that an individual cannot,
owing to his legal status as a shareholder in municipal law, obtain, in
international law, the protection of his national State in cases of unlaw-
ful acts, attributable to a foreign State, which result in material loss
for the company. I have indicated the reason why the problem before
the Court is a different one: because the relationship between the indi-
vidual shareholder and the company is inextricable from the phenomenon
of overall investment. However, even on the Judgment’s own ground, the
position does not strike me as convincing.

In terms of the reasoning followed by the Court, the problem may
be divided into two: in the first place, is it the status of shareholder
which makes protection impossible or is it, in the second place, the
nature of the damage caused to the shareholder “through” the assets
of the company?

In the present case, the shareholder has been treated in discussion as
a uniform abstract being. But there are in fact at least three categories
of shareholder: the small private investor, largely unfamiliar with the
detailed problems of investment and inclined to leave his investments
undisturbed 1; the speculator, who buys for a quick resale; the business-
man or company that, as shareholders, control the activity of a company
in their own interest, at times with a proportionally small holding (finan-
cial circles speak of 10 per cent.), either by means of their actual presence
in the organs running the company or the banks lending it vital assistance
or by the conclusion of agreements for technical or commercial co-opera-
tion.

There is no essential difference between a shareholder in the first
category whose investment abroad is lost on account of an unlawful
act attributable to the foreign State, and the owner of a deposit of money
or some other property abroad which has disappeared for the same reason.

It therefore remains to be shown that the share is a form of property
right which, for reasons peculiar to the legal régime governing the rela-

1 It is in respect of this category of shareholder that one would tend to concede,
prima facie, a “continuity” in the ownership of Barcelona Traction shares acquired
before 1948, up to 1962. It is also in respect of these individual shareholders that,
despite the particular characteristics of the holding company, the question might
arise of whether direct rights have been infringed, as the Judgment says in para-
graph 47. However, the claim was not concerned with this legal point.

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BARCELONA TRACTION (SEP. OP. GROS) 272

tionships between a limited company and its shareholders, is not pro-
tected. This is the reasoning followed by the Judgment, and I regret that
1 am unable to accept it. For it is based on a conception of the role of
the Court, and of the relationship between international and municipal
law, which may be summarized as follows:

(a) an international court must fall back on concepts of municipal law
when seeking to define the legal relationships between the company
and the shareholder;

{b) municipal law does not comprise any right of action of the share-
holder in behalf of the company;

(c) since such right of action does not exist, the State of the shareholder
cannot invoke its right of protection for what is no more than an
individual financial interest.

9. The premise of this reasoning seems to me as unacceptable as its
conclusions: the renvoi to municipal law leads eventually, in the present
case, to the establishment of a superiority of municipal over international
law which is a veritable negation of the latter. It may happen, in certain
cases, that the only problem to be decided is that of whether a rule of
municipal law is in conformity with a treaty rule, and that it is necessary
for the purpose to interpret municipal law as it stands. But here we
have a different situation, one in which a denial of justice is alleged to
have been committed against foreign nationals, both the company
itself and the shareholders. To consider as a ground for exonerating a
State from international responsibility for an alleged denial of justice the
fact that its municipal law, or some systems of municipal law, do not
feature a shareholder’s right of action is not admissible; any more than
the absence of municipal rules on the responsibility of the State for
damage caused by the legislature, administration or judiciary is taken
into account by international law.

10. In the present case, the rules of municipal law are nothing more
than facts in evidence, and they deserve the same attention as the other
facts, and the same rigour in their interpretation, but no more. The
Court does not have to apply the rules of municipal law, as a municipal
court of last instance would, to the relationships between the company
and the shareholder; it takes account of them as being facts for the
purpose of its appraisal of the legal situationlaid before it by Parties
and in order to see whether that situation as a whole is in conformity
with the rules of international law or not. It is the latter rules which for
an international tribunal go to constitute the reasons of its decision.
It is therefore not enough to say that since a given municipal legal
system creates a certain legal relationship, an international tribunal is
obliged, on account of renvoi to municipal law, to accept that relation-
ship as possessing the same legal cogency. The international tribunal
takes this legal relationship as an established fact and tests it against the
rules of international law. This holds good in the present case for the

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relationship between the shareholder and the limited company, which
we will examine further below.

