Introduction

In a consequential decision for international arbitration and insurance law, the United States Court of Appeals for the Second Circuit held that Article II Section 3 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) is self-executing. This holding directly abrogates the Circuit’s prior precedent in Stephens v. American International Insurance (Stephens I), 66 F.3d 41 (2d Cir. 1995), to the extent Stephens I concluded otherwise. The court’s ruling aligns the Second Circuit with post-Medellín authority in other circuits and removes a longstanding obstacle to enforcing arbitration clauses in insurance contracts that fall under the Convention when state insurance law otherwise prohibits arbitration.

The opinion consolidates two appeals—Certain Underwriters at Lloyd’s, London v. 3131 Veterans Blvd LLC and Certain Underwriters at Lloyd’s, London v. MPIRE Properties LLC—each arising out of surplus lines insurance policies covering Hurricane Ida losses in Louisiana. Both policies contained arbitration clauses requiring New York-seated arbitration under New York law. Louisiana law, however, prohibits arbitration clauses in insurance contracts. The district courts denied the insurers’ petitions to compel arbitration, relying on Stephens I and the McCarran–Ferguson Act (MFA) to find that Louisiana’s anti-arbitration statute “reverse preempted” the Federal Arbitration Act (FAA) and the Convention’s implementing legislation.

Writing for a unanimous panel, Judge Gerard E. Lynch concluded that Medellín v. Texas, 552 U.S. 491 (2008), fundamentally altered the test for determining whether treaty provisions are self-executing. Applying Medellín, the court held that Article II(3) of the New York Convention is self-executing and therefore not subject to McCarran–Ferguson reverse preemption. The court reversed and remanded both cases for further proceedings.

Summary of the Opinion

• The Second Circuit holds that Article II Section 3 of the New York Convention is self-executing under Medellín’s framework.
• Stephens I is abrogated to the extent it held Article II Section 3 is not self-executing.
• Louisiana’s anti-arbitration statute for insurance contracts (La. R.S. § 22:868), as interpreted by the Louisiana Supreme Court in 2024, remains valid under state law and bars insurance arbitration clauses as a matter of Louisiana law.
• The FAA and FAA-derived delegation principles are reverse-preempted by the MFA in the insurance context and cannot, by themselves, override Louisiana’s prohibition.
• Because Article II(3) is self-executing, it is not an “Act of Congress” and therefore not subject to MFA reverse preemption; courts must honor the Convention’s directive to refer covered disputes to arbitration unless narrow exceptions apply.
• The court reverses the district courts’ denials of petitions to compel arbitration to the extent they relied on Stephens I, and remands for proceedings consistent with the Convention.

Factual and Procedural Background

The cases involve surplus lines insurance policies issued by a consortium of carriers at Lloyd’s, London to cover commercial properties damaged by Hurricane Ida in August 2021. The insured properties were later purchased by 3131 Veterans Blvd LLC and MPIRE Properties LLC, who received assignments of rights under the policies from the original insureds.

Each policy contained an identical arbitration clause requiring arbitration in New York under New York law and covering “all matters in difference” regarding the insurance, including issues of “formation and validity.”

When disputes arose about the adequacy of claim payments, 3131 Veterans and MPIRE sued in Louisiana state court. The insurers filed petitions in the Southern District of New York to compel arbitration and to enjoin the state suits under the FAA and Article II(3) of the Convention. Both district courts (Judge Preska and Judge Abrams) denied the petitions, holding that Louisiana’s anti-arbitration insurance law reverse-preempted the FAA and the Convention’s implementing statutes under the MFA, relying on Stephens I.

