Forum Selection Clauses Research Articles

Restructuring Lebanese Sovereign Debt: Tackling the Holdout Problem

Lebanon can threaten to take the following three actions to restructure its debt and weaken the position of a potential holdout creditor, such as the Ashmore Group, that holds more than 25% of the outstanding debt. First, unilaterally amend the terms of the Fiscal Agency Agreement pursuant to Para. 23.1 to allow bondholders representing a simple majority of the outstanding debt to amend non-core terms, contrary to the 75% required to pass an extraordinary resolution. Second, initiate the debt restructuring through a debt exchange program with an exit consent that requires participating bondholders to vote to amend the two non-core terms in the Fiscal Agency Agreement: (1) amend the forum selection clause to ensure that in the event of default, the creditor may only bring a lawsuit against the debtor in a Lebanese court (para. 8.3); (2) remove the pari passu clause (para. 3). Third, the Lebanese Parliament enacts a law effectively accomplishing that (1) the New bonds are senior to the Old Bonds; (2) the government may make selective payments on its senior debt until they are paid in full without resulting in default on junior claims; (3) successful creditor-litigants have the obligation to apply the proceeds of a successful judgment against Lebanon to senior creditors. In the event that Lebanon fails in these three actions, Lebanon can still rely on the necessity doctrine as an affirmative defense.

How to Restructure Lebanon's Debt

To restructure its debt, the Republic of Lebanon should conduct an exchange offer that transfers existing bonds into the hands of a fiduciary agent that is contractually bound to block any attempts to accelerate the debt by non-participating creditors. The exchange offer should also solicit consent to modify the forum selection clause in the old bonds, making Lebanon the exclusive forum for adjudicating disputes. Simultaneously, the Republic should clarify a crucial inconsistency in the Republic’s 2010 Fiscal Agency Agreement. Under Condition 15(a) of the relevant bonds, modifying non-payment terms like the forum selection provision arguably requires a lower threshold, which the agreement authorizes the Republic to supplement in accordance with prevailing market norms. Finally, the Republic should enact legislation that subordinates bondholders who attempt to challenge this interpretation. Together, these steps would considerably strengthen the Republic’s position with respect to potential holdouts.

Enforcing Outbound Forum Selection Clauses

Forum selection clauses are a staple of modern business law. Parties agree, ex ante, on where they can sue one another and then rely on the courts to enforce these agreements. Although the number of contracts containing forum selection clauses has skyrocketed in recent years, there is a dearth of empirical information about enforcement practice at the state level. Are there any states that refuse to enforce them? How frequently are they enforced? Under what circumstances, if any, will these clauses be deemed unenforceable? The existing literature provides few answers to these questions. This Article aims to fill that gap. It surveys more than 200 state statutes and nearly 900 state cases involving outbound forum selection clauses to contribute to the scholarly discussion in two important ways. First, it provides a much needed, and heretofore missing, empirical account of when outbound forum selection clauses will be enforced in state courts. Second, the Article offers a rich descriptive account of why outbound forum selection clauses sometimes go unenforced. It shows that state courts generally refuse to enforce these clauses for one of two reasons: 1) they are contrary to public policy; or 2) they are unreasonable, a famously malleable term that encompasses a relatively stable subset of reasons. The data presented in this Article offers important insights to actors who interact with outbound forum selection clauses on a regular basis—litigators, judges, and scholars. Armed with this information, litigators can take care to avoid pitfalls that may result in a clause being deemed unenforceable. Judges can gain a better sense for how their colleagues in other states address the myriad challenges posed by these clauses. And scholars can draw upon this data to evaluate whether there exists a difference between state and federal practice in this area and, if so, whether this difference presents a problem under the Supreme Court’s seminal decision in Erie Railroad Co. v. Tompkins.

Enforcing Inbound Forum Selection Clauses in State Court

Enforcing Inbound Forum Selection Clauses in State Court

Wykładnia umowy jurysdykcyjnej zawartej na podstawie art. 25 Rozporządzenia Parlamentu Europejskiego i Rady (UE) Nr 1215/2012. Glosa do postanowienia Sądu Najwyższego z dnia 5 października 2018 r., I CSK 611/17

The choice of court agreement (forum selection clause) is effectively concluded if there is no doubt that the party has actually become acquainted with its content. The Court of Justice of the European Union focuses on those aspects of the conclusion of the contract that allow the assessment that the other party is not surprised by the establishment of a subjective link. The compliance with formal requirements implies that the parties agreed on the conclusion of the contract. There are no objections about so understood “real consent of the parties” as a consequence of fulfilling not only the requirements as to the form, but above all as the way of the conclusion of the contract. The acceptance of the thesis that since the party expressed the undoubted consent to conclude the contract, there is thus no problem of the interpretation of the declaration of intent, is impossible. There is no dispute that the interpretation of a declaration of intent is a legal matter,since the methods of interpretation are determined by the law. According to the Polish Supreme Court, on the basis of Regulation 1215/2012 there is no problem of seeking of the applicable law, because the rules for the interpretation of a jurisdictional agreement should be interpreted from the provision of art. 25 of this regulation. This position is based on the main argument that any deviation from the autonomous rules of interpretation creates the danger that the courts of the Member States will differently determine the law applicable. The Court of Justice of the European Union accepts that an objective (normative) method of interpreting party’s statements should be used. In some situations, it is necessary to apply legis causae to effectuate a supplementary interpretation of the declarations of will.

