October 2013 Supreme Court Term Begins

The United States Supreme Court began its October 2013 term today.  One of the cases the high court will consider this fall is BG Group PLC v. Republic of Argentina, Docket No. 12-138.  In the case, the District of Columbia Circuit vacated an arbitral award that was issued as a result of a Bilateral Investment Treaty (“BIT”) entered into between the United Kingdom and Argentina.  The treaty itself provides that any disputes between a business investor and a host nation will be resolved in the host state’s courts.  If no resolution is available after 18 months, however, an investor may seek arbitration.

In the case at hand, British oil and gas company BG Group, PLC invoked the BIT’s arbitration clause against the Republic of Argentina without first filing a complaint in an Argentine court.  Despite this, an arbitral panel ruled that it had jurisdiction over the dispute and ruled in favor of BG Group.  The Republic of Argentina appealed and the D.C. Circuit held:

Although the scope of judicial review of the substance of arbitral awards is exceedingly narrow, it is well settled that an arbitrator cannot ignore the intent of the contracting parties. Where, as here, the result of the arbitral award was to ignore the terms of the Treaty and shift the risk that the Argentine courts might not resolve BG Group’s claim within eighteen months pursuant to Article 8(2) of the [**503] [*1366] Treaty, the arbitral panel rendered a decision wholly based on outside legal sources and without regard to the contracting parties’ agreement establishing a precondition to arbitration. Accordingly, we reverse the orders denying the motion to vacate and granting the cross-motion to confirm, and we vacate the Final Award.

BG Group then filed a petition for certiorari with the U.S. Supreme Court.  The nation’s high court agreed to hear the case in June and oral argument is currently set for December 2nd.  The issue before the justices is:

Whether, in disputes involving a multi-staged dispute resolution process, a court or the arbitrator determines whether a precondition to arbitration has been satis?ed.

An amicus brief was filed by the American Arbitration Association, Professors and Practitioners of Arbitration Law, United States Council for International Business, and the United States.  (Special thanks to SCOTUSblog for the links.)  Please stay tuned to Disputing for more on this interesting case!