Forum Non Conveniens: A jurisprudential analysis

Forum non conveniens (Latin: "inconvenient forum" or "inappropriate forum") (“FNC”) has been explained by Indian courts as a discretionary power of the courts to not entertain a matter on the grounds that there exists a more appropriate court of competent jurisdiction, which would be in a better position to decide the matter. Conversely, an anti suit injunction is granted by a court preventing the parties before it from instituting or continuing with proceedings in another court.

The 188th Report (December 2003) by the Law Commission of India on ‘Proposals for Constitution of Hi Tech Fast Track Commercial Divisions in High Courts’ has pointed out a disturbing trend in the judgments of UK and US courts of selectively applying the principle of ‘FNC’ and staying actions filed by foreigners in their country and refusing to apply the same norm when actions are filed in these countries against foreigners, primarily on the generalisation that cases filed in India would take a minimum of ‘twenty five years’ for disposal.

The Indian perspective

As per the judgment of the Delhi High Court in the case of Glaxosmithkline and Horlicks Limited v Heinz India (MANU/DE/0011/2009) (“Horlicks”), the doctrine of FNC requires a two-stage enquiry:

• Whether there is an alternative competent forum, which is appropriate.
• Whether it is in the interest of justice to relegate the parties to the alternative forum.

An important point to be noted is that a court must have jurisdiction before rejecting a matter on the ground of FNC. The observations of the Delhi High Court in the case of Horlicks are worth noting and are as follows:

1. The principle of 'FNC’ flows from a desire to avoid multiplicity of proceedings and conflicting or confusing judgments.
2. Each case has to be decided on its own circumstances which include economic strength of the parties, expenses, availability of evidence etc.
3. FNC is applied rarely, when advantages and justice clearly outweigh proceedings before a court which in law has jurisdiction but another court having concurrent jurisdiction is the more 'natural' and the plaintiff has deliberately avoided the said forum.
4. There should be a distinct disadvantage to deny the right of the plaintiff to decide his court.
5. Balance of convenience is a material consideration, but not the sole criteria justifying FNC.

Notwithstanding the appropriateness of a particular forum, courts in general give primacy to the governing law contractually chosen by the parties, particularly in commercial transactions. For instance, in August 2010, the Delhi High Court in the case of Piramal Healthcare v DiaSorin S.p.A (MANU/DE/2099/2010) held that circumstances such as comparison of litigation expenses in England and in India or the hardship of taking the witnesses to the English Court, is insufficient to render a contractually agreed forum as a FNC as they were foreseeable at the time of entering into the contract.

The Supreme Court in the case of Modi Entertainment v. W.S.G. Cricket (AIR 2003 SC 1177) stated that only in exceptional circumstances, a contractually agreed court (court of choice) can be declared as a ‘FNC’ through an anti suit injunction by the court of natural jurisdiction. This anti suit injunction can be granted by the court to prevent injustice if the scenario is such that it permits a contracting party to be relieved of the burden of the contract. The exceptions include events since the date of the contract which have made it impossible for the party seeking injunction to litigate the case because the essence of the jurisdiction of the contractually chosen court no longer exists, or the court does not exist at a later point of time or because of force majeure (unforeseen events beyond the control of the parties).

International perspective

US and UK courts have traditionally recognised FNC, though it does not have legislative backing. The courts generally evaluate whether a satisfactory alternate court exists, which court has a greater connection to the case and factually analyse how the convenience of the alternative court to one party weighs against the burden placed on the other party.

Civil law countries, in general do not recognise the doctrine of FNC primarily due to the lack of certainty of its application and the discretionary power given to the judiciary. The case of Owusu v Jackson ([2005] QB 801 Case C 281/02) (“Owusu”), is noteworthy since the Court held that the doctrine of FNC is incompatible with the mandatory system of jurisdiction (wherein person may only be sued in the state in which he or she is domiciled) established by the Brussels Convention.

The case of Owusu discussed above, has severely limited the power of the English courts to apply FNC in the context where the Brussels Convention and EC Regulation would apply. While responding to European Commission’s Report and Green Paper on the EC Regulation, the United Kingdom has officially stated that it regrets the inflexibility inherent in the ECJ’s decision in Owusu which it feels has to a great extent disabled the valuable procedural mechanism of FNC which facilitates the transfer of cases which would be more appropriately dealt with by the courts in another jurisdiction.

Conclusion

An analysis of the doctrine of FNC is significant in the context of cross border transactions.

Though FNC is primarily an equitable relief, valid concerns such as a lack of predictability and clarity in the decisions of the courts do exist. Critics of FNC would also argue that it aids forum shopping and protracting the litigation through interlocutory applications. In the context of transnational cases, clear and simple rules might reduce time and expense for the parties concerned rather than hoping for courts to exercise the right amount of judicial discretion.

On the other hand, rules however comprehensive, cannot anticipate the vast range of situations which might arise, which necessitates some degree of judicial flexibility and discretion. FNC can ensure fairness by coming to the aid of a poor defendant in a third world country who is faced with litigation in a first world country, say by a multinational corporation.

Rajesh Begur is Managing Partner, and Shreevidhya is an Associate at ARA Law