Another Court Invalidates the Combination of Forum Selection and Choice of Law Clauses but Severs To Uphold International Arbitration Provision

A district court in Florida furthered international comity by permitting removal of a case from state to federal court, then ordering that international and even U.S. Statutory claims be arbitrated in accordance with arbitration provisions in a contract that the court saved from unenforceability by severing a specific, unenforceable provision. 

In Matthews v. Princess Cruise, Ltd., Case No. 10-60830-CIV-GOLD/MCALILEY (S.D. Fla. 7/7/10), the district court addressed a contract requiring arbitration, where even U.S. statutory claims (here under the federal Jones Act) were forced to be arbitrated in Bermuda under Bermuda law.  The defendant in the case stipulated to the application of U.S. law to the plaintiff’s U.S. statutory claims but continued to press for those claims to be resolved in an arbitration to take place in Bermuda.  The district court followed the majority of federal courts to have addressed this issue, holding that the New York Convention’s public policy defense is “construed narrowly to be applied only where enforcement would violate the forum state’s most basic notions of morality and justice” (quoting Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir. 1975)).  Although finding the combination of the choice of law clause unenforceable as “void as a matter of public policy”, given the choice of law’s stand-alone nature, and the express severability clause in the underlying contract, the court upheld the arbitration provision otherwise and rejected the plaintiff’s contention that her inability to afford air fare from Canada to Bermuda rendered enforcement of the forum clause unconscionable. 

Interestingly, the court “recongnize[d] that a contrary result might be warranted in a purely domestic context”; “[h]owever”, the court said (quoting the Eleventh Circuit in Bautista v. Star Cruises, 396 F.3d 1289 (11th Cir. 2005)[ http://caselaw.findlaw.com/us-11th-circuit/1398469.html], “such an approach is required by the unique circumstances of foreign arbitration [where] the concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties’ agreement, even assuming that a contrary result would be forthcoming in a domestic context”.

This entry was posted in Arbitration, International Practice and tagged , , , . Bookmark the permalink.

One Response to Another Court Invalidates the Combination of Forum Selection and Choice of Law Clauses but Severs To Uphold International Arbitration Provision

  1. Pingback: Court Determines Arbitrability; Voids Arbitration Clause Containing Choice-of-Law Clause Antithetical to Federal Claim | Cadwalader International Practice Law Blog

Leave a Reply