[The authors are Ifrah Barge, Saanya Vashishtha and Shreya Tiwari]
ABSTRACT
Forum law shopping is- an element of identity within the realm of international commercial law and a carrier of diverse connotations for the concept of jurisdiction and enforceability of cross-border business contracts. Forum shopping governs the regal crown of choosing the court or jurisdiction when one or more courts have jurisdiction over the dispute at hand. The clash and tensions arise when one of the parties secures the upper hand or favourable position over the other. The concept of forum shopping has led to immense debate and rhetorical speeches concerning the intersection of the delivery of justice and the advantageous position that one party acquires in a legal dispute. The fundamental problem occurs when the most favourable legal jurisdiction is not the one best suited to the matter. The plaintiff when offered a choice of jurisdiction will seek to extract the optimum advantage out of the permissible laws and use it to fulfil his legal purposes. However, the sole burden of this law shopping does not come on the plaintiff as the initiation of this process is part of the legal machinery itself. At such a crucial juncture tension has escalated as legal academicians and international law experts have become wary of the practice of forum shopping and instead consider it as an evil practice. This paper dwells on the global impact and stance of forum law shopping as well as the constantly evolving legal demography and statutory changes that have mystified future pathways. Further, it elaborates on a comparative analysis of the trends in forum law shopping within different jurisdictions and the subsequent challenges that the regime poses to uniformity in justice.
Keywords– forum shopping, international commercial law, demography, uniformity, justice
AN OVERVIEW OF FORUM LAW SHOPPING
Forum law shopping allows the offended party to choose the legal jurisdiction that it finds the most suitable in comparison to all the available jurisdictions. The concept is dependent on two prior conditions-
- The availability of choice is a necessary element for forum shopping to. In simpler language more happen than one court
- should be available and competent to deal with the legal dispute.
- The potential legal systems must be heterogenous and different in certain terms. This is a necessary requisite as same legal systems would provide no incentive for forum shopping.
ty of choice is a necessary element for forum shopping to happen. In simpler language more than one court should be available and competent to deal with the legal dispute.
Forum shopping occurs in two ways as mentioned below-
- Domestic Forum Shopping – plaintiff needs to choose a court between the available ones present in a country’s legal system.
- Transnational Forum Shopping – plaintiff has an option to choose between courts of different countries.
The plaintiff always has an advantaged position in forum law shopping as he has the right to choose the court in which the case will be heard and he is considered to be the “master of the complaint”[1]. The plaintiff gets to exercise control over the procedural guidelines and substantive law which will govern the dispute at hand. The choice of forum is dependent on several factors which are taken into consideration by the plaintiff. One of the factors that the plaintiff looks for while filing a suit is the value of the claim, that is, the plaintiff shall after rationally analysing look to file a suit for claim in courts which can offer them the highest value for their claim reducing the cost of litigation, in accordance with the substantive and procedural rules followed in that courts’ jurisdiction. An example of this could be the United States wherein the costs of suing for the litigant are comparatively less and the damages accorded by the courts are relatively greater. Secondly, the plaintiff also opts for forum shopping in case of transnational litigation in cases where the plaintiff expects higher court access decisions. The court access decision is the decision made by the court in order to determine whether the suit brought before the court by the plaintiff should be allowed to proceed.[2] Thus, a plaintiff shall forum shop in order to nullify the option of losing money due to the rejection of court access. The plaintiff also acts with care while deciding for choice-of-law decisions. The choice-of-law decisions are the decisions wherein the court decides whether it has to apply the substantive law of its own country or the substantive law of a foreign country. This becomes pivotal as different legal systems have different rules and regulations with different degrees of harshness. Thus, the plaintiff shall want to forum shop the choice-of-law decisions which would allow them to make a stronger argument or claim for themselves which would further lead to them being in an advantageous position and winning the award.
The defendant does not exercise sole discretion over choosing the forum of law but he is in exceptional circumstances allowed to engage in this practice. The principle of “forum non conveniens” gives power to the courts for dismissing a case when another legal forum has better competency to deal with the case.[3] Furthermore, jurisdictions can be challenged on the subject matter, territorial, or personal reasoning grounds. As a final option, the defendant can convert his position from the current one to being a plaintiff through a declaratory judgment when he sues the other party. However, the relief provided to the defendant is quite limited and always positions him in an inferior status compared to the plaintiff.
