REVISED OCTOBER 2, 2008
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 29, 2008
No. 06-30262
Charles R. Fulbruge III
Clerk
SAFETY NATIONAL CASUALTY CORPORATION,
Plaintiff–Appellee,
LOUISIANA SAFETY ASSOCIATION OF TIMBERMEN–SELF INSURERS
FUND,
Intervenor Plaintiff–Appellee,
v.
CERTAIN UNDERWRITERS AT LLOYD’S, LONDON; ET AL.,
Defendants,
CERTAIN UNDERWRITERS AT LLOYD’S, LONDON,
Defendant–Appellant.
CERTAIN UNDERWRITERS AT LLOYD’S, LONDON,
Plaintiff–Appellant,
v.
SAFETY NATIONAL CASUALTY CORPORATION; LOUISIANA SAFETY
ASSOCIATION OF TIMBERMEN,
Defendant–Appellee.
No. 06-30262
Appeal from the United States District Court
for the Middle District of Louisiana
No. 02-W-1146-A
No. 05-W-262-A
Before KING, DeMOSS, and OWEN, Circuit Judges.
PRISCILLA R. OWEN, Circuit Judge:
The basis for this interlocutory appeal pursuant to 28 U.S.C. § 1292(b) is
the district court’s denial of a motion to compel arbitration of a contractual
dispute among three insurers. The district court concluded that because of the
McCarran–Ferguson Act,1 the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (Convention)2 and federal legislation providing that
the Convention shall be enforced in United States courts, found in 9 U.S.C.
§§ 201-208, are reverse preempted by LA. REV. STAT. ANN. § 22:629. We
disagree.
I
Louisiana Safety Association of Timbermen–Self Insurers Fund (LSAT) is,
as its name implies, a self-insurance fund operating in Louisiana. It provided
workers’ compensation insurance for its members. Certain Underwriters at
Lloyd’s, London (the Underwriters) provided excess insurance to LSAT by
reinsuring claims for occupational-injury occurrences that exceeded the amount
of LSAT’s self-insurance retention. Each reinsurance agreement contained an
arbitration provision.
1
15 U.S.C. § 1011.
2
June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3.
2
No. 06-30262
Safety National Casualty Corporation (Safety National) also provides
excess workers’ compensation coverage and alleges that in a loss portfolio
transfer agreement, LSAT assigned its rights under the reinsurance agreements
with the Underwriters to Safety National. The Underwriters refused to
recognize the assignment, contending that LSAT’s obligations were strictly
personal and therefore non-assignable.
Safety National sued the Underwriters in federal district court. The
Underwriters filed an unopposed motion to stay proceedings and compel
arbitration. The district court initially granted that motion and stayed the
lawsuit.
The Underwriters initiated arbitration proceedings with Safety National
and LSAT; however, the parties could not agree upon how arbitrators were to be
selected. The Underwriters then filed a motion to lift the stay in order to join
LSAT as a party in the district court and to compel arbitration to resolve the
dispute about how to compose the arbitration panel. In response, LSAT moved
to intervene, lift the stay, and quash arbitration. LSAT asserted that the
arbitration agreements were unenforceable under Louisiana law. While those
motions were pending, the Underwriters filed a separate action against Safety
National and LSAT seeking recovery of unpaid premiums under the policies.
The district court consolidated the two actions.
The district court ultimately reconsidered its initial decision and granted
LSAT’s motion to quash arbitration. The district court concluded that although
the Convention would otherwise require arbitration, a Louisiana statute3 that
has been interpreted to prohibit arbitration agreements in insurance contracts
was controlling. The district court reasoned that since that statute had “the
purpose of regulating the business of insurance” within the meaning of the
3
LA. REV. STAT. ANN. § 22:629.
3
No. 06-30262
McCarran–Ferguson Act, the Louisiana statute reverse preempted the
Convention.4 The district court subsequently certified that its order embodying
these rulings involves a controlling question of law as to which there is
substantial ground for difference of opinion and an immediate appeal pursuant
to 28 U.S.C. § 1292(b) may materially advance the termination of the litigation.
We granted leave to appeal.
