In Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s, Lloyd’s demanded arbitration to settle a dispute under a reinsurance contract, basing its demand on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The district court denied a motion to compel arbitration, holding that under the McCarran- Ferguson Act, a Louisiana statute that prohibited arbitration agreements in insurance contracts reverse-preempted the Convention.
The Convention requires that courts of signatory states “shall, at the request of one of the parties, refer the parties to arbitration ….” McCarran-Ferguson mandates that “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ….” The U.S. Fifth Circuit Court of Appeals in Safety National addressed whether the Convention or its enabling legislation was an “Act of Congress” within the meaning of McCarran-Ferguson.
The Fifth Circuit held that treaties are not “Acts of Congress” within the meaning of McCarran-Ferguson, and hence are not reverse-preempted when they conflict with state laws. The court relied upon: (1) an analysis of the language of McCarran-Ferguson; (2) the absence of any indication that Congress, in enacting McCarran-Ferguson, intended to impair the executive power to negotiate treaties; and (3) that treaties are “something more than an act of Congress” due to their being negotiated by the Executive Branch and ratified by the Senate. The court rejected the contention that the Convention was an Act of Congress given that it was not self-executing and required an Act of Congress for its implementation, because that “does not answer the question of what Congress intended when it used the terms ‘[n]o Act of Congress’ and ‘such Act’ in 1945 or why Congress would have addressed only treaties that required implementation by Congress.”