FORUM SHOPPING IN THE EUROPEAN CONTEXT
The European law flows from the Brussels Convention on Jurisdiction and Enforcement of Judgements in Civil and Commercial Matters from 1968 and the Lugano Convention on Jurisdiction Enforcement of Judgements in Civil and Commercial which is based on the Latin legal maxim “actor sequitur forum rei”.[4] The fundamental ethos behind this is that the plaintiff must follow the forum of the thing in dispute. The regulation of jurisdictional power in commercial matters between parties established or residing in the EU is governed by the Brussels I Regulation. [5]This European regulation only governs cases where the complaint or claim is filed post 10th January 2015. Article 2, 3, and 4 of the Brussels I Regulations [6]establishes the general rule that the legal proceeding is to be made in the state where the defendant has his domicile in the EU (any member state). This is regardless of the nationality of the parties to the lawsuit, so in case the plaintiff is domiciled in a third state, the Brussels I Regulation would be applicable. Article 23 of the Brussels I Regulation [7]contains the choice of forum clause and establishes that it is only legal under certain conditions such as: If it is a written agreement (also including electronic communication) if it is in such format that is customary in conduct between the parties or in the international commercial practice. Article 25 of the Regulation[8] focuses on the freedom of parties to choose a particular jurisdiction which is termed forum shopping in the U.S. and jurisdiction agreement in the EU. According to Article 25, if there is an agreement between the parties regarding a court of courts of member states to have jurisdiction to settle disputes that have arisen or can arise with respect to a certain legal relationship, the agreed court or courts shall have jurisdiction regardless of the domicile of parties. This will only be applicable if the agreement is not null and void as to its substantive validity under the law of the member states. This will amount to exclusive jurisdiction unless the parties have agreed otherwise. The validity of jurisdiction clauses that exist separately is not dependent on the legality of the underlying contract. Any claim disputing the validity of the contract will not have any impact on the jurisdiction agreement. When a contract confers jurisdiction on a court in a different EU member state, courts within the EU are required to stay the proceedings in the presence of a contractual agreement. This rule cannot be avoided by arguing that the contract will ultimately be invalid in jurisdictions other than the one specified in the contract.[9] As a result, there is less potential for opportunistic forum shopping because of the certainty of the jurisdiction agreements. Moreover, the Brussels I regulation does not explicitly confer the parties with the power to uphold their contractual choice over the default rule of suing the defendant in their country. This regulation does not always bar a national court of the EU country from exercising jurisdiction over a matter even when a dispute is already being heard in a non-EU nation. Even if a non-EU court has already begun a case involving the same dispute, EU Member State courts continue to have discretion over the need to stay proceedings[10]. Thus, defeating the purpose of forum shopping.
Despite the inclusion of a clause granting jurisdiction to a Third State, British courts are oriented toward taking cases brought before them within their own jurisdiction.[11] However, the Brussels I Regulations does not protect the contractual agreement that confers jurisdictional power to a Third State’s court. In the event that the plaintiff decides to submit his claim to a court of a third state, that court will determine whether it has jurisdiction over the claim in accordance with its own norms of private international law. If the court determines that it has jurisdiction, its judgment will be enforceable in that particular third State and may also be recognized and enforced in other States—possibly even in some EU Member States—due to international treaties or domestic laws of the states where recognition and enforcement are sought. However, Brussels I Regulations have no part in the same.[12]
Furthermore, Article 60 of the Brussels I Regulations used three independent criteria to determine whether a legal person is domiciled in a member state or outside. The article has listed three alternatives i.e. statutory seat, central administration and principal place of business and this implies, even if all of them are located in other EU Member States or in third countries outside the EU, the legal person may still be sued in that Member State’s courts if only one of them is located there. This definition even between EU Member States leaves scope for forum shopping. For e.g. If the statuary place of the company is located outside the EU (third state)- Turkey and the place of business is in France. In this case, there will be competing jurisdiction and the Plaintiff will have the choice of the forum under the Brussels I regulation. If the Plaintiff decides to take the case in the third state, then the courts of Turkey shall determine if it is allowed to proceed with the case based on the private international rules. Traversing through these legal arguments, the Brussels I Regulations is seen to have taken an anti-forum shopping attitude however, both the Brussels Convection and Brussels I Regulation have provided ample space for forum shopping.[13] This is again because they follow the principle “actor sequitur forum rei”[14], which leads to granting the plaintiff to select the forum of their choice to initiate the legal proceedings.[15]
WEIGHING FORUM SHOPPING ON THE SCALES OF JUSTICE
The increasing concern around forum law shopping has led to an increased call for uniformity in laws within the realm of international law. The Contract for the International Sale of Goods (CISG) drafted by the United Nations Commission on International Trade Law (UNCITRAL) is a substantive law provision that is generally referred to in this context. Article 57, sub-clause 1 of the CISG deals with scenarios where both the arguing parties do not have any existing contractual agreement pertaining to the place of performance of the obligation to pay the purchase price.[16] In the absence of any such agreement about the place of performance, the buyer is supposed to make the payment at the seller’s place of business. This article opens gateways for the seller to start proceedings against the buyer at the seller’s place of business which would otherwise not have been possible in domestic law. The CISG thus goes against the general rule of suing the defendant/ debtor for the price at its place of business.[17] Resultantly, this leads to the fact that the Contract for the International Sale of Goods (CISG) tends to promote forum law shopping from its earlier goal of preventing jurisdiction shopping.
