Role of Judges in Determining Jurisdiction of Arbitration Tribunals to be Clarified in Upcoming Supreme Court Case

Posted by Kylie Kim – November 26, 2013 @ 01:11

In January of last year, the D.C. Circuit ruled on the contentious BG Group PLC v. Republic of Argentina. The court found that an arbitral tribunal did not have the authority to address a particular dispute between a U.K. investor, BG Group, and Argentina because “BG Group was required to commence a lawsuit in Argentina’s courts and wait [18] months before filing for arbitration[,] pursuant to Article 8(3) [of the 1993 Britain-Argentina Bilateral Investment Treaty (“BIT”)], if the dispute remained.” The Supreme Court granted BG Group’s cert petition and is scheduled to hear the case on December 2.

The case has attracted attention from a number of interested parties. “Professors and Practitioners of Arbitration Law” filed an amicus brief in favor of Respondents arguing that the BIT was only a conditional offer by Argentina to agree to arbitration, and that the condition—the 18-month requirement—was not met. Also, although the arbitrators could decide on jurisdiction “in the first instance,” their “decision was subject to de novo review by the court.” The United States government and the Republic of Ecuador joined in this sentiment, and Respondent has largely adopted these positions.

On the other hand, the American Arbitration Association raised concerns about the future of international arbitration in the United States if the “cost and efficiency benefits of arbitration are undermined by judicial intrusion,” and if the Court disregards expert findings by “eminent arbitrators.” The United States Council for International Business added to this view by arguing that allowing judges to rule on issues of jurisdiction would be ignoring the parties’ consent to the rules of the United Nations Commission on International Trade Law (UNCITRAL Rules), which “explicitly vest” jurisdictional decisions in arbitrators. The Plaintiffs’ own arguments are largely in line with these positions.

Regardless of the interest surrounding the case, the long-term significance of the case will likely depend on whether the Court “clarif[ies] what constitutes [] ‘procedural arbitrability’” or simply decides whether “compliance with certain [(pre-)]conditions to arbitration” (emphasis added)—namely, the 18-month requirement specific to the Britain-Argentina BIT—is for an arbitrator or a judge to decide. At the very least, however, this case will remain relevant as the first U.S. Supreme Court ruling on international investment arbitration, even if the Court adopts domestic or commercial arbitration principles, already addressed in cases such as Howsam v. Dean Witter Reynolds, Inc., in reaching the decision.