161

1.

SEPARATE OPINION OF JUDGE JESSUP

T agree with the majority of the Court that the Belgian claim must be

dismissed, but since I reach that conclusion by different lines of reasoning,
I feel it is incumbent on me to explain what my reasons are.

2.

I regret that the Court has not considered it appropriate to include

in its Judgment a wider range of legal considerations. For my part, I share
the view of the late Judge Sir Hersch Lauterpacht, ‘“‘that there are com-
pelling considerations of international justice and of development of
international law which favour a full measure of exhaustiveness of judicial
pronouncements of international tribunals’ (Lauterpacht, The Develop-
ment of International Law by the International Court, Revised Edition,
1958, Chapter 3, p. 37). Sir Hersch went on to say (at p. 39):

3.

“The administration of justice within the State can afford to rely on
purely formal and procedural grounds. It can also afford to dis-
regard the susceptibilities of either of the parties by ignoring such of
its arguments as are not indispensable to the decision. This cannot
properly be done in international relations, where the parties are
sovereign States, upon whose will the jurisdiction of the Court
depends in the long run, and where it is of importance that justice
should not only be done but that it should also appear to have been
done.”

Six months after he wrote the Preface to that important book,

Judge Lauterpacht put his preachment into practice in his separate
opinion in the Certain Norwegian Loans case, wherein he wrote U.C.J.
Reports 1957, p. 9 at p. 36):

162

“In my opinion, a Party to proceedings before the Court is entitled
to expect that its Judgment shall give as accurate a picture as pos-
sible of the basic aspects of the legal position adopted by that Party.
Moreover, I believe that it is in accordance with the true function of
the Court to give an answer to the two principal jurisdictional ques-
tions which have divided the Parties over a long period of years and
which are of considerable interest for international law. There may
be force and attraction in the view that among a number of possible
solutions a court of law ought to select that which is most simple,
most concise and most expeditious. However, in my opinion such
considerations are not, for this Court, the only legitimate factor in
the situation.”
162 BARCELONA TRACTION (SEP. OP. JESSUP)

4. In Interhandel (f.C_J. Reports 1959, p. 6), the Court had before it
four preliminary objections advanced by the United States. (One notes in
passing that Interhandel, like Barcelona Traction, was a case involving a
holding company and complicated corporate stock interests.) In its
Judgment, the Court found it appropriate to record its view on all four
preliminary objections. By nine votes to six, the Court upheld the third
preliminary objection to the effect that Switzerland had not exhausted
the local remedies available to it in the United States. Since the case was
disposed of on this ground, it could be argued that the Court should not
have ruled in its Judgment on the other three preliminary objections.
However, the Court held: by ten votes to five, that it rejected the first
preliminary objection; unanimously, that it rejected the second pre-
liminary objection; by ten votes to five, that it was not necessary to
adjudicate on part (a) of the fourth preliminary objection; by fourteen
votes to one, that it rejected part (b) of the fourth preliminary objection.

Judge Sir Percy Spender, in his separate opinion, and President Klaestad
and Judge Sir Hersch Lauterpacht in their dissenting opinions, felt it
necessary also to deal with part (a) of the fourth preliminary objection
on which the Court declined to rule, because that objection dealt with the
important issue of the self-serving or automatic reservation of the United
States to its declaration accepting the jurisdiction of the Court.

5. In the Arbitral Award Made by the King of Spain on 23 December
1906 (I.C.JT. Reports 1960, p. 192), Judge Moreno Quintana in his declara-
tion (p. 217) stated that while he was in agreement with the decision, he
believed that a number of “legal questions which are of particular con-
cern...should have been dealt with in the first place”. He listed the
questions which he had in mind and on which the judgment failed to pro-
nounce.

6. In the Temple of Preah Vihear case (I.C.J. Reports 1961, p. 17), the
Court in its Judgment said that the reasons it gave for upholding its
jurisdiction made it unnecessary to consider Cambodia’s other basis for
asserting jurisdiction or Thailand’s objection to that basis. In the joint
declaration of Judges Sir Gerald Fitzmaurice and Tanaka (pp. 36, 38),
one reads:

“As regards the second preliminary objection of Thailand—
whilst we are fully in agreement with the view expressed by Sir
Hersch Lauterpacht in the South West Africa—Voting Procedure
case (U.C.J. Reports 1955, at pp. 90-93) to the effect that the Court
ought not to refrain from pronouncing on issues that a party has
argued as central to its case, merely on the ground that these are not
essential to the substantive decision of the Court—yet we feel that
this view is scarcely applicable to issues of jurisdiction (nor did Sir
Hersch imply otherwise). In the present case, Thailand’s second

163
163 BARCELONA TRACTION (SEP. OP. JESSUP)

preliminary objection was of course fully argued by the Parties. But
once the Court, by rejecting the first preliminary objection, has
found that it has jurisdiction to go into the merits of the dispute...
the matter is, strictly, concluded, and a finding, whether for or
against Thailand, on her second preliminary objection, could add
nothing material to the conclusion, already arrived at, that the Court
is competent.”

7. In Barcelona Traction, Light and Power Company, Limited, Pre-
liminary Objections, IL.C.J. Reports 1964, p. 4, Judge Tanaka in his
separate opinion said (at p. 65):

“The more important function of the Court as the principal judicial
organ of the United Nations is to be found not only in the settlement
of concrete disputes, but also in its reasoning, through which it may
contribute to the development of international law.”

8. One of the great jurists of the Permanent Court of International
Justice, Judge Anzilotti, also shared the Lauterpacht philosophy of the
nature of the international judicial process, as is shown in his dissenting
opinion in Diversion of Water from the Meuse (P.C.I.J., Series A]B, No. 70,
p. 4 at 45):

“The operative clause of the judgment merely rejects the sub-
missions of the principal claim and of the Counter-claim. In my
opinion, in a suit the main object of which was to obtain the inter-
pretation of a treaty with reference to certain concrete facts, and in
which both the Applicant and the Respondent. presented submis-
sions indicating, in regard to each point, the interpretation which they
respectively wished to see adopted by the Court, the latter should
not have confined itself to a mere rejection of the submissions of the
Applicant: it should also have expressed its opinion on the submis-
sions of the Respondent; and, in any case, it should have declared
what it considered to be the correct interpretation of the Treaty.

It is from the standpoint of this conception of the functions of the
Court in the present suit that the following observations have been
drawn up.”

9. The specific situations in each of the cases cited can be distinguished
from the situation in the instant case, but all of the quoted extracts are
pervaded by a certain “conception of the functions of the Court” which
I share but which the Court does not accept. Article 59 of the Statute
indeed provides: “The decision of the Court has no binding force except
between the parties and in respect of that particular case.” But the in-
fluence of the Court’s decisions is wider than their binding force.

The instant case, however, presents its own particularity. In its decision
in 1964 the Court joined to the merits two of Spain’s preliminary objec-

164
164 BARCELONA TRACTION (SEP. OP. JESSUP)

tions. Whatever the legal interpretation of the character of those prelim-
inary objections at this stage of the proceedings, it remains true that the
Belgian claim must be dismissed if either of the objections is well founded.
Since one of them is sustained by the Court (and on different grounds in
this opinion), it can be said that the Court would reach out too far if it
made a judicial finding on the basic question of the existence of a denial of
justice—an issue which it has decided Belgium has no right to bring
before the Court. Under these circumstances, I agree that it would be
excessive for a separate opinion to analyse and pass upon the volu-
minous proceedings before the Spanish administrative and judicial
authorities. There are situations in which the logical must yield to the
practical; this is such a situation.

I associate myself with Judge Gros’ allusion, in paragraph 28 of his
separate opinion, to the problem of the exhaustion of local remedies.

I would also observe that the procedural processes of the Court
happily facilitate an informal but nonetheless fruitful division of labour
when some judges feel obliged to file separate opinions. Having-had the
benefit of a preview of the separate opinions of Judges Sir Gerald
Fitzmaurice and Gros, I feel content to leave to their opinions, and to
other separate opinions as well, the amplification of certain juridical con-
siderations which I do not treat, even as they have been willing to rely
on some of my factual summaries. In: neither case does it necessarily
follow that I or they reach the same conclusions on each point of law or
fact.

* * *

10. In adjudicating upon the Barcelona Traction case the Court must
apply rules from one of the most controversial branches of international
law. The subject of the responsibility of States for injuries to aliens
(otherwise referred to as the diplomatic protection of nationals), evokes
in many current writings recollections of political abuses in past eras }.
The Court is not involved here in any conflict between great capital-
exporting States and States in course of development. Belgium and Spain
are States which, in those terms, belong in the same grouping. I do not
agree with the Spanish contention on 20 May 1969 that Belgium was
merely trying to get the Court to internationalize a private litigation, but
it is true that basically the conflict was between a powerful Spanish
financial group and a comparable non-Spanish group. This case cannot
be said to evoke problems of ‘“‘neo-colonialism”’.

1 The writer may be excused for mentioning that he described and deplored such
abuses, more than two decades ago: A Modern Law of Nations, 1947, Chapter V.
Happily, the days of ‘‘gun-boat diplomacy” are now lost in limbo.

165
165 BARCELONA TRACTION (SEP. OP. JESSUP)

Moreover, the Court is not here in the least concerned with such
provocative problems as State sovereignty over natural resources or the
rules applicable to compensation in case of nationalizations or expro-
priations. Professor F. V. Garcia Amador, in his sixth report as Special
Rapporteur of the International Law Commission on State responsibility
(Yearbook of the International Law Commission, 1961, Vol. II, p. 2 at p. 46),
set forth an admirable attitude:

“.,. his purpose was to take into account the profound changes
which are occurring in international law, in so far as they are capable
of affecting the traditional ideas and principles relating to respon-
sibility. The only reason why, in this endeavour, he rejected notions
or opinions for which acceptance is being sought in our time, is that
he firmly believes that any notion or opinion which postulates ex-
treme positions—whatever may be the underlying purpose or motive
—is incompatible and irreconcilable with the idea of securing the
recognition and adequate legal protection of all the legitimate in-
terests involved. That has been the policy followed by the Commis-
sion hitherto and no doubt will continue to be its policy in the
future.”

11. The institution ‘of the right to give diplomatic protection to
nationals abroad was recognized in...the Vienna Convention on
Diplomatic Relations, 1961”, as Mr. Gros (as he then was) reminded the
sub-committee of the International Law Commission (Yearbook of the
International Law Commission, 1963, Vol. II, p. 230). The institution of
the right to give diplomatic protection is surely not obsolete although new
procedures are emerging.

With reference to diplomatic protection of corporate interests, the
customary international law began to change in the latter half of the
nineteenth century 1. As Jennings writes, in somewhat picturesque and
Kiplingesque language:

“It is small wonder that difficulties arise when 19th century pre-
cedents about outrageous behaviour towards aliens residing in
outlandish parts are sought to be pressed into service to yield
principles apposite to sophisticated programmes of international
investment.” (121 Hague Recueil 1967, II, p. 473.)

Since the critical date in this case is 1948, developments in the law

1 Paul De Visscher sees the change developing after the decision in the Ruden case
in 1870; 102 Hague Recueil 1961, II, at pp. 467-468.

166
166 BARCELONA TRACTION (SEP. OP. JESSUP)

and procedures during the ensuing last two decades are not controlling.

12. Any court’s application of a rule of law to a particular case,
involves an interpretation of the rule. Historical and logical and tele-
ological tools may be used by the judge, consciously or unconsciously. If
the Court in the instant case had decided to include more factors in its
Judgment, it could have clarified the traditional system in the light of
clearer understandings of business practices and forms of corporate
organization, as these were already well developed two decades ago when
the events called into question in this case transpired. Legal norms ap-
plicable to those events should not be swept aside on the assumption that
they have already become mere cobwebs in the attics of legal history.
Corporations today and tomorrow may well utilize other methods of
financing and controlling foreign enterprises, and governments will have
adapted or will adapt their own laws and practices to meet the realities of
the economic factors which affect the general interests of the State. The
“law of international economic development” will mature. Thus joint
business ventures, State guarantees of foreign investment, the use of
international organizations such as the IBRD and UNDP, may in the
course of time relegate the case of Barcelona Traction to the status now
occupied by Delagoa Bay—a precedent to be cited by advocates if
helpful to the pleading of a cause, but not a guiding element in the life of
the international business community.

Nevertheless, the Court has the duty to settle a specific dispute between
Belgium and Spain which arose out of Spain’s exercising jurisdiction
over a complex of foreign corporate enterprises.

13. There is a trend in the direction of extending the jurisdictional
power of the State to deal with foreign enterprises which have contact
with the State’s territorial domain; “... all that can be required of a
State is that it should not overstep the limits which international law
places upon its jurisdiction; within these limits, its title to exercise juris-
diction rests in its sovereignty !. But what are the limits placed by inter-
national law? Do the courts of the United States, for example, go too far
in applying its anti-trust laws to foreign enterprises, following the state-
ment of principle by Judge Hand in Alcoa ?? But that principle is accepted
in at least six other countries 3. Are the jurisdictional limits on national
jurisdiction exceeded in the cases dealing with product liability of a

1 Lotus, Judgment No. 9, 1927, P.C.I.J., Series A, No. 10, p. 19.

2 148 Fed. 2d 416 (1946). Cf. Jessup, Transnational Law, 1956, pp. 73 ff.

3 Drachsler, ‘American Parent and Alien Subsidiary: International Anti-trust
Problems of the Multinational Corporation”, Bulletin of the Section of International

167
167 BARCELONA TRACTION (SEP. OP. JESSUP)

“giant octopus corporation” with multiple subsidiaries abroad? Rules
valid enough for inter-state conflicts within the constitutional system of
the United States, may be improper when placing a burden on inter-
national commerce +. The Committee on International Law of the As-
sociation of the Bar of the City of New York concluded that “. .. the
extension of the regulatory and penal provisions of the Securities Ex-
change Act of 1934... to foreign corporations which have neither listed
securities in the United States nor publicly offered securities within the
United States is a violation of international law ?”.

14. In States having different types of economic and financial problems,
international law has become increasingly permissive of actions involving
nationalizations. In place of what used to be denounced as illegal ex-
propriation, the issues now turn largely on the measure of compensation,
since even the famous General Assembly Resolution on Permanent
Sovereignty Over Natural Resources *, provides that compensation is due.

To whom, in such cases is compensation due? If in the anti-trust,
product-liability and other situations, the corporate veil is freely pierced
to assert the State’s jurisdictional power, why should it not also be
pierced to determine the State’s responsibility to the interests actually
injured by action damaging to a foreign enterprise? In the instant case,
Spain asserted its power to deal with Barcelona Traction’s subsidiaries in
Spain, disregarding the Canadian nationality of Ebro and others. The
equitable balance of legal interests permits Belgium to pierce the veil of
the Canadian “charter of convenience” and to assert the real interests of
the shareholders—assuming of course that their continuous Belgian
character is established. In so far as there has been an increase in the
permissible limits of the exercise of State authority over foreign corporate
enterprises, there must be an accompanying realistic liberalisation of
rules identifying the State or States which may, in case of abuse, invoke
the right of diplomatic protection.

15. The legal rights which are vindicated through the international

and Comparative Law of the American Bar Association, July 1964, pp. 29 and 48,
and authorities there cited.

1 Mecsas, ‘‘Personal Jurisdiction over Foreign Corporations in Product Liability
Actions: Forum Non Conveniens and Due Process Limitations on In Personam
Jurisdiction over Foreign Corporations”, 50 Cornell Law Quarterly, p. 551 at
p. 563 (1965). Cf. American Law Institute, Restatement of the Law, Second,—
Conflict of Laws, Title C (1967 ed.).

2 The Record of the Association, Vol. 21, No. 4, April 1966, p. 240 at p. 252.

3 G.A. 1803 (XVID), 14 December 1962. Cf. Mughraby, Permanent Sovereignty
Over Oil Resources (1966), p. 30.

168
168 BARCELONA TRACTION (SEP. OP. JESSUP)

procedure of diplomatic protection, are not identical with rights derived
from the applicable municipal law; the rights are on different planes.
There are situations in which no right under municipal law exists because
that law does not provide or permit legal action to enforce the claim, but
international law does afford a remedy. The obvious cases are those where
an injury is inflicted by a State instrumentality or agent which is immune
from suit. If, for example, a naval vessel of State A negligently rams and
sinks a merchant vessel of State B, and the law of State A does not permit
any legal action against the State or its instrumentality, State B, on the
international plane, may press a claim for damages on behalf of the vessel
which possesses its nationality 1. Of course if there are no local remedies,
the international rule for exhaustion of such remedies is not applicable
and a State may incur international liability for the very reason that there
is no local remedy 7. Although statutes now provide in many countries a
cause of action for damages caused by the death of a person, no such
cause of action existed at common law. The subject was discussed by
Umpire Parker in the Lusitania cases ((1923) VII U.N.R.I_A.A., pp. 32,
34 ff.), in holding that international law and practice support the presenta-
tion of claims of heirs and widows (where the nationality requirements are
met), irrespective of the question whether under the law of the State
charged with responsibility for wrongful death, the heir or widow has a
right to damages.

