Beware International Laws and Conventions | Kilpatrick Townsend & Stockton LLP - JDSupra - JD Supra
In the decision, McDonnel Group, LLC v. Great Lakes Insurance SE, UK Branch. No. 18-30817, 2019 WL 2082905, (5th Cir. May 13, 2019), the Fifth Circuit held that federal law favoring the enforceability of arbitration in international contracts pre-empts state law purporting to invalidate attempts to set jurisdiction or venue in another state. While the contract at issue in the case was an insurance policy, it is clear that the implications of this case are two-fold. First, this case directly affects potential insurance coverage disputes, a common fixture in construction defect litigation. Second, it also may affect other types of construction litigation. Many states have clauses that can nullify the effects of provisions in contracts requiring another state’s laws to be applied, or venue in another state, when the issues in dispute are construction issues in the home state. Such clauses may render the provision void or voidable, depending upon a state’s laws. When a party is dealing with an international construction related transaction (e.g., purchase of a piece of equipment from overseas), McDonnel holds that a party will not be able to use a similar state statute to overcome an arbitration clause.
Originally published as a Practice Point by the American Bar Association.
Please see full publication below for more information.
enforceability of arbitration in international contracts pre-empts state law purporting to invalidate
clauses that can nullify the effects of provisions in contracts requiring another state’s laws to be
applied, or venue in another state, when the issues in dispute are construction issues in the home
When a party is dealing with an international construction related transaction (e.g., purchase of a
In McDonnel, the contract at issue was a builder’s risk insurance policy. The insurance policy
contained a provision in which the policyholder agreed to arbitrate its disputes with the insurers.
policy to applicable state law, thereby triggering the effect of another state law that nullified any
The court characterized the legal issue as one of preemption, federal law trumping state law. The
federal law that the state law was up against was a commercial treaty adopted in the 50’s. The
international contracts ...” When the Convention is applicable, courts of signatory states must “at
Because the Convention was an act of the executive branch and the Senate, the McCarran- Ferguson Act which nullifies any federal law affecting state laws related to the insurance industry
The take-away is to beware of international laws and conventions when a construction project
source: https://www.jdsupra.com/legalnews/beware-international-laws-and-4271330/
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