Drafting a forum selection clause: read these 4 points first

A forum selection clause is an agreement in a contract or in your general terms and conditions that allows you to determine in advance which court has jurisdiction in the event of a dispute. This prevents you from suddenly having to litigate at a distant court – or abroad – in the event of a conflict. A forum selection clause is only valuable if it is validly drafted: the other party must have demonstrably and expressly agreed to it, and the clause must not conflict with mandatory law. In this article, you will read what a forum selection clause is, when it does and does not work, and which four points you should pay attention to when drafting one yourself.

What is a forum selection clause?

A choice of forum clause (also known as a choice of forum or jurisdiction clause) designates the court competent to settle a dispute between the parties. You therefore determine in advance where proceedings will take place should a dispute unexpectedly arise regarding the agreement. Entrepreneurs often choose the court in their own region or district, simply because it is close by, familiar, and cheaper.

The clause plays an important role in dispute resolution. Without a choice of forum, statutory rules determine which court has jurisdiction – and that could be a court you would rather avoid. Especially in international trade, this can mean having to litigate in another country and in a foreign language, with all the associated extra costs and uncertainty. A good choice of forum clause gives you control over this.

Note the difference with a choice-of-law clause: a choice of forum determines which court has jurisdiction, whereas a choice of law determines which law (for example, Dutch law) applies to the agreement. In practice, both provisions are often included together, but they are two separate agreements.

Why is a forum selection clause important for entrepreneurs?

For SME entrepreneurs, predictability is everything. A dispute over an unpaid invoice or a failed delivery already costs enough time and money; you don't want to also have to argue about which court has the right to hear the case. With a forum selection clause, you arrange this in advance and eliminate a great deal of uncertainty.

• Cost control: litigating at a distant or foreign court is more expensive and complex.
• Predictability: you know in advance where a potential conflict will be fought out.
• Strategic advantage: the knowledge that the opposing party must appear before "your" judge can lower the threshold for negotiations.

However, in practice, we often see that the clause appears somewhere in the general terms and conditions but is insufficiently anchored. It is precisely then that it offers a false sense of security. Below are the four points of attention that make the difference between an effective and a worthless forum selection clause.

1. A forum selection clause is not always permitted

In principle, freedom of contract gives you considerable leeway to appoint a court yourself. Nevertheless, the legislature has made exceptions in a number of areas, both at the national and international levels. Consider agreements with consumers, employees, or certain insurance relationships: in these cases, protective rules often apply that restrict or even exclude a free choice of forum.

Therefore, always check in advance whether a forum selection clause is permitted in your situation at all. If you fail to do so, you run the risk that the judge will set the clause aside and you will have to litigate elsewhere – exactly what you wanted to avoid. In case of doubt, especially in international relations, legal advice is by no means a luxury.

2. Explicitly emphasize the forum selection clause

A common mistake: the forum selection clause is merely hidden within the general terms and conditions and does not appear anywhere else. This is not without risk. European case law has established that express consent from both parties is required for a valid choice of forum. The well-known ruling of the Court of Justice in the Colzani/Ruwa (1976) is still cited in this context: a reference to terms and conditions containing a forum selection must be sufficiently clear and express so that the counterparty could actually have consented to it.

Dutch case law has also confirmed that merely demonstrating proper delivery and acceptance of the general terms and conditions is not automatically sufficient. The counterparty must have actually had the opportunity to agree to the choice of forum. This is understandable: judges know very well that most people do not read general terms and conditions.

You can strengthen the validity of your forum selection clause in several ways:

• Print the forum selection clause in your general terms and conditions in bold or make it visually stand out.
• Include the general terms and conditions with all correspondence (or at least an extract containing the forum selection clause).
• Explicitly point out the choice of forum in the quotation, order confirmation, or contract, so that the other party cannot circumvent it.

Merely referring to terms and conditions that can be consulted externally – for example, on your website – is generally insufficient for a watertight forum selection clause.

3. The legal validity of your general terms and conditions

The forum selection clause is part of your general terms and conditions. The logical consequence is that the clause is only valid if those terms and conditions themselves are legally applicable. If the validity of your general terms and conditions is in dispute, the forum selection clause may also be invalidated.

Therefore, pay due attention to the classic validity requirements: have the terms and conditions been handed over in a timely manner (transfer), is there a clear reference, and has the counterparty accepted them? Filing your general terms and conditions with the Chamber of Commerce can be a useful addition, but it does not replace proper transfer.