16. In connection with the instant case, the question arises from the
argument that there can be no international right to damages for share-
holders indirectly injured by damage to the company in which they
hold shares, since no such right is generally established in municipal law.
Much. reliance is placed upon the proposition that under most systems of
municipal law, shareholders have no rights in or to the assets of the
corporation until after it is dissolved or wound up. Shareholders’ suits
are indeed provided by law in the United States and somwhat less
extensively in Great Britain. In the United States “The derivative stock-
holder-plaintiff is not only a nominal plaintiff, but at the same time a real

1 Under the British-United States Claims Convention of 1853, the umpire
awarded damages to the owners of the British collier Confidence, which had been run
down by the United States frigate Constitution; XII Moore, International Arbitrations,
3063. Cf. The Lindisfarne, in the United States-Great Britain Claims Commission
under the 1910 Treaty, VI U.N.R.I.A.A., 21.

2 So in Ruden’s case and in Johnson’s case, in the United States-Peruvian Claims
Commission 1870, awards were made to the claimants when a circular of the Minister
of Justice forbade the judges to receive suits of the type in question. Moore, Jnter-
national Arbitrations, Vol. IL, pp. 1653 and 1656.

169
169 BARCELONA TRACTION (SEP. OP. JESSUP)

party in interest. He sues not selely upon a corporate cause of action but
also upon his own cause of action”. See Koessler, ““The Stockholder’s
Suit: A Comparative View”, 46 Columbia Law Review 1946, pages 238 and
242. The provisions for shareholder suits in the European countries
seem to be somewhat less favourable to the shareholder. But the trend in
France is toward more protection of shareholders, as Judge Gros points
out in paragraph 11 of his separate opinion.

17. Although the concept of corporate personality is a creature of
municipal law, none of the theories evolved in that frame of reference can
be relied on universally to explain the legal relations surrounding that
“technical legal device”.

‘“Gierke’s theory was based upon Germanic village communities,
medieval guilds and similar truly corporate entities. But such a
theory hardly fits the modern holding company ...The result is
that those who administer the law, whether as judges, revenue
authorities, or as administrators, in civilian and common law
systems alike [and I would add in the international law system] have
had to discard all known theories of corporate personality, and to
relativise the conception of juristic personality, respecting it for some
purposes [1 disregarding it for others, in accordance with the nature
of the problem before them.” (Friedmann, Legal Theory, Sth ed. 1967,
pp. 522-523. See also p. 571.)

I would paraphrase and adapt a dictum from a recent decision of the
Supreme Court of the United States in an anti-trust case: the International
Court of Justice in the instant case is “not bound by formal conceptions
of” corporation law. “We must look at the economic reality of the relevant
transactions” and identify “the overwhelmingly dominant feature” 2. The
overwhelmingly dominant feature in the affairs of Barcelona Traction
was not the fact of incorporation in Canada, but the controlling influence

1 Thus, for example, where a corporation carries on a purely commercial activity,
international law does not ‘‘pierce the veil” to grant it the sovereign immunity
attaching to the State by which it is wholly owned and managed; see Harvard
Research in International Law, Report on Competence of Courts in Regard to
Foreign States, 1932, Art. 12, p. 641.

2 Mr. Justice Marshall delivering the opinion of the Court in United States v.
The Concentrated Phosphate Export Assn. Inc. et al., 89 S. Ct. p. 361 at pp. 366-367,
1968. Cf. the statement of a leading member of the New York Bar: ‘“‘To give any
degree of reality to the treatment, in legal terms, of the means for the settlement of
international economic disputes, one must examine the international community, its
emerging organizations, its dynamics, and relationships among its greatly expanded
membership.” (Spofford, “‘Third Party Judgment and International Economic
Transactions”, 113 Hague Recueil 1964, III, pp. 121-123.)

170
170 BARCELONA TRACTION (SEP. OP. JESSUP)

of far-flung international financial interests manifested in the Sofina
grouping.

It may well be that the new structures of international enterprise will be
increasingly important‘, but any glance at the world-wide picture today
shows chat non-governmental corporations still have a major role to
play *. That is why so many new States, and the United Nations itself,
encourage the investment of private capital 5.

The Right to Extend Diplomatic Protection
to Corporate Enterprises

18. The decision of the Court, in this case, is based on the legal con-
clusion that only Canada had a right to present a diplomatic claim on behalf
of Barcelona Traction which was a company of Canadian nationality.
My own conclusion is that; for reasons which I shall explain, Canada did
not have, in this case, a right to claim on behaif of Barcelona Traction. As
a matter of general international law, it is also my conclusion that a
State, under certain circumstances, has a right to present a diplomatic
claim on behalf of shareholders who are its nationals. As a matter of
proof of fact, I find that Belgium did not succeed in proving the Belgian
nationality, between the critical dates, of those natural and juristic
persons on whose behalf it sought to claim. The Belgian claim must
therefore be rejected.

The Record of Actual Diplomatic Representations

19. If a State extends its diplomatic protection to a corporation to
which it has granted a “‘charter of convenience” while at the same time

1 See Friedmann et al., International Financial Aid, 1966; Kirdar, The Structure of
United Nations Economic Aid to Underdeveloped Countries, 1966.

2 See Friedmann, The Changing Structure of International Law, 1964, Chap. 14;
Hyde, “Economic Development Agreements”, 105 Hague Recueil 1962, I, p. 271.

3 Blough, ‘‘The Furtherance of Economic Development”, International Organi-
zation, 1965, Vol. XIX, p. 562, and especially, Dirk Stikker’s report to UNCTAD
on “The Role of private enterprise in investment and promotion of exports in
developing countries” (1968), UN Doc. TD/35/Rev.1, and ‘‘Panel on Foreign
Investment in Developing Countries”, Amsterdam, 16-20 February, 1969, E/4654,
ST/ECA/117.

171
171 BARCELONA TRACTION (SEP. OP. JESSUP)

similar diplomatic assistance is being extended by another State whose
nationals hold 100 per cent. of the shares, the situation might be con-
sidered analogous to cases of dual nationality of natural persons !. In
those cases, international jurisprudence supports the principle that
preference should be given to the “real and effective nationality”, as was
held by this Court in the Nottebohm, Second Phase, Judgment (I.C.J.
Reports 1955, pp. 4, 22), which will be discussed later in this opinion.

If Canada could be considered the State of the “real and effective
nationality” of Barcelona Traction and if Canada assumed and main-
tained the role of Barcelona Traction’s diplomatic protector, such facts
would militate against the Belgian posture that Belgium was the State
entitled to press the claim. The arguments of the Parties followed some
such theory; Counsel for Spain called it an “essential point” and exam-
ined at length the record of Canadian diplomatic activity in the case (20
June 1969). The lack or failure of Canadian diplomatic protection is
distinctly relevant to an analysis of the so-called “exceptions” to the
alleged general rule that only the State of which the company has the
nationality is entitled to claim on its behalf. Such “exceptions” will be
discussed later. The facts relative to the positions as claimant Govern-
ments of Canada and Belgium—and of Great Britain and the United
States as well—must accordingly be taken into account. The record
throws light on the nature and extent of the several national interests.

In the instant case, Spain was at one time confronted by diplomatic
representations of Great Britain, Canada, the United States and Belgium.
But at that stage of multiple diplomatic activity, specific claims for dam-
ages were not being advanced; Spain was being asked to take steps to
halt what were considered to be destructive actions against Barcelona
Traction. Spain’s replies in the early stages rested on the proposition that
the Government could not interfere with the normal functioning of the
Spanish courts.

Great Britain

20. The first British Note was dated 23 February 1948 and asserted an
interest due to the dismissal of high-ranking British officers in the Barce-
lona Traction company and to the position of bondholders ‘resident in
the United Kingdom”. (A.P.O. (1960), Vol. III, pp. 193 ff. for this and
subsequent démarches, except as otherwise noted.) In the next British
Note, of 27 March, there was support for the Canadian representations

1 The analogy may be drawn even though the nationality of shareholders is not the
test of the nationality of a corporation for purposes of international law.

172
172 BARCELONA TRACTION (SEP. OP. JESSUP)

“‘on behalf of the United Kingdom bondholders’’. On 28 September 1951,
the British Note speaks on behalf of the protection of (unidentified)
“shareholders and bondholders’’. Thereafter, aside from correspondence
about the failure of Spain to reply to the British Notes and about the
committee of experts and its report in 1951, the British position seemed
to be merely one of supporting Canada. Throughout this period, Canada
had no embassy in Madrid and-its notes were transmitted through the
British Embassy. But the Receiver and Manager of Barcelona Traction,
in a memorandum submitted to the Supreme Court of Ontario, on 24
December 1951, reported a conference with British Treasury officials in
London on the preceding 25 July, during which Mr. Eggers, a represen-
tative of the Treasury, “stated that Great Britain had taken no action
independent of Canada. He insinuated that the British had merely fol-
lowed the Canadian lead which we know to be untrue”. (Emphasis sup-
plied.) (Receivership Docs., Vol. 5, p. 772.) The basis for this last con-
clusion is not clear.

Canada

21. The aid of the Canadian Government was originally requested by
National Trust, as trustee for certain Barcelona bond issues, which made
representations to the Canadian Government when it learned of the
developments in Spain following the bankruptcy judgment of 12 February
1948. Counsel for National Trust informed the Supreme Court of
Ontario that:

“The Government of Canada as a result of such representations
made a demarche to the Government of Spain through appropriate
diplomatic channels with regard to the matter... +” (Receivership
Docs., Vol. 1, p. 16. A memorandum in ibid., Vol. 4, p. 585, indicates
that Barcelona Traction joined National Trust in its representations.)

22. The first Canadian Note—like the first Belgian Note and the
second British Note—was dated 27 March 1948. (The Belgian Note will
be cited later to A.M., Vol. IV, Annex 250.) Canada made an official
protest, alleging a denial of justice to Barcelona Traction, Ebro and
National Trust, because of a lack of proper notice and an absence of
jurisdiction under the principles of private international law. Passing
over some of the Canadian notes, one finds that on 21 July 1949 a long

1 This statement was made by Counsel on 9 July 1948 in connection with
National Trust’s application for the appointment of a receiver and manager, an
application which was granted by the Court on 15 July 1948.

173
173 BARCELONA TRACTION (SEP. OP. JESSUP)

note of protest alleges discrimination against Canadian interests and
against “foreign investments in Spain”; the emphasis is on Ebro, a
Canadian corporation.

23. In February of 1950, there was close collaboration between the
Canadian and Belgian Governments; they proposed to urge the Spanish
Government to agree to the appointment of a committee of experts
composed of representatives of Spain, Canada and Belgium to study
certain financial aspects of the Barcelona case. The Governments of
Great Britain and of the United States were also consulted by Canada
and it was planned that those governments would support the démarche.
Canadian drafts of the proposed note to Spain were submitted to the three
other Governments. Throughout, Canada stressed its appreciation of the
large financial interest of Belgian nationals in Barcelona Traction. A text
provisionally approved, stated that the Governments of the United
Kingdom and of the United States ‘‘are interested in this matter as it
relates to the security of foreign investments generally”. The phrasing of
the quoted clause was suggested by the United States. Before the final
text could be co-ordinated with all the four Governments, the Spanish
Government took the initiative by a Note of 16 March 1950 to the
British Embassy in Madrid, proposing a similar commission, but com-
posed of Spanish, Canadian and British representatives; Belgium was
omitted 1.

24. There is some question whether the Canadian and British participa-
tion in the Tripartite Committee of Experts in 1950-1951 should be
considered as an aspect of diplomatic protection. The Receiver and
Manager on 16 November 1950 sent a memorandum to the Ontario
Court informing him that the Canadian Department of External Affairs
had asked him to put up $20,000 to cover the fees and expenses of Mr.
Norman, the Canadian member of the Commission. The Receiver and
Manager asked for authority to pay that amount and said:

“It is my opinion that the intervention of the Government of
Canada in this matter has been of the utmost importance and that
the continued support of the Government of Canada is essential if
the integrity of the portfolio held by the plaintiff [National Trust] is
to be restored and the properties presently under seizure in Spain are
to be recovered.” (Receivership Docs., Vol. 4, p. 585.)

1 The documentation is in A.R., Annexes 37 and 38. Mr. Heineman, the directing
personality of Barcelona Traction, on 24 February 1950, was apparently confident
that the Canadian Note was about to be delivered with the support of the other
three Governments; telegram Heineman to Brosens in Buenos Aires, 24 February
1950, O. & S., New Docs. 1964, App. 8.

174
174 BARCELONA TRACTION (SEP. OP. JESSUP)

In its pleading, Spain took the position, on 20 June 1969, that when the
Canadian and British members of the Committee joined in signing an
Agreed Minute which supported the Spanish contention that foreign
exchange had been denied to Barcelona Traction because the company
refused to furnish the information demanded by the Spanish authorities,
this was an indication that the Canadian Government was satisfied that
there was no basis for Barcelona’s complaints. However, Mr. Glassco,
the Receiver and Manager, informed the Ontario Court through his
memorandum of 24 December 1951 that he had attended a conference in
the Department of External Affairs in Ottawa together with representa-
tives of National Trust and Barcelona Traction. He said they—

“,,, were advised that the Canadian and British Governments had
signed the Agreed Minute in order to prevent the issuance of a
much stronger unilateral statement by the Spanish Government;
that the statements in the Agreed Minute with respect to foreign
exchange had been agreed with a view to saving the face of the
Spanish Government as regards the non-provision of foreign ex-
change to the subsidiaries of the defendant [Barcelona Traction] in
the past; and that the Canadian and British Governments hoped
that the atmosphere created by the Agreed Minute would be such
that the private interests concerned could work out a settlement of
their differences in the expectation that a suitable modus operandi
for the future could be achieved with the Spanish Government”.
(Ibid., Vol. 5, p. 756.)

25. The next Canadian Note of 26 July 1951 reflects a continuing
Canadian interest since it objects to the issuance of new share certificates
of the subsidiaries which “would be to render valueless the previously is-
sued shares’’. Ebro, National Trust and Barcelona Traction bondholders
are mentioned. The Canadian Note of 28 September 1951 stresses both
Ebro and Barcelona Traction and says Canada “feels bound to renew its
representations ...for the protection of the interests of these compa-
nies”. A long Note of 22 December 1951 invokes Canadian rights under
a treaty between the United Kingdom and Spain concerning respect for
corporate personality and offers to arbitrate that issue. The Note reserves
the “right to make any claim under international law which may be open
to it if the sale of the assets takes place on the 4th January, 1952, since it is
advised that this would constitute a denial of justice”. In this Note,
Barcelona Traction, Ebro, Catalonian Land, International Utilities and
National Trust as trustee for the bonds, are all mentioned. (A.C.M.,
Vol. VI, Annex 1, No. 28 +.)

1 Consequent upon certain enquiries and observations from the Bench, Belgium

175
175 BARCELONA TRACTION (SEP. OP. JESSUP)

26. On 12 February 1952, the Belgian Ambassador in Madrid reported
a conversation with the Spanish Minister for Foreign Affairs, Mr. Artajo,
in which the latter told him that the Spanish Consul in Ottawa had talked
about the Barcelona case with the Canadian Secretary of State for
External Affairs who said: (tr.) “The Canadian interests in this case are
so small that it interests us very little.” Such a view does not seem to be
quite in line with the Canadian Note of 21 April 1952 which was produced
as a new document by Belgium in May 1964. The Note repeats the Cana-
dian view of the mistreatment of the companies in Spain, especially
Ebro; invokes again the treaty of 1922 and willingness to resort to arbitra-
tion; but concludes that no further exchange of Notes was apt to help
reach a settlement and that private negotiations might be the best way to
a solution. In sending a copy of this Note to the Belgian Ambassador in
Ottawa, the Canadian Government noted that it was much shorter than
a draft which had previously been shown to the Belgian Government—
there was no use reiterating legal arguments. (K. J. Burbridge to Vicomte
du Parc, 7 May 1952.) It was not until 10 May 1969 that Mr. Artajo, in
a letter in reply to an enquiry from the Spanish Agent in the Barcelona
Traction case before this Court, flatly denied the accuracy of the Belgian
Ambassador’s report. (Spanish New Docs., 16 May 1969, Vol. III, p. 181.)
The lapse of time in securing such a denial was not explained.

27. Canada’s further activity in the case was moderate. On 15 Feb-
ruary 1955, Mr. Arthur Dean, American attorney for Sidro, suggested to
Wilmers in Brussels that it would be helpful if Canada would join in a
démarche in Madrid, although he doubted whether Canada could be
convinced that they had sufficient interest other than in the rights of the
Canadian trustee for the bonds. (O. & S., New Docs., 1964, App. 13.)
Canada had by this time established its own embassy in Madrid and it ap-
pears that the Canadian Secretary of State for External Affairs had paid a
personal call on the Foreign Office in Madrid in connection with the
Barcelona case in 1954 (A.C.M., Vol. VI, p. 109). On 21 March 1955 the
Canadian Government had commended Mr. Dean’s visit, saying that
Canada “continues, of course, to be deeply interested in the affair of
Barcelona Traction”. (A.C.M., Chap. II, Ann. 1, Doc. No. 30.) On 1 July
1955, Mr. Dean wrote at length to Mr. Pearson, Canadian Secretary of State
for External Affairs, reporting on his visit in Madrid. He hoped Canadian
Ambassador Pope would be instructed to join in energetic representations

produced additional documentation in 1964 and in 1969: see e.g., Distr. 64/72 and
64/74 and 1969 New Docs. 42-45.

176
176 BARCELONA TRACTION (SEP. OP. JESSUP)

to Foreign Minister Artajo. (New Docs., 1964.) Mr. Pearson replied on
19 July that Canada believed that the best hope lay in private negotia-
tions.

