Applicable law clauses
Applicable law clauses

The following Dispute Resolution guidance note provides comprehensive and up to date legal information covering:

  • Applicable law clauses
  • What is an applicable law clause?
  • Why include an applicable law clause?
  • Difficulties with agreeing an applicable law clause
  • Disadvantages of not choosing an applicable law
  • Factors to take into account
  • Applicable law clause—is it valid?
  • What is a non-national system of law clause and is it valid?
  • What are floating law clauses and are they valid?
  • What are stabilisation clauses and are they valid?
  • more

Brexit: The UK's departure from the EU on exit day, ie Friday 31 January 2020, has implications for practitioners considering applicable law. For guidance, see: Cross border considerations—checklist—Applicable law—Brexit specific.

This Practice Note explains what a governing law clause is, the reasons to choose one and the disadvantages of not choosing one. Factors to take into account are identified and a sample clause given.

What is an applicable law clause?

The applicable law clause in a contract sets out the law to be applied to any contractual dispute between the parties. The stated law is known as the governing law. For an introduction to the applicable law, see Practice Note: Applicable law.

Reasons to choose an applicable law

Parties negotiating a contract should take the opportunity to consider which applicable law should be used to determine any disputes between them arising out of the contract at a later date. All too often this is regarded as the last thing to be considered when negotiating a contract and ends up being forgotten. The applicable law should be agreed early in negotiations as it affects how the remainder of the contract is drafted and negotiated.

The applicable law agreed on by the parties should be expressly recorded in the contract, wh