11. First, an observation with regard to the limited scope of the
Judgment. If it is true that between 1948 and 1952, at the time of the
acts complained of whereby the investment in question changed hands
from the viewpoint of Hispano-Belgian relations the legal system of neither
country contained any provision generally enabling a shareholder to act
in place or in behalf of a limited company, that is not a generally accepted
rule. Suffice it to refer to the provisions of the French law of 24 July 1966,
which institutes for a minority of shareholders a mechanism enabling
them to participate in controlling the way a limited company is run,
as well as an action for the reparation of damage sustained by the com-
pany (Articles 226 and 245) 1. The result finally produced is that the
position of the shareholder as regards the exercise of diplomatic protec-
tion would depend in each case on the existence of provisions of municipal
law; if, in a given case of investment abroad, one of the States in question
allowed shareholders an individual right of action, that would be sufficient
to preclude basing on the renvoi theory any finding that the State had
no capacity.

12. If the renvoi method is not applicable in the present case and
if the provisions of municipal law are merely factual data, the complaint
that the shareholders in a limited company were despoiled must be judged
in terms of the rules of international law applicable to foreign invest-
ments in the territory of a State, and it would appear that, as between
two European States such as Belgium and Spain, on the critical dates no
less than at present, a total loss of assets that results from acts described
as unlawful and is wholly unindemnified, which amounts to confiscation,
constitutes a grievance justifying a claim to establish international
responsibility. The protocol of 20 March 1952 to the European Conven-
tion on Human Rights declares:

“Article I: Every natural or legal person is entitled to the peaceful
enjoyment of his possessions. No one shall be deprived of his
possessions except in the public interest and subject to the conditions
provided for by law and by the general principles of international
law... .”” (My italics.)

Although Spain is not a party to that convention, there can be no
doubt but that it accepts its content. The least that can be said is that
here is a general principle of law which loses none of its binding force
through being restated in the 1952 protocol; irrespective of any treaty
provisions, it is directly opposable to Spain. Investment consists of a
decision to assign assets to a productive activity; it does not, merely

1 Likewise the Swedish company-law of 1944, revised in 1948, provides a right of
action for a 10 per cent. minority of shareholders (Art. 129); there are similar pro-
visions in Norwegian law (Art..122 of the 1957 company-law) and in Articles 122-124
of the corresponding law of the Federal Republic of Germany.

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BARCELONA TRACTION (SEP. OP. GROS) 274

because it takes place in a foreign country, thereby turn into a vulnerable
form of property subject to confiscation without redress, when it enjoys
secure protection from unlawful acts if carried out within the national
territory. The opponents in the present case are two States whose econo-
mic and legal conceptions are the same; any reference to different legal
systems is the less acceptable that, generally speaking, they exclude resort
to an international court, with the result that their rules cannot be sub-
jected to the examination of such a tribunal. I would add that it is para-
doxical, to say the least, to invoke the protection of human rights in
the name of universality while at the same time excluding from it the
protection of property from unlawful acts in the name of a particular
way of thinking which contests that right.

One cannot but observe how an industrial undertaking which nobody
ever claimed to be Spanish before 1948 became Spanish, against the will
of the corporate organs of Barcelona Traction, as a result of acts charac-
terized as a denial of justice both overall and in detail. In fact the
undertaking is today incorporated into the economy of Spain by a sort
of “nationalization” which, if it was effected by a misuse of legal proce-
dure, constitutes a breach of international law as between the Parties.
It is clear that any nationalization of a regular kind would have been
accompanied by compensation. The fact that negotiations between the
private groups involved, halted the first proceedings also shows that the
Spanish private group accepted in principle that some compensation
should be provided. I find it hard to see how it could be claimed that,
as between the Parties, an irregular confiscation would not be a breach
of international law, on the sole ground that in municipal law the share-
holder, as such, would have no direct remedy. That is really to displace
the problem rather than solve it.

13. If the view that it is impossible to take international proceedings
in behalf of the shareholders in a limited company cannot be justified
by a renvoi of the question to a system of municipal law from which
a shareholder’s right of action is absent, it remains to examine the
second reason advanced for finding that the State of which the share-
holders are nationals lacks capacity to institute proceedings.

It has been maintained that the shareholder cannot sustain direct
damage: the damage is always to the company; it is true that the share-
holder’s personal finances might be adversely affected, but only “‘on the
rebound”. Here we once again come up against the theory based on
certain systems of municipal law as they stood in the early stages of
limited-company legislation, explaining the latter by the idea that the
shareholder confides his investment to the company for better and for
worse, and must accept all the risks without having any right to the
protection which the holder of a bond enjoys. As applied to the small
private investor, this theory is incorrect in its economic justification,
but it is even more incorrect as regards the majority of large companies
in the modern economic scene—and this was already true in 1948. The

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BARCELONA TRACTION (SEP. OP. GROS) 275

shareholder no longer plays any useful part in controlling the manage-
ment of the company via general meetings, for “‘we observe that the
board of directors has entirely confiscated the power of the general meeting
and become to all intents omnipotent” (A. Tunc, in Travaux et conférences
de l’Université libre de Bruxelles, 1959, p. 11) !.

