The Second Circuit Held That the New York Convention Preempts State Anti-Arbitration Insurance Laws

At a Glance

• In a significant win for international insurers, the Second Circuit held in Certain Underwriters at Lloyd’s v. 3131 Veterans Blvd LLC & Mpire Properties LLC that Article II(3) of the New York Convention is self-executing and preempts Louisiana’s state law barring arbitration of insurance disputes.
• The decision abrogates the Second Circuit’s 1995 precedent in Stephens v. American Int’l Insurance Co., resolving a long-standing outlier view and narrowing a key federal circuit split.
• The ruling affirms the enforceability of international arbitration agreements in insurance policies issued by foreign carriers, even in states with anti-arbitration laws.

Case Background and Legal Conflict

The dispute involved surplus lines insurers at Lloyd’s of London seeking to compel arbitration of hurricane damage claims filed by Louisiana property owners, 3131 Veterans Blvd LLC and Mpire Properties LLC. The underlying insurance policies — covering commercial properties damaged by Hurricane Ida — contained standard international arbitration provisions requiring disputes to be resolved in New York State under New York law.

The insured parties, however, sued in Louisiana state court, invoking Louisiana Revised Statutes, title 22, section 868, which prohibits arbitration provisions in insurance contracts delivered or issued for delivery in the state. The insurers responded by initiating parallel proceedings in the Southern District of New York to enforce the arbitration agreements under Chapter 2 of the Federal Arbitration Act (FAA), which implements the 1958 New York Convention in the United States.

Relying on Stephens, both district courts held that the McCarran-Ferguson Act (MFA) permitted Louisiana law to reverse-preempt federal arbitration obligations, and denied the insurers’ petitions to compel arbitration. The Second Circuit reversed.

The Second Circuit’s Analysis: Medellín and Self-Executing Treaties

At the heart of the Second Circuit’s May 8, 2025, ruling is a reevaluation of whether Article II(3) of the New York Convention is “self-executing” — meaning it requires no further legislative implementation to be binding in U.S. courts.

The court concluded that its prior reasoning in Stephens had been overtaken by the U.S. Supreme Court’s 2008 decision in Medellín v. Texas, which clarified the standard for determining whether a treaty is self-executing. Applying Medellín, the panel held that Article II(3) is self-executing because:

• It provides a clear directive to domestic courts to refer parties to arbitration.
• It uses mandatory language (“shall refer”) that requires enforcement.
• And there is no indication that its effectiveness depends on further legislative action.

The court emphasized that its prior decision in Stephens failed to analyze the treaty text and structure, or to consider that some treaty provisions may be self-executing even if others are not. The panel aligned itself with the First, Fifth and Ninth Circuits, all of which have held in recent years that the New York Convention requires enforcement of qualifying arbitration agreements, notwithstanding contrary state insurance laws.

Commercial and Doctrinal Significance

The Second Circuit’s decision has significant implications for both arbitration jurisprudence and the insurance industry.

Alignment Among Circuits

With the Second Circuit joining other circuit courts of appeals in recognizing Article II(3) as self-executing, the likelihood of Supreme Court review diminishes. This growing consensus reduces the risk of forum shopping and promotes uniformity in the enforcement of arbitration agreements across jurisdictions.

Abrogation of Stephens Clarifies Preemption Doctrine

The decision eliminates a long-standing source of uncertainty in one of the most commercially important circuits. Given that New York is a center for both international arbitration and insurance markets, the court’s ruling brings needed clarity to parties contracting under the New York Convention.

Enhanced Predictability for Cross-Border Disputes

Foreign insurers and reinsurers that include arbitration provisions in policies with U.S.-based insureds can now enforce those agreements with greater confidence — even where state laws purport to prohibit arbitration.

MFA Reverse Preemption Narrowed

The decision reaffirms that the MFA does not provide states with carte blanche to override international treaty obligations. Where treaty provisions are self-executing, they remain binding federal law under the Supremacy Clause.

Practical Takeaways for Insurers and Arbitration Practitioners

Revisit Policy Language

Insurers should ensure that arbitration provisions in their policies — especially surplus lines policies — are drafted with clarity as to seat, governing law and consent. The Second Circuit’s decision confirms such provisions are enforceable in many states, even those with anti-arbitration statutes.

Reconsider Jurisdictional Strategy

Where state courts may refuse to enforce arbitration provisions in insurance contracts, insurers can now more confidently seek relief in federal court under the New York Convention.

Broader Treaty Analysis Applies

Beyond the insurance context, the court’s careful application of Medellín offers a template for assessing whether other treaty provisions are self-executing — and thus insulated from state-law override.

Conclusion

With this ruling, the Second Circuit brings its jurisprudence into line with other circuits that have recognized the supremacy of the New York Convention over conflicting state insurance laws. The decision reinforces the federal policy favoring arbitration and underscores the binding nature of the United States’ treaty obligations in the international commercial context.

As the use of arbitration in global insurance markets continues to grow, this decision offers welcome clarity to foreign carriers, reinsurers and policyholders seeking predictability in dispute resolution.