Republic of Argentina v. Bg Group Plc

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2011 Decided January 17, 2012

No. 11-7021

REPUBLIC OF ARGENTINA,

APPELLANT

v.

BG GROUP PLC,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:08-cv-00485)

Gabriel Bottini, pro hac vice, argued the cause for

appellant. On the briefs was John P. Gleason. Fernando O.

Koatz entered an appearance.

Alexander A. Yanos argued the cause for appellee. With

him on the brief was Elliot Friedman. Paul L. Yde entered an

appearance.

Before: SENTELLE, Chief Judge, HENDERSON and ROGERS,

Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

2

ROGERS, Circuit Judge: The Republic of Argentina appeals

the denial of its motion to vacate an arbitral award on the

principal ground that the arbitral panel exceeded its authority by

ignoring the terms of the parties’ agreement. That agreement,

in the form of a Bilateral Investment Treaty between the United

Kingdom of Great Britain and Northern Ireland, and Argentina

(“the Treaty”), provides that disputes between an investor and

the host State will be resolved in the host State’s courts. If,

however, no final court ruling is forthcoming within eighteen

months or the dispute is unresolved after a court ruling, the

Treaty provides that resort may then be had to arbitration. BG

Group, PLC, a British corporation and investor in Argentina gas

companies pursuant to the Treaty, invoked the arbitration clause

without first filing a claim in the Argentine courts. The arbitral

panel nonetheless ruled it had jurisdiction, found Argentina had

violated the Treaty, and awarded BG Group damages.

Although the scope of judicial review of the substance of

arbitral awards is exceedingly narrow, it is well settled that an

arbitrator cannot ignore the intent of the contracting parties.

Where, as here, the result of the arbitral award was to ignore the

terms of the Treaty and shift the risk that the Argentine courts

might not resolve BG Group’s claim within eighteen months

pursuant to Article 8(2) of the Treaty, the arbitral panel rendered

a decision wholly based on outside legal sources and without

regard to the contracting parties’ agreement establishing a

precondition to arbitration. Accordingly, we reverse the orders

denying the motion to vacate and granting the cross-motion to

confirm, and we vacate the Final Award.

I.

The Bilateral Investment Treaty between the United

Kingdom and Argentina was signed December 11, 1990, and

became effective on February 19, 1993. It aimed to promote a

3

favorable investment environment between the contracting

parties following Argentina’s economic reformation to reduce

inflation and the public debt. As relevant, Article 8(1) of the

Treaty provides that disputes between an investor under the

Treaty and the host State that “have not been amicably settled

shall be submitted, at the request of one of the Parties to the

dispute, to the decision of the competent tribunal of the

Contracting Party in whose territory the investment was made.”

Article 8(2) sets the conditions by which such a dispute may be

submitted to international arbitration:

(a) if one of the Parties so requests, in any of the

following circumstances:

(i) where, after a period of eighteen months has

elapsed from the moment when the dispute was

submitted to the competent tribunal of the

Contracting Party in whose territory the investment

was made, the said tribunal has not given its final

decision;

(ii) where the final decision of the aforementioned

tribunal has been made but the Parties are still in

dispute; [or]

(b) where the Contracting Party and the investor of the

other Contracting Party have so agreed.

Art. 8(2) (emphasis added). Article 8(3) provides that if, after

three months from written notification of the claim, the parties

to the dispute are unable to agree on one of the described

arbitration procedures, then “the Parties to the dispute shall be

bound to submit it to arbitration under the Arbitration Rules of

the United Nations Commission on International Trade Law

[“UNCITRAL Rules”],” although they can modify these rules.

4

Article 8(4) instructs that “[t]he arbitral tribunal shall decide the

dispute in accordance with the provisions of this Agreement [i.e.,

the Treaty], the laws of the Contracting Party involved in the

dispute, including its rules on conflict of laws, the terms of any

specific agreement concluded in relation to such an investment

and the applicable principles of international law.”

