Republic of Argentina v. Bg Group Plc

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 10, 2011 Decided January 17, 2012
No. 11-7021
REPUBLIC OF ARGENTINA,
APPELLANT
v.
BG GROUP PLC,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:08-cv-00485)
Gabriel Bottini, pro hac vice, argued the cause for
appellant. On the briefs was John P. Gleason. Fernando O.
Koatz entered an appearance.
Alexander A. Yanos argued the cause for appellee. With
him on the brief was Elliot Friedman. Paul L. Yde entered an
appearance.
Before: SENTELLE, Chief Judge, HENDERSON and ROGERS,
Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
2
ROGERS, Circuit Judge: The Republic of Argentina appeals
the denial of its motion to vacate an arbitral award on the
principal ground that the arbitral panel exceeded its authority by
ignoring the terms of the parties’ agreement. That agreement,
in the form of a Bilateral Investment Treaty between the United
Kingdom of Great Britain and Northern Ireland, and Argentina
(“the Treaty”), provides that disputes between an investor and
the host State will be resolved in the host State’s courts. If,
however, no final court ruling is forthcoming within eighteen
months or the dispute is unresolved after a court ruling, the
Treaty provides that resort may then be had to arbitration. BG
Group, PLC, a British corporation and investor in Argentina gas
companies pursuant to the Treaty, invoked the arbitration clause
without first filing a claim in the Argentine courts. The arbitral
panel nonetheless ruled it had jurisdiction, found Argentina had
violated the Treaty, and awarded BG Group damages.
Although the scope of judicial review of the substance of
arbitral awards is exceedingly narrow, it is well settled that an
arbitrator cannot ignore the intent of the contracting parties.
Where, as here, the result of the arbitral award was to ignore the
terms of the Treaty and shift the risk that the Argentine courts
might not resolve BG Group’s claim within eighteen months
pursuant to Article 8(2) of the Treaty, the arbitral panel rendered
a decision wholly based on outside legal sources and without
regard to the contracting parties’ agreement establishing a
precondition to arbitration. Accordingly, we reverse the orders
denying the motion to vacate and granting the cross-motion to
confirm, and we vacate the Final Award.
I.
The Bilateral Investment Treaty between the United
Kingdom and Argentina was signed December 11, 1990, and
became effective on February 19, 1993. It aimed to promote a
3
favorable investment environment between the contracting
parties following Argentina’s economic reformation to reduce
inflation and the public debt. As relevant, Article 8(1) of the
Treaty provides that disputes between an investor under the
Treaty and the host State that “have not been amicably settled
shall be submitted, at the request of one of the Parties to the
dispute, to the decision of the competent tribunal of the
Contracting Party in whose territory the investment was made.”
Article 8(2) sets the conditions by which such a dispute may be
submitted to international arbitration:
(a) if one of the Parties so requests, in any of the
following circumstances:
(i) where, after a period of eighteen months has
elapsed from the moment when the dispute was
submitted to the competent tribunal of the
Contracting Party in whose territory the investment
was made, the said tribunal has not given its final
decision;
(ii) where the final decision of the aforementioned
tribunal has been made but the Parties are still in
dispute; [or]
(b) where the Contracting Party and the investor of the
other Contracting Party have so agreed.
Art. 8(2) (emphasis added). Article 8(3) provides that if, after
three months from written notification of the claim, the parties
to the dispute are unable to agree on one of the described
arbitration procedures, then “the Parties to the dispute shall be
bound to submit it to arbitration under the Arbitration Rules of
the United Nations Commission on International Trade Law
[“UNCITRAL Rules”],” although they can modify these rules.
4
Article 8(4) instructs that “[t]he arbitral tribunal shall decide the
dispute in accordance with the provisions of this Agreement [i.e.,
the Treaty], the laws of the Contracting Party involved in the
dispute, including its rules on conflict of laws, the terms of any
specific agreement concluded in relation to such an investment
and the applicable principles of international law.”
