BG Group, PLC v. Republic of Argentina

Background

BG Group, a British energy company, bought control of MetroGAS, an Argentine gas distributor created during privatization. Argentina changed tariffs from dollars to pesos during an economic crisis, turning profits into losses. BG Group invoked the U.K.-Argentina investment treaty’s Article 8 and sought arbitration in Washington, D.C. An arbitral panel excused BG Group’s failure to litigate first in Argentina, found a treaty violation of fair treatment, and awarded about $185 million; the Court of Appeals then reversed.

Reasoning

The core question was who should decide compliance with Article 8’s local-court requirement: a U.S. court or arbitrators. The Court held the provision is a procedural, claims-processing rule and, absent clear language showing the parties intended otherwise, such rules are presumptively for arbitrators to interpret. Because the Treaty did not treat the rule as an explicit "condition of consent," the Court required judicial deference to the arbitrators and reversed the appeals court.

Real world impact

This decision affects foreign investors and governments that rely on bilateral investment treaties. U.S. courts must generally defer to arbitrators when they interpret or excuse compliance with similar treaty pre-arbitration procedures, unless the treaty clearly shows parties intended otherwise. The ruling resolves the standard of review for such disputes in courts where the arbitration sits, but the Court left open whether treaties that explicitly call a rule a "condition of consent" should be treated differently.

Dissents or concurrances

Justice Sotomayor concurred in part, warning that a treaty’s explicit "consent" label might matter. Chief Justice Roberts, joined by Justice Kennedy, dissented, arguing the local litigation rule is a condition on consent and that courts should decide compliance and remand.