The theory in question, therefore, bases the refusal of shareholder
protection on a reason which is today incorrect, because the “legal
pature” of the relationships between the company and the shareholder
now has scarcely anything in common with the legislative texts of the
early nineteenth century. It is inadmissible for the legal analysis to ignore
the economic facts; the shareholder-bondholder contrast is now meaning-
less if the situation of the State in relation to the company be envisaged.
The various guarantees that the State gives the shareholders no less than
the company by its protecting interventions (advancing credit in the event
that an undertaking be threatened with closure) are the very negation of
the notion of risk. Investment is an instrument of general economic policy.
But the theory of the financial risk to be borne by the shareholder must be
ruled out for a reason deriving from the above-mentioned idea that the
situation created in international law by a confiscation characterized as
unlawful cannot be ignored on the sole ground that shareholders must ac-
cept all the risks. That is to proceed as if the substantive issue had been
settled, for if there has been unlawful confiscation, there has been a
breach of international Jaw. Foreigners are not, just because they are
shareholders, bound under international law to run the risk of seeing
their investments disappear as a result of unlawful acts. The shareholder’s
risk is a financial one, not a risk of subjection to unlawful treatment.

14. The international-law situation which must be taken into account
in the present case is made up of a series of acts on the part of one State
which have been described as unlawful, and of their effects upon invest-
ments made by the nationals of another State. To affirm that the share-
holder is always a speculator who must shoulder every risk, on the
strength of an explanation that no longer corresponds to prevailing
corporation law, not only constitutes, on the international plane, an
irrelevant submission vis-a-vis a State complaining that, via its nationals’
investments, its general economy has been damaged by an act described
as unlawful, but also leaves out of account the rule of international law
which prohibits confiscation without compensation *.

1 With regard to the United States, see J. K. Galbraith, The New Industrial
State, London, 1967, p. 403:

“For many years those who specialize on the problems of the corporation
have been much concerned with the way control in the large firm has been
passing without recourse from stockholders to the hired management. The
latter, as sufficiently noted in this study, selects itself and its successors as an
autonomous and self-perpetuating oligarchy.”

of course one must not forget the efforts made by certain countries to remedy this
situation by legislative means: cf. paragraph 11 above.
2 Modern bankruptcy law has evolved to no less an extent than corporation law,

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BARCELONA TRACTION (SEP. OP. GROS) 276

15. In the analysis based on municipal law, it is indeed ‘stated that the
damage at all events is never “‘personal” and proper to the shareholder,
but solely damage sustained by the company; this makes it possible to
maintain that there has been no damage suffered by the shareholder, and
therefore no confiscation. Here again, even if the standpoint adopted is
that of municipal law, abstraction must not be driven too far: a limited
company is always an assemblage of persons who do not vanish with the
attribution of a corporate personality, the raison d’étre of. which is to
facilitate the running of the business. The shareholders form the company,
and the Judgment recognizes the possibility of action by the State of the
shareholders when the company has disappeared. In the present case the
company has been entirely deprived of the means for pursuing its corpo-
rate objects and, from the point of view of the shareholders, this produces
the same effects as a disappearance of the company. The shade of differen-
tiation is therefore a matter of form or rather of formality. As from 1952
the corporate objects of the Barcelona Traction group have been void of
meaning {.

If a shareholder were to claim compensation for the loss of profits of a
company whose activities had come to an end, he would be demanding a
kind of “functional” protection, a guarantee of the right to trade abroad,
which, if it existed by virtue of a treaty or of general international law,
could be invoked only by the State in whose territory the company is
incorporated and to the economy of which it is linked. But when share-
holders ask for compensation for their investment and what it represented
on the date of the damage, on the ground that the company is no longer in
a position to continue its operations, the fact that this damage, by the
totalling of the damages sustained by all the shareholders, is also the
damage done to the company does not seem to be relevant, leaving aside
the problems of assessment and apportionment. The damage to the
company is that it is destroyed; the damage to the shareholders is that they
are injured in respect of their property through the destruction of the

so that the proceedings in the present case can be seen to have developed on ana-
chronistic lines. It is nowadays the tendency to rescue the enterprise no matter
what the faults committed by its officers and the penalties to which they are liable.
See M. Houin’s account of the matter in Idées nouvelles sur le droit de la faillite,
1969, pp. 122 ff. Suffice it to observe that the judge chooses between the liquidation
of the assets (bankruptcy) and judicial settlement (composition) in accordance with
an economic yardstick: the chance of bringing the enterprise back to normal.
Furthermore, French legislation has set up special machinery for preventing the
failure of important undertakings whose disappearance would be likely to result
in grave perturbations for the national economy (Ordonnance of 23 September
1967).

