## Facts

- BG Group plc, a U.K. investor, acquired a controlling interest in MetroGAS, a privatized natural-gas distributor in Buenos Aires.
- When BG invested, Argentina’s regulatory regime calculated tariffs in U.S. dollars and contemplated tariff levels providing a reasonable return.
- After Argentina’s 2001–2002 crisis, it enacted emergency measures that converted dollar-based tariffs to pesos, froze tariff increases, and altered the utilities’ economic framework, causing MetroGAS to suffer major losses.
- The U.K.–Argentina bilateral investment treaty (BIT) provided that disputes could be submitted to Argentine courts and, after 18 months without a final decision (or if a final decision issued but the parties still disputed), to international arbitration; it also permitted the parties to agree to proceed directly to arbitration.
- BG initiated UNCITRAL arbitration in Washington, D.C. without first litigating in Argentine courts; Argentina objected, arguing the tribunal lacked authority because the 18-month local-court requirement was not met.
- The arbitral tribunal concluded Argentina’s actions hindered effective access to its courts and treated the local-litigation requirement as excused; it found no expropriation but awarded damages for breach of the BIT’s fair-and-equitable-treatment standard.
- A federal district court confirmed the award; the D.C. Circuit vacated it, treating the local-litigation requirement as a condition of sovereign consent requiring de novo judicial review.

## Issues

1. Whether the BIT’s 18-month local-litigation requirement is a “question of arbitrability” for courts to decide de novo or a procedural precondition for arbitrators to interpret and apply.
2. Whether, under the applicable standards for judicial review of arbitral awards, the reviewing court must defer to the tribunal’s determination that the precondition was satisfied or excused.

## Decision

- The Supreme Court reversed the D.C. Circuit and reinstated the award (with remand for further proceedings consistent with its opinion).
- The Court held the 18-month local-litigation requirement functions as a procedural condition precedent governing when arbitration may occur, not whether there is an agreement to arbitrate.
- Because the provision is procedural, arbitrators primarily decide its meaning and application, and courts must apply ordinary, highly deferential review when evaluating the tribunal’s resolution.
- The treaty context did not change the analysis absent clear textual evidence that the contracting states intended courts to decide compliance with the local-litigation requirement.

## Legal Principles

- Courts generally decide “gateway” questions of arbitrability (e.g., whether a valid arbitration agreement exists or whether it covers the dispute), but arbitrators generally decide procedural conditions related to how and when arbitration proceeds (e.g., waiver, delay, and similar preconditions).
- A dispute over compliance with an arbitration precondition that resembles an order-of-steps or timing requirement is presumptively for arbitrators to resolve.
- The presence of the arbitration clause in a bilateral investment treaty does not, by itself, convert procedural preconditions into jurisdictional limits requiring de novo judicial determination.
- On review of an arbitral award, a court may not substitute its own interpretation of a procedural precondition for the arbitrators’ interpretation where the arbitrators acted within the bounds of their authority.

## Conclusion

The Court held that the BIT’s 18-month local-court litigation requirement is a procedural precondition whose interpretation and application are for arbitrators in the first instance, and that U.S. courts reviewing the resulting award must defer to the tribunal rather than conduct de novo review.


BG Group plc v. Republic of Argentina, 572 U.S. 25 (2014)