Supreme Court of The United States: Petitioner
Supreme Court of The United States: Petitioner
Supreme Court of The United States: Petitioner
12-138
IN THE
Supreme Court of the United States
————
BG GROUP PLC,
Petitioner,
v.
REPUBLIC OF ARGENTINA,
Respondent.
————
On Writ of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit
————
BRIEF OF AMICUS CURIAE
THE AMERICAN ARBITRATION ASSOCIATION
IN SUPPORT OF PETITIONER
————
September 3, 2013
(i)
ii
TABLE OF AUTHORITIES
CASES Page(s)
Awuah v. Coverall N. Am., Inc., 554 F.3d 7
(1st Cir. 2009) ........................................... 17
Contec Corp. v. Remote Solution Co., Ltd.,
398 F.3d 205 (2d Cir. 2005)....................... 17
Dialysis Access Ctr., LLC v. RMS Lifeline,
Inc., 638 F.3d 367 (1st Cir. 2011) ............. 7
El Dorado Sch. Dist. No. 15 v. Cont’l Cas.
Co., 247 F.3d 843 (8th Cir. 2001) ............. 7
Fadal Machining Ctrs., LLC, v.
Compumachine, Inc., 461 Fed. App’x 630
(9th Cir. 2011) ........................................... 17
Fallo v. High-Tech Inst., 559 F.3d 874 (8th
Cir. 2009) ................................................... 17
First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938 (1995) ............................. 13, 14, 17
Green v. Supershuttle Int’l, Inc., 653 F.3d
766 (8th Cir. 2011) .................................... 17
Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79 (2002) ...................... 6, 7, 8, 9, 12, 22, 24
Int’l Bhd. of Elec. Workers, Local Union
No. 124 v. Smart Cabling Solutions, Inc.,
476 F.3d 527 (8th Cir. 2007) ..................... 7
John Wiley & Sons, Inc. v. Livingston, 376
U.S. 543 (1964) .................... 6, 7, 8, 9, 12, 22, 24
Lumbermens Mut. Cas. Co. v. Broadspire
Mgmt. Servs., Inc., 623 F.3d 476 (7th Cir.
2010) .......................................................... 7
iii
TABLE OF AUTHORITIES—Continued
Page(s)
Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614 (1985)......... 4, 21
Oracle America, Inc. v. Myriad Group,
A.G., No. 11-17186, 2013 WL 3839668
(9th Cir. July 26, 2013) ............................. 15, 16
Petrofac, Inc. v. DynMcDermott Petrol.
Ops. Co., No. 11-20141, 2012 U.S. App.
LEXIS 14610 (5th Cir. July 17, 2012) ...... 17
Preston v. Ferrer, 552 U.S. 346 (2008) ........ 8
Qualcomm Inc. v. Nokia Corp., 466 F.3d
1366 (Fed. Cir. 2006) ................................ 17
Republic of Ecuador v. Chevron Corp., 638
F.3d 384 (2d Cir. 2011) ............................. 14, 15
Schneider v. Kingdom of Thailand, 688
F.3d 68 (2d Cir. 2012) ............................... 14-15
Terminix Int’l Co., LP v. Palmer Ranch
Ltd. P’ship, 432 F.3d 1327 (11th Cir.
2005) .......................................................... 17
Thai-Lao Lignite Co. Ltd. v. Gov’t of the
Lao People’s Democratic Republic, 492
Fed. App’x 150 (2d Cir. 2012) ................... 15
Wal-Mart Stores, Inc. v. PT Multipolar
Corp., Nos. 98-16952, 98-17384, 1999 WL
1079625 (9th Cir. Nov. 30, 1999) ............. 15
iv
TABLE OF AUTHORITIES—Continued
Page(s)
Canfor Corp. v. United States, NAFTA
(UNCITRAL), Decision on the Place of
Arbitration, Filing of a Statement of
Defence and Bifurcation of the
Proceedings (Jan. 23, 2004), available
at www.naftalaw.org/disputes_us_canfor.
htm ............................................................ 23-24
Dallah Real Estate & Tourism Holding Co.
v. Ministry of Religious Affairs, Gov’t of
Pakistan, [2010] UKSC 46 ........................ 25
Merrill & Ring Forestry L.P. v. Canada,
NAFTA (UNCITRAL), Decision of the
Tribunal on the Place of Arbitration (Dec.
13, 2007), available at www.nafta
law.org/disputes_canada_merrill&ring.
htm ............................................................ 23
Nihon Plast v. Takata, Cour d’appel [CA]
[regional court of appeal] Paris, 1e ch.,
Mar. 4, 2004, REVUE DE L’ARBITRAGE
2005, 143 (Fr.) ........................................... 24
United Mexican States v. Metalclad Corp.,
2001 B.C.S.C 664 (May 2, 2001) ............... 23
United Parcel Servs. v. Canada, NAFTA
(UNCITRAL), Order on the Place of
Arbitration (Oct. 17, 2001), available at
www.naftalaw.org/disputes_canada_ups.
htm ............................................................ 23
v
TABLE OF AUTHORITIES—Continued
Page(s)
STATUTES
Revised Unif. Arbitration Act of 2000, 7
U.L.A. 13 (Supp. 2002) ............................. 7, 8
§ 6 cmt. n.2 at 26 ....................................... 8
§ 6(c), ......................................................... 7
United States Arbitration Act, Ch. 2, 9
U.S.C. §§ 201-08 (1982) ............................ 3
FOREIGN STATUTES
1
No counsel for a party authored this brief in whole or in part,
and no counsel or party made a monetary contribution intended
to fund the preparation or submission of this brief. No person
other than amicus curiae, its members, or its counsel made a
monetary contribution to its preparation or submission. Letters
from the parties consenting to the filing of amicus briefs have
been filed with the Clerk of the Court.