Around the time the Treaty took effect, as part of its

economic reformation, Argentina privatized the state-owned gas

transportation and distribution company, Gas del Estado, and

established a 1:1 fixed parity between the Argentine peso and the

U.S. dollar. Gas del Estado was split into two transportation

companies and eight distribution companies, one of which was

MetroGAS. MetroGAS was granted a thirty-five year exclusive

license to distribute gas in the city of Buenos Aires and portions

of the surrounding metropolitan area, and the license provided

that tariffs would be calculated in U.S. dollars and expressed in

pesos. One provision of MetroGAS’s license provided that

adjustments to tariffs would be made every six months for

inflation, in accordance with the United States Product Price

Index (“PPI”). MetroGAS was entitled to review of its tariffs

every five years to ensure reasonable returns. BG Group

eventually acquired a 54.67 percent interest in Gas Argentino,

S.A. (“GASA”), which in turn owned seventy percent of

MetroGAS. In addition, BG Group invested directly in

MetroGAS, and by 1998 held a 45.11 percent interest in

MetroGAS.

The Argentine economy collapsed in late 2001 and early

2002 following, Argentina explained, the collapse of the

Brazilian currency, a run on Argentine banks, and the

withholding of a billion dollar loan installment by the

International Monetary Fund. In response, Argentina enacted

Emergency Law 25,561 on January 6, 2002, to terminate the

currency board that had pegged the peso to the U.S. dollar, to

5

convert U.S. dollar based adjustment clauses in agreements to

peso-based adjustment clauses, to prohibit inflation adjustments

based on foreign price indices (e.g., the PPI), and to convert

dollar-based tariffs into peso-based tariffs at a rate of one peso

to one U.S. dollar. Argentina also established, by Resolution

308/02 and Decree 1090/02, a renegotiation process for public

service contracts (excluding any licensee who sought redress in

court or arbitration). And on March 2, 2002, Argentina adopted

Decree 214/02, Article 12 of which stayed for 180 days the

compliance with injunctions and execution of final judgments in

lawsuits brought on account of the Emergency Law’s effect on

the financial system.

Eight months after the stay under Article 12 of Decree

214/02 had expired, BG Group filed a Notice of Arbitration, on

April 25, 2003, pursuant to Article 8(3) of the Treaty. When it

was unable to reach agreement with Argentina on an alternate

forum, BG Group submitted to arbitration under the UNCITRAL

Rules. As characterized by the Arbitral Panel, a ministerial

opinion (appearing in an article by the former Argentina

Attorney General and Minister of Justice) submitted by BG

Group estimated that it would take six years to resolve BG

Group’s claim in the Argentine courts, and BG Group therefore

viewed the requirement in Article 8(2) of the Treaty as

“senseless,” Final Award ¶ 142, and saw no reason to wait

eighteen months before requesting arbitration. Alternatively, BG

Group argued that customary international law did not require

exhaustion of local remedies, and that Article 3 of the Treaty, the

Most Favored Nation Clause, obviated the requirement that it

seek recourse in Argentine courts given that Argentina’s

investment treaty with the United States lacked such a

requirement.

The Arbitral Panel issued a Final Award on December 24,

2007, in Washington, D.C. The Panel determined it had

6

jurisdiction. It rejected BG Group’s arguments that the dispute

was arbitrable because an Argentine court would not resolve the

dispute within eighteen months and that international law did not

require exhaustion of local remedies. Instead, the Panel

concluded that although BG Group did not seek recourse in

Argentine courts for the eighteen month period required by

Article 8(2) of the Treaty, that provision could not, “[a]s a matter

of Treaty interpretation . . . be construed as an absolute

impediment to arbitration.” Final Award ¶ 147. Citing Article

32 of the Vienna Convention,1 the Panel concluded that because

Argentina by emergency decrees had restricted access to its

courts and had excluded from the renegotiation process any

licensee that sought redress, a literal reading of the Treaty would

produce an “absurd and unreasonable result.” Id. The Panel thus

found it unnecessary to decide whether Article 3 of the Treaty

made Article 8(1) and (2) inoperative.

