This morning, the US Supreme Court agreed to decide whether the arbitrator or the court decides whether contractual preconditions to arbitration have been met. In deciding the case, the Supreme Court will have the opportunity to resolve two different circuit splits about arbitrability. The case is BG Group PLC v. Republic of Argentina, No. 12-138. The Court's on-line docket is here. The petition, response, reply, and amicus briefs are available on SCOTUSBlog's page for the case here.
A big part of the dispute is in how the parties characterize the issue. The petitioner argues that the question is who decides whether a contractual precondition to arbitration has been met. The respondent instead characterized the issue as whether there is an enforceable agreement to arbitrate. The D.C. Circuit held that the court has the power to decide de novo whether the contractual preconditions have been met.
The petitioner suggests that the Supreme Court can resolve two circuit splits. First, there is a split about whether the satisfaction of contractual preconditions implicates procedural arbitrability or the existence of a legally binding agreement to arbitrate. The First, Sixth, Seventh, and Eighth Circuits have held that it implicates procedural arbitrability, and that, therefore, it is a decision for the arbitrator. The Eleventh and D.C. Circuits have held that the decision implicates the existence of a legally binding agreement to arbitrate, and is therefore a question for the court.
Second, the petition argues that the D.C. Circuit's opinion created a split with the Second Circuit about the effect of incorporating arbitration rules into the arbitration agreement. The Supreme Court has held that even when there is a presumption that an issue should be decided by the court rather than the arbitrator, it can be overcome by "clear and unmistakable" intent that it be decided by the arbitrator. The Second Circuit has held that such intent where the agreement incorporates arbitration rules that provide that the arbitrator will hear such issues. Even though the agreement at issue here incorporates the same arbitration rules as in the Second Circuit case, the D.C. Circuit held that incorporation of the rules did not indicate intent for the arbitrator to decide the issue.
The case is also interesting because the Supreme Court had asked for the views of the Solicitor General, who had suggested that the Court deny the petition.
-- Rich Phillips, Thompson & Knight
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