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Ii) Article 10

The general principles relating to the requirement of continuous nationality have been addressed in connection with the protection of natural persons. In practice problems of continuous nationality arise less in the case of corporations than with natural persons. Whereas natural persons change nationality easily as a result of naturalization, marriage or adoption, and State succession, corporations generally change nationality only by being re-formed or reincorporated in another State, in which case the corporation assumes a new personality, thereby breaking the continuity of nationality of the corporation. ¹⁷⁵ The most frequent instance in which a corporation may change nationality without changing legal personality is in the case of State succession.

Paragraph 1 of Article 10 asserts the traditional principle that a State is entitled to exercise diplomatic protection in respect of a corporation that was its national both at the time of the injury and at the date of the official presentation of the claim. It also requires continuity of nationality between the date of the injury and the date of the official presentation of the claim. These requirements have been discussed in connection with natural persons. Those requirements are relevant here as well. The date of the official presentation of the claim, as explained earlier, is preferred to that of the date of the award. An exception is, however, made in paragraph 22 Article 10 to cover cases in which the corporation acquires the nationality of the State against which the claim is brought after the presentation of the claim.

The requirement of continuity of nationality is met where a corporation undergoes a change of nationality as a result of the succession of States. ¹⁷⁶ In effect, this is an exception to the continuity of nationality rule. This matter is covered by the reference to ‘predecessor State’ in Article 10(i).

(p. 136) In terms of Article 10, paragraph 2, a State is not entitled to exercise diplomatic protection in respect of a corporation that acquires the nationality of the State against which the claim is brought after the presentation of the claim. This paragraph is designed to cater for the type of situation that arose in the Loewen case ¹⁷⁷ in which a corporation ceased to exist in the state in which the claim was initiated (Canada) and was reorganized in the respondent State (the USA). This matter of the change of nationality was also considered in connection with natural persons.

Difficulties arise in respect of the exercise of diplomatic protection of a corporation that has ceased to exist according to the law of the State in which it was incorporated and of which it was a national. If one takes the position that the State of nationality of such a corporation may not bring a claim as the corporation no longer exists at the time of presentation of the claim, then no State may exercise diplomatic protection in respect of an injury to the corporation. A State could not avail itself of the nationality of the shareholders in order to bring such a claim as it could not show that it had the necessary interest at the time the injury occurred to the corporation. This matter troubled several judges in the Barcelona Traction Case ¹⁷⁸ and it has troubled certain courts and arbitral tribunals ¹⁷⁹and scholars. ¹⁸⁰ Paragraph 3 of Article 10 adopts a pragmatic approach and allows the State of nationality of a corporation to exercise diplomatic protection in respect of an injury suffered by the corporation when it was its national and has ceased to exist—and therefore ceased to be its national—as a result of the injury. In order to qualify, the claimant State must prove that it was because of the injury in respect of which the claim is brought that the corporation has ceased to exist. This paragraph is to be read in conjunction with Article 11, paragraph (a), explained below, which makes it clear that the State of nationality of shareholders will not be entitled to exercise diolomatic protection in respect of an injury to a corporation that led to its demise.