The North Carolina Business Court ruled today on an issue of first impression — when a North Carolina Court should apply the law of a foreign country — and concluded that it would apply North Carolina law to a forum selection clause requiring the parties to litigate their dispute in the Commercial Court of Paris, under French law.
The result was that the Court enforced the forum selection clause and dismissed a crossclaim brought by an Arizona corporation (Swift) against a French Bank (Paribas), in Speedway Motorsports International Ltd. v. Bronwen Energy Trading, Ltd., 2009 NCBC 3 (N.C. Super. Ct., February 18, 2009).
The provisions specifying French law and a French choice of forum were contained in a series of Third Party Letter of Credit Agreements which had been submitted by Swift and another Defendant (Bronwen) to Paribas. They stated that French law would apply and that "[a]ny disputes arising [t]hereunder or in connection [t]herewith shall be exclusively submitted to the commercial court of Paris, France."
When the Bank moved to dismiss, Swift argued that the Bank had never signed the agreement, that Its tort claims were not in any event subject to the clause, and also that it would violate public policy to make it litigate its claims in a French court.
The first issue for the Court was whether North Carolina law or French law should be applied to determine the validity of the forum selection provision. The opinion is the first published decision under Rule 44.1 of the North Carolina Rules of Civil Procedure, which addresses a trial court’s determination of the law of a foreign country. Judge Diaz, relying on federal cases, determined that:
- He had "broad authority to conduct [his] own independent research to determine foreign law," but that he had no duty to so.
- It was the burden of both parties to "raisethe issue that foreign law may apply in an action, and the burden of adequately proving foreign law to enable the court to apply it in a particular case."
- When the "parties fail to satisfy either burden the court will ordinarily apply the forum’s law."
The Business Court applied North Carolina law, because the parties hadn’t provided the Court "with any authority or evidence from which it might discern how French law would evaluate the validity and scope of the forum selection clause in the" Agreements.
Under North Carolina law, it didn’t make a difference that Paribas hadn’t signed the agreement. Judge Diaz reasoned that the only signature required should be that of "the party to be charged therewith," that Swift had signed the Agreements, and that the Agreements spoke to Swift’s obligations to Paribas He also relied on cases involving arbitration provisions, which are often enforced against non-signatories when the claims are "intimately founded in and intertwined with the underlying contract obligations." The Judge also noted the "strong seal of approval that our Supreme Court has given to contract clauses requiring litigation in a foreign jurisdiction."
Swift’s argument that its claims sounded in tort, and that they were therefore outside the scope of the clause, was rejected. The Court determined that claims stemmed from the contracts themselves, and that they could not be restyled as tort claims to avoid the agreement to the Parisian forum.
Lastly, the Court rejected the public policy argument that it simply wasn’t fair for Swift to have to litigate its claims in France. Swift said it would "be deprived of the full scope of discovery that would otherwise be available in" the Business Court. Judge Diaz said there was "no authority . . . for the proposition that merely requiring a party to litigate in a forum with substantially different discovery rules than those applied in a U.S. court is sufficient cause to override the parties’ choice of forum." Swift was neither "deprive[d] of its day in court" nor "without an adequate remedy."