Question

Ronald Riley, a U.S. citizen, and Council of Lloyd’s, a British insurance corporation with its principal place of business in London, entered into an agreement in 1980 that allowed Riley to underwrite insurance through Lloyd’s. The agreement provided that if any dispute arose between Lloyd’s and Riley, the courts of England would have exclusive jurisdiction, and the laws of England would apply. Over the next decade, some of the parties insured under policies that Riley underwrote experienced large losses, for which they filed claims. Instead of paying his share of the claims, Riley filed a lawsuit in a U.S. district court against Lloyd’s and its managers and directors (all British citizens or entities), seeking, among other things, rescission of the 1980 agreement. Riley alleged that the defendants had violated the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5. The defendants asked the court to enforce the forum-selection clause in the agreement. Riley argued that if the clause was enforced, he would be deprived of his rights under the U.S. securities laws. The court held that the parties were to resolve their dispute in England. [Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992)]

Did the court’s decision fairly balance the rights of the parties? How would you argue in support of the court’s decision in this case? How would you argue against it?

Should the fact that an international transaction may be subject to laws and remedies different from or less favorable than those of the United States be a valid basis for denying enforcement of forum-selection and choice-of-law clauses?

All parties to this litigation other than Riley were British. Should the court consider this fact in deciding this case?

Answer 1

Answer 1 :

The court did balance the rights of the parties.The primary document reference for any loacal national involved in a business arrangement outside his/her native country is the contract signed between them. As the contract clearly stated that in case of any dispute, the matters shall be resolved in England. It may be possible that losses are happening due to some political crisis or some sort of temporary economic crisis in England and therefore, this very clause further supports the insurance company as the situation has arisen because of factors not in their hands.
The argument against can be based on the grey definition of protecting personal rights as mentioned in the constitution. Laws pertaining to any segment of the economy find their roots in the constituion which basically adheres to the protection of personal rights. But in this case, the court decides not to even look into a matter which may be hampering the rights of the citizen of his own country.

Answer 2:

As i discuss in my first answer, international transaction involves different laws, regulations and factors affecting them. Therefore, i think it can be a valid bases for denying the fourth-selection and choise-of-laws clauses.

Answer 3:

No,the court should not look at the citizenship of a party of the litigation. If the content of the case involves international transaction, like this one, then it becomes the duty of the court to look at that factor. But if it was dealing with a case subject to local transactions but involved the same British parties, it would had to act on it as the laws of the land shall apply in that condition. Therefore, nationality does not change the context of the subject of the case in question.