Arbitration deference on an international scale

Familiar rules, applied to a treaty rather than a contract. Today's SCOTUS case: BG Group v. Republic of Argentina (US Supreme Court 03/05/2014).

This case involves an investment treaty between the United Kingdom and Argentina. The treaty authorizes a party to submit a dispute to a local court, and permits arbitration “where, after a period of eighteen months has elapsed from the moment when the dispute was submitted to [that] tribunal . . . , the said tribunal has not given its final decision."

A dispute arose between BG Group and Argentina. BG Group commenced arbitration without first going to a local Argentine court. Argentina balked, saying the arbitrators had no jurisdiction because BG Group had not complied with the local litigation requirement.

The arbitration panel concluded that it had jurisdiction because Argentina’s conduct (such as enacting new laws that hindered recourse to its judiciary by firms in BG Group’s situation) had excused BG Group’s failure to comply with the local litigation requirement.

The US Supreme Court, applying familiar rules, upheld the arbitrators.

The presumption is that courts decide whether the parties agreed to arbitrate (which they clearly did here), and arbitrators decide procedural preconditions to arbitration (such as time limits and - in this case - the local litigation requirement and whether that requirement was excused).

A totally unsurprising conclusion to a $185 million case.

[For a list of current employment law cases, see Supreme Court Watch.]