“The Canadian Government has not been prepared actually to
intervene in this matter or to make representations to the Spanish
Government as to the measures which ought to be taken toward a
settlement.”

The requested instructions to Ambassador Pope would not be sent.
(Ibid.) In 1957, Belgium informed Canada that they intended to resort
to the International Court of Justice. The Canadian official merely ex-
pressed his appreciation for the courtesy of keeping him informed.
Belgium similarly notified Ottawa in 1964 and 1965. (Belgian New Docs.,
Nos. 42 et seq.)

Finally, further questions from the Bench were conveyed by the
Belgian Ambassador in Ottawa on 23 June 1969, to the Canadian
Secretary of State for External Affairs, who replied on the following day
that the correspondence which had passed between the Canadian and
Spanish Governments was in the dossier before the Court and was self-
explanatory.

“As was suggested in a communication of 21 April 1952, the Govern-
ment of Canada was of the opinion that there was little chance of
settling this dispute by means of additional diplomatic representa-
tions. The Government of Canada has acted accordingly.” (My
trans., New Docs. Nos. 44-45.)

It is a fair conclusion that Canadian diplomatic protection of Barcelona
Traction ceased in April 1952.

United States

28. Apparently the first diplomatic démarche by the United States
Government on behalf of Barcelona Traction was a Note from the
Chargé in Madrid to Foreign Minister Artajo on 22 July 1949. The Note
stated that:

“... the Government of the United States lends its support to and
is in concurrence with the Note of 21 July 1949, submitted to your
Ministry by the British Embassy on behalf of the Canadian Govern-
ment, the Note in question relating to the treatment which has been
and is currently being accorded to the Canadian company, Barcelona
Traction, Light and Power Company Limited, a company in which
American citizens have interests...

The treatment which had been accorded this company, in which

177
177 BARCELONA TRACTION (SEP. OP. JESSUP)

foreign capital is so heavily invested, has had an adverse effect in
foreign banking and investment circles . . .””’ (A.P.O., 1960, Vol. III,
p. 247.)

Attention has already been called to the co-operation of the United
States with Canada in February 1950, where American interests were
described as arising from “the security of foreign investments generally”’.

In June and July 1951, the United States Embassy requested complete
copies of the reports of the Spanish experts on the international tripartite
committee and “reiterates its deep interest in the issues involved in the
case of the Barcelona Traction Company...” (ibid., pp. 249 and 251).
It seems that the United States Secretary of Commerce, when in Madrid
in October 1954, brought up with some officials of the Spanish Govern-
ment the possibility of that Government’s intervention in the judicial
proceedings; he was told this was hardly possible. (Spanish New Docs.,
1969, Vol. IIT, p. 174.)

29. In 1955, United States Ambassador John Lodge in Madrid lent
his assistance to Mr. Arthur Dean in connection with his efforts on behalf
of Sidro. An office memorandum of the Spanish Ministry of Foreign
Affairs, 30 March 1955, recorded that Ambassador Lodge had phoned to
support Mr. Dean’s request for an interview with Minister for Foreign
Affairs Artajo.

“The United States Ambassador stressed the extraordinary interest
—he insisted that it be put that way—which the State Department
attributes to a rapid and satisfactory solution of that matter about
which the aforesaid Department continues to be concerned. He
suggests the opportuneness of a solution by direct negotiations
between the parties.” (Loc. cit.)

The interview was granted—the request having been supported by the
Canadian Embassy also—and Mr. Dean in writing to Mr. Artajo to
express his thanks, stated:

“Our inability to arrive at an appropriate settlement of this matter
is naturally a matter of very great concern to the management and
shareholders of Sofina, in which there is now a substantial American
interest . . .”” (Spanish New Docs., 1969, Vol. IIE, p. 178.)

Mr. Dean informed Mr. Lester Pearson, the Canadian Secretary of State
for External Affairs, about his visits as already noted.

30. But despite the warmth of Ambassador Lodge’s message to the
Spanish Foreign Office, it is clear that the interest of the United States
was of a general nature and that its support did not amount to diplomatic
protection of the Barcelona Traction company or of any identified

178
178 BARCELONA TRACTION (SEP. OP. JESSUP)

shareholders in that company or in Sidro or in Sofina. In a cable of
15 February 1955, before the visits to Madrid which have just been de-
scribed, Mr. Dean advised Wilmers, President of Barcelona Traction
and then in Brussels, that he had—

‘“...received request from our Department [sc. Department of
State] suggesting they have never considered operating company
in question [sc. Barcelona Traction] American and have treated
this matter not as a protection case but on more general grounds
of principle regarding treatment and encouragement of international
investment and would appreciate extent to which U.S. capital now
participating in company”. (O. & S., New Docs. 1964, App. 13.)

It is not known what information was given to the State Department
concerning the extent of the United States capital participation at that
time ?. It seems clear from the record that the placing of Barcelona
Traction shares in the names of American nominees did not require any
investment of United States capital. But Mr. Dean apparently represented
both Sidro and Sofina and on 1 February 1955 he informed the Spanish
Ambassador in Washington that Sofina was “‘the majority common
shareholder” in Barcelona Traction, and informed the Spanish Foreign
Minister that there was a “substantial American interest” in Sofina. (The
letter to the Ambassador is in the New Documents presented by Spain
on 16 March 1964.)

31. There were references by Spain to Amitas, a Delaware.corporation
which financed the National Trust receivership, as if it represented a
United States interest, but the real interest there seems to have been
Belgian. The Canadian Receiver and Manager of National Trust bor-
rowed at least $980,000 from Amitas by selling to Amitas Receiver’s
5 per cent. certificates. In his request to the Ontario Court for authoriza-
tion to borrow the first $100,000 on 25 August 1949, the Receiver and
Manager referred to this—

“American Intercontinental Trade & Service Company (Amitas)
Inc., a Delaware corporation which is understood to be associated
or affiliated with a Belgian corporation which holds bonds and the
majority of the outstanding shares”

of Barcelona Traction. (Receivership Docs., Vol. 2, p. 273.) On 3 August
he had written to the Canadian Foreign Exchange Control Board about

1 As indicated elsewhere, the evidence offered concerning certifications and
payments of coupons does not seem persuasive despite the argument of counsel for
Belgium on 8 July 1969 citing A.M., Vol. I, Annexes 18 and 20, pp. 133 and 142.

179
179 BARCELONA TRACTION (SEP. OP. JESSUP)

the anticipated dollar transaction, and made a more definite statement.
He stated that Amitas is—

“controlled, I believe wholly owned, by the Belgian interests, com-
monly referred to as ‘Sofina’, who are the majority owners of the
equity stock of the Barcelona company and who also hold a sub-
stantial quantity of its bonds”.

He explains that if his receivership is successful, he will have plenty of
United States dollars to repay the loan but:

“Looking at the darkest side of the picture, should the portfolio
prove unsaleable, the position would simply be that Amitas would
be unable to collect anything upon the Receiver’s certificates as
there is no personal liability attached thereto.” (Jbid., p. 277. The
last receiver’s request to the Court for authority to borrow, which is
recorded in the Receivership Documents filed with this Court by
Spain, was on 19 March 1963; Vol. 8, p. 1356.)

This evidence supports the Belgian assertion that the Receiver was
financed by Sofina, but of course there were American interests in Sofina.
The Receiver in his numerous requests did not refer to nominees or to the
trust agreement of Sidro with Securitas which will be discussed later in
this opinion.

32. On 25 May 1967, the Belgian Embassy in Washington enquired of
the United States Department of State whether the first United States
Note of 22 July 1949, concerning American interests in Barcelona
Traction, had in mind Americans interested as owners or beneficial
owners of shares or whether it included also American citizens acting as
trustees or nominees for third persons not having American nationality.
The State Department’s reply of 5 June 1967 stated that the 1949 Note
was inspired by questions of principle relative to the equitable treatment
of foreign investments in order to preserve the confidence of foreign
investors in the security of their investments in Spain. The interests of
American citizens which were mentioned in the 1949 Note, referred only
to those who had rights of property or beneficial ownership in the com-
pany. (Belgian New Doc. 5 presented 7 April 1969.)

Belgium

33. The first Belgian Note concerning the Barcelona Traction case is
dated 27 March 1948 (A.M., Vol. IV, Annex 250). The Note stresses the
importance of Belgian interests in Barcelona Traction by asserting that
Sidro owns more than 70 per cent. of the shares of Barcelona Traction
and other Belgian individuals own enough to bring the total to 80 per

180
180 BARCELONA TRACTION (SEP. OP. JESSUP)

cent. In addition, the Belgian State had 50,000 shares of Sidro received
as a capital tax, and 40 to‘ 45 per cent. of the First Mortgage bonds of
Barcelona Traction were also held by Belgians. Like the British Govern-
ment, the Belgian Government notes that some of the higher ranks of the
personnel of the companies have been discharged, especially Mr. William
Menschaert, a Belgian national, President and sole legal representative of
Ebro in Spain. The proceedings in Spain are summarized and declared
improper or illegal. The note concludes with the statement that there has
been a series of denials of justice which cannot help but gravely injure
legitimate Belgian interests in the companies involved. The Spanish reply
as usual indicated that the Government could not interfere with the courts.

The next Belgian Note on 22 July 1949 touched on the refusal of
foreign exchange, reviewed the further steps in the Spanish proceedings
and repeated that the denial of justice continued to injure very important
Belgian interests (ibid., Annex 252). Spain sent a reasoned rebuttal on
26 September 1949 but did not challenge Belgium’s right to speak for the
Belgian interests (ibid., Annex 253).

34. As already noted, in February 1950 Belgium was actively co-
operating with Canada on the project for establishing a tripartite com-
mittee of experts. When this démarche was frustrated by the Spanish
proposal, Belgium vigorously objected to being left off the Committee of
Experts. Belgium’s next diplomatic protest was on 13 July 1951 (ibid.,
Annex 254). Stress was laid on the effect of the measures in Spain on the
Belgian investors. It was said that in equity, note should be taken of the
interest of Barcelona Traction in Ebro and of the interest of Sidro in
Barcelona; the interest of the Belgian investors in Sidro was given at 40 to
45 per cent., without counting the participation of Sofina which was 35
per cent. After there had been some conversations on the subject, the
Belgian Note of 7 November 1951 again stressed their concern in the
protection of very important Belgian interests and enclosed a memoran-
dum on Spanish law (ibid., Annex 256).

35. The Spanish reply of 14 November 1951 now insisted that diplo-
matic intervention in the Barcelona Traction case was the exclusive
function of the Canadian and British Governments, whose represeritatives
had been asked to join in the expert committee to examine the question of
the refusal of foreign exchange (ibid, Annex 257). Belgium replied on
6 December, discussing the merits of the matter and asserting that the
importance of the Belgian interests in the capital of Barcelona Traction
justified Belgium being represented on the Committee of Experts. On the
same date, Belgium proposed arbitration under the treaty of 19 July 1927;

181
181 BARCELONA TRACTION (SEP. OP. JESSUP)

the issue would be the damage to Belgian interests caused by the bank-
ruptcy of Barcelona (ibid., Annex 258). The Spanish reply of 22 December
1951 argued that Belgium had not complied with the 1927 treaty since it
had not presented a formal claim, had not proved the Belgian nationality
of the shareholders in a Canadian company, and had not shown that
Belgian interests had been injured by an illegal act on the part of Spain
(ibid., Annex 259). Belgium replied in rebuttal on 31 December 1951, and
Spain countered on 3 January 1952 (ibid., Annexes 260 and 261). At this
stage the issue concerning the right of Belgium to interpose in connection
with a Canadian company, comes sharply into focus.

36. A Belgian Note of 21 March 1955, indicating the possibility of
private negotiations which were then in train, and mentioning the visits
of Mr. Dean, is not printed in the Annexes to the Belgian Memorial but
as Annex 66, Document No. 2, of the 1963 Preliminary Objections. Then,
on 31 December 1956, Belgium sent a long Note summarizing the whole
affair (A.M., Vol. IV, Annex 262). On 16 May 1957, a further Belgian
Note refers to certain personal conversations of their Ambassador in
Madrid and broaches the possibility of a judicial settlement’ (ibid.,
Annex 263). The Spanish Note of 10 June 1957 and the Belgian
Note of 8 July deal extensively with the question of the right of
Belgium to act in this case (ibid., Annexes 264 and 265). The last Note
puts more stress on the 50,000 shares held by the Belgian State and sum-
marizes again the extent of the interests of Sidro. It seems unnecessary to
follow the ensuing correspondence which involves the actual Application
to this Court, the discontinuance and the new Application of 1962.

37. It is hard to explain the apparent reluctance of the applicant
Government to place this entire record before the Court in a composite
and coherent form especially in view of their recent initiative in eliciting
the information from the Government of the United States as noted
above. But the conclusion emerges that although in 1948 the Canadian
Government, like the other three Governments involved, was disturbed
by the judicial proceedings which overtook Barcelona Traction in Spain,
the chief Canadian interest was in the securities of which National Trust
was trustee and that when the bonds were paid off after the assets were
sold in Spain, Canadian interest declined. This was the conclusion reached
by counsel for Belgium in his pleading in 1964. (Oral Proceedings, 13 May
1964.) It must be borne in mind that the securities pledged under the
Barcelona Traction Prior Lien and First Mortgage bonds held by
National Trust Co., Ltd., as trustee, included bonds and shares of Ebro
and of Catalonian Land Co., Ltd., and other subsidiaries. Of Ebro, for
example, there were some £11 million face value, of bonds and some
300,000 shares of stock. (In another connection, it is interesting that many
of the shares had blank powers of attorney attached to the certificates.

182
182 BARCELONA TRACTION (SEP. OP. JESSUP)

See Receivership Documents, Vol. 1, p. 54.) But Canada apparently had
no deep abiding interest either in Canadian shareholdings in Barcelona
Traction, for they were not large, or in the company itself which (at
least after the payment of the bonds) was linked to Canada only by the
“charter of convenience” and the receivership proceedings !. The latter
were not of a nature to stimulate Canadian diplomatic action, although,
under the supervision of the Ontario court, the Receiver and Manager
took an active part in trying to promote a settlement through negotiations
of the private interests involved. (See Receivership Documents, Vol. 5,
p. 774.) I do not find it credible that Canada can be considered to be
competing with Belgium in diplomatic protection of the interests clustered
around Barcelona Traction.

The interests of the United States and Great Britain were those of
governments of States which contain great financial capitals—New York
and London. Neither of them pressed claims on behalf of specific persons
whether natural or juristic. Both Governments have a general interest in
the welfare of international “banking and investment circles” which are
closely linked with their national economies.

Belgium remains the only identifiable claimant against Spain in con-
nection with the bankruptcy of the Barcelona Traction Company.

If, under international law, a State is not entitled to extend its diplo-
matic protection to large shareholder interests of its nationals in circum-
stances such as those in the instant case, none of the equity interests in
the Barcelona Traction enterprise would be entitled to diplomatic pro-
tection. I do not believe international law requires that such a con-
clusion be reached.

*
* *

38. There is no question that, under international law, a State has in
general a right to extend its diplomatic protection to a corporation which
has its nationality, or national character as it is more properly called.
The proposition raises two questions:

(1) What are the tests to determine the national character of a corpora-
tion?

(2) Assuming the appropriate tests are met, must that national char-

! Belgian counsel’s argument on 30 June 1969 about the “‘violation of Canadian
sovereignty” and interference with the functions of the receiver as a Canadian
“public authority’? does not seem to reflect the actual thinking of the Canadian
Government.

183
183 BARCELONA TRACTION (SEP. OP. JESSUP)

acter be “‘real and effective” as shown by the ‘‘link” between the corpora-
tion and the State, just as, in the Nottebohm case, this Court decided that
a certain claim to nationality is not enough in all situations to justify a
State in extending its diplomatic protection to a natural person?

39. There are two standard tests of the ‘‘nationality” of a corporation.
The place of incorporation is the test generally favoured in the legal
systems of the common law, while the siége social is more generally
accepted in the civil law systems. (See Kronstein, “The Nationality of
International Enterprises”, 52 Columbia Law Review (1952), p. 983.)
There is respectable authority for requiring that both tests be met |.

It is not possible to speak of a single rule for all purposes. The tests used
in private international law have their own character, as well brought out
by Caflisch, “La nationalité des sociétés commerciales en droit inter-
national privé”, Annuaire suisse de droit international, Vol. XXIV, 1967,
page 119.

Commercial treaties and claims conventions often contain their own
definitions of which companies shall be considered to have the nationality
of a State for purposes of the treaty. (Cf. Walker, “Provisions on Com-
panies in United States Commercial Treaties”, 50 American Journal of
International Law, 1956, p. 373; Wilson, United States Commercial
Treaties and International Law, 1960; and, for a more comprehensive
survey, Ginther, “Nationality of Corporations”, Osterreichische Zeit-
schrift für Offentliches Recht, Vol. XVI, 1966, p. 28 at pp. 31-59.) The
tests used for such purposes may be quite different—even in the practice
of the same State—from the tests used for other purposes. For example,
the “‘control’’ test was widely used to determine the enemy character of
property during war, but it is not established in international law as a
general test of the nationality of a corporation ?. On the other hand,
control may constitute the essential link which, when joined to nationality,
gives the State the right to extend diplomatic protection to the corporation.
Itisa familiar fact that the laws of certain States provide favourable con-
ditions for companies incorporating therein, especially in relation to
taxation. Canada is one such State, Liechtenstein is another. In the
United States, many companies find it advantageous, for various reasons,
to incorporate in Delaware or New Jersey *. Charters secured for such
reasons may be called “charters of convenience”.