2
The AAA is the world’s largest provider of alterna-
tive dispute resolution services. Since its founding in
1926, the AAA has administered approximately 3.7
million domestic and international disputes. The AAA
has signed 70 cooperative agreements with arbitral
institutions in 48 countries and has offices throughout
the United States, as well as in Singapore, Mexico, and
Bahrain. The number of international arbitrations
filed with the AAA’s international division, the
International Centre for Dispute Resolution (“ICDR”),
continues to grow.
Because of its extensive experience administering
arbitrations, the AAA is well positioned to provide
insight into the practical impact of court decisions that
have broad-ranging implications for arbitration.
The national policy favoring arbitration embodied in
the Federal Arbitration Act (“FAA”) and the increased
use of arbitration in the United States can be under-
mined by unwarranted judicial interference, and the
AAA counts as a key objective the development of
arbitration law that promotes the effective use of arbi-
tration as a means of resolving disputes.
Toward that end, the AAA was at the forefront of
organizations recommending that the United States
accede to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10,
1958, 330 U.N.T.S. 3, 21 U.S.T. 2517, T.I.A.S. No. 6997
(“New York Convention”). The New York Convention,
which was ratified by the United States in 1970, pro-
vides among other things for prompt and effective
enforcement of voluntary international agreements to
arbitrate. At the request of the State Department, the
AAA convened a committee of international arbitra-
tion experts to draft proposed implementing legisla-
tion. The AAA’s proposal formed the basis for what is
3
now Chapter 2 of the United States Arbitration Act,
9 U.S.C. §§ 201-08 (1982). Also at the request of the
State Department, the AAA assisted the United
Nations Commission on International Trade Law
(“UNCITRAL”) in developing a draft Model Law on
International Commercial Arbitration.
The AAA endeavors through its activities to ensure
that the United States remains receptive to arbitra-
tion and at the forefront of global developments in
arbitration. The AAA, and hence the United States, is
believed to have the world’s largest annual interna-
tional arbitration caseload. That caseload, however, is
sensitive to judicial attitudes to arbitration, attitudes
reflected in U.S. judicial decisions that are keenly
studied by the global arbitration community. Where
those decisions deviate from international arbitral
norms supportive of arbitration, the United States’
reputation as a venue with a legal framework that is
supportive of arbitration can be seriously diminished.
In addition, the AAA seeks to ensure that parties
who provide that disputes shall be resolved under the
rules of the AAA can do so with the expectation that
those rules will be enforced in a predictable manner.
The AAA is concerned that the D.C. Circuit’s decision
will limit the effectiveness of provisions of the
UNCITRAL Arbitration Rules, whose text mirrors
that of certain core AAA arbitration rules, by inviting
increased judicial involvement in numerous arbitra-
tions.
4
The AAA has filed amicus curiae briefs in many of
the major arbitration cases decided by the Supreme
Court of the United States. The AAA does so again
here, as this case involves issues of great concern to
the development of arbitration law in the United
States, the confidence that courts will interpret and
enforce the AAA’s arbitration rules in a predictable
manner, and the future of the United States as a place
of arbitration.
INTRODUCTION AND SUMMARY
As this Court acknowledged in Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
631 (1985), the FAA establishes an “emphatic federal
policy in favor of arbitral dispute resolution,” which
“applies with special force in the field of international
commerce.” A key factor in giving effect to this federal
policy is limiting judicial intervention into the arbitral
process. In arbitration, a party “trades the procedures
and opportunity for review of the courtroom for the
simplicity, informality, and expedition of arbitration.”
Id. at 628.
In an AAA study of over 250 corporate legal depart-
ments, 73% of respondents stated that one of their
reasons for using arbitration was that arbitration
“saves time,” and 71% responded that arbitration
“saves money.” See AM. ARB. ASS’N, DISPUTE-WISE
BUSINESS MANAGEMENT: IMPROVING ECONOMIC AND
NON-ECONOMIC OUTCOMES IN MANAGING BUSINESS
CONFLICTS 25 (2006).2 These cost and efficiency bene-
fits of arbitration are undermined by judicial intrusion
2
Available at www.adr.org/aaa/ShowPDF?doc=ADRSTG_0043
26.
5
into the arbitral process that goes beyond the type of
limited court review provided for by the FAA.
The D.C. Circuit’s decision to vacate the arbitral
award rendered by three eminent international arbi-
trators under the Bilateral Investment Treaty signed
by the United Kingdom and Argentina (the “BIT”)3
represents a dramatic and unprecedented instance of
such judicial intrusion. In conflict with the precedent
of this Court and other circuits, and despite the
express provisions of the governing rules to submit
questions of arbitrability to the arbitrators, the D.C.
Circuit disregarded the thorough analysis and find-
ings of the arbitrators regarding the satisfaction of a
condition precedent to arbitration (the 18-month local
litigation requirement in Article 8 of the BIT). See Pet.
App. 161a-171a.
