The Problem of Conflicting Arbitration and Forum Selection Clauses

Abstract

The paper presents the peculiar problem that arises when a contract provides for an arbitration clause and, at the same time, sets forth a forum selection clause. Due to their differing effects, the existence of both clauses confronts courts and arbitral tribunals with questions as to their validity and scope. A review of various court decisions from multiple jurisdictions and arbitral awards indicates that courts and arbitral tribunals have adopted different approaches in tackling these issues, notably the following: (i) resort to a hard and fast rule, presuming the superiority of either clause, and (ii) interpretation of the seemingly conflicting clauses in order to determine their relationship, validity and scope. After a discussion of the reviewed decisions, the author concludes and welcomes that in most instances, courts and arbitral tribunals alike upheld the validity of both the forum selection and the arbitration clauses in question and reconciled them in a sensible way, mainly by applying the principle of interpreting a contract as a whole. At the same time, the author rejects the application of presumptions of superiority of either clause and emphasizes the eminence of the parties' intent when dealing with conflicting arbitration and forum selection clauses. In that sense, the presence of both an arbitration and a forum selection clause in the same contract will most often be a strong indication that the parties intended to avoid adjudication of their dispute by the competent state court under the procedural rules otherwise applicable by default. Consequently, in the author's view, a finding that both clauses are invalid due to differing effects is unwarranted.