1 The argument using the fact that Barcelona Traction shares have recently been
transacted to prove that the company is still active is unconvincing. A few purchases
or sales are enough to keep certain loan-stock, unpaid for over half a century,
quoted on some exchanges. When it is said that the shareholder has the right to
dispose of his share, this certainly means to dispose of it under normal conditions,
which—apart from a few speculations on the outcome of the present case before the
Court—is no longer true in respect of Barcelona Traction.

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BARCELONA TRACTION (SEP. OP. GROS) 277

investment; the damage suffered by the State of the shareholders is that
one component element of the national economy has undergone spolia-
tion. The cause of the responsibility is in all cases the unlawful act of the
State, and the action for the protection of the shareholders cannot be
described as an intervention in the domestic affairs of that State, as has
sometimes been alleged, unless it is claimed that denial of justice does not
come within the purview of international law. The point that there should
not be any double reparation, on the one hand for the company and on the
other for the shareholders, denotes a very understandable concern for fair
play. Nevertheless, intellectually and juridically, the individualization of
the damage remains a possibility.

Finally, the Judgment’s view which admits the possibility of action by
the State of the shareholders in the event of the disappearance of the
company is lacking in logic for, in such an eventuality, if the company’s
State had started an action it could not be nonsuited through the disap-
pearance of the company. And even if such action had been instituted
after the disappearance of the company, it is difficult to see why the State
of the company should be unable to make a claim in respect of the
unlawful act which was the root cause of the disappearance. If then, in
this case, both States can act, does this not mean that the general rule
conferring the right of action on the State of the company is not an
exclusive rule?

16. Let us now return to the argument of the financial risk that must be
borne by the shareholder: the shareholder is not injured in respect of his
“rights”, but only in respect of an economic interest which is not legally
guaranteed and not entitled to diplomatic protection or recourse to
proceedings. If a partnership were involved, those very persons who refuse
the idea of protection of the shareholder admit that protection would be
possible, but we are told that, as a shareholder does not enjoy any right
over the company, he has merely an interest in its optimum functioning.

In the first place, this is again to erect definitions taken from certain
municipal systems of law into a rule of international law; this is para-
doxical in the present-day world, when two-thirds of the population live
outside the capitalist system and the legal rules to which the Parties
adhere. The principle asserted must therefore be demonstrated to form a
veritable rule for States with a liberal economic system, one accepted by
them as a rule of regional international law. Such is patently not the case,
as is shown by diplomatic practice and arbitration. Moreover, we must
recall the numerous agreements, which were concluded precisely in the
period when the dispute arose, by which minority holdings in companies
were indemnified at the request of the State of which the minority share-
holders were nationals (the agreement of 19 March 1948 between France
and Poland, for instance). In the conventions concluded by Switzerland
with Hungary on 19 July 1950, with Romania on 3 August 1951 and with
Bulgaria on 26 November 1954, compensation is granted even to the
holders of single shares. It seems to me impossible to dismiss these agree-

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BARCELONA TRACTION (SEP. OP. GROS) 278

ments with a stroke of the pen, in particular those of Switzerland, which
are not peace settlements imposed by a victorious State; it is not the habit
of States to make each other free gifts +, and the number of agreements for
the compensation of shareholders considered apart from the limited
company does imply the recognition of an obligation.

17. In the current ethos the limited company is simply a means of
investment in the industrial economy. The State, now having scarcely any
property of its own?, supervises and directs the activities which go to make
up the gross national product, by drawing up the economic policy of the
nation. The supervision requisite to make sure that the components of the
national economy are maintained in normal working conditions, and in
particular to prevent their disappearance as a result of decisions contrary
to law, constitutes one of the normal functions of the State, and takes the
form of anticipating, guiding and assisting at the time of the decision to
make the investment, and of protecting in case of need after the investment
has been made. Investments which have made possible the creation or the
development of an enterprise abroad are as essential to the national
economy as investments which are made within the national territory.
The action of the State for the purpose of protecting a component item of
the national economy is a natural feature of the economic society of which
Belgium and Spain formed part at the time when the dispute arose.

18. It would be a distortion of this argument to claim that it leads to
the recognition that, in all circumstances, every shareholder has the right
to secure the protection of his State in respect of any act which has in-
flicted damage on the limited company itself. In the first place, the present
opinion has been directed towards showing that, while accepting for the
sake of argument the renvoi to systems of municipal law, the alleged legal
obstacles to the exercise of a right of protection of shareholders, as such,
were not insuperable even within this legal framework. It is not the case
that the legal characteristics of the bond between the shareholder and the
company do not permit the State to act; neither is it the case that the

1 In the Hammaken case (U.S.A./Mexico, Moore, International Arbitrations,
Vol. IV, p. 3471) the umpire rejected the argument by the agent of Mexico that a
sum of $100,000 allowed by Mexico on account of the cancellation of a concession
was only an ex gratia donation: “‘if the [Mexican Government] did not think that
the wrong had been done by the Mexican authorities, it would not have agreed to
grant compensation...”

