The Ninth Circuit considers Article II, Section 3 of the New York Convention to be “self-executing” and not a “law of Congress”, thus upholding the order for the compulsory execution of arbitration.


In CLMS Management Serv. et al. vs. Amwins Brokerage et al., the United States Court of Appeals for the Ninth Circuit considered whether a state law (under the federal McCarran-Ferguson law, which gives states the power to regulate the insurance industry) setting aside Arbitration agreements in insurance contracts preempted Article II, Section 3 of the New York Convention. Normally, Article VI, Clause 2 of the United States Constitution (the “supremacy clause”) requires that the law of the state give way to the federal law in conflict, but the McCarran-Ferguson Act provides that the state insurance law prevails over the conflicting federal law. Faced with this issue, the Ninth Circuit ruled that Article II, Section 3 of the New York Convention is “self-executing”, not an “act of Congress” and is not subject to the preemption reversed by the New York Convention. McCarran-Ferguson Act. As a result, the Ninth Circuit upheld the District Court’s order binding arbitration, as discussed and analyzed in more detail in this post.

The Interaction Between the Supremacy Clause, McCarran-Ferguson Law, State Law, and the New York Convention

The supremacy clause of the Constitution of the United States provides: “This Constitution and the laws of the United States which shall be made pursuant thereto; and all treaties made or to be made under the authority of the United States, will be the supreme law of the land ”(emphasis added). This means that “state law gives way to contradictory federal law”.

However, Congress enacted the McCarran-Ferguson Act in 1945, which was “in response to the decision of the United States Supreme Court in United States v. South-Eastern Underwriters Ass’n, 322 US 533, 552-53 (1944) ”, finding that insurance is subject to federal regulation under the commercial clause of the US Constitution. In the relevant part, the Law provides that “[t]The insurance business, and any person engaged in it, will be subject to the laws of the various states which relate to the regulation or taxation of that business. § 1012 (a). And, “[n]o Act of Congress shall be construed as invalidating, altering or superseding any law enacted by a state for the purpose of regulating the affairs of insurance, or which imposes a fee or tax on such affairs, unless such law relates specifically to the affairs of insurance. assurance. § 1012 (b) (emphasis added). In the insurance industry, for example, “the McCarran-Ferguson Act has transformed the legal landscape by overturning the normal rules of preemption” (internal quotation marks omitted).

Within this legal framework, the state of Washington has enacted laws to regulate insurance within its state. In the present case, § 48.18.200 of the revised Washington Code provides: “No insurance contract… shall contain any condition, stipulation, or agreement … Depriving the courts of this state of the jurisdiction of action against the insurer… Any such condition, stipulation or agreement in violation of this section will be zero … ”(Emphasis added). The Ninth Circuit explained that “[t]he Washington Supreme Court interpreted § 48.18.200 as “prohibiting binding arbitration agreements in insurance contracts” and ruled that arbitration provisions binding before disputes in insurance contracts are inapplicable. “

However, at the heart of the matter CLMS Management Serv., Article II, section 3 of the New York Convention provides: request by one of the parties, refer the parties to arbitration, unless it finds that the said agreement is void, inoperative or not susceptible to ‘be executed. The Ninth Circuit stated that the New York Convention obliges the courts when seized of a case in which the parties have agreed to arbitrate: “(1) to recognize and enforce written agreements to submit disputes to foreign arbitration and (2) foreign nations ”(citing ESAB Grp., Inc. v. Zurich Ins. API, 685 F.3d 376, 381 (4th Cir. 2012)).

Therefore, the issue on appeal was whether Washington State law, under the McCarran-Ferguson Act, preempted the New York Convention in reverse.

The Ninth Circuit holds NYC Article II, Section 3 is self-executing and not an act of Congress

The Ninth Circuit analyzed the foregoing question by examining whether it was the treaty of the New York Convention itself that compels the execution of an arbitration agreement, or whether it is certain federal laws that have amended the Federal Arbitration Law (that is to say, Acts of Congress) “to enable the implementation” of the New York Convention which oblige the execution of the arbitration agreement.

The Ninth Circuit explained that the United States Supreme Court has “long recognized the distinction between treaties which have automatic effect as domestic law and those which – although they constitute commitments under international law – do not operate.” themselves as a binding federal law ”” (citing Medellin v. Texas, 552 US 491, 504 (2008)). “A treaty is directly applicable and automatically has the force of law as internal law” when it operates on its own without the aid of any legislative provision. ” Identifier. to 505. “When, on the other hand,“ the stipulations of treaties are not directly applicable, they can only be applied in accordance with the legislation to put them into force ”. ” Identifier. “We have said that ‘basically the question of self-execution is about whether a provision of a treaty is directly enforceable in national courts’” (citing Republic of the Marshall Islands v. United States, 865 F.3d 1187, 1193 (9th Cir. 2017)).