Stickiness and Incomplete Contracts

Both economic and legal theory assumes that sophisticated parties routinely write agreements that maximize their joint surplus. But more recent studies analyzing covenants in corporate and government bond agreements have suggested that some contract provisions are highly path dependent and “sticky,” with future covenants only rarely improving upon previous ones. This Article demonstrates that the stickiness hypothesis explains the striking lack of choice-of-forum provisions in commercial contracts, which are absent in the majority of half a million material agreements reported to the SEC. When drafting these contracts, external counsel relies heavily on templates and whether or not a contract includes a forum selection clause is almost exclusively driven by the template that is used to supply the first draft. There is no evidence to suggest that counsel negotiates over the inclusion of choice-of-forum provisions, nor that law firm templates are revised in response to changes in the costs and benefits of incomplete contracting. Together, the findings reveal a distinct apathy with respect to forum choice among transactional lawyers that perpetuates contractual gaps. The persistence of these gaps suggests that default rules can have significantly greater implications for the final allocation of the contractual surplus than is assumed under traditional theory.

Is There a Better Option than the Data Transfer Model to Protect Data Privacy?

The data transfer model and the accountability model, which are the dominant models for protecting the data privacy rights of citizens, have begun to present significant difficulties in regulating the online and increasingly transnational business environment. Global organisations take advantage of forum selection clauses and choice of law clauses and attention is diverted toward the data transfer model and the accountability model as a means of data privacy protection but it is impossible to have confidence that the data privacy rights of citizens are adequately protected given well known revelations regarding surveillance and the rise of technologies such as cloud computing. But forum selection and choice of law clauses no longer have the force they once seemed to have and this opens the possibility that extraterritorial jurisdiction may provide a supplementary conceptual basis for championing data privacy in the globalised context of the Internet. This article examines the current basis for extraterritorial application of data privacy laws and suggests a test for increasing their relevance.

Understanding public policy limits to the enforceability of forum selection clauses after Douez v Facebook

This article explores the nature of public policy limits to the enforcement of forum selection clauses, recently considered by the Supreme Court of Canada in Douez v Facebook. The public policy factors relied on by the plurality of the Court, inequality of bargaining power and the quasi-constitutional nature of the right at issue, possess neither the doctrinal clarity nor the transnational focus necessary to guide the deployment of public policy in this context. Here, I argue for a public policy exception to the enforcement of forum selection clauses based on the doctrine of mandatory overriding rules. This approach would focus on whether a forum selection clause has the effect of avoiding the application of local norms intended to enjoy mandatory application in the transnational context. This conception of public policy would be a more coherent guide to the exercise of courts’ discretion to enforce forum selection clauses in cases like Douez.

The Hague Convention on Choice of Court Agreements and the enforcement of forum-selection clauses in Indian private international law

The Hague Convention on Choice of Court Agreements (the HCCA) that came into effect on 1 October 2015, fundamentally regulates forum-selection clauses in international civil and commercial agreements and the manner in which, the courts of Contracting States shall enforce them. Although India is a member of the Hague Conference, it is yet to sign and ratify the HCCA. In the domestic realm, matters pertaining to jurisdiction are governed in India by the Code of Civil Procedure (CPC) 1908, with there being no particular provision to regulate the enforcement of forum-selection clauses in international matters. This article rummages to find whether Indian courts correspondingly enforce forum-selection clauses in international civil and commercial agreements, so as to suspend or dismiss proceedings in circumstances where the parties have made a choice in favour of an international court. Accordingly, it demonstrates the basis on which, Indian courts would uphold exclusive choice of court agreements in international civil and commercial matters, to draw the complementarities, if any, that exist in this respect, between the HCCA and Indian private international law.

Forum Selection Clauses in a Brave New World: Opting out of Parochialism?

Forum Selection Clauses in a Brave New World: Opting out of Parochialism?

