When Forum Selection Clauses Meet Choice of Law Clauses

69 Am. U. L. Rev. 325 (2019).

* Professor of Law, Roger Williams University School of Law. The author would like to thank Tyler Martin and Lucas Sylvia for their very helpful research assistance.

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.

Introduction

Parties to contracts, particularly international contracts, desire certainty. They want to know ahead of time where they will litigate if a dispute arises and under what law. Accordingly, contracts often contain both forum selection and choice of law clauses.¹ If a forum selection clause is carefully drafted, then the inquiry should be fairly straightforward. For instance, if the parties agree that “the courts of France shall have exclusive jurisdiction over any and all claims related to the contract, including, without limitation, any statutory or tort claims,” there is little interpretative wiggle room. The parties clearly intended the clause to be mandatory, since they expressly used the term “exclusive.” And they clearly intended for the clause to be construed very broadly to cover all claims, including statutory and tort claims. If a party files suit in New York in contravention of the clause, the court would likely have little difficulty enforcing the clause by dismissing the action.

Unfortunately, forum selection clauses are not always a model of clarity. They are frequently lifted from other contracts without much thought to their exact wording or scope. This leaves courts with the unenviable task of trying to figure out “what the parties intended” by a particular forum selection clause. Did they intend for the clause to be permissive or mandatory? Did they intend for related tort claims to be adjudicated in the chosen forum? Did they intend for non-signatories to be bound by the clause? None of these are easy questions. However, over the years, courts have developed a number of interpretative canons to help guide them in the exercise.²

The issue becomes considerably more complex when choice of law clauses enter into the mix. A choice of law clause complicates the inquiry because it raises the specter that the parties’ chosen law should apply to these interpretative questions. If a U.S. court is called upon to interpret a forum selection clause in a contract also containing a choice of law clause, it faces a choice of law decision: Should it apply forum law to interpret the forum selection clause? Or, should it apply the parties’ chosen law? Up until fairly recently, it was common to see courts applying forum law to interpret a forum selection clause. The reasoning was that issues related to the validity and enforcement of a forum selection clause were procedural matters to be governed by the law of the forum, and the interpretation of a forum selection clause was a necessary prerequisite to its enforcement.³

Lately, though, courts have held that issues of forum selection clause interpretation should be governed by the law chosen by the parties in their contract. They advance several arguments in support of this position. First, choice of law is a manifestation of party autonomy, and courts should not interfere with that autonomy. Second, courts should strive to give effect to the intentions of the parties; by selecting the governing law, the parties intend for a court to interpret the contract, including the forum selection clause, in accordance with that law. Third, outcomes will be more certain if courts apply the parties’ chosen law to interpretative questions presented by a forum selection clause. Fourth, matters of contractual interpretation are fundamentally substantive in nature and therefore should be governed by the chosen law. Fifth, since a forum selection clause is part of a contract, there is no principled justification for singling it out and applying a law other than the chosen law. Sixth, by interpreting a forum selection clause in accordance with the chosen law, forum shopping is curtailed.

This Article challenges each of these rationales, arguing that they do not provide a compelling justification for applying the parties’ chosen law to interpret a forum selection clause. This Article also describes the myriad complications that arise when courts purport to apply the parties’ chosen law to questions of interpretation, particularly where the parties have chosen foreign law⁴ to govern their dispute. Many years ago, Professor Mullenix observed that:

When confronted with a combined forum-selection and choice-of-law provision, most courts construe the forum-selection clause without any reference to the choice-of-law provision . . . . A few courts, however, have speculated that the presence of a contractual choice-of-law provision might alter this conventional course of events. Such idle speculation leads courts into predictable conflict-of-laws contortions.⁵

We are now in the midst of these “predictable conflict-of-laws contortions.”⁶ This Article endeavors to move courts away from these contortions and toward a much simpler analysis.

This Article proceeds as follows: in Part I, I discuss forum selection clauses and how they are treated by U.S. courts. In Part II, I introduce the complications presented by a contract containing both a forum selection clause and a choice of law clause. Next, in Part III, I propose a four-part framework for approaching the intersection between these two types of clauses. I then transition in Part IV to my primary argument: that the rationales advanced in support of applying the parties’ chosen law to question of forum selection clause interpretation are not persuasive. In Part V, I provide five separate reasons for why courts should not use the parties’ chosen law to interpret forum selection clauses, especially when that law is foreign law. Finally, I offer some concluding remarks about how much of this can be easily avoided.

I. Forum Selection Clauses in U.S. Courts

Forum selection clauses⁷ are ubiquitous in contracts, particularly international commercial contracts.⁸ They are seen as a manifestation of party autonomy and are thought to provide a measure of foreseeability and predictability with respect to any potential litigation. There are two broad types of forum selection clauses: mandatory and permissive.⁹ A mandatory forum selection clause requires that the parties litigate only in their designated forum. That is, a mandatory clause purports to preclude the parties from initiating suit in any jurisdiction other than the one chosen in the forum selection clause. By contrast, a permissive forum selection clause, as its name suggests, merely permits the parties to sue in the chosen forum, but does not preclude them from suing elsewhere.¹⁰ Mandatory forum selection clauses tend to be more common because they are seen as providing a greater measure of certainty to the parties.

In an ideal world, parties would sue in the place they designated in an exclusive forum selection clause. However, we do not live in an ideal world, and parties often flout the obligations that they assumed under a forum selection clause. When they do so, a court other than the court chosen in the forum selection clause must decide what to do. Should it proceed with the litigation despite the clause? Or, should it dismiss or transfer the proceedings? In other words, the forum must decide what effect the forum selection clause has on its ability to hear the case. This will require a court to answer some pivotal questions: Is the forum selection clause valid? Is the clause, in fact, mandatory? Does the clause encompass the dispute at issue? The answers to these questions will determine what a court will do next.

In federal court, once a court determines that the clause is valid, mandatory, and encompasses the dispute at issue, it will usually dismiss or transfer the case. A federal court will dismiss an action if the forum designated in the forum selection clause is either a foreign country or a state court,¹¹ and it will transfer an action if the designated forum is another federal court.¹² This is its way of “enforcing” the clause; by shutting litigants out of the federal forum, it indirectly forces litigants to the place chosen in their forum selection clause.¹³

Importantly, dismissal or transfer is not automatic. It is effectuated through the forum’s procedural mechanisms and rules. A federal court, faced with a valid forum selection clause in favor of another federal court, will usually¹⁴ transfer the case to that other federal court under 28 U.S.C. § 1404.¹⁵ This section authorizes transfer to another district court “for the convenience of parties and witnesses” and “in the interest of justice.”¹⁶ It is the federal equivalent of the common law forum non conveniens doctrine.¹⁷ When federal courts are faced with a valid and enforceable forum selection clause in favor of another state, they must give primacy to the forum selection clause. Accordingly, they do not conduct a “normal” forum non conveniens analysis—i.e., looking at whether public and private interest factors warrant dismissal.¹⁸ Instead, a court considering transfer in light of a mandatory forum selection clause may only examine public interest factors in the transfer analysis.¹⁹ This is because, by entering into the forum selection clause in the first place, the parties have effectively waived their right to challenge the chosen forum as inconvenient.²⁰

The same general analysis applies where the clause nominates a foreign court or a state court in the forum selection clause. However, in this case, a federal court would resort to the common law doctrine of forum non conveniens, with the necessary adjustments mandated by the presence of a forum selection clause.²¹ The law in state courts is similar, with the obvious difference being that state courts do not have the power to transfer cases to another state.²² State courts will usually employ some version of the forum non conveniens doctrine or specific state law on forum selection agreements to dismiss an action where the parties have entered into a valid forum selection clause nominating a court in another state or country.²³

II. When Forum Selection Clauses Meet Choice of Law Clauses

Things become considerably more complicated when forum selection clauses meet choice of law clauses.²⁴ A typical forum selection clause will provide something to the effect that “any and all disputes arising out of, or related to, this contract will be adjudicated exclusively in State A.” As discussed above, oftentimes a party will choose to file suit in State B in contravention of the forum selection clause.²⁵ The defendant will likely resist litigating in State B and ask State B to dismiss or transfer the suit. The plaintiff, on the other hand, will probably raise issues related to the validity, enforceability, or interpretation²⁶ of the forum selection clause in order to avoid suit in State A. For instance, the plaintiff may argue that the forum selection clause is invalid and therefore should not be given effect. The plaintiff’s goal, of course, is to keep the case in the courts of State B.

