Ercüment Erdem Att. Fatih Isik

Forum Shopping Decision of the Federal Supreme Court of Switzerland

June 2018

Introduction

In its judgment dated 14 March 2018 and numbered 4A_417/2017, the Federal Supreme Court of Switzerland (“Federal Court”) ruled that the Swatch Group AG (“Swatch”) had a legal interest in filing a negative declaratory action against the British Cousins Material House UK (“Cousins”) in Switzerland. With this decision, the Federal Court changed its approach to the forum shopping rule in international disputes since, prior to this decision, the Federal Court did not accept lawsuits filed before Swiss courts that had the sole purpose of benefiting from the forum choice.

Subject of the Case and Decision

Swatch ended its partnership with British wholesaler Cousins on 31 December 2015 upon creating a selective distribution system for spare parts. Cousins notified Swatch that if no spare parts were supplied, it would file a lawsuit before the English courts on 16 March 2016, but later changed the date to 20 April 2016. However, Swatch filed a negative declaratory action against Cousins on 19 April 2016 before the Commercial Court of Bern. Cousins applied to the British courts on 29 April 2016.

Based on the Federal Court’s precedents that did not accept the plaintiff’s filing a lawsuit before the court that would be to its benefit (Forum Shopping)[1], the Commercial Court of Bern ruled on 26 July 2017 that there is no legitimate benefit, and refused the request for a negative declaratory action. Swatch then appealed the decision and requested the Federal Court to change its ruling. Finding Swatch’s claim to be legitimate, the Federal Court changed its practice regarding Forum Shopping in its judgment dated 14 March 2018 and numbered 4A_417/2017, and ruled that in the event a negative declaratory action is filed in order to provide for a forum that is to the plaintiff’s benefit, the presence of a legitimate benefit should be accepted. Upon this decision, the file was sent again to the Bern Trade Court to rule with respect to its jurisdiction.

Forum Shopping”

The parties of the dispute may seek to have the case tried before the courts of a particular jurisdiction in order to select the court that is most appropriate for them, and to prevent the proceedings from being conducted before other courts, as the court of competent jurisdiction may affect the outcome of the case. As such, forum shopping can be described as “an effort by a party to file the case before a court that will be in its favor”[2].

Filing the case before a particular court may have several benefits for a party of the dispute. The law to be applied to the merits and procedure shall be determined according to the law of the place where the case is filed. The application of the rules of the jurisdiction that contains provisions that are in favor of the party or provisional rules that the court and the parties are more familiar with shall facilitate the proceedings, and may also result in a favorable decision for the plaintiff. In addition, every aspect of the case that is affected by lex fori shall be determined according to the place of the court.

Negative Declaratory Action as a Method of Forum Shopping

In the event a party of the dispute faces the threat of a lawsuit in a court that is not favorable to it, this party can provide for lis pendens by way of filing a negative declaratory action in a court where it feels it will receive a favorable judgment. If another case is filed before a court that is assumed to be to the detriment of the party that has filed the negative declaratory action, after the filing of the negative declaratory action, the latter court may accept the negative declaratory action providing the condition of lis pendens. In such a case, the latter court may dismiss the case for lack of jurisdiction, and as a result, the case may not be heard before this court.

Forum Shopping” in Turkish Law

In the Turkish doctrine, it is accepted that parties seeking the forum that is most favorable for them (forum shopping) is the most natural right of the parties of a dispute, so long as the rule of good faith is not violated[3]. The Supreme Court also ruled that filing a lawsuit before the most favorable forum is a legitimate interest, and commented that “The choice of a court where the benefits of the party are protected in the most appropriate manner, between multiple courts, cannot be considered an unjustifiable and damaging act,” in a decision in 2009[4].

Conclusion

The Swiss Federal Court's decision dated 14 March 2018 made it easier to file a negative declaratory lawsuit before the Swiss courts. As a result of this precedent of the Swiss Federal Court, in the event an international dispute is concerned, the party facing the threat of being sued before a court that is incompatible with its interests, may have its action tried before the Swiss courts by way of filing a negative declaratory action.

[1] BGE 136 III 523.

[2] Black’s Law Dictionary defines forum shopping as “when a party attempts to have its action tried in a particular court or jurisdiction where it feels it will receive the most favorable judgment or verdict”.

[3] Nomer, Ergin: Devletler Hususi Hukuku (International Private Law), 21th Edition, İstanbul 2015, p. 489. “Thus, forum shopping is also legal and legitimate under Turkish law as it is in the field of international law”.

[4] Decision of the 11th Civil Chamber of the Supreme Court numbered 2008/10582 E. 2009/4282 K. and dated 08.04.2009.