1

Article 32 of the Vienna Convention on the Law of Treaties,

May 23, 1969, 1155 U.N.T.S. 331 (“Vienna Convention”), provides

that in interpreting a treaty:

Recourse may be had to supplementary means of

interpretation, including the preparatory work of the treaty

and the circumstances of its conclusion, in order to confirm

the meaning resulting from the application of article 31, or to

determine the meaning when the interpretation according to

article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or

unreasonable.”

Article 31 sets forth the “General rule of interpretation,” stating in

paragraph 1 that “[a] treaty shall be interpreted in good faith in

accordance with the ordinary meaning to be given to the terms of the

treaty in their context and in the light of its object and purpose.”

7

On the merits, the Arbitral Panel ruled BG Group had

standing to bring its claim because, under the terms of the

Treaty, it was an “investor” with an “investment”2 (in GASA and

MetroGAS), which suffered a decrease in the value as a result of

the Emergency Law. It rejected BG Group’s claim that

Argentina had breached Article 5 of the Treaty or expropriated

its investment in MetroGAS, because the decrease in the value

of BG Group’s investment was not permanent. It found,

however, that Argentina had violated Article 2 of the Treaty by

failing to provide fair and equitable treatment to investments,3 in

that its actions in the early 1990s led to BG Group’s investment

and by dismantling the regulatory scheme that induced the

investment, “Argentina violated the principles of stability and

predictability inherent to the standard of fair and equitable

treatment.” Id. ¶ 307. The violation was exacerbated, it found,

by the exclusion of licensees seeking relief in an arbitral or other

forum from the renegotiation process. The Panel rejected

Argentina’s state-of-necessity defense under customary

international law, on the ground the defense was limited to

exceptional circumstances, such as where there is a “serious and

imminent threat and no means to avoid it.” Id. ¶ 410 (internal

quotation marks and citation omitted). Finally, the Panel

2

Article 1(a)(ii) of the Treaty defines an “investment” to

include “shares in and stock and debentures of a company and any

other form of participation in a company, established in the territory

of either of the Contracting Parties.”

3

Article 2(2) of the Treaty provides that “[i]nvestments of

investors of each Contracting Party shall at all times be accorded fair

and equitable treatment . . . . Neither Contracting Party shall in any

way impair by unreasonable . . . measures the management,

maintenance, use, enjoyment or disposal of investments in its territory.

. . . Each Contracting Party shall observe any obligation it may have

entered into with regard to investments of investors of the other

Contracting Party.”

8

awarded damages based on a comparison of two trades of BG

Group’s shares — one in 1998 (three and a half years before

enactment of the Emergency Law) and one in 2002 (shortly after

enactment of the Emergency Law) — extrapolating the value of

BG Group’s total investment and assessing the difference as the

damages caused by the Emergency Law: $185,285,485.85 in

U.S. dollars (excluding interest, costs, and attorneys’ fees).

Argentina petitioned to vacate or modify the Final Award

pursuant to the FAA, 9 U.S.C. §§ 10(a) & 11.4 BG Group filed

an opposition and a cross-motion for recognition and

enforcement of the Final Award, and for a prejudgment bond.

Following further filings in opposition or reply, the district court

denied vacatur and granted enforcement. Republic of Argentina

v. BG Group PLC, 715 F. Supp. 2d 108 (D.D.C. 2010); Republic

of Argentina v. BG Group PLC, 764 F. Supp. 2d 21 (D.D.C.