Questions of validity focus on whether the forum selection clause was validly formed²⁷ and whether there are reasons not to enforce the clause.²⁸ When dealing with the validity of forum selection clauses, the analysis is a little muddy—at least in federal courts. This is because it is not clear whether federal courts sitting in diversity should use federal law or state law to determine the validity of a forum selection clause.²⁹ One commentator explains that the split of authority is “rooted in two distinct qualities of forum-selection clauses: (1) they are agreements relating to the forum for adjudication which may or may not be enforceable; and (2) they are contractual agreements which may or may not be enforceable.”³⁰ In practice, there is usually a great deal of overlap between federal and state law³¹ on the validity of forum selection clauses, so it may not matter much which law a court applies.³²

Things become considerably more involved, however, when parties have included a choice of law clause in their contract. Many contracts that contain a forum selection clause will also contain a choice of law clause.³³ A typical choice of law clause provides that the contract “will be governed by the law of State A.”³⁴ Using the example above, a State B court will need to decide what law applies to determine the validity of the forum selection clause nominating State A.³⁵ In particular, should a court use the parties’ chosen law to determine the validity of the forum selection clause?³⁶ The majority of federal courts hold that the parties’ chosen law should not govern questions of validity, since such questions are inherently procedural and therefore governed by federal law.³⁷ State courts follow a similar practice, characterizing questions of validity as procedural and therefore governed by forum law, not the chosen law.³⁸ Oftentimes, the practice is largely reflexive, with courts providing little to no discussion of the rationale for applying forum law to questions of validity.³⁹

Although there is not much academic discussion on the topic, there is some disagreement on whether forum law or chosen law should govern questions related to the validity of forum selection clauses. Professor Yackee argues that the parties’ chosen law should govern these issues.⁴⁰ He maintains that forum law is a “poor choice” to govern forum selection clauses for the following reasons:

[I]t risks subjecting the contract to multiple laws, it makes it difficult for parties to anticipate at the contract drafting stage which law will actually be applied to [the forum selection clause], it may promote forum shopping, and it ignores the parties’ bargained-for jurisdictional expectations by overlooking a contract’s explicit or implicit choice of law.⁴¹

Accordingly, Professor Yackee’s position is that forum selection agreements “should be governed first and foremost by the parties’ explicit choice of law.”⁴² And, indeed, a few U.S. courts have applied the parties’ chosen law to questions concerning validity and enforceability.⁴³

Professor Clermont, on the other hand, argues that forum law should apply to determine the validity of forum selection clauses. He provides a host of policy reasons as to why this should be the case, including arguments related to forum control over jurisdiction, the procedural nature of the issue, and the potential to weed out abusive clauses.⁴⁴ Professor Symeonides concludes that “[a]ll things considered, Clermont has the better arguments.”⁴⁵ He is particularly persuaded by the argument that if a forum were to apply the chosen law to test the validity of a forum selection clause this would unduly punish weaker parties who have likely “agreed” to unfavorable choice of law clauses.⁴⁶ Professor Symeonides notes that in many cases, these choice of law clauses are “usually drafted by the corporate defendant, virtually never negotiated, and often unsuspectingly imposed on the weak party.”⁴⁷

Despite Professor Yackee’s criticism of the practice, and a handful of outlier cases, it seems to be settled law that the forum will use its own law⁴⁸ to determine the validity of a forum selection clause contained in a contract that also includes a choice of law clause. According to Professor Symeonides, the “vast majority” of U.S. courts apply forum law to questions of validity and “more often than not, do so without a choice-of-law inquiry.”⁴⁹

The law gets even more complex when it comes to questions of forum selection clause interpretation.⁵⁰ A court will often need to interpret a forum selection clause to determine, for instance, whether the claim at issue even falls within the purview of the clause.⁵¹ Questions of interpretation usually fall within one of the following three⁵² categories: (1) Is the forum selection clause mandatory or permissive? In other words, does the clause require the parties to submit their dispute to the chosen forum, or merely permit them to do so?⁵³ (2) Are the claims at issue within the scope of the forum selection clause? That is, does the clause require that the particular claim or claims be resolved pursuant to the forum selection clause?⁵⁴ (3) Is the party resisting enforcement subject to the forum selection clause?⁵⁵ These questions are often dispositive, so a great deal turns on how a court chooses to interpret the forum selection clause.⁵⁶

Returning to the example above, assume that the plaintiff advances a statutory claim in State B, alleging that the claim is not a “dispute[] arising out of, or related to, th[e] contract.” The task of State B will be to apply some body of law to decide whether the claim falls within the scope of the forum selection clause. If State B finds that the claim does fall within the scope of the clause, and provided there are no other interpretative issues, the court would likely dismiss or transfer the action.

Up until fairly recently, U.S. courts treated issues related to the interpretation of forum selection clauses the same way that they treated issues of validity and enforceability—that is, they applied forum law to all these questions.⁵⁷ In the 2000s, however, courts began to pay a bit more attention to the specific issue of whether forum law should be applied to interpret forum selection clauses when the parties had selected a different law to govern their dispute.⁵⁸ One of the first court of appeals cases to examine this issue was the 10th Circuit in Yavuz v. 61 MM Ltd.⁵⁹ The court in Yavuz noted that the choice of law issue was one of first impression and had received little scholarly or judicial attention in the context of international contracts.⁶⁰ The court held that the forum selection clause should be interpreted using Swiss law, the law chosen by the parties in their contract,⁶¹ reasoning that:

If the parties to an international contract agree on a forum-selection clause that has a particular meaning under the law of a specific jurisdiction, and the parties agree that the contract is to be interpreted under the law of that jurisdiction, then respect for the parties’ autonomy and the demands of predictability in international transactions require courts to give effect to the meaning of the forum-selection clause under the chosen law . . . . [W]e now hold that under federal law the courts should ordinarily honor an international commercial agreement’s forum-selection provision as construed under the law specified in the agreement’s choice-of-law provision. The practice, although apparently merely reflexive, of applying the law of the jurisdiction in which the suit is pending (lex fori), is unsatisfactory.⁶²

Most other appellate courts that have considered this issue have followed the approach endorsed in Yavuz—i.e., using the parties’ chosen law to adjudicate matters related to the interpretation of the forum selection clause.⁶³

Professor Symeonides examined recent cases involving the intersection between forum selection and choice of law clauses. His results show a very clear trend toward applying forum law to issues of validity and enforceability, and the parties’ chosen law to issues of interpretation.⁶⁴ He noted that in 2017, there were nineteen appellate cases that involved the intersection between choice of law and choice of forum clauses.⁶⁵ He observed that: (a) Eight cases involved only questions of enforceability and they all applied forum law; (b) Six cases involved only questions of interpretation, five of them applied the chosen law, and one applied forum law; and (c) Five cases involved both interpretation and enforceability, two applied forum law to both issues, and three applied forum law to questions of enforceability and the chosen law to questions of interpretation.⁶⁶ What these results show is that courts are generally applying forum law to issues of validity and enforceability and applying the parties’ chosen law to questions of interpretation. Prior to analyzing whether this bifurcation between validity and interpretation is appropriate, I propose a framework for thinking about the intersection between choice of law and choice of forum clauses.

III. Framework for the Intersection Between Forum Selection Clauses and Choice of Law Clauses

Because of the complexity of the validity, enforceability, and interpretation analysis, it is helpful for courts approaching the confluence of choice of law clauses and forum selection clauses to have some sort of governing framework for the analysis—that is, some start point and some end point.⁶⁷ Otherwise, the issues all tend to bleed together.⁶⁸ Accordingly, I propose the following four-step framework.⁶⁹

A. Step One: Validity and Enforceability of Choice of Law Clause

First, courts should consider the validity and enforceability of the choice of law clause contained in the contract. The validity inquiry entails whether the clause is properly formed as a matter of contract law, and whether there are any contractual barriers to enforcement (e.g., unconscionability).⁷⁰ Currently, “very few courts focus on the question whether the choice-of-law clause is itself enforceable as a matter of contract law.”⁷¹ But, if there is no valid choice of law clause, the “chosen law” will be irrelevant.

Then, the court must consider whether to enforce the clause as a conflict of laws matter. This means that a court will apply section 187 of the Restatement (Second) of the Conflict of Laws—or whatever other approach the forum has adopted—to ensure that it is comfortable enforcing the choice of law clause.⁷² If the choice of law clause is invalid or unenforceable, the court must then determine what law to apply both to the underlying dispute and to the interpretation of the forum selection clause.

B. Step Two: Validity of Forum Selection Clause

Second, courts must determine the validity of the forum selection clause—i.e., is the forum selection clause valid as a matter of contract law? As discussed above, the common practice is for a court to apply forum law to the issue.⁷³ If the court determines that the forum selection clause is invalid, then it will proceed as though no forum selection clause was present. Conversely, if a court determines that the clause is valid and enforceable, then a court will turn to either Step Three (if applicable), or Step Four.