An affirmance by this Court of the D.C. Circuit’s
decision would have negative implications for the
practice of arbitration in the United States in three
ways.
First, the D.C. Circuit’s decision to scrutinize com-
pliance with a condition precedent to arbitration intro-
duces wide-ranging opportunities for delay and in-
creased arbitration-related litigation, because clauses
requiring disputing parties to submit to dispute res-
olution processes such as negotiation or mediation
before resorting to arbitration are so prevalent in
practice.
Second, the D.C. Circuit’s decision imposes a novel
temporal limitation on common agreements to arbi-
trate questions of arbitrability found in many arbitra-
tion rules, including the rules of the AAA and the
3
Agreement for the Promotion and Protection of Investments,
Arg.-U.K., Dec. 11, 1990, 1765 U.N.T.S. 33.
6
ICDR. This new limitation has the potential to affect
adversely the many parties who have come to rely on
such rules to empower arbitrators to determine issues
of arbitrability.
Third, the D.C. Circuit’s decision, based entirely on
domestic law considerations, to vacate an arbitral
award rendered under an investment treaty between
two foreign sovereigns with no regard for the detailed
international law findings of three eminent arbitra-
tors jeopardizes the standing of the United States as a
leading center for international arbitration. The D.C.
Circuit’s decision has already drawn sharp criticism,
and an affirmance would likely have a negative impact
on the willingness of foreign parties to arbitrate in the
United States.
For these reasons, the judgment below should be
reversed.
ARGUMENT
I. The D.C. Circuit’s Decision Invites
Inefficiencies in the Arbitral Process
through Increased Judicial Intervention
The D.C. Circuit, in direct conflict with the decisions
of this Court and other circuit courts, held that satis-
faction of a condition precedent to arbitration, in the
form of the 18-month local litigation requirement in
the BIT, is a “question of arbitrability” to be decided
by the courts. Pet. App. 13a.
In John Wiley & Sons, Inc. v. Livingston, 376 U.S.
543 (1964) and Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79 (2002), this Court held that the fulfillment
of conditions precedent to arbitration is not an issue of
“substantive arbitrability” for the courts to determine,
but a procedural question (an issue of “procedural
7
arbitrability”) for the arbitrators to decide. In the
wake of Howsam, courts have uniformly held that the
satisfaction of mandatory contractual dispute resolu-
tion steps prior to arbitration, such as negotiation,
mediation or third-party review of claims, is a proce-
dural question for the arbitrator to decide.4
Arbitration parties and arbitration practitioners
now rely on the principle embodied in John Wiley and
confirmed in Howsam as a bright-line rule. The rule
has been so widely accepted that the Revised Uniform
Arbitration Act (“RUAA”), which to date has been
adopted by 17 states and the District of Columbia,
incorporates clear direction on the allocation of decision-
making responsibilities between courts and arbitrators.
Under the RUAA, the arbitrators, not the courts,
“shall decide whether a condition precedent to arbitra-
bility has been fulfilled.” See Revised Unif. Arbitra-
tion Act of 2000 § 6(c), 7 U.L.A. 13 (Supp. 2002).5
4
See, e.g., Dialysis Access Ctr., LLC v. RMS Lifeline, Inc., 638
F.3d 367, 375 (1st Cir. 2011) (“[T]he determination as to whether
RMS complied with the Arbitration Clause’s supposed ‘good faith
negotiations’ pre-condition to arbitration is an issue presump-
tively for the arbitrator to decide . . . .”); Lumbermens Mut. Cas.
Co. v. Broadspire Mgmt. Servs., Inc., 623 F.3d 476, 481 (7th Cir.
2010) (Compliance with pre-arbitration notice and negotiation
provisions was “a procedural question . . . for the arbitrator to
address.”); Int’l Bhd. of Elec. Workers, Local Union No. 124 v.
Smart Cabling Solutions, Inc., 476 F.3d 527, 530 (8th Cir. 2007)
(determining that the “bona fide[s]” of pre-arbitral negotiations
was a condition precedent and thus “a matter for the arbitrator
to decide”) (internal citations omitted); El Dorado Sch. Dist.
No. 15 v. Cont’l Cas. Co., 247 F.3d 843, 846 (8th Cir. 2001)
(Compliance with a precondition to arbitration is “a question
of procedural . . . arbitrability . . . ‘that . . . should be left to the
arbitrator to decide.’”) (internal citation omitted).
5
The official comments to the RUAA further explain that
“[s]ubsections (b) and (c) of Section 6 are intended to incorporate
8
This clear allocation of responsibilities between
courts and arbitrators has served to preserve key ben-
efits of arbitration. “A prime objective of an agreement
to arbitrate is to achieve ‘streamlined proceedings and
expeditious results.’” Preston v. Ferrer, 552 U.S. 346,
357 (2008). In John Wiley, material to this Court’s
decision to leave to the arbitrators questions of compli-
ance with pre-arbitration dispute resolution steps was
the concern that opening the door to litigation over
such issues would result in “opportunities for deliber-
ate delay and the possibility of well-intentioned but no
less serious delay. . . .” John Wiley, 376 U.S. at 558.
Howsam likewise stated a concern to establish a rule
suitable “better to secure a fair and expeditious reso-
lution of the underlying controversy. . . .” Howsam, 537
U.S. at 82.
The D.C. Circuit’s decision blurs the bright-line rule.
