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Governing Clause For International Contracts

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You are recently appointed as the Sales Director of the "Pharmaceutical (UK)," a British Company. You have been requested to draft a standard "Governing Law" clause for all the Company's International Contracts. Draft a "Governing Clause" and give at least five reasons for the choice of Law.


A commercial contract is successfully persuaded by complying with all applicable legal provisions. It is an important issue which is to be reviewed in case of international context, where a contract is connected or dealt in many countries (Moses, 2017). Being a Sales Director of “Pharmaceutical (UK)” Governing clause for the international contract has been drafted below. Further five reasons for choosing the same has also been provided.

Governing Clause For International Contracts

“ This agreement and any other argument  or disagreement or claim which has been arising out of or in connection with its subject matter (comprising non-contractual disputes or claims) shall be governed by and construed in accordance with provision available in English law. Further, any dispute in the case arises out of or in connection with this contract, comprises validity or termination would be ultimately resolved by arbitration rules which are deemed to be included in this clause. The no. of arbitrator (one / three) (specify along with the provisions relating to the manner in which arbitrators will be chosen). The legal place of arbitration shall be Ghana. The language to be used in the proceeding relating to arbitrate shall be English. The governing law for the international contracts of the company shall be substantive English Law.”

Reason For The Choice Of Law

Historical Importance and Influence

English law is preferred governing law for international contracts and for business transactions on a worldwide level.  In the case where international aspects are involved in the transaction, it is necessary to set out in a contract both the governing law as well as the jurisdiction. Jurisdiction can be specified as the name of the country’s law which will govern the contract and in which country disputes arising relating to the contract will be finally decided (Cuniberti, 2013).  Many countries retain the system of common law as for development and interpretation of rules English law is taken for guidance and unusual issues. Thus, as the law is well-known, reputable jurisprudence and well- developed; the same has been chosen.


HM Courts and Tribunal Service

English Law is strengthened by its sovereignty of judiciary, the knowledge, experience and reputation of judges and enhanced quality of UK law firms and lawyers. The court resolves and deals with issues which comprise commercial disputes and individuals asserting their employment rights to family law and issues relating to administrative law (Clermont, 2014). The relative speed and effectiveness with which commercial disputes are resolved through English Court or any other alternative mechanism also contribute to the trust relating to English Law.

Judicial Independence

The manner of selection, experience and impartiality of English Law judges are highly qualified and coupled with a skill which is necessary for dealing with complex cases. Judicial Independence is one of the key principles of UK constitution (Woodward Jr, 2014). Judges are authorized to resolve the case or take required action in accordance with their own judgement relating to the case. Further, no outside influence and government control are enforced on the independent decision of judges.

Content of English Law

English Law is considered as transparent and predictable which provides freedom of contract or agreement and pro-business approach. In accordance with the provisions available in English Law, no implied overarching responsibility relating to the duty of good faith exists which is available in other jurisdictions. The principle of good faith requires that neither party should be able to take advantage of another party (Levy, 2017). The similar concept of Good Faith in relation with other countries provide obligation for the parties to communicate each other in case the other party is not able to discover important points on its own. Even it creates appropriate obligations for application of reasonable diligence while executing contractual obligation and analysing moral and ethical behaviour standard.

Sector Dominance

A variety of sectors is dominated by English Law. The same comprises international commercial contracts, maritime and shipping, merger and acquisition, international arbitration, etc. For the purpose of dealing with other countries, it is necessary for the company to select appropriate governing law for the purpose of cross-border transactions. Usually, English Law is chosen as it is amenable to allowing and enforcing a limitation of liability clauses, liquidation of anticipated damages and other favourable provision relating to international contracts (Clermont, 2014). The discussion with a lawyer is required to be kept confidential in accordance with provisions of English Law