When Forum Selection Clauses Meet Choice of Law Clauses
62 Pages Posted: 13 Jan 2020
Date Written: 2019
Many contracts that contain a forum selection clause also contain a choice of law clause. This raises the issue of whether to apply the parties’ chosen law to questions of forum selection clause interpretation, such as whether the clause is mandatory or permissive and how far the scope of the clause extends. The recent trend has been for courts to apply the law selected by the parties in their choice of law clause to govern these interpretation issues. This Article argues that the law has gone in the wrong direction and that courts should apply forum law to questions of forum selection clause interpretation.
This Article challenges each of the stated rationales in favor of applying the parties’ chosen law to interpret a forum selection clause: the party autonomy argument; the intention of the parties argument; the certainty and predictability argument; the substance versus procedure argument; the “part of the contract” argument; and the forum shopping argument. None of the purported arguments in favor of applying the parties’ chosen law stand up to closer scrutiny.
Additionally, this Article examines the myriad complications presented by interpreting a forum selection clause in conjunction with a choice of law clause. Foremost among these is the sheer complexity of the exercise. Particularly when it comes to applying foreign country law, there is uncertainty over exactly what the “chosen law” is. If the parties have selected the law of a European Union country, for instance, there are a variety of possible laws that could apply: internal domestic law, the Brussels Regulation, the Hague Choice of Court Convention, or some combination thereof. Additional complications are presented by structural dynamics of the choice of law endeavor: the principle of party prosecution and the differential treatment of forum selection clauses in a contract without a choice of law clause. Finally, when one examines what courts are doing in practice, it is clear that they are not particularly adept at ascertaining and applying the parties’ chosen law to interpret a forum selection clause. The net result is a hodge-podge interpretation of mixed U.S. and foreign law.
The choice of law exercise is complicated enough. This Article suggests that we need not make it any more complicated by using the parties’ chosen law to interpret a preliminary issue. Ultimately, the responsibility is on the parties to draft forum selection clauses clearly and without ambiguity. If they do so, then none of this is an issue.
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