Navigating Cross-Border Litigation

International Litigation

As the number of global transactions continues to grow, the international litigators at my law firm have seen a rise in inquiries relating to litigation between domestic and international parties, from both companies and from domestic litigators

When a dispute involves a foreign party, a host of special considerations come into play – one of which is, where will this be litigated? Often, in an attempt to have the home court advantage, we see situations where both sides have initiated lawsuits in their respective courts. But where the parties ultimately end up litigating is not a simple matter of who got to their courthouse first. In this post I will discuss to two principles that may come into play in your U.S. court case: international abstention and forum non conveniens.

International Abstention

When a case is brought in the United States against a foreign defendant, it may trigger an early motion to dismiss based on "international abstention." This principle, derived from the case Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), allows a U.S. court to decline jurisdiction over a case in favor of another court if doing so serves the interest of "wise judicial administration." In simpler terms, a U.S. court may decide that it makes more sense for a different court to handle the case to avoid wasting resources or creating conflicting decisions.

But how does a court decide whether to step back from a case? The Colorado River decision provides several factors that a court should consider:

1. Jurisdiction over Property: Does either court have control over property that's central to the dispute?
2. Convenience of the Forums: Which court location is more convenient for the witnesses? Are the witnesses located closer to the U.S. court or the foreign court? Are some witnesses beyond the U.S. court's subpoena power?
3. Avoiding Piecemeal Litigation: Is there a risk that different parts of the dispute could be handled in different courts, leading to inconsistent rulings?
4. Order of Jurisdiction: Which court took on the case first? Has more progress been made in one court than the other?
5. Controlling Law: What country's law applies to the dispute?
6. Enforcement of Relief: Where does the final court order need to be enforced?
7. Adequacy of the Foreign Court: Is the foreign court capable of providing a fair and just outcome?

Example: Imagine a U.S. company is involved in a contract dispute with a Chinese company. Both companies file lawsuits in their home countries, hoping for a favorable outcome. If the U.S. court considers that the dispute centers around Chinese property and the Chinese court has already made significant progress in the litigation there, it might opt to abstain from the case under the principles outlined in Colorado River. However, this is an exception rather than the rule. U.S. courts usually prefer to retain cases unless there's a compelling reason to defer to a foreign court.

Forum non conveniens

Another strategy we often see foreign defendants use is to seek dismissal of the case on the grounds of "forum non conveniens." This legal principle allows a court to dismiss a case if it believes that there is a more appropriate location for the trial. Unlike international abstention, which focuses on jurisdictional fairness, forum non conveniens considers practicalities like convenience and efficiency.

To succeed in a motion for dismissal based on forum non conveniens, the defendant (usually the foreign party) must prove two main points:

1. Adequate Alternative Forum: There must be another court that can adequately hear the case. Most countries are considered "adequate" forums unless they are known for corruption or lack of fairness.
2. Balance of Interests: The court will weigh private and public interests to decide whether dismissing the case in favor of another forum is more just and efficient.

Private interest factors include:

• Ease of access to evidence and witnesses.
• Cost and logistics of getting witnesses to court.
• Any practical issues that would make the trial easier, faster, or less expensive in another forum.

Public interest factors include:

• The burden on local courts (court congestion).
• The local interest in resolving disputes that impact the community.
• The benefit of having a case tried in a court familiar with the applicable law.
• Avoiding legal conflicts that could arise from applying foreign laws.
• Avoiding burdening local jurors with cases that have no local connection.

Example: Consider a situation where a Mexican citizen sues a U.S. corporation in a New York court over a car accident that occurred in Mexico. The U.S. corporation might argue for dismissal based on forum non conveniens, claiming that Mexico courts are better suited to handle the case since the accident occurred there, witnesses and evidence are located in Mexico, and Mexican law will apply. If the U.S. court agrees, it might dismiss the case, requiring the plaintiff to refile in Mexico.

Forum Selection Clauses

Given the fact-specific nature of both international abstention and forum non conveniens, a well-drafted contract can be invaluable. Many contracts include a "forum selection clause," which specifies where any disputes will be resolved. Courts generally uphold these clauses as long as they are not "unreasonable under the circumstances," as highlighted in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).

Including a clear forum selection clause in your contract can save you time and money by avoiding lengthy legal battles over where a dispute should be heard. For example, if your business operates internationally, you might specify in your contracts that any disputes will be resolved in a particular state or country. This preemptive measure can help streamline potential litigation and ensure that you're not dragged into an unfamiliar legal system. But as I wrote in Drafting Your China Arbitration Clause, it is crucial that you choose your forum well.

Conclusion

Two critical principles—international abstention and forum non conveniens—play a significant role in determining where a case will be litigated. Understanding these principles is essential for any party involved in cross-border litigation, as they can significantly impact both the strategy and outcome of a case.

International abstention allows a U.S. court to defer jurisdiction to a foreign court when doing so serves judicial efficiency and fairness. Factors such as jurisdiction over property, convenience for witnesses, and the potential for piecemeal litigation all influence this decision. However, abstention is more the exception than the rule; U.S. courts typically prefer to retain cases unless there is a compelling reason to defer to a foreign jurisdiction.

On the other hand, forum non conveniens is a strategy that focuses on practicality and efficiency, allowing a court to dismiss a case if a more appropriate venue exists. Courts consider factors like ease of access to evidence, cost and logistics of bringing witnesses to court, and public interest in resolving local disputes. This principle ensures that cases are tried in the most suitable forum, balancing fairness and convenience.

Key takeaway: Being proactive is crucial. Including a well-drafted forum selection clause in your contracts can save time and resources by avoiding lengthy battles over where a dispute should be litigated. Such clauses are generally upheld by courts unless shown to be unreasonable under the circumstances. By carefully choosing your forum in advance, you can streamline potential litigation and avoid being pulled into an unfamiliar legal system.

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