Limitations on Forum Selection in Government Procurement Contracts

In the practice of procurement of goods and services by the Government (ministries/agencies/regional governments), State-Owned Enterprises (SOEs), or Regional-Owned Enterprises (ROEs), we often encounter arbitration forum selection clauses in contracts. The chosen forums include foreign or international arbitration institutions. To date, no prohibition exists against such a practice. The legal basis for selecting such forums rests on a principle in contract law known as partij autonomie (party autonomy). This means that the contracting parties have the freedom (autonomy) to choose both the forum (choice of forum) and the governing law (choice of law) applicable to the contract they agree upon. Although no accurate data are available on how many of our procurement contracts include foreign or international arbitration clauses, such clauses do appear - for example, in the dispute between Navayo and the Government of the Republic of Indonesia concerning the lease of the Artemis satellite.