While John Wiley should have been controlling, the
D.C. Circuit limited the scope of that decision, holding
that it reflected merely “the policy behind federal labor
law.” Pet. App. 17a. Reading Howsam as warranting
a case-specific factual inquiry into the nature of the
condition precedent at issue, the D.C. Circuit con-
cluded that “[w]here the contracting parties agree to
require dispute resolution in a court prior to arbitration,
… a fundamentally different question of arbitrability
the holdings of the vast majority of state courts and the law that
has developed under the FAA that . . . whether prerequisites such
as time limits, notice, laches, estoppel, and other conditions
precedent to an obligation to arbitrate have been met, are for the
arbitrators to decide.” Revised Unif. Arbitration Act (2000)
(U.L.A.) § 6 cmt. n.2 at 26.
9
arises than that of the ignored informal resolution
steps in John Wiley.” Pet. App. 19a.6
The D.C. Circuit’s decision to depart from the
bright-line rule in John Wiley and Howsam offers a
precedent for parties to delay and disrupt ongoing
arbitrations by seeking review in court of compliance
with conditions precedent or, worse, to challenge final
and binding awards on the sole basis that the arbitra-
tor was not the proper decision-maker to decide
whether a condition precedent was satisfied or excused.
The D.C. Circuit’s decision is bound to have wide-
spread ramifications for the practice of arbitration,
because “tiered” or “stepped” dispute resolution clauses
requiring resort to other forms of dispute resolution,
such as negotiation or mediation, before arbitration
are increasingly prevalent and encouraged in commer-
cial contracts. For the purpose of this proceeding, the
AAA has conducted a survey of 663 dispute resolution
clauses submitted in connection with international
arbitrations filed with the AAA and its international
division, the ICDR, between July 1, 2012 and June 30,
2013. A condition precedent to arbitration was in-
cluded in over a third—34%—of the dispute resolution
6
It is anticipated that Argentina will argue, as it did at the
certiorari stage, that the D.C. Circuit’s decision did not implicate
a condition precedent (and the precedent of this Court regarding
the same) because no agreement to arbitrate was ever formed.
The argument is unpersuasive because the D.C. Circuit itself
framed the issue as one of who—the courts or the arbitrators—is
best suited to decide compliance with a condition precedent
(“precondition”) to arbitration and took pains to distinguish John
Wiley on its facts. In any event, Argentina had offered a standing
agreement to arbitrate in the BIT, which BG later accepted in
writing.
10
clauses that were studied. The breakdown in the types
of conditions precedent was as follows:
Number
Type of Condition % of
of
Precedent Total
Clauses
Negotiation 73 33%
Mediation 47 21%
Executive/Representative
28 12.5%
Meeting
Executive/Representative
24 11%
Meeting & Negotiation
Negotiation & Mediation 23 10%
Other Combinations of
Executive Meeting,
28 12.5%
Negotiation, Mediation &
Other Forms of ADR
Total 223 100%
These empirical findings are consistent with the
reported experience of practitioners that tiered dispute
resolution clauses are increasingly common in practice.7
They are also confirmed by surveys of arbitration users.
7
See, e.g., INT’L BAR ASS’N, IBA GUIDELINES FOR DRAFTING
INTERNATIONAL ARBITRATION CLAUSES 30 (2010) (“It is common
for dispute resolution clauses in international contracts to pro-
vide for negotiation, mediation or some other form of alternative
dispute resolution as preliminary steps before arbitration.”); JAN
PAULSSON ET AL., THE FRESHFIELDS GUIDE TO ARBITRATION AND
ADR 114 (2d ed. 1999) (“It is increasingly common, especially in
contracts involving long term projects or commercial relation-
ships, for parties to agree upon varying forms of staged or inter-
mediate dispute resolution procedures, such as expert adjudica-
tions or decisions by review boards, which must be followed prior
to the commencement of arbitration proceedings.”).
11
According to a 2011 survey conducted by Fulbright &
Jaworski LLP, approximately 51% of the U.S. com-
panies and 60% of the U.K. companies surveyed had
resolved disputes through contractually agreed staged
processes involving negotiation, mediation and arbi-
tration.8 A 2006 survey of corporate arbitration users
conducted by PriceWaterhouseCoopers concluded that
“[m]ulti-tiered or escalating dispute resolution clauses
are increasingly popular.”9
Such tiered dispute resolution clauses are found not
only in commercial contracts, but also in virtually all
bilateral investment treaties,10 including those entered
into by the United States.11
8
FULBRIGHT & JAWORSKI LLP, SECOND ANNUAL LITIGATION
TRENDS SURVEY FINDINGS 4 (2011), available at www.adr.org/
aaa/ShowPDF?doc=ADRSTG_004354.
9
PRICEWATERHOUSECOOPERS, INTERNATIONAL ARBITRATION:
CORPORATE ATTITUDES AND PRACTICES 2006 11 (2006), available
at www.pwc.be/en_BE/be/publications/ ia-study-pwc-06.pdf.
10
See, e.g., Agreement between the Government of the United
Kingdom of Great Britain and Northern Ireland and the
Government of the Arab Republic of Egypt for the Promotion and
Protection of Investments, June 11, 1975, 1032 U.N.T.S. 32, art.
