SCOTUS Decides a Rare Forum Non Conveniens Case: Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp

by Christopher A. Whytock

[Chris Whytock is a Ph.D. candidate at Duke University and will join the faculty of the University of Utah S.J. Quinney College of Law in the fall. He has kindly agreed to lend his timely analysis of the Sinochem opinion to Opinio Juris readers]

On March 5, 2007, the U.S. Supreme Court announced one of its rare decisions on the doctrine of forum non conveniens. The decision has a somewhat narrow scope, and therefore is unlikely to give observers of transnational litigation quite as much to talk about as the court’s last major statement on the doctrine. Nevertheless, the decision is an interesting one, for it resolved a significant circuit split and, because of both what it addressed and what it failed to address, it may have broader implications for forum non conveniens practice.

The case, Sinochem International Co. Ltd. v. Malaysia International Shipping Corp., arose from a dispute over a bill of lading. Petitioner Sinochem, a Chinese state-owned company, ordered steel coils from Triorient Trading, Inc., an American manufacturer, pursuant to a contract requiring shipment by April 30, 2003. Triorient had the coils shipped on a vessel subchartered from respondent Malaysia International. Upon arrival in China, Malaysia International’s vessel was arrested by order of a Chinese admiralty court, based on a petition filed by Sinochem alleging that Malaysia International had falsely backdated the bill of lading to indicate an April 30 shipment, when in fact the shipment was not loaded until May. Malaysia International then sued Sinochem in the U.S. District Court for the Eastern District of Pennsylvania, alleging that Sinochem made misrepresentations to the Chinese admiralty court, leading to the vessel’s arrest.

Sinochem moved to dismiss the U.S. action. The U.S. district court determined that it had subject matter jurisdiction, but that discovery would be needed before it could determine whether it had personal jurisdiction over Sinochem. However, the court dismissed the case without resolving the personal jurisdiction question, reasoning that even if, hypothetically, it did have personal jurisdiction, dismissal was appropriate under the forum non conveniens doctrine.

Malaysia International appealed to the Court of Appeals for the Third Circuit, presenting the following issue: Whether a district court must determine that it has jurisdiction before dismissing a suit on forum non conveniens grounds? Noting a split among circuits (with the D.C. and Second Circuits, but not the Fifth, Seventh and Ninth Circuits, allowing forum non conveniens dismissals without prior resolution of jurisdictional issues), the circuit court held that forum non conveniens is a non-merits ground for dismissal, but that the district court nevertheless should have concluded its jurisdictional inquiry before dismissing under the doctrine. It therefore reversed. The circuit court’s logic was simple and formalistic. The essence of the forum non conveniens doctrine is the discretion it gives a court to abstain from exercising jurisdiction when there is a more appropriate foreign court. “As a court can only abstain from jurisdiction it already has, if it has no jurisdiction ipso facto it cannot abstain from the exercise of it.” 436 F.3d 349, 363. Thus, “the very nature and definition of forum non conveniens presumes that the court deciding this issue has valid jurisdiction.” Id. at 361. The circuit court also pointed to language from the Supreme Court’s opinion in one of its seminal forum non conveniens decisions, Gulf Oil Corp. v. Gilbert, stating that “[t]he doctrine . . . can never apply if there is absence of jurisdiction . . . .” Id.

In a unanimous decision, the Supreme Court reversed the Court of Appeals. The Supreme Court began by emphasizing the principle underlying its 1998 decision in Steel Co. v. Citizens for Better Environment and its 1999 decision in Ruhrgas AG v. Marathon Oil Co.: that jurisdiction is essential only when a court makes a decision on the merits of a case (slip op. at 7-8). It then characterized forum non conveniens dismissal as a determination denying the plaintiff a decision on the merits because the merits should be decided elsewhere—a determination that “does not entail any assumption by the court of a substantive law-declaring power” (slip op. at 8-9). Therefore, the Supreme Court concluded, forum non conveniens is a non-merits ground for dismissal for which jurisdiction need not be established. This means that “[a] district court . . . may dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction . . .” (slip op. at 8). Because Gilbert did not address the issue before the court in Sinochem—whether a court may dismiss on forum non conveniens grounds before deciding on jurisdiction—the Supreme Court argued that the language from Gilbert quoted by the circuit court was “no hindrance to the decision we reach today,” particularly when understood in context.

The decision strikes me as a small but significant victory for pragmatism in transnational litigation. As the Supreme Court argued, to require the district court to resolve the jurisdictional issue would have led to burden and delay—“[a]nd all to scant purpose: The District Court inevitably would dismiss the case without reaching the merits, given its . . . forum non conveniens appraisal.” Such an outcome also would disserve judicial economy and be in tension with one of the stated purposes of forum non conveniens: to reduce inconvenience. The circuit court acknowledged these concerns in its opinion, but concluded that its hands were tied by doctrine: “precedent, logic, and the very terms of the forum non conveniens doctrine dictate this result.” At the risk of reading too much into the Supreme Court’s interpretive methodology in the case, I would suggest that the decision may indicate a rejection of highly formalistic analysis of the rules of transnational litigation, and an embrace of a more purposive and functionally-oriented approach.