Forum law shopping has drawn huge criticism from international lawyers due to the leeway it provides in the delivery of justice. Forum shopping also provides the following privileges –
- Forum shopping places the authority of substantive state law at an inferior position.
- Forum law shopping taxes certain legal jurisdictions more and others in a lesser capacity.
- Shopping of jurisdictions leads to certain orthodox and rigid observations regarding legal forums.
Erie R. Co. v. Tompkins[18] is a landmark case that established the foundations of an anti-forum shopping policy wherein legal diversity was curbed and substantive law was given priority. The Hughes court had tried to prevent forum shopping between state and federal jurisdictions within a country. This was achieved by imposing the application of state laws on the federal courts with respect to issues of substantive law when sitting in diversity. Following the rule of law established in Erie, the anti-forum shopping policy concerning the choice between state and federal court was reflected in various cases such as Guaranty Trust Co. v. York[19] and Klaxon Co. v. Stentor Electric Manufacturing Co.[20] One of the main reasons behind the establishment of the anti-forum shopping policies is that several courts are overburdened due to the recently established trend of Forum Shopping. The same view has been echoed in several other cases such as Gulf Oil Corp v Gilbert[21], wherein the Court stated that “administrative difficulties follow for the courts when litigation is piled up in congested centres instead of being handled at its origin”. In the case of Gantes v. Kason Corp[22], the court had pointed out that “the policy against forum shopping is intended to ensure that national courts in certain areas are not burdened with cases that have only ‘slender ties’ to their geographical or economic outlines”. These cases have entrenched the fact that forum law shopping overburdens the courts as well as delays the delivery of justice. Another drawback of forum shopping is that in addition to overburdening the courts it creates additional and unnecessary expenses as litigants seek the most favourable or advantageous forum rather than selecting the simplest or nearest forum. In contrast to the notion of a “level playing field” while assuring the distribution of justice forum shopping places both parties on uneven grounds.[23] Furthermore, in the case of Hanna v. Plumer[24] it was postulated that forum shopping is also capable of creating a negation approach toward the equality of the legal system. In order to combat the drawbacks and disadvantages posed by the exclusive nature of Forum shopping and the broad choice granted to the Plaintiff through the same, the U.S. courts have established an anti-forum shopping instrument known as forum non-conveniens with the aim to limit the choice.
TRANSNATIONAL JUDICIAL COMPARATIVE ANALYSIS
American Forum Shopping System
The law of the United States can be classified under two heads, that is, the substantive law and the procedural law. Plaintiffs who are involved in transnational disputes generally forum shop to pick the United States of America since the substantive and the procedural laws of the United States of America are tilted towards the plaintiff which makes the situation for the plaintiff more favorable. This is so because firstly, the substantive laws in the United States of America not only allow for the plaintiff to take action for harm on different aspects but also allow them to claim for damages for the harm caused.[25] An example of this could be that the substantive laws in the United States of America not only allow a person to be sued for strict damages but also allows the plaintiff to claim for damages for the same. Secondly, the plaintiff’s process of forum shopping the United States due to court access as the Supreme Court of the United States of America in the case of International Shoe Co. v. Washington[26] made its approach more progressive as it held that the physical presence of the defendant’s property or person in the forum state’s territory is not required.
Indian Forum Shopping System
The courts in India have adopted a very strict stance against forum law shopping as they feel it hampers the delivery of justice. The apex court endorsed the same view and held that a litigant cannot be allowed to even think that he can indulge in “forum shopping” to get a favorable order. The supreme court in a recent case of M/S. Chetak Construction Ltd vs Om Prakash & Ors[27] held that forum shopping should not be indulged in by the litigant in order to get a favorable order. The court held that- “Unscrupulous litigants are not to be allowed even to remotely entertain the idea that they can engage in forum-shopping, a depreciable conduct in the field of law”.[28] Notable jurists like Dipak Misra and U Lalit had stated that the practice of forum law shopping should be condemned in order to keep faith in the “principle of judicial decorum, discipline, and propriety”. The civil courts in India under Section 20 of the Civil Procedure Code and in the case of Union of India v. Ladulal Jain[29] had postulated that justice should be as near as possible to every man’s hearthstone and the defendant should not be put to unnecessary troubles.