C. Step Three: Interpretation of the Forum Selection Clause

Third, a court must interpret the forum selection clause. This may involve determining whether the clause is mandatory or permissive, and whether the claim at issue falls within the scope of the clause. Here, there is an open question as to whether forum law, or the chosen law, should govern. If the chosen law governs, there is an additional step of determining what that chosen law is exactly, which, in the international context, may require examination of international treaties and involve the doctrine of renvoi.⁷⁴ If the parties have not entered into a choice of law clause, a court must decide whether to apply forum law to interpretation issues, or whether to conduct a choice of law analysis to ascertain the applicable law. In other words, a court faces a choice of law analysis whether or not the parties have chosen a governing law.

D. Step Four: Effect of Forum Selection Clause

Fourth, a court must decide what effect to give the forum selection clause.⁷⁵ Here, the exact analysis will differ depending on the litigation posture. The most common scenario involves a court other than the one chosen in the forum selection clause determining whether it should hear the action before it or dismiss/transfer the proceedings in light of the forum selection clause.⁷⁶ If a court determines that the clause is mandatory and that the claim falls within the scope of the clause, it will ordinarily “enforce”⁷⁷ the clause by dismissing or transferring its proceedings. If a court determines that the clause is permissive, or that it is mandatory but does not encompass the claims at issue, the court will need to determine whether it has jurisdiction to hear the claim and whether it should exercise that jurisdiction.⁷⁸

***

As is apparent from the above, this is not an inquiry for the faint of heart. It is an involved, multi-step analysis.⁷⁹ There are several choice of law issues presented by the above: What law should apply to the validity and enforceability of a choice of law clause? What law should apply to the validity of a forum selection clause? What law should apply to interpret a forum selection clause? It seems that the overwhelming majority of courts use forum law to gauge the validity of both forum selection clauses and choice of law clauses. Courts are divided, however, on the question presented at Step Three, what law should apply to issues of forum selection clause interpretation.⁸⁰

This Article argues that courts should apply forum law—not the parties’ chosen law—to interpretation questions presented by forum selection clauses. This position is somewhat against the grain of current thinking on the topic, though there are certainly cases that apply forum law to questions of interpretation.⁸¹ The leading case in this respect is Manetti-Farrow, Inc. v. Gucci America, Inc.⁸² In that case, the Ninth Circuit Court of Appeals held that federal law should govern all issues related to forum selection clauses, including issues of interpretation.⁸³ It reasoned that “because enforcement of a forum clause necessarily entails interpretation of the clause before it can be enforced, federal law also applies to interpretation of forum selection clauses.”⁸⁴ The Ninth Circuit’s reasoning for lumping interpretation in with issues of validity and enforceability is simply that interpretation is part and parcel of enforceability, and thus, all issues should be governed by federal law.⁸⁵ Courts following the Ninth Circuit’s lead have used similar logic.⁸⁶

The reasoning in Manetti-Farrow is not particularly detailed or persuasive,⁸⁷ but this Article nonetheless maintains that applying forum law is, in fact, the better course of action. This is because there are no compelling reasons to apply the parties’ chosen law to the issue, and to apply the chosen law only creates the potential for additional confusion and complication to result from this inquiry. This is particularly so when the parties have chosen foreign law to govern their contract.⁸⁸ Accordingly, the remainder of this Article provides less of an affirmative argument for applying forum law, and more of an argument against applying the chosen law.

IV. Examining the Stated Rationales for Applying the Chosen Law

Courts and commentators provide several reasons why forum selection clauses should be interpreted in accordance with the parties’ chosen law.⁸⁹ First, they posit that a choice of law clause is an expression of party autonomy, and that parties should have the right to choose which law governs the interpretation of the forum selection clause in their contract. Second, and somewhat related, courts and scholars maintain that interpreting a forum selection clause in accordance with the chosen law respects the intentions of the parties. Third, they argue that outcomes are more certain and predictable if courts interpret forum selection clauses pursuant to the chosen law. Fourth, courts and commentators assert that the interpretation of a forum selection clause is a substantive (versus a procedural) issue, to be determined in accordance with the parties’ chosen law. Fifth, they maintain that since a forum selection clause is “part of” the contract, there is no principled reason for singling it out for application of a law other than the chosen law. Finally, they argue that interpreting a forum selection clause in accordance with the parties’ chosen law avoids forum shopping. Upon closer examination, none of these rationales hold up.

A. The Party Autonomy Argument

One of the rationales provided in support of applying the parties’ chosen law to interpret a forum selection clause is that party autonomy dictates that the parties should be free to select the law to govern all aspects of their relationship. Indeed, Professor Yackee argues that all issues regarding enforceability and interpretation should be left to the law chosen by the parties: “[t]he routine enforcement of choice of law clauses, and indeed the wide acceptance of the more general principle of ‘party autonomy’ in [business to business] contracting generally, suggests that courts should turn first and foremost to the law that the parties have explicitly selected to govern their relationship.”⁹⁰

The party autonomy argument, however, suffers from one major weakness: parties do not have unfettered autonomy to select whatever law they wish to govern their contractual relationship. American courts have imposed limits on party choice. For instance, section 187 of the Restatement (Second) on the Conflict of Laws circumscribes the ability of the parties to choose the law governing their agreement.⁹¹ Under this section, the parties are not permitted to derogate from mandatory law by way of a choice of law clause where the chosen law has no substantial relationship to the parties or the transaction, where there is no other reasonable basis for the parties choice, or where application of the chosen law would be contrary to the public policy of the law of the state that would apply absent a choice of law clause.⁹² Moreover, parties are not permitted to choose a law to govern the validity of a forum selection clause, even if they expressly indicate such an intention in their contract. Many forum selection clauses provide that the chosen law will govern all issues arising from or related to the contract, including issues of whether a contract was validly formed.⁹³ Yet, U.S. courts have deliberately ignored such language, characterizing issues of validity as a procedural matter to be governed by the law of the forum, irrespective of the intentions of the parties.

For the purpose of this Article, the point is simply that invoking party autonomy as a reason to apply the parties’ chosen law is not as compelling as it may seem at first blush. This is because party autonomy is already circumscribed by a forum’s choice of law rules, and its characterization of the validity of a forum selection clause as a procedural rather than substantive matter.

B. The Parties’ Intentions Argument

Perhaps the most persuasive argument in favor of having the chosen law govern the interpretation of a forum selection clause is the parties’ intentions argument: “To ensure that the meaning given to a forum selection clause corresponds with the parties’ legitimate expectations, courts must apply the law contractually chosen by the parties to interpret the clause.”⁹⁴ Nearly all courts that apply the parties’ chosen law advance some version of this argument.⁹⁵ While the argument certainly sounds good in theory—after all, who can be against giving effect to the will of the parties in matters of contract law?—it does not hold up to closer scrutiny.

First, the argument meets a significant roadblock right at the outset. If it is true that parties “intend” to have forum selection clauses interpreted in accordance with the chosen law, then surely it is true that the parties also “intend” to have matters related to validity of the forum selection clause also governed by the chosen law. That is, it is silly to bifurcate validity issues and interpretation issues and to simply declare that the parties must have intended the latter to be governed by the chosen law. Either the parties intended everything related to the contract—validity, enforceability, interpretation—to be governed by the chosen law, or they did not. Yet, as discussed above, when it comes to validity and enforceability of the forum selection clause, the overwhelming majority of courts proceed to apply forum law, not the parties’ chosen law.⁹⁶ Seldom is a word said about the parties’ intentions in this respect, even though many choice of law clauses expressly manifest the parties’ intentions that issues of validity should be governed by the chosen law. It is disingenuous for courts to invoke the parties’ intentions when the issue involves the interpretation of a forum selection clause, but to disregard the matter entirely when it comes to validity and enforceability issues.

