Europe & UK: Which governing law to choose for your contract?

Jurisdiction

Pros

Cons

Austria

Statutory law supplements contracts, reducing need for excessive detail and ensuring balance

Highly codified, offering predictability and stability

Protects weaker parties by invalidating clauses breaching minimum standards or public morals (e.g., excessive liability limits, payment terms)

Significant autonomy for individually negotiated agreements, subject to limited mandatory rules

Restrictions on T&Cs and clauses contra mores limit flexibility in standardised contracts

Unlimited liability by default creates significant risk unless expressly limited

Complex statutory framework and mandatory provisions can challenge foreign parties unfamiliar with civil law systems

Mandatory provisions override contractual terms regardless of choice of law

England and Wales

Common law system offers flexibility and strong contractual freedom

Predictable due to extensive case law and commercial precedent

Parties can negotiate bespoke terms with minimal statutory interference

Widely recognised internationally, aiding enforcement

Default unlimited liability unless expressly limited

Complex case law can increase interpretation risk

Mandatory rules on unfair terms restrict boilerplate clauses

Litigation costs can be high compared to civil law jurisdictions

France

Predictable and stable: based on Codes with comprehensive legal framework

Well-developed case law in commercial matters

Specific performance generally available as a remedy

Good faith principle promotes fairness in long-term relationships

Mandatory provisions limit contractual freedom, especially in distribution and agency law

Strict control of standard terms restricts boilerplate clauses.

Mandatory rules on termination reduce flexibility

Language requirements for consumer-facing documents add compliance burden.

Germany

Highly codified, offering predictability

Statutory law supplements contracts, reducing need for excessive detail

Strong protection for weaker parties under T&C rules

Broad autonomy for negotiated agreements within mandatory limits

Strict T&C rules limit flexibility in standard contracts

Unlimited liability by default creates significant risk

Complex statutory framework can challenge foreign parties

Mandatory provisions override contractual terms

Italy

Comprehensive codification ensures predictability

Broad autonomy in B2B contracts subject to limited mandatory rules

Good faith principle encourages fair dealings

Fully harmonised with EU law

Mandatory rules on liability limitations

Courts may reduce excessive penalty clauses

Mandatory provisions override contractual terms

‘Vexatious clauses’ in standard non-negotiated terms require separate written approval, adding complexity

Netherlands

Statutory law supplements contracts reducing need for excessive detail

Few mandatory provisions in B2B contracts, favouring flexibility

Last shot rule applies in battle of forms

Aligned with EU law and offers strong predictability

Broad autonomy for negotiated agreements within mandatory limits

Reasonableness and fairness principle can reduce certainty

Mandatory provisions still apply in specific areas (in areas where public interests are at stake, such as consumer protection or labour law)

Negotiations cannot be terminated without compensation once essential terms agreed

Language and compliance requirements may apply in consumer contexts

Spain

Broad contractual freedom: parties can agree terms provided they do not breach law, morality, or public order

Strong recognition of autonomy of will, enabling tailored agreements

Choosing Spanish law offers legal certainty for operations in Spain, supported by established court interpretation

Mandatory laws cannot be waived, limiting contractual flexibility

Recognition and enforcement of foreign judgments involve complex procedures

Conflict-of-law rules can create uncertainty in cross-border contracts if provisions are unclear