BG Group PLC v. Argentina

RESPONDENT: Republic of Argentina
LOCATION: E. Barrett Prettyman U.S. Courthouse and William B. Bryant Annex

DOCKET NO.: 12-138
DECIDED BY: Roberts Court (2010-2016)

CITATION: 572 US (2014)
GRANTED: Jun 10, 2013
ARGUED: Dec 02, 2013
DECIDED: Mar 05, 2014

Ginger D. Anders -
Jonathan I. Blackman - for the respondent
Thomas Goldstein - on behalf of the petitioner

Facts of the case

In the early 1990s, BG Group PLC (BG), a British company, made a major investment in Argentina's natural gas industry. Later, in the midst of an economic crisis, Argentina enacted an emergency law that required investors to collect tariff revenues in Argentinian pesos at a rate of one peso per dollar. Given the weak international peso-to-dollar exchange rate, these changes that made it difficult for BG to see a return on its investment. Simultaneously, Argentina adopted legislation that stayed all lawsuits arising from the emergency measures. . BG sought recourse under a bilateral investment treaty (Treaty) between the United Kingdom and Argentina. The Treaty required that BG first attempt to resolve its dispute before a "competent tribunal" in Argentina for at least eighteen months. Instead, BG bypassed the Argentinian courts and submitted its dispute directly to an arbitral tribunal. The arbitral panel, seated in Washington, D.C., held that Argentina's changes to its judicial system excused the eighteen-month precondition to arbitration and awarded BG over US$185 million in damages. Argentina petitioned the district court to vacate the award under the Federal Arbitration Act by arguing that the arbitral panel exceeded its powers. The court denied the petition. The U.S. Court of Appeals, District of Columbia Circuit reversed and held that the determination of whether BG could submit its dispute directly to arbitration must be made by a court, not the arbitral tribunal.


Is it the role of a court to decide whether a precondition to arbitration has been satisfied?

Media for BG Group PLC v. Argentina

Audio Transcription for Oral Argument - December 02, 2013 in BG Group PLC v. Argentina

Audio Transcription for Opinion Announcement - March 05, 2014 in BG Group PLC v. Argentina

Justice Breyer has our opinion this morning in case 12-138, BG Group v. Republic of Argentina.

I know this is a little complicated, but Argentina and the United Kingdom entered into an investment treaty that insisted upon things like, “You can't expropriate the investor.

You have to give fair and equal treatment and so forth.”

Now later, BG Group which was a United Kingdom firm and owned a part of a natural gas distributor in Argentina said Argentina had violated the treaty.

“It hurt us,” an English investor, in ways that were forbidden.

All right so it invoked Article 8 which is the arbitration provision and it wanted to go to arbitration.

Now Argentina asked the arbitration tribunal, which met here in Washington, among other things to dismiss the arbitration.

It said BG can't come to arbitration because it didn't comply with the -- some initial provisions in the Article 8 which first they authorized local Argentina court resolution of a dispute about what the treaty meant, now it applied.

And then second, it provided for arbitration, “Where after a period of 18 months has lapsed, the said tribunal -- namely the local Argentina court -- had not given its final decision.”

And there were some other things too, but that's enough.

BG replied, “No, Argentina waived that local court requirement because it imposed certain onerous conditions on our going into the local court.”

Eventually, the arbitration tribunal agreed with BG about that matter and said, “We're going to arbitrate,” and decided some things in their favor.

It was later reviewed by a federal district court here in Washington which said, “Well how Article 8 applies as this local court thing is up to the arbitration tribunal to decide and they decided reasonably that's the end of it.”

But the Court of Appeals said, “Nope, that matter was not for the local -- for the arbitration tribunal to decide, it was for courts to decide.”

And it agreed with Argentina, “We're going to decide it.

We think that BG should have gone to the local Argentina court first.”

So what we agreed to decide is who, the arbitrators or the judges bare primary responsibility for interpreting Article 8 in respect to that local Argentina litigation requirement.

We now decide the answer is - here on - the arbitrators [Laughter].

We first ask how we should decide this question.

How would we decide if we were considering not a treaty but an ordinary contract?

And if it were an ordinary contract, we would say, “It all depends on what the parties intended.”

And whereas here, the contract was silent about what they intended.

We would, and try to infer the intent with the help of certain presumptions.

On the one hand, we would presume that the parties intended courts to decide disputes about -- for example, whether a party is bound it all by an arbitration agreement or whether an arbitration agreement applies to a particular kind of the dispute which is at issue.

On the other hand, we presume that the parties intended arbitrators to decide disputes about purely procedural matters such as clauses requiring the filing of an arbitration request within a certain time or requiring notice of a certain type.

We think -- though there are feature of both -- we think that the local litigation requirement here is more like the latter, the more procedural requirements that it is like the former, the more substantive kind of requirements.

The text in the structure made clear that that little clause determines whether there is a contractual -- not -- it does not determine -- see this is why it's complicated.

It does not determine whether there is a contractual duty to arbitrate.

It seems more to decide when the contractual duty to arbitrate arises.

It gives no substantive weight to the local court's decision, if it has it.