II
The Louisiana statute at issue provides:
A. No insurance contract delivered or issued for delivery in this
state and covering subjects located, resident, or to be performed in
this state . . . shall contain any condition, stipulation, or agreement:
....
(2) Depriving the courts of this state of the jurisdiction of
action against the insurer.
....
C. Any such condition, stipulation, or agreement in violation of this
Section shall be void, but such voiding shall not affect the validity
of the other provisions of the contract.5
Although it is not clear from this provision’s text that arbitration agreements are
voided, Louisiana courts have held that such agreements are unenforceable
because of this statute.6
4
See generally U.S. Dept. of Treasury v. Fabe, 508 U.S. 491, 507 (1993) (“Ordinarily,
a federal law supersedes any inconsistent state law. The first clause of [§ 1012(b)] reverses
this by imposing what is, in effect, a clear-statement rule, a rule that state laws enacted ‘for
the purpose of regulating the business of insurance’ do not yield to conflicting federal statutes
unless a federal statute specifically requires otherwise.”).
5
LA. REV. STAT. ANN. § 22:629.
6
See Doucet v. Dental Health Plans Mgmt. Corp., 412 So. 2d 1383, 1384 (La. 1982)
(“Classification of the contract at issue as an insurance contract renders the arbitration
provisions of that contract unenforceable under R.S. 22:629.”); see also McDermott Int’l, Inc.
v. Lloyds Underwriters of London, 120 F.3d 583, 586 (5th Cir. 1997) (“Compulsory arbitration
4
No. 06-30262
The McCarran–Ferguson Act provides that “Congress hereby declares that
the continued regulation and taxation by the several States of the business of
insurance is in the public interest, and that silence on the part of the Congress
shall not be construed to impose any barrier to the regulation or taxation of such
business by the several States.”7 The Act further provides, “[n]o 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, or which imposes
a fee or tax upon such business, unless such Act specifically relates to the
business of insurance . . . .”8
The Convention does not specifically relate to the business of insurance.
Nor do Underwriters challenge the district court’s conclusion that LA. REV. STAT.
ANN. § 22:629, when applied to disputes arising under reinsurance agreements
between insurers, regulates the business of insurance within the meaning of the
McCarran–Ferguson Act.9 Accordingly, we will assume, without deciding, that
the Louisiana statute does regulate the business of insurance, although the
matter is not entirely free from doubt. One of the criteria for determining
whether a law regulates the business of insurance is whether it has the effect of
spreading or transferring a policyholder’s risk.10 The Supreme Court has
clauses in certain insurance contracts are unenforceable in Louisiana because of La.R.S.
22:629 . . . .”); W. of Eng. Ship Owners Mut. Ins. Ass’n (Luxembourg) v. Am. Marine Corp., 981
F.2d 749, 750 n.5 (5th Cir. 1993) (“Louisiana has prohibited arbitration clauses in insurance
policies” (citing LA. REV. STAT. ANN. § 22:629; Doucet, 412 So. 2d at 1384)).
7
15 U.S.C. § 1011.
8
Id. § 1012(b); see also id. §1101; Fabe, 508 U.S. at 507 (explaining that the first clause
of [§ 1012(b)] mandates that state statutes “regulating the business of insurance” do not yield
to conflicting federal statutes unless a federal statute specifically requires otherwise).
9
15 U.S.C. § 1012(b).
10
See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (explaining that
“three criteria relevant in determining whether a particular practice is part of the ‘business of
insurance’” include “whether the practice has the effect of transferring or spreading a
5
No. 06-30262
emphasized that arbitration agreements are forum-selection provisions and do
not displace substantive rights afforded by a statute or other substantive law.11
An argument could be made that at least in theory, resolving claims in an
arbitration rather than in a court before a jury does not substantially affect the
risk pooling arrangement between the insurer and the insured. However, this
court has held in American Bankers Insurance Co. of Florida v. Inman that the
Federal Arbitration Act12 was reverse preempted by the McCarran–Ferguson Act
in the context of a dispute between an injured insured and his insurer regarding
underinsured-motorist coverage governed by Mississippi law.13 Therefore, this
issue is foreclosed in this circuit and in any event is not before us.