Around the time the Treaty took effect, as part of its
economic reformation, Argentina privatized the state-owned gas
transportation and distribution company, Gas del Estado, and
established a 1:1 fixed parity between the Argentine peso and the
U.S. dollar. Gas del Estado was split into two transportation
companies and eight distribution companies, one of which was
MetroGAS. MetroGAS was granted a thirty-five year exclusive
license to distribute gas in the city of Buenos Aires and portions
of the surrounding metropolitan area, and the license provided
that tariffs would be calculated in U.S. dollars and expressed in
pesos. One provision of MetroGAS’s license provided that
adjustments to tariffs would be made every six months for
inflation, in accordance with the United States Product Price
Index (“PPI”). MetroGAS was entitled to review of its tariffs
every five years to ensure reasonable returns. BG Group
eventually acquired a 54.67 percent interest in Gas Argentino,
S.A. (“GASA”), which in turn owned seventy percent of
MetroGAS. In addition, BG Group invested directly in
MetroGAS, and by 1998 held a 45.11 percent interest in
MetroGAS.
The Argentine economy collapsed in late 2001 and early
2002 following, Argentina explained, the collapse of the
Brazilian currency, a run on Argentine banks, and the
withholding of a billion dollar loan installment by the
International Monetary Fund. In response, Argentina enacted
Emergency Law 25,561 on January 6, 2002, to terminate the
currency board that had pegged the peso to the U.S. dollar, to
5
convert U.S. dollar based adjustment clauses in agreements to
peso-based adjustment clauses, to prohibit inflation adjustments
based on foreign price indices (e.g., the PPI), and to convert
dollar-based tariffs into peso-based tariffs at a rate of one peso
to one U.S. dollar. Argentina also established, by Resolution
308/02 and Decree 1090/02, a renegotiation process for public
service contracts (excluding any licensee who sought redress in
court or arbitration). And on March 2, 2002, Argentina adopted
Decree 214/02, Article 12 of which stayed for 180 days the
compliance with injunctions and execution of final judgments in
lawsuits brought on account of the Emergency Law’s effect on
the financial system.
Eight months after the stay under Article 12 of Decree
214/02 had expired, BG Group filed a Notice of Arbitration, on
April 25, 2003, pursuant to Article 8(3) of the Treaty. When it
was unable to reach agreement with Argentina on an alternate
forum, BG Group submitted to arbitration under the UNCITRAL
Rules. As characterized by the Arbitral Panel, a ministerial
opinion (appearing in an article by the former Argentina
Attorney General and Minister of Justice) submitted by BG
Group estimated that it would take six years to resolve BG
Group’s claim in the Argentine courts, and BG Group therefore
viewed the requirement in Article 8(2) of the Treaty as
“senseless,” Final Award ¶ 142, and saw no reason to wait
eighteen months before requesting arbitration. Alternatively, BG
Group argued that customary international law did not require
exhaustion of local remedies, and that Article 3 of the Treaty, the
Most Favored Nation Clause, obviated the requirement that it
seek recourse in Argentine courts given that Argentina’s
investment treaty with the United States lacked such a
requirement.
The Arbitral Panel issued a Final Award on December 24,
2007, in Washington, D.C. The Panel determined it had
6
jurisdiction. It rejected BG Group’s arguments that the dispute
was arbitrable because an Argentine court would not resolve the
dispute within eighteen months and that international law did not
require exhaustion of local remedies. Instead, the Panel
concluded that although BG Group did not seek recourse in
Argentine courts for the eighteen month period required by
Article 8(2) of the Treaty, that provision could not, “[a]s a matter
of Treaty interpretation . . . be construed as an absolute
impediment to arbitration.” Final Award ¶ 147. Citing Article
32 of the Vienna Convention,1 the Panel concluded that because
Argentina by emergency decrees had restricted access to its
courts and had excluded from the renegotiation process any
licensee that sought redress, a literal reading of the Treaty would
produce an “absurd and unreasonable result.” Id. The Panel thus
found it unnecessary to decide whether Article 3 of the Treaty
made Article 8(1) and (2) inoperative.
1
Article 32 of the Vienna Convention on the Law of Treaties,
May 23, 1969, 1155 U.N.T.S. 331 (“Vienna Convention”), provides
that in interpreting a treaty:
Recourse may be had to supplementary means of
interpretation, including the preparatory work of the treaty
and the circumstances of its conclusion, in order to confirm
the meaning resulting from the application of article 31, or to
determine the meaning when the interpretation according to
article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or
unreasonable.”
Article 31 sets forth the “General rule of interpretation,” stating in
paragraph 1 that “[a] treaty shall be interpreted in good faith in
accordance with the ordinary meaning to be given to the terms of the
treaty in their context and in the light of its object and purpose.”