In many cases the respondent State prefers to pay an indemnity rather than to be
declared responsible for the damage; hence the conventional reference to payments
‘in equity”, ‘‘without admitting any legal obligation”, ‘‘without reference to the
question of liability” (cf. Moore, International Law Digest, Vol. VI, in particular
with regard to the lynching of Italians in Colorado (p. 841) and at New Orleans,
and the lynching of Chinese at Rock Springs (p. 830)). But these forms of words do
not remove the problem of the imputation of international responsibility.

2 When, in liberal economies, public bodies buy stock in companies and become
shareholders, are they to be deprived of the protection of the State? (The Industrial
Reorganisation Corporation in the United Kingdom; the Institut de développement
industriel in France.)

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damage done to the company necessarily rules out the possibility of there
being a damage proper to the shareholder in respect of which the State
may intervene; neither, lastly, is it the case that the State of the share-
holders possesses no right of its own to seek to preserve the component
items of the national economy. In fact there are no legal obstacles to such
protection; there are only necessary dispositions, precautions to be taken
so as to-reach a reasonable solution in each case.

In the second place, the view that investments may be defended
by the State whose national economy is adversely affected is subject to
limitation by the terms of that very definition. The investments in
question must be connected with the national economy (and therefore not
an ephemeral transaction in securities) and there must have been an
unlawful act involving the responsibility of a State. The only problem is
that of deciding in each case how to co-ordinate the protections possible,
that of the company and that of the shareholders.

19. To apply this reasoning more specifically to the case, there is a
complaint of denial of justice, the claim that an industrial undertaking
was made to change hands by procedures that are described as unlawful,
and therefore a problem of violation of international law. The substance
of the obligation invoked against the Spanish Government is the obligation
to respect the investments of Belgian nationals and to protect them from
unlawful acts: this is a general obligation incumbent upon States in the
conduct of their econemic relations. The Belgian Government’s capacity
to institute proceedings corresponds to the right possessed by every State to
secure the respect of that obligation, when the investments of its nationals
constitute an important part of the national economy. The foundation of
a rule of economic international law must abide by economic realities.
The company’s link of bare nationality may not reflect any substantial
economic bond. As between the two criteria the judge must choose the
one on the test of which the law and the facts coincide: it is the State
whose national economy is in fact adversely affected that possesses the
right to take legal action.

*
* *

20. In the present matter one must seek to ascertain what is reasonable
both on the legal plane and on the plane of economic realities. When a
limited company has been set up, it may be granted that the shareholder
is, in principle, defended by the company, subject to the remarks above as
to the three categories of shareholder and the special character of holding
companies.

Accordingly, the State which has the right to protect the Barcelona
Traction investment would be Canada, and that, according to the Judg-
ment, is what both Parties have admitted. But that is a proposition which
must be verified, just as any contention made by a State which brings an
international claim before a court must be verified, to make sure that it

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really corresponds to the facts. The issue here relates to certain invest-
ments which have suffered serious damage; who has been harmed? If any
property suffers damage, reparation should be sought by the State with
which the property is genuinely linked. Now, supposing that Canada had
intervened before the Court in order to be recognized as having an interest
of a legal nature, relying on Article 62 of the Statute, Spain would not
have failed to object that there were not in Barcelona Traction any
substantial or genuine Canadian interests. It is of course inevitable in
complicated cases that parties should commit self-contradictions, but it
would be regrettable if the Court were indirectly to recognize these as
possessing significance. There is indeed a major reason why no account
should be taken of the statements made by the Parties concerning the
Canadian character of the company. The example of the right to intervene
provided for in Article 62 is to the point: if Canada had intervened, even
an agreement between the two Parties by which Canada were recognized
to have a legal interest as being the national State of the company would
not have dispensed the Court from examining the question whether
Canada really had a legal interest, for Article 62 says that “It shall be for
the Court to decide” whether an intervention is justified, and it seems to
me that, in the matter of jurisdiction, the Court cannot content itself
with taking note of an agreement between the Parties concerning the
existence of a legal interest on the part of a third State which is absent
from the proceedings. The legal interest of Canada either exists or does
not exist; it is not for third States to create it, and the most they could
have done would be to recognize this legal interest so far as their positions
in the present case were concerned, without such recognition having for
the Court any effect whatever in regard to the obligation laid upon it by
its Statute to verify its own competence.

