A forum selection clause, controlled by Austrian law, was recently interpreted by the Delaware Court of Chancery as a mandatory forum selection clause requiring the dispute to be litigated in Vienna. In Germaninvestments A.G. v. Allomet Corporation, C.A. No. 2018-0666-JRS (Del. Ch. May 23, 2019), the court also determined that the choice of law provision designating Austrian law and the forum selection clause requiring litigation in Vienna were both enforceable.
N.B. The Delaware Supreme Court reversed this decision in an opinion dated Jan. 27, 2020.
The court observed that Rule 12(b)(3), which addresses improper venue, was “the proper procedural rubric” for addressing a motion to dismiss based on a forum selection clause. The court also explained that a motion under Rule 12(b)(3) does not “shackle” the court to the plaintiff’s complaint, but rather the court is permitted to consider extrinsic evidence from the outset. See footnote 63.
The court also noted that Chancery Rule 44.1 provides the procedure for presenting foreign law to the court to allow the court to interpret a document governed by foreign law. The rule provides that a party is required to give notice in the pleadings or other reasonable written notice that the law of a foreign country will control. Prior decisions have recognized that expert affidavits may be considered along with expert testimony.
Key Statements of Law:
· The court explained the well-settled rule that Delaware courts will give effect to the terms of private agreements providing for forum selection clauses. See footnote 64 and accompanying text.
· In order for a forum selection clause to be considered exclusive under Delaware law, the “contractual language must be crystalline in stating the parties’ intent to litigate only in the designated forum.” See footnote 66.
· The Delaware courts also generally honor contractually-designated choice of law provisions as long as the jurisdiction selected “bears some material relationship to the transaction.” See footnote 70.
· A key issue is whether the forum selection clause states that it is exclusive, or whether the language will be construed as merely permissive. See footnote 80 (citing Delaware cases holding that a mandatory forum selection clause must make clear that the litigation is required to proceed in the designated forum).
· In this instance, the applicable Austrian law applied to require litigation only in Vienna.
· The court also rejected the argument that DGCL Section 168 applied because the statute relates to replacements for lost stock certificates, and in this instance the issue was whether the original stock certificate should have been issued.