Forum selection clauses—i.e., contractual provisions that designate a particular venue for litigation related to the contract—are ubiquitous and potentially powerful tools found in contracts ranging from divorce settlements to complex derivative instruments. And although forum selection clauses have always been a useful tool for both counsel and management looking to control and contain the cost of potential litigation, the U.S. Supreme Court’s recent decision in Atlantic Marine Construction Company v. U.S. District Court for the Western District of Texas clarified—and, indeed, amplified—the significance such clauses can have, if executed correctly.
When drafted and enforced as discussed below, forum selection clauses provide not only control over the specific court in which litigation related to the contract must be brought, but also a significant likelihood of enforcement (often through dismissal) if a litigation adversary brings an action elsewhere. If not drafted properly, however, a contracting party runs the substantial risk that a court will find that the forum selection clause does not cover certain noncontractual claims, such as fraud, or that the forum to which the clause refers is merely a permissible, as opposed to mandatory, venue.
Mandatory and Applicable
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