21. It is therefore an obiter dictum void of judicial significance to assert
at the present time the Canadian nationality of the Barcelona Traction
company. That Canada did in fact act at the diplomatic level for a certain
time, that it proposed arbitration, these are not reasons for recognizing
its right to institute proceedings; it is not enough to claim a right to be
recognized as possessing it. All litigants make claims and one is always
the loser, and, his claim having been dismissed, he finds that he did not
have a right. A holding company whose capital is apportioned among
shareholders of several nationalities and of which the object is to operate
an industry abroad cannot be governed by one system of municipal law in
respect of all the problems concerning it (cf. paragraph 29 below). And
the question of which municipal law is applicable to a specific problem is a
matter for international law. That is what underlies the problem of the
“nationality” of companies. The assertion by a State that it has juris-
diction over a company is nothing but a claim so long as it has not been
admitted by all the States directly concerned in that situation or by an
international judicial decision.

22. It has not been established that Canada has capacity to institute

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proceedings in behalf of Barcelona Traction, since that company was
Canadian in appearance only ! and since, in the economic sphere, the
protection of investments must conform to the reality of the connection.
The decision regarding Nottebohm, an individual, which tacitly left the
case of companies open, can be applied with even greater reason to
companies, for the connecting factor of economic interest, as between
investments and the State from which they really come, is essential, as
has been stated above 2. It is even more true of investment via a limited
company than of an individual or a ship that it cannot be given considera-
tion at the international level unless the State which puts forward the
claim has suffered a damage to its national economy; when there are
several States with which a company has a genuine connection, a compli-
cation may arise, but that is not the case of all limited companies engaged
in activities abroad and the Court is not called upon to deliver a judgment
laying down the law for the protection of limited companies in general.

23. One final observation must be made concerning the attitude of
Canada ever since the proceedings were brought. If Canada had felt any
interest in the case ithad means so to inform the Court, without having to
intervene and run the risk of judicial rejection of its intervention. In the
Corfu Channel case various documents were proposed to the Court by the
Yugoslav Government, which was not a party to nor intervening in the
proceedings, and they were finally submitted to the Court by the Albanian
Government following a decision taken by the Court on 10 December 1948
(1.C.J. Pleadings, Vol. II, p. 190; see also the Judgment on that case, with
regard to this point: C.J. Reports 1949, p. 17). In the present case, any
Canadian document relating the course of diplomatic protection by Can-
ada and giving the exact views of the Canadian Government could have
been furnished to the Court by the same procedure. Yet, on the contrary,
the elliptical answer returned by the Canadian Government on 24 June
1969 to the question put by Members of the Court did not supply any
clarification (New Documents Nos. 44 and 45 submitted by the Belgian
Government). On this point I would refer to paragraphs 19 ff. of the
separate opinion of Judge Jessup.

24. Although the Court has rejected the possibility of considering any
analogy with the Nottebohm case, it seems to me that the Nottebohm

1 Notwithstanding the references in the Judgment in paragraph 71 to various
points of connection with Canada, I agree with the observations made by Judge
Jessup in paragraph 49 of his separate opinion (in particular the footnote thereto).
Those really in control of Barcelona Traction do not seem to have featured any
genuine connection with Toronto.

2 The distinction between seeking a genuine connection in favour of or against a
company is devoid of legal significance. No party is ever either favoured or penalized
by the law, because of the fundamental principle of equality before the law. The
purpose of seeking the reality behind appearances is to discover the true legal
situation underlying the forms adopted. The bringing of truth to light is not inspired
by any favourable or unfavourable attitude towards one of the elements of the
problem but by the needs of the process of ascertaining the law.

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Judgment does establish a relative standard and does not go further than
the rule already recalled: “each case must be considered on its individual
merits.” Thus, even without any need to rely on that Judgment, the
particulars of the present case are such as to place in the forefront of
the matters which the Court should have investigated the problem of the
real provenance of the investments in question. The theory of the genuine
connection implies comparison between Canada, Belgium and Spain—
and perhaps other States—, and inquiry into the concentration of the
undertaking in Spain, the problem as to whether the real control lay with
the organs of Barcelona Traction or elsewhere, and the reality of the
Belgian investment. As the Court did not in fact consider these verifica-
tions to be necessary, it is difficult to give any final opinion concerning the
real connection of Barcelona Traction with any national economy, but the
documents in the case do permit of a few conclusions.

25. The connection with the national economy of Canada is certainly
not the most conspicuous, for the undertaking has never appeared to
constitute a factor of production in that economy.

