Can parties agree on arbitrary jurisdiction for a contract?

Question

I am not a lawyer, but I'm intrigued by how, in international contracts, parties can agree to the jurisdiction under which the contract falls. My question is rather simple: can two parties agree to contract under an arbitrary jurisdiction? Even if neither parties have any link to those? For example, if a UK company gets into a contract with an Irish company, could they agree that disputes have to be resolved by a Dutch court?

Answer 1

The forum state's courts would have to decide if it would honor the choice of forum agreement. So would the courts of any jurisdiction in which there was an effort to enforce a judgment of the forum state.

So, in this case, the decision regarding whether to honor the forum selection clause would be made first by a Dutch court applying Dutch law on the subject.

Then, if it honored the forum selection agreement, a determination would also have to be made under the law of the country in which the winner of the lawsuit sought to enforce it against the loser of the lawsuit. Where the winner sought to enforce the judgment of a Dutch court would depend to a great extent upon where the judgment debtor had assets from which collection could be had, which wouldn't necessarily be the country where the judgment debtor was organized.

Since many developed countries have treaties requiring that money judgments in contract cases from one treaty signatory be honored by other treaty signatories, the decision of the Dutch court would probably be controlling.

I don't know what Dutch law says on this question.

united-states

In the United States, the majority common law rule is that a forum for dispute resolution in the courts (as opposed to arbitration) must have some connection to the parties or the transaction. But it need not be the forum that would have been selected by the courts in the absence of a forum selection clause.

In a parallel U.S. example:

if a UK company gets into a contract with an Irish company, could they agree that disputes have to be resolved by a [U.S.] court?

For the results to be resolved by the U.S. court that follow the majority common law rule, the contract would have to have some connection to the U.S. jurisdiction named. But, it could be, for example, that the contract was negotiated or executed in that jurisdiction, or that the contract was to be performed (in part) there, or that, for example, a bonding company securing performance of the contract was located there.

If the agreement were to arbitration in the U.S. rather than a court resolution in the U.S., the New York Arbitration Convention would govern the question of whether it was a valid forum. This convention does not obviously contain an exception for an arbitrarily chosen forum, although I have not reviewed the relevant case law.