8(1) (requiring, as a precondition to arbitration, that the parties
engage in a three-month settlement period “through pursuit of
local remedies, through conciliation or otherwise”). See generally
RUDOLF DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF
INTERNATIONAL INVESTMENT LAW 247 (2008) (“Nearly all consent
clauses in treaties provide for certain procedures that must be
adhered to. A common condition for the institution of arbitration
proceedings is that an amicable settlement has been attempted
through consultations or negotiations. This requirement is sub-
ject to certain time limits ranging from three to twelve months.
If no settlement is reached within that period, the claimant may
proceed to arbitration.”).
11
See, e.g., 2012 U.S. Model Bilateral Investment Treaty, arts
23-24, available at http://www.ustr.gov/sites/default/files/BIT%
12
The matter under review involved an agreement
to submit a dispute to judicial determination prior to
arbitration. Such a condition precedent to arbitration
is unlikely to be found in commercial agreements, and
none of the 663 dispute resolution clauses surveyed by
the AAA and ICDR contained such a condition prece-
dent. However, despite these unusual circumstances,
the decision below has material consequences for con-
ditions precedent to arbitration generally. The D.C.
Circuit’s decision to ignore the bright-line rule, its
suggestion that John Wiley is somehow limited to the
labor context, and its reading of Howsam as warrant-
ing a case-specific factual inquiry into the nature of
the condition precedent at issue, all invite litigation
over compliance with conditions precedent, with its
attendant “opportunities for deliberate delay and the
possibility of well intentioned but no less serious
delay….” John Wiley, 376 U.S. at 558.
The door opened by the D.C. Circuit’s decision for
parties to delay or otherwise disrupt—whether delib-
erately or in good faith—the many arbitral proceed-
ings that involve tiered or staged dispute resolution
clauses is an outcome that is especially unfortunate,
because the principal reason that tiered dispute reso-
lution clauses have become popular among arbitration
users is that these clauses have been successful in
reducing the costs and delays of resolving disputes
by promoting early resolution. See, e.g., FULBRIGHT &
JAWORSKI LLP, SECOND ANNUAL LITIGATION TRENDS
SURVEY FINDINGS 4 (2011) (showing that the experi-
ence of most surveyed companies, including 94% of the
12
Available at www.adr.org/aaa/ShowPDF?doc=ADRSTG_004
354.
14
the existence or validity of the arbitration clause or of
the separate arbitration agreement.” UNCITRAL
Arbitration Rules (1976), art. 21(1), G.A. Res. 31/98,
U.N. Doc. A/RES/31/98 (Dec. 15, 1976).13
The intent and purpose of Article 21(1) of the
UNCITRAL Rules are precisely to delegate arbitrability
questions, including questions regarding the existence
and validity of an arbitration agreement, to the arbi-
trators. This rule (which embodies the principle known
in international practice as Kompetenz-Kompetenz) is
“critical to the efficient conduct of the arbitration”
because “without it a party could stall the arbitration
at any time merely by raising a jurisdictional objection
that could then only be resolved in possibly lengthy
court proceedings.” DAVID D. CARON & LEE M. CAPLAN,
THE UNCITRAL ARBITRATION RULES: A COMMENTARY
(2d ed. 2013) 450-451 (discussing Article 23(1) of the
2010 UNCITRAL Rules).
Consistent with the intent and purpose of the
UNCITRAL Rules, the Second and Ninth Circuits
have held that Article 21(1) constitutes, for the pur-
poses of First Options, “clear and unmistakable” evi-
dence of the parties’ intent to empower the arbitrators
to decide questions of arbitrability. See Republic of
Ecuador v. Chevron Corp., 638 F.3d 384, 395 (2d Cir.
2011) (ruling that because the relevant BIT “incorpo-
rated by reference the UNCITRAL rule delegating
questions of arbitrability to the arbitral panel . . .
Ecuador cannot now ‘disown its agreed-to obligation to
arbitrate . . . the question[s] of arbitrability’”); Schneider
13
While the UNCITRAL Rules were revised in 2010, they con-
tinue to provide arbitrators with the power to rule on their own
jurisdiction. However, the present dispute arose and is governed
by the 1976 UNCITRAL Rules.
15
v. Kingdom of Thailand, 688 F.3d 68, 73-74 (2d Cir.
2012) (holding that the parties’ “adoption of the
UNCITRAL rules . . . is clear and unmistakable
evidence of their intent to arbitrate issues of
arbitrability”); Oracle America, Inc. v. Myriad Group,
A.G., No. 11-17186, 2013 WL 3839668, at *7 (9th Cir.
July 26, 2013) (holding that “incorporation of the
[UNCITRAL] arbitration rules into an arbitration pro-
vision in a commercial contract constitutes clear and
unmistakable evidence that the parties to the contract
intended to delegate questions of arbitrability to the
arbitrator”).14
The D.C. Circuit accepted that “the Treaty’s incor-
poration of the UNCITRAL Rules provides ‘clear[] and
unmistakabl[e] evidence’ that the parties intended for
the arbitrator to decide questions of arbitrability.”
