Essentially, there are three basic aspects to be consulted where a dispute arises under an agreement: (1) what, if any, specific dispute resolution processes are required prior to, in conjunction with, or instead of a lawsuit (see Dispute Resolution), (2) what is the specific location where a lawsuit or other legal claim should or must be initiated, and (3) what is the law that applies to determine the rights and obligations under the agreement.
The parties may select a particular forum for various reasons, for example because that forum is conveniently located and/or has (or is perceived to have):
Expertise in relevant areas of law;
A high standard of judicial decision-making or low corruption;
The nominated forum must also have the authority to make determinations of law and fact in the case (subject-matter jurisdiction) that are binding on the parties (personal jurisdiction). Otherwise, that forum will apply its procedural law to determine the proper forum and remove the case.If the agreement explicitly provides that a specific court and jurisdiction is the appropriate forum, that choice will be respected so long as:
The purpose of the forum selection clause is not to evade the proper application of relevant law.
There is no evidence of fraud, duress, undue influence or other bad faith in the signing of the contract.
Generally, the procedural laws of the forum will apply to the dispute, but the substantive laws may be local or foreign. Agreements often specify which law will apply to substantive issues that arise under the agreement (called a choice of law or proper law nomination). The choice of law should be related in some way to the parties, the project, or the transaction, or else it may be seen as an attempt to evade the proper application of relevant law. One issue is that courts are generally the most familiar with their own law, and may therefore be reluctant to apply foreign law, or may misapply it.
Forum selection and choice of law clauses often are grouped together in the agreement, though forum selection also often appears with the dispute settlement clause.
Example 1, Choice of Law (private carbon emissions reduction purchase agreement)
Example 2, Applicable Law (participation agreement for government REDD+ program)
Example 3, Dispute Settlement and Forum Selection (participation agreement for government REDD+ program)
These Clauses are:
Very controversial - Moderately controversial
Disclaimer: Materials on this site are meant to highlight issues that should be considered in PES transactions, not to provide a substitute for experienced legal counsel. It will be essential to engage legal counsel in conjunction with any PES transaction to ensure that any agreements reflect the latest developments in the field and comply with current local and national legislation.
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