40. The Judgment of the Court in Nottebohm, Second Phase, in 1955

1 There is ample coverage of the literature in the excellent study by Ginther,
op. cit., infra.

2 See the observations of the Permanent Court of International Justice on the
control test in Certain German Interests in Polish Upper Silesia (Series A, No. 7,
at p. 70).

3 Cf. Cahill, “‘Jurisdiction over Foreign Corporations and Individuals who Carry
on Business within the Territory”, 30 Harvard Law Review, 1917, p. 676.

184
184 BARCELONA TRACTION (SEP. OP. JESSUP)

U.C.J. Reports 1955, p. 4), has been widely discussed in the subsequent
literature of international law, particularly with reference to the so-called
“link theory” by which the effectiveness of nationality may be tested !.

It has been argued that the doctrine is equally applicable in the case of
ships flying “flags of convenience’ and in relation to the diplomatic
protection of corporations. I have maintained the view that it should
apply in both those situations ?.

41. In the instant case the Parties did not debate the applicability of the
link principle to the Barcelona Traction Company, but they were certainly
aware of the question. The Spanish side stated:

““... the Spanish Government never disputed the effective character
of Barcelona Traction’s Canadian nationality, because a number of
factors were present which were sufficient proof of the existence of a
real link between the company and the economic life of Canada”.
(P.O., 1963, p. 190.)

Counsel for Belgium argued on 4 July 1969 that ‘if the Canadian Govern-
ment had been able to espouse in international judicial proceedings the
cause of Barcelona Traction, its action could have been challenged on the
ground of the lack of sufficient true Canadian interest”. Counsel for
Spain responded directly to this remark on 21 July.

42. Tam in full agreement with the proposition that the decisions of the
International Court of Justice should not be based upon a legal rule or
principle which has not been considered by the parties >—indeed, I
believe that the failure to heed that proposition is the only criticism
which can properly be directed at the Court’s decision in Nottebohm.
When, however, both Parties have revealed a full awareness of the fact
that the “link” principle might be applied to test the national quality of
Barcelona Traction, the fact that they did not choose to develop their
arguments on the ground of legal principle, rather than of fact, cannot
operate to prevent the Court from dealing with the principle. Of course

1 The wide range of unfavourable comments is refiected in the text and citations
in Grossen, ‘‘Nationalité et protection diplomatique”, Jus et Lex, Festgabe zum
70. Geburtstag von Max Gutzwiller, 1959, p. 489. Brownlie, Principles of Public
International Law, 1966, has a full treatment at pp. 323 ff. His position is generally
favourable to the Court’s judgment.

2 Jessup, ‘The United Nations Conference on the Law of the Sea”, 59 Columbia
Law Review, 1959, pp. 234, 256. Meyers, The Nationality of Ships, 1967, fully covers
the question of flags of convenience, and the applicability of the rule to corporations
is treated in Harris, “The Protection of Companies in International Law in the Light
of the Nottebohm Case”, 18 International and Comparative Law Quarterly, April 1969,
p. 275.

3 The proposition has been admirably expounded in Carsten Smith, The Re-
lation Between Proceedings and Premises, a Study in International Law, 1962.

185
185 BARCELONA TRACTION (SEP. OP. JESSUP)

the question whether the link principle does apply to juristic persons is a
question of international law and jura novit curia. The implication in the
pleading of Belgian counsel just cited, intimated a conclusion that the
link principle does apply to juristic persons.

It is indeed true that since Spain admitted that Canada had a right to
extend diplomatic protection to Barcelona Traction, it may be argued
that Spain is estopped to deny such a right although the elements of true
estoppel may be lacking and such estoppel could be claimed (if at all) by
Canada and not by Belgium. Aside from the fact that I believe the juris-
prudence of the Court has tended to rely too heavily on estoppel or
preclusion, the question posed here is in the first place a question of the
Court’s finding a rule of law. The Court in its Judgment does not accept
the application of the link theory to juristic persons. Since I have reached
the conclusion that the existence of a link between a corporation holding
a “charter of convenience” and the State granting the charter, is the key
to the diplomatic protection of multinational corporate interests, J can-
not avoid the problems of law and fact on any such basis as the applica-
tion of the doctrine of estoppel in this particular case.

43. It has also been argued that the Court should not pass judgment on
the question whether there existed the necessary link between Canada and
Barcelona Traction without hearing argument on behalf of Canada.
Canada might have sought to intervene in the instant case under Article 62
of the Statute, but it did not do so. It is said that after judgment is
pronounced in this case of Belgium v. Spain, Canada might find some
jurisdictional ground to found an application to institute a case of
Canada v. Spain. It is known that no such jurisdictional ground now
exists. It seems quite unreal to suppose that Spain would now agree with
Canada upon a compromis submitting to the Court a Canadian claim on
behalf of Barcelona Traction, thus exposing Spain to the new hazard of
being required to pay some two hundred millions of dollars of damages.
But if the Court were properly seised of an application by Canada, it
would have to take cognizance of the fact that following Article 59 of the
Statute, ‘“The decision of the Court has no binding force except between
the parties and in respect of that particular case”. Had the Court endorsed
the application of the link principle to juristic persons, in its present
decision in Belgium v. Spain, Canada could have argued against that
conclusion in the hypothetical case of Canada v. Spain, or might have
relied on Spanish admissions that Canada was entitled to protect the
company.

186
186 BARCELONA TRACTION (SEP. OP. JESSUP)

The “Link” Concept

44, It seems to be widely thought that the “link” concept in connection
with the nationality of claims, originated in the International Court of
Justice’s Judgment in Nottebohm. I do not agree that in that instance the
Court created a new rule of law. Indeed the underlying principle was
already well established in connection with diplomatic claims on behalf of
corporations. To look for the link between a corporation and a State is
merely another example of what is now the familiar practice of “lifting the
veil”. See, for example Cohn and Simitis ‘Lifting the Veil’ in the Com-
pany Laws of the European Continent”, 12 International and Comparative
Law Quarterly (1963), page 189; Drachsler in Report of the Section of
International and Comparative Law of the American Bar Association, July
1964, page 29. The practice of such States as the United States and
Switzerland had already given weight to the proposition that a corpora-
tion would not be protected solely because it was incorporated in the
State, i.e., had the State’s nationality; some other link was required and
that link usually was related to the ownership of shares. Such abstention,
being as it were “‘against interest”, has special probative value !.

Three years after the decision in Nottebohm, the Italian-United States
Conciliation Commission, under the presidence of the late Professor
Sauser Hall, in the Flegenheimer case stated:

“The right of challenge of the international court, authorizing it to
determine whether, behind the nationality certificate or the acts of
naturalisation produced, the right to citizenship was regularly
acquired, is in conformity with the very broad rule of effectivity which
dominates the law of nationals entirely and allows the court to
fulfill its legal function and remove the inconveniences specified.”
(Emphasis supplied.) (53 American Journal of International Law,
1959, p. 944.)

That the link concept represents a general principle of law and not
merely an ad hoc rule for the decision of a particular case, is indicated also
by its applicability to the test of the nationality of ships which fly “flags
of convenience”. These maritime situations are comparable to the cor-
porate situations just discussed since they involve corporate decisions to
register their ships under the flags of States which offer special advantages
in connection with tax, labour and other laws.

45. The Judgment in Nottebohm, Second Phase, was pronounced on
6 April 1955. At that time, the International Law Commission, which
was preparing its projects on the law of the sea, had not yet developed

1 State practice is noted infra, paras. 60 ef seq.

187
187 BARCELONA TRACTION (SEP. OP. JESSUP)

the concept of a “genuine link” as a requisite for the recognition of the
nationality of a ship. But the link theory was thereafter actively argued in
the Commission and at length in the Geneva Conference of 1958 on the
Law of the Sea. Article 5 of the Convention on the High Seas was
adopted in the following terms: .

“Each State shall fix the conditions for the grant of its nationality
to ships, for the registration of ships in its territory, and for the right
to fly its flag. Ships have the nationality of the State whose flag they
are entitled to fly. There must exist a genuine link between the State
and the ship; in particular, the State must effectively exercise its
jurisdiction and control in administrative, technical and social mat-
ters over ships flying its flag.” (Emphasis supplied.)

46. In 1959, governments were submitting to the International Court of
Justice views on the Constitution of the Maritime Safety Committee of the
Inter-Governmental Maritime Consultative Organization case. The in-
fluence of the link concept was apparent. (Meyers, The Nationality of
Ships, 1967, pp. 227 ff.) When the Court gave its Advisory Opinion on the
above case in 1960, it clearly confined itself to a particular question of
treaty interpretation and declined to examine general customary law on
“a genuine link”. (Z.C.J. Reports 1960, p. 171.) It made a passing reference
to Article 5 of the “‘unratified Geneva Convention on the High Seas’’. In
his dissenting opinion, Judge Moreno Quintana said that the provision in
Article 5—

“,..by which international law establishes an obligation binding
in national law, constitutes at the present time the opinio juris
gentium on the matter”. (Jbid., p. 178.)

The Nottebohm case itself was not discussed at length in connection
with the law of the sea in the International Law Commission but Dr.
Garcia Amador, Special Reporter for the International Law Commission
on State Responsibility, in his Sixth Report, noted that he had added a
paragraph to his earlier draft “in order to incorporate the rule laid down
by the International Court of Justice in the Nottebohm case”. (Yearbook
of the International Law Commission, 1961, Vol. II, p. 53; see Article 23
of his revised draft at p. 49.) Although the “link” concept was much
discussed at the Geneva Conference, only a few governments or delegates
referred to the Nottebohm case (Meyers, op. cit., pp. 269 {f.). Four
States—Netherlands, Norway, Liberia and the United Kingdom—in
their pleadings in the Constitution of the Maritime Safety Committee of the
Inter-Governmental Maritime Consultative Organization case made some
reference to the Court’s statements in Nottebohm, Second Phase, about
“unilateral acts” of States. U.C.J. Pleadings, pp. 357-359 ; 365-366; 374;

188
188 BARCELONA TRACTION (SEP. OP. JESSUP)

404-405.) The important point is that there was growing recognition of the
rule that if a State wishes to have its “unilateral acts” recognized and
given effect by other States, those acts must conform to the principles and
rules of international law. If a State confers its nationality on a person
who has no genuine link with it, another State may not need to recognize
the person as such national. Such nationality has been styled “‘a citizen-
ship of convenience’’ +. If a State purports to confer its nationality on
ships by allowing them to fly its flag, without assuring that they meet such
tests as management, ownership, jurisdiction and control, other States
are not bound to recognize the asserted nationality of the ship ?. As a
matter of principle and logic—supported by State practice—a comparable
rule is applicable to corporations. A State may, by extending diplomatic
protection to a corporation, hold out that corporation as having its
“nationality”, because the State had granted it its charter of incorporation.
But if in fact there is no “‘genuine link”’ between the corporation and the
State in question, the State to which diplomatic representations are made
may, on that ground reject them. Perhaps one makes here an analogy to
stateless persons but the stateless individual has nothing behind him and
cannot be protected until the present imperfect law of human rights is
fully developed ?. On the other hand, the corporation which has a
nominal connection with a State of incorporation but whose shares are
all owned by nationals of another State in which latter State the actual
management and control of the company are carried on, has behind it the
shareholders who represent the real interest. No rule of law, no principle,
forbids that latter State to extend its diplomatic protection to those
interests.

47. It is true that the Court in the Constitution of the Maritime Safety

1 Uebersee Finanz-Korporation A.G., Liestal, Switzerland, Plaintiff, Fritz von
Opel, Intervener-Plaintiff v. Herbert Brownell, Jr., Attorney General, et al., 133 F.
Supp. 615, 619 (1955), affd. 244 F. 2d 789 (1957). This case, decided by the United
States District Court, District of Columbia, in the same year as the decision of the
International Court of Justice in Nottebohm, also involved a consideration of the
validity of the naturalization of a German in Liechtenstein during the Second
World War. The question was in part whether the intervener was an innocent.
stockholder in a company vested by the Alien Property Custodian as enemy alien
property. The United States Court did not cite the Nottebohm case.

2 There are, however, situations in which national courts still find it appropriate
to recognize ‘‘the law of the flag”; see McCulloch v. Sociedad Nacional de Marineros
de Honduras, 83 S. Ct. (U.S.) 671 (1963).

3 And query whether the term ‘“‘man” in ‘“‘The Rights of Man” includes a cor-
poration!

The Court’s decision in Nottebohm, Second Phase, has been criticized as creating a
new group of apatrides; see Bindschedler-Robert, “La protection diplomatique des
sociétés et des actionnaires”, Revue de la Société des juristes bernois, Vol. 100,
1964, p. 141.

189
189 BARCELONA TRACTION (SEP. OP. JESSUP)

Committee of the Inter-Governmental Maritime Consultative Organization
case, as a matter of treaty interpretation, and taking into account the
travaux préparatoires, stated that:

““_..it is unlikely that it was contemplated [in drafting the Conven-

.tion which established IMCO] that the test should be the nationality
of stock-holders and of others having beneficial interests in every
merchant ship; facts which would be difficult to catalogue, to ascer-
tain and to measure. To take into account the names and nationali-
ties of the owners or shareholders of shipping companies would. . .
‘introduce an unnecessarily complicated criterion’... On the other
hand, the criterion of registered tonnage is practical, certain and
capable of easy application.” (1.C.J. Reports 1960, p. 169.)

It would be unsound to transpose some of these words from their con-
text, where persuasive reasons are set out for the particular issue before
the Court, to support an argument that it is not practical to ascertain the
existence of preponderant, majority or substantial stock interests in
corporations. In particular it will be shown that in at least certain cases,
international law does not exclude the protection of shareholders on the
ground that it is difficult to identify them, e.g., in the case where inter-
national law permits the protection of foreign shareholders in a corpora-
tion which is the victim of unlawful destructive acts performed by the
State of incorporation. Nor can the rule which permits the protection of
shareholders in certain circumstances be discarded because company
management may sometimes find it inconvenient to reveal the exact
position in regard to the ultimate ownership of the shares.

48. One of the reasons for the rule on continuity of nationality of
claims is the avoidance of assignments of claims by nationals of a small
State to nationals of a powerful State. If a powerful State should seek to
attract corporations to incorporate under its laws so that it could claim
them as its nationals even though the corporations had no further con-
nection with that State, this Court should not “regard itself as bound by
the unilateral act” of that State. The same conclusion must be reached
when less powerful States attract the incorporation of companies or the
registration of ships by providing ‘‘charters of convenience” or “‘flags of
convenience”.

It has been noted that Canada is one of the States which attracts the
incorporation of companies through favourable tax laws, etc. Counsel for
Spain called attention to the fact that a corporation called the San
Antonio Land Company was incorporated in Toronto in the same year—
1911—as Barcelona Traction by Mr. Pearson, “‘the promoter and first
president of Barcelona Traction”. The identity of some of the personalities
in the two companies, as well as their London agents, was stressed. The

190
190 BARCELONA TRACTION (SEP. OP. JESSUP)

business of the Land Company was carried on in Texas. Counsel quoted
from the report of the Special Master of the Federal District Court in
New York !:

“It is perfectly clear that the Toronto office, the Board of
Directors, etc., was maintained only in pursuance of the require-
ments of the statutory existence of the corporation under the laws
of the Dominion of Canada. The effective control of the affairs of the
corporation plainly was lodged elsewhere than in Toronto and followed
the peregrinations of Dr. Pearson, the master mind 2.” (Hearing of
27 May 1969.)

49. The evidence shows that counsel for Spain was correct in asserting
that the situation in Barcelona Traction was parallel. Throughout, one
finds that the important decisions, the vital planning, was done by such
persons as Heineman, Wilmers, Speciael, Hubbard and Lawton, whose
instructions issued from Great Britain, the United States and Belgium
and Spain itself, but rarely if ever from Canada. The general meetings of
shareholders held in Toronto seem to have been pro forma affairs. It is
true that in 1948 a “Receiver and Manager” of Barcelona Traction was
appointed in Canada and operated out of Toronto, but since the operating
companies in Spain had passed into the control of the bankruptcy offi-
cials there, the Receiver and Manager could merely try to encourage a
settlement; he did not have the power to make a settlement.

Counsel for Belgium, in the same pleading in which he rebutted some
of the Spanish contentions about the San Antonio Land Co. case, quoted
from a judgment of Mr. Justice Roxburgh in the English High Court of
Justice, the following passage which strongly confirms the fact that
Barcelona Traction’s management was not centred in Toronto:

“Barcelona was a holding and not an operating Company. Sterling
was its life blood. It also borrowed pesetas but it had little interest in
Canadian dollars. London was its financial seat... . There were in
Canada, so far as I know, or rather so far as I have been told, nothing
but a registered office of undisclosed size with a staff of undisclosed
dimensions, and share registers.”

1 The nature of the litigation in question is not relevant to the point being dis-
cussed here. ‘

2 The rebuttal of counsel for Belgium, on 27 June 1969, while correctly pointing
to some errors in the Spanish analysis of the San Antonio Land Co. case, did not
affect the point here under consideration.

191
191 BARCELONA TRACTION (SEP. OP. JESSUP)

Counsel noted that on the final point the judge had not had discovery,
but counsel did not deny the truth of the judge’s comment.