Pet. App. 14a (citing Republic of Ecuador v. Chevron
Corp., 638 F.3d 384 (2d Cir. 2011)). The D.C. Circuit
nonetheless declined to give effect to the parties’
agreement on the basis that “the [UNCITRAL] Rules
are not triggered until after an investor has first, pur-
suant to Article 8(1) and (2) [of the BIT], sought
recourse, for eighteen months, in a court of the
14
See also Thai-Lao Lignite Co. Ltd. v. Gov’t of the Lao People’s
Democratic Republic, 492 Fed. App’x 150, 151 (2d Cir. 2012) (“The
[Agreement] specifically provides that any arbitration will be
governed by UNCITRAL Rules . . . . There is no question, then,
that the arbitral panel was free to decide the scope of its own
jurisdiction . . . .”); Wal-Mart Stores, Inc. v. PT Multipolar Corp.,
Nos. 98-16952, 98-17384, 1999 WL 1079625, at *2 (9th Cir. Nov.
30, 1999) (holding that because the parties incorporated the
UNCITRAL Rules into their agreements, the “arbitrator, rather
than the district court, should decide whether the parties’
disputes are arbitrable”).
16
contracting party where the investment was made.”
Pet. App. 14a.
This novel “temporal limitation” on the reach and
effectiveness of Article 21(1) defeats the intent and
purpose of that provision, i.e., to ensure the efficient
conduct of the arbitration as a cost- and time-effective
alternative to litigation. As the AAA’s survey of dis-
pute resolution clauses shows, conditions precedent to
arbitration are common in practice, and a similar
temporal argument could be made with respect to
virtually any type of condition precedent. Consequently,
the D.C. Circuit’s decision creates opportunities for
parties to use court intervention to delay or even derail
arbitral proceedings, the very outcome that the
drafters of Article 21(1) sought to prevent.
The implications of the D.C. Circuit’s decision for
the practice of arbitration extend to both domestic and
international arbitrations administered by the AAA
and the ICDR. Article 21(1) of the UNCITRAL Rules
served as the basis for Rule 7(a) of the AAA Commercial
Arbitration Rules15 and Article 15(1) of the ICDR
International Dispute Resolution Procedures.16 Circuit
courts have noted the similarity between the AAA and
ICDR Rules and Article 21(1) of the UNCITRAL Rules.
See, e.g., Oracle America, Inc., v. Myriad Group A.G.,
2013 WL 3839668 at *4 (9th Cir. July 26, 2013) (noting
that “the AAA rules contain a jurisdictional provision
15
Rule 7(a) provides that “[t]he arbitrator shall have the power
to rule on his or her own jurisdiction, including any objections
with respect to the existence, scope or validity of the arbitration
agreement.”
16
Article 15(1) provides that “[t]he tribunal shall have the
power to rule on its own jurisdiction, including any objections
with respect to the existence, scope or validity of the arbitration
agreement.”
17
similar to Article 21(1) of the 1976 UNCITRAL Rules
and almost identical to Article 23(1) of the 2010
UNCITRAL Rules.”).
Circuit courts have overwhelmingly held that the
AAA and ICDR provisions empower arbitrators, and
not courts, to decide issues of arbitrability. See, e.g.,
Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205,
208-11 (2d Cir. 2005) (holding that the incorporation
of the AAA Commercial Arbitration Rules was “clear
and unmistakable evidence” of the parties’ intent to
delegate the question of arbitrability to the arbitrator).17
In doing so, these courts have upheld the intent of the
AAA and of the many parties that incorporate its rules
in their contracts. It was precisely to make the parties’
intent unmistakable, and with this Court’s decision in
First Options in mind, that the AAA amended its
Commercial Arbitration Rules in 1999 to include what
is currently Rule 7(a). See Am. Arb. Ass’n, Commentary
on the Revisions to the Commercial Arbitration Rules
of the American Arbitration Association, 3 ADR
CURRENTS 6, 7 (Dec. 1998) (explaining that then Rule
R-8(a) was adopted in the wake of First Options to
“make more explicit” the parties’ agreement to arbi-
trate issues of arbitrability).
The decision below creates uncertainty for the thou-
sands of arbitration users who incorporate the AAA
17
See also Petrofac, Inc. v. DynMcDermott Petrol. Ops. Co., No.
11-20141, 2012 U.S. App. LEXIS 14610 (5th Cir. July 17, 2012);
Green v. Supershuttle Int’l, Inc., 653 F.3d 766 (8th Cir. 2011);
Fadal Machining Ctrs., LLC, v. Compumachine, Inc., 461 Fed.
App’x 630 (9th Cir. 2011); Awuah v. Coverall N. Am., Inc., 554
F.3d 7 (1st Cir. 2009); Fallo v. High-Tech Inst., 559 F.3d 874 (8th
Cir. 2009): Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed.
Cir. 2006); Terminix Int’l Co., LP v. Palmer Ranch Ltd. P’ship,
432 F.3d 1327 (11th Cir. 2005).
18
and ICDR rules into their contracts each year, trusting
that such incorporation reserves the determination of
arbitrability issues to the arbitrators. See ICDR,
INTERNATIONAL DISPUTE RESOLUTION PROCEDURES:
INCLUDING MEDIATION AND ARBITRATION RULES 9
(2009) (assuring potential arbitration users that “[b]y
providing for arbitration under these [ICDR] Rules,
parties can avoid the uncertainty of having to petition
a local court to resolve procedural impasses”).
An affirmance by this Court of the D.C. Circuit’s
judgment would cast doubt over the reach and effec-
tiveness of agreed arbitral rules, in disregard of the
intent of the parties who incorporate them into their
contracts.
