Post by Mary Pennisi on Dec 7, 2010 5:41:54 GMT 4
Enforcing International Insurers’ Expectations: Can States Unilaterally Quash Commercial Arbitration Agreements Under the McCarran-Ferguson Act?
Mary Pennisi
Fordham University - School of Law
Fordham Journal of Corporate and Financial Law, 2011
Abstract:
Commercial parties worldwide rely on arbitration clauses to mitigate the high risks inherent in international business transactions. A split in federal circuit courts has emerged and left the validity of arbitration agreements in global insurance contracts under the United Nations Convention on the Recognition and the Enforcement of Arbitral Agreements (the "New York Convention") in a state of uncertainty in the United States. Safety Nat’l Casualty Corp. v. Certain Underwriters at Lloyd’s, London created a split in federal circuit courts over whether the McCarran-Ferguson Act reverse preempts the New York Convention and allows states to circumvent the United States’ national policy favoring arbitration and invalidate global insurers’ arbitration agreements. This Note examines the split in federal circuit courts created by Safety Nat’l Casualty Corp. Part I examines the legal framework governing arbitration in the United States, including New York Convention and Federal Arbitration Act. It also explores the current state of insurance arbitration and the McCarran-Ferguson Act.
Part I briefly reviews the doctrine of preemption and foreign relations law concerning the status of treaties in United States law. Part II discusses the split in federal authority, particularly both sides’ interpretations of foreign relations law and the McCarran-Ferguson Act. Part III proposes two possible resolutions to the conflict in authority, both legislative and judicial. Part III.A suggests that Congress should amend the McCarran-Ferguson Act to exempt the New York Convention in light of the national policy favoring arbitration and the importance of arbitration in promoting international business in which parties rely on arbitration to diminish risks and efficiently resolve their conflicts. Part III.B offers a judicial solution. It contends that the Supreme Court should accept certification in Safety National and hold that the McCarran-Ferguson Act does not enable state law to reverse-preempt the New York Convention or enable states to thwart arbitration of disputes concerning insurance contracts. It argues that the Fifth Circuit appropriately found that the plain meaning of “Act of Congress” when Congress enacted the MFA did not include treaties but instead only contemplated legislation. It further maintains that the MFA’s legislative history reflects that "Act of Congress" does not contemplate treaties. The current status of the Convention as executing and non-self-executing remains unknown, but it is irrelevant for this analysis. Furthermore, it posits that the Supreme Court should recognize that the MFA does not cover the Convention as an "Act of Congress" because the MFA only applies to interstate commerce and does not apply to international arbitration agreements under the Convention. Finally, it contends that Congress did not intend the MFA preemption exemption to apply to arbitration or dispute resolution because in enacting the MFA. This Note concludes that Congress and the Supreme Court should ensure that states do not have unlimited power to preclude international business parties from enforcing mutually agreed-upon arbitration clauses in insurance contracts.
Mary Christina Pennisi
Fordham University - School of Law
140 West 62nd Street
New York, NY 10023
United States
papers.ssrn.com/sol3/papers.cfm?abstract_id=1706283
Mary Pennisi
Fordham University - School of Law
Fordham Journal of Corporate and Financial Law, 2011
Abstract:
Commercial parties worldwide rely on arbitration clauses to mitigate the high risks inherent in international business transactions. A split in federal circuit courts has emerged and left the validity of arbitration agreements in global insurance contracts under the United Nations Convention on the Recognition and the Enforcement of Arbitral Agreements (the "New York Convention") in a state of uncertainty in the United States. Safety Nat’l Casualty Corp. v. Certain Underwriters at Lloyd’s, London created a split in federal circuit courts over whether the McCarran-Ferguson Act reverse preempts the New York Convention and allows states to circumvent the United States’ national policy favoring arbitration and invalidate global insurers’ arbitration agreements. This Note examines the split in federal circuit courts created by Safety Nat’l Casualty Corp. Part I examines the legal framework governing arbitration in the United States, including New York Convention and Federal Arbitration Act. It also explores the current state of insurance arbitration and the McCarran-Ferguson Act.
Part I briefly reviews the doctrine of preemption and foreign relations law concerning the status of treaties in United States law. Part II discusses the split in federal authority, particularly both sides’ interpretations of foreign relations law and the McCarran-Ferguson Act. Part III proposes two possible resolutions to the conflict in authority, both legislative and judicial. Part III.A suggests that Congress should amend the McCarran-Ferguson Act to exempt the New York Convention in light of the national policy favoring arbitration and the importance of arbitration in promoting international business in which parties rely on arbitration to diminish risks and efficiently resolve their conflicts. Part III.B offers a judicial solution. It contends that the Supreme Court should accept certification in Safety National and hold that the McCarran-Ferguson Act does not enable state law to reverse-preempt the New York Convention or enable states to thwart arbitration of disputes concerning insurance contracts. It argues that the Fifth Circuit appropriately found that the plain meaning of “Act of Congress” when Congress enacted the MFA did not include treaties but instead only contemplated legislation. It further maintains that the MFA’s legislative history reflects that "Act of Congress" does not contemplate treaties. The current status of the Convention as executing and non-self-executing remains unknown, but it is irrelevant for this analysis. Furthermore, it posits that the Supreme Court should recognize that the MFA does not cover the Convention as an "Act of Congress" because the MFA only applies to interstate commerce and does not apply to international arbitration agreements under the Convention. Finally, it contends that Congress did not intend the MFA preemption exemption to apply to arbitration or dispute resolution because in enacting the MFA. This Note concludes that Congress and the Supreme Court should ensure that states do not have unlimited power to preclude international business parties from enforcing mutually agreed-upon arbitration clauses in insurance contracts.
Mary Christina Pennisi
Fordham University - School of Law
140 West 62nd Street
New York, NY 10023
United States
papers.ssrn.com/sol3/papers.cfm?abstract_id=1706283