Three’s a Crowd: The Unhappy Interplay Among the New York Convention, FAA, and McCarran-Ferguson Act

Zachary M. VanVactor | Comment

In recent years, arbitration has become an increasingly favored means of dispute resolution, particularly in the field of maritime insurance. In the United States, maritime arbitration is governed by two primary sources: the Federal Arbitration Act and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Louisiana, along with several other jurisdictions that regularly handle maritime disputes, provides an injured party the right to name the alleged tortfeasor’s insurer as a direct defendant based on the insured’s tortious conduct. These direct action statutes often include language or specific provisions that, in many instances, courts have interpreted to void arbitration clauses in insuring agreements, reasoning that the enforcement of such clauses would impair or impede the right of direct action created by the statute. Because direct action statutes regulate the business of insurance–a field of legislation largely reserved to the states by the McCarran-Ferguson Act–they are generally exempt from preemption by federal law. This Comment presents a brief survey of state direct action statutes; an overview of the McCarran-Ferguson Act, the Federal Arbitration Act, and the New York Convention; an analysis of the conflicting interpretations of the New York Convention among the federal circuits; and a discussion of the conflicting outcomes in cases involving (1) McCarran-Ferguson and the Federal Arbitration Act and (2) McCarran-Ferguson and the New York Convention. Finally, this Comment will discuss the implications of those results and offer suggestions on how Congress or the Supreme Court can (or may well) resolve the incongruities.