Before Ending the Case:† Disassembling Jurisdiction and Admissibility in Bg v. Argentina

BEFORE ENDING THE CASE:

†

DISASSEMBLING

JURISDICTION AND ADMISSIBILITY IN BG V.

ARGENTINA

JASON ROTSTEIN*

ABSTRACT

Pre-arbitration requirements contained in bilateral investment treaties

(BITs) have been variously interpreted as pertaining to issues of arbitrability,

procedure, jurisdiction, or admissibility. That categorization—getting the cate-

gorization right—can determine the outcome of when and whether a case

reaches the merits. This Article explores the current ad hoc method of categoriza-

tion and the international disharmony that exists.

BG v. Argentina, the arbitral award, and the enforcement action that went

up on appeal before the United States Supreme Court, is foregrounded as a focal

point for the struggle with pre-arbitration requirements, specif‌ically, the local lit-

igation requirement in the Argentina-United Kingdom BIT. Ultimately, this

Article seeks to put in conjunction and evaluate the various approaches to pre-

arbitration requirements; it aims to lay the groundwork for further development

in the law around threshold issues stemming from treaties. It posits a unitary

jurisdictional approach/regime to process requirements. One of the instigations

for this paper is Chief Justice Roberts’ statement in his dissent in BG v.

Argentina, the Supreme Court’s f‌irst decision interpreting a bilateral invest-

ment treaty. He stated: “The only question is whether BG group formed an arbi-

tration agreement with Argentina.”

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

† “One can understand why a superf‌icial reading of cases leads to the temptation to lump

together all objections which, if upheld, would end the case.” Jan Paulsson, Jurisdiction and

Admissibility, in GLOBAL REFLECTIONS ON INTERNATIONAL LAW, COMMERCE AND DISPUTE

RESOLUTION, LIBER AMICORUM IN HONOUR OF ROBERT BRINER 601, 608 (G. Aksen, K.H.

Bo

¨ckstiegel, P.M. Patocchi, & A.M. Whitesell eds., 2005). “In the end, an investment tribunal may

dismiss a case because it f‌inds that it lacks jurisdiction or because it considers that the claims are

inadmissible. Thus, a valid question arises concerning whether this distinction is not merely an

artif‌icial or, at best, academic one that satisf‌ies the observer’s predilection for categorizing

phenomena that may indeed be distinguishable, but in the end are irrelevant.” August Reinisch,

Jurisdiction and Admissibility in International Investment Law, 16 LAW & PRAC. INT’L CTS. & TRIBS. 21,

25 (2017).

* Jason Rotstein is an Associate at Arent Fox LLP, practicing international arbitration and

trade law. The views expressed in this Article are those of the author and not necessarily those of

Arent Fox LLP. They in no way represent the off‌icial views of the f‌irm or its partners. V

C 2020,

Jason Rotstein. Thank you to Patrick Pearsall and Can Yeginsu for their advice on this article.

81

II. THE IMPORTANCE AND CONSEQUENCES OF A DECISION ON

JURISDICTION VERSUS A DECISION ON ADMISSIBILITY AND THE

AWARD IN BG V. ARGENTINA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

A. Differential Consequences . . . . . . . . . . . . . . . . . . . . . . . . . 84

1. Reviewability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

2. Relative Ordering . . . . . . . . . . . . . . . . . . . . . . . . . 85

3. Discretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

B. The Award: The Right Decision for the Wrong Reasons? . . . . 88

III. THE DEFINITION OF JURISDICTION AND ADMISSIBILITY AND THE

SUPREME COURT’S DECISION IN BG V. ARGENTINA: TOWARD A

BRIGHTER-LINE TEST OR HEURISTIC?. . . . . . . . . . . . . . . . . . . . . 94

A. Division and Def‌inition: Stating A Difference . . . . . . . . . . . 94

B. The Supreme Court’s Decision: More Confusion. . . . . . . . . . 99

1. The Majority’s Reasoning . . . . . . . . . . . . . . . . . . . 99

2. Analysis of Sources: International Arbitration

Treatises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

3. Toward a Brighter-Line Test . . . . . . . . . . . . . . . . . 108

IV. WITHOUT DISTINCTION: FLOUTING AND SIDESTEPPING

JURISDICTION, ANALYZING TRADEOFFS . . . . . . . . . . . . . . . . . . . . . 112

V. CONCLUSION: THE PRESUMPTION OF A JURISDICTIONAL REGIME . . . 115

I. INTRODUCTION

Threshold issues are a hard-fought battle in investment arbitration

because of the stakes involved and the costs of litigation.