7
On the merits, the Arbitral Panel ruled BG Group had
standing to bring its claim because, under the terms of the
Treaty, it was an “investor” with an “investment”2 (in GASA and
MetroGAS), which suffered a decrease in the value as a result of
the Emergency Law. It rejected BG Group’s claim that
Argentina had breached Article 5 of the Treaty or expropriated
its investment in MetroGAS, because the decrease in the value
of BG Group’s investment was not permanent. It found,
however, that Argentina had violated Article 2 of the Treaty by
failing to provide fair and equitable treatment to investments,3 in
that its actions in the early 1990s led to BG Group’s investment
and by dismantling the regulatory scheme that induced the
investment, “Argentina violated the principles of stability and
predictability inherent to the standard of fair and equitable
treatment.” Id. ¶ 307. The violation was exacerbated, it found,
by the exclusion of licensees seeking relief in an arbitral or other
forum from the renegotiation process. The Panel rejected
Argentina’s state-of-necessity defense under customary
international law, on the ground the defense was limited to
exceptional circumstances, such as where there is a “serious and
imminent threat and no means to avoid it.” Id. ¶ 410 (internal
quotation marks and citation omitted). Finally, the Panel
2
Article 1(a)(ii) of the Treaty defines an “investment” to
include “shares in and stock and debentures of a company and any
other form of participation in a company, established in the territory
of either of the Contracting Parties.”
3
Article 2(2) of the Treaty provides that “[i]nvestments of
investors of each Contracting Party shall at all times be accorded fair
and equitable treatment . . . . Neither Contracting Party shall in any
way impair by unreasonable . . . measures the management,
maintenance, use, enjoyment or disposal of investments in its territory.
. . . Each Contracting Party shall observe any obligation it may have
entered into with regard to investments of investors of the other
Contracting Party.”
8
awarded damages based on a comparison of two trades of BG
Group’s shares — one in 1998 (three and a half years before
enactment of the Emergency Law) and one in 2002 (shortly after
enactment of the Emergency Law) — extrapolating the value of
BG Group’s total investment and assessing the difference as the
damages caused by the Emergency Law: $185,285,485.85 in
U.S. dollars (excluding interest, costs, and attorneys’ fees).
Argentina petitioned to vacate or modify the Final Award
pursuant to the FAA, 9 U.S.C. §§ 10(a) & 11.4 BG Group filed
an opposition and a cross-motion for recognition and
enforcement of the Final Award, and for a prejudgment bond.
Following further filings in opposition or reply, the district court
denied vacatur and granted enforcement. Republic of Argentina
v. BG Group PLC, 715 F. Supp. 2d 108 (D.D.C. 2010); Republic
of Argentina v. BG Group PLC, 764 F. Supp. 2d 21 (D.D.C.
2011). Argentina appeals; our review of the district court’s
findings of fact is for clear error and our review of questions of
4
Section 10(a) of the FAA, 9 U.S.C. § 10(a), provides that an
arbitration award may be vacated
(1) where the award was procured by corruption, fraud, or
undue means;
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing
to postpone the hearing, upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights
of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
9
law is de novo. See First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 947–48 (1995); Lessin v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 481 F.3d 813, 816 (D.C. Cir. 2007).
II.
The “gateway” question in this appeal is arbitrability: when
the United Kingdom and Argentina executed the Treaty, did
they, as contracting parties, intend that an investor under the
Treaty could seek arbitration without first fulfilling Article 8(1)’s
requirement that recourse initially be sought in a court of the
contracting party where the investment was made? That
question raises the antecedent question of whether the
contracting parties intended the answer to be provided by a court
or an arbitrator.
The Supreme Court has held that the intent of the
contracting parties controls whether the answer to the question
of arbitrability is to be provided by a court or an arbitrator. See,
e.g., First Options, 514 U.S. at 943. “Courts should not assume
that the parties agreed to arbitrate arbitrability unless there is
‘clea[r] and unmistakabl[e]’ evidence that they did so.” Id. at
944 (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 649 (1986) (alterations in original). This comports
with the “basic objective” of arbitration, which the Court
explained “is not to resolve disputes in the quickest manner
possible, no matter what the parties’ wishes, but to ensure that
commercial arbitration agreements, like other contracts, are
enforced according to their terms.” Id. at 947 (internal quotation
marks and citations omitted). Thus, in “construing an arbitration
clause, courts and arbitrators must ‘give effect to the contractual
rights and expectations of the parties.’” Stolt-Nielsen S.A. v.
Animalfeeds Int’l Corp., 130 S. Ct. 1758, 1773–74 (2010)
(quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland
Stanford Junior Univ., 489 U.S. 468, 479 (1989)).