III. The D.C. Circuit’s Decision Puts the
United States at Odds with the
International Arbitration Community and
Threatens its Standing as a Seat for
International Arbitration
The United States is one of the preferred seats for
international arbitration, along with jurisdictions
such as England, France, Switzerland, Japan and
Singapore. QUEEN MARY UNIV. OF LONDON, 2010
INTERNATIONAL ARBITRATION SURVEY: CHOICES IN
INTERNATIONAL ARBITRATION 19 (2010).18
In most cases, the seat of an international arbitra-
tion is a matter of choice for the parties. Surveys of
arbitration users show that parties pay most attention
to the legal framework offered by potential seats of
arbitration. QUEEN MARY UNIV. OF LONDON, 2010
INTERNATIONAL ARBITRATION SURVEY: CHOICES IN
18
Available at www.arbitrationonline.org/docs/2010_Internati
onalArbitrationSurveyReport.pdf.
19
INTERNATIONAL ARBITRATION 17 (2010) (identifying
the “formal legal infrastructure” as the most
important factor in choosing the seat of arbitration for
62% of survey respondents).
A key factor that parties and their counsel consider
in determining the desirability of a location as a seat
of arbitration is the attitude of the local judiciary
towards arbitration and the risk of judicial interfer-
ence in the arbitral process. See, e.g., GARY BORN,
INTERNATIONAL ARBITRATION AND FORUM SELECTION
AGREEMENTS: DRAFTING AND ENFORCING 64 (3d ed.
2010) (“Nations with interventionist or unreliable
local courts should always be avoided as arbitral
seats.”); JAN PAULSSON, ET AL., THE FRESHFIELDS
GUIDE TO ARBITRATION CLAUSES IN INTERNATIONAL
CONTRACTS 32 (3d ed. 2010) (“Legal systems allowing
extensive judicial interference with arbitral awards
should be avoided.”).
In keeping with the stated preference of arbitration
users, jurisdictions intent on promoting their standing
as a seat of international arbitration emphasize the
non-interventionist attitude of their judiciary. A
prime example is France, which recently enacted a
new arbitration law extending the traditional non-
interventionist policy of its judiciary. See Marie
Bellan, Arbitrage: Paris veut conserver son leadership
[Arbitration: Paris wants to maintain its leadership],
LES ÉCHOS, June 14, 2011, at 5 (referring to the new
law as “reinforcing the non-interventionist philosophy
of the state judge” and quoting the French Minister of
Justice as commenting that “Paris is the premier place
in the world for arbitration and I wish it to remain
so; since our law is so well recognized, it is the
responsibility of the public authorities to ensure that
it continues to thrive”).
20
Singapore likewise advertises its “unequivocal judi-
cial policy of facilitating and promoting arbitration.”
See Kasiviswanathan Shanmugam, Minister for Law
and Second Minister for Home Affairs, Address at the
Inaugural Singapore International Arbitration Forum
(Jan. 21. 2010).19 In an effort to attract foreign arbitra-
tion users, Bahrain went so far as to allow parties to
exclude court intervention altogether. John M.
Townsend, The New Bahrain Arbitration Law and the
Bahrain “Free Arbitration Zone”, 65 DISP. RES. J. 74
(Feb. – Apr. 2010). In this respect, it followed in the
steps of Switzerland, whose arbitration law likewise
allows foreign parties to an arbitration seated in
Switzerland to exclude recourse to the Swiss courts.
Swiss Fed. Code on Private Int’l L., Art. 192.
By contrast, and as explained above, the D.C.
Circuit’s judgment invites increased judicial interven-
tion in the arbitral process. It also demonstrates
disregard for the findings of three arbitrators emi-
nently qualified to interpret the BIT in accordance
with international law. The president of the arbitral
tribunal, Guillermo Aguilar-Alvarez, teaches interna-
tional investment law at Yale Law School. He served
as Principal Legal Counsel to the Government of
Mexico for the negotiation and implementation of the
North American Free Trade Agreement and free trade
agreements with Costa Rica, Bolivia, Colombia, and
Venezuela. He has also acted as counsel or arbitrator
in numerous cases involving investment treaty inter-
pretation.20 His co-arbitrators were likewise recog-
nized experts in the field. Professor Albert Jan van
19
Available at www.news.gov.sg/public/sgpc/en/media_releas
es/agencies/minlaw/speech/S-20100121-2.html.
20
Mr. Aguilar-Alvarez has also published and spoken on in-
vestment arbitration, and on the relationship between courts and
21
den Berg teaches international law and arbitration
law at Erasmus University in Rotterdam and at the
University of Miami Law School. He has arbitrated
numerous disputes involving the interpretation of
investment treaties and other international law issues,
and is a recognized authority on the interpretation of
the 1958 New York Convention.21 Professor Alejandro
M. Garro teaches international commercial law,
comparative law, and Latin American legal systems at
Columbia Law School and is Senior Research Scholar,
Parker School of Foreign and Comparative Law,
Columbia University. He has acted as arbitrator in
investment treaty arbitrations and is a recognized
22
Professor Garro, in addition to his academic appointments
and his experience as an arbitrator, has acted as a consultant for
the World Bank on arbitration and has studied and published
articles about the jurisdiction of arbitral tribunals. See, e.g.
Alejandro M. Garro, Enforcement of Arbitration Agreements &
Jurisdiction of Arbitral Tribunals in Latin America, 1 J. INT’L
ARB. 293 (1984).
