Forum Selection Clause - Discussion

Discussion

The choice of law stage in a conflict case requires the forum court to decide which of several competing laws should be applied to resolve the dispute. In this, there is an important distinction to be made between a forum selection clause and a choice of law clause. As an application of the public policy of freedom of contract, the parties are usually free to nominate the proper law under which all relevant disputes will be resolved. If there is an express selection, this choice will be respected so long as it is made bona fide, i.e. the subjective intention prevails unless the purpose is to:

• evade the operation of some mandatory provisions of a relevant law,
• there was an element of fraud or duress or undue influence involved in the signing of the contract, or
• there was some other evidence of mala fides.

But, if the parties do no more than nominate a forum, this is no more than an indication that they intend that forum's law to apply. There are many reasons why parties may select a forum (see a discussion of forum shopping):

• the forum has established significant expertise in the relevant areas of law, e.g. shipping, charterparties, carriage by air, etc.;
• the standard of judicial decision making may be high:
• there may be no corruption or other outside influence to affect the fairness of the judgments;
• the procedures may be efficient and minimise losses arising through any delay in arriving at a judgment;
• all the major witnesses may be resident within the jurisdiction making the forum convenient (see forum non conveniens); etc.

If the parties have selected a jurisdiction as the place for the resolution of a dispute, the implication is that the courts may nevertheless apply their lex fori which includes their general choice of law principles. Thus, in the ordinary course of legal events, the forum court may identify and apply a foreign law as the proper law. The majority of professionally drafted contracts will address both issues, and contain clauses specifying both the forum and the law to be applied therein. The fact that the particular contract only specifies the forum therefore becomes highly revealing as implying that the parties intended to leave the choice of law issue to the forum nominated.

Forum selection clauses have been criticised by a minority of courts as improper attempts to divest them of personal jurisdiction over the parties. Because of this, some jurisdictions refuse to give effect to these clauses, declaring them to be void as against public policy. However, most jurisdictions now recognise and enforce forum selection clauses, so long as the parties were acting in good faith.