As our readers know, we have been following the developments in Louisiana Safety Association of Timbermen – Self Insured Fund v. Certain Underwriters at Lloyd’s, London, et al., No. 09 945, a case under consideration for certiorari by the U.S. Supreme Court that concerns whether Article II of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as implemented by Chapter 2 of the Federal Arbitration Act (the “FAA”), is an “Act of Congress” subject to the anti preemption provision of the McCarran Ferguson Act, 15 U.S.C. 1011, et seq. The U.S. is a signatory to the Convention, which promotes and provides a mechanism for the enforcement of written agreements to arbitrate. McCarran Ferguson provides that no “Act of Congress” shall preempt “any law enacted by any State for the purpose of regulating the business of insurance,” unless the Act of Congress “specifically relates to the business of insurance.” At issue in Louisiana Safety is whether a Louisiana statute, which provides that arbitration agreements in insurance contracts are unenforceable, is preempted by the Convention and, specifically, the portions that require enforcement of agreements to arbitrate.
The Solicitor General recently filed an amicus curiae brief on the issue in response to the Supreme Court’s order seeking the views of the United States. The Solicitor General’s position is that Article II of the Convention is a “self-executing” treaty, such that it is not an “Act of Congress” encompassed within the McCarran-Ferguson Act. Notably, all parties agree that McCarran-Ferguson does not apply to self-executing treaties.
The Solicitor General further argued that because the Convention is a treaty, and not an “Act of Congress,” it preempts and supersedes the Louisiana state law precluding the enforcement of arbitration agreements in insurance contracts, as well as any other conflicting state law (including state insurance regulation). To that end, the Solicitor General contends that permitting state law to preclude arbitration of insurance-related disputes could be construed as impacting the United States’ treaty obligations (citing case law holding that, by entering into the Convention, the U.S. obligated itself to enforce arbitration agreements between foreign and domestic contracting parties).
Last, the Solicitor General noted that several circuit courts have rejected the application of McCarran Ferguson’s reverse preemption where it would be inconsistent with federal law or policy, even if the law or policy does not relate to the business of insurance. Given the strong federal policy in favor of enforcing arbitration agreements under uniform standards – particularly in the context of international commerce – the Solicitor General asserted that the McCarran Ferguson Act does not authorize states to preclude enforcement of arbitration agreements encompassed by the Convention and the FAA.
Accordingly, the Solicitor General recommended that the petition for a writ of certiorari be denied.