September 24, 2013 Articles

The Supreme Court's New Arbitrability Options

By Monique Sasson

An enduring issue in U.S. jurisprudence has been the difficulty of determining when a court, rather than an arbitral tribunal, should make the initial decision on whether the arbitrators have the authority to hear a dispute. Although the Supreme Court has provided general guidance on this "gateway" question in a few cases, there has been substantial room for lower court judges to fashion an array of arbitrability rulings. The tendency has been to favor the arbitrators as the first stop, drawing the United States closer to the more mature international arbitration jurisdictions, which characteristically place the arbitrators in command from the outset. However, in Republic of Argentina v. BG Group PLC, 665 F.3d 1363 (D.C. Cir. 2012), the U.S. Court of Appeals for the District of Columbia Circuit took a restrictive position on competence-competence in interpreting a "precondition to arbitration" provision in a bilateral investment treaty (BIT), and set aside the arbitral award that BG Group had won.

The Supreme Court has granted BG Group's petition for a writ of certiorari, despite the cogently argued recommendation of the U.S. Solicitor General (SG) that the petition be denied. In this closely watched case in the international arbitration community, the Supreme Court will now have the opportunity to (a) adopt BG Group's position outright and thereby reinforce the tendency that the Court set in motion preeminently in Howsam v. Dean Witter, 537 U.S. 79 (2002), favoring the arbitrators to decide arbitrability; (b) confine the D.C. Circuit's ruling to the peculiarity of the BIT provision at issue (a principal reason for the SG's recommendation to deny certiorari), which would affirm the set-aside ruling but also leave in place the above-described Howsam tendency; or (c) affirm the D.C. Circuit such that the Howsam tendency is ended, and a new, restrictive competence-competence regime is established. While many observers—especially international arbitration practitioners—expect the Court to take option (a) or, at worst, option (b), they may well experience the unpleasant surprise of option (c), because a number of the SG's arguments, even if they did not prevail on certiorari, could prove very persuasive on the underlying question of the logic of initial review by courts, not arbitral tribunals.

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