CONCLUSION
The legislative processes that have churned discussion around the concept of forum law shopping were entirely based on the majority of notions surrounding justice. International legal scholars and jurists have drafted detailed responses stating how this practice has undermined the authority of domestic law as well as burdened certain courtroom jurisdictions. Yet these efforts have been wholly ignored and forum law shopping continues to actively take place in the current era of global connectivity. The international law community has majorly placed strong reliance on the need for a uniform substantive body of law that is a cumulation of real demands of justice.
While the emerging concept of forum law shopping has been under scrutiny it is indeed the beginning of a 100-mile struggle to ensure equal treatment of both parties in international forums. The upliftment of the defendant’s position should be a question within the ongoing dialogue between international legal statutes and jurisdictions. The onslaught of violations in the delivery of justice should be met with a tough stance by law enforcement agencies as well as drafters. However, what has been achieved till now is woefully inadequate to include justice and ease of litigation in the mainstream international law but proper institutional and legal framework will open up more latitude for incorporating genuine demands.
[1] “Forum Shopping Reconsidered.” Harvard Law Review 103, no. 7 (1990): 1677–96. https://doi.org/10.2307/1341283.
[2] Anulekha M. “Forum Shopping: Challenges in Private International Law” (2020), https://blog.ipleaders.in/forum-shopping-challenges-private-international-law/.
[3] C. M., Jr. “The Doctrine of Forum Non Conveniens.” Virginia Law Review, vol. 34, no. 7, 1948, pp. 811–22. JSTOR, https://doi.org/10.2307/1069695.
[4] Petsche, Markus. “What’s Wrong with Forum Shopping- An Attempt to Identify and Access the Real Issues of a Controversial Practice” (2011), Volume 45, Number 4, https://scholar.smu.edu/cgi/viewcontent.cgi?article=1448&context=til.
[5] Regulation (EU) 1215/2012.
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] Podda, Pietro. Pastore, Massimiliano. “Recast Brussels Regulations 2015 and the Challenges of Forum Shopping” https://www.academia.edu/23170612/Recast_Brussels_Regulation_2015_and_the_Challenges_of_Forum_Shopping
[10] Ibid.
[11] Plaza Bv v the law Debenture Trust Corporation PLC [2015] EWHC 43 (Ch).
[12] The Brussels I Regulation (2001) http://www.dutchcivillaw.com/content/brusselsone011.htm .
[13] Roche Nederland and others (Case C-539/03).
[14] Besix v. Kretschmar (2002) ECR I-1718.
[15] Refer n (3).
[16] Whytock, Christopher. “The Evolving Forum Shopping System.” 2011, Volume 96, Issue 3, Cornell Law Review, https://core.ac.uk/download/pdf/216736124.pdf .
[17] Ferrari, Franco. “‘Forum Shopping’ Despite International Uniform Contract Law Conventions.” The International and Comparative Law Quarterly, vol. 51, no. 3, 2002, pp. 689–707. JSTOR, http://www.jstor.org/stable/3663073.
[18] Erie R. Co. v. Tompkins (1938) 304 U.S. 64.
[19] Guaranty Trust Co. v. York (1945) 326 U.S. 99.
[20] Klaxon Co. v. Stentor Electric Manufacturing Co. (1941) 313 U.S. 487.
[21] Gulf Oil Corp v Gilbert (1947) 330 U.S. 501, 508.
[22] Gantes v. Kason Corp (1996) 679 A.2d 106, 113.
[23] Ferrari, Franco. “‘Forum Shopping’ Despite International Uniform Contract Law Conventions.” Vol. 51, no. 3, 2002, https://blogs.law.nyu.edu/transnational/wp-content/uploads/2013/10/Forum-Shopping-in-the-International- Commercial-Arbitration-Context-with-Index.pdf .
[24] Hanna v. Plumer (1965) 380 U.S. 460, 468.
[25] Ewert, Jan-Peter. Weslow, David. “Forum Shopping in Europe and the United States”, 2011, Vol. 66, No. 9, INTA Bulletin, https://www.wiley.law/media/publication/116_Weslow–INTABulletin–05_01_11.pdf.
[26] International Shoe Co. v. Washington (1945) 326 U.S. 310.
[27] M/S. Chetak Construction Ltd vs Om Prakash & Ors (1998) Misc. Appln. No. 1437/1994.
[28] Press Trust of India, “Litigants can’t be allowed forum shopping to choose court: SC”, 2014, https://www.business-standard.com/article/pti-stories/litigants-can-t-be-allowed-forum-shopping-to-choose-court-sc-114121900909_1.html.
[29] Union of India v. Ladulal Jain (1963) AIR 1681.