The connection of Barcelona Traction with the Spanish economy can-
not be disputed so far as the factor of the production of goods and services
in Spain is concerned. The company concentrated all its activities in
Spain, and its subsidiaries, Spanish companies all but three, were under
its absolute control, so that it may be considered that the Barcelona
Traction group as an integrated enterprise formed a component in the
Spanish national production. But although this aspect of the matter may
have legal consequences, more particularly in respect of certain problems
of jurisdiction, it has none whatsoever for the purpose of ascertaining
with which State the foreign investments underlying the creation and
development of the enterprise are truly connected. It has not been estab-
lished that these investments were mainly Spanish. There is therefore,
from the standpoint of the law applicable to the investments, no genuine
connection with the Spanish economy.

26. The connection with the Belgian economy has been made the
subject of exhaustive commentary by Judge Sir Gerald Fitzmaurice and
Judge Jessup. For the sake of brevity, I will merely say that I do not feel
proof has been supplied that the investments in question belong to the
Belgian economy in the sense of the view propounded in this opinion.

In this case, proof has not been supplied in a manner satisfying for a
court that Barcelona Traction, in continuous fashion, predominantly—or
even substantially—represented an investment on the part of the Belgian
economy. While it was possible to furnish prima facie evidence that over
certain periods, in terms of origin of capital invested and of actual control
of industrial and financial operations, the Belgian economy was more
involved than others, the observations made by Judge Jessup in para-
graphs 72-98 of his opinion show that the same has not been proved true
of the period after 1940, more particularly during part of the critical period.
Neither was it possible to demonstrate a predominant, constant and certain

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connection with the Belgian economy on the basis of an inspection of the
company-group of which Barcelona Traction forms part.

To claim the right to protect investments, the presumption that Belgian
interests existed is indeed not enough; what is needed is to prove a
genuine connection with the economy during a continuous period, thus
enabling it to be said that appurtenance to the State in which the company
was incorporated is not in line with economic realities. If it is possible to
verify the genuineness of the seat, that cannot be for the purpose of
substituting one presumption for another. In all cases of this kind, it is
naturally difficult to pinpoint effective appurtenance to a particular na-
tional economy, but the fault does not lie in any inadequacy of legal
rules: it lies in the very features of a complex undertaking. Within the
ramification of companies in such a group it is perhaps possible at a given
moment, and with reference to a given operation, to determine with what
national economy that operation is connected; it is not certain that this
will be possible for the whole of the group’s operations, especially not
with regard to long periods during which there will have been changes in
stockholdings, control and management. But each case raises its own
particular problem and it would not, conversely, be difficult to refer to
company-groups which, despite their complexity, are incontestably con-
nected with a given national economy.

27. There is therefore no reason to treat company-groups as stateless
and deprive them of all protection at the level of international law; it is not
unlawful either in municipal or in international law to set up such
groups, and the problems to which they give rise are in no way different
from those arising out of the commercial, financial or industrial operations
carried out by other corporations. The difficulty of determining the con-
necting link creates a complication, not an incapacity. What is hecessary
is to ascertain in each case whether the investment in question is, in fact,
connected with a particular national economy and whether the national
economic prosperity of the claimant State has been harmed by the un-
lawful act which directly affected the company. When several economies
are affected, this produces a situation which is familiar in international
law and is resolved by the acknowledgment of an obligation to negotiate
(cf. the agreements nowadays concluded among several creditor States vis-
a-vis a debtor State).

That the connection should be genuine is a necessary condition for the
protection of a corporate person no less than for that of an individual,
and in its absence the link with the State is fictitious and does not confer
capacity to institute proceedings. Finding that proof of Barcelona
Traction’s appurtenance to the Belgian economy has not been produced,
whether on account of the internal organization, of the group or for other
reasons, I am obliged to conclude that the claim must be dismissed.

*
* *

28. I would add that there is another ground on which I would con-
sider the dismissal of the claim justified, but as the Court has not dis-

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cussed the matter I can do no more than allude to it. Within the limits of
a separate opinion on a point not settled by the Judgment and not
deliberated, I must needs be brief '. Nevertheless the matter is of sufficient
interest and priority to justify an outline of my reasoning.