Second, the parties’ intentions argument must be considered in light of the specific context in which it arises. Usually, a forum other than the one selected in the forum selection clause is being asked to determine whether it should proceed with the litigation notwithstanding the clause. As part of this inquiry, the forum will need to examine the validity and enforceability of the clause and possibly grapple with issues of contractual interpretation. As indicated, the trend now is for the forum to apply the chosen law to these latter issues, in part because that must have been the intention of the parties. What the parties intended, however, was that the chosen forum would apply the chosen law.⁹⁷ They did not necessarily intend that a forum unilaterally selected by one party (ostensibly in contravention of an exclusive forum selection clause⁹⁸) would apply the chosen law. In fact, if one surveyed the parties on this point, they might actually prefer for a court that is not nominated in a forum selection clause to apply its own law to issues of contractual interpretation.⁹⁹

Third, the parties’ intentions argument appears to be largely an ex post facto academic justification for applying the chosen law to interpret forum selection clauses. It is a stretch to believe that the parties “intended” to have issues of interpretation of forum selection clauses governed by the chosen law. To say that the parties “intended” something would imply that the parties considered the issue and deliberately took steps to memorialize their understanding. Contracting parties are primarily concerned with memorializing the key details of their contract.¹⁰⁰ Much of the rest is boilerplate. The parties, or most likely their lawyers, cut and paste some standard clauses into the contract (a forum selection clause and a choice of law clause among them) and then hope for the best.¹⁰¹ It is extremely doubtful that the parties to any contract have ever given any real thought to the question of what law they would want for a court not nominated in their contract to use in interpreting the forum selection clause contained in their contract. The sentiment is aptly articulated by Professor Coyle:

When the contract language consists of non-negotiated boilerplate, however, an inquiry into the actual intent of the specific parties to a particular agreement will rarely turn up useful. The parties are using the same language as have thousands of other parties in thousands of other contracts. In such cases, it is difficult for the courts to credibly maintain that they are giving effect to the intent of these particular parties to this particular contract. They are instead assigning a meaning to the language that—they hope—is broadly in line with what most other parties using that same language would want it to mean.¹⁰²

One other point is worth exploring. Above, I have referred to party intentions as though the parties were on equal terms. In many contracts, and certainly in consumer contracts, the parties lack equal bargaining power. Accordingly, the stronger party will dictate the terms of the contract, including any choice of forum or choice of law clause.¹⁰³ As Professor Woodward explains, “any full understanding of what a choice-of-forum clause means in rational choice terms is likely to be absent from the vast run of people who receive forms.”¹⁰⁴ So, at least in these sorts of cases, it does not make much sense to talk about the parties’ intentions, plural. Rather, we are simply talking about what the intention is of the stronger party, who was able to get the weaker party to accede to his terms.¹⁰⁵ Given all this, it seems that invoking party intentions as a justification for applying the chosen law to interpret a forum selection clause is a bit of a stretch. The reality is the parties intend for the “best” law to govern their forum selection clause—and the best law for the plaintiff will differ from the best law for the defendant. The idea that the parties intended something at the time of contract formation is nothing but fiction.

C. The Certainty Argument

Courts and commentators also argue that applying the parties’ chosen law to interpret a forum selection clause promotes certainty and predictability, two virtues that are particularly important for contracting parties. Strangely, though, it is hard to pin down the certainty and predictability arguments with any level of specificity.¹⁰⁶ It seems that the certainty and predictability arguments are twofold: (1) if courts were to apply the chosen law—rather than forum law—to questions of interpretation, then the result should be the same regardless of where suit is initiated (“the uniformity argument”); and (2) given that ultimate questions of contractual interpretation will be governed by the chosen law, it would seem more consistent to apply the chosen law to the interpretation of the forum selection clause so as to avoid any anomalous results (“the consistency argument”). Each of these rationales suffers from inherent weaknesses.

The uniformity argument essentially posits that “the forum-selection clause should have the same interpretation everywhere; we do not want the clause to mean one thing here and another thing there.”¹⁰⁷ The uniformity argument rests on the unstated assumption that each court in which litigation could conceivably be filed would apply the parties’ chosen law to questions of interpretation, and apply it in the same way. This is an unrealistic assumption. Even within the United States, it is unlikely that all states would get “on board” with applying the chosen law to interpretative questions posed by forum selection clauses. When one considers the myriad of non-U.S. forums where litigants may initiate disputes, the goal for uniformity through application of the chosen law becomes a pipe dream.¹⁰⁸ But even if all states were to apply the chosen law to questions of forum selection clause interpretation, this still would not greatly advance the goal for predictability and certainty. This is because the chosen law would be interpreted not by the chosen court, but instead by a court unilaterally selected by one of the parties. There will certainly be disparities in how a given court will apply the law of another state or another country to interpretation issues presented by a forum selection clause.¹⁰⁹

The consistency argument is even more attenuated than the uniformity argument. The argument is basically that we do not want a word or phrase having one meaning in the context of a forum selection clause and then a different meaning elsewhere in the contract.¹¹⁰ Thus, this argument rests on the following factual predicates: (a) there is a word or phrase used in a forum selection clause that requires interpretation; (b) that same word or phrase is used somewhere else in the contract; (c) that word or phrase somewhere else in the contract also requires interpretation; and (d) that word or phrase somewhere else in the contract that also requires interpretation would be interpreted in accordance with the chosen law, which would differ from how a court interpreted that word or phrase in the forum selection clause if it used forum law. There are likely very few cases where this would be an issue. The very unique nature of the potential “problem” suggests that this should not be used as a justification for applying the parties’ chosen law to the interpretation question.

D. The Substance/Procedure Argument

Several courts and scholars have relied on the distinction between substance and procedure to support the practice of applying the parties’ chosen law to questions of forum selection clause interpretation. For instance, Professor Symeonides argues that “not many people would question that the interpretation of [forum selection] clauses—like the interpretation of a contract—is a ‘quintessentially substantive’ question. Consequently, like any other substantive question, it should not be answered by the law of the forum qua forum.”¹¹¹

The substance/procedure divide is not particularly helpful in advancing the discussion. Professor Symeonides asserts that the interpretation of forum selection clauses is a “quintessentially substantive” matter.¹¹² Perhaps it is. But so too is the very validity of a forum selection clause. What can be more substantive than determining whether or not a contract (or a clause contained therein) was validly formed? Professors Roosevelt and Jones, for instance, argue that “[s]ince [a forum selection clause] is a substantive contractual provision, there is no obvious reason why its validity should be determined by any law other than the one that governs the rest of the contract.”¹¹³ Despite the fact that questions of validity appear to be substantive in nature—i.e., related to the substance of the parties’ rights and obligations—courts have repeatedly characterized these questions as procedural.¹¹⁴ Accordingly, courts resort to forum law, not the parties’ chosen law, to test the validity of forum selection clauses. These courts reason that because such clauses implicate venue, they are considered procedural in nature.¹¹⁵ This characterization illustrates the inherent malleability of the substance/procedure dichotomy and explains why some authors have observed that the “substance-procedure characterization is murky and unsatisfying within traditional choice of law.”¹¹⁶

The point here is simply that using the substance/procedure framework to say that issues of validity or enforceability are procedural (and therefore governed by forum law) and issues of interpretation are substantive (and therefore governed by chosen law) is not a meaningful exercise. Both can persuasively be characterized as either substantive or procedural because of the inherent malleability of these labels.¹¹⁷

E. Miscellaneous Arguments: The “Part of the Contract” Argument and the Forum Shopping Argument

There are two other arguments that are sometimes advanced in support of applying the parties’ chosen law: (1) the forum selection clause is part of the contract and, like all other parts of the contract, should be interpreted in accordance with the chosen law, and (2) if courts do not apply the parties’ chosen law, this will encourage forum shopping. What these two arguments have in common is that they tend to be “throwaway” arguments that appear as an afterthought to the core rationales for applying the parties’ chosen law.

First, courts reason that “[a] forum-selection clause is part of the contract. We see no particular reason . . . why a forum-selection clause . . . should be singled out as a provision not to be interpreted in accordance with the law chosen by the contracting parties.”¹¹⁸ This argument once again fails to recognize that forums legitimately apply forum law to determine the validity and enforceability of various clauses, including choice of law clauses and forum selection clauses. If we were to follow the logic above, a court should apply the parties’ chosen law to determine whether a choice of law clause—which is, after all, part of the contract—is enforceable. Yet, because we recognize that the forum should have control over certain preliminary matters, we are comfortable allowing some portions of the contract being governed by law other than that selected in a choice of law clause.

Second, proponents of applying the parties’ chosen law to interpret a forum selection clause argue that to do otherwise would promote forum shopping.¹¹⁹ The argument goes as follows: a party looking to avoid an exclusive forum selection clause will look for a forum that interprets such clauses restrictively, such that it will continue to hear the case notwithstanding the forum selection clause. Forum shopping is often invoked as a policy rationale for or against a certain position. The reality is that litigants are always going to forum shop—because that is what litigants do. Forum shopping is dictated by a plethora of factors;¹²⁰ very low on that totem pole of factors is whether the chosen court would apply forum versus chosen law to interpret a forum selection clause.

As discussed above, the justifications for applying the parties’ chosen law to interpret a forum selection clause are not particularly convincing. And there is a significant downside to using the parties’ chosen law to interpret forum selection clauses: it is far too complicated at far too early a stage of litigation. It is to that issue that I now turn.

