BG Group v. Republic of Argentina

BG Group plc (BG) (plaintiff), a British investment firm, purchased a majority interest in MetroGAS, a gas-distribution company created by the Republic of Argentina (Argentina) (defendant) to privatize its state-owned gas utility. MetroGAS had a long-term exclusive license to distribute natural gas in Buenos Aires, and BG won the bid when Argentina submitted a controlling interest in MetroGAS to international public tender. The United Kingdom and Argentina had signed an investment treaty containing a dispute-resolution provision that governed disputes between one of the signing countries and an investor from the other signing country. The treaty provided that parties could submit disputes to a local court in the signing country in which the investment was made. Arbitration was available if a party requested it and if 18 months had passed since the dispute was submitted to the local court or if the court issued a final decision and the parties were still in dispute. The parties could also agree to proceed directly to arbitration. A dispute arose under the treaty when Argentina changed gas-tariff calculations and MetroGAS suffered financial losses. BG sought arbitration under the treaty, and the parties commenced arbitration hearings in the United States. While arguing the merits of the alleged treaty violations, Argentina argued that the arbitration panel did not have jurisdiction over the dispute because BG initiated arbitration without first litigating in Argentina’s courts. The arbitration panel ruled in favor of BG. BG and Argentina sought review in federal district court, with BG seeking confirmation of the award under the New York Convention and the Federal Arbitration Act and Argentina seeking to vacate the award. The district court confirmed the award, and the District of Columbia Circuit vacated the award on appeal. BG appealed to the United States Supreme Court.