A Contractual Approach to Choice of Law Rules for Forum Selection Clauses

Akron Law Review Volume 56 Issue 1 Article 2 2023 A Contractual Approach to Choice of Law Rules for Forum Selection Clauses Shahar Avraham-Giller Follow this and additional works at: https://ideaexchange.uakron.edu/akronlawreview Part of the Contracts Commons Please take a moment to share how this work helps you through this survey. Your feedback will be important as we plan further development of our repository. Recommended Citation Avraham-Giller, Shahar (2023) "A Contractual Approach to Choice of Law Rules for Forum Selection Clauses," Akron Law Review: Vol. 56: Iss. 1, Article 2. Available at: https://ideaexchange.uakron.edu/akronlawreview/vol56/iss1/2 This Article is brought to you for free and open access by Akron Law Journals at IdeaExchange@UAkron, the institutional repository of The University of Akron in Akron, Ohio, USA. It has been accepted for inclusion in Akron Law Review by an authorized administrator of IdeaExchange@UAkron. For more information, please contact , . Avraham-Giller: Forum Selection Clauses A CONTRACTUAL APPROACH TO CHOICE OF LAW RULES FOR FORUM SELECTION CLAUSES Shahar Avraham-Giller* I. II. III. IV. V. Introduction ....................................................................37 The Tendency to Apply Forum Law to Questions of Validity and Interpretation of Forum Selection Clauses ....41 A. The Validity and Interpretation of Forum Selection Clauses.....................................................................41 B. The Tendency to Apply the Forum Law in AngloAmerican Courts and Literature.................................46 Arguments for Applying the Law of the Contract .............53 A. The Tendency to Apply Forum Law – Parties Expectations .............................................................56 B. The Tendency to Apply Forum Law – Procedural and Jurisdictional Thinking..............................................59 Contractually Oriented Choice of Law Rules for Forum Selection Clauses ............................................................65 A. Choice of Law Rules for the Questions of Validity and Interpretation of Forum Selection Clauses..................65 B. The Effect of Overriding Mandatory Provisions .........68 Conclusion ......................................................................74 I. INTRODUCTION In commercial agreements that can be subject to more than one legal system, it is a common practice to include a clause setting out where litigation will take place in case of a dispute between the contracting parties. This is a forum selection clause. 1 This kind of stipulation has * PhD (Law). Special thanks are due to Celia Fassberg and Sharon Shakargy for their useful comments on an earlier version of this paper. 37 Published by IdeaExchange@UAkron, 2023 1 Akron Law Review, Vol. 56 [2023], Iss. 1, Art. 2 38 AKRON LAW R EVIEW [56:37 received much attention in academic literature. However, the literature has yet to fully identify the choice of law rule that should govern questions concerning the validity and interpretation of such clauses. Arguably, the natural expectation of parties using such clauses is that, in the event of litigation between them, this stipulation will be treated the same way as other contractual stipulations, including in the context of conflict of laws. That is to say: the applicable law to these questions will be the same as to the rest of the contract. According to the general principles of choice of law rules for contracts, the law of the contract (lex contractus) would govern the validity and interpretation of forum selection clauses. In the case of a contract that contains a choice of law clause, the law of the contract is the law chosen by the parties. This means that the law chosen by the parties governs questions concerning the validity of forum selection clauses, such as whether there was mutual assent, and questions of interpretation, such as whether the clause is mandatory (i.e., excludes all other jurisdictions) or permissive (i.e., authorizes a certain court without excluding other courts that might have jurisdiction). Yet, in Part I, the article will show how courts in the Anglo-American legal world often decide questions of validity and interpretation of forum selection clauses under forum law (lex fori). In this part the paper will also examine the relatively sparse discussion in American literature—mainly in the articles of the scholars Symeonides, Clermont, Yackee, and Monestier 2 —over the question which law should govern these questions: the law of the contract (which is very often the law chosen by the parties) or the law of the forum. This article shows that while the discourse on the subject reveals opposing positions, it also articulates a growing tendency towards the application of forum law to these questions. The article seeks to change the direction of this trend. Following that, in Part II, the article raises two arguments that have not been adequately discussed in favor of applying the law of the contract. First, the paper shows how the application of forum law makes it difficult for parties to anticipate at the drafting stage which law will be applied to the forum selection clause, and, consequently, what law will apply to its validity and interpretation. Second, the paper argues that applying the law 1. Other common monikers include “choice of court clause,” “choice of forum clause,” “jurisdiction clause,” or “jurisdiction agreement.” 2. Symeon Symeonides, What Law Governs Forum Selection Clauses, 78(4) LA. L. R EV. 1120 (2018); Kevin M. Clermont, Governing Law on Forum-Selection Agreements, 66 HASTINGS L.J. 643 (2015); Jason Webb Yackee, Choice of Law Considerations in the Validity & Enforcement of International Forum Selection Agreements: Whose Law Applies?, 9 UCLA J. INT’L L. & F OREIGN AFF. 43, 67 (2004); Tanya Monestier, When Forum Selection Clauses Meet Choice of Law Clauses, 69(2) AM. U.L. R EV. 325 (2019). https://ideaexchange.uakron.edu/akronlawreview/vol56/iss1/2 2 Avraham-Giller: Forum Selection Clauses 2022] F ORUM S ELECTION C LAUSES 39 of the forum is inconsistent with Anglo-American theoretical legal thinking on forum selection clauses. Finally, in part III, the article moves to its primary contribution by proposing a new approach for choosing the law that should govern forum selection clauses. The starting point is that forum selection clauses are contractual clauses and should be treated as such, including in the context of choice of law. At the same time, the proposal acknowledges the crucial role of overriding mandatory provisions of both the seized forum and the agreed forum in deciding the validity of these clauses, thus safeguarding important public interests. Before moving on, a preliminary remark is needed in order to clarify the scope of the article. The article focuses exclusively on choice of law rules for forum selection clauses in the Anglo-American world. The treatment of forum sel (...truncated)