Analysis

Precedents and Authorities Cited and Their Influence

• Stephens v. American International Insurance (Stephens I), 66 F.3d 41 (2d Cir. 1995): Held that the New York Convention was not self-executing and therefore could be reverse-preempted by the MFA. The district courts relied on this decision. The Second Circuit now abrogates Stephens I in light of Medellín.
• Medellín v. Texas, 552 U.S. 491 (2008): Established the controlling test for whether a treaty provision is self-executing, focusing on (1) whether the text directs domestic courts, (2) uses mandatory language such as “shall,” and (3) whether text, background, and history show an intent for immediate judicial effect. Medellín undermined Stephens I’s earlier approach, which weighed the existence of implementing legislation without undertaking this textual and historical analysis.
• First and Ninth Circuit decisions applying Medellín to Article II(3): The court finds persuasive the First Circuit’s Green Enterprises, LLC v. Hiscox Syndicates Ltd., 68 F.4th 662 (1st Cir. 2023), and the Ninth Circuit’s CLMS Mgmt. Servs. Ltd. P’ship v. Amwins Brokerage of Ga., LLC, 8 F.4th 1007 (9th Cir. 2021), both holding that Article II(3) is self-executing because it is a direct command to domestic courts that they “shall” refer parties to arbitration.
• Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714 (5th Cir. 2009) (en banc): Cited for the concurring observation that Article II(3) contains a mandatory judicial directive. The Second Circuit’s reasoning aligns with the thrust of post-Medellín analysis emphasizing Article II(3)’s direct judicial command.
• Louisiana authorities on anti-arbitration insurance law: La. R.S. § 22:868(A)(2) bars arbitration clauses that deprive Louisiana courts of jurisdiction or venue in insurance contracts. The court notes Courville v. Allied Professionals Ins. Co., 174 So. 3d 659 (La. Ct. App. 2015), and highlights the Louisiana Supreme Court’s recent decision in Police Jury of Calcasieu Parish v. Indian Harbor Ins. Co., 395 So. 3d 717 (La. 2024), explaining that Louisiana’s 2020 amendment did not open the door to arbitration clauses in surplus lines policies.
• FAA and delegation jurisprudence: Cases like Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019), Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392 (2d Cir. 2018), and NASDAQ OMX Grp., Inc. v. UBS Sec., LLC, 770 F.3d 1010 (2d Cir. 2014) recognize parties’ ability to delegate “gateway” arbitrability issues to arbitrators under the FAA. The Second Circuit explains that these FAA-derived delegation principles are themselves subject to MFA reverse preemption in the insurance context.
• McCarran–Ferguson Act (15 U.S.C. § 1012(b)): Provides that no Act of Congress shall invalidate, impair, or supersede state laws regulating the business of insurance unless the Act specifically relates to insurance. The Second Circuit applies MFA to reverse-preempt the FAA but not the self-executing treaty obligation in Article II(3).
• Other Supreme Court guideposts: The court cites Southland Corp. v. Keating, 465 U.S. 1 (1984) (Supremacy Clause preemption by FAA absent MFA), Humana Inc. v. Forsyth, 525 U.S. 299 (1999) (MFA scope), GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 590 U.S. 432 (2020) (Convention does not define arbitrability; domestic law informs), and Coinbase, Inc. v. Suski, 602 U.S. 143 (2024).
• Executive Branch view: The court notes the United States took the position in a Supreme Court amicus brief that Article II(3) is self-executing, a view “entitled to great weight.”
• Restatement (Fourth) of Foreign Relations Law § 310 cmt. b (2018): Acknowledges that treaties can contain both self-executing and non-self-executing provisions; the inquiry focuses on the specific provision at issue.

