Selection of the Forum

Selection of the Forum

The selection of the forum of a contract is of great importance to the value of the contract. Naturally, there are always advantages in litigating in a familiar setting, but there are advantages and disadvantages when choosing any forum. For example, the American civil litigation system, unlike many other countries' systems, permits jury trials. What is more, punitive damages are possible, in the jury’s discretion, as well as statutorily authorized treble damage awards. Thus, a company exposes itself to a greater risk of liability if its disputes are subject to the jurisdiction of US courts and may wish to avoid US courts if possible.

Ultimately, whether your forum selection clause is included in the contract is a matter for negotiation. If you prevail, draft the clause with care. It is essential to be clear whether the designation of jurisdiction is exclusive or non-exclusive because some courts may be reluctant to find exclusivity where the clause is ambiguous.

Drafter’s Tip

Use the following language to designate exclusivity:

“Each party hereby irrevocably agrees that the courts of (Country X) shall have exclusive jurisdiction to resolve any controversy or claim of whatever nature arising out of or relating to this contract or breach thereof.”