Supreme Court Decides Investment Arbitration Case

Today, the Supreme Court decided BG v. Argentina, in which an arbitration panel awarded BG $185 million in damages.

The basic issue is who—court or arbitrator—bears primary responsibility for interpreting and applying an investment treaty provision providing for arbitration 18 months after litigation in Argentina’s courts.

The Supreme Court today holds that investment treaties should in some respects be treated like ordinary contracts.  "A treaty is a contract between nations, and its interpretation normally is a matter of determining the parties’ intent. Where, as here, a federal court is asked to interpret that intent pursuant to a motion to vacate or confirm an award made under the Federal Arbitration Act, it should normally apply the presumptions supplied by American law."

The relevant presumptions are those the Supreme Court articulated, primarily in its Howsam decision:

In an ordinary contract, the parties determine whether a particular matter is primarily for arbitrators or for courts to decide.  If the contract is silent on the matter of who is to decide a "threshold" question about arbitration, courts determine the parties’ intent using presumptions. That is, courts presume that the parties intended courts to decide disputes about "arbitrability," e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U. S. 79, 84, and arbitrators to decide disputes about the meaning and application of procedural preconditions for the use of arbitration, see id., at 86, including, e.g., claims of "waiver, delay, or a like defense to arbitrability,"  and the satisfaction of, e.g., " ‘time limits, notice, laches, [or] estoppel,’ " Howsam, 537 U. S., at 85. The [treaty] provision at issue is of the procedural variety.