2011). Argentina appeals; our review of the district court’s

findings of fact is for clear error and our review of questions of

4

Section 10(a) of the FAA, 9 U.S.C. § 10(a), provides that an

arbitration award may be vacated

(1) where the award was procured by corruption, fraud, or

undue means;

(2) where there was evident partiality or corruption in the

arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing

to postpone the hearing, upon sufficient cause shown, or in

refusing to hear evidence pertinent and material to the

controversy; or of any other misbehavior by which the rights

of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so

imperfectly executed them that a mutual, final, and definite

award upon the subject matter submitted was not made.

9

law is de novo. See First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938, 947–48 (1995); Lessin v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 481 F.3d 813, 816 (D.C. Cir. 2007).

II.

The “gateway” question in this appeal is arbitrability: when

the United Kingdom and Argentina executed the Treaty, did

they, as contracting parties, intend that an investor under the

Treaty could seek arbitration without first fulfilling Article 8(1)’s

requirement that recourse initially be sought in a court of the

contracting party where the investment was made? That

question raises the antecedent question of whether the

contracting parties intended the answer to be provided by a court

or an arbitrator.

The Supreme Court has held that the intent of the

contracting parties controls whether the answer to the question

of arbitrability is to be provided by a court or an arbitrator. See,

e.g., First Options, 514 U.S. at 943. “Courts should not assume

that the parties agreed to arbitrate arbitrability unless there is

‘clea[r] and unmistakabl[e]’ evidence that they did so.” Id. at

944 (quoting AT & T Techs., Inc. v. Commc’ns Workers of Am.,

475 U.S. 643, 649 (1986) (alterations in original). This comports

with the “basic objective” of arbitration, which the Court

explained “is not to resolve disputes in the quickest manner

possible, no matter what the parties’ wishes, but to ensure that

commercial arbitration agreements, like other contracts, are

enforced according to their terms.” Id. at 947 (internal quotation

marks and citations omitted). Thus, in “construing an arbitration

clause, courts and arbitrators must ‘give effect to the contractual

rights and expectations of the parties.’” Stolt-Nielsen S.A. v.

Animalfeeds Int’l Corp., 130 S. Ct. 1758, 1773–74 (2010)

(quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland

Stanford Junior Univ., 489 U.S. 468, 479 (1989)).

10

In Howsam v. Dean Witter, 537 U.S. 79 (2002), the Court

provided guidance on the circumstances in which a court, rather

than the arbitrator, is to decide a “question of arbitrability,” id. at

83. A court will decide the question

in the kind of narrow circumstances where the

contracting parties would likely have expected a court

to have decided the gateway matter, where they are not

likely to have thought that they had agreed that an

arbitrator would do so, and, consequently, where

reference of the gateway dispute to the court avoids the

risk of forcing parties to arbitrate a matter that they may

well not have agreed to arbitrate.

Id. at 83–84. In such circumstances, where “the parties did not

agree to submit the arbitrability question itself to arbitration, then

the district court should decide that question . . . independently.”

First Options, 514 U.S. at 943 (emphasis in original). If, on the

other hand, there is clear and unmistakable evidence that the

parties intended for the arbitrator to decide the question of

arbitrability, a district court’s review of the arbitrator’s decision

on that matter “should not differ from the standard courts apply

when they review any other matter that parties have agreed to

arbitrate. . . . That is to say, the court should give considerable

leeway to the arbitrator, setting aside his or her decision only in

certain narrow circumstances.” Id. (internal citations omitted).

The district court viewed Argentina as having conceded that

the Treaty provided that the arbitrator would decide the question

of arbitrability. It cited counsel’s statement at the motions

hearing that Argentina “‘acknowledge[s] that the Arbitral

Tribunal has the principal power to rule upon its jurisdiction.’”