23
The aftermath of the other reported instance of a
national court vacating an investment treaty award—
United Mexican States v. Metalclad Corp., 2001
B.C.S.C 664 (May 2, 2001)—is a reminder that vacatur
decisions have real-world consequences that extend
well beyond the particular case at hand. The Cana-
dian court’s decision to vacate in part an award
rendered against Mexico under the North American
Free Trade Agreement not only drew sharp criticism
from commentators,23 but also had a demonstrable
impact on the willingness of parties to select Canada
as a seat of international arbitration. In the wake of
Metalclad, parties to international arbitral proceed-
ings,24 including the United States,25 have pointed to
23
See, e.g., William Dodge, Mexico v. Metalclad Corporation,
2001 B.C.S.C. 664 (Case Comment), 95 AM. J. INT’L L. 910, 916
(2001) (“[T]he case may lead one to wonder whether it is appropri-
ate to allow national courts to review Chapter 11 awards.”); Todd
Weiler, Metalclad v. Mexico: A Play in Three Parts, 9 CTRE. OF
ENERGY, PETROLEUM AND MIN. L. AND POL’Y INTERNET J. (2003)
(criticizing the British Columbia judge for “decid[ing] that he
knew better than an expert tribunal what the ‘usual and ordinary
meaning’ of ‘international law’ must be” and “stepp[ing] beyond
the bounds of his legislative mandate.”); David Williams, Chal-
lenging Investment Treaty Arbitration Awards—Issues Concern-
ing the Forum Arising from the Metalclad Case, 2003 BUS. L. INT’L
156, 166 (“Metalclad may be presented as an example of why it is
inappropriate for a national court to enter upon matters of inter-
national law when reviewing an international arbitral decision.”).
24
See, e.g., United Parcel Servs. v. Canada, NAFTA
(UNCITRAL), Order on the Place of Arbitration, ¶ 8 (Oct. 17,
2001), available at www.naftalaw.org/disputes_canada_ ups.htm;
Merrill & Ring Forestry L.P. v. Canada, NAFTA (UNCITRAL),
Decision of the Tribunal on the Place of Arbitration, ¶ 22 (Dec.
13, 2007), available at www.naftalaw.org/disputes_canada_
merrill&ring.htm.
25
See, e.g., Canfor Corp. v. United States, NAFTA
(UNCITRAL), Decision on the Place of Arbitration, Filing of a
24
that decision and the arguments advanced by the
Canadian government in those proceedings as reasons
to resist the selection of Canada as seat of arbitration.
The observation made by Argentina and the United
States at the certiorari stage that some foreign courts
review questions of jurisdiction de novo begs the
question: is the fulfillment of conditions precedent to
arbitration properly characterized as a question of
“jurisdiction”? Consistent with the approach of this
Court in Howsam, the favored view in international
practice is that the fulfillment of conditions precedent
to arbitration should be regarded not as a question of
“jurisdiction,” subject to review by the controlling
court, but as a question of “admissibility” for the
arbitrators to decide. See, e.g., J. Paulsson, Jurisdic-
tion and Admissibility, in G. Aksen et al. (Eds.),
REFLECTION ON INTERNATIONAL LAW, COMMERCE AND
DISPUTE RESOLUTION 603, 614-15 (2005) (endorsing
the John Wiley and Howsam approach); GARY BORN,
INTERNATIONAL COMMERCIAL ARBITRATION 845-47
(2009) (concluding, on the basis of reported cases, that
courts in other jurisdictions would likely adopt the
Howsam approach and leave to the arbitrators the
issue of whether preconditions to arbitration are
satisfied); Nihon Plast v. Takata, Cour d’appel [CA]
[regional court of appeal] Paris, 1e ch., Mar. 4, 2004,
REVUE DE L’ARBITRAGE 2005, 143 (Fr.) (holding that
preconditions to an arbitration clause relate to admis-
sibility, not jurisdiction, and are thus outside the scope
of art. 1502 of the New French Civil Procedure Code
setting forth grounds for annulment). The U.K.
Supreme Court’s decision that both Argentina and the
26
Paula Hodges, Laurence Shore & Peter Godwin, Cert.
Petition in the BG v. Argentina Case: No Support from the US
Solicitor General, H.S.F. ARBITRATION NOTES (May 17, 2013),
available at www.hsf-arbitrationnotes.com/2013/05/17/cert-pet
ition-in-the-bg-v-argentina-case-no-support-from-the-us-solicitor-
general.
27
Carolyn B. Lamm & Eckhard R. Hellbeck, US Court of
Appeals Vacates BG Group’s Investment Treaty Award Against
Argentina for Failure to Litigate in Argentine Court for 18 Months
Before Commencing Arbitration, 15 INT’L ARB. L. REV. N-14, N-
18 (2012).
28
Timothy Nelson & Julie Bedard, United States: Nixing a
Final Award on Jurisdictional Grounds, GLOBAL ARB. REV. (Jun.
10, 2013), available at www.globalarbitrationreview.com/jou
rnal/article/31607/united-states-nixing-final-award-jurisdictional-
grounds. See also Asari A. Aniagolu et al, US Supreme Court 2013
26
In sum, an affirmance by this Court of the D.C.
Circuit’s judgment is likely to have a negative impact
on the willingness of foreign parties to arbitrate in the
United States, and thus to threaten the standing of
the United States as a leading seat of international
arbitration.
Respectfully submitted,
September 3, 2013