Barcelona Traction, Light and Power Company,

Ltd. (Belgium v. Spain)

Procedural History:
Action for damages for the expropriation of a corporation.
Overview:
Belgium (Plaintiff) brought an action for damages against Spain (Defendant)
on the ground that its nationals as shareholders of the Barcelona Traction Co.,
incorporated and registered in Canada, had been seriousl harmed b actions
of Spain (D) resulting in expropriation.
The Barcelona Traction, !ight, and Po"er Co. "as incorporated and
registered in Canada for the purpose of de#eloping and operating electrical
po"er in Spain (D).
After the Spanish Ci#il $ar, the compan "as declared ban%rupt b a Spanish
court and its assets "ere sei&ed.
After the Canadian interposition ceased, Belgium (P) brought an action for
damages against Spain (D) for "hat it termed expropriation of the assets of
the Traction Co. on the ground that a large ma'orit of the stoc% of the
compan "as o"ned b Belgian (P) nationals.
Spain (D) raised the preliminar ob'ection that Belgium (P) lac%ed standing to
bring suit for damages to a Canadian compan.
Issue:
Does the state of the shareholders of a compan ha#e a right of diplomatic
protection if the state "hose responsibilit is in#o%ed is not the national state of
the compan(
Outcome:
)o. *n order for a state to bring a claim in respect of the breach of an obligation
o"ed to it, it must first establish its right to do so. This right is predicated on a
sho"ing that the defendant state has bro%en an obligation to"ard the national
state in respect of its nationals. *n the present case it is therefore essential to
establish "hether the losses allegedl suffered b Belgian (P) shareholders in
Barcelona Traction "ere the conse+uence of the #iolation of obligations of "hich
the are beneficiaries.
*n the present state of the la", the protection of shareholders re+uires that
recourse be had to treat stipulations or special agreements directl
concluded bet"een the pri#ate in#estor and the state in "hich the in#estment
is placed. Barring such agreements, the obligation o"ed is to the corporation,
and onl the state of incorporation has standing to bring an action for
#iolations of such an obligation. )onetheless, for reasons of e+uit a theor
has been de#eloped to the effect that the state of the shareholders has a right
of diplomatic protection "hen the state "hose responsibilit is in#o%ed is the
national state of the compan. This theor, ho"e#er, is not applicable to the
present case, since Spain (D) is not the national state of Barcelona Traction.
Barcelona Traction could ha#e approached its national state, Canada, to as%
for its diplomatic protection.
,or the abo#e reasons, the Court is of the opinion that Belgium (P) lac%s
standing to bring this action.
Rule:
The state of a shareholders corporation has a right of diplomatic protection onl
"hen the state "hose responsibilit is in#o%ed is the national state of the
compan.
Analysis:
The -estatement of the ,oreign -elations !a" of the .nited States. / 012, states
that failure of a state to pa 'ust compensation for the ta%ing of the propert of an
alien is "rongful under international la", regardless of "hether the ta%ing itself
is concei#ed as "rongful. Such a "rongful ta%ing is characteri&ed either as
tortious conduct or as un'ust enrichment.