The opposing argument (articulated in the appellate court position in BG) is that, absent compliance with the pre-condition, the parties cannot be said to have agreed to submit to arbitration, a fundamental requirement of arbitration. The arbitral tribunal cannot therefore have authority to determine a matter which ultimately sits outside the scope of the arbitration agreement. This is the approach adopted in a number of other jurisdictions where courts faced with a challenge centred on failure to adhere to a pre-condition will not treat the matter as one of admissibility. Instead the court will consider the interpretation and enforceability of the pre-condition within the bounds of a challenge to the tribunal's jurisdiction. In England, for example, where the courts retain the power to examine or re-examine for themselves the tribunal's jurisdiction, a question arose as to whether the parties needed to engage in "friendly discussions" before referring the dispute to arbitration (Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm)). The High Court heard the challenge, noting that" .. .it is common ground that the application before the court is a re-hearing of the jurisdiction challenge." The High Court then went on to find that there had been an obligation to engage in "friendly discussions", in which case the condition precedent to arbitrate was enforceable. Similarly, in Switzerland where parties had agreed to follow a conciliation process but one party did not, the court accepted a challenge to the tribunal's jurisdiction. The Court considered the issue afresh, finding in favour of the party that brought the challenge, which led to a stay in the arbitration pending compliance (Case 4A_628/2015 (Swiss Supreme Court, 16 March 2016)).
While BG v Argentina certainly had its own factual and procedural peculiarities and is not without its critics, it could be said that the US approach adopted in BG is a forward-looking method of dealing with such quasi-jurisdictional issues. There may be a practical reason why it cannot or does not make sense to require adherence with a pre-condition to arbitrate and the tribunal should be able to decide that without its jurisdiction to hear the substantive dispute being challenged. It could be seen that in hearing challenges of this kind anew, national courts are undermining the arbitration process and stepping in where the question is simply one of admissibility and, therefore, procedure within the context of the arbitration. It allows pre-conditions which are maybe out of step with the circumstances of a dispute potentially to derail an otherwise valid attempt to arbitrate. Tackling multi-tier clauses If a party is faced with a multi-tier dispute resolution clause but, for justifiable reasons, wishes to by-pass possibly mandatory pre-conditions and resort to arbitration, advice as to the law in the seat of the arbitration should be obtained. The outcome will be different in many jurisdictions and might prevent a costly jurisdictional challenge in due course. As a practical point, ask yourself why, as a party to a contract, you would wish to oblige yourself by contract to negotiate. You have that right without the multi-tier dispute resolution clause!
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