10
In Howsam v. Dean Witter, 537 U.S. 79 (2002), the Court
provided guidance on the circumstances in which a court, rather
than the arbitrator, is to decide a “question of arbitrability,” id. at
83. A court will decide the question
in the kind of narrow circumstances where the
contracting parties would likely have expected a court
to have decided the gateway matter, where they are not
likely to have thought that they had agreed that an
arbitrator would do so, and, consequently, where
reference of the gateway dispute to the court avoids the
risk of forcing parties to arbitrate a matter that they may
well not have agreed to arbitrate.
Id. at 83–84. In such circumstances, where “the parties did not
agree to submit the arbitrability question itself to arbitration, then
the district court should decide that question . . . independently.”
First Options, 514 U.S. at 943 (emphasis in original). If, on the
other hand, there is clear and unmistakable evidence that the
parties intended for the arbitrator to decide the question of
arbitrability, a district court’s review of the arbitrator’s decision
on that matter “should not differ from the standard courts apply
when they review any other matter that parties have agreed to
arbitrate. . . . That is to say, the court should give considerable
leeway to the arbitrator, setting aside his or her decision only in
certain narrow circumstances.” Id. (internal citations omitted).
The district court viewed Argentina as having conceded that
the Treaty provided that the arbitrator would decide the question
of arbitrability. It cited counsel’s statement at the motions
hearing that Argentina “‘acknowledge[s] that the Arbitral
Tribunal has the principal power to rule upon its jurisdiction.’”
Republic of Argentina, 764 F. Supp. 2d at 33 & n.8 (quoting Tr.,
Sept. 28, 2010, at 4) (alteration in original). The context in which
11
counsel made this statement, and the subsequent colloquy with
the district court, however, indicate that Argentina was conceding
an altogether different point: once the Treaty’s arbitration
provision was properly triggered, after eighteen months’ recourse
to an Argentine court, any question of arbitrability then would be
decided by the arbitrator. See Tr., Sept. 28, 2010, at 5. Indeed,
in the sentence immediately following the one cited by the
district court, Argentina’s counsel stated: “However, we also
understand that this Court has the right to and the duty to under
the New York Convention to assess whether . . . Argentina’s
consent to arbitration [was] respected.” Id. at 4. The transcript
indicates this statement qualifies the previous sentence about
arbitrability, rather than presents a new argument, because
counsel next stated that the consent was “also” relevant to
“whether the award is contrary or not to U.S. [public] policy,” id.,
a separate argument under the New York Convention.
Any concession by Argentina was thus limited to stating that
the parties agreed the issue of arbitrability would be decided by
an arbitrator if the aggrieved party had first sought relief in an
Argentine court, pursuant to Article 8(1) and (2) of the Treaty.
Indeed, its counsel made the point explicit in responding to the
district court’s next inquiry about whether the Treaty provided
that the UNCITRAL Rules would apply if there were no
agreement on an arbitral forum. See id. at 4–5. Argentina’s
counsel stated: “The fundamental issue[] here and that’s our first
objection is that [under the terms of the Treaty] Argentina’s
consent to arbitration had a very important condition. And that
condition was that the dispute had to be submitted for 18 months
to local courts to an Argentine judge.” Id. at 5. The transcript
thus demonstrates, when the statement by Argentina’s counsel on
which the district court relied is viewed in context, that the
district court clearly erred in finding that Argentina had conceded
that the arbitrator had the power to determine arbitrability under
the circumstances.
12
A temporal analysis of the Treaty confirms this conclusion.
Article 8(3) of the Treaty provides for the procedure to be
followed once the possibility of arbitration is triggered, but only
after an Argentine court first has an opportunity to resolve the
dispute. Under Article 8(3), if the parties do not agree on an
arbitration forum or procedure, the UNCITRAL Rules will
govern resolution of the dispute; the UNCITRAL Rules grant the
arbitrator the power to determine issues of arbitrability.5 Thus,
once Article 8(3) of the Treaty is triggered, the Treaty’s
incorporation of the UNCITRAL Rules provides “clear[] and
unmistakabl[e] evidence,” AT & T Techs., 475 U.S. at 649; see
First Options, 514 U.S. at 944, that the parties intended for the
arbitrator to decide questions of arbitrability. See Republic of
Ecuador v. Chevron Corp., 638 F.3d 384, 394 (2d Cir. 2011).
