Forum selection clause

A forum selection clause in a contract with a conflict of laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum. There are three types of clause:

A simple forum selection clause covering both the proper law of the contract and the forum for resolving disputes might read:

“This contract is governed by the laws of England and any dispute shall be finally resolved by the English courts.”

In many cross-border contracts, the forum for resolving disputes may not be the same as the country whose law governs the contract. And the contract may provide for a staged procedure for resolving disputes. For example:

“1.This agreement shall be governed by and interpreted in accordance with the laws of England. 2.The parties shall endeavour to settle any dispute that arises by direct negotiation between their managing directors or similar senior executives but if direct negotiation does not result in a resolution of the dispute, either Party may require that it be referred to mediation in accordance with the CEDR (Centre for Effective Dispute Resolution) Mediation Rules at present in force. 3. Any dispute that is not settled by direct negotiation or by mediation shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”

The choice of law stage in a conflict case requires the forum court to decide which of several competing laws should be applied to resolve the dispute. In this, there is an important distinction to be made between a forum selection clause and a choice of law clause. As an application of the public policy of freedom of contract, the parties are usually free to nominate the proper law under which all relevant disputes will be resolved. If there is an express selection, this choice will be respected so long as it is made bona fide, i.e. the subjective intention prevails unless the purpose is to:

But, if the parties do no more than nominate a forum, this is no more than an indication that they intend that forum's law to apply. There are many reasons why parties may select a forum (see a discussion of forum shopping):

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Wikipedia