One Response

  1. Chris Whytock’s interesting analysis of the US Supreme Court’s decision in Sinochem raises some intriguing issues; including the interdisciplinary (law/political science) approach to forum non conveniens decision-making and his “territoriality heuristic” thesis, both of which make important contributions to conflict of laws analysis. Mr. Whytock notes that the US Supreme Court “emphasize[d] the fact that the territorial locus of the underlying dispute between Sinochem and Malaysia International was almost entirely foreign” which, coupled with the existence of parallel proceedings, underscores the private and public interest factors at the heart of forum non conveniens doctrine.

    From a Canadian conflict of laws perspective, despite the notable differences in constitutional frameworks, jurisprudential history and jurisdictional/court hierarchies, the Canadian judicial approach to forum non conveniens more closely resembles Gulf Oil than Sinochem.

    In Canadian common law, jurisdiction simpliciter is the threshold issue. The three bases for establishing jurisdiction over a non-resident defendant are: 1. Assumed (subject-matter) jurisdiction based upon a multi-factor (8-factor) “real and substantial connection” test; 2. Presence-based (personal) jurisdiction; or 3.Consent-based jurisdiction (attornment or prior agreement). Where jurisdiction simpliciter is otherwise established, a Canadian superior court or Federal Court (except a Quebec superior court which applies the Civil Code of Quebec) may then exercise its discretion to stay a proceeding based upon forum non conveniens grounds. If jurisdiction simpliciter is not extant, then a stay of proceedings based upon forum non conveniens, is superfluous. Moreover, it is highly doubtful that a Canadian court has the power to conditionally grant a stay of proceedings based upon forum non conveniens grounds (e.g. by requiring the defendant to waive a limitation defence) in lieu of jurisdiction simpliciter.

    Recently, in Shekhdar v. K&M Engineering and Consulting Corp. (available online (CANLII) at: ) [2006] O.J. No. 2120, (2006) 148 A.C.W.S. (3d) 568 (Ont. C.A.), rev’g [2004] O.J. No. 2548 ,(2004) 71 O.R. (3d) 475, (2004) 131 A.C.W.S. (3d) 638 (Ont. S.C.J.), the Ontario Court of Appeal reaffirmed the two-step jurisdictional analysis, noting in a brief endorsement, as follows:

    “…¶ 2 The defendants, respondents to this appeal, concede that, if their attornment to the courts of Ontario is sufficient to constitute consent, the appeal must succeed. In our view, it is incontrovertible that the defendants did attorn to the Ontario jurisdiction and thus consented to it. Without in any way questioning jurisdiction, they responded to the plaintiff’s pleadings in Ontario; they attended for examinations for discovery in Ontario, their counsel appeared before a master and three Superior Court judges in Ontario, and they participated in almost three days of the trial of this action before Matlow J. who, on his own motion, raised the question of jurisdiction and instructed counsel to research the stay provision in s. 106 of the Courts of Justice Act. It was then, for the first time, that the defendants took the position that Ontario did not have jurisdiction to entertain this action. Matlow J. adopted that position. He rejected consent as a separate basis of jurisdiction and focused on assumed jurisdiction. He concluded that his hands were tied because, on his analysis of the eight factors appearing in Muscutt, the action had no real and substantial connection with Ontario and the Superior Court therefore had no jurisdiction to entertain it. While he undoubtedly had the authority that he purported to exercise under s. 106, having regard to the costs the parties had already incurred in this litigation, it was inappropriate for him to exercise his discretion in the way he did. Moreover, for the reasons set out above, his decision was wrong in law…”.

    Quaere whether the Sinochem decision now renders moot anti-suit (or anti-anti suit) injunctions as procedural tools–if forum non conveniens involves “non-merits” analysis, then the lack of jurisdictional discovery, creates a greater burden on plaintiff’s counsel to keep the case in the U.S. District Court. Conversely, in Canada, particularly in Ontario, there is no “jurisdictional discovery” per se; rather, the defendant bears the onus to demonstrate that the foreign court is the more convenient forum. The procedure generally involves cross-examinations of affiants on their respective affidavits, including affidavits from legal experts proferring opinions on foreign law (where applicable). The predominant, albeit non-determinative, factor in the forum non conveniens analysis in recent Canadian caselaw appears to be “loss of juridical advantage” which suggests that “access to justice” may be a residual, policy-based concern adopted by Canadian courts. When all other factors are neutral, Canadian judges may implicitly, if not, explicitly scrutinize the plaintiff’s claims to discern (divine?) whether the plaintiff is relying upon procedural advantages (e.g. case management, substantive law, documentary/oral discovery, etc.) unavailable in the foreign forum, or is simply “forum shopping”.

    This may be the crux of the issue: are the current forum non conveniens test(s) adequate jurisdictional methodologies, which facilitate access to justice and procedural fairness, while acting as a judicial filter for claims with dubious jurisdictional validity?

    Antonin I. Pribetic

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