Legal Reasoning

1. Louisiana law bars insurance arbitration clauses. Louisiana Revised Statutes § 22:868(A)(2) prohibits agreements that deprive Louisiana courts of jurisdiction or venue in insurance contracts. Although a 2020 amendment allowed certain forum or venue selection clauses in forms not subject to Department of Insurance approval, the Louisiana Supreme Court has clarified that the amendment did not authorize arbitration clauses in surplus lines policies. Arbitration clauses in such policies remain unenforceable under Louisiana law.
2. FAA and delegation principles are reverse-preempted in this context. The FAA would ordinarily ensure enforceability of arbitration agreements and permit parties to delegate arbitrability questions to arbitrators. But the MFA allows state insurance laws to reverse-preempt Acts of Congress that do not specifically regulate insurance. Applying FAA-based delegation would “invalidate, impair, or supersede” Louisiana’s statutory ban, so the FAA and its delegation case law are reverse-preempted here. The gateway questions cannot be sent to an arbitrator by relying on the FAA.
3. The key question: Does the New York Convention’s Article II(3) operate directly (self-executing) or only via implementing legislation? If Article II(3) is self-executing, the MFA does not apply because it reaches only Acts of Congress, not self-executing treaty obligations. If non-self-executing, the Convention would depend on Chapter 2 of the FAA (9 U.S.C. §§ 201–208), and Louisiana law could potentially reverse-preempt via the MFA.
4. Medellín’s test governs and undermines Stephens I. Medellín instructs courts to determine self-execution by (a) assessing whether the treaty text directs domestic courts, (b) whether it uses mandatory “shall/must” language, and (c) whether the text, background, and history show intent for immediate judicial enforceability. Stephens I did not conduct this analysis; it focused on the existence of implementing statutes for the Convention as a whole and did not parse Article II(3).
5. Article II(3) satisfies Medellín’s criteria. Article II(3) states that a court of a contracting nation “shall” refer parties to arbitration unless the agreement is “null and void, inoperative or incapable of being performed.” This is an explicit directive to domestic courts using mandatory language, signaling immediate judicial application. Nothing in the negotiating history cited, nor in the Executive Branch’s position, suggests otherwise.
6. No conflict with other Convention provisions. The court rejects an “all or nothing” view. Treaties can contain both self-executing and non-self-executing provisions. Article I(3) (commercial reservation) and Article II(1) (leaving scope of arbitrability to domestic law) do not negate Article II(3)’s self-executing nature. Rather, these provisions simply define the Convention’s scope using background domestic law; once an agreement falls within that scope, Article II(3)’s command to courts applies directly.
7. Conclusion of law. Article II(3) is self-executing. It is not an Act of Congress and therefore not subject to McCarran–Ferguson reverse preemption. The district courts’ reliance on Stephens I was error; those denials of arbitration were reversed to that extent and the cases remanded.

Scope, Limits, and What Remains Open on Remand

• Scope: The ruling concerns arbitration agreements that “fall under” the New York Convention (i.e., foreign or non-domestic agreements as defined by 9 U.S.C. § 202). It does not decide issues outside the Convention’s scope.
• FAA delegation still inapplicable here: Because the FAA is reverse-preempted by Louisiana law in the insurance context, delegation of arbitrability to arbitrators cannot be based on the FAA. The court reached the Article II(3) issue itself.
• Remaining defenses: On remand, courts may still consider Convention-recognized defenses—for example, whether an agreement is “null and void, inoperative or incapable of being performed”—and other issues consistent with the seat and choice-of-law clauses. Louisiana’s categorical anti-arbitration rule cannot supply the “null and void” defense.
• Relief against parallel state actions: The district courts previously denied injunctions as moot. On remand, the courts will address appropriate remedies (such as orders compelling arbitration and any relief concerning pending state proceedings) consistent with federal law.

Impact

Immediate Effects

• Enforcement of insurance arbitration clauses under the Convention: Parties to surplus lines or other insurance contracts that fall under the Convention can invoke Article II(3) directly, notwithstanding state insurance statutes that prohibit arbitration. This is particularly salient in jurisdictions, like Louisiana, that bar arbitration clauses in insurance policies.
• Realignment with other circuits: The Second Circuit now aligns with the First and Ninth Circuits in holding Article II(3) self-executing under Medellín. This convergence enhances uniformity in the enforcement of the Convention in U.S. courts.
• Drafting incentives: Insurers and commercial policyholders have renewed incentives to structure arbitration clauses and transactions to fall within the Convention (e.g., foreign insurers, non-domestic elements, New York seat), ensuring enforceability despite contrary state insurance law.

