Applicable Law

How is the Applicable Law Determined?

The Law of the Contract

The parties’ choice will usually be upheld unless it is contrary to public policy of the place where the proceedings are to be held or the choice is not exercised for bona fide reasons and for a legal purpose.

In 1948 Lord Denning stated what is probably still the approach of the English courts, as follows:

‘I do not believe the parties are free to stipulate by what law the validity of their contract is to be determined. Their intention is only one of the factors to be taken into account.’ [1]

Substantive law

This is the law governing the interpretation of the contract. For example, the parties may agree that the law of the contract is English law, even if the contract is for work done in Austria. Very often, countries having their embassies built in foreign countries will prefer the law of the contract to be their own domestic law.

Procedural law

Whatever the substantive law, the procedural law (the law which governs the proceedings) will be that of the country in which the proceedings take place.