Foreign Forum Selection Clauses in the Federal Courts: All in the Name of International Comity

Article excerpt

I. INTRODUCTION

When parties engage in international trade, each side frequently believes that the transaction will be controlled by their own domestic laws and practices.(1) However, when trading across borders, parties are subject not only to their own laws, but also to the laws of other countries where they conduct business.(2) To reduce litigation risks and costs, contemporary international contracts usually contain forum selection clauses to govern disputes between parties.(3) Forum selection clauses are valuable tools because they allow parties to specify an exclusive choice of forum or even a procedure for resolving contractual disputes.(4) The treatment of these clauses becomes crucial when a dispute arises and suit is filed in a forum other than that specified in the forum selection clause.

Historically, the courts emphasized various reasons for refusing to enforce forum selection clauses.(5) However, increased international trade compelled U.S. courts to abandon their age-old prejudice and to hold parties to the terms of their agreements.(6) The decision to enforce such clauses allows contracting parties to make the economic result of their agreements more predictable.(7) Enforcement also permits the judicial system to function more economically and efficiently.(8)

This comment focuses on the federal enforcement of foreign forum clauses in international contracts from a U.S. perspective. Part II of this comment provides an overview of the "ouster" doctrine and the developing conflict towards enforcement in the lower courts. Part III discuses the landmark Supreme Court decision in The Bremen, followed by the controversial Carnival Cruise decision. The parallel conflict over forum arbitration clauses is presented in Part IV. Part V focuses on the more recent lower court Lloyd's cases. Part VI concludes the comment with an analysis of the continued growth in international markets and the current state of law that has resulted in the name of international comity.

II. HISTORICAL TREATMENT OF FORUM SELECTION CLAUSES

The common law historically viewed forum selection clauses as an attempt by parties to contractually "oust" a court of its jurisdiction.(9) Generally, contracting parties could not, by contractual agreement, prevent a court from exercising jurisdiction.(10) A classic example of the ouster doctrine can be traced back to an excerpt from the 1874 Supreme Court opinion in Home Insurance Co. v. Morse:

   Every citizen is entitled to resort to all the courts of the country, and
   to invoke the protection which all the laws or all those courts may afford
   him. A man may not barter away his.., freedom, or his substantial
   rights....

   ... [A]greements in advance to oust the courts of the jurisdiction
   conferred by law are illegal and void.(11)

The reasoning behind the ouster doctrine is that a court's jurisdiction is established by law, and thus it cannot be altered by private agreement.(12) In addition to the ouster doctrine, some courts refused to enforce these types of contractual agreements on the ground that they were naturally considered contrary to public policy.(13) Other courts refused to enforce the clauses because they related to the law of remedies, which could not be affected through private agreements.(14)

The hostility towards forum selection clauses also twisted its way into the realm of statutory interpretation. In 1893, Congress enacted the Harter Act to unify the law for the carriage of goods arriving at, or originating from, any U.S. port.(15) The Act applied to any cargo carried under a bill of lading, and provided specific liabilities and defenses to shippers and carriers.(16) All cargo transported by common carriers over navigable waters was governed by these provisions regardless of the parties' intentions.(17) Although the Harter Act did not specifically address forum selection clauses, the courts strictly applied the Act to void these types of agreements. …