It is true that Roxburgh J. was dealing with a period of time anterior to
the bankruptcy proceedings in Spain, but I find nothing in the record to
suggest that there was later a material change whereby the principal
power centre of Barcelona Traction was located in Toronto }.

*
* *

50. There are three situations in which there is wide agreement that
a State may extend its diplomatic protection to shareholders who are its
nationals, although the company whose shares they hold has the nation-
ality of another State. These three situations are sometimes considered
“exceptions” to a general rule allowing protection of the corporation
itself.

51. The first of these situations is where the corporation has been
incorporated in the State which inflicts the injury on it without legal
justification, and where the shareholders are of another nationality.

It is in such situations that one finds the widest agreement that a State
may extend diplomatic protection to shareholders who are its nationals 2.
The rationale seems to be based largely on equitable considerations and

1 Jn the same court proceeding, the testimony of Mr. Hubbard, Chairman or
President of Barcelona Traction during several years, is not wholly clear. He testified
that all meetings of the Directors of the Company were held in Canada; that he
attended some but not all such meetings; that neither he nor his predecessor or
successor as President or Chairman was resident in Canada; that Mr. Speciael, as
President may have gone to Canada from New York to attend some directors’
meetings; it was not necessary for the President or Chairman of the Board to
preside over directors’ meetings. (According to the company law of Canada, it
seems that the directors present may elect a chairman of the meeting if neither the
President nor vice-president is present; Fraser and Stewart, Handbook on Canadian
Company Law, Fifth Ed. 1960, p. 134.) Mr. Hubbard indicated that some decisions
were made in London, with notice to the office in Toronto and that in other cases
“instructions came from Canada”. Mr. Hubbard testified that ‘“‘There was a very
strong Board in Canada” but of the directors listed as residing in Canada (according
to a list submitted to the Court in the same proceeding) the only one appearing
in the list of registered shareholders in 1948 (A.M., Ann. 2) held one share. (The
records of the Court proceedings are in A.C.M., Vol. I, Annex 13, especially
Document No. 6.) This was a Mr. Merry who is listed as Secretary of the Company
(but not a director) in 1918. (A.P.O., Ann. 22, Doc. No. 2. This is the only extract
from minutes of directors’ meetings which lists those present, so far as I have been
able to ascertain; three directors were present.)

2 The Respondent here shares in this agreement. Bindschedler-Robert (op. cit.,
p. 174), writing in 1964, considered that this view was being accepted in international
law. She cites the well-reasoned and well-documented study by Kiss, ‘La protection

192
192° BARCELONA TRACTION (SEP. OP. JESSUP)

the result is so reasonable it has been accepted in State practice. Judge
Charles De Visscher says this result is required by “des considérations
impérieuses de justice”. (“De la protection diplomatique des action-
naires d’une société contre l’Etat sous la législation duquel cette société
s’est constituée”, 61 Revue de droit international et de législation com-
parée, 1934, p. 624.) By hypothesis, the respondent State has committed
an unlawful act from which injury results. The corporation itself cannot
seek redress and therefore the State whose nationals own the shares may
protect them ut singuli. The equities are particularly striking when the
respondent State admits foreign investment only on condition that the
investors form a corporation under its law. These points are clearly made
by Petrén, 109 Hague Recueil, 1963, II, pages 506 and 510. Petrén refers with
approval to the earlier lectures by Paul De Visscher, 102 Hague Recueil,
1961, I, page 399; see especially pages 478-479.

Judge Wellington Koo, in his separate opinion in this Barcelona case
in 1964 asserted emphatically:

“,..the original simple rule of protection of a company by its
national State has been found inadequate and State practice, treaty
regulation and international arbitral decisions have come to recog-
nize the right of a State to intervene on behalf of its nationals,
shareholders of a company which has been injured by the State of
its own nationality, that is to say, a State where it has been incorpo-
rated according to its laws and therefore is regarded as having
assumed its nationality” (.C.J. Reports 1964, p. 58).

Judge Wellington Koo considered it immaterial whether this rule should
or should not be considered as an “exception”.

52. It is curious that this “exception” should have been so widely
accepted since it ignores the traditional rule that a State is not guilty of
a breach of international law for injuring one of its own nationals. It
rebuts also the notion that an injury to a corporation is not a direct

diplomatique des actionnaires dans la jurisprudence et la pratique internationale”,
in La personalité morale et ses limites (1960), p. 179. Kiss indeed cites abundant
authority for even broader rights to protect shareholders; he refers to Borchard,
Ch. De Visscher, Sibert, Ralston, Fitzmaurice, Pinto, Paul De Visscher, Perry,
Séfériades, Jones, Guggenheim, Battagliani, Bindschedler, but query whether ail
these carry their conclusion as far as does Kiss. See also in support of the broader
rule allowing protection of shareholders, Agrawala, ‘‘State Protection of Share-
holders’ Interests in Foreign Corporations”, The Solicitor’s Quarterly, 1962, p. 13;
Nial, “Problems of Private International Law”, 101 Hague Recueil, 1960, III,
p. 259.

193
193 BARCELONA TRACTION (SEP. OP. JESSUP)

injury to the shareholders. Moreover, if the foreign shareholders may be
protected in such a situation, it is also necessary to choose one horn of a
dilemma: either one admits that the right of the shareholders existed at
the moment when the injury was done to the corporation, which means
that the rights of shareholders may be damaged by an injury to the
corporation, or, if that right came into existence subsequently, then one
ignores the rule of international law that a claim must be national in
origin. Moreover, the admission of this “exception” negates the argument,
sometimes advanced against the diplomatic protection of shareholders,
to the effect that such claims expose an accused State to a vast variety of
claims on behalf of persons of whose existence it was ignorant. Since
customary practice has, however, accepted this “exception”, other argu-
ments against protection of shareholders are correspondingly weakened,
especially since the doctrine in question generally does not insist that the
life of the corporation must have been extinguished so that it could be
said the shareholders had acquired a direct right to the assets.

53. The second situation in which it is widely agreed that a State may
claim on behalf of its shareholders in a foreign corporation, is where
the State of incorporation has liquidated or wound up the corporation
after the injury was inflicted by some third State.

This situation differs from that just considered in that the respondent
State has committed its unlawful act (let us say total confiscation) against
a foreign corporation. Here some doctrine would say that ordinarily
State A, the State of incorporation, should be the one to extend diplomatic
protection. But by hypothesis the corporate life has been extinguished by
State A, so that—just as in the first situation—a claim can not be pressed
for the corporation. Brownlie states the situation as follows:

“Where the State under the law of which the company is incorpo-
rated terminates the existence of the company in law, or other
circumstances make the company practically defunct, the share-
holders remain as the interests affected by government act: inter-
vention on their behalf would seem to be justified in such a case.”
(Brownlie, Principles of Public International Law, 1966, p. 401.)

Here it may be said that after liquidation and payment of creditors,
the shareholders—under an applicable system of municipal law—have a
property interest in the assets and for that reason may be protected. But
at the time of the unlawful act (“‘confiscation’’) they did not have such a
property interest and therefore under the rule of continuity the claim did
not have in origin the appropriate nationality on that basis.

194
194 BARCELONA TRACTION (SEP. OP. JESSUP)

54. But Brownlie equates the case of the termination of the existence
of the company with the case where it is ‘‘practically defunct”. This is a
term which was used by the British Government in the Delagoa Bay case
and used a good deal by the Parties in their pleading in the instant case.
Its exact meaning is not clear but Barcelona Traction did have some life in
Canada even after the practical annihilation in Spain. From 1948 on it
was under a receivership, but the “appointment of a receiver and manager
over the assets and business of a company does not dissolve or an-
nihilate the company...” (Kerr, On the Law and Practice as to Receivers,
13th ed. by Walton, 1963, p. 232). As already noted, the Receiver and
Manager of Barcelona Traction concerned himself only with promoting
negotiations for a settlement between the private parties; none of the
public utility enterprises in Spain were under his direction or within his
control; and he had to borrow the money for his operations from an
affiliate or subsidiary of the Belgian company, Sidro.

Itis true that after 1948 there was some trading in Barcelona Traction
shares on the Brussels Bourse (Verbatim Record for 7 July 1969), and
according to Moody’s Manual of Investments, for years ranging from 1952
to 1967, there were sales in New York, Canada and London. No infor-
mation is available to make it possible to say whether the transactions
were merely speculative, but it may be noted that in 1961, when the first
Belgian application was withdrawn from this Court in expectation of a
private negotiated settlement, the quoted price was somewhat higher.

55. It is true that so far as Canadian law is concerned, the shareholders
had not yet acquired a direct right to the assets but since I do not base my
conclusion on this factor, I do not pursue it further.

56. [also find it unnecessary to consider in detail what is considered the
third “exception” where shareholders may admittedly be protected,
namely where the injury is inflicted directly on the shareholders and not
indirectly through damage to the company.

*
* *

57. It is now possible to turn to the question which is crucial for the
instant case, namely whether the three situations just mentioned are the
only ones in which international law permits a State to extend diplo-
matic protection to shareholders who are its nationals.

I find no evidence or reasoning which precludes such protection in

other situations, but the question can be answered only by analysing the
fundamental principles underlying the right of diplomatic protection.

195
195 BARCELONA TRACTION (SEP. OP. JESSUP)

The Basic Principle of State “Interest”

58. In this opinion traditional language has been used, for example in
speaking of injuries to a corporation as such, but this is really a bit of
anthropomorphism since, as Sir Edward Coke remarked, corporations
“have no souls” (case of Sutton’s Hospital, 10 Rep. 32) and as stated by
more recent jurists, the corporation “is not a thing. It is a method.”
(Douglas and Shanks, “Insulation from Liability through Subsidiary
Corporations”, 39 Yale Law Journal, 1929, pp. 193, 194.) That corpora-
tions have a nationality, is a legal fiction '. In legal principle and practice,
the situation is that in relations with other States, a State is entitled to
treat a corporation as if it were one of its nationals, provided the corpora-
tion is connected with it by certain links.

“Indeed, it is at least arguable that ail cases of apparent protection
of corporations are in reality cases of protection of the shareholding
interest of nationals of the protecting State.” (Clive Parry, ‘Some
Considerations upon the Protection of Individuals in International
Law”, 90 Hague Recueil, 1956, II, p. 657 at p. 704.)

Tt is customary also to speak about “claims of individuals” or “of
natural persons” and about “corporate claims” or ‘claims of corpora-
tions”. Such language is convenient, but it conceals the fact that in inter-
national relations, the claims in question are always the claims of a State,
not of a natural or juristic person. A citizen has no right to diplomatic
protection; it is wholly within the discretion of the government whether
it will or will not extend its diplomatic protection.

59. A State takes up a claim against another State when it considers
that its own interests have been affected. As the Court said in Nottebohm,
Second Phase (p. 24) “Diplomatic protection and protection by means of
international judicial:proceedings constitute measures for the defence of
the rights of the State”. In Mavrommatis Palestine Concessions (P.C.L.J.,
Series A, No. 2, p. 12) the Court identified the State’s “‘own rights” as
“its right to ensure in the person of its subject respect for the rules of
international law’. Almost the identical words were repeated by the
Court in Panevezys-Saldutiskis Railway (P.C.I.J., Series A]B, No. 76,
p. 16), although in this latter case the Court went on to elaborate the
importance of “the bond of nationality”’.

1 “Legal fiction”, according to Morris Cohen, ‘‘is the mask that progress must
wear to pass the faithful but blear-eyed watchers of our ancient legal treasures. But
though legal fictions are useful in thus mitigating or absorbing the shock of in-
novation, they work havoc in the form of intellectual confusion.” Quoted in Trans-
national Law, p. 70.

196
196 BARCELONA TRACTION (SEP. OP. JESSUP)

In explaining the basis for a State’s right to give diplomatic protection,
the rather simplistic notion that a State was injured when an injury was
inflicted abroad upon the least of its nationals, has come to be superseded
by the realization of the national economic importance of foreign invest-
ments as State interests.

This is one reason why it is not now pertinent to stress the difference in
municipal law between private “rights” and “interests”, as Judge Gros
shows so clearly in his separate opinion.

“|. States protect their corporations chiefly on the basis of the
real national interest and not, in fact, on the basis of nationality.
In such a situation, it seems necessary to allow the State of the
nationality of these shareholders to present their claims to the limit
of their interest in the corporation. ...

Since the protection of national interest in foreign corporations
is based on protecting an economic or pecuniary interest, it matters
little whether the party in whose behalf the protection is exercised is a
shareholder or a bondholder, or even if the national interest is held
indirectly; e.g., if a national corporation controls another corpora-
tion which holds bonds or shares in a third corporation sustaining an
injury.” (Khalid A. Al-Shawi, The Role of the Corporate Entity in
International Law, 1957, pp. 55 and 59.)

“In three countries—Italy, Britain and France—all proposals for
foreign investment must clear government agencies before they can be
carried out, whether or not government sources of credit are used...
The Government of Japan, through the Ministry of Finance (and when
required, through such additional agencies as the Ministry of Inter-
national Trade and Investment and the Ministry of Agriculture), must
approve all foreign investments . . .” (Friedmann and Kalmanoff, Joint
International Business Ventures, 1961, pp. 188 and 190.)

60. No survey of Staté practice can, strictly speaking, be comprehen-
sive and the practice of a single State may vary from time to time—
perhaps depending on whether it is in the position of plaintiff or defen-
dant. However, I am not seeking to marshal all the evidence necessary to
establish a rule of customary international law. Having indicated the
underlying principles and the bases of the international law regarding
diplomatic protection of nationals and national interests, I need only cite
some examples to show that these conclusions are not unsupported by
State practice and doctrine.

61. The primacy of the general economic interests of the State in
protecting private investments abroad, and the minimizing of any one es-

197
197 BARCELONA TRACTION (SEP. OP. JESSUP)

sential test justifying diplomatic protection, are strikingly brought out in
the message of the Swiss Conseil fédéral of 29 October 1948 to the As-
semblée fédérale, concerning the negotiation of agreements with Yugo-
slavia on trade, payments, and a global settlement of Swiss claims for
nationalized property:

“Article 5 indicates what must be considered as Swiss assets,
holdings or claims. This question presents no difficulty when the
assets belong to natural persons; in that case the nationality of the
owner or creditor serves as the criterion. So far as corporate persons
and companies are concerned, the seat, which must be in Switzerland,
has not been made the only test, but the question is also raised as to
whether there is a substantial Swiss interest in the corporate person
or company. In most cases the substantial Swiss interest will be
shown to exist when the effective majority of the capital is in Swiss
hands. If there is no such majority, it is the minority exerting a
decisive influence on the company which is to be taken into account;
this is particularly easy to discern when there is a compact minority
on one side and a scattered majority on the other. The composition
of the board of directors and senior management may also be a
determining factor when it belongs to them to shape the will of the
corporate person and decide on its behalf. Lastly, in certain cases
the creditors ought not to be overlooked either, for they too may
exert a certain influence on the undertaking. But it is always neces-
sary to consider the real circumstances and not trust in purely legal
constructions, whose sole aim may be to dissimulate the true facts.”
(Feuille fédérale de la Confédération suisse, 100° année 1948, Vol.
Ill, p. 672 at 686. / Translation from French by the Registry.})

62. In its note of 20 April 1938 to the Mexican Government, in regard
to the case of Mexican Eagle Oil Company, a Mexican corporation, the
British Government said:

“But the fact remains that the majority of shareholders who are
the ultimate sufferers from the action of the Mexican Government
are British, and the undertaking in question is essentially a British
interest.

For this reason alone His Majesty’s Government have the right
...to protest against an action which they regard as unjustified.”
(8 Whiteman Digest of International Law, p. 1273.)

In a section of the British Digest of International Law, entitled ‘Protection
of British Interests in Foreign-Incorporated Companies”, one finds a
number of passages in which the stress is on the British “interests”
rather than on the nationality of the company. (See Vol. 5, Part VI,
pp. 535 ff.)

198
198 BARCELONA TRACTION (SEP. OP. JESSUP)

63. In regard to the practice of the United States, it has already been
noted that that Government maintains that it is entitled under inter-
national law to protect substantial American shareholder-interests in
foreign corporations and that it declines to protect American companies
in which the substantial interest is alien-owned. Thus, in 1912, the
Department of State declined to make representations on behalf of an
American company in which Americans owned only $100 worth of
shares out of a total of $450,000. (V. Hackworth, Digest of International
Law, p. 845.) In 1965, the same Department informed an American
embassy: “...the Government of the United States has the right under
principles of international law to intervene or espouse a claim on behalf
of nationals of the United States who own a substantial interest in a
corporation organized under the laws of...[a foreign country]’’. (8
Whiteman Digest, p. 1272.)

The Restatement of Foreign Relations Law of the American Law
Institute (1965) in Section 173 provides that a State is liable for damage
to alien stockholder interests in a corporation of a third State if “a
significant portion of the stock” is alien-owned, the corporation fails to
obtain reparation, for reasons which the shareholders can not control,
and the corporation has not waived or settled its claim.

“In international law, as in the domestic law of the United
States, there has been a gradually increasing tendency to disregard
the separate corporate entity when necessary to avoid injustice.
Originally the United States, like Great Britain, refused to intervene
on behalf of its national shareholders in a foreign corporation .. .
Since late in the 19th century, a number of such claims have been
presented to and allowed by international tribunals. In most of
these, the international responsibility of the State with respect to the
injury to the alien shareholder as such was not squarely presented as
a question of international law, since this point was settled by the
terms of the international agreement establishing the tribunal or by
the compromis under which the case was submitted to it . . . [citing
Delagoa Bay]. However, the practice of providing for such cases in
international arbitration agreements has apparently come to be
regarded as a reflection of customary international law, and it now
seems to be recognized that, at least under some circumstances, the
State is responsible for the injury to alien shareholders owning a
significant interest in the injured corporation.” (Reporter’s Notes to
S. 172; cf. IL, Hyde, p. 904.)

