Published on · Last updated
A choice of law clause states which country’s law governs a contract, for example “This agreement is governed by Dutch law”. Within the EU, the courts give effect to that choice under the Rome I Regulation: the choice can be made expressly or be clearly demonstrated by the terms of the contract or the circumstances, and it can cover all or part of the contract (Article 3(1)).
This page is for businesses that contract across borders and want to choose Dutch law, or that face a contract governed by Dutch law. It explains what a choice of law does and does not do, which law applies without a choice, how a choice of Dutch law relates to the Vienna Sales Convention (CISG) and how to draft the clause. Which court decides a dispute is a separate question, covered on our page on Dutch jurisdiction in international disputes.
What is a choice of law clause?
A choice of law clause is a contract term in which the parties designate the law that governs their contract. That law then determines, among other things, how the contract is interpreted, what the parties must do, what happens on breach and how claims expire.
The parties can choose the law for the whole contract or for part of it, and they can change their choice later by agreement (Article 3(1)-(2) Rome I). A choice that is not stated expressly can still follow clearly from the contract or the circumstances. Do not rely on that: write the choice down. A simple clause reads: “This agreement is governed by the laws of the Netherlands.”
A choice of law is not the same as a choice of forum. The Rome I Regulation does not apply to agreements on the choice of court (Article 1(2)(e) Rome I). Whether a chosen court has jurisdiction follows from other rules, within the EU from Regulation (EU) No 1215/2012 (Brussels I recast) (Article 25). A Dutch court can apply foreign law, and a foreign court can apply Dutch law.
Can you choose Dutch law in your general terms and conditions?
Yes. A choice of law in general terms and conditions is valid if those terms form part of the contract. Whether they do is determined by the law that would govern the contract if the choice were valid (Articles 3(5) and 10(1) Rome I).
A party can, however, rely on the law of its own country to show that it did not consent, if it would not be reasonable to judge its conduct under the chosen law (Article 10(2) Rome I). If both parties refer to their own terms with different choices of law, you first have to resolve the battle of forms; see our page on the battle of forms under Dutch law.
Note one Dutch rule that surprises foreign companies. The special Dutch rules on general terms and conditions in the Civil Code do not apply to a contract between businesses that are not both established in the Netherlands, whatever law governs the contract (Article 6:247(2) Dutch Civil Code, DCC). A business is established where its principal place of business is, or the other establishment that must perform the contract (Article 6:247(3) DCC). If Dutch law applies, an unreasonable clause can then still be set aside if applying it would be unacceptable according to standards of reasonableness and fairness (Article 6:248(2) DCC). More on this in our guide to general terms and conditions in the Netherlands.
Which law applies if the contract has no choice of law?
Without a choice, the Rome I Regulation designates the law. A sale of goods is governed by the law of the country where the seller has its habitual residence, and a services contract by the law of the service provider’s country (Article 4(1)(a)-(b) Rome I).
A distribution contract is governed by the law of the distributor’s country and a franchise contract by the law of the franchisee’s country (Article 4(1)(e)-(f)). Other contracts are governed by the law of the country of the party that must perform the characteristic obligation (Article 4(2)). If the contract is manifestly more closely connected with another country, that country’s law applies instead (Article 4(3)). For a company, habitual residence means the place of its central administration (Article 19(1)).
These rules often lead to the law of the other party. A Dutch buyer of goods from a German supplier will, without a choice, usually end up with German law, including the CISG where it applies. That is why a choice of law matters in practice: you know in advance which rules apply to delivery, payment, liability and limitation.
What are the limits of a choice of Dutch law?
Businesses can in principle choose any country’s law, also the law of a non-EU country (Article 2 Rome I). The choice cannot, however, set aside certain mandatory rules, and it gives consumers less room than businesses.
- If all other elements of the situation are located in one country, a choice of another country’s law does not set aside the rules of the first country that cannot be derogated from by agreement (Article 3(3) Rome I). Likewise, if all elements are located in EU member states, choosing the law of a non-EU country does not set aside mandatory EU law (Article 3(4)).
- The choice does not prevent the court from applying the overriding mandatory provisions of its own law, and the court can give effect to those of the country of performance in so far as they make performance unlawful (Article 9(2)-(3) Rome I).
- A provision of the chosen law can be refused only if its application is manifestly incompatible with the public policy of the court’s country (Article 21).
- In a consumer contract, a choice of law cannot deprive the consumer of the mandatory protection of the law of his habitual residence, if the business pursues or directs its activities to that country (Article 6(1)-(2)).
Does choosing Dutch law mean a Dutch court decides disputes?
