Barcelona Traction, shareholder protection, diplomatic protection, ICJ International Court of Justice, international investment agreements, bilateral investment treaties, EU european union, foreign investment, national law, Éric J CHICATE-LAURENT, University of Paris 1 Panthéon-Sorbonne
This research paper has been written by Mr Éric J. CHICATE-LAURENT, a student at University of Paris 1 Panthéon-Sorbonne.
The Barcelona Traction judgment of the International Court of Justice (ICJ) of February 5th 1970, considerably shaped the protection of foreign investors. Indeed, this judgment which introduced an innovative distinction, but ultimately in conformity with existing legal concepts, between the rights of the company and the interests of the shareholders, and this, despite their financial links, came to specify that the nationality of a company depends essentially on the country where it is legally constituted and where its registered office is established. Thus, in the event of harm suffered by a foreign company in a third country, the request for diplomatic protection must generally come from the country of origin of the company. However, the Court rejected the criterion of control as a basis for defining the nationality of the company, thus dissociating the nationality of the majority shareholders. In addition, It should also be noted that this case also ultimately led to a strengthening of the legal security of international investments and prompted States to adopt other measures aimed at promoting the protection of foreign investors. These developments have thus enabled foreign investors to circumvent the traditional mechanisms of diplomatic protection by resorting to more appropriate instruments to preserve their rights independently. However, these new mechanisms are not without criticism.
[...] Some IIAs and BITs have been criticised for not incorporating sufficient sustainable development standards, particularly in the environmental and social fields. The agreements could encourage investment without guaranteeing adequate compliance with environmental and social standards. IIAs and BITs could, in some cases, favour large multinational companies to the detriment of small and medium-sized enterprises and local investment. This could contribute to a concentration of economic power. IIA and BIT negotiations often involve a lack of meaningful participation by domestic stakeholders, including civil society groups and indigenous peoples. [...]
[...] The examination of RDIE in the light of the Barcelona Traction case In the specific case of Barcelona Traction, the RDIE could have provided a direct remedy for damaged foreign shareholders, allowing them to challenge the actions of the Spanish State before an international arbitral tribunal. Based on the standards of protection set out in international investment agreements, foreign investors could have sought redress for the harm suffered as a result of the infringement of their economic and personal rights, since, conversely, the diplomatic protection of companies is highly dependent on the political will of the States concerned. [...]
[...] Sánchez González, J. (2012). La Protección Diplomática de los Inversionistas Extranjeros en el Derecho Internacional. Revista Boliviana de Derecho, 99-136. [...]
[...] However, the Canadian authorities rejected the project, citing environmental and local planning concerns. Bilcon claimed that the rejection of the project violated Canada's obligations under NAFTA and the Energy Charter Treaty, infringing its rights as an investor. In 2015, the arbitration tribunal ruled in favour of Canada, finding that the Canadian authorities had acted reasonably, and that the rejection of the project was justified on legitimate grounds of environmental protection and territorial planning. This case illustrates the challenges of balancing the protection of foreign investment with environmental and public welfare concerns. [...]
[...] Where both the company and the shareholders are of foreign origin, the company is given a nationality, and according to the principles of international law, it is the national state of the company that has the capacity to intervene. However, if the shareholders have a nationality other than that of the company, the national State of the shareholders is not qualified to protect them. More specifically, in this judgment, the International Court of Justice sets out a rule of principle concerning unlawful acts directed against a foreign-owned company: "Liability is not incurred if a mere interest is affected; it is incurred only if a right is violated, so that acts which are aimed at and affect only the rights of the company do not involve any liability towards the shareholders, even if their interests suffer as a result" (§36): according to international law, only the national State of this company has the right to bring a claim. [...]
APA Style reference
For your bibliographyOnline reading
with our online readerContent validated
by our reading committee