64. In the Hannevig case, Norway espoused against the United States,
the claim of Hannevig, a Norwegian national, on the ground that he had a

199
199 BARCELONA TRACTION (SEP. OP. JESSUP)

substantial interest in certain American corporations alleged to have
been damaged by action of the United States Government. (The case is
described in 32 American Journal of International Law, 1938, p. 142.) The
United States did not assert the American character of the corporations
as a basis for resisting the claim.

65. This section of the opinion may close with the words of Judge
Huber in the familiar Ziat, Ben Kiran claim:

“International law, which in this field, is in the main based on
principles of equity, has laid down no formal criterion for granting
or refusing diplomatic protection to national interests bound up
with interests belonging to persons of different nationalities.” (8
Whiteman Digest, p. 1283.)

*
* *

The Question of Double or Multiple Protection

66. Counsel for the Respondent made numerous statements to the
effect that diplomatic protection could never be extended by more than
one State in any one case. Such an argument is advanced against the
possibility that more than one large shareholding interest might be
protected, it being alleged that if the State of which the company has the
nationality is the only State entitled to extend diplomatic protection,
impermissible double protection would be avoided. That position is not
correct since there are various situations in which international law recog-
nizes the right of more than one State to interpose in connection with the
same allegedly wrongful act.

67. In an ordinary case of dual nationality, both of those States of
which claimant is a national may extend protection although in case of
conflict an international tribunal may apply the doctrine of effective
nationality. This Court said in the Reparation for Injuries Suffered in the
Service of the United Nations case: ‘International Tribunals are already
familiar with the problem of a claim in which two or more national
States are interested, and they know how to protect the defendant State in
such a case.” (J.C.J. Reports 1949, pp. 174, 186.) In that case, the Court
was asked by the General Assembly to consider, and it did consider,
whether a claim might be brought both by the State of which the injured
person was a national and by the United Nations. The Court said that
“there is no rule of law... which compels either the State or the Or-
ganization to refrain from bringing an international claim”. The General
Assembly thereafter recognized that two claims might be presented, and
authorized the Secretary-General to negotiate agreements to reconcile
action by the United Nations with the rights of the State of which the
victim was a national. (UN General Assembly Res. 365 (IV), 1 Dec. 1949,
para. 2.)

200
200 BARCELONA TRACTION (SEP. OP. JESSUP)

68. The situation is not so simple when one considers the condition of
artificial or juristic persons. International law has not developed a clear
rule of dual nationality for such entities although different criteria are
employed for determining nationality. Respondent indicated that a
company may have dual nationality because both criteria are acceptable
(Preliminary Objections, 1963, p. 191), but it insisted only one of the two
States may make a claim. Yet in cases which are now very commen in the
commercial life of the world, the corporation may have various links
with more than one State—links just as real as those which may connect a
natural person with two different States whose nationality he possesses.
International law cannot be oblivious to these corporate links. As already
indicated above, they include the place of incorporation, the place of
management, the place of operation (probably including employment of
labour and payment of taxes), the nationality of the persons (natural or
artificial) who exercise ccntrol, whether through the board of directors
and management, or through stock interests, which not infrequently may
exercise control even when a relatively small minority.

69. I shall not go over all the cases but merely note the double or joint
diplomatic interposition in Delagoa, Mexican Eagle and Tlahualilo. (Cf.
Paul De Visscher, 102 Hague Recueil, 1961, I, pp. 477-478.) In the case of
Barcelona Traction, diplomatic representations, some perhaps only in the
nature of good offices, were made by Canada, the United Kingdom,
United States of America and Belgium.

In the case of two different but simultaneous justifiable diplomatic
interpositions regarding the same alleged wrongful act, the Respondent
can eliminate one claimant by showing that a full settlement had been
reached with the other. If, in this case, Spain made a settlement with
Canada for Barcelona Traction, the Belgian claim for the shareholders
might be considered moot.

70. With all respect to the Court, I must point out the irrational
results of applying a rule which would provide that only the State in
which a company is incorporated may extend diplomatic protection in
case of damage inflicted under circumstances in which the State inflicting
the damage incurs liability under international law, as illustrated by the
organization of the Iranian Oil Consortium. In September 1954 an agree-
ment was concluded between eight oil companies on the one side and, on
the other side, the Government of Iran and the Government-owned
National Iranian Oil Company; it was ratified by the Iranian Parliament.

201
201 BARCELONA TRACTION (SEP. OP. JESSUP)

The agreement gives to the Consortium the exclusive rights in a defined
area for the production, refining and processing of crude oil and natural
gas, together with other facilities. The eight participating oil companies
include the former Anglo-Iranian Oil Company, now British Petroleum
Company, which participates to the extent of 40 per cent.; five American
oil companies also having 40 per cent.; the one Dutch company having
14 per cent. and the French company having 6 per cent. To carry out the
operations, the Consortium caused to be incorporated in the Netherlands,
two Dutch companies, one a Producing company and the other a Refining
company. All the shares of the Dutch Producing company and of the
Refining company are owned by an English holding company, Iranian Oil
Participants Limited, with offices in London. The shares of the “Holding
Company” are owned by the members of the Consortium in the percen-
tages indicated above 1. The two operating companies were incorporated
in the Netherlands because of the liberal provisions of its commercial
code which permit the companies to have their head offices and board of
directors and management overseas, in this case, in Iran. The code also
permits ‘‘one-man” companies, which makes it possible for all their shares
to be held by the “Holding Company” in London. Fortunately, the Iran-
ian Oil Consortium agreement was so skilfully drawn in a co-operative
spirit, that one does not anticipate the likelihood of any diplomatic
claims, quite aside from the fact that the agreement includes notable ar-
rangements for arbitration of any disputes 2. But should there be any
question in the future of representations by any government, it would be
absurd to maintain that the Netherlands Government would be the sole
government entitled to make such representations. Nor would it seem
rational to assign an exclusive role to the British Government on the
ground that the Holding Company was incorporated in Great Britain
and has its office in London. Perhaps a stronger link between the enter-
prise and Great Britain would be the extent of British Government
participation in holding shares in British Petroleum.

*
* *

1 Actually, in 1955 nine independent American companies were admitted to
participate and each of the original American participating companies surrendered
1 per cent. of their shareholdings to the new group. For the purposes of this illustrative
example, it is not necessary to explain further the position of another British company,
Iranian Oil Services Ltd. This account of the organization of the companies is
based upon ‘‘History and Constitution of Iranian Oil Participants and Iranian Oil
Services”, a talk by Mr. J. Addison, General Manager of Iranian Oil Participants
Ltd. to Staff Information Meeting, Tehran, 21 August 1961.

2 See ‘“‘The Oil Agreement Between Iran and the International Oil Consortium:

The Law Controlling”, by Abolbashar Farmanfarma, of the Tehran Bar, in 34
Texas Law Review, 1955, p. 259.

202
202 BARCELONA TRACTION (SEP. OP. JESSUP)

71. The Court could logically have begun its analysis of the case by
examining the proof of the nationality of the physical or juristic persons
whom Belgium asserts the right to protect. If it found that such nationality
was not proved, the Belgian claim must be dismissed without regard to the
rule concerning the diplomatic protection of shareholders in a corpora-
tion chartered in a third State.

72. The burden of proof was clearly on the Applicant to prove the
Belgian nationality of the shareholders on whose behalf Belgium claims.
The Belgian argument (7 May 1969) that Spain was estopped or precluded
from contesting the Belgian character of Sidro and Sofina, is not per-
suasive.

The Continuity Rule

73. The two dates on which the nationality had to be proved, are
determined by the rule of continuity. As the term implies, the rule requires
that the nationality remain unchanged between those two dates. Sir
Gerald Fitzmaurice makes a forceful argument against any “too rigid and
sweeping” application of the continuity rule, but I believe his illustrative
situation in paragraph 62 of his separate opinion may be covered by
another rule deriving from the law of State succession, and on that basis
would escape the application of the continuity rule for international
claims which I consider to be generally binding—specialia generalibus
derogant.

74. Although the phraseology varies, there is general agreement on the
principle that the claim must be national in origin, that is to say that the
person or persons alleged to have been injured must have had the na-
tionality of the claimant State on the date when the wrongful injury was
inflicted. One might well admit that there is a certain artificiality in the
whole notion since it rests basically on the Vatelian fiction, but I do not
think the Court can change a long established practice on this matter.
(But cf. 1932 Annuaire de I’ Institut de droit international, Vol. 37, pp. 479
ff., and Jessup, A Modern Law of Nations, 1947, p. 116.)

75. There was a fleeting attempt by Belgium to identify the origin of
the claim as the refusal of foreign exchange, which indeed started the
toboggan down the slide in terms of the Belgian contentions. (See espe-
cially the statement by counsel for Belgium on 18 April 1969: “Belgium
rests its case on the illegality in international law of Mr. Suanzes’s
rulings in October and December 1946 and the circumstances surrounding
them.’’)

This position was abandoned (it would have weakened the Belgian
case in terms of the continuity rule), and throughout much of the written
pleadings and oral argument it seems to have been taken for granted

203
203 BARCELONA TRACTION (SEP. OP. JESSUP)

that the critical date, when the injury complained of was inflicted, was
that of the Reus decree declaring Barcelona Traction bankrupt, namely
12 February 1948 1. I think the Court is entitled to accept that date, at
least to the extent of saying that if the claim was not Belgian on that date,
the claim must be dismissed.

76. The terminal date under the continuity rule is more controversial.
Historically, many international claims have been settled through the
diplomatic channel and never were presented to an international tribunal.
In many mixed claims commissions, claims were heard long after the
events complained of because the commissions were established ad hoc
after a certain number of claims had accumulated. For a moderate
example, the British-American Mixed Claims Commissions established
under a treaty concluded in 1910, decided in 1920 a claim based on events
which took place in 1898. (VI, U.N.R.ILA.A., p. 42.) This diplomatic
practice supported the view that the nationality of the claim had to be
proved up to the time when it was espoused by the State. Thereafter, it
was argued, the claim could be regarded as statal and, for the purposes of
the continuity rule, the status of the individual on whose behalf the claim
was made, became immaterial.

Now the first Belgian representation in regard to the bankruptcy
proceedings involving Barcelona Traction, was dated 27 March 1948
(A.M., Vol. IV, Annex 250). But in its Note of 22 December 1951 (ibid.,
Annex 259), Spain maintained that Belgium had not then as yet made a
formal claim. This was denied by Belgium (Annex 260), which insisted
that its diplomatic protest of March 1948 should be considered a formal
claim. In any event, at that period Belgium seems to have claimed on
behalf of the Barcelona Traction company and not the Belgian share-
holders.

77. However, when a case is brought before a permanent tribunal such
as the International Court of Justice, the date of the application takes the
place of the first diplomatic representation 7. Counsel for Belgium on
4 July 1969 made a persuasive argument in favour of choosing that as the
date required by the continuity rule although I do not agree that the
Court is driven to making new law no matter what terminal date it

! In its final submissions on 15 July 1969 under heading VI, Belgium asserted:

“that the Belgian Government has established that 88 per cent. of Barcelona
Traction’s capital was in Belgian hands on the critical dates of 12 February 1948
and 14 June 1962 and so remained continuously between those dates. . .” (Emphasis
supplied.) The same assertion was amplified under heading V.

2 See Institut de droit international, Annuaire, 1965, Vol. II, p. 270.

204
204 BARCELONA TRACTION (SEP. OP. JESSUP)

selects. Counsel for Spain on the other hand, insisted on 21 July 1969
that the critical moment for the terminal date should be when the terms
of the dispute were clearly defined which could only be after the respon-
dent State had indicated its position. I find slight precedent for this view
and see no logic in it !. I therefore conclude that the terminal date for
compliance with the continuity rule is 19 June 1962, the date of the “new”
Application.

Piercing the Veil of Sidro and Sofina

78. Belgium conceded that to prove the nationality of Sidro and Sofina
it should go, and had gone, beyond the simple facts of State of corpora-
tion and séige social, It stated that in strict law it was not necessary to go
beyond that but—

“it has always admitted—basing itself on the constant practice of
States—that a government is only justified in taking up the claim of
a company !! if the latter’s nationality be real and effective. For
this reason, the Belgian Government has made a point, from its very
first pleadings, of showing that three-quarters of Sidro’s shares
belonged to Belgian shareholders on the two crucial dates (1948 and
1962). On account of the size of the participation in Sidro’s capital
of another Belgian company, Sofina, the Belgian Government has
taken a further step; it has shown that on the same dates Belgian
shareholders had an even larger holding in Sofina than in Sidro.”
(Reply, Part III, Sec. 1013, p. 738.)

In the next section Belgium states that it is not obliged to show that
Sidro’s shares are, for the major part, Belgian owned but has nevertheless
done so particularly in Annex 133 to the Reply.

79. In the light of this statement in its written pleading, the Court is
justified in deciding whether Belgium succeeded in its attempt to prove
the nationality of the alleged Belgian shareholders in Sidro and Sofina,
in other words, to pierce the corporate veils of these two Belgian com-
panies. I repeat that share-ownership is not a test of corporate nationality

1 Nevertheless, there is some support for the view that nationality must be
continuous to the date of the Court’s judgment; see the convenient summary in
Roéd, “Bankruptcy and the Espousal of Private Claims under International Law”
in Legal Essays—A Tribute to Frede Castberg, 1963, pp. 307-309.

2 The “company” in question is Sidro as shareholder in Barcelona Traction.
Mr. Arthur Dean, in his letter of 1 February 1955 to the Spanish Ambassador in
Washington, stated that he represented ‘‘Sofina, the majority common shareholder”
in Barcelona Traction. [Footnote added.]

205
205 BARCELONA TRACTION (SEP. OP. JESSUP)

in the broad sense, but, as Belgium states, a test of whether the nationality
is “real and effective”. Belgium in effect thus accepts the application to
corporations of the Nottebohm link principle. But there are other
Belgian statements in the oral argument which seem to modify that posi-
tion and which object to the Spanish demand for proof of Belgian share-
holding in the two Belgian companies.

80. Hf, as I maintain, Canada was not legally competent to protect
Barcelona Traction because of the absence of a link (such absence being
in part proved by the extent of foreign shareholding) !, then Belgium by
the same token would not be legally competent to protect Sidro unless
the presence of a link is established. This is the challenge which Belgium
seems to have accepted. Apparently Belgium was willing to have the
link tested entirely by the extent of shareholdings and not by other factors.
This may be due to inability to prove that the international controlling
group was associated with or operated out of Belgium. Here again there
is an illustration of the fact that the rule which permits claims to be
submitted on behalf of shareholders places a heavy burden of proof on
the claimant State, especially in the case of great international holding
companies whose focus of power can not easily be proved especially over
a period of years. There is added difficulty in time of war when many
steps, some of them devious, but quite justifiable, need to be taken to
avoid enemy appropriation or exploitation and also characterization as
enemy by allied or friendly States. As Berle has abundantly demonstrated,
the centre or focus of power is not necessarily to be identified by the
location of the largest number of shares Z. Counsel for Belgium recognized
this fact in stating, on 13 May 1969, that Sofina was, at one period,
controlled by about 8 per cent. of the shareholdings. The place of in-
corporation, whence the promoters of an enterprise secure a “charter of
convenience”, has lost its significance as evidence of the real identification

1 Tn all the analyses of the nationality of shareholders, very little emphasis is put
on any Canadian holdings. On 1 Apri! 1962, out of 1,798,854 issued shares of
Barcelona Traction 41,294 were held in Canada. The Canadian shareholders included
57 individuals (of whom 20 held less than 5 shares each) and 43 Canadian companies
of which one, Houston & Co., held 30,225 shares. In the ‘“‘U.S.A. Section”, 11,
not counting Newman & Co., held over 1,000 shares each. 15 shareholders holding a
total of 2,387 shares, had addresses in Belgium. Of these, 7 held only 1 share each;
in at least some of these cases they seem to have been simply qualifying shares
(A.M., Annex 10).

2 “|, it is just possible that in talking the language of ‘ownership’ in relation to
the flow of national capital, we are talking the language of history rather than the
language of reality” (Berle, Power Without Property (Eng. ed. 1960), p. 45).

This is true because, as Judge Tanaka has pointed out, anonymity brings about
the separation of management from the ownership. (Cf. Morphologie des groupes
financiers, Centre de recherche et d’information socio-politiques, 1962, pp. 9 and
60, and Meyssan, Les droits des actionnaires et des autres porteurs de titres dans les
sociétés anonymes, 1962, pp. 9-10.)

206
206 BARCELONA TRACTION (SEP. OP. JESSUP)

of a holding company. Moreover, the siége social in terms of an office,
etc., can be merely a façade.

