Forum Selection and Choice of Law Clauses

• Author: Ernesto Sanchez
• Pages: 263-267

263

23

FOR UM SEL ECTI ON A N D C HOICE OF

LAW CL AU S ES

§ 23.1 INTRODUCTION

In cases concerning contracts or contractual relationships, forum selection clauses in the initial

contracts can reduce uncertainty regarding where an action should be brought. Forum selection

clauses in contracts select particular venues or courts for litigating disputes that may arise out of

such contracts. Contracts governing a transaction or relationship between a private party and a

party the FSIA presumptively immunizes can certainly contain these clauses.

§ 23.2 FORUM SELECTION CLAUSES

Forum selection clauses can be either exclusive, requiring that all litigation between parties be

resolved in a specic forum, or nonexclusive, permitting litigation in a designated forum while

not precluding litigation in other courts possessing jurisdiction and where venue would also be

proper. If private parties and parties encompassed by the FSIA are content to have a dispute

resolved in one of any number of U.S. judicial districts, they will nd that choosing between

these districts, in formulating a forum selection clause or not, does not raise issues of conve-

nience, language, dierences in governing law, and local bias to the degree that having to decide

between a U.S. court or a foreign court does.

Where forum selection clauses are especially useful is in preventing the kind of parallel for-

eign litigation that can raise the complicated forum non conveniens issues described in Chapter

21.1 For FSIA purposes, then, the main issues parties must consider with respect to forum selec-

tion clauses are (1) how to draft the clauses; (2) such clauses’ enforceability; and (3) the extent to

which these clauses will enable the dismissal of actions brought in other forums on the grounds

of improper venue.

(1) Drafting Forum Selection Clauses

Parties should draft forum selection clauses with care and be sure to use crystal clear language

if they wish to limit potential litigation to one sole judicial district—federal or state—and not

leave open the possibility that courts will interpret their clauses dierently. A 2009 Virginia

case clearly illustrates this necessity. e case concerned plainti real estate purchasers who had

entered into a purchase transaction and contract with a forum selection clause specifying that

“[t]he sole venue for any litigation shall be Loudoun County, Virginia.” Defendants removed a

subsequent state court lawsuit for fraud and violations of Virginia consumer protection law to

the appropriate federal court (i.e., removal from the Circuit Court of Loudoun County, Vir-

ginia, to the U.S. District Court for the Eastern District of Virginia). e plaintis sought to

remand the case back to the state court, but the court refused on the basis of the forum selection

1. See supra Ch. 21, § 21.3.

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