U.S. Supreme Court Weighs Reinstatement of Arbitration Award
Friday, December, 6, 2013
A dispute between British company BG Group and the country of Argentina stemming from a 2002 natural gas price freeze in that country made its way to the U.S. Supreme court, which rejected Argentina’s argument that the case should have been filed in Argentina after BG argued that Argentina's court system has limited access and usually punishes investors that file suits in the country.
The dispute states that in 2002, Argentina violated a treaty signed between that country and Great Britain when it froze natural gas prices. BG argued that this reduced the value of its holdings in the Argentinian energy sector by as much as 45%.
In 2007, The International Chamber of Commerce International Court of Arbitration in Washington, D.C. ruled in favor of BG, citing the fact that the emergency decree that froze prices also restricted court access, making it impossible for BG to seek redress. Later, a Federal district court judge upheld the award, which was $185 million. A Federal Appeals Court, however, reversed this ruling, finding that BG should in fact have at least attempted to resolve it in the Argentinian court system before seeking relief in other jurisdictions.
The Supreme Court appeared dubious about Argentina’s position that BG should have pursued local courts first, although an official ruling on the case is not expected for several weeks. The case is being watched carefully in light of other suits stemming from Argentina’s 1993 default and emergency decree with potential damages in excess of $133 billion. In those suits, investors in Argentina who refused to comply with forced restructuring of debts imposed by the government are suing for the full value of their investments. The BG case could shed some light on the mood of the courts on these related subjects.