Republic of Argentina, 764 F. Supp. 2d at 33 & n.8 (quoting Tr.,

Sept. 28, 2010, at 4) (alteration in original). The context in which

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counsel made this statement, and the subsequent colloquy with

the district court, however, indicate that Argentina was conceding

an altogether different point: once the Treaty’s arbitration

provision was properly triggered, after eighteen months’ recourse

to an Argentine court, any question of arbitrability then would be

decided by the arbitrator. See Tr., Sept. 28, 2010, at 5. Indeed,

in the sentence immediately following the one cited by the

district court, Argentina’s counsel stated: “However, we also

understand that this Court has the right to and the duty to under

the New York Convention to assess whether . . . Argentina’s

consent to arbitration [was] respected.” Id. at 4. The transcript

indicates this statement qualifies the previous sentence about

arbitrability, rather than presents a new argument, because

counsel next stated that the consent was “also” relevant to

“whether the award is contrary or not to U.S. [public] policy,” id.,

a separate argument under the New York Convention.

Any concession by Argentina was thus limited to stating that

the parties agreed the issue of arbitrability would be decided by

an arbitrator if the aggrieved party had first sought relief in an

Argentine court, pursuant to Article 8(1) and (2) of the Treaty.

Indeed, its counsel made the point explicit in responding to the

district court’s next inquiry about whether the Treaty provided

that the UNCITRAL Rules would apply if there were no

agreement on an arbitral forum. See id. at 4–5. Argentina’s

counsel stated: “The fundamental issue[] here and that’s our first

objection is that [under the terms of the Treaty] Argentina’s

consent to arbitration had a very important condition. And that

condition was that the dispute had to be submitted for 18 months

to local courts to an Argentine judge.” Id. at 5. The transcript

thus demonstrates, when the statement by Argentina’s counsel on

which the district court relied is viewed in context, that the

district court clearly erred in finding that Argentina had conceded

that the arbitrator had the power to determine arbitrability under

the circumstances.

12

A temporal analysis of the Treaty confirms this conclusion.

Article 8(3) of the Treaty provides for the procedure to be

followed once the possibility of arbitration is triggered, but only

after an Argentine court first has an opportunity to resolve the

dispute. Under Article 8(3), if the parties do not agree on an

arbitration forum or procedure, the UNCITRAL Rules will

govern resolution of the dispute; the UNCITRAL Rules grant the

arbitrator the power to determine issues of arbitrability.5 Thus,

once Article 8(3) of the Treaty is triggered, the Treaty’s

incorporation of the UNCITRAL Rules provides “clear[] and

unmistakabl[e] evidence,” AT & T Techs., 475 U.S. at 649; see

First Options, 514 U.S. at 944, that the parties intended for the

arbitrator to decide questions of arbitrability. See Republic of

Ecuador v. Chevron Corp., 638 F.3d 384, 394 (2d Cir. 2011).

But the Treaty’s incorporation of the UNCITRAL Rules has a

temporal limitation: the Rules are not triggered until after an

investor has first, pursuant to Article 8(1) and (2), sought

recourse, for eighteen months, in a court of the contracting party

where the investment was made.

The Treaty does not directly answer whether the contracting

parties intended a court or the arbitrator to determine questions of

arbitrability where the precondition of resort to a contracting

party’s court pursuant to Article 8(1) and (2) is disregarded by an

investor. By comparison, the Treaty states in Article 9(2) that

should a dispute arise between the contracting parties themselves,

the United Kingdom and Argentina, and it is not resolved through

diplomatic channels, the dispute will go directly to arbitration.

Article 9(5) provides that “[t]he [arbitral] tribunal shall determine

its own procedure.” This provision indicates that the contracting

5

Article 21(1) of the UNCITRAL Arbitration Rules, G.A.

Res. 31/98, art. 21, para. 1, U.N. Doc. A/RES/31/98 (Dec. 15, 1976),

provides that “[t]he arbitral tribunal shall have the power to rule on

objections that it has no jurisdiction” to hear the arbitration.

13

parties were aware of how to provide an arbitrator with the

authority to determine a “question of arbitrability,” cf. BFP v.