Longer-Term Consequences

• Limits of McCarran–Ferguson in international arbitration: MFA remains a powerful shield against federal statutes like the FAA in the insurance space, but it does not reach self-executing treaty obligations. This decision clarifies the boundary between domestic arbitration law and the United States’ treaty commitments.
• Procedural posture going forward: Litigants should expect federal courts (not arbitrators) to decide gateway arbitrability questions in insurance cases where the FAA is reverse-preempted, but courts will then apply Article II(3)’s command to refer covered disputes to arbitration absent narrow exceptions.
• State policy choices vs. treaty commitments: State policies skeptical of arbitration in insurance contracts will yield where an agreement falls under the Convention. Domestic law can still define what disputes are arbitrable and defenses such as fraud or impossibility, but state categorical bans cannot block the Convention’s command to refer parties to arbitration.

Complex Concepts Simplified

• Self-executing vs. non-self-executing treaties: A self-executing treaty provision has immediate effect in U.S. courts without further legislation. A non-self-executing provision requires implementing legislation (an Act of Congress) to be enforceable domestically. Medellín tells courts to look for direct instructions to courts and mandatory language like “shall,” and to consider the provision’s text and history.
• McCarran–Ferguson Act “reverse preemption”: MFA protects state insurance laws from being displaced by federal statutes that do not specifically regulate insurance. It does not apply to self-executing treaty obligations, which are not “Acts of Congress.”
• FAA “delegation” of arbitrability: Parties may agree to let arbitrators decide gateway questions (like whether an arbitration agreement is enforceable), but that delegation authority comes from the FAA. In the insurance context, if MFA reverse-preempts the FAA, delegation cannot be used to send those questions to the arbitrator.
• The New York Convention, Article II(3): Commands courts of contracting nations to refer parties to arbitration when a covered arbitration agreement exists, unless the agreement is “null and void, inoperative or incapable of being performed.” These exceptions are narrow and generally track familiar contract defenses (e.g., fraud, duress, impossibility).
• “Non-domestic” agreements under the Convention: The Convention applies to foreign and non-domestic arbitration agreements. Agreements involving foreign parties or foreign elements, or otherwise meeting 9 U.S.C. § 202’s criteria, typically “fall under” the Convention even if the seat is in the United States.
• Surplus lines insurance: Insurance provided by non-admitted carriers to cover risks that admitted carriers will not underwrite. Such policies are common for catastrophic risks (e.g., hurricanes) and often involve international insurers, bringing them within the Convention’s scope.

Key Takeaways and Practical Guidance

• For insurers and policyholders: Where possible, draft arbitration clauses to fall under the Convention (e.g., involvement of foreign insurers; specify a New York seat; include a New York choice-of-law clause). Article II(3) will support enforcement despite state anti-arbitration rules in insurance.
• For counsel litigating in anti-arbitration states: Do not rely on FAA delegation to arbitrators for gateway issues in insurance cases; MFA may reverse-preempt the FAA. Instead, move in federal court to enforce the Convention directly under Article II(3).
• For courts on remand: The analysis should proceed under Article II(3): confirm that the agreement falls under the Convention, then determine whether any narrow Convention defenses apply. State rules categorically banning arbitration cannot supply those defenses.
• For policymakers: The decision delineates the limits of state control over arbitration in insurance where international obligations are engaged. State categorical bans cannot override a self-executing treaty command.

Conclusion

The Second Circuit’s decision represents a significant recalibration of its treaty jurisprudence in light of Medellín. By declaring Article II Section 3 of the New York Convention self-executing and abrogating Stephens I to the contrary, the court confirms that the United States’ treaty obligation to send covered disputes to arbitration operates directly in federal courts, beyond the reach of McCarran–Ferguson reverse preemption. At the same time, the court carefully preserves the distinct role of the MFA in reverse-preempting the FAA and its delegation regime in insurance cases.

Practically, this ruling clears a dependable pathway to compel arbitration of international or non-domestic insurance disputes notwithstanding state anti-arbitration laws. It brings the Second Circuit into alignment with contemporary circuit authority and reaffirms the supremacy and immediacy of the United States’ commitments under the New York Convention. On remand, the district courts will apply Article II(3)’s directive—referring parties to arbitration unless a narrow Convention defense applies—thus implementing the treaty’s core promise of predictable, enforceable arbitration in international commerce.