V. Additional Reasons to Not Apply the Chosen Law

Recall that issues of forum selection and choice of law arise at the outset of litigation. To require a court to delve into a potentially complex morass of foreign law in order to decide a threshold issue that it is fully equipped to answer does not make much sense.¹²¹ This is particularly so given that the court will already be applying forum law to other preliminary questions, such as the validity and enforceability of the forum selection clause.¹²² For the sake of simplicity—and because there are no powerful arguments to the contrary—I suggest that interpretation questions presented by a forum selection clause be governed by forum law. This is especially important when the chosen law is foreign law, as opposed to the law of another state. Below, I examine the additional problems and complications that arise when courts apply the parties’ chosen law to issues of interpretation, focusing largely on when that chosen law is the law of another country.

A. What Law Applies?

In a typical choice of law clause, the parties will provide something to the effect that “any and all disputes arising under this agreement shall be governed by X law.” The analysis envisioned is that if an interpretation question arises, such as whether a particular issue is captured under the moniker of “any and all disputes,” the forum will turn to X law to decide this threshold issue. If the dispute is encapsulated within the clause, as determined by the forum applying the chosen law, then the forum can proceed with the rest of its analysis.¹²³ But what exactly is X law?

If the parties have selected the law of another U.S. state, then the analysis should be fairly straightforward. However, if the parties have chosen the law of a foreign country, particularly a country that is a signatory to a relevant convention or treaty, problems are likely to arise right at the outset. A U.S. court will need to decide whether to apply the chosen forum’s internal law, or its treaty/convention law. For instance, assume that the parties have chosen Austrian law to govern their contractual dispute and have nominated Austria as the exclusive forum for the resolution of all contractual disputes. The plaintiff sues in New York in contravention of the clause. A New York court will apply Austrian law to any interpretation questions presented by the forum selection clause, such as whether a given dispute falls within the ambit of the clause. But it is unclear what “Austrian law” is: Is it domestic Austrian law? Or, is it Brussels Regulation law because Austria is a signatory to the Brussels Regulation?¹²⁴ Or, is it the Hague Choice of Court Convention because Austria is in the European Union (E.U.), and the European Union has ratified the Convention?¹²⁵

The sheer complexity of the initial determination of what body of law to apply is illustrated by Li v. Certain Underwriters at Lloyd’s, London,¹²⁶ a recent New York federal case where the parties agreed that “Swiss Law” applied.¹²⁷ The parties could not agree, however, “which particular body of Swiss law applie[d].”¹²⁸ Initially, the parties agreed that the Lugano Convention governed questions of interpretation because Switzerland was a signatory to the Convention.¹²⁹ However, the parties disagreed on what specific provisions within the Convention would be applicable—the provisions dealing with contracts in general, or the provisions dealing with insurance contracts in particular.¹³⁰ After oral argument, the defendants changed course and argued that the Lugano Convention was not applicable to the dispute.¹³¹ Instead, they argued that the Swiss Private International Law Act of December 18, 1987 and the Swiss Federal Law on Insurance Contracts were the applicable reference points for Swiss law.¹³² The parties then submitted expert affidavits in an effort to assist the court in figuring out what “Swiss law” was.¹³³ As Li illustrates, interpreting a forum selection clause in accordance with the parties’ chosen law often involves the very difficult question of what exactly that law is.

Where there is a patchwork of domestic and treaty law to consider, the exercise becomes an extremely complicated one. And this exercise is conducted simply to determine what body of law to apply. After that is determined, a court must turn to the equally cumbersome task of deciding what foreign law says on the relevant issues and how to apply that foreign law to the forum selection clause in question.

The Lugano Convention at issue in Li is the treaty by which certain European countries, including Switzerland, were brought into the fold of the Brussels Regulation, the treaty that governs the recognition and enforcement of foreign judgments in the European Union.¹³⁴ Accordingly, it is more common in the U.S. case law to see references to the Brussels Regulation. Many U.S. courts have held that the Brussels Regulation supplants national law when the parties have chosen the law of a country that is a signatory to the Brussels Regulation.¹³⁵ Accordingly, a U.S. court applying the law of an E.U. Member State often has resort to Brussels Regulation law and not national law.¹³⁶

The analysis, though, is more than a little awkward since U.S. courts are essentially applying a treaty in the abstract. The Brussels Regulation ordinarily applies only if the defendant in an action is domiciled in a Member State.¹³⁷ There is an exception, however, for jurisdiction agreements: if parties to an action designate a Member State to hear their dispute, the courts of that Member State will have jurisdiction and any resultant judgment will be enforceable across all Member States.¹³⁸ The jurisdiction agreement is presumed to be exclusive.¹³⁹ The key, though, is that the Brussels Regulation only “kicks in” if the courts of a Member State are chosen as the forum for the resolution of disputes and proceedings are before the courts of that Member State or another Member State.¹⁴⁰ The Regulation has no application outside of this context. Simply choosing a Member State’s “law” does not mean that the Brussels Regulation applies.¹⁴¹

Even if the Brussels Regulation could be said to apply when the parties choose the law of a Member State,¹⁴² there is the added wrinkle of what is covered by Brussels Regulation law and what is covered by national law. Issues related to whether a clause is mandatory or permissive are said to be governed by Brussels Regulation law.¹⁴³ Accordingly, a U.S. court would have resort to European law on this particular question.¹⁴⁴ Thus, a U.S. court would look at jurisprudence from the European Court of Justice and domestic courts of Member States interpreting the Brussels Regulation.¹⁴⁵ Issues of scope, on the other hand, are left to national law. Professor Merrett emphasizes that “it is clear that national law still has an important role to play in the operation of Article 23 [now Article 25 of the Brussels Regulation] because questions as to interpretation, and therefore the scope of the jurisdiction agreement, remain a question of national law, namely the applicable law.”¹⁴⁶ So, even if a U.S. court were to apply Brussels Regulation law to certain interpretation questions, such as whether a clause is mandatory or permissive, the court would still have to apply the internal law of the Member State to other interpretation questions.¹⁴⁷ This would mean that a U.S. court would apply forum law to the validity and enforceability of a forum selection clause, Brussels Regulation (European) law to whether the clause is mandatory or permissive, and domestic Member State law to other interpretation questions.

As if that were not enough, there are also renvoi-type issues to consider.¹⁴⁸ The doctrine of renvoi recognizes that when parties chose the “law” of some state, that law necessarily encompasses a state’s choice of law rules. Those choice of law rules might in turn, point toward applying some other body of law.¹⁴⁹ In other words, when the parties choose a state’s law, they may intend for a court to apply that state’s whole law, including its conflict of laws rules.¹⁵⁰ In short, the goal of renvoi is for the forum to replicate what the chosen law would do in the circumstances.¹⁵¹ Because renvoi is conceptually amorphous, it is helpful to view the issue in more concrete terms. Assume that the parties have chosen “English law” to govern all contractual disputes. A U.S. court could apply internal English law to the interpretation questions presented by the forum selection clause.¹⁵² That is, a U.S. court would look to how English courts interpret the ambiguous words and phrases contained in the forum selection clause at issue. This would involve no renvoi and is clearly the simplest solution. However, there is another possibility—in applying English law to interpret the forum selection clause, a U.S. court could apply England’s whole law, including its choice of law rules. This involves the question of renvoi. In this scenario the U.S. court would ask, “What would England do if presented with the interpretation of a forum selection clause?” and seek to mirror that result.¹⁵³ In the above example, it could be that England regards the interpretation question as procedural and therefore governed by forum law. If English law applies forum law to the question of interpretation, then arguably, there is a case for “remission”—metaphorically sending the case “back” to be governed by U.S. law.¹⁵⁴

There is another renvoi-type issue that is worth considering. What happens if the chosen law would deem the forum selection clause to be invalid?¹⁵⁵ For instance, assume that English law invalidates all forum selection clauses in consumer contracts. The parties enter into a consumer contract containing an English forum selection clause and an English choice of law clause. One party sues in the United States in contravention of the clause. A U.S. court applying English law to questions of interpretation would be engaging in a completely irrational analysis. If English law would invalidate the forum selection clause in the consumer contract, it would never have occasion to interpret it. By bifurcating the analysis, such that validity is governed by forum law and interpretation is governed by the chosen law, a U.S. court may be interpreting something that an English court would never interpret. Thus, the exercise is entirely artificial.

This Section illustrates that even identifying “what law” to apply is a highly complex endeavor. Courts and parties struggle when determining whether to apply domestic law or treaty law to the interpretation of a forum selection clause. And even if domestic law does apply, there are further renvoi-type complications. All of this militates against applying the parties’ chosen law to interpretation questions and instead viewing the interpretation exercise as intertwined with the determination of a clause’s validity and enforceability, calling for an application of forum law.

