Question

Why would the court choose to enforce a forum-selection clause? What are some reasons that a court would not choose to enforce a forum-selection clause? Do you think forum-selection clauses are fair to plaintiffs? Can you locate a case in your jurisdiction where the court enforced a forum-selection clause and transferred a case to the selected forum?

Answer 1

A forum selection clause (sometimes called a dispute resolution clause, choice of court clause, jurisdiction clause or an arbitration clause, depending upon its form) in a contract with a conflict of laws element allows the parties to agree that any disputes relating to that contract will be resolved in a specific forum. They usually operate in conjunction with a choice of law clause which determines the proper law of the relevant contract.

The court reasoned that, in the consumer context, there is “gross inequality of bargaining power” between consumers and service providers, and that forum selection clauses “encroach on the public sphere of adjudication”. Much of the majority’s analysis turned on the implicated privacy rights at issue, recognised as having quasi-constitutional status. While the majority found consumer interests were paramount, the dissent gave greater weight to the commercial public policy considerations and to certainty and predictability in cross-border transactions.   

It remains to be seen whether the decision will be followed generally with respect to forum selection clauses in any consumer contract, or limited to the facts of this case ? and, for example, whether it will be followed only if quasi-constitutional consumer rights (eg, privacy) are being asserted in a Canadian court.

The decision is likely to be significant to legal areas where a Canadian forum is not mandated by law, but where a consumer complaint is likely, particularly where the type of complaint implicates rights that are afforded constitutional or quasi-constitutional status

Courts have historically declined to enforce forum selection clauses, . In M/S Bremen v. Zapata Off-Shore Co.,the Court stated that they were often perceived as being contrary to public policy or to prevent an otherwise proper court from hearing a dispute. However, the court went against precedent, ultimately ruling that "in the light of present-day commercial realities ... we conclude that [a] forum clause should control absent a strong showing that it should be set aside."To make this determination, a court can consider whether the forum selection clause contains an inconvenient venue. An inconvenient venue is typically one which has no real connection to the parties' contract, and/or is designed to discourage the party with no bargaining power from filing a lawsuit. A negotiated contract generally eliminates this concern because there is actual bargaining between the parties, as well as mutual agreement regarding venue.

On December 3, 2013, the U.S. Supreme Court, in Atlantic Marine Construction Company v. United States District Court for Western District of Texas1 clarified the procedures for enforcing forum selection clauses in federal courts. Petitioner Atlantic Marine Construction Company, a Virginia corporation, entered into a contract with the Army Corps of Engineers to construct a child-development center at Fort Hood, located in the Western District of Texas. Atlantic Marine subcontracted with respondent J-Crew Management, Inc., a Texas corporation, for work on the project.