Resolution Trust Corp., 511 U.S. 531, 537 (1994), and suggests

that the absence of such language in Article 8(1) and (2) was

intentional, cf. First Options, 514 U.S. at 945. It also underscores

the importance the contracting parties ascribed to Article 8(1) and

(2), counseling against a reading that would render its

requirements inoperative.

Furthermore, the contracting parties likely never conceived

of the need to specify that a court should decide whether Article

8(1) and (2)’s requirement that disputes first be brought to a court

should be respected. The Treaty provides a prime example of a

situation where the “parties would likely have expected a court”

to decide arbitrability. Howsam, 537 U.S. at 83. It would be odd

to assume that where the gateway provision itself is resort to a

court, the parties would have been surprised to have a court, and

not an arbitrator, decide whether the gateway provision should be

followed. At the very least, there is no clear and unmistakable

evidence, see First Options, 514 U.S. at 944, that the contracting

parties intended an arbitrator to decide the gateway question.

Because the Treaty provides that a precondition to arbitration

of an investor’s claim is an initial resort to a contracting party’s

court, and the Treaty is silent on who decides arbitrability when

that precondition is disregarded, we hold that the question of

arbitrability is an independent question of law for the court to

decide. See id. The district court therefore erred as a matter of

law by failing to determine whether there was clear and

unmistakable evidence that the contracting parties intended the

arbitrator to decide arbitrability where BG Group disregarded the

requirements of Article 8(1) and (2) of the Treaty to initially seek

resolution of its dispute with Argentina in an Argentine court.

14

The Supreme Court’s decision in John Wiley & Sons, Inc. v.

Livingston, 376 U.S. 543 (1964), does not require the opposite

conclusion. In John Wiley, the Court drew a distinction between

“substantive” questions of arbitrability and “procedural”

questions of arbitrability, assigning the former to courts and the

latter to arbitrators. Id. at 557. It did so in the context of an

industrial labor dispute under section 301 of the Labor

Management Relations Act, 29 U.S.C. § 185. The premise

underlying section 301 is a congressional policy favoring speedy

arbitral resolution of labor disputes as an ongoing part of the

collective bargaining process, to avoid the industrial strife that

had historically led to labor strikes. See United Steelworkers of

America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578

(1960). “[A]rbitration of labor disputes . . . is part and parcel of

the collective bargaining process itself,” id., and thus “[t]he

processing of disputes through [arbitration] is actually a vehicle

by which meaning and content are given to the collective

bargaining agreement,” id. at 581. In the context of labor

disputes, “judicial inquiry under [§] 301 must be strictly confined

. . . . Doubts should be resolved in favor of [arbitration].” Id. at

582–83. Given this context, the John Wiley Court was concerned

with “the delay attendant upon judicial proceedings preliminary

to arbitration. . . . [S]uch delay may entirely eliminate the

prospect of a speedy arbitrated settlement of the dispute, . . .

contrary to the aims of national labor policy.” John Wiley, 376

U.S. at 558.

The dispute between Argentina and BG Group arises in an

entirely different context: an international investment treaty

between two sovereigns. The provision at issue in the United

Kingdom–Argentina Treaty, Article 8(1) and (2), illustrates why

the reasoning in John Wiley is inapposite. The Treaty explicitly

requires judicial proceedings prior to arbitration. That is, the

contracting parties specifically desired “the delay attendant upon

judicial proceedings preliminary to arbitation,” John Wiley, 376

15

U.S. at 558, and the procedural/substantive arbitrability

distinction drawn to accord with “the policy behind federal labor

law,” id. at 559, cannot be applied to a dispute over the operation

of an international treaty provision that requires that which the

Court in John Wiley sought to avoid. Furthermore, in John Wiley,

the Court found it significant that the Union, not the arbitrator,

questioned the operative relevance of the preconditions to

arbitration in the collective bargaining agreement, because as a

result the facts underlying the question of arbitrability “gr[e]w

out of the dispute and b[ore] on its final disposition. Id. at 557.