But the Treaty’s incorporation of the UNCITRAL Rules has a
temporal limitation: the Rules are not triggered until after an
investor has first, pursuant to Article 8(1) and (2), sought
recourse, for eighteen months, in a court of the contracting party
where the investment was made.
The Treaty does not directly answer whether the contracting
parties intended a court or the arbitrator to determine questions of
arbitrability where the precondition of resort to a contracting
party’s court pursuant to Article 8(1) and (2) is disregarded by an
investor. By comparison, the Treaty states in Article 9(2) that
should a dispute arise between the contracting parties themselves,
the United Kingdom and Argentina, and it is not resolved through
diplomatic channels, the dispute will go directly to arbitration.
Article 9(5) provides that “[t]he [arbitral] tribunal shall determine
its own procedure.” This provision indicates that the contracting
5
Article 21(1) of the UNCITRAL Arbitration Rules, G.A.
Res. 31/98, art. 21, para. 1, U.N. Doc. A/RES/31/98 (Dec. 15, 1976),
provides that “[t]he arbitral tribunal shall have the power to rule on
objections that it has no jurisdiction” to hear the arbitration.
13
parties were aware of how to provide an arbitrator with the
authority to determine a “question of arbitrability,” cf. BFP v.
Resolution Trust Corp., 511 U.S. 531, 537 (1994), and suggests
that the absence of such language in Article 8(1) and (2) was
intentional, cf. First Options, 514 U.S. at 945. It also underscores
the importance the contracting parties ascribed to Article 8(1) and
(2), counseling against a reading that would render its
requirements inoperative.
Furthermore, the contracting parties likely never conceived
of the need to specify that a court should decide whether Article
8(1) and (2)’s requirement that disputes first be brought to a court
should be respected. The Treaty provides a prime example of a
situation where the “parties would likely have expected a court”
to decide arbitrability. Howsam, 537 U.S. at 83. It would be odd
to assume that where the gateway provision itself is resort to a
court, the parties would have been surprised to have a court, and
not an arbitrator, decide whether the gateway provision should be
followed. At the very least, there is no clear and unmistakable
evidence, see First Options, 514 U.S. at 944, that the contracting
parties intended an arbitrator to decide the gateway question.
Because the Treaty provides that a precondition to arbitration
of an investor’s claim is an initial resort to a contracting party’s
court, and the Treaty is silent on who decides arbitrability when
that precondition is disregarded, we hold that the question of
arbitrability is an independent question of law for the court to
decide. See id. The district court therefore erred as a matter of
law by failing to determine whether there was clear and
unmistakable evidence that the contracting parties intended the
arbitrator to decide arbitrability where BG Group disregarded the
requirements of Article 8(1) and (2) of the Treaty to initially seek
resolution of its dispute with Argentina in an Argentine court.
14
The Supreme Court’s decision in John Wiley & Sons, Inc. v.
Livingston, 376 U.S. 543 (1964), does not require the opposite
conclusion. In John Wiley, the Court drew a distinction between
“substantive” questions of arbitrability and “procedural”
questions of arbitrability, assigning the former to courts and the
latter to arbitrators. Id. at 557. It did so in the context of an
industrial labor dispute under section 301 of the Labor
Management Relations Act, 29 U.S.C. § 185. The premise
underlying section 301 is a congressional policy favoring speedy
arbitral resolution of labor disputes as an ongoing part of the
collective bargaining process, to avoid the industrial strife that
had historically led to labor strikes. See United Steelworkers of
America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578
(1960). “[A]rbitration of labor disputes . . . is part and parcel of
the collective bargaining process itself,” id., and thus “[t]he
processing of disputes through [arbitration] is actually a vehicle
by which meaning and content are given to the collective
bargaining agreement,” id. at 581. In the context of labor
disputes, “judicial inquiry under [§] 301 must be strictly confined
. . . . Doubts should be resolved in favor of [arbitration].” Id. at
582–83. Given this context, the John Wiley Court was concerned
with “the delay attendant upon judicial proceedings preliminary
to arbitration. . . . [S]uch delay may entirely eliminate the
prospect of a speedy arbitrated settlement of the dispute, . . .
contrary to the aims of national labor policy.” John Wiley, 376
U.S. at 558.
