Republic of Argentina v. BG Group PLC

The United Kingdom and Argentina (defendant) were parties to a bilateral investment treaty (the treaty). Under Article 8 of the treaty, unresolved disputes between an investor and the host state were first required to be submitted to a court in the territory where the investment was made. Article 8 provided conditions to submitting a dispute to international arbitration, including that 18 months must have passed after the submission of the dispute to a domestic court with no final decision. Additionally, under Article 8, if the parties could not agree to an arbitration procedure, the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL rules) applied. British corporation BG Group PLC (plaintiff) invested in Argentine gas companies under the treaty’s provisions. The gas companies distributed gas in Buenos Aires and earned returns that were subject to periodic adjustment for inflation. Subsequently, the Argentine economy collapsed, and the government enacted measures that affected the gas companies’ earnings. In April 2003, the BG Group filed a notice of arbitration. The BG Group and Argentina were unable to agree on an alternative forum for dispute resolution, and the BG Group submitted to arbitration under the UNCITRAL rules, which allowed an arbitrator to determine arbitrability. According to the BG Group, it was not required to first submit the dispute to an Argentine court because it was estimated to take six years to resolve the dispute through the court system and waiting 18 months before requesting arbitration was “senseless.” The arbitral panel found that it had jurisdiction to hear the dispute and rendered a final award for BG Group. On Argentina’s petition, the trial court denied vacatur of the final award. Argentina appealed, arguing that the arbitral panel exceeded its authority in deciding the dispute.