By contrast, as characterized by the Arbitral Panel, BG Group did

not question its ability to commence a lawsuit in an Argentine

court based on any of the decrees discussed by the Panel, but

instead argued that a decision would not be rendered within

eighteen months and thus it was “senseless” to adhere to the

Treaty provision, Final Award ¶ 142. Unlike in John Wiley, here

the facts underlying the question of arbitrability did not “grow out

of the dispute” between BG Group and Argentina, but instead

were raised sua sponte by the Panel. The question of arbitrabilty

here precedes rather than grows out of the dispute.6

Because the Treaty provision at issue is explicit, the usual

“emphatic federal policy in favor of arbitral dispute resolution,”

6

Howsam, 537 U.S. at 82, 85, is also distinguishable because

the question of arbitrability arose from a rule, promulgated by the

National Association of Securities Dealers (“NASD”), that functioned

as a six year statute of limitations. Id. at 82. The question of

arbitrability thus was intertwined with the facts underlying the

substantive dispute. The Supreme Court reasoned that the NASD

arbitrators were “comparatively more expert about the meaning of

their own rule, . . . [and thus] better able to interpret and to apply it.”

Id. at 85. Here, the question of arbitrability is separate from the

underlying dispute, and the Treaty requirement to seek relief first in

court was required by the contracting parties, not promulgated by the

Arbitral Panel.

16

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 631 (1985), cannot function to override the intent of

the contracting parties. It may be that parties generally negotiate

arbitration clauses to “trade[] the procedures and opportunity for

review of the courtroom for the simplicity, informality, and

expedition of arbitration.” Id. at 628. A court interpreting such

a clause in the international trade context is informed by “a strong

belief in the efficacy of arbitral procedures for the resolution of

international commercial disputes and an equal commitment to

the enforcement of freely negotiated choice-of-forum clauses.”

Id. at 631. In a case such as Mitsubishi Motors, this results in

enforcing an agreement to arbitrate, which historically required

“national courts . . . to shake off the old judicial hostility to

arbitration.” Id. at 638 (internal quotation marks and citation

omitted). But where, as here, the contracting parties provided

that an Argentine court would have eighteen months to resolve a

dispute prior to resort to arbitration, a court cannot lose sight of

the principle that led to a policy in favor of arbitral resolution of

international trade disputes: enforcing the intent of the parties.

“‘[A]greeing in advance on a forum acceptable to both parties is

an indispensable element in international trade, commerce, and

contracting.’” Id. at 630 (quoting M/S Bremen v. Zapata Off-

Shore Co., 407 U.S. 1, 13–14 (1972)). Therefore, “concerns of

international comity, respect for the capacities of foreign and

transnational tribunals, and sensitivity to the need of the

international commercial system for predictability in the

resolution of disputes requires that we enforce the parties’

agreement.” Id. at 629. Where the contracting parties agree to

require dispute resolution in a court prior to arbitration, and the

aggrieved party initiating the dispute disregards the requirement,

a fundamentally different question of arbitrability arises than that

of the ignored informal resolution steps in John Wiley. In

keeping with the foundational principles expressed above, see,

e.g., Stolt-Nielsen, 130 S. Ct. at 1774–75; Howsam, 537 U.S. at

17

83, a John Wiley assumption that the arbitrator is to determine the

question of arbitrability cannot sensibly apply here.

Accordingly, “[b]ecause we conclude that there can be only

one possible outcome on the [arbitrability question] before us,”

Stolt-Nielsen, 130 S. Ct. at 1770, namely, that BG Group was

required to commence a lawsuit in Argentina’s courts and wait

eighteen months before filing for arbitration pursuant to Article

8(3) if the dispute remained, we reverse the orders denying the

motion to vacate and granting the cross-motion to confirm the

Final Award, and we vacate the Final Award.