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Wednesday, December 22, 2004

Damages for breach of forum selection clause

Ssrn_logo Forum selection clauses are ubiquitous in contracts today, and they are routinely disregarded when parties find it to their advantage to disregard them.  What damages are appropriate for breach of a contract forum selection clause?  Are damages available at all?

In a new paper, Damages for Breach of Forum Selection Clauses, Principled Remedies, and Control of International Litigation, Daniel S. Tan takes a look at those questions.

ABSTRACT:

Commercial parties often provide for their disputes to be litigated in certain courts by agreeing to forum selection clauses. This Article examines the issue of whether the courts may properly make an award of damages to vindicate the breach of such agreements—for if these clauses are contractual terms like any other, the remedy of damages ought to be available when a party breaches the clause by commencing proceedings in a non_contractual forum. An award of damages in this context, if properly developed, is potentially a very powerful tool to control international litigation. Unfortunately, the United States cases are equivocal as to whether damages should be allowed for breach of forum selection clauses. In fact, the courts purport to decide the issue without so much as considering the wider implications of recognizing the remedy, or the arguments supporting or denying such a cause of action. This Article attempts to explicate and discuss the various arguments in favor and against recognizing the damages remedy. It is only by understanding these arguments that we can properly rationalize the remedy. This Article will conclude that although the courts should recognize such a cause of action, principles of comity demand that rational limits be placed on any putative remedy, and suggests several limiting techniques to achieve this. The resolution of the policy clash between a fundamental domestic right and private international law considerations has larger implications, including, how the damages remedy relates to the evolving remedy of the anti_suit injunction. It also presents an invaluable opportunity to clarify wider private international law policies implicated by international litigation.

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