November 13, 2009

New York Convention Is Not “Reverse Pre-Empted” By State Insurance Regulation Designating Judicial Forum

Our U.S. Court of Appeals for the Fifth Circuit has issued an important en banc decision, refusing to enforce a Louisiana state insurance law whose effect is to prohibit arbitration of international insurance disputes, on the basis that the Louisiana law is pre-empted by the New York Convention and Chapter Two of the Federal Arbitration Act.

This outcome might on the surface appear to be unsurprising. But the federal McCarran-Ferguson Act provides that no Act of Congress shall interfere with the rights of the states to regulate the business of insurance. Therefore the Court had to struggle with the question whether there was a “reverse pre-emption” of the New York Convention, if it were concluded that the Convention’s implementing legislation, FAA Chapter Two, is an “Act of Congress” that “interferes with” state regulation of insurance insofar a state regulates insurance by requiring a judicial forum to resolve disputes.

Useful analysis of the main opinion, concurrence, and dissent in the case will require some time. I will post a full commentary to Arbitration Commentaries in a day or two. But given the importance of the decision I did not want to delay reporting it to you. The case is: Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s, 2009 U. S. App. LEXIS 24585 (5th Cir. Nov. 9, 2009).

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