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In a dispute over compliance and conciliation, the arbitration panel precedes



The Supremacy clause in the US Constitution repeals state laws that violate US federal laws and treaties. Under the McCarran-Ferguson Act, the federal law of the state insures insurance that affects state-owned insurance business. This issue arises in conflicts between arbitration provisions in certain states' laws of law and federal arbitration ("FAA"). But what if it is not the FAA, but a treaty, such as the UN Convention on the Recognition and Enforcement of Foreign Arbitration (the "Convention")? And what if the insurance policy contains a provision that requires the policy to comply with state law, where a provision of the policy – such as the arbitration clause – violates state law?

McDonnel Group, L.L.C. v. Great Lakes Ins. SE, UK Branch No. 18-30817 (May 4, May 13, 2019), the Fourth Circle confirmed a court ruling that a state anti-dumping regulation was introduced by the Convention. That holding was nothing new, as the fourth circuit had previously claimed that a treaty is not a law that Congress has gone and is therefore not the opposite of McCarran-Ferguson. What is new here, as the court stated, is how a provision on compliance with the statutes affects the analysis.

A provision on "compliance with statutory" prescribes, in principle, that if a provision of a policy violates state law, then the Policy is amended to comply with state law. Here, the policyholder claimed that the state legislation on arbitration must "change" the arbitration in the insurance policy. The Court of Appeal held, and the court of law confirmed that, for the Convention to require state law, the State anti-dumping rule cannot be applied to the policy at issue. And since the law does not apply to the policy, there is no conflict between the policy and the State Act. Therefore, the compliance clause is not triggered and the arbitration clause survives.

There are many moving parts here, but basically the arbitral tribunal acted for the anti-government law to be introduced by a US treaty – not a law approved by Congress and was not reverse-prempted by McCarran-Ferguson.


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