The Underwriters set forth three issues: whether (1) the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards is an “Act of Congress”
within the meaning of the McCarran–Ferguson Act,14 (2) the
McCarran–Ferguson Act applies to international commercial transactions, and
(3) the Convention takes precedence over the McCarran–Ferguson Act even if
the latter applies to international transactions. For the reasons we consider
policyholder’s risk,” although “[n]one of these three criteria is necessarily determinative in
itself”); cf. Ky. Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 338 (2003) (explaining, albeit
in the context of ERISA, “that conditions on the right to engage in the business of insurance
must also substantially affect the risk pooling arrangement between the insurer and the
insured”).
11
See, e.g., Preston v. Ferrer, 128 S. Ct. 978, 987 (2008) (“By agreeing to arbitrate a
statutory claim, a party does not forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral . . . forum.” (omission in original) (quoting Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985))).
12
9 U.S.C. § 1 et seq.
13
See 436 F.3d 490, 494 (5th Cir. 2006) (holding that a state law prohibiting “required
arbitration of disputes stemming from the uninsured motorist coverage provisions . . .
regulates risk by subjecting all [such] policy disputes . . . to the possibility of a jury trial”).
14
15 U.S.C. § 1012(b) (“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. . . .”).
6
No. 06-30262
below, we are persuaded that Congress did not intend to include treaties within
the scope of an “Act of Congress” when it used those words in the
McCarran–Ferguson Act, and we therefore do not reach other issues pressed by
the Underwriters.
III
LSAT contends that treaties stand on equal footing with acts of Congress,
the Convention was not self-executing and could only have effect in the courts
of this country when Congress passed enabling legislation, and therefore, the
Convention’s enabling legislation is the equivalent of an “Act of Congress” within
the meaning of the McCarran–Ferguson Act. LSAT is correct that an act of
Congress is on full parity with a treaty.15 “‘[W]hen a statute which is subsequent
in time is inconsistent with a treaty, the statute to the extent of conflict renders
the treaty null.’”16 The Underwriters maintain that the Convention was ratified
after the McCarran–Ferguson Act was enacted and that in any event, the
Convention is self-executing, which means that it did not require an act of
Congress to have effect in United States courts. The Underwriters assert that
a “later-in-time self-executing treaty supercedes a federal statute if there is a
conflict.”17 The Convention is not an act of Congress, the Underwriters
15
Reid v. Covert, 354 U.S. 1, 18 (1957) (plurality opinion) (“[An] Act of Congress . . . is
on a full parity with a treaty . . . .”); Breard v. Greene, 523 U.S. 371, 376 (1998) (per curiam)
(same) (quoting Reid, 354 U.S. at 18); see also Egle v. Egle, 715 F.2d 999, 1013 (5th Cir. 1983)
(“Under our Constitution, treaties and statutes are equal in dignity. If a treaty and a statute
are inconsistent, ‘the one last in date will control the other . . . .’” (omission in original) (quoting
Whitney v. Robertson, 124 U.S. 190, 194 (1888))).
16
Breard, 523 U.S. at 376 (quoting Reid, 354 U.S. at 18); see also Medellin v. Texas, 128
S. Ct. 1346, 1359 n.6 (2008) (“[A] later-in-time federal statute supersedes inconsistent treaty
provisions.”).
17
Medellin, 128 S. Ct. at 1364 (citing Cook v. United States, 288 U.S. 102, 119 (1933)).
7
No. 06-30262
alternatively contend, even if the Convention was not self-executing, because a
treaty is more than an act of Congress.
It is unclear whether the Convention is self-executing. The Supreme
Court’s recent decision in Medellin v. Texas instructs that “[t]he interpretation
of a treaty, like the interpretation of a statute, begins with its text.”18 In
Medellin, the Court examined the Vienna Convention on Consular Relations19
and the Optional Protocol Concerning the Compulsory Settlement of Disputes
to the Vienna Convention20 to determine whether a judgment of the
International Court of Justice (ICJ) was “directly enforceable as domestic law in
a state court in the United States.”21 The United States had agreed to submit
disputes arising out of the Vienna Convention to the ICJ, but the Supreme Court
recognized that “submitting to jurisdiction and agreeing to be bound are two
different things.”22 The Court observed that the Optional Protocol “says nothing
about the effect of an ICJ decision and does not itself commit signatories to
comply with an ICJ judgment.”23 The Court went on to consider any obligations
imposed by Article 94 of the United Nations Charter, finding that it also “does
not provide that the United States ‘shall’ or ‘must’ comply with an ICJ decision,
nor indicate that the Senate that ratified the U.N. Charter intended to vest ICJ
decisions with immediate legal effect in domestic courts.”24 By contrast, the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
18
Id. at 1357.
