Forum selection clause
For example, a loan agreement may provide that if the borrower wishes to bring proceedings against the lender, that can only be done by way of arbitration.
Forum selection clauses have been criticised by a minority of courts as improper attempts to divest them of personal jurisdiction over the parties.
[7] Forum selection clauses are sometimes enforced against proceedings filed in foreign courts by use of an anti-suit injunction.
The Supreme Court endorsed forum selection clauses for providing "certainty and security in transaction".
If there is, the court must grant a stay unless the plaintiff demonstrates sufficiently strong reasons to show that they should not be bound by the forum selection clause.
[11] The Court, in exercising its discretion, should consider factors such as: where evidence is situated or more readily available, whether foreign law applies and whether it differs from domestic law, the country with which the parties are connected and how closely, whether the defendants are seeking procedural advantages, and whether the plaintiffs would be prejudiced by the need to sue in a foreign court.
In Expedition Helicopters Inc. v Honeywell Inc. [2010 ONCA 51], the Ontario Court of Appeal outlined factors which may justify departing from enforcement including: the plaintiff was induced to agree to the clause, the contract is otherwise unenforceable, the selected forum is unwilling or unable to accept jurisdiction, the claim or circumstances are outside of what was reasonably contemplated by the parties in agreeing to the clause, the plaintiff cannot longer expect a fair trial in the forum due to subsequent events that could not have been reasonably anticipated, or the enforcement of the clause would frustrate clear public policy.
[11] Factors considered in the majority's decision included: the nature of the right (constitutional right to privacy), the gross inequality of bargaining power between the parties, the lack of alternatives for the consumers, the interest of the courts, clarity and certainty.
The Court asserted that choice of law, forum selection and forced arbitration clauses can deprive parties of possible remedies thus violating their reasonable expectations.
[14] Quebec's Civil Code renders forum-selection and arbitration clauses in consumer and employment contracts unenforceable.
[15] The United States Supreme Court has upheld forum selection clauses on several occasions, and has suggested that they should generally be enforced.
A court in the United States will typically distinguish between exclusive and non-exclusive forum selection clauses.
In Future Industries of America v. Advanced UV Light GmbH, 10–3928,[16] the United States Court of Appeals for the Second Circuit in New York City affirmed the dismissal of a case that sent the parties to Germany because the forum selection clause made German courts the exclusive forum.
[23] Empirical studies have found that U.S. court enforce outbound forum selection clauses in the overwhelming majority of cases where they are challenged.
Surveying the case law in 2015, Bonnie Roe, Daniel Tabak, and Jonathan Hofer have argued (in Lexology)[26] that forum selection bylaws have become an established part of corporate governance in only a few short years.
This position is well summarized in an article in the Chicago-Kent Law Review by Marty Gould, who argues that, unlike most federal courts – which have enforced such clauses in the consumer context – a state court in Illinois correctly refused enforcement in connection with a claim relating to an online dating service contract.
A number of American states have enacted statutes that require franchisors to agree to litigate disputes with franchisees in-state.
