BG Group v Argentina: The US Supreme Court and Judicial Review of Investment Treaty Awards
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On March 5, 2014, the United States Supreme Court, in BG Group PLC v. Republic of Argentina,1 ruled for the first time on the standard of review U.S. courts should apply when examining investment treaty awards to determine whether an arbitral tribunal exceeded its powers. In a 7-2 split, with a concurrence, the majority adopted a highly deferential standard of review based on interpretive presumptions developed under U.S. domestic law for arbitration agreements found in ordinary contracts between private parties. The dissent, by contrast, opted for a de novo standard of review based on the recognition that states have delegated an important function of policing arbitral decisions on jurisdiction to national courts and that particular care is required when this function is exercised in investor-state disputes founded on interstate treaties. The dissent’s approach is preferable because it appreciates the public international law basis and public law nature of investment treaty arbitration, which differs in important ways from contractual arbitration between private parties. Standards of review are a crucial issue in the investment treaty system because investor-state awards are not currently subject to a full-blown appellate review mechanism. Instead, awards issued under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention) are subject to annulment on certain bases, which include that the tribunal “manifestly exceeded its powers.”2 Absent annulment, the ICSID Convention requires contracting states to recognize awards as binding and to enforce them as if they were final judgments of their own courts.3 By contrast, non-ICSID Convention awards, like the one at issue in BG Group, are open to two avenues of judicial review by domestic courts. First, one of the disputing parties may seek to set aside the award in the seat of arbitration under the laws of that state. Second, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards obliges contracting states to recognize and enforce arbitral awards but permits a disputing party to resist recognition and enforcement on certain specified grounds.
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Wei, Shen. The American Journal of International Law; Washington Vol. 108, Iss. 4, (Oct 2014): 750-782.