Contract – Forum-Selection Clause – ‘Subject to Jurisdiction’

Albemarle Corp. v. AstraZeneca UK Ltd. (Lawyers Weekly No. 10-01-1202, 18 pp.) (Niemeyer, J.) No. 10-1000, Dec. 8, 2010; USDC at Orangeburg, S.C. (Seymour, J.) 4th Cir. Click here for the full text of the opinion.

Holding: In an international contract between a Virginia corporation and a United Kingdom corporation for an ingredient used to manufacture an anesthetic, the 4th Circuit interprets a forum-selection clause making the contract “subject to jurisdiction” in the U.K. to require the litigation to be pursued in the designated English court.

In this case, we address how to interpret a forum-selection clause that makes an international contract “subject to jurisdiction” in the United Kingdom.

AstraZeneca UK Ltd., a United Kingdom corporation, agreed in a 2005 contract to purchase a substantial portion of its needs for di-isopropyl-phenol (DIP) from Albemarle International Corporation, a Virginia corporation. Albemarle International Corporation was the global marketing arm of Albemarle Corporation, a Virginia corporation (both corporations, collectively Albemarle), and Albemarle Corporation manufactured DIP in its plant in South Carolina. AstraZeneca used DIP to manufacture the drug Diprivan, a fast-acting anesthetic, at its plant in England.

In the 2005 contract, Astra-Zeneca also agreed that if it ceased using DIP in favor of propofol, a derivative of DIP, it would give Albemarle the right of first refusal to supply AstraZeneca with propofol. When AstraZeneca did elect a year later to use propofol in lieu of DIP, Albemarle contends that AstraZeneca breached its duty to give Albemarle the right of first refusal, and Albemarle commenced this action in South Carolina, alleging that AstraZeneca breached the 2005 contract.

Based on a forum-selection clause in the 2005 contract, which provided that the contract was “subject to” the jurisdiction of the English High Court, AstraZeneca filed a motion to dismiss this action for improper venue. The district court granted the motion and dismissed the complaint, applying English law, which the contract specified was applicable, to hold that the forum-selection clause was mandatory and exclusive, even though such a clause would likely be construed under federal case law to be permissive.

We affirm. Resting on the traditional proposition that we should give effect to parties’ expectations as manifested in their legitimate agreements, we apply English law to construe the forum-selection clause and conclude that under English law, the clause requires that this litigation be pursued in the designated English court. We also conclude that enforcing the forum-selection clause in this manner is not unreasonable, as unreasonableness is detailed in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15-18 (1972).

Judgment affirmed.