19
Apr. 24, 1963, 1970 21 U.S.T. 77, 596 U.N.T.S. 261.
20
Apr. 24, 1963, 1970 21 U.S.T. 325, 596 U.N.T.S. 487.
21
Medellin, 128 S. Ct. at 1353.
22
Id. at 1358.
23
Id.
24
Id.
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No. 06-30262
expressly states that courts “shall” compel arbitration when requested by a party
to an international arbitration agreement:
The court of a Contracting State, when seized of an action in
a matter in respect of which the parties have made an agreement
within the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of being
performed.25
The Convention additionally sets forth at least some procedures to be followed
in obtaining enforcement of an arbitration award.26 However, the Supreme
Court indicated in dicta in Medellin that at least the provisions of the
Convention pertaining to the enforcement of judgments of international
arbitration tribunals are not self-executing.27 This reference in Medellin could
be read to imply that the Convention in its entirety is not self-executing,
although such a conclusion cannot be drawn with any certainty from the brief
discussion in the Court’s opinion.
But even if the Convention required legislation to implement it in United
States courts, that does not mean that Congress intended an “Act of Congress,”
as that phrase is used in the McCarran–Ferguson Act, to include a treaty.
Implementing legislation does not replace or displace a treaty. A treaty remains
something more than an act of Congress. It is an international agreement or
25
Art. II(3), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38.
26
See id. arts. III, IV.
27
See Medellin, 128 S. Ct. at 1366 (“Congress is up to the task of implementing non-self-
executing treaties, even those involving complex commercial disputes. The judgments of a
number of international tribunals enjoy a different status because of implementing legislation
enacted by Congress. [citing 9 U.S.C. §§ 201-208] . . . Such language demonstrates that
Congress knows how to accord domestic effect to international obligations when it desires such
a result.” (citation omitted)); see also Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15
(1974) (observing, although not in the context of whether the Convention was self-executing,
“Congress passed Chapter 2 of the United States Arbitration Act in order to implement the
Convention” (citation omitted)).
9
No. 06-30262
contract negotiated by the Executive Branch and ratified by the Senate,28 not
Congress. The fact that a treaty stands on equal footing with legislation when
implemented by Congress does not mean that it ceases to be a treaty and
becomes an “Act of Congress.”
The Supreme Court has indicated that the preemptive reach of the
McCarran–Ferguson Act was not intended to extend to the conduct of foreign
affairs. The Supreme Court considered in American Insurance Ass’n v.
Garamendi whether a state law, aimed at aiding Holocaust victims by requiring
insurers to disclose information about insurance policies sold in Europe before
and during World War II, interfered with the Federal Government’s conduct of
foreign relations.29 The President of the United States had entered into an
executive agreement with Germany’s chancellor in which the United States
agreed that whenever a German company was sued in an American court
regarding a Holocaust-era claim, the United States government would submit
a statement that “it would be in the foreign policy interests of the United States
for the Foundation to be the exclusive forum and remedy for the resolution of all
asserted claims against German companies arising from their involvement in the
National Socialist era and World War II.”30 This and other executive agreements
regarding Holocaust claims had not been ratified as treaties by the United
States Senate but were instead acts solely of the Executive Branch. The
Supreme Court observed that “[g]enerally, . . . valid executive agreements are
fit to preempt state law, just as treaties are, and if the agreements here had
expressly preempted laws like [California’s law], the issue would be
28
See U.S. CONST. art. II § 2 (“[The President] shall have Power, by and with the Advice
and Consent of the Senate, to make Treaties, provided two thirds of the Senators present
concur . . . .”).
29
Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 401 (2003).
30
Id. at 406.