B. What Happens When No Law is Chosen?

Using the parties’ chosen law to interpret forum selection clauses leads to an analytical disconnect between contracts with choice of law clauses and contracts without choice of law clauses. There seems to be agreement among scholars that if interpretation issues are to be governed by the parties’ chosen law, then the same approach should follow when the parties have not chosen a governing law.¹⁵⁶ In other words, if we are to accept that the law governing the contract applies to interpretation questions presented by a forum selection clause, then the principle applies equally whether or not the parties have chosen the governing law. Accordingly, in the absence of a choice of law clause, courts should first ascertain what the governing law of the contract would be—through a formal conflicts analysis—and then apply that law to issues of forum selection clause interpretation.

For instance, assume that the parties have agreed “to adjudicate all disputes in the courts of Italy.” They have not, however, designated a governing law. As is typical, one of the parties files suit in a forum other than Italy (say, Delaware). A Delaware court should determine what law governs the underlying contract by reference to its domestic choice of law rules.¹⁵⁷ This analysis would lead a Delaware court to some body of law—perhaps Italian law, perhaps Delaware law, perhaps some other body of law. Whatever body of law governs the contract would be used to interpret the forum selection clause. This is the most theoretically sound result, such that all forum selection clauses would be governed by the law otherwise applicable to the contract at issue, whether or not they contain a choice of law clause. As recognized by the Fifth Circuit, “the presence or absence of a specific choice-of-law clause does not alter the core obligation of a federal court, sitting in diversity, to ascertain which body of substantive law to apply by implementing the choice-of-law rules of its home jurisdiction.”¹⁵⁸ The problem is that most courts simply do not engage in this sort of analysis¹⁵⁹—and it is unlikely that they will anytime soon.¹⁶⁰ Why?

It may be that courts and parties do not even have it on their horizon that some law other than forum law could govern the interpretation of a forum selection clause. Since issues of validity, enforceability, and interpretation tend to mesh together, litigants and judges may uncritically assume that forum law is the appropriate reference point. This is particularly so in cases without an explicit choice of law clause to remind courts and parties that a choice of law inquiry needs to be undertaken. Alternatively, even if parties are aware of the issue, they may choose not to raise choice of law for one reason or another. A party may decide that it is not worth the time or expense of injecting choice of law issues into the calculus. Or, a party may realize that it would fare worse if a U.S. court used the law dictated by a choice of law analysis in the interpretation exercise. The bottom line is that courts and litigants treat contracts containing explicit choice of law clauses differently than contracts not containing choice of law clauses when it comes to interpreting a forum selection clause.¹⁶¹ This leads to a conceptual disconnect between cases involving choice of law clauses and those not involving choice of law clauses.

C. The Principle of Party Prosecution

Things become even more convoluted when one considers that issues of pleading and proof of foreign law are generally subject to party prosecution. If the parties do not raise the possibility of the chosen law applying to interpret a forum selection clause, a court will usually decide any interpretation issues in accordance with forum law.¹⁶² In the words of one court:

Courts may be justified in pretermitting this analysis when neither party contends that any distinctive feature of the relevant substantive law decides the dispute. And indeed, parties’ failure to brief choice-of-law analysis or arguments about distinctive features of foreign law seems to have driven many courts to default to general contract principles, even when they recognize that either ordinary choice-of-law rules or a valid choice-of-law clause would, in principle, dictate application of foreign law.¹⁶³

Parties often fail to raise or brief the issue that the parties’ chosen law may govern the interpretation of the forum selection clause, so it is common to see courts resorting to forum law despite the presence of a choice of law clause.¹⁶⁴ In many cases, parties raise the possibility of the chosen law governing the interpretation of the forum selection clause, then proceed to cite exclusively to federal law on the issue.¹⁶⁵ Sometimes parties choose to rely on foreign law for some interpretation issues, and forum law for others.¹⁶⁶ In some cases, it seems like the parties are not really clear on what law they even want to apply.¹⁶⁷

Given the principle of party prosecution, there is a patchwork approach to the question of what law a court will apply to interpret a forum selection clause. Variables that will go into the mix include whether the parties have explicitly chosen a governing law, whether the parties have raised the choice of law issue, and whether the court independently decides to apply chosen law to interpretation issues. The different approaches can be summarized as follows:

Variable

Possible Results

No choice of law clause

Court conducts choice of law inquiry and applies governing law or court applies forum law.

Choice of Law Clause

(raised by parties)

Court will usually apply the chosen law; some courts apply forum law.

Choice of Law Clause

(not raised by parties)

Court will usually apply forum law; some courts will apply chosen law.

Thus, even if one accepted the premise that the parties’ chosen law (or the law directed by a choice of law analysis) should apply to interpretation questions, actually having a court apply that law is far from certain. Because of the principle of party prosecution, the ability of a court to control the litigation before it, and obscurity of the choice of law issue in the absence of an explicit clause, any certainty and uniformity arguments in support of having the chosen law govern interpretation are significantly undermined.

D. The Complications of Foreign Law

There are numerous challenges presented by introducing foreign law into a U.S. case.¹⁶⁸ The issue is no different when endeavoring to ascertain and apply foreign law to interpret a forum selection clause. First, there are translation difficulties. If the foreign law is in a foreign language, it will need to be translated into English for U.S. courts to work with. This translation exercise is fraught with difficulties since translated words often do not carry the same connotation in English as in the original language.¹⁶⁹ Additionally, parties may not even agree on what the appropriate translation of foreign law is.¹⁷⁰

Second, law does not exist in a vacuum and cannot be plucked wholesale from the system from which it originates. A U.S. court cannot simply excise certain words and phrases from a foreign statute or a case without appreciating the backdrop against which the foreign law operates.¹⁷¹ Accordingly, U.S. courts must examine foreign law in context—a context they may not be familiar with.

Third, U.S. courts face problems related to proof of foreign law. Typically, courts rely on parties to present them with the content of foreign law. This is usually effectuated by parties presenting expert affidavits from lawyers or academics who are specialists in foreign law. The complexity of the battle of the experts cannot be overstated. In TH Agriculture & Nutrition, L.L.C. v. Ace European Group Ltd.,¹⁷² for instance, the parties submitted affidavits from six different experts on Dutch law. Several of these declarations were in excess of twenty pages.¹⁷³ The experts’ opinions conflicted as to whether the forum selection clause at issue was exclusive or non-exclusive under Dutch law. The court seemed to throw up its hands, emphasizing that the court “is not nor does it purport to be an expert in the law of The Netherlands.”¹⁷⁴ The court then rested on the plaintiff’s inability to rebut the presumption that a forum selection clause is ordinarily considered exclusive under the Brussels Regulation.¹⁷⁵ The court made no effort to grapple with the (presumably) hundreds of pages of expert testimony before it. Similarly, in Sberbank of Russia v. Traisman,¹⁷⁶ the court was presented with conflicting expert affidavits on Russian law. Again, rather than engage with Russian law, the court simply seemed to side with one of the experts because of “his credentials as a scholar of Russian law and his citation to Russian legal authority that supports his opinion.”¹⁷⁷

In addition to wading through the morass of expert affidavits, the court must consider that these “experts” are in fact hired guns.¹⁷⁸ As aptly stated by Judge Posner in arguably the leading case on the use of foreign law in U.S. courts, Bodum USA, Inc. v. La Cafetiere, Inc.:

Lawyers who testify to the meaning of foreign law, whether they are practitioners or professors, are paid for their testimony and selected on the basis of the convergence of their views with the litigating position of the client, or their willingness to fall in with the views urged upon them by the client. These are the banes of expert testimony.¹⁷⁹

In the same case, Judge Easterbrook emphasized that proving foreign law through experts “adds an adversary’s spin, which the court must then discount.”¹⁸⁰

Finally, interjecting foreign law into a case dramatically increases the cost and complexity for the parties and the court. Parties need to hire foreign law experts, who certainly do not come cheap. One commentator explains:

Finding a capable, credible expert remains a huge challenge for litigants. As one scholar from the print era noted: “they are not listed in the yellow pages.” And in the Internet age, despite a plethora of claims of expertise online, few people have what it takes to empower a judge to comfortably construe foreign law. The best experts will perform a “‘double process of translation’” wherein they analyze terms and concepts embedded within the culture of the foreign legal system and then explain those terms and concepts within the context of the U.S. legal framework. Needless to say, this process requires fluency in both the foreign legal system and the U.S. legal system plus impeccable language and communication skills. Many litigants will not be able to afford the substantial costs involved with identifying and hiring a foreign law expert.¹⁸¹

Not only is this a costly and complicated endeavor for litigants, but it is also burdensome for courts. When faced with issues of foreign law, courts need to devote more time and institutional resources to sorting out these issues than they would simply applying forum law to interpretation issues.¹⁸² And, it bears repeating that all these foreign law complications arise before a case even begins.