1

Nevertheless, two categories of preliminary issues—jurisdiction and

admissibility—are blended, blurred, and confused.

2

Frequently mis-

understood is the relative value and ordering of jurisdiction and

1. See Jan Paulsson, Jurisdiction and Admissibility, in GLOBAL REFLECTIONS ON INTERNATIONAL

LAW, COMMERCE AND DISPUTE RESOLUTION, LIBER AMICORUM IN HONOUR OF ROBERT BRINER 601,

602–03 (G. Aksen, K.H. Bo

¨ckstiegel, P.M. Patocchi, & A.M. Whitesell eds., 2005); Friedrich

Rosenfeld, Arbitral Praeliminaria – Ref‌lections on the Distinction between Admissibility and Jurisdiction

after BG v. Argentina, 29 LEIDEN J. INT’L L. 137, 137 (2016).

2. “If a tribunal has elected to make a preliminary ruling on issues relating to its jurisdiction or

the admissibility of claims, then such issues must be determined conclusively by the tribunal in its

preliminary decision.” ZACHARY DOUGLAS, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS 134

(2009). Admissibility is not only a preliminary issue. It also concerns the “alleged failure of new

claims to remain within the scope of the initial notice” and whether “additional claims may be

raised once the initial pleadings have been submitted.” Paulsson, supra note 1, at 609.

GEORGETOWN JOURNAL OF INTERNATIONAL LAW

82 [Vol. 51

admissibility and the fundamental difference between the terms.

3

The

U.S. Supreme Court’s decision in BG v. Argentina typif‌ies the ground

for controversy and debate—and what happens when the importance

of the terms in international investment law goes unrecognized and the

rules governing power and control are not observed.

4

“[T]he f‌irst decision in its [the Supreme Court’s] history on the

interpretation of a bilateral investment treaty” demonstrates: (1) the

importance and consequences of the distinction between jurisdiction

and admissibility; (2) the need for a brighter-line rule or shorthand

dividing line; and (3) why institutions such as the Supreme Court have

avoided or sidestepped the distinction, contributing to inconsistency

and incoherence in international law.

5

It is necessary to foreground the importance of the question—the

admissibility of jurisdiction and admissibility as choice or distinction—

for the economic cooperation between host states and investors.

6

Preliminarily, it concerns the expectations and reliance interests of the

parties.

7

This Article attempts to balance and mediate between the ad

hoc method of dealing with these threshold issues, which has led to

inconsistency—“subjective decision-making process[es] [of arbitral tri-

bunals] that disappointed litigants may consider unprincipled”—and

international law concepts such as fair and equitable treatment, access

to and the administration of justice, procedural due process and good

faith—and whether such principles should ever remain entirely sepa-

rate and distinct from questions of jurisdiction and admissibility.

8

3. Obtaining or surviving dismissal based on jurisdiction as compared with admissibility goes

to the fundamental quantif‌ication of the case. The distinction is critical and this explains why

jurisdiction and admissibility are often pitted against each other.

4. See Rosenfeld, supra note 1, at 152–53 (“the parties, exercise power and control over the

grant of jurisdiction;” “the arbitral tribunal, exercises power and control over the decision on

admissibility;” “[i]n BG v. Argentina the majority of the US Supreme Court has taken a distorted

view on the distribution between power and control.”).

5. Rosenfeld, supra note 1, at 138.

6. See, e.g., JESWALD SALACUSE, THE LAW OF INVESTMENT TREATIES 252–54 (2d ed. 2015)

(discussing investment treaties in the context of “legitimate economic expectations” of the parties

and “making economic life more calculable or predictable”).

7. See id. at 253–54 (“Investor expectations are fundamental to the investment process. It is the

investor’s expectations with respect to the risks and rewards of the contemplated investment that

have a crucial inf‌luence on the investor’s decision to invest. . . . Thus, when a state has created

certain expectations through its laws and acts that have led the investor to invest, it is generally

considered unfair for the state to take subsequent actions that fundamentally deny or frustrate

those expectations.”).

8. Id. at 251, 253.

BEFORE ENDING THE CASE

2019] 83