BG Group, PLC v. Republic of Argentina
134 S. Ct. 1198
| SCOTUS | 2014Background
- BG Group plc, a British investor, held a majority stake in MetroGAS, an Argentine distributor granted a 35-year exclusive license.
- Argentina changed tariff calculations from dollars to pesos, turning MetroGAS’s profits into losses and prompting treaty-based claims by BG Group.
- BG Group invoked Article 8 of the UK-Argentina treaty, seeking arbitration in Washington, D.C., claiming expropriation and denial of fair and equitable treatment.
- Article 8 requires local litigation for 18 months before arbitration unless the parties explicitly agree to direct arbitration; BG Group argued the new laws impeded access to its courts and justified bypassing local courts.
- The arbitration panel found jurisdiction, held that Argentina’s actions excused noncompliance with Article 8, and awarded BG Group damages in the amount of $185 million.
- The D.C. Circuit vacated the award, holding that Article 8’s local litigation requirement was a matter for de novo review and BG Group must exhaust local remedies before arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides threshold arbitration questions? | BG Group: courts should decide arbitrability de novo. | Argentina: arbitrators should decide threshold issues with deference. | Threshold issues interpreted by arbitrators; deference on review. |
| Is Article 8’s local litigation requirement a condition of consent or a procedural precondition? | BG Group contends it is a procedural precondition to arbitration. | Argentina contends it is a condition on consent to arbitrate. | Local litigation requirement treated as a procedural precondition; not a consent condition. |
| If treated as a consent condition, should review be de novo or deferential? | BG Group would be entitled to de novo review if treated as a consent condition. | Argentina would argue for court review on consent questions. | Court maintains the framework that consent questions (if applicable) are reviewed with de novo standards by courts. |
Key Cases Cited
- Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960) (set forth presumption about arbitrability in silent contracts)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (gateway questions typically decided by court vs. arbitrator)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) (time limits and conditions precedent to arbitrability)
- Granite Rock Co. v. Teamsters, 561 U.S. 287 (2010) (formation of arbitration agreement is a court matter)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (court decides whether parties agreed to arbitrate when contract is silent)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986) (arbitration review limited to preserve efficiency)
- John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964) (arbitration provisions and survival after corporate changes)
- Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57 (2000) (prearbitration procedures and thresholds)
- Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010) (arbitrator not to exceed authority; deference to arbitration decisions)