Where You Litigate Can Materially Impact the Cost and Outcome of a Contractual Dispute: Forum Selection Clauses in US Contracts

This post is part of an ongoing series examining the key features of US civil litigation for international businesses. Here, we turn to a provision that may quietly determine the outcome of your next cross-border dispute before a single argument is heard: the forum selection clause.

A forum selection clause does one thing: it governs where disputes under a contract will be heard. For international businesses contracting with US counterparties, that single determination can shape the cost, duration, procedural complexity, and ultimate enforceability of any future claim. It deserves far more attention than it typically receives.

Consider the alternative. Without a forum selection clause—or with a poorly drafted one—companies expose themselves to parallel proceedings in multiple jurisdictions, costly threshold battles over venue, the risk of litigating in an unfamiliar system under unfavorable rules, and the need to marshal witnesses and evidence far from their normal location. 

US courts enforce these clauses—and set a high bar for parties seeking to escape them. Since The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the Supreme Court has treated forum selection clauses as presumptively valid, even when they point to a jurisdiction outside the United States. A court typically will decline to enforce a clause only where the challenging party demonstrates fraud, a violation of strong US public policy, or inconvenience so severe that it effectively denies a party its day in court.

The choice of forum should be treated as a commercial decision. Companies should consider whether judgments from the chosen forum are enforceable where their counterparty holds assets, what procedural features—such as broad US-style discovery or jury trials—the forum entails, and whether the judiciary has experience adjudicating cross-border commercial disputes. Moreover, foreign companies should weigh the risk of consenting to the selected forum’s jurisdiction, if the company would not have otherwise faced suit there. These factors can materially affect the practical value of the rights a contract is designed to protect, as well as the risks it entails.

Drafting demands precision. Forum selection clauses may fail based on details. Language that merely “consents to jurisdiction” in a given forum may be treated as permissive—allowing, but not requiring, litigation there, whereas mandatory, exclusive language is intended to bind both parties to the chosen court. The distinction between courts “in” a state (which typically includes federal courts sitting there) and courts “of” a state (which may be limited to state courts) is not intuitive but can change where a case can be heard. And the scope of covered claims—whether limited to those “arising under” the contract or extended to all matters “relating to” it—should be a deliberate choice, not an afterthought.

Part of a broader architecture. The forum selection clause is only one component of a broader framework. It must work in concert with a choice of law provision, which determines the substantive law governing the dispute (discussed in our prior post). Pairing a forum selection clause with a waiver of service may help the parties save time and costs by forgoing the delivery of formal summons. Negotiating parties should also consider an arbitration clause as a potentially compelling alternative for cross-border enforcement, a topic we examine in our next post in this series. 

For now, the essential point is this: the dispute resolution provisions of your contract collectively define the terrain on which any future conflict will be fought. Negotiate them accordingly.