There Is a There There: Forum Selection Clauses, Consumer Protection and the Quasi-Constitutional Right to Privacy in Douez v. Facebook

There Is a There There: Forum Selection Clauses, Consumer Protection and the Quasi-Constitutional Right to Privacy in Douez v. Facebook

The Hague Convention on Choice of Court Agreements and the enforcement of forum-selection clauses in Indian private international law

The Hague Convention on Choice of Court Agreements and the enforcement of forum-selection clauses in Indian private international law

An Empirical Study of Dispute Resolution Clauses in International Supply Contracts

International transactions present unique legal risks. When a contract touches several different nations, a party may not know where it will be called upon to defend a lawsuit or, alternatively, which nation’s law will be applied to resolve that dispute. To mitigate these risks, parties will often write dispute resolution provisions into their contracts. Arbitration clauses and forum selection clauses help to reduce uncertainty relating to forum. Choice-of-law clauses help to reduce uncertainty as to governing law. Over the past few decades, such provisions have become commonplace in international contracting. And yet there exist vanishingly few empirical studies exploring the use of these provisions in international commercial agreements. This Article aspires to help fill this gap. Drawing upon a hand-collected dataset of 157 international supply agreements, it describes the ways in which large corporations seek to mitigate their risk in international transactions via dispute resolution clauses. The Article first provides a thick descriptive account of choice-of-law clauses in these agreements to illustrate the myriad ways these clauses do (and do not) mitigate legal risk. It then undertakes the same project with respect to arbitration clauses and forum selection clauses, paying careful attention to the ways in which actual practice deviates from the model forms promulgated by arbitration groups, to show how these clauses mitigate forum risk. While the primary object of the Article is descriptive rather than normative — it seeks to describe the contents of agreements that have heretofore been largely ignored by legal scholars — it also discusses the normative implications of its descriptive account for three groups. First, legal scholars may draw upon this account to better understand how contract boilerplate evolves and changes over time. Second, judges called upon to interpret a contract may utilize this account to determine whether a phrase is typically included in clauses of a given type. Third, and finally, contract drafters may glean useful insights into how to craft dispute resolution provisions that maximize the reduction in uncertainty in international contracting.

The Interpretation and Effect of Permissive Forum Selection Clauses Under U.S. Law

A forum selection clause is a form of contractual waiver. By this device, a contract party waives its rights to raise jurisdictional or venue objections if a lawsuit is initiated against it in the chosen court. The use of such a clause in a particular case may therefore raise a set of questions under contract law. Is the waiver valid? Was it procured by fraud, duress, or other unconscionable means? What is its scope? And so on. Unlike most contractual waivers, though, a forum selection clause affects not only the private rights and obligations of the parties, but something of more public concern: the jurisdiction of a court to resolve a dispute. The enforcement of such a clause therefore raises an additional set of questions under procedural law. For instance, if the parties designate a court in a forum that is otherwise unconnected to the dispute, must (or should) that court hear a case initiated there? If one of the parties initiates litigation in a non-designated forum that is connected to the dispute, must (or should) that court decline to hear the case? This report, prepared for the International Academy of Comparative Law in connection with its XXth International Congress, analyzes the approach to these questions in the United States. The bottom line is straightforward: almost always, in consumer as well as commercial contracts, forum selection clauses will be enforced. Navigating the array of substantive, procedural, and conflicts rules whose interplay yields that result, though, is far less straightforward. That is the task of this report. Following a short background, it surveys current state law on their use, in consumer as well as commercial contracts. The report then discusses the interpretation and enforcement of forum selection clauses in both state and federal courts. It analyzes their effect on jurisdiction as well as on doctrines involving venue, such as removal and forum non conveniens. The report also covers choice of law problems, particularly as they arise in the course of litigation in federal courts.

Back to The Bremen (1972): Forum Selection and Worldmaking

The US Supreme Court’s 1972 decision in The Bremen v. Zapata Off-Shore Co. is widely seen as a landmark in the law of jurisdictional party autonomy. Where earlier American courts had rejected forum-selection clauses as ‘ousters’ of jurisdiction and therefore as against public policy, the Supreme Court now firmly came out in their favour, and Chief Justice Burger’s resounding rejections of ‘parochialism’ in his opinion for the court have often been cited since. This brief Comment revisits the decision, arguing that The Bremen should be understood not as a mere statement of principle or change in doctrine, but as a particularly striking instance of worldmaking. The Comment discusses in particular: (a) the constructive roles of ‘scale’ and scalar modulation as techniques of worldmaking, and (b) some paradoxes in the character of the world of private party autonomy that the decision helped imagine and make real.

