May 22, 2014 Articles

Review by U.S. Courts of Investment Treaty Awards

By William B. Panlilio

In its first case involving investment treaty arbitration, the U.S. Supreme Court in BG Group PLC v. Rep. of Argentina, 134 S. Ct. 1198 (2014), addressed the question of whether it is primarily for arbitrators or the courts to interpret and apply a local litigation requirement enshrined in a bilateral investment treaty between two sovereign nations. Related to that question is the issue of which standard of review U.S. courts should adopt with respect to investment treaty awards. Specifically, should courts review those awards deferentially, as they would if arbitrators had the primary authority to interpret and apply the local litigation requirement, or should courts undertake a de novo review of the arbitral award, as they would if the local litigation requirement was primarily for courts to interpret and apply?

At the heart of the dispute, was the interpretation of a pre-arbitration local litigation requirement in the bilateral investment treaty between the United Kingdom and Argentina. See Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Republic of Argentina for the Promotion and Protection of Investments, U.K.–Arg., Dec. 11, 1990, 1765 U.N.T.S. 33. Article 8 of the treaty required disputes that have not been settled amicably between any contracting party (that is, the United Kingdom or Argentina) and an investor to be submitted to "the decision of the competent tribunal [that is, the local courts] of the Contracting Party in whose territory the investment was made." The dispute shall then be submitted to international arbitration as requested by one of the parties if the local court had not made a final decision within 18 months or if the parties are still in dispute even after the local court had made a final decision.

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