Republic of Argentina v. BG Group PLC, Civil Action No. 08-485 (D.D.C. Jan. 2011), involved an application to confirm an arbitral award in the amount of $185 million plus other costs against the Republic of Argentina. The proceeding was brought under the Federal Arbitration Act 9 U.S.C. § 207 (2000), and the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38). Noteworthy rulings in the decision from the perspective of international practice include:
First, BG Group had arbitrated its claims directly under the bilateral treaty between Argentina and the United Kingdom titled Agreement for the Promotion and Protection of Investments, Dec. 11, 1990, 1765 U.N.T.S. 33. The Investment Treat’s purpose was to ensure that “foreign” investors “would be treated fairly and equitably”. The Court rejected the argument that BG Group’s claim was essentially derivative, suing for the loss of value on its investment; said the District Court, there were numerous aspects of the international treaty that gave BG Group direct rights.
Second, the arbitral panel rejected BG’s argument that Argentina’s conduct rose to the level of an expropriation; it nonetheless found that Argentina has breached its commitments to BG by “fundamentally modifying the investment regulatory framework”. This constituted breach enough to permit an award of damages.
Third, the District Court summarized the important differences between moving to vacate and moving to confirm a non-domestic arbitral award:
“[T]he purpose of a proceeding to vacate an arbitral award, which can only be held in “the country in which, or under the [arbitration] law of which, [an] award is made,” is to render the award unenforceable in any other nation that is a party to the New York Convention, see TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 935-36 (D.C. Cir. 2007) (quoting New York Convention, art. V(1)(e)) (concluding that a “principal precept of the New York Convention” is that “an arbitration award does not exist to be enforced in other Contracting States if it has been lawfully ‘set aside’ by a competent authority in [the country in] which the award was made”), while a proceeding to confirm an award, which can be held in any other signatory state to the New York Convention, concerns whether an arbitral award — even one that has not been ‘set aside’ by a competent authority — should nonetheless be enforced in that particular state, see Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 287 (5th Cir. 2004) (observing that the issue confronting countries “where recognition and enforcement are sought” is “whether that state should enforce the arbitral award”).
Fourth, the court joined the ever-growing number of courts expressing “serious doubts” about whether “manifest disregard of the law” remains a viable grounds to challenge an arbitral award. The District Court also questioned whether a general, “the arbitral panel exceeded its powers”, is a cognizable grounds for challenge under the New York Convention (as opposed to the FAA).
Finally, on the subject of whether the court or the panel of arbitrators should have decided whether the parties to the particular dispute “have agreed to submit a particular dispute to arbitration”, the District Court followed the Supreme Court’s ruling in Granite Rock Co. v. Int’l Brotherhood of Teamsters, 130 S. Ct. 2847, 2856 (2010), that this “typically [is] an issue for judicial determination” and is given to the arbitrators only where the record reflects a “clear and unmistakable” intention by the parties to arbitrate arbitrability.