The U.S. Supreme Court reinstated a $185 million award won by BG Group Plc, a U.K. oil and gas company, in a dispute with Argentina over that country’s 2002 cap on natural gas prices.
The high court, voting 7-2, today said a federal appeals court was wrong to throw out an arbitration award in BG’s favor. The appeals court had said that under an Argentine-U.K. treaty the three-member arbitration panel in Washington lacked power to take up the dispute.
The Supreme Court said today the appeals court should have deferred to the arbitrators’ conclusion that the case could go forward.
The treaty requires disputes to be submitted to a court in Argentina for 18 months before arbitration can begin. In declining to apply that provision to BG’s case, the arbitrators said that, had the company sued, it would have been punished under Argentine law and excluded from negotiations designed to mitigate the effects of the price cap.
BG says the 2002 price freeze caused the bankruptcy of Metrogas SA, an Argentine gas distributor it previously controlled.
In a separate case, Argentina is seeking Supreme Court review in a case that has unsettled the country’s financial markets and might force it to make payments on billions of dollars of defaulted bonds. Argentina is challenging a lower court ruling that said the country must pay owners of the repudiated bonds in full before it can make payments on $24 billion in restructured debt.
The case ruled on today is BG Group v. Argentina, 12-138.