81. There is, to be sure, a certain logic in taking the position that if
international law permits a State to protect a shareholder interest, the
State should be able to protect a single shareholder and would not have
to prove that a substantial percentage of the shares were held by its
nationals. This seems to be the Swiss practice but not that of the United
States and there is very little support in the doctrine for pushing logic to
such extremes. Nor does the claimant State in the instant case rely on
any such principle—quite the contrary. Law is constantly balancing
conflicting interests. The British-American Claims Commission, under
the Presidency of Henri Fromageot, in 1923 in the Eastern Extension case,
declared that “‘the function of jurisprudence is to resolve the conflict of
opposing rights and interests by applying... the corollaries of general
principles”. (VI, U.N.R.LA.A., pp. 112, 114.) It is such reasoning which
supports Dunn’s allocation of risk theory in the law of State responsibility.
I have elsewhere pointed out as a transnational illustration, the power of
a single shareholder to induce a great corporation to change its policies.
But the international protection of broad State interests of an economic
and financial character does not require permitting a State to protect, let
us say, a holder of just one of the hundreds of millions of shares of a
company like A.T. & T.

82. It must be realized how different in character are various corpora-
tions. Holding companies like Barcelona Traction are very different from,
let us say, the Ford Motor Company or the Du Pont Company. In these
two examples, regardless of foreign holdings or interests of the companies,
and regardless of the number of their shares which may be held by
foreign interests, the location of plant, the employment of labour and
the payment of taxes are all factors, in addition to place of incorporation
and of policy making, identifying the companies as “American”. Gener-
alizations clustered around the word “corporation” or “company” are
therefore dangerous.

83. If one looks at the link of management-brains, the citizenship of an
individual is not conclusive. If a “Nottebohm” were the sole managing
and controlling personality in a company, this would not prove that the
company was identified with Liechtenstein, for purposes of the application
of rules of international law. Nor is apparent residence conclusive; com-
pare the arguments of the Parties about the residence of Juan March at

207
207 BARCELONA TRACTION (SEP. OP. JESSUP)

certain periods, and the challenges to evidence produced to prove resi-
dence. From the point of view of explaining the reasons for diplomatic
protection, it may be significant that the controlling power group has,
for one reason or another, strong political influence with a certain govern-
ment, Spain’s invocation of old press reports of scandalous connections
between Belgian Government. officials and personalities connected with
Sidro or Sofina, suggested this element.

84. There are, of course, abundant precedents for protection of bond-
holders—] refer to the holders of corporate bonds and not the holders of
government bonds which raise entirely different legal (and political)
problems, as Drago clearly showed. In the instant case, there was at
certain times, as already noted, stress by Great Britain and by Canada
upon the interests of bondholders. As a characterization of the claim as
Belgian, bondholding does not seem to be significant.

Proof by Presumptions

85. In the attempt by Belgium to prove that Sofina’s shares were held
by Belgians, at least in large part, there is a very extended analysis of
Belgian wartime legislation. The subject is covered in greatest detail in
Annex 133 of the Reply and in counsel’s pleading on 13 May 1969. In
this line of argument it is explained that under the legislation in question,
various rules were laid down concerning certifications and the declarations
of ownership of types of shares, whether held in Belgium or abroad. The
argument is to say the least devious and rests on a pyramid of presump-
tions. In Annex 133 to the Reply at page 769, it is said that the proof
adduced “rests on presumptions, but presumptions represent a mode of
proof recognized by all legislative systems . . .”’. Yet counsel for Belgium
on 17 April wisely admonished the Court: “The Court will, I trust, here
as elsewhere, reject any attempt to substitute allegations for proof or in-
sinuations for fact.” It must also be noted that Belgian counsel admitted
on 4 July 1969 that the certificates did not purport to establish continuity
of Belgian ownership. Moreover, there are facile transitions as from broad
categories such as “‘non-enemy’’, which included “allied”, to the partic-
ularity of “Belgian”. I do not find the evidence at all convincing.

In the pleading of Belgian counsel in 1964, it was stated on 15 April
that there is a presumption “that when a company is established in a

208
208 BARCELONA TRACTION (SEP. OP. JESSUP)

particular State and enjoys the national character of that State, the com-
pany is also owned and controlled by shareholders of the same nation-
ality’. By this token, the controlling shareholders of Barcelona Traction
would have been Canadian. Counsel offered a further presumption that
since the shares of Sidro and Sofina “are traded principally in the Brussels
stock market”, Belgian nationals own the shares in those companies.
[bid., p. 14.] It was further suggested that if shareholders give an address
in Belgium, they must be presumed to be Belgians. [/bid., pp. 9-10.]

86. The Belgian Memorial filed in 1959 after the first Application, was
more realistic in its appraisal of a submitted classification of ownership
of Barcelona Traction shares. The Memorial stated (at p. 19):

“It should be noted that the foregoing classification was, in almost
all cases, established on the basis of the place of residence of the
person in whose name the shares were registered at that time.
Having regard to the Anglo-Saxon custom of resorting to nominees
who are merely custodians of the securities, such a classification does
not necessarily correspond to the place of residence of the real
owners of the securities. Sidro itself had its Barcelona Traction
shares registered in the name of an American nominee.

Furthermore, the place of residence may not correspond to the
nationality of the person concerned, but this is of no great importance
in view of the small number of shares considered as Belgian apart
from those held by the Sidro company.”

On 13 May 1969, Belgian counsel presented a long detailed list of
presumptions, largely based on the time and place of declaration and
certification under the Belgian wartime legislation. The information
does not seem, as claimed by counsel, to be “both exact and consistent”.

On 7 May counsel for Belgium had argued from certain reports of
trading in Barcelona Traction bearer shares on the bourse in both Paris
and Brussels during 1961-1962. (The reports are in A.R., Annexes 131
and 132.) In Paris the shares were apparently unlisted and there was no
record of the number of shares bought and sold. In Brussels 44,264
shares were traded and counsel remarked: “True it cannot be said that
all the purchasers were necessarily Belgian but the /ikelihood is that they
were.” [Emphasis supplied.]

87. The actual Belgian position seemed to fall back on that taken by
counsel on 7 May 1969 in the following statement:

“After all, and this is a point of some importance, it is not neces-
sary for the Government of Belgium to satisfy the Court regarding

209
209 BARCELONA TRACTION (SEP. OP. JESSUP)

the identity and Belgian nationality of every individual shareholder
whose rights and interests underlie the Belgian claim. According to
the doctrine recognized by this Court and generally accepted by
States, Belgium is presenting a claim for injury done to the State of
Belgium through wrongs inflicted upon its nationals. The Court
therefore, need do no more than estimate in proximate terms the
number of Belgian shareholders in Barcelona Traction.”

Although he argued that the evidence is enough for the Court to find
that as of 14 June 1962 “‘at least 200,000 bearer shares in Barcelona
Traction were owned by Belgians other than Sidro”, it was actually
left to the Court to make an approximate estimate. All of these presenta-
tions and others not noted here, do not suffice to discharge the burden of
proof which rested on the Applicant.

88. One cannot deny that it is far from easy to trace the ownership of
bearer shares. In the Certain German Interests in Polish Upper Silesia
case, the Polish Government argued that “no importance can be attached
to the possession of bearer securities, since it is impossible to ascertain in
whose hands they may be at a given moment”. (P.C.I.J., Series A, No. 7,
p. 67.) The Court did not find it necessary to pursue this point. In the
instant case, Belgium said that Spain was seeking to drive them with their
backs to the wall by demanding a probatio diabolica for identification of
holders of bearer shares. But Belgium insisted that in this instance it was
able to accomplish this almost impossible task. (Memorial, 1959, p. 17;
Reply, Part III, p. 156, and C.R. for 13 May 1969.) I am not convinced
that it succeeded '.

Apparently 341,326 bearer shares were in the trust account with
Securitas (to be discussed later herein), after being deposited 31 December
1939 (O.S., p. 203). Then 8,525 more bearer shares were deposited by
Sidro with Securitas—7,925 on 12 December 1939 and 600 on 22 Feb-
ruary 1940—while 2,075 bearer shares were, for some reason, left in
Brussels. (Zbid., pp. 203-204.)

When on 19 April 1948, Sidro asked Securitas to send to Newman &
Co. various securities, it included in the lot to be sent 6,025 bearer shares
and the coupons of 341,326 bearer shares, but not the latter certificates
themselves. (App. 2 to Annex 11 of the Anexes to the Memorial.) In
January 1952, Sidro converted the 341,326 bearer shares then in its

1 The Belgian State in 1946 or 1947 possessed 10,000 shares of Sofina and 50,000
shares of Sidro. The shares were acquired in payment of a capital levy in 1946 but
were apparently held by the State only briefly and probably not after 31 December
1947. See A.O.S., Ann. 30, App. 3, pp. 368 and 381 and Sub-App. 3, p. 388. It was
in another context that Belgian counsel spoke, on 4 July 1969, of “‘the overall
claim, here put forward by the Belgian Government, in respect of the injury done to
the Belgian State by the unlawful acts for which Spain is responsible”.

210
210 BARCELONA TRACTION (SEP. OP. JESSUP)

possession to registered shares; they were registered in the name of
Newman & Co. (See ibid., Annexes 11 and 4.) I have not been able to
establish that none of these 341,326 bearer shares changed hands be-
tween 12 February 1948 and January 1952.

It is alleged that 244,832 additional bearer shares were owned by other
Belgians in February 1948. (M., Sec. 10.) It was claimed that on 14 June
1962, 200,000 bearer shares were held by Belgians other than Sidro.
(O.S., p. 206). I find no proof that these bearer shares were continuously
Belgian-owned (assuming the above allegations to be correct) between
1948 and 1962.

89. In reply to a question from the Bench concerning the possible
effect on continuity if shares were transferred during the period 1948-1962,
counsel for Belgium said, on 4 July 1969, that if shares were sold to other
Belgians and then repurchased by Sidro, “the continuity requirement
would be satisfied”. But “if the shares had been sold to, and then re-
purchased from, non-Belgian nationals, other than Spanish nationals, the
requirement might possibly not have been satisfied . . .”. The Spanish side
challenged this statement, and properly so, because one does not see why
this situation would differ from counsel’s third case. The third case he put
was where the shares had been sold to, and then repurchased from,
Spanish nationals; here he agreed the continuity requirement would not
have been satisfied. Counsel sought to justify his answer to his own
second case by various quotations to the effect that the continuity rule is
artificial and should be re-examined. But he merely says that Belgium
“feels it right that the existence of this body of critical opinion should be
drawn to the attention of the Court”. He did not, however, deny the
existence of the rule. When later he analysed his evidence of Belgian
holdings in 1948, he did not try to adduce proof that the shares did not
change hands between 1948 and 1962. It was in this context that he
rejected the Spanish suggestion that Belgium should prove in regard to
each shareholder that he was a Belgian and that he was a shareholder
during the critical period. Counsel said:

“It is a lengthy and expensive procedure to carry out the investiga-
tion proposed by the Government of Spain. It is justifiable if there is
something to be distributed. [Sc. an award in this case.] It is not
justifiable otherwise.”

He felt this was the more true because he considered that Belgium had
proved that there was at all material times Belgian ownership of at least
200,000 shares aside from the Sidro holdings. None the less, the state-
ment is a damaging admission of Belgium’s inability to identify the

211
211 BARCELONA TRACTION (SEP. OP. JESSUP)

shareholders it sought to protect. The exhaustive effort to trace the
bearer shares would hardly have been necessary if Belgium had been
confident that the Court would be convinced that Sidro was the real
owner Of the 1,012,688 registered Barcelona shares throughout the
critical period since so large a holding would presumably satisfy the
demand that Sidro be identified with Belgian interests. This may be
another slight indication that Belgian counsel were aware that they were,
for one reason or another, not in a position to prove when the Securitas
trust arrangement terminated. (See paragraph 96 below.)

Securitas as Trustee for Sidro

90. On 6 September 1939 Sidro concluded a “custodian” contract
with Securitas Ltd. which was a United States corporation formed under
the laws of Delaware. (P. 722 of the Chayes Opinion, A.R., Ann. 125; so
stated also in A.O.S., Ann. 11, p. 206. Other statements of fact here are
taken from the recital in Annex 3 of the Memorial unless otherwise
stated.) It is said that this contract was concluded “‘foreseeing the danger
of war”. (The contract is in A.M., Ann. 3, App. 2.) Such a custodian
contract did not transfer the “real ownership” which was vested in Sidro.

91. The recitals in Annex 3 of the Memorial do not mention the fact
(revealed later in A.O.S., Ann. 11, p. 207) that on the same date, 6 Sep-
tember 1939, Sidro made with Securitas a second contract which was a
trust agreement. It was further revealed that this trust agreement of 6
September 1939 was replaced by another trust agreement on 27 February
1940, but it is said that the differences between the two trust agreements
are without relevance for this case! It is said that the second agreement
merely took advantage of some new Belgian war legislation. The texts of
the trust agreements have never been revealed throughout the pleadings.
But the existence of the trust agreement of 27 February is recorded in
Annex 3, page 36, to the Memorial, where it is described as completing the
measures for protection during the war. It is said that this trust agree-
ment was to enter into force when the Brussels area was occupied by the
enemy or when any other critical situation developed threatening the
normal operations of Sidro. It is further recited that the period of the
application of the trust agreement was indicated by a ‘‘suspense period”
which would cease six months after the end of the critical period. Turning
again to Annex 11 of the Observations and Submissions, at pages 207 and
208, it is stated that when one of the “Operative Events” occurred,

212
212 BARCELONA TRACTION (SEP. OP. JESSUP)

Securitas automatically became a trustee of Sidro’s property outside
Belgium and especially of 341,326 bearer shares of Barcelona Traction.
The 1,012,688 registered shares were also already on deposit with
Securitas and its possession was transformed into “legal ownership”
when Securitas became trustee 1. Securitas became the trustee in May
1940 (ibid., p. 209).

Curiously enough, Mr. Mockridge, Belgium’s Canadian expert, refers
to the agreement of 6 September 1939 as the “trust agreement” under
which Securitas “became Trustee rather than Custodian”. (A.R., Ann.
126, p. 8). On the other hand, Professor Chayes, Belgium’s American
expert, bases the trust on the agreement of 27 February 1940 and does not
reveal a familiarity with the earlier trust agreement of 6 September 1939.

92. Annex 17 to the Observations and Submissions is a certificate
without date signed by members of the committee named in application of
clause 9 of the trust deed of 27 February 1940, certifying, in conformity
with clause 4 (III) of the trust deed, that the state of danger which
threatened Sidro (citing clause 3 of the trust deed) had ceased to exist on
14 February 1946 (p. 230). (I note that the Belgian Government had
returned to Brussels on 8 September 1944 and Germany surrendered on
7 May 1945.) According to the report of Securitas to Sidro dated 24
September 1946 (op. cit., Ann. 18, p. 231; photocopy in A.R., Ann. 123),
the ‘“‘suspense period” ended 14 August 1946, which was six months
after the certified date of the end of the danger; this is said to be according
to Article 4 (III) of the trust deed. Securitas reports an inventory of what
they held in trust on that date. The letter says they hold the securities
subject to future instructions from Sidro. There is no flat statement that
they ceased at that moment to be trustee although this is implied. A
further letter of 17 April 1947 (A.M., Ann. 3, App. 8) encloses a state-
ment of securities held for Sidro “in custody for your account” as of 31
December 1946. It was not until 19 April 1948 that Sidro instructed
Securitas to send the securities to Newman & Co. On 3 May 1948
Securitas wrote that they had delivered the securities and that this
operation closed Sidro’s deposit account with them (A.O.S., Anns. 19 and
20). The lists showed 1,012,688 shares registered in the name of Charles
Gordon & Co., and certificates (presumably of bearer shares?) 6,025.
On 7 June 1948, Newman & Co. wrote that the shares in the former

1 Securitas held for Sidro many securities other than and in addition to those of
Barcelona Traction. For example, of Mexican Light & Power Co. 6 per cent.
cumulative income debenture stock, they held shares to par value of $2,254,250,
registered in the name of the Midland Bank of London as nominees, and to the value
of $1,958,000 registered in the name of the Schréder Bank in London as nominees,
the nominees in both instances holding for the account of Charles Gordon &
Co. (A.O.S., Ann. 14, p. 219).

213
213 BARCELONA TRACTION (SEP. OP. JESSUP)

group had been registered in their name and were in the Chase Safe
Deposit Co. in New York (ibid., Ann. 22).

93. Securitas was dissolved by legal action in Delaware, 16 September
1948 (ibid., Annex 25, p. 258). An affidavit by Duncan, Alley and New-
man, all directors or officers of Securitas, 30 October 1958, attesting this
fact, says they examined the books of Securitas and that it had held (in
addition to the registered shares) 341,326 bearer shares at Winchester
House, London, and 7,925 plus 600 bearer shares in Chase National
Bank, New York. Further, on 20 January 1947 Securitas “delivered” to
Sidro 1,400 of these bearer shares and on 25 February 1947, 1,100 of the
same. On 16 January 1947, the safe deposit box at Winchester House,
with contents, was “assigned”? to Sofina. On 3 December 1947, in ac-
cordance with request of Sidro, the 341,326 bearer shares were credited
by Sofina to Sidro’s account (ibid., Annex 26).

94. Now title to bearer shares may be considered to pass by delivery
of the certificates, unless the transferee is a nominee or other depositary,
for the trustee. It is not clear to me from the documents whether Securitas,
as trustee, did actually divest itself of title to these bearer shares through
these transactions. It should be noted that the communications in question
were originaliy in English and the words quoted above —“delivered” and
“assigned”’—are the actual terms used, which might or might not indicate
passage of title from the trustee. (See A.O.S., Ann. 25.)