4. Forum selection clause and its relationship with your other terms and conditions

General terms and conditions never stand alone; they must be read as a whole. Therefore, ensure that the annulment or termination of the main agreement does not automatically invalidate your entire set of terms and conditions. In practice, it is therefore often stipulated that the terms and conditions apply to all assignments, orders, order confirmations, deliveries, and agreements, in order to give them the broadest possible scope.

There are other ways to preserve the validity of the forum selection clause. For example, you can include a clause stipulating that the validity of the forum selection cannot be challenged solely on the grounds that the underlying agreement is invalid. This ensures that the chosen court remains competent to settle the dispute, even if there is still disagreement regarding the agreement itself.

forum selection clause versus arbitration clause

A forum selection clause is sometimes confused with an arbitration clause, but they are two different things. A forum selection clause designates a state court . An arbitration clause, on the other hand, opts for dispute resolution outside the ordinary courts, by an arbitrator or arbitration committee. Both have advantages and disadvantages regarding costs, speed, and confidentiality. Which choice is sensible for your company depends on the type of contracts you enter into and with whom you do business.

Example of a forum selection clause

A forum selection clause does not have to be complicated. A simple wording in your general terms and conditions could look like this, for example:

All disputes arising from or related to this agreement and the general terms and conditions applicable thereto shall be submitted exclusively to the competent court of the district in the district where the Contractor is established

Important: a sample text is a starting point, not a guarantee. Whether this clause holds up depends on who you are contracting with (consumer, business, or foreign party), how you refer to your terms and conditions, and whether you have provided them correctly. Therefore, always adapt the wording to your situation and have it checked if in doubt.

Drafting a forum selection clause: step-by-step plan

If you want to get started yourself, follow this order so that your clause actually holds up:

1. Check whether a choice of forum is permitted for the type of counterparty (note consumers, employees, and international relations).
2. Choose a logical, competent court – usually that of your own place of business.
3. Clearly include the clause in your general terms and conditions and refer to it explicitly in the quotation or contract.
4. Provide the terms and conditions in a timely manner and retain proof of such provision.
5. Have the entire document legally reviewed, especially for larger or international contracts.

Frequently asked questions about the forum selection clause

What is a forum selection clause in general terms and conditions?

It is a provision used to determine which court has jurisdiction in the event of a dispute regarding the agreement. It ensures that you do not unexpectedly have to litigate in a distant court or abroad.

Is a forum selection clause always valid?

No. The clause is only valid if the general terms and conditions are legally applicable and the counterparty could demonstrably and expressly have agreed to the choice of forum. Moreover, exceptions apply, for example regarding consumers and employees.

What is the difference between a forum selection clause and a choice of law clause?

A forum selection clause designates the competent court, while a choice-of-law clause determines which law applies to the agreement. They are two separate agreements that are often included side by side in a contract.

Does a forum selection clause also apply to international contracts?

Often this is the case, but additional rules apply in international relations. In such situations, a choice of forum can be particularly valuable to avoid having to litigate in another country. Therefore, have an international contract drafted carefully.

Is referring to general terms and conditions on my website sufficient?

As a rule, no. Merely referring to terms and conditions available online is usually insufficient for a valid forum selection clause. Actively provide the terms and conditions and explicitly point out the choice of forum.

Which court do I choose in a forum selection clause?

Many entrepreneurs choose the court of their own place of business: close by, familiar, and generally cheaper to litigate at. However, do take into account mandatory exceptions that may limit your choice.

What is the difference between a forum selection clause and an arbitration clause?

A forum selection clause designates an ordinary state court, while an arbitration clause opts for dispute resolution outside the courts, via arbitration. Which form is best depends on your situation.

Good general terms and conditions are specialist work

The forum selection clause is just one of many clauses in your general terms and conditions, but it clearly demonstrates how closely it matters. One careless reference or a forgotten delivery, and you are left legally empty-handed. Moreover, because both national and international rules apply, it is best to leave the drafting of your general terms and conditions to a specialized lawyer. Are you involved in an ongoing dispute and is your contract law at stake? We are happy to assist you in that situation as well.

Need help with your forum selection clause or general terms and conditions?

At MKB Juristen, sound general terms and conditions form the heart of every business. We are happy to assist you in drafting or reviewing a watertight forum selection clause, at transparent rates and without any surprises afterwards. Would you like to know what we can do for your business? Schedule a no-obligation intake and we will discuss your situation personally.