The dispute between Argentina and BG Group arises in an
entirely different context: an international investment treaty
between two sovereigns. The provision at issue in the United
Kingdom–Argentina Treaty, Article 8(1) and (2), illustrates why
the reasoning in John Wiley is inapposite. The Treaty explicitly
requires judicial proceedings prior to arbitration. That is, the
contracting parties specifically desired “the delay attendant upon
judicial proceedings preliminary to arbitation,” John Wiley, 376
15
U.S. at 558, and the procedural/substantive arbitrability
distinction drawn to accord with “the policy behind federal labor
law,” id. at 559, cannot be applied to a dispute over the operation
of an international treaty provision that requires that which the
Court in John Wiley sought to avoid. Furthermore, in John Wiley,
the Court found it significant that the Union, not the arbitrator,
questioned the operative relevance of the preconditions to
arbitration in the collective bargaining agreement, because as a
result the facts underlying the question of arbitrability “gr[e]w
out of the dispute and b[ore] on its final disposition. Id. at 557.
By contrast, as characterized by the Arbitral Panel, BG Group did
not question its ability to commence a lawsuit in an Argentine
court based on any of the decrees discussed by the Panel, but
instead argued that a decision would not be rendered within
eighteen months and thus it was “senseless” to adhere to the
Treaty provision, Final Award ¶ 142. Unlike in John Wiley, here
the facts underlying the question of arbitrability did not “grow out
of the dispute” between BG Group and Argentina, but instead
were raised sua sponte by the Panel. The question of arbitrabilty
here precedes rather than grows out of the dispute.6
Because the Treaty provision at issue is explicit, the usual
“emphatic federal policy in favor of arbitral dispute resolution,”
6
Howsam, 537 U.S. at 82, 85, is also distinguishable because
the question of arbitrability arose from a rule, promulgated by the
National Association of Securities Dealers (“NASD”), that functioned
as a six year statute of limitations. Id. at 82. The question of
arbitrability thus was intertwined with the facts underlying the
substantive dispute. The Supreme Court reasoned that the NASD
arbitrators were “comparatively more expert about the meaning of
their own rule, . . . [and thus] better able to interpret and to apply it.”
Id. at 85. Here, the question of arbitrability is separate from the
underlying dispute, and the Treaty requirement to seek relief first in
court was required by the contracting parties, not promulgated by the
Arbitral Panel.
16
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 631 (1985), cannot function to override the intent of
the contracting parties. It may be that parties generally negotiate
arbitration clauses to “trade[] the procedures and opportunity for
review of the courtroom for the simplicity, informality, and
expedition of arbitration.” Id. at 628. A court interpreting such
a clause in the international trade context is informed by “a strong
belief in the efficacy of arbitral procedures for the resolution of
international commercial disputes and an equal commitment to
the enforcement of freely negotiated choice-of-forum clauses.”
Id. at 631. In a case such as Mitsubishi Motors, this results in
enforcing an agreement to arbitrate, which historically required
“national courts . . . to shake off the old judicial hostility to
arbitration.” Id. at 638 (internal quotation marks and citation
omitted). But where, as here, the contracting parties provided
that an Argentine court would have eighteen months to resolve a
dispute prior to resort to arbitration, a court cannot lose sight of
the principle that led to a policy in favor of arbitral resolution of
international trade disputes: enforcing the intent of the parties.
“‘[A]greeing in advance on a forum acceptable to both parties is
an indispensable element in international trade, commerce, and
contracting.’” Id. at 630 (quoting M/S Bremen v. Zapata Off-
Shore Co., 407 U.S. 1, 13–14 (1972)). Therefore, “concerns of
international comity, respect for the capacities of foreign and
transnational tribunals, and sensitivity to the need of the
international commercial system for predictability in the
resolution of disputes requires that we enforce the parties’
agreement.” Id. at 629. Where the contracting parties agree to
require dispute resolution in a court prior to arbitration, and the
aggrieved party initiating the dispute disregards the requirement,
a fundamentally different question of arbitrability arises than that
of the ignored informal resolution steps in John Wiley. In
keeping with the foundational principles expressed above, see,
e.g., Stolt-Nielsen, 130 S. Ct. at 1774–75; Howsam, 537 U.S. at
17
83, a John Wiley assumption that the arbitrator is to determine the
question of arbitrability cannot sensibly apply here.
Accordingly, “[b]ecause we conclude that there can be only
one possible outcome on the [arbitrability question] before us,”
Stolt-Nielsen, 130 S. Ct. at 1770, namely, that BG Group was
required to commence a lawsuit in Argentina’s courts and wait
eighteen months before filing for arbitration pursuant to Article
8(3) if the dispute remained, we reverse the orders denying the
motion to vacate and granting the cross-motion to confirm the
Final Award, and we vacate the Final Award.