Stayin' Alive?: BG Group, PLC v. Republic of Argentina and the Vitality of Host-Country Litigation Requirements in Investment Treaty Arbitration

Abstract

Over the last few decades, international arbitration has emerged as the preferred mechanism for resolving high-stakes international investment disputes. Last Term the Supreme Court of the United States decided BG Group, PLC v. Republic of Argentina, the first case the Court had ever heard concerning an international arbitration award rendered pursuant to an investment treaty dispute. The bilateral investment treaty (BIT) at issue expressly required litigation in a host-country's courts prior to international arbitration, but petitioner BG Group sought arbitration directly against Argentina without first seeking recourse in the Argentine courts. The arbitral tribunal held that failure to fulfill this condition did not strip it of jurisdiction and the tribunal reached the merits, finding in favor of BG. Because the parties chose the United States as the seat of arbitration, Argentina began proceedings in the U.S. national courts to vacate the award. On March 5, 2014, the Supreme Court ruled not to vacate, relying chiefly on the premise that fulfillment of the litigation requirement in the BIT was a procedural precondition to arbitration and thus a question for an arbitrator, not a court, to decide. But what about the text of the BIT, which plainly insists on host-country litigation prior to arbitration? What about the broader criticism that the current investment treaty arbitration (ITA) regime shortchanges host-country sovereignty in order to please foreign investors? Or that host-country courts are better positioned than international arbitral tribunals to decide questions of host-country law? These concerns deserve a response if ITA is to maintain its prominence. Thus, in addition to exploring the implications of the Court's decision for ITA and international commercial arbitration, this Note proposes an improved host-country litigation requirement, arguing that countries should learn from BG Group and seek to implement or improve host-country litigation requirements in their BITs.