Forum Selection Clauses—Procedural Tools or Contractual Obligations? Conceptualization and Remedies in American and German Law

Authors

Peter Hay

Abstract

German and American law differ methodologically in treating exclusive forum selection clauses. German law permits parties, subject to limitations, to derogate the jurisdiction of courts and, in the interest of predictability, to select a specific court for any future disputes. The German Supreme Court emphasized in 2019 that, as a contract provision, the clause also gives rise to damages in case of breach. American law historically does not permit parties to “oust” the jurisdiction a court has by law. But the parties’ wishes may be given effect by granting a party’s motion to dismiss for forum non conveniens (FNC) when sued in a different court in breach of the agreement. FNC dismissals are granted upon a “weighing of interests” and in the court’s discretion. The clause, even when otherwise valid, is therefore not the kind of binding obligation, enforced by contract remedies, as in German law. The case law does not give effect to its “dual nature,” as characterized by the German Supreme Court. The latter’s decision correctly awarded attorneys’ fees for expenses incurred by the plaintiff when the defendant had sued (and lost) in the United States in breach of a forum selection clause, especially since German jurisdiction and German law had been stipulated. Application of the “American Rule” of costs most probably would not have shifted fees to the losing party had American law been applied, although the rule is far less stringent today than often assumed.

Recommended Citation

Peter Hay, Forum Selection Clauses—Procedural Tools or Contractual Obligations? Conceptualization and Remedies in American and German Law, 35 Emory Int'l L. Rev. 1 (2021).
Available at: https://scholarlycommons.law.emory.edu/eilr/vol35/iss1/1