95. It is a vital matter to know when the trust ceased to exist. Professor
Chayes, Belgium’s American expert, clearly points out why this is so; he
says that during the German occupation of Belgium—

“... Securitas acted as trustee of the property. As such, Securitas
held legal title to the property and could manage the property in its
own discretion, without regard to any instructions from Sidro.
Indeed, the whole point of the arrangement was to free Securitas
from the control of Sidro, since during the German occupation,
instructions might come from Belgium with respect to the shares that
were inimical to Sidro’s true interests and to the allied cause.
Securitas was of course, bound to use its discretion for the benefit of
Sidro, the beneficiary under the trust instrument. The trustee would
be liable if it abused its discretion or used its position to take
advantage of Sidro. And it had to account to Sidro, ultimately, for
dividends and other profits. But subject to these general limitations,

214
214 BARCELONA TRACTION (SEP. OP. JESSUP)

as trustee during the war Securitas had full authority over the
property” (A.R., Ann. 125, p. 707) '.

Chayes concludes that the trust had been terminated by 12 February
1948, but in proof of this statement he merely cites Annex 3 to the
Memorial, paragraph (g), where it is asserted that the trust ended on
14 August 1946. It is apparent that he either never saw the trust deeds or
was not at liberty to disclose their exact terms.

96. Spain, in its Preliminary Objections in March 1963, pages 61-62,
remarked on the failure to produce the trust deeds. It also noted the
fragile character of the “proof” that the trust ended on 14 August 1946.
It noted other documentary omissions by Belgium, some of which at
least were later supplied—but the trust deeds were not supplied. The
Belgian omission is especially remarkable in Annex 11 to the Observations
and Submissions, page 208, where it discusses the two trust agreements of
6 September 1939 and 27 February 1940 and, as already noted, blandly
remarks that the differences between the two contracts are irrelevant for
the purposes of this case! The content of the trust agreements is described
but the text is not produced. In the Rejoinder (p. 951) Spain hammers the
point that, with all its documentation, Belgium has not produced the text
of the trust agreements, adding a footnote that it was again calling at-
tention to this abnormality. The Rejoinder cites the Chayes opinion along
the lines noted above. It makes the sound point that since the personalities
acting for Sidro, Securitas and Sofina are essentially the same, their as-
sertions supporting each other are equivalent to self-serving declarations
which have little probative value.

In his pleading on 7 May 1969, counsel for Belgium dealt with the
question of nominees but did not discuss the trust. On 4 July, he brushed
aside the trust issue which had again been raised by counsel for Spain on
18 June. Nor do I find elsewhere in the Belgian oral arguments an at-
tempt to meet the Spanish criticism of the failure to produce the text of
the trust agreements.

In his final pleading of 21 July, counsel for Spain stressed the non-
production of the trust agreements, calling attention to the whole record
on this matter, ending with a reference to the opinion of Professor
Chayes. In particular he remarked that the only transfer of shares which
Securitas made was that of 3 May 1948 to Newman & Co.—two-and-a-

1 Securitas evidently was not a ‘‘passive trustee” in the sense described by Judge
Augustus Hand in the San Antonio Land and Irrigation Co. case to which the Spanish
side attached such importance. (New Documents, Vol. III, p. 114.)

215
215 BARCELONA TRACTION (SEP. OP. JESSUP)

half months after the critical date of the declaration of bankruptcy.
(This is in accord with A.M., Ann. 11, App. 2).

97. I fully agree with Sir Gerald Fitzmaurice (in paragraph 58 of his
separate opinion) that this Court does not have any fully developed
practice on rules of evidence, but I believe that in the circumstances which
have been described it is proper to apply the common law rule which is to
the effect that if a party fails to produce on demand a relevant document
which is in its possession, there may be an inference that the document
“if brought, would have exposed facts unfavourable to the party...” 1.
Although it is true, as Sir Gerald Fitzmaurice emphasizes, that one
should give due weight to the pressures engendered by the situation in the
Second World War, international law has long taken cognizance of
practices designed to thwart belligerents by concealing the truth; the
history of the law of neutral rights and duties, is full of examples. If
disclosure of the text of the trust deeds would have prejudiced some
governmental interest, Belgium could have pleaded this fact, as the
United Kingdom successfully pleaded “naval secrecy” in the Corfu
Channel case, I.C.J. Reports 1949, pages 4, 32.

Article 48 of the Rules of Court concerning documents submitted after
the close of the written proceedings, requires consent of the other party
or a special decision of the Court; in this instance, the other party asked
for the production of the trust document. Nor was the Court strict in the
instant case about applying the rule—witness the fact that over 4,000
pages of “‘new’’ documents were introduced by the two Parties during the
oral proceedings between 21 April and 8 July 1969.

98. The legal aspect of the trust situation which is important is the one
which distinguishes it from the nominee situation. As Chayes points out,
during the trust, Securitas had not only legal title but full control, even
though the beneficial title was in Sidro. Accordingly Belgian character of
the claim did not exist during the trust. But in the nominee situations, the
nominee is in the position of an agent and the legal title coincides with
the beneficial title in the principal even though he is not a registered
shareholder.

1 Wigmore, Evidence, 3rd ed. 1940, Vol. 2, secs. 285 and 291. Wigmore traces the
rule back to the beginning of the seventeenth century.

216
216 BARCELONA TRACTION (SEP. OP. JESSUP)
The Status of “Nominees”

99. The requirements of linguistic simplicity necessitate the constant
use of the term “shareholder”. The danger is that the reality behind the
term will be lost to sight through semantic insistence upon the term
itself !, To my mind, this defect faults the Spanish arguments concerning
nominees. The Spanish argument identifies in all situations, the real
“shareholders” with the names inscribed on the stock registers. See the
Counter-Memorial, Chapter VI, Sections 47 ff. and Rejoinder, Part III,
Chapter II, especially Subsection 2. The legal situation of nominees
reveals the fallacy of this approach, quite aside from the fact that the
names of holders of bearer shares do not appear on the register although
they are certainly “shareholders”.

100. Under principles of private international law, the legal nature of
the right, title, or interest of nominees in whose names Barcelona Traction
shares were registered, must be determined by either New York or Ca-
nadian law. Counsel for Belgium properly noted on 7 May 1969 that the
principles governing the choice of law are not unfamiliar to the Court in
view of the Permanent Court’s decisions in the Serbian and Brazilian
Loans cases, P.C.I.J., Series A, Nos. 20 and 21, Since according to the
unrebutted expert opinions of Chayes and Mockridge there is no material
difference between the two legal systems in the matters here involved, they
need not be analyzed separately.

Annex 125 of the Reply is the opinion of Professor Chayes, and An-
nex 126 is the opinion of Mr. Mockridge on the Canadian law. I think it is
clear that under both New York and Canadian law, the nominee does not
have “‘real title”, is not the “‘real owner” and that the one for whom the
nominee acts has all the real elements of ownership ?. The limitations on
this statement are only those which relate to the rights of the corporation,
as for example, its right to deai with the registered owner in the payment
of dividends, etc. As has been shown, where shares are held by a trustee
under a trust instrument, the same conclusion cannot be drawn. The
distinction is clear in both opinions although Mockridge lays more stress
on cases where there is a “bare trust”. There can be situations in which the
legal owner of even 97 per cent. of the shares may own something

! On this point counsel for Belgium, speaking on 4 July 1969, was absolutely
correct: ‘“‘The question is not who has the right to term himself ‘shareholder’ but, in
Professor Ago’s own words, ‘who in the last resort has a proper claim to the economic
content of the ownership of a share’. . . so as to enjoy the protection of international
law.”

2 In opposition to the Belgian position on nominees, Spain invokes an opinion
from an eminent New York law firm— Davis, Polk, Wardwell, Sunderland & Kiend].
(See C.M., Chap. VI, p. 675, and the text of the firm’s letter of 28 February 1963 in
Annex 65, Appendix 2, Preliminary Objections 1963). In my view, this opinion
does not controvert the essentials of the Chayes opinion.

217
217 BARCELONA TRACTION (SEP. OP. JESSUP)

worthless because, for example, of the beneficial interests of a usufruct
under German law—but this is not such a case. (Cf. the decision of the
United States District Court in the Uebersee case cited above, at p. 13 of
that Court’s opinion.)

101. Chayes in his conclusion on page 722 (loc. cit.) says “I have the
honor to conclude that neither Securitas, Ltd., Charles Gordon &
Company, Newman & Company ever had any property interest in the
Barcelona Traction shares, except for the period of the German oc-
cupation of Belgium during World War If, when Securitas, Ltd., held
them as Trustee”. Mockridge (A.R., p. 732) agrees with Chayes except he
adds the period during which the shares were vested in the Canadian
Custodian of Enemy Property which period he says terminated before the
commencement of the bankruptcy proceedings. According to the Obser-
vations and Submissions (p. 204), they were deblocked 29 April 1947; this
fact is confirmed in the Reply, paragraph 994. When the shares were first
transferred to Charles Gordon & Co., there was attached (in accordance
with cabled instructions by Wilmers) a notice reading:

“We hereby certify that the within transfer does not involve a
change of ownership of the shares represented by the annexed
certificates as it is being made to Charles Gordon & Co. as nominee
of our depositary therefore no transfer tax is exigible.”’ (A.M., Vol. I,
Ann. 3, App. 5, p. 50.)
This was on 11 September 1939 and Chayes stresses that there was
nothing inconsistent with the Securitas arrangement in the fact that
Sidro transferred direct to Gordon & Co. (A.R., Vol. II, Ann. 125, p. 5).
Chayes states on the same page that Sidro listed the shares registered in
Gordon’s name with the United States authorities before the United
States entered the war but there is no documentary record of this listing.
But he says that Sidro reported the trust agreement with Securitas and
did not report Gordon as holding any interest.

102. I find that it is of no legal consequence that the agents in whose
names the shares were registered were not listed publicly as professional
nominees. (So also in Canada; Mockridge, A.R., p. 729.) The practice of
registering shares in the names of nominees is very common in the United
States as Chayes shows (ibid., pp. 708-709). Although nominees were
much used in time of war to cloak the identity of the real owner, they are
generally used in the United States—where bearer shares are not issued—
simply to facilitate transactions in shares !. Somewhat comparably, when
shares are pledged with a bank as collateral for a loan, a stock power
endorsed in blank will be attached.

2 Under the name of “‘share warrants” bearer shares may be issued in Canada

218
218 BARCELONA TRACTION (SEP. OP, JESSUP)

103. Chayes noted (ibid., pp. 714 and 715) that unregistered owners
of shares may bring a shareholder’s derivative suit, or under Delaware
and New York law, in case of voting against a merger, may demand an
appraisal of their shares and cash payment of the appraised value. In an
appraisal case the New York court said there was no justification for
interpreting the word “‘stockholder’”’ in the statute as meaning “registered
stockholder” (ibid., p. 720). Mockridge shows that Canadian courts
interpreted the word “shareholder” in agreements, as being broader than
and not'limited to “registered shareholders” ?.

Mockridge (ibid., p. 730) indicates that shares registered in Charles
Gordon & Co.’s name were vested in Canada although Charles Gordon &
Co. had United States nationality, because Sidro as beneficial owner was
“enemy” during the German occupation. He does not mention Securitas
in this context. In the Observations and Submissions (p. 199), it is said
that while the trust was still in force, Sidro declared the Barcelona Trac-
tion shares under Belgian law, although they were registered in the name
of Charles Gordon & Co.

104. The jurisprudence of the Foreign Claims Settlement Commission
of the United States is of interest, notwithstanding the fact that this is a
national body, operating in accordance with its statutory terms of
reference and with the terms of agreements with various governments ?.
For example, the Commission “denied recovery to a domestic [i.e.,
United States] corporation with more than eighty per cent. of its stock
registered in the names of American citizens but beneficially owned by
aliens. (Claim of Westhold Corporation . . .)’ (Foreign Claims Settlement
Commission of the United States, Decisions and Annotations, 1968, p. 20).
Thus neither place of incorporation nor majority of shares registered in
the names of American nominees, sufficed to make the claim “American”.

In the Annotations one reads (at pp. 39-41):

“Beneficial interest—Occasionally legal title is vested in one
person while the true owner is another. Normally such an arrange-

as in England, but they are not extensively used; Schlesinger, Comparative Law,
2nd ed., 1960, p. 442.

1 Cf. Henn, Corporations, 1961, sec. 179: ‘‘Statutory references to shareholders
are not always clear as to whether they refer only to shareholders of record or also
to the beneficial owners of shares. A substantial amount of stock is held by brokers
in their own names (known as ‘street names’) in behalf of their customers.”

2 For the contrary Spanish view on the interest of this jurisprudence, see C.M.,
Chap. VI, Section 55.

219
219 BARCELONA TRACTION (SEP. OP. JESSUP)

ment is unnecessary; but as the Arndr decision indicates, a ‘cloaking’
of title was sometimes imperative in view of the discriminatory
measures that were practiced during World War IL Applying
settled rules of international law, the Commission held that beneficial
interest, as opposed to nominal or bare legal title, was controlling in
deciding the question of ownership. [Emphasis supplied.]

A more common example of beneficial ownership is the case of
an agent who acquires title to property on behalf of his principal ...

The technical, legal form in which title to property is held, and the
legal capacity to sue, constituting the so-called ‘indicia of title,’ must
be considered of secondary importance to the question whether the
interest for which espousal is sought is truly that of a United States
national. ...

A claim concerned an interest in a family fund or ‘syndicate’,
that owned shares of stock in a Swiss corporation, which assertedly
owned all the outstanding shares of stock in a Yugoslav corporation.
It was stated that 18,949 shares of stock held by the ‘syndicate’ in
Switzerland had been transferred to claimant in 1942, in recognition
of her undivided fractional interest in the family fund . . . It appeared
that the various record entries of the transactions were designed
merely to cloak the shares of stock with ownership by a national of
the United States, a device which was then considered best calculated
to safeguard the family interests. The Commission held that on the
date of loss claimant was not the owner of the 18,949 shares of
stock, but was the beneficial owner of only a 5.29% interest in the
family fund. (Claim of Antonia Hatvany, Docket No. Y-1063, Dec.
No. Y-910, Final Decision.)”

105. Belgium not having established the Belgian character of any
substantial number of shares throughout the critical period which the
continuity rule defines, might rely, and at times seemed to rely, on the
Belgian nationality of the group which shaped the will of the corporate
person and dictated its policies. This also may be a difficult task in the
case of great holding companies with many cross-holdings of shares,
which cross-holdings, Belgium stated, were permissible under Belgian law.
The centre of power may be deliberately concealed, not only in time of
war, but for reasons of avoidance of taxation or of the application of
anti-trust laws, or otherwise. The individuals who give instructions—for

220
220 BARCELONA TRACTION (SEP. OP. JESSUP)

example, in this case, Mr. Heineman and Mr. Wilmers—may be acting
for unidentified financial interests, although I have no reason to suggest
that this was actually the case. Belgium in the Reply (Ann. 127, Vol. IT)
quotes from the report of the Spanish members of the International
Committee of Experts in 1950, passages attesting that Sidro controlled
Barcelona Traction and that Sofina controlled Sidro; and counsel stated
on 13 May 1969 that at least in a certain period, Sofina “était contrôlée
par des filiales”. The Spanish arguments and Belgian explanations about
the alleged ‘“Belgianization” and take-over bids in 1964 do not prove
what the situation was on 19 June 1962. But whatever is the alleged basis
for the State interests which justify protection, that basis must be proved
just as much as if the justification were to be found solely in the continued
nationality of shareholders.

106. The influence of the Court’s judgments is great, even though
Article 59 of the Statute declares that the decision ‘has no binding force
except between the parties and in respect of that particular case”. It may
be said that the new methods and institutions for foreign investments
which have been referred to earlier in this opinion, will overtake the
possible consequences of the rule which the Court now holds to be the
law. But not all of the older business practices have been abandoned and
the managerial community of the commercial world might have to meet
the announced rule by new devices. If, for example, it is agreed that when
the company has been wound up and has ceased to exist, the share-
holders, now having a direct right to the assets, may benefit from the
diplomatic protection of the State of which they are nationals, it would be
quite feasible to secure the cancellation of the “charter of convenience”
which the corporation had obtained. But surely no economic, social or
political advantage would be gained if in a situation like that in the
instant case, the life of the Barcelona Traction Company had to be
officially ended in Canada so that the principal shareholders, who are the
real parties in interest, could be protected diplomatically. And could it
be reasonably argued in such circumstances, that the United States
would be the State entitled to extend diplomatic protection because a
majority of the shares were found to be registered in the name of American
nominees? One is entitled to test the soundness of a principle by the
consequences which would flow from its application; the consequences
here would clearly be undesirable. With deference to the opinion of the
Court, I cannot agree that international law imposes such a solution of

221
221 BARCELONA TRACTION (SEP. OP. JESSUP)

the problem which the Barcelona Traction case has laid before the Inter-
national Court of Justice*.

(Signed) Philip C. Jessup.

* Since I have personally had occasion to correct misconceptions
about the “Jaw’s delays” as a feature of the procedure in the International
Court of Justice, I, like Sir Gerald Fitzmaurice, welcome the inclusion
in this Judgment of the Court of an indication of the fact that the fault
lies with governments of States and not with the Court or its Registry.
The Court has never been asked to treat a contested case or a request
for an advisory opinion by summary procedure, quite apart from the
possible use of the standing Chamber of Summary Procedure, but if the
governments concerned desired a prompt decision, the Court could meet
their request.

222