The fact that a State may invoke the right to protect its nationals who
are shareholders in a company does not exempt the company from the
obligation of exhausting the local remedies available for the rectification
of the situation complained about. Barcelona Traction ought to have
entered a plea of opposition to the judgment declaring bankruptcy within
the legal time-limit, and there are no reasonable grounds for deciding
that the company’s failure to enter such opposition within the time-limit
does not form a bar to the institution of proceedings on the international
level. As Sir Hersch Lauterpacht wrote in his separate opinion on the
Certain Norwegian Loans case: “however contingent and theoretical
these remedies may be, an attempt ought to have been made to exhaust
them” (/.C.J. Reports 1957, p. 39). As it happens, at the time when the
Reus judge gave his decision, there was nothing to justify the contention
that the remedy of opposition was merely theoretical. Generally speaking,
in bankruptcy law the bankruptcy judgment divests the bankrupt as soon
as it is delivered and before any publication; the rule is perhaps too
rigorous but there are reasons for it with which specialists in commercial law
are familiar, and that effect was at all events a feature of Spanish law
in 1948 *. Even if it had been intended to maintain that this rule was con-
trary to a general principle of law, it was necessary to enter opposition to
the judgment while expressing the necessary reservations as to the lack of
notification; this complaint ought indeed to have been laid in the first
instance before the local judge so that he could rule upon it and, if need
be, rectify the situation. Whether it be Spanish law or international law
that is considered to have been violated, it is necessary to request the
local courts to look into the matter and allow them the opportunity of
correcting any mistake.

29. The necessity of entering a plea of opposition becomes still more
evident when it is observed how the concentration of the industrial under-

1 I consider that this point of principle remains governed by the observation of
President Huber in July 1926 (P.C.LJ., Series D, addendum to No. 2, p. 15) and the
resolution adopted by the Permanent Court of International Justice on 17 February
1928 (Stauffenberg, Statut et Réglement de la Cour permanente de Justice inter-
nationale, p. 414). When a point of law has not been retained, in application of
Article 4 of the Resolution concerning the Internal Judicial Practice, as one which
should be decided by the Court, any observations thereon that a judge may make
are precluded from possessing the character of judicial pronouncements.

2 There is nowhere to be found in the different legislations of the same legal
system, at that time, any provisions concerning publication which are such that
they enable the existence to be deduced of a general principle of law the infringement
of which would ipso facto render the entire proceedings null and void. And if it be
held that failure to publish the judgment at the bankrupt’s place of domicile con-
stitutes a breach of Article 1044 (5) of the Spanish Commercial Code, then it is to the
Spanish courts that complaint must first be addressed in this regard.

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taking in Spain lends colour, prima facie to, the Spanish assumption ofjuris-
diction, on considering the jurisdiction problem in general and quite apart
from the petition for bankruptcy on account of failure to honour bonds.

The corporate purpose of the undertaking is to develop the hydro-
electricity industry in Spain, and the electric railway and tramway system
in the city and province of Barcelona (cf. Moody’s Public Utility Manual,
1968, p. 2067). No area other than Spain is contemplated for hydro-
electric development, and in fact Barcelona Traction never undertook
works in any other country; its subsidiaries operated electricity produc-
tion and distribution systems in Barcelona, Catalonia “and the industrial
cities of Tarrasa, Tarragona, Reus” (sic) “and Tortosa” (ibid.: it should
be noted that these details are based on information supplied by the
company; see the paragraphs “Property Seized” and “Assets in Spain
sold”), In these circumstances, the absence of publication in Canada can
be seen in a particular light; furthermore, the considerations set forth in
a number of separate opinions concerning the genuineness or otherwise
of the company’s headquarters in Toronto could have been adduced by
the Spanish judge, who could also have invoked the judicial precedents
of certain States, where foreign companies which have a branch, have
carried on business, issued bonds or entered into contracts within the
national territory have been adjudged bankrupt !. It should be noted that
the courts of certain States have declared bankruptcies for non-repayment
of loans, when a businessman has called on credit in their territory,
though that is an exceptional circumstance. The claim to possess a certain
jurisdiction over the activities of the Barcelona Traction group in Spain
was consequently not, a priori, illegitimate, though this does not imply the
legitimacy of all the measures for the execution of the bankruptcy, or of
the actual petition made to the Reus judge. But the state of the law con-
cerning the bankruptcy of foreign companies was not, at the time of the
facts, such as to justify any abandonment by the company of the remedies
open to it.

After the passage of many years and countless proceedings, it is not
easy to recover the standpoint of the time when the act complained of
occurred, but that is what has to be done in utter objectivity, and in that
light it will be seen that a plea of opposition to the declaration of bank-
ruptcy ought to have appeared to the company as an immediately
available and practicable remedy.

(Signed) André Gros.

1 In several European legal systems a debtor can be declared bankrupt by the
courts of a country in which he carries on a secondary occupation or possesses
assets (Article 9 of the Italian, Article 2 of the Netherlands and Article 238 of the
Federal German laws concerned), or if he is in debt there (French case-law). Some
doubt is thrown on the character of Barcelona Traction as a holding company
by direct activities in Spain (cf. hearing of 14 July 1969).

286