There's an intriguing legal development concerning international arbitral awards that recently took root in the US Supreme Court, whereby SCOTUS and Argentina are (at least initially) at odds with one another. Specifically, the Supreme Court heard oral arguments (on Monday December 2, 2013) with regard to weighing British company BG Group PLC's ("BG") bid to reinstate a $185.3 million international arbitral award against Argentina that a US appeals court had previously thrown out.
This dispute (BG Group v. Argentina, U.S. Supreme Court, No. 12-138) concerns whether BG should recover the money on the grounds that a decision by the Argentine government in 2002 to freeze gas prices had actually breached a 1993 treaty between Britain and Argentina. Argentina is arguing that BG should have sued in Argentina's courts first. In response however, BG, a natural gas exploration and distribution company, states that it did not wish to take that route because Argentina had restricted access to its courts and sought to punish investors (such as BG) that filed lawsuits.
To provide a bit of background, the 1993 United Kingdom-Argentina treaty was designed to encourage investment by foreign companies such as UK-based BG. Argentina imposed the freeze on gas prices shortly after it announced a sovereign debt default of roughly $100 billion in 2001. BG challenged the freeze, saying it reduced the value of its roughly 45% stake in Argentina's Metrogas SA; BG sold its stake in Metrogas earlier this year to YPF SA and Integra Gas Distribution, LLC. Following these developments, the International Chamber of Commerce International Court of Arbitration, based in Washington, D.C., held in 2007 that since Argentina had by emergency decree restricted access to its courts, it would create an "absurd and unreasonable result" to read the treaty literally and require BG to go through the courts first. Subsequently, a federal district court judge in Washington upheld the award in a 2011 decision. Nevertheless, a federal appeals court ruled for Argentina a year later, saying that BG should have first tried to sue in Argentina and then wait 18 months for a ruling, as required by the treaty, before resorting to arbitration.
As for the present Supreme Court case, however, things aren't looking as promising for Argentina. In opposition to the previous federal appeals court ruling, a majority of Justices already expressed skepticism about Argentina's position during the December 2nd oral arguments. Justice Kennedy bluntly told Argentina's attorney that "[his] whole argument gives [him] intellectual whiplash." On top of that, Justice Samuel Alito questioned the value of BG filing a lawsuit in Argentina when it knew that the matter would eventually go to arbitration anyway. As far as common sense is concerned, I share the same opinions as those of Justices Kennedy and Alito.
In the context of the international arbitral realm, however, I personally find Argentina's stance in this case to be untenable if not unconscionable. The notion that a country shouldn't force foreign parties to sue in their courts first, while at the same time punishing those foreign parties for suing in their courts first, seems obvious enough in any sense. But more importantly, the present international arbitration regime favors fair, uniform and reasonably-burden-free access to international arbitration, especially in those countries that are signatories of applicable international treaties.
That said, Argentina's argument, as well as the relevant Argentine law that it so vehemently defends, both appear to fly in the face of this very fundamental principal of our current system of international arbitration. A country more-or-less arbitrarily forcing foreign investors to first file suit in that country's courts, and to then wait 18 months for a court ruling, prior to being able to gain access to already-available methods of international arbitration doesn't at all sync well with the underlying principles and goals found within our present international-arbitral legal system. Protectionist laws and policies such as those of Argentina in this regard are the very same types of domestic laws and policies that the international-arbitral domain strives to see mitigated if not extinguished. For the sake of fostering and maintaining a dependable, effective and legitimate system of international arbitration, I can only hope that other countries don't follow in Argentina's footsteps in the years to come.
Regardless of who ends up winning this arbitral-award-based dispute though, it will be interesting to see what ripple effects, if any, the US Supreme Court's decision will have on the current international arbitration regime. If Argentina loses, then perhaps more countries will loosen up limits on original international-arbitral jurisdiction out of fear of suffering the same fate as Argentina in similar arbitral-award disputes down the line. Conversely, if Argentina wins, then perhaps more countries will be emboldened to enforce protectionist policies that favor hegemonies of their respective domestic legal systems over international-arbitral venues of dispute resolution. As such, I think it's safe to say that the manner in which and degree to which the international community reacts will reflect the US Supreme Court's global influence in this regard, but only time will tell.
Personal opinions and reflections aside, a ruling for the current case is due by the end of June.
