In Republic of Argentina v BG Group PLC, (DC Cir. Jan. 17, 2012), BG Group, PLC (BG), a British investor in Argentinean gas companies, filed for arbitration under the UK-Argentina bilateral investment treaty (BIT) when emergency laws passed by Argentina caused a decrease in value of BG's gas distribution contracts. The relevant portion of the BIT required investor disputes to be resolved in the host state's courts. It allowed arbitration only if there was no final court ruling within eighteen months or if the parties agreed.

BG initiated arbitration without first going to court. It argued that it would take over 18 months for local courts to resolve the claims because Argentinean emergency decrees restricted access to its courts and that customary international law does not require exhaustion of local remedies. The arbitral panel rejected BG's arguments, but found it had jurisdiction because the emergency decrees limited access to courts. This meant that reading the BIT literally would create "an absolute impediment to arbitration" which was an absurd result. The panel then found that Argentina had violated the BIT and awarded BG damages.

Argentina petitioned to vacate the award, while BG filed a cross-motion for recognition and enforcement of the award. The District Court denied the motion to vacate and granted the motion to enforce. On review, the DC Circuit reversed the District Court and vacated the award on the grounds that it disregarded the parties' intent.

The DC Circuit found that pursuant to the parties' agreement under the BIT, the gateway question of jurisdiction could only be decided by the arbitrator after recourse to an Argentinean court. The DC Circuit determined that Argentina's consent to arbitration under the BIT was conditioned on fulfillment of this local court waiting period and that the arbitral panel improperly disregarded the requirement. The DC Circuit concluded that the federal policy in favour of arbitral dispute resolution could not override the underlying intent of the contracting parties.

This case provides an example of a court vacating an arbitral award and demonstrates the importance of interpreting the scope and intent of the contracting parties’ arbitration agreement.