10
No. 06-30262
straightforward.”31 The Court ultimately concluded that the state law conflicted
with Presidential foreign policy as expressed in executive agreements with
foreign nations and was preempted.32 In addressing California’s argument that
in the McCarran–Ferguson Act “Congress authorized state laws of [the] sort
[California had enacted],” the Court said,
As the text itself makes clear, the point of McCarran–Ferguson’s
legislative choice of leaving insurance regulation generally to the
States was to limit congressional preemption under the commerce
power, whether dormant or exercised . . . . [A] federal statute
directed to implied preemption by domestic commerce legislation
cannot sensibly be construed to address preemption by executive
conduct in foreign affairs.33
We think it unlikely that when Congress crafted the McCarran–Ferguson
Act, it intended any future treaty implemented by an act of Congress to be
abrogated to the extent that treaty conflicted in some way with a state law
regulating the business of insurance if Congress’s implementing legislation did
not expressly save the treaty from reverse preemption by state law. If this had
been Congress’s intent, it seems probable that Congress would have included “or
any treaty requiring congressional implementation” or similar language
following “Act of Congress” and “such Act” when it said, “[n]o 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 . . . unless such Act
specifically relates to the business of insurance.”34 There is no indication in the
McCarran–Ferguson Act that Congress intended, through the preemption
provision and the use of the term “Act of Congress,” to restrict the United States’
31
Id. at 416-17.
32
Id. at 420-26.
33
Id. at 427-28.
34
15 U.S.C. § 1012(b).
11
No. 06-30262
ability to negotiate and implement a treaty that might affect some aspect of
international insurance agreements in the same way that other international
agreements would be affected by the terms of the treaty. If that were Congress’s
intent, it would seem, as we have said, that Congress would have more clearly
articulated its design.
Most importantly, there is no apparent reason why Congress would have
chosen to distinguish in the McCarran–Ferguson Act between treaties that are
self-executing and those that are not. It is undisputed that if the provisions in
the Convention directing courts to enforce international arbitration agreements
were self-executing, then the McCarran–Ferguson Act would have no preemptive
effect because self-executing treaties are not an “Act of Congress.” No rationale
has been offered by anyone as to why Congress would have intended to include
a treaty that requires implementation by Congress within the reach of the
McCarran–Ferguson Act’s reverse preemption provisions but not self-executing
treaties.
We are aware that the Second Circuit has held that “the Convention is not
self-executing, and therefore, relies upon an Act of Congress for its
implementation.”35 As a consequence, the Second Circuit held Congress’s
“implementing legislation [did] not preempt”36 a Kentucky statute that
“subordinated” all “choice of law or arbitration provisions” in a contract to which
an insolvent insurer in liquidation proceedings was a party.37 The court
reasoned that “when the terms of [a treaty] import a contract—when either of
the parties engages to perform a particular act, the treaty addresses itself to the
political, not the judicial department; and the legislature must execute the
35
Stephens v. Am. Int’l Ins. Co., 66 F.3d 41, 45 (2d Cir. 1995).
36
Id.
37
Id. at 43.
12
No. 06-30262
contract, before it can become a rule for the court.”38 The court then quoted the
“[n]o Act of Congress” provision in the McCarran–Ferguson Act and said,
“[a]ccordingly, the implementing legislation does not preempt the Kentucky
Liquidation Act . . . .”39
We agree, of course, that when provisions of a treaty are not self-executing,
they cannot be enforced in a court in this country unless and until those
provisions are implemented by Congress. But, we submit, this 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. The text of the
McCarran–Ferguson Act does not support the inclusion by implication of “a
treaty implemented by an Act of Congress.” Because we give the phrases “Act
of Congress” and “such Act” their usual, commonly understood meaning, we
conclude that treaties, self-executing or not, are not reverse preempted by the
McCarran–Ferguson Act.
The Supreme Court’s decision in Missouri v. Holland40 reflects that a
treaty followed by implementing legislation, may accomplish more than either
treaty or an Act of Congress, standing alone. The United States had
consummated a treaty with Great Britain to protect migratory birds, and the
treaty stated that “the two powers would take or propose to their lawmaking
bodies the necessary measures for carrying the treaty out.”41 Accordingly, the
treaty was not self-executing. An act was passed giving effect to the Convention,
directing the Secretary of Agriculture to promulgate regulations and prohibiting
38
Id. at 45.
