05 March 2014

Law in Plain English: BG Group PLC v. Republic of Argentina

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblogBG Group PLC v. Republic of Argentina

Argument: Dec 2 2013 (Aud.)

Background: A bilateral investment treaty between the United Kingdom of Great Britain and Northern Ireland, and Argentina provides that disputes between an investor and the host State will be resolved in the host State's courts. If no final court ruling is forthcoming within eighteen months or the dispute is unresolved after a court ruling, the treaty provides that the dispute may be sent to arbitration. BG Group, PLC, a British corporation and investor in Argentina gas companies, invoked the arbitration clause without first filing a claim in the Argentine courts. The arbitration panel nonetheless ruled it had jurisdiction, found Argentina had violated the treaty, and awarded BG Group damages. The DC Circuit reversed, finding that the question of arbitrability is an independent question of law for the court to decide; and as a result, that BG Group was required to  file its lawsuit in Argentina's courts and wait eighteen months before filing for arbitration.

Issue: The question before the Court is whether, in disputes involving a multi-staged dispute resolution process, a court or the arbitrator determines whether a precondition to arbitration has been satisīŦed.

Holding: In a 7-2 decision, the Supreme Court ruled that a court of the United States, in reviewing an arbitration award made under the Treaty, should interpret and apply “threshold” provisions concerning arbitration using the framework developed for interpreting similar provisions in ordinary contracts. Under that framework, the local litigation requirement is a matter for arbitrators primarily to interpret and apply. Courts should review their interpretation with deference.
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