BARCELONA TRACTION, LIGHT AND POWER COMPANY, LIMITED CASE

Facts: The Barcelona Traction, Light and Power Company, Limited, was incorporated in 1911 in
Toronto (Canada), where it has its head office. For the purpose of creating and developing an
electric power production and distribution system in Catalonia (Spain) it formed a number of
subsidiary companies, of which some had their registered offices in Canada and the others in
Spain. According to the Belgian Government, Barcelona Traction share capital came to be very
largely held by Belgian nationals, but the Spanish Government contends that the Belgian
nationality of the shareholders is not proven. Barcelona Traction issued several series of bonds,
principally in sterling. In 1936 the servicing of the Barcelona Traction bonds was suspended on
account of the Spanish civil war. On February 12, 1948 a judgment was given declaring the
company bankrupt and ordering the seizure of the assets of Barcelona Traction and of two of its
subsidiary companies. In June 15, 1959, the Belgian Government asked the International Court
of Justice to decide that the behavior of the organs of the Spanish State in declaring the
Barcelona Traction Company in bankruptcy and seizing then liquidated its assets was contrary to
international law, and that the Spanish State was responsible for the resulting injury.

Issue: Whether or not International Law overrides Municipal Law.

Held: NO. The Court found that Belgium lacked jus standi to exercise diplomatic protection of
shareholders in a Canadian company with respect to measures taken against that company in
Spain. The Court observed that when a State admitted into its territory foreign investments or
foreign nationals it was bound to extend to them the protection of the law and assumed
obligations concerning the treatment to be afforded them. The court considers that in the field of
diplomatic protection as in all other fields and international law, it is necessary that the law be
applied reasonably. It has been suggested that if in a given case, it is not possible to apply the
general rule that the right of diplomatic protection of a company belongs to its national state,
considerations of equity might call for the possibility of protection of the shareholders in
question by their own national state. The Court has to decide the case in disregard of the relevant
institutions of municipal law; it would without justification, invite serious legal difficulties. It is
to rules generally accepted by municipal systems and not to the municipal law of a particular
State, that international law refers.