E. Interpretation in Practice: Courts Do Not Do a Good Job Applying the Chosen Law

That courts should not apply the parties’ chosen law to interpret a forum selection clause is plainly evident in the cases themselves. Below, I make five observations about how courts are faring in using the parties’ chosen law to interpret a forum selection clause. As noted above, the cases here focus exclusively on courts’ using foreign law when it is chosen by the parties.

1. Problem One: Courts are “all over the place” in their analysis

Many courts do not seem to be on solid footing when it comes to applying the parties’ chosen law to interpret a forum selection clause. Accordingly, the analysis is all over the place, mixing forum and foreign law as though it were interchangeable. A prime example of this free-flowing approach to interpretation is EnQuip Technologies Group v. Tycon Technoglass S.R.I.¹⁸³ In EnQuip, the American plaintiff sued the Italian defendant in Ohio.¹⁸⁴ The parties’ contract contained a forum selection clause in favor of Italy, and a choice of law clause providing that all disputes would be governed by Italian law.¹⁸⁵ The court determined that Italian law should govern the interpretation of the forum selection clause, and in particular, the question of whether the provision “the law Court of Venice will be competent for any dispute” was a mandatory or permissive forum selection clause.¹⁸⁶

The court inexplicably started off its analysis by applying Ohio (forum) interpretative principles to the dispute. The court cited to Ohio law for the proposition that language in a contract bears the meaning intended by the parties to the contract.¹⁸⁷ The court also referred generally to Ohio principles of contractual interpretation, such as the rule that a contract must be read as a whole and that meaning must be determined contextually.¹⁸⁸ Following this, the court explored Ohio principles governing the distinction between mandatory and permissive jurisdiction clauses.¹⁸⁹ After this extensive recitation of Ohio law and much more meandering through Ohio and federal case law, the court finally turned to Italian law, which it had said at the outset would apply to the question of interpretation.¹⁹⁰

The Ohio court determined that because Italy was a signatory to the Brussels Regulation, that legal instrument governed whether the impugned clause was mandatory or permissive.¹⁹¹ Beyond that, the court engaged in very little meaningful analysis. It quoted the relevant provision of the Brussels Regulation—that if parties agree that a particular court is “to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court . . . shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.”¹⁹² The court made no effort to determine whether the parties had “agreed otherwise.” It cited only three Italian cases in its entire judgment. The extent of its analysis of Italian law was largely as follows:

Italy’s highest court . . . has held that a forum-selection clause in which the parties agree that ‘‘the competent court for any possible dispute is the court of the initiating party” conferred exclusive jurisdiction on that court. The Court of Genoa has said that it is not necessary for the clause to expressly refer to the identified court’s exclusivity.¹⁹³

The Ohio court provided no elaboration beyond the one quote. The court then abruptly turned to English law, reasoning that England is also a signatory to the Brussels Regulation.¹⁹⁴ However, the Ohio court did not actually look to English law on the matter, but rather a U.S. federal court’s interpretation of what English law was.¹⁹⁵

In short, the mix of Ohio, federal, Italian, and English law was a mess. It was impossible to glean what the court was doing at any given moment. This mish-mash is fairly typical of how courts approach the interpretation exercise when it involves applying the parties’ chosen law, particularly when that law is foreign law.¹⁹⁶

2. Problem Two: Courts rely on other U.S. courts’ interpretation of foreign law

A major problem with many of the cases that apply the parties’ chosen law to issues of interpretation is that they rely on a U.S. court’s interpretation of the chosen law, not the chosen law itself. That is, instead of canvassing and analyzing legal authority from the actual chosen law, many courts simply rely on what other U.S. courts say this law is.¹⁹⁷

Amto, LLC v. Bedford Asset Management, LLC¹⁹⁸ is emblematic of the approach that courts seem to be taking. In Amto, the Southern District of New York decided to apply the parties’ chosen law, English law, to decide the forum selection clause’s scope.¹⁹⁹ Instead of actually looking at English law, the court looked at “[t]wo recent cases from the Second Circuit [that] provide a helpful exploration of English law on the subject of the scope of forum selection clauses.”²⁰⁰ After a detailed recitation of what these two New York cases said English law was, the court concluded that the defendant’s “defenses, counterclaims, and third-party claims are much more akin to the claims in [U.S. Case 1] than the claims in [U.S. Case 2].”²⁰¹ Similarly, in Laspata DeCaro Studio Corp. v. Rimowa GmbH,²⁰² the court purportedly interpreted the forum selection clause’s language in accordance with German law without citing one German case. Instead, it noted that “[American] courts applying German law have held similar language to be mandatory.”²⁰³ It then cited to three U.S. cases that interpreted similar language applying German law.²⁰⁴

The approach that U.S. courts use to foreign law in this context is reminiscent of the children’s game commonly known as “Broken Telephone.”²⁰⁵ The game involves one child whispering something to the next child and that child whispering it to the next. By the end of the “telephone line,” what was originally said has completely morphed into something else. The same is true here. One court pronounces what “X law” is, and other courts keep repeating it until the law becomes something it is not.

3. Problem Three: Courts generally do not engage in meaningful analysis of foreign law

In most cases involving U.S. courts applying the parties’ chosen law to questions of forum selection clause interpretation, U.S. courts do not engage in a meaningful analysis. Instead, they simply pick one side with little justification, rest on the burden of proof, or make some cursory or generic statements about the chosen law and then draw a conclusion.

For instance, in IDV North America, Inc. v. Saronno,²⁰⁶ the court applied the parties’ chosen law, Italian law, to determine the scope of the forum selection clause. The court noted that it had received conflicting affidavits from experts in Italian law. The experts apparently also disagreed on whether domestic Italian law or the Brussels Regulation was the appropriate reference point.²⁰⁷ The court then seemed to break the impasse by invoking the burden of proof, stating that “the defendant has failed to show that under Italian law, the language of the forum selection clause confers exclusive jurisdiction on the Italian court.”²⁰⁸ The court cited two Italian cases in parentheticals and briefly referenced the Brussels Regulation (without deciding on whether the Brussels Regulation governed the issue).²⁰⁹ The court did not grapple with the authorities or actually delve into the relevant language. Instead, it just seemed to pick one side with little reasoning or justification.²¹⁰

In LVAR L.P. v. Bermuda Commercial Bank Ltd.,²¹¹ the court also half-heartedly applied foreign law to interpret the forum selection clause at issue.²¹² In that case, the court said it was applying Bermudan law to the question of whether the forum selection clause was mandatory or permissive.²¹³ It cited one Bermudan case in its entire analysis, Re A Trust; the rest of the citations were to American authorities.²¹⁴ On the separate interpretative issue of whether all the parties involved were covered by the forum selection clause, the court did not even bother citing to Bermudan law. Instead, it cited exclusively to federal law on point.²¹⁵

Oftentimes, U.S. courts give the appearance of applying foreign law—by citing broad and non-controversial statements of foreign law—but then quickly dispose of the interpretation questions without significant discussion. For instance, in DBS Solutions LLC v. Infovista Corp.,²¹⁶ the court referenced French treatises for generic statements of French law: “[u]nder French law, courts interpreting a contract attempt to discern the mutual intent of the parties”;²¹⁷ “a clear and precise contract must not be ‘denatured’ by resort to one party’s declaration of intent”;²¹⁸ and, “French courts favor forum selection clauses in international commercial agreements.”²¹⁹ The court then simply drew the conclusion that the dispute at issue was “related to” the contract under French law.²²⁰ Similarly, in Trade Wind Distribution, LLC v. Unilux Ag,²²¹ the court referenced non-controversial statements of German law on which the parties agreed, such as the goal of interpretation being to divine the “parties’ true ‘intentions.’”²²² The court also cited one German case from 1972 and then concluded that German law would regard the forum selection clause at issue as mandatory.²²³

These cases illustrate that many courts take the easy way out.²²⁴ They like to say that they are applying the parties’ chosen law to interpret the forum selection clause, but they really are not. They are including some token citations to foreign law, perhaps, but they are failing to meaningfully examine it.

4. Problem Four: Courts tend to engage in macro level analysis

When U.S. courts apply the parties’ chosen law to analyze the scope of a forum selection clause, they usually do so at a macro level, without examining the actual issues presented in the case at hand. For instance, in Martinez v. Bloomberg,²²⁵ the Second Circuit was tasked with determining whether the plaintiff’s statutory discrimination claim fell within the ambit of the forum selection clause nominating England as the exclusive forum for the resolution of disputes.²²⁶ The court focused on whether the words “arising hereunder,” contained in a forum selection clause, would be interpreted narrowly or broadly by an English court.²²⁷ It concluded that English law endorsed a broad approach to the term. The Martinez court then used this broad approach to conclude that English law would deem the plaintiff’s discrimination claim to fall within the scope of the forum selection clause. Accordingly, the Second Circuit enforced the forum selection clause by dismissing the plaintiff’s action.

