International Trade

U.S. Supreme Court Refuses to Review Decision Upholding $185 Million Award

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Nov. 3 denied a petition for writ of certiorari filed by the Republic of Argentina, which sought review of a recent Supreme Court ruling that reversed an appellate court decision to vacate an order confirming a $185,285,485.85 international arbitration award issued in favor of a United Kingdom investor (BG Group Plc v. Republic of Argentina, No. 14-211, U.S. Sup.; See March 2014, Page 4) [lexis.com subscribers may access Supreme Court briefs for this case].

Award

Argentina entered into the Agreement for the Promotion and Protection of Investments between Argentina and the United Kingdom (referred to as the BIT).  As part of a reformation, Argentina divided its gas transportation and distribution industries into two transportation companies and eight distribution companies.  BG Group PLC, a U.K. company, invested in MetroGAS, one of the distribution companies, through a consortium of investors.

Argentina began to experience an economic crisis and enacted an emergency law in 2002 that negatively affected BG Group's investment.   BG Group filed arbitration proceedings against Argentina pursuant to the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules.  An arbitration panel issued an award of $185,285,485.85 plus fees, costs and interest for BG Group, finding that Argentina breached the BIT.

Enforcement

Argentina filed a petition to vacate or modify the award in the U.S. District Court for the District of Columbia pursuant to the Federal Arbitration Act (FAA) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, arguing that the arbitrators exceeded their authority by not taking into consideration the terms of the agreement between parties.  BG Group cross-moved to confirm the award.  The District Court denied Argentina's motion to vacate and confirmed the award on the merits.

Argentina appealed to the District of Columbia Circuit U.S. Court of Appeals.  The appeals court reversed the District Court's ruling and vacated the award, finding that the tribunal exceeded its powers in permitting the arbitration to proceed.  The appeals court found that BG Group did not comply with a dispute resolution provision in the BIT, which required it to first seek review of the dispute for 18 months in a local court of the contracting party where the investment was made.

Original Petition

BG Group filed a petition for writ of certiorari in the U.S. Supreme Court.  BG Group presented the question of whether "in disputes involving a multi-staged dispute resolution process, does a court or instead the arbitrator determine whether a precondition to arbitration has been satisfied?"  Oral arguments in the case were held Dec. 2, 2013.

In a majority ruling, the Supreme Court on March 5 found that the arbitrators' jurisdictional findings were lawful.  The Supreme Court found that the appeals court's decision reversing confirmation of the award should be reversed and said the issue was for arbitrators to decide.  The tribunal made three relevant decisions, including that "as a matter of treaty interpretation," the local litigation provision "cannot be construed as an absolute impediment to arbitration," the Supreme Court said.   The Supreme Court also accepted the facts set forth by the arbitrators as valid and found that their findings were not barred by the BIT.

On Aug. 19, Argentina filed a petition for writ of certiorari with the Supreme Court.  BG opposed the petition.   The Supreme Court denied Argentina’s petition.

Counsel

BG Group is represented by Alexander A. Yanos of Hughes Hubbard & Reed in New York.

Argentina is represented by Matthew D. Slater of Cleary Gottlieb in Washington.

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