Originally from Arbitration Clauses for International Contracts - Second Edition

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CHOICE OF LAW CLAUSES

A “choice of law” clause is in practice understood to be a clause that designates the substantive law governing the parties’ contractual rights and obligations, and this Chapter offers drafting suggestions for choice of law clauses. Choice of law itself is a vast subject beyond the scope of this book.

In addition to the choice of substantive law, choice of law can encompass the law governing the parties’ arbitration agreement and the arbitration proceedings. Clauses addressing the law governing the arbitration agreement and arbitration are discussed in Chapter 6 above.

(1) Choice of Substantive Law in Relation to Choice of Dispute Resolution Method

The substantive law is the law that governs the parties’ substantive rights and obligations.

Every international contract should contain a clause that selects the governing substantive law. If the contract fails to do so, the parties may incur substantial time and expense debating the issue once a dispute arises. A choice of law clause will be enforced by the arbitral tribunal.