Nathan M. Crystal & Francesca Giannoni-Crystal, Enforceability of Forum Selection Clause: A “Gallant Knight” Still Seeking Eldorado, 8 S.C. J. Int’l. L. & Bus 203
In Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972), the Supreme Court reversed the historical judicial antagonism to forum selection clauses and established a strong presumption in favor of the enforceability of such clauses. However, Bremen included a number of possible limitations on the enforceability of FSC, especially the requirement of reasonableness, that create uncertainty (and basis for litigation) about such clauses. Relying on Bremen standards, courts today generally enforce forum selection clauses. However, the vagueness of the Bremen standards leaves room for a party to resist enforcement and the result may be delay and inefficiency.
In Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), the Supreme Court has said that an arbitration clause is a form of FSC, but it has applied different standards for the enforcement of arbitration clauses from FSC.
This paper argues that the Court should abandon these limitations in enforcing FSC in international commercial contracts. Such clauses should be subject to the general standards for enforceability of any contract. In addition, paralleling arbitration, the analysis of the enforceability of a FSC should apply only to the FSC itself not the contract as a whole (so called “severability doctrine”, see Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, (1967)) This article argues also for two other changes in the law: (1) A FSC should be interpreted according to the law of the chosen court (and this not only when the parties have included a choice-of-law clause – see Albemarle v. AstraZeneca, U.K., Ltd., 628 F.3d (4th Cir. 2010) -- but also when they have failed to do so) (2) In addition, as a matter of policy, a FSC should be interpreted as exclusive, unless the clause contains clear language to the contrary. This approach reflects the majority view as expressed in international conventions on jurisdiction and arbitration, and, more importantly, they carry out the reasonable expectations of the parties. In addition, reasons of economic efficiency, history, and international uniformity support this change in the law.
While the Hague Convention on Choice of Court Agreements (COCA) resolves many issues associated with the enforceability of FSC, the ratification of the Convention by the United States will leave a number of questions unanswered. The grounds for unenforceability of a FSC under the Convention are quite broad and ill-defined. Moreover, many international commercial contracts are not subject to the Hague Convention. Courts will have an opportunity to reexamine the grounds for refusing to enforce a FSC.