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.

11th Circuit Holds New No-Arbitration Agreement Supersedes Earlier Arbitration Agreement

 

Dasher v. RBC Bank (USA), __ F.3d __, 2014 WL 504704 (11th Cir. Feb. 10, 2014), is a class action part of the larger Checking Account Overdraft Multidistrict Litigation.  As the 11th Circuit explains, the original account agreement "contained an arbitration clause with terms broad enough to cover this overdraft fee dispute.” When the bank was acquired by another bank, it sent out to new account agreements with no arbitration clause.  In the 11^th Circuit, the bank cited a labor arbitration case stating there is “a presumption of arbitrability in the sense that an order to arbitrate . . . should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650, 106 S. Ct. 1415, 1419 (1986) (internal quotation marks omitted).  The 11^th Circuit rejected this argument by citing a labor arbitration case holding that this presumption of arbitrability applies when an “arbitration agreement is ambiguous about whether it covers the dispute at hand.” Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, __, 130 S. Ct. 2847, 2858 (2010). The FAA’s presumption is inapplicable in this situation, as courts are to apply “the presumption of arbitrability only where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand.” Granite Rock, 561 U.S. at __, 130 S. Ct. at 2858 (emphasis added).

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