The issue in the Martinez case, however, was not whether the words “arising hereunder” would be interpreted broadly or narrowly under English law. The issue was whether a claim advanced in a U.S. court—that the defendant violated the Americans with Disabilities Act (ADA)—was within the ambit of the forum selection clause according to English law. But, of course, the Second Circuit could not cast the issue in this light because, thus presented, the question makes no sense. Of course the ADA claim is not within the purview of the clause. The ADA is a creature of statute, available only under U.S. law. But the Martinez court made no effort to ascertain how English law would interpret a forum selection clause where the claim advanced by the plaintiff in the non-chosen court has no counterpart in the chosen court. If it had, then it might have referenced the Ryanair Ltd v. Esso Italiana Srl²²⁸ case, where the English court considered the interpretation of a non-exclusive jurisdiction clause in which the claim involved a violation of “statutory duty in circumstances where there was no analogous contractual claim possible under the contract.”²²⁹ The court concluded that the Fiona Trust presumption—that the parties intended all disputes to be resolved in the chosen forum—was not applicable in these circumstances. It held that “rational businessmen would be surprised to be told that a non-exclusive jurisdiction clause bound or entitled the parties . . . to litigate in a contractually agreed forum an entirely non-contractual claim for breach of statutory duty . . . .”²³⁰ Accordingly, the English court recognized that statutory claims not having any basis in the contract may not fall within the ambit of a forum selection clause.

The intention here is not to argue that Martinez was necessarily incorrectly decided. The intention is simply to illustrate that the vantage point from which the analysis takes place will necessarily affect the result. If a U.S. court approaches the inquiry from the 10,000 foot level (does English law interpret “arising hereunder” broadly or narrowly?), this will yield a different result than if the U.S. court approached the inquiry at a more granular level (how does English law determine the scope of a forum selection clause where there is no legal counterpart in the chosen forum?).

5. Problem Five: Courts unduly rely on one case—at least as it concerns English law

Many cases involving the intersection between choice of law and forum selection clauses implicate English law and English courts.²³¹ Accordingly, U.S. courts have had myriad occasions to apply English law in interpreting the scope of a forum selection clause. Yet, the analysis is lacking in depth, breadth, and context. As discussed above, U.S. courts routinely piggyback on other U.S. courts’ views of English law, rather than going to the source. As such, it seems like one U.S. case sets out “English law” and the rest follow that case’s lead. In New York, that case is Martinez v. Bloomberg, which described in detail Fiona Trust, the leading English case on the interpretation of arbitration clauses.²³²

The Martinez court noted that the Fiona Trust case stands for the proposition that courts should broadly construe arbitration clauses.²³³ Thus, a presumption arises that parties intended all disputes to fall within the ambit of an arbitration clause, including disputes related to the validity of the clause. The Martinez case took the Fiona Trust principle and applied it to a case involving the interpretation of a forum selection clause in an employment agreement.²³⁴ While the court acknowledged the differences between the Fiona Trust case and the dispute at issue in Martinez, it nonetheless concluded that English courts would treat the two cases similarly. Cases after Martinez seized on its premise that the Fiona Trust case is, essentially, the be-all-and-end-all when it comes to interpreting forum selection clauses under English law.²³⁵

There are some problems, however, with U.S. courts’ exclusive reliance on the Fiona Trust case to guide them in interpreting forum selection clauses under English law. First, Fiona Trust involved the interpretation of an arbitration agreement, not a forum selection clause.²³⁶ It specifically involved whether an arbitrator should, in the first instance, decide issues related to the validity of an arbitration agreement.²³⁷ The English court concluded that the parties likely intended for all issues, including those of the validity of the arbitration clause itself, to be decided by an arbitrator.²³⁸ Thus, the case involved the interpretation of an arbitration clause as it concerned the proper division of adjudicative authority (court vs. arbitrator).²³⁹

U.S. courts have taken the Fiona Trust decision to mean something different: that when the parties agree to adjudicate “all disputes” in a particular forum, that phrase should be read broadly to include statutory, tort, and extra-contractual claims. This is not the proposition that Fiona Trust stands for.²⁴⁰ The Fiona Trust case simply stands for the proposition that issues related to the validity of the arbitration agreement should be adjudicated by the arbitrator designated by the parties.²⁴¹ Ironically, U.S. courts deem issues of validity to be procedural matters determined by the law of the forum, a holding directly at odds with the Fiona Trust principle. Thus, U.S. courts are using the Fiona Trust authority selectively and in a way that differs considerably from the case holding itself.

Second, the Fiona Trust case involved an international commercial dispute. Accordingly, the court observed that “rational businessmen” would not intend to have disputes bifurcated between the courts and an arbitrator.²⁴² As such, it must be presumed that they intended one-stop-shopping, i.e., for an arbitrator to decide all disputes. This rationale does not instinctively apply beyond the international commercial context. In particular, this rationale does not carry much weight in the consumer context, where a weaker party is beholden to terms imposed on it by the stronger party.

Third, a closer look reveals that English courts have imposed limits on the Fiona Trust principle. For instance, in Deutsche Bank AG London Branch v. Petromena ASA,²⁴³ the court stated that “Since Fiona Trust . . . it is axiomatic as a matter of English law, that jurisdiction clauses and arbitration clauses should be widely and generously construed, but this does not extend to all relationships however different even if they are assumed by the parties to an original relationship.”²⁴⁴ In Airbus SAS v. Generali Italia SpA,²⁴⁵ the court quoted with approval Dicey and Morris’s treatise, stating that “the decision in Fiona Trust has limited application to the questions which arise where parties are bound by several contracts which contain jurisdiction agreements for different countries.”²⁴⁶ Moreover, English courts have repeatedly held that normal canons of contractual constructions are to be applied in determining the scope of a jurisdiction clause, irrespective of the presumption in the Fiona Trust.²⁴⁷ Thus, under English law, the scope of a forum selection clause does not rise or fall exclusively on one case, as the U.S. case law would suggest.

As this Section illustrates, U.S. courts are not particularly interested in, or adept at, applying foreign law to interpret a forum selection clause. The exercise is complicated, convoluted, and unnecessary. In the long-run, litigants will fare better by having a court apply a body of law it is familiar with to resolve interpretation issues presented by forum selection clauses.

Conclusion

This Article has argued that courts should not apply the parties’ chosen law to interpret a forum selection clause. The rationales provided in support of applying the parties’ chosen law are not sufficiently compelling to counterbalance the complexity of such an exercise. Accordingly, U.S. courts should apply forum law to all preliminary questions involving forum selection clauses—validity, enforceability, and interpretation. This is the easiest and cleanest solution to the choice of law/choice of forum conundrum.

Any perceived unfairness in this approach can easily be mitigated by the parties themselves. If parties clearly draft forum selection clauses, there is very little, if anything, that requires interpretation. Professor Coyle notes that “[i]f a contract is clearly drafted, of course, there will be no need for the courts to invoke any of the canons discussed above. Contract drafters should therefore aspire to state their intentions clearly, thereby making it unnecessary for the courts to construe a clause.”²⁴⁸ Professor Coyle then provides a guide to how litigants can draft appropriate forum selection clauses that achieve a desired result.²⁴⁹ With respect to the two most common interpretation issues that arise—whether the clause is mandatory or permissive and whether the clause encompasses the dispute at issue—he offers the following guidance:

If the goal is EXCLUSIVITY, use words like “sole,” “only,” “exclusive,” and “must” to convey an intent to litigate exclusively in the chosen forum.

If the goal is NON-EXCLUSIVITY, omit all the words listed above and use the word “non-exclusive” or state that the parties “submit to jurisdiction” or “consent to venue” in the chosen forum.

If the goal is to give the clause a BROAD SCOPE, state that the clause shall apply to all claims “relating to” the contract or the parties’ relationship.

If the goal is to give the clause a NARROW SCOPE, state that the clause shall only apply to “contract claims” or to claims “arising out of the alleged breach of this agreement.”²⁵⁰

Ultimately, since the parties themselves are able to effectively convey what they intend in a forum selection clause simply by taking some time to carefully draft it, the forum selection clause meets choice of law clause issue is rendered moot. But if parties fail to draft their forum selection clauses carefully, courts should not engage in “conflict-of-laws contortions”²⁵¹ to honor the parties’ so-called intent by applying their chosen law to questions of forum selection clause interpretation.

When Forum Selection Clauses Meet Choice of Law Clauses

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