No. A choice of law only determines the applicable law. Which court or arbitral tribunal decides follows from a separate forum clause (Article 25 Brussels I recast) or arbitration clause, or, without one, from the general jurisdiction rules (for example Articles 4 and 7 Brussels I recast).
In arbitration, the tribunal decides according to the rules of law chosen by the parties (Article 1054(2) Dutch Code of Civil Procedure, Rv). Parties that want both Dutch law and a Dutch forum therefore need two clauses. For international disputes, they can also agree to litigate in English before the Netherlands Commercial Court in Amsterdam, if all conditions of Article 32a(1) Rv are met. Our page on commercial dispute settlement in the Netherlands compares the options.
What should you know before choosing Dutch law?
Dutch contract law gives the parties much freedom, but a contract also has the legal effects that follow from the law, custom and reasonableness and fairness (Article 6:248(1) DCC). A term can be set aside where applying it would be unacceptable by those standards (Article 6:248(2) DCC).
At a party’s request, a Dutch court can also amend or terminate a contract because of unforeseen circumstances that are such that the other party cannot expect the contract to be maintained unchanged, unless those circumstances are for the account of the party invoking them (Article 6:258(1)-(2) DCC).
For an international sale of goods, a choice of Dutch law does not by itself exclude the Vienna Sales Convention. The CISG applies to sales between parties in different contracting states (Article 1(1) CISG), and Dutch law includes it. The parties can exclude it (Article 6 CISG), but a general choice of Dutch law is in principle not an exclusion. If you want the Dutch Civil Code instead, say so expressly. See our pages on the CISG and on excluding the CISG in general terms and conditions.
How do you draft a choice of law clause?
State the chosen law expressly, decide whether the CISG applies, and combine the clause with a forum or arbitration clause. Use the same choice in the contract and in your general terms and conditions.
- Name one country’s law: “the laws of the Netherlands”, not a mix of systems.
- Decide on the CISG: if you want to exclude it, write “excluding the United Nations Convention on Contracts for the International Sale of Goods (CISG)”.
- Consider whether the clause should also cover non-contractual claims, such as claims based on an unlawful act connected with the contract; separate EU rules decide whether such a choice is effective.
- Add a forum clause (for example the Amsterdam District Court or the Netherlands Commercial Court) or an arbitration clause, so that law and forum fit together.
- Check the mandatory rules that the choice cannot avoid, such as consumer protection and overriding mandatory provisions (Articles 6 and 9 Rome I).
Frequently asked questions about choice of law under Dutch law
What is a choice of law clause?
It is a contract term that states which country’s law governs the contract, for example Dutch law. Within the EU, the court gives effect to that choice under Article 3 of the Rome I Regulation. The choice can cover the whole contract or only part of it.
What does “governed by Dutch law” mean in a contract?
It means that Dutch law determines the interpretation and effects of the contract, including reasonableness and fairness (Article 6:248 DCC). For an international sale of goods, Dutch law includes the CISG, unless the parties exclude it (Article 6 CISG). It does not say which court decides.
Which law applies if a contract has no choice of law clause?
Within the EU, the Rome I Regulation decides. A sale of goods is governed by the law of the seller’s country and a services contract by the law of the service provider’s country, unless the contract is manifestly more closely connected with another country (Article 4(1) and (3) Rome I).
Does choosing Dutch law exclude the CISG?
Not in principle. If the parties have their places of business in different contracting states, the CISG applies (Article 1(1)(a) CISG). Parties can exclude it (Article 6 CISG), but a general choice of Dutch law is in principle not an exclusion. Exclude it expressly if that is what you want.
Is a choice of law the same as a choice of forum?
No. A choice of law designates the applicable law; a choice of forum designates the court. The Rome I Regulation does not apply to choice of court agreements (Article 1(2)(e)); within the EU, Article 25 of Brussels I recast governs them. Agree on both.
Primary sources
- Regulation (EC) No 593/2008 (Rome I Regulation), Articles 1, 2, 3, 4, 6, 9, 10, 19 and 21
- Regulation (EU) No 1215/2012 (Brussels I recast), Articles 4, 7 and 25
- United Nations Convention on Contracts for the International Sale of Goods (CISG): Article 1, Article 6
- Dutch Civil Code (Burgerlijk Wetboek): Article 6:247, Article 6:248, Article 6:258
- Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering): Article 32a, Article 1054
Do you want your choice of law clause reviewed?
A choice of law clause is only a few lines, but it decides which rules apply when things go wrong. As an international law firm in the Netherlands, MAAK can review your contract or general terms and conditions, align the choice of law with the forum clause and advise on whether to exclude the CISG.
