'ACSYNGO' v Compagnie de Saint-Gobain (France) SA

CourtCommercial Tribunal (Belgium)
Belgium, Commercial Court of Namur

(Mlot, President)

(Madame Matray, President; Borsu and Jacqmin, Judges)

ACSYNGO and Others
Compagnie de Saint-Gobain (France) SA and Others

Expropriation Compensation For lawful nationalization Property of nationals of expropriating State Payment of just and adequate compensation Valuation of expropriated property Assets of companies Valuation based on average price of shares during reference period Discrimination Measures directed against particular companies Requirement of equality of treatment Public interest Requirement that taking of property be necessary in the public interest

Expropriation Extraterritorial effect Nationalization of companies with their seat within the territory of nationalizing State Effect on assets situated abroad Indirect nationalization of foreign subsidiary Separation of rights of shareholders from assets of company

Jurisdiction Extraterritorial Expropriatory legislation Expropriation of shares in company Effect on subsidiary owned by company in another State

Relationship of international law and municipal law Recognition and effect of foreign laws Public laws Legislation providing for expropriation of shares in company Circumstances in which legislation would be recognized by courts of another State The law of Belgium

Summary: The facts:A French law of 11 February 1982 provided for the nationalization of various industrial concerns, banks and financial institutions, including the French conglomerate Compagnie de Saint-Gobain. The nationalization was effected by the compulsory transfer to the French State of those shares in the nationalized undertakings which had hitherto been held by private sector investors. Compensation was paid on the basis of the average stock exchange quotation for the shares during a reference period, adjusted to allow for monetary devaluation and lost dividends. The provisions of the Nationalization Law were approved as being in conformity with the French Constitution by a decision of the French Constitutional Council of 11 February 1982.1

Compagnie de Saint-Gobain owned, either directly or through its Dutch and Swiss subsidiaries, a total of 50.04% of the share capital of a Belgian company, Glaceries de Saint-Roch. In June 1982 former shareholders in Compagnie de Saint-Gobain instituted proceedings before the Belgian courts claiming ownership of those shares and thereby seeking to divest the nationalized French company of its controlling interest in the Belgian company. They argued that to allow the French company and its subsidiaries to retain their shares in the Belgian company would amount to giving extraterritorial effect in Belgium to the French Nationalization Law. An order for the sequestration of the shares in question was granted. A third-party objection to this order was heard by the President of the Commercial Court of Namur.

Held (by the President of the Commercial Court of Namur on 12 August 1982):The objection to the sequestration of the shares was rejected, the sequestration order was upheld and voting rights in the shares were suspended. The judge, exercising his summary jurisdiction, stressed that his analysis of the legal position would not be binding on the trial court.

(1) A distinction was to be drawn between the recognition of the nationalization in international law and the effectiveness of that nationalization beyond the boundaries of the nationalizing State. A foreign nationalization was to be recognized by the Belgian courts wherever it was compatible with Belgian international public policy. The French Nationalization Law of 11 February 1982 satisfied this test since it was not discriminatory and provided for the payment of compensation to the expropriated shareholders. It was unnecessary to examine whether the arrangements made for the payment of compensation were above reproach, since the French Constitutional Council had already ruled that those arrangements were equitable (p. 132).

(2) The fact that a foreign judge would recognize a French nationalization measure did not necessarily imply that the nationalization was effective with regard to assets situated abroad. In western industrialized countries with liberal economic systems, both doctrine and jurisprudence were overwhelmingly in favour of the view that measures of nationalization, even where they were recognized, were strictly limited in their effect to the territory of the nationalizing State. Nationalization was an act of sovereignty which could not be exercised beyond the boundaries of its holder without the risk of infringing to an intolerable extent the sovereignty of other States where assets could be situated which the nationalizing State might seek to affect by its measure. Furthermore the French decision to nationalize considerable sectors of the economy was an essentially political decision, as the French President had himself stressed. In accordance with its basic objective, which was to protect private interests, private international law excluded the application of foreign political laws (pp. 1323).

(3) The shareholding at issue was essentially made up of nominal shares registered at the office of a Belgian company. The consequence of the principle of territoriality was that this shareholding, localized in Belgium, did not form part of the rights of the French legal body which had been nationalized. Where the territorial effect of a nationalization had to be determined, account was to be taken of the political and economic realities of the measure. This examination had to go beyond the technicalities of the legal method chosen by the expropriating State in order to avoid the possibility of allowing the indirect achievement of something whose direct achievement western legal systems would not allow (p. 133).

In November 1982 the sequestration order was vacated by agreement between the parties. The Commercial Court of Namur gave judgment on the merits on 14 October 1986.

Held (by the Commercial Court of Namur on 14 October 1986):The claim of former shareholders in the nationalized French company to ownership of the shares held by that company and its subsidiaries in the Belgian company was rejected and the other relief sought by the plaintiffs was denied.

(1) In order to satisfy the requirements of Belgian international public policy, a foreign nationalization should be neither confiscatory (spoliatrice) nor discriminatory. A nationalization was not confiscatory where, as here, the level of compensation provided was just and appropriate. Compensation did not need to be proportionate to the real value of the assets. It was adequate in this case that the average stock exchange quotation, the effects of inflation and lost dividends had all been taken into account. Neither was the nationalization discriminatory. The different treatment of private sector investors (whose shares were expropriated) and public sector investors (whose shares were not expropriated) did not violate the principle of equality since this principle did not prevent different rules being applied to categories of persons in different situations. The Law in question was aimed at specific economic sectors without distinction as to race, religion or political persuasion (pp. 1368).

(2)(a) Under international law nationalization was regarded as an expression of sovereignty which could not be exercised beyond the territory of the nationalizing State. Consequently no State could lawfully obtain assets situated abroad by seeking to enforce a nationalization decision beyond its boundaries. Shares in companies were to be regarded for these purposes as being located in the State of the issuing company (p. 139).

(b) However, the French State had only ordered the transfer of the ownership of assets legally situated in France. The expropriation of the shares in a company did not in any way affect the legal personality of that company, just as it had no direct impact upon its assets including any shares which it might hold in a foreign subsidiary. The principle which should be applied was that of the separation between the rights of shareholders and the assets of the company concerned. The identity of the subsidiary company was not modified by the measure, which affected the rights of shareholders. To that extent, and so long as the nationalizing State did not seek to go beyond the indirect measures of nationalization by effecting sovereign acts abroad, there was no justification for speaking of extraterritorial effects stricto sensu. Neither was there any justification in such circumstances for piercing the corporate veil (p. 140).

(c) The plaintiffs argued that, because the nationalized French company and its subsidiaries held a controlling interest in the Belgian company, the shares in the Belgian company had been indirectly nationalized by the French State. However, there was no rule of municipal or private international law which forbade doing indirectly something which could not be done directly. On the contrary it was common and perfectly legitimate to choose a particular legal procedure, provided that it was not a sham, in order to obtain a result which could not have been achieved by any other method. In private international law it was only frauded la loi which was forbidden, where what was intended was to artificially change a factual element for the purpose of evading the application of the provisions of municipal law (p. 144).

(d) It was not illegal for the nationalizing State to take control of assets situated within foreign territory, by virtue of the links between those assets and assets situated on its own territory, provided that the economic independence of the foreign State was respected. Everything depended on the circumstances of the case (p. 145).

(3) The appropriation of assets by a State was, by its nature, an act governed by public law. Where it concerned assets situated beyond the territory of that State, it was nevertheless lawful...

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