Applicable law clauses
Applicable law clauses

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

  • Applicable law clauses
  • What is an applicable law clause?
  • Example applicable law clause
  • Why include an applicable law clause?
  • Difficulties with agreeing an applicable law clause
  • Disadvantages of not choosing an applicable law
  • 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?
  • Retrospective changes to the applicable law
  • More...

Applicable law clauses

This Practice Note considers applicable law clauses also known as governing law clauses, proper law clauses or choice of law clauses. Most commercial contracts will include an applicable law clause. Such clauses are used to determine the law to be applied by the courts when determining the substantive dispute between the parties.

This Practice Note considers the rationale for agreeing an applicable law clause and the factors to take into account when agreeing one. It covers situations where parties can change the applicable law clause in their contract as well as whether specific types of clauses, ie floating applicable law clauses and stabilisation clauses, are valid. A sample applicable law clause is provided.

What is an applicable law clause?

A commercial contract will set out the terms on which the contracting parties will carry out the contract. Where elements of the contract involve different countries, the interpretation and effect of the contract terms may vary significantly depending on which country’s laws are used to interpret the terms. The law applied to do this is the applicable law.

Where the parties agree the applicable law during the contract negotiations, it should be expressly recorded in the contract. This agreement is set out in an applicable law clause. The applicable law clause in a contract will usually be set out alongside a jurisdiction clause. For information on

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