Gabriel Bottini, pro hac vice, argued the cause for appellant. On the briefs was John P. Gleason. Fernando O. Koatz entered an appearance. Alexander A. Yanos argued the cause for appellee. With him on the brief was Elliot Friedman. Paul L. Yde entered an appearance.
SENTELLE, Chief Judge, HENDERSON and ROGERS, Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
The Republic of Argentina appeals the denial of its motion to vacate an arbitral award on the principal ground that the arbitral panel exceeded its authority by ignoring the terms of the parties’ agreement. That agreement, in the form of a Bilateral Investment Treaty between the United Kingdom of Great Britain and Northern Ireland, and Argentina (“the Treaty”), provides that disputes between an investor and the host State will be resolved in the host State’s courts. If, however, no final court ruling is forthcoming within eighteen months or the dispute is unresolved after a court ruling, the Treaty provides that resort may then be had to arbitration. BG Group, PLC, a British corporation and investor in Argentina gas companies pursuant to the Treaty, invoked the arbitration clause without first filing a claim in the Argentine courts. The arbitral panel nonetheless ruled it had jurisdiction, found Argentina had violated the Treaty, and awarded BG Group damages.
Although the scope of judicial review of the substance of arbitral awards is exceedingly narrow, it is well settled that an arbitrator cannot ignore the intent of the contracting parties. Where, as here, the result of the arbitral award was to ignore the terms of the Treaty and shift the risk that the Argentine courts might not resolve BG Group’s claim within eighteen months pursuant to Article 8(2) of the Treaty, the arbitral panel rendered a decision wholly based on outside legal sources and without regard to the contracting parties’ agreement establishing a precondition to arbitration. Accordingly, we reverse the orders denying the motion to vacate and granting the cross-motion to confirm, and we vacate the Final Award.