The New York Convention and the American Federal System

Abstract

Virtually all American states have statutes that make arbitration agreements and awards enforceable and that set out procedures for their enforcement in state courts. A number of states, including California, Texas, and Florida, have enacted international arbitration statutes to supplement their domestic arbitration laws.2 But this extensive body of state arbitration law has had only a “marginal impact” on American arbitration practice – particularly international arbitration practice because the Federal Arbitration Act (FAA) preempts conflicting state arbitration laws, even in state court. Although we know that the FAA preempts state law, the scope of that preemptive effect is not clear. Indeed, a pair of United States Supreme Court cases have suggested a possible broader role for state law in arbitration matters. In Hall Street Associates, LLC v. Mattel Inc., the Court indicated in dicta that parties might be able to contract for expanded review under state law although the FAA does not permit them to do so.5 And in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the Court suggested that the arbitrators might not have exceeded their powers in construing an arbitration clause to permit class arbitration if they had relied on a state default rule permitting class arbitration. Whether state law can play a broader role in international arbitration matters in the United States depends on the extent to which the New York Convention and Chapter Two of the FAA (which implements the Convention) preempt state arbitration law. This article undertakes a preliminary analysis of that broad topic by examining several legal questions central to determining the preemptive effect of the New York Convention: (1) What effect, if any, does the federal-state clause (Article XI) have on U.S. obligations under the Convention? (2) To what extent does Chapter Two of the FAA apply in state court? and (3) Is the New York Convention self-executing? Part II briefly sets out background information on the New York Convention and its implementation in the U.S. Part III describes three models of how an arbitration convention might be implemented: the “exclusive spheres” model, the “federal preemption” model, and the “access” model. Part IV analyzes the legal questions identified above and considers their implications for the models. Part V discusses the extent to which parties can contract out of the FAA and into state arbitration law. Finally, Part VI identifies some possible implications of this analysis and concludes.