Albermarle Corp., et al. v. AstraZeneca UK Ltd., No. 10-100 (4th Cir. 8 Dec. 2010), addressed the role of drafting in the interpretation of choice of law and choice of forum clauses, which we discuss in our e-book International Practice: Topics and Trends. Albermarle involved an international agreement containing an English choice of law clause and a forum clause that the contract was “subject to” the jurisdiction of the English High Court. U.S. federal law reads the language “subject to” as granting permissive but not mandatory jurisdiction of the English court. UK law treats this language as mandatory and exclusive.
Albermarle sued AstraZeneca in a South Carolina court over a dispute relating to two agreements (the Fourth Circuit held that the second of the contracts was not relevant to the dispute) relating to the drug Diprivan, a fast-acting anesthetic. AstraZeneca moved to dismiss based on the interplay between the choice of law and forum clauses, among other things. The Court of Appeals held or explained:
- Under federal law, “an agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion” (following, inter alia, John Boutari & Son, Wines & Spirits, S.A. v. Attiki Imp. & Distrib., Inc., 22 F.3d 51 (2d Cir. 1994). Under U.S. federal law, therefore, the language of the contract was clearly permissive.
- However, the Fourth Circuit held that there was more in the contract than simply a choice of forum clause – there was also an English law choice-of-law clause. So although the Court of Appeals held that “a federal court interpreting a forum selection clause must apply federal law in doing so”, and although under U.S. federal law the language at issue would be deemed permissive and not mandatory/exclusive, since the contract invokes English law, English law should apply to the interpretation of the forum clause – and under English law the language was mandatory and exclusive.
- The Court of Appeals rejected Albermarle’s argument that enforcement of the forum clause mandating the U.K. violated a strong public policy of South Carolina, which enacted a statute essentially making all forum clauses permissive. The Circuit Court held that any such applicability of the South Carolina statute would be preempted by federal law, especially since the Supreme Court’s decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), rejected the rationale underlying the South Carolina statute as being based on a “provincial attitude regarding the fairness of other tribunals”. The Fourth Circuit then ruled that an express state statute overriding exclusive forum selection clauses did not “manifest a strong public policy of South Carolina”. We discussed a similar statute in our posting concerning the First Circuit’s treatment of the interplay between choice of law and forum clauses, which did not feel the need to hold that the state statute (there from North Carolina) did not express the strong public policy of the state.
- Although the Fourth Circuit found irrelevant the second contract between the parties, the Court of Appeals did hold that the language in that contract, that prior contracts (including the main contract in the case) “shall have no further force or effect”, did not mean that the earlier contract was moribund but that only it would have no further force or effect.