When it comes to international contracts, one of the key components is the governing law clause. This clause determines the law that will govern the interpretation and enforcement of the contract.
Including a governing law clause in international contracts is essential for several reasons. Firstly, it provides clarity and predictability in case of disputes or conflicts. It helps the parties to understand the laws and legal system that will apply in the event of a dispute, avoiding confusion and uncertainty. Secondly, it can help to avoid costly and time-consuming litigation in multiple jurisdictions.
However, when drafting a governing law clause for international contracts, it is important to consider the following factors:
1. Jurisdiction: The governing law clause must clearly identify the jurisdiction whose laws will apply to the contract. This will depend on various factors such as the location of the parties, where the contract was formed, the subject matter of the contract, and any relevant regulations or international conventions.
2. Language: The governing law clause must be drafted in a language that is easily understood by all parties. It is essential to avoid any ambiguity or confusion that may arise due to language barriers.
3. Applicable law: The governing law clause must identify the specific laws that will apply to the contract. This includes both substantive and procedural laws, which may vary from jurisdiction to jurisdiction.
4. Arbitration: In some cases, parties may agree to resolve any disputes through arbitration rather than litigation. In such cases, the governing law clause must identify the jurisdiction whose laws will apply to the arbitration process.
Here is a sample governing law clause for an international contract:
“This Agreement shall be governed by and construed in accordance with the laws of the State of _________. Any disputes arising out of or relating to this Agreement shall be resolved through arbitration under the rules of the International Chamber of Commerce in __________. The language of the arbitration shall be __________ and the governing law of the arbitration shall be the law of the State of _________.”
In conclusion, a well-drafted governing law clause is crucial for international contracts. It helps to provide clarity, predictability, and stability in the event of a dispute. It is, therefore, important to carefully consider all relevant factors when drafting a governing law clause, and to seek professional assistance if necessary.