In interpreting Article II, Section 3 of the New York Convention, the Ninth Circuit began with the “time-honored” approach of starting with the text of the treaty itself. In particular, the Ninth Circuit focused on the words: “The court of a Contracting State, when seized of an action in a case on which the parties have concluded an agreement within the meaning of this article , must … Refer the parties to arbitration… ”(emphasis added). The Ninth Circuit ultimately concluded that Article II, Section 3, is self-executing and not an act of Congress.

The Ninth Circuit supported its decision with US Supreme Court precedent, legislative history, and secondary academic authority (citing HR Rep. No. 90-1181, at 3603 (1970) and Gary B. Born , The New York Convention: a directly applicable treaty, 40 Mich. J. Int’l L. 115, 147 (2018) (arguing that the enactment of the New York Convention shows “only that Congress wanted to ensure the effective and efficient application of the substantive self-executing terms of the Convention to States- United Courts ”by providing for“ procedural and auxiliary mechanisms ”which“ could not reasonably be regulated by a multilateral treaty with a large number of contracting States)).

The Ninth Circuit relied primarily on the decision of the United States Supreme Court in Medellin to explain the difference between a directly applicable treaty and a non-directly applicable treaty. Medellin sent a judgment of the International Court of Justice (ICJ) which ruled that, “on the basis of violations of the Vienna Convention, 51 named Mexican nationals have the right to review and reconsider their convictions and sentences handed down by the courts of State in the United States ”. Medellin, 552 US at 497-98. In reviewing this judgment, the United States Supreme Court “considered whether a judgment of the [ICJ] was directly enforceable as domestic law. The Court explained that “the obligation for the part of the signatory nations to comply with the judgments of the ICJ derives from[…]of Article 94 of the Charter of the United Nations ”, which provides that“ each member of the United Nations undertakes to abide by the decision of the ICJ in any matter to which he is a party. The Court concluded that Article 94 is not directly applicable and that, therefore, decisions of the ICJ are not automatically enforceable, as Article 94 “is not a directive to national courts” and ” does not provide that the United States “shall” or “must” comply with a decision of the ICJ, nor indicate that the Senate which ratified the Charter of the United Nations intended to give the decisions of the ICJ an effect immediate legal action in national courts. [in another Ninth Circuit decision] to conclude that Article VI of the Treaty on the Non-Proliferation of Nuclear Weapons is not directly applicable. See in general Republic of the Marshall Islands v. United States, 865 F.3d 1187 (9th Cir. 2017).

The Ninth Circuit found that Article II, Section 3 of the New York Convention “contrasts sharply” with the provisions of the treaty in Medellin and Marshall Islands, who rather speak in “broad and ambitious terms”. In particular, as noted above, the Ninth Circuit focused on the word “shall” in Article II, Section 3 of the New York Convention as evidence that the Convention is directly applicable to federal and state courts of law. United States. Therefore, the Ninth Circuit found that “[t]The clear text of Article II, Section 3 and the relevant drafting and negotiating history of the Convention lead us to conclude that Article II, Section 3 is directly applicable.


There are other reasons why the Ninth Circuit decision in CLMS Management Serv. et al. vs. Amwins Brokerage et al. confirmed the United States’ “liberal federal policy in favor of arbitration agreements”. Mitsubishi Motors Corp. vs. Soler Chrysler-Plymouth, 473 US 614, 625 (1985). While not exhaustive for the purposes of this blog, as stated in Gary Born’s law article titled The New York Convention: a directly applicable treaty, 40 Mich. J. Int’l L. 115 (2018), the judgment of the Ninth Circuit affirms “one of the fundamental objectives of the Convention: the establishment of uniform rules of international law governing international arbitral proceedings”. Identifier. at 116. At this point, Born correctly postulates that if the New York Convention were not directly applicable, “its terms would not apply directly in state or federal courts.” As a result, international agreements and arbitral awards would be subject to a confused array of different and uncertain legal rules in different US courts, with state law being, in any event, applicable to important categories of such agreements and awards in US courts. American states. ” Identifier. to 131. That is, if the New York Convention was not directly applicable, then acts of Congress which amended the Federal Arbitration Act to allow the implementation of the New York Convention York would have been applicable only to US federal courts and not to US states. courts. Such an outcome would defeat the fundamental purpose of the New York Convention. See for example, id. to 151.

The position of the Ninth Circuit is also consistent with the interpretation of the treaty by many other contracting states of the New York Convention as being self-executing. As Born explains further, a 2008 report released by the UNCITRAL Secretariat found that “for a large majority of states, the New York Convention was considered ‘self-executing’. Identifier. at 169. Consequently, while American jurisprudence controls whether a treaty is directly applicable in the United States, the Ninth Circuit decision reaffirms the primary objective of the New York Convention to establish uniform rules of international law governing the international arbitration process.

This article first appeared on the Kluwer Arbitration Blog here. Written by Giorgio Sassine of Musick, Peeler & Garrett LLP


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