Supreme Court clarifies competence-competence principle


In a highly anticipated decision, the US Supreme Court recently confirmed a $185 million award against Argentina in BG Group Plc v Republic of Argentina. The BG Group decision is significant for international arbitration practitioners because it not only clarifies the respective roles that courts and arbitrators should play when deciding threshold issues of arbitrability or jurisdiction under international arbitration agreements, but also reinforces the US Supreme Court's pro-arbitration outlook.

Facts -

The underlying dispute in BG Group arose out of the Argentine financial crisis of 2001 and the resulting 2002 emergency measures that unpegged the Argentine peso from the US dollar and changed the manner in which certain public utility tariffs were calculated.

BG Group Plc was an English company that invested in a privatised Argentine gas distribution company in the early 1990s. At the time BG Group invested, Argentine law provided that gas tariffs would be calculated in US dollars and that tariffs would also be set at levels that would permit the distributor to achieve reasonable rates of return.

Originally published in ILO - March 20, 2014.

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