39
Id.
40
252 U.S. 416 (1920).
41
Id. at 431.
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the killing of migratory birds except as permitted by regulations compatible with
the treaty.42 The State of Missouri sought to prohibit the enforcement of the
Migratory Bird Treaty Act and the Secretary’s regulations, arguing that the
statute interfered with rights reserved to the States by the Tenth Amendment.43
The Supreme Court recognized a difference between acts of Congress and
“a treaty followed by such an act.”44 It observed that “[a]n earlier act of Congress
that attempted by itself and not in pursuance of a treaty to regulate the killing
of migratory birds within the States had been held bad . . . .”45 The Court said,
“[w]hether the two cases cited [holding the prior Acts of Congress “bad”] were
decided rightly or not they cannot be accepted as a test of the treaty power. Acts
of Congress are the supreme law of the land only when made in pursuance of the
Constitution, while treaties are declared to be so when made under the authority
of the United States.”46 The Court continued, “[w]e do not mean to imply that
there are no qualifications to the treaty-making power; but they must be
ascertained in a different way. It is obvious that there may be matters of the
sharpest exigency for the national well being that an act of Congress could not
deal with but that a treaty followed by such an act could . . . .”47 The Supreme
Court ultimately concluded “that the treaty and statute must be upheld.”48
In the present case, as in Holland, the treaty followed by the
implementing legislation, must be considered as the sum of its parts, not
42
Id. at 431-32.
43
Id. at 430-31.
44
Id. at 433.
45
Id. at 432.
46
Id. at 433.
47
Id.
48
Id. at 435.
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piecemeal, in determining what Congress meant when it used the words “Act of
Congress” and “such Act” in the McCarran–Ferguson Act.
Our focus on congressional intent and the conclusion that referral to
arbitration is required in this case is reinforced by the Supreme Court’s analysis
in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,49 although the
McCarran–Ferguson Act was not implicated in that case. The question was the
“arbitrability, pursuant to the Federal Arbitration Act and the [Convention], of
claims arising under the Sherman Act and encompassed within a valid
arbitration clause in an agreement embodying an international commercial
transaction.”50 The Court held such claims were arbitrable.51 But in the process,
the Supreme Court explained that “not . . . all controversies implicating
statutory rights are suitable for arbitration.”52 In determining which are not, the
Court said “[j]ust as it is the congressional policy manifested in the Federal
Arbitration Act that requires courts liberally to construe the scope of arbitration
agreements covered by that Act, it is the congressional intention expressed in
some other statute on which the courts must rely to identify any category of
claims as to which agreements to arbitrate will be held unenforceable.”53
Importantly, the Court said, “[w]e must assume that if Congress intended the
substantive protection afforded by a given statute to include protection against
waiver of the right to a judicial forum, that intention will be deducible from text
or legislative history.”54
49
473 U.S. 614 (1985).
50
Id. at 616 (citations omitted).
51
Id. at 626-27.
52
Id. at 627.
53
Id. (emphasis added).
54
Id. at 628.
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Later in the Mitsubishi decision, the Supreme Court observed that “[t]he
Convention reserves to each signatory country the right to refuse enforcement
of an award where the ‘recognition or enforcement of the award would be
contrary to the public policy of that country.’”55 The Court also noted that “Art.
II(1) of the Convention, which requires the recognition of agreements to arbitrate
that involve ‘subject matter capable of settlement by arbitration,’ contemplates
exceptions to arbitrability grounded in domestic law.”56 “Yet in implementing
the Convention by amendment to the Federal Arbitration Act, Congress did not
specify any matters it intended to exclude from its scope.”57 “Doubtless,
Congress may specify categories of claims it wishes to reserve for decision by our
own courts without contravening this Nation’s obligations under the
Convention.”58 But the Court “decline[d] to subvert the spirit of the United
States’ accession to the Convention by recognizing subject-matter exceptions
where Congress has not expressly directed the courts to do so.”59
The question, then, is whether the use of “no Act of Congress” and “such
Act” in the McCarran–Ferguson Act is an express direction by Congress that a
treaty such as the Convention is preempted to the extent it “invalidate[s],
impair[s], or supersede[s]”60 a state law that renders arbitration clauses
unenforceable. For the reasons considered above, the text and context of the
55
Id. at 638 (quoting Convention on Recognition and Enforcement of Foreign Arbitral
Awards art. V(2)(b), June 10, 1958, 21 U.S.T 2517, 330 U.N.T.S. 3).