When the Consumer Would Rather Not Litigate: Arbitration Agreement As a Defense Against a Motion for Summary Judgment in a Contractor-vs-Homeowner Case

Appellate caselaw on arbitration-related issues is replete with cases involving the question whether a motion to compel arbitration was properly granted or denied. Currid v. Coit Cleaning & Restoration Services, No. 01-17-00630-CV (Tex.App. – Houston [1st Dist.] 2018) presents a less common scenario: A contractor sued a homeowner for additional amounts allegedly owed under a contract for remediation of water-damage at her home. Defendant Homeowner answered the lawsuit through an attorney but did not promptly file a motion to compel arbitration. Defendant-Homeowner instead invoked the arbitration clause contained in the underlying contract in opposition to the Contractor’s motion for a final summary judgment against her. Within the same response, the Homeowner Defendant cross-moved for dismissal on the ground that the lawsuit had been filed in the wrong forum. A visiting judge granted the summary judgment for the Contractor and the presiding judge of the trial court later denied the Homeowner’s motion for reconsideration, opining that the Homeowner had brought up arbitration too late. On appeal, the Contractor defended the summary judgment on arbitration-waiver grounds. The amicus curiae brief submitted in support of the Homeowner argues that the arbitration defense was not waived procedurally because it had been timely asserted in opposition to the Plaintiff’s motion for summary judgment, and that the contractual right to arbitrate had not been waived substantively under the waiver factors the Texas Supreme Court had articulated in Perry Homes v. Cull, 258 S.W.3d 580, 593-94 (Tex. 2008). Nor had the Contractor’s waiver argument been timely under the summary judgment rule. Unlike the homeowners in Cull, the homeowner here had not brought the lawsuit in the first instance; had not switched from first choosing litigation and then seeking a transfer to arbitration for tactical reasons; had not herself substantially invoked the litigation process; and had not even defended the claim against her on the merits, insisting instead that it was being pursued in the wrong forum. The brief also addresses the matter of the arbitration clause also being a forum selection clause, which takes it beyond the procedural framework governing arbitration-related motions under the Federal Arbitration Act (FAA) and the Texas General Arbitration Act (TGAA or TAA). Date of Abstract: April 7, 2018 Date of Amicus Brief: December 26, 2017

Global social media vs local values: Private international law should protect local consumer rights by using the public policy exception?

This article focuses on the relationship between forum selection clauses, choice of law clauses and data protection and privacy protection. In particular, it discusses the question whether and why jurisdiction and choice of law clauses used in the terms of social media providers should not be enforced against social media users located in a different jurisdiction. The article distinguishes between the contractual, private law analysis and the application of public policy as part of the private international law analysis. The contract law analysis is centred on doctrines such as unconscionability, which in turn examines issue such as fairness and overwhelming bargaining power of one party. By contrast, the public policy analysis in private international law focuses on fundamental rights, legality of contractual clauses according to the local law of the forum and the interests of justice. It is argued here that both aspects (contractual and public policy doctrines) are paramount for achieving not only justice between the parties of a dispute but also ensuring good administration of justice in the public interest.

Facebook’s forum selection clause not ‘liked’ by Supreme Court of Canada

In Douez v. Facebook, Inc., 2017 SCC 33, a majority of the Supreme Court of Canada held Facebook’s forum selection clause, which required that all disputes be litigated in Santa Clara County (California), unenforceable.

Contracting out of Access to Justice: Enforcement of Forum-Selection Clauses in Consumer Contracts

Forum-selection agreements in consumer contracts nominate by default the business’s home jurisdiction to resolve disputes and thus directly impact a consumer’s ability not only to access courts, but also to obtain access to substantive justice. It has been argued that courts should consider enforcing jurisdiction clauses in consumer contracts with “greater scrutiny” because of their inherent power imbalance. To examine how the courts approach forum-selection clauses in consumer contracts, this article analyzed all reported consumer cases involving forum-selection agreements in Canadian common law jurisdictions between 1995 and 2016. The analysis of these cases shows that the courts have failed to exercise the greater scrutiny that was called for. In light of the analysis of the surveyed cases, this article argues that the rules for enforcing forum-selection clauses in consumer contracts ought to be recalibrated to reflect the power dynamics of consumer relationships, the ubiquity of standard-form contracts, and their effect on consumers’ ability to obtain redress. This article proposes two suggestions for reform: legislative intervention to invalidate forum-selection clauses in consumer agreements, and reframing and recalibrating the common law strong-cause test for the enforcement of forum-selection clauses in consumer transactions.

Has the CJPTA Readied Canada for the Hague Choice of Court Convention?

This paper examines whether the Court Jurisdiction and Proceedings Transfer Act has readied Canada to adopt the 2005 Hague Choice of Court Convention. Reviewing the Convention as well as previous and current law and cases on forum selection clauses in common law Canada, including the very recent Supreme Court decision in Douez v Facebook, yields two conclusions. First, there are existing interpretive challenges flowing from gaps in the CJPTA with respect to jurisdictional clauses that need to be addressed. Second, the principles governing forum selection clauses in Canada are largely consistent with those put forward in the Hague Convention and should not be perceived as obstacles to its adoption.