56
Id. at 639 n.21 (“And it appears that before acceding to the Convention the Senate
was advised by a State Department memorandum that the Convention provided for such
exceptions.”).
57
Id.
58
Id.
59
Id. (emphasis added).
60
15 U.S.C. § 1012(b).
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McCarran–Ferguson Act compel us to conclude that it contains no such express
congressional direction.
The McCarran–Ferguson Act embodies a strong policy that the states have
an interest in the regulation of the business of insurance. A reinsurance
contract that has the potential to affect policyholders within a state
unquestionably relates to the business of insurance. But concerns that a state’s
regulatory policies regarding such contracts may not be recognized in an
international arbitration are ameliorated by provisions in the Convention and
are not a basis for refusing to require that an arbitration go forward. The
Supreme Court explained in Mitsubishi, in the context of federal antitrust law,
that “[h]aving permitted the arbitration to go forward, the national courts of the
United States will have the opportunity at the award-enforcement stage to
ensure that the legitimate interest in the enforcement of the antitrust laws has
been addressed.”61 As already noted, the Court recognized, “[t]he Convention
reserves to each signatory country the right to refuse enforcement of an award
where the ‘recognition or enforcement of the award would be contrary to the
public policy of that country.’”62 The Court observed ‘[w]hile the efficacy of the
arbitral process requires that substantive review at the award-enforcement
stage remain minimal, it would not require intrusive inquiry to ascertain that
the tribunal took cognizance of the antitrust claims and actually decided them.”63
The same is true of any Louisiana laws that apply to the reinsurance
agreements presently at issue.
The Supreme Court emphasized in Mitsubishi that “[a]s international
trade has expanded in recent decades, so too has the use of international
61
Mitsubishi, 473 U.S. at 638.
62
Id. (quoting Convention on Recognition and Enforcement of Foreign Arbitral Awards
art. V(2)(b), June 10, 1958, 21 U.S.T 2517, 330 U.N.T.S. 3).
63
Id.
17
No. 06-30262
arbitration to resolve disputes arising in the course of that trade.”64 The Court
admonished:
If they are to take a central place in the international legal
order, national courts will need to “shake off the old judicial hostility
to arbitration,” and also their customary and understandable
unwillingness to cede jurisdiction of a claim arising under domestic
law to a foreign or transnational tribunal. To this extent, at least,
it will be necessary for national courts to subordinate domestic
notions of arbitrability to the international policy favoring
commercial arbitration.65
We note that as ratified by the United States, the Convention applies “only
to differences arising out of legal relationships . . . which are considered as
commercial under the national law of the State” ratifying or acceding to the
Convention.66 There is no doubt that the present dispute among three insurers
arises out of legal relationships that are commercial. We are not called upon to
explore the outer bounds of what “commercial” legal relationships may
encompass.
In sum, the McCarran–Ferguson Act does not cause LA. REV. STAT. ANN.
§ 22:629 to reverse preempt the Convention with regard to the dispute before us.
IV
We finally consider Safety National’s request that we affirm the district
court’s ruling that the rights under the policies are assignable. The order
embodying that ruling, dated August 13, 2003, has not been certified by the
64
Id.
65
Id. at 638-39 (quoting Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d
978, 985 (2d Cir. 1942)).
66
Art. I(3), 21 U.S.T., at 2561 n.3.
18
No. 06-30262
district court under 28 U.S.C. § 1292(b). We therefore lack appellate jurisdiction
to consider it.67
* * *
We REVERSE the district court’s denial of the motion to compel
arbitration and remand for further proceedings consistent with this opinion.
67
See Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 205 (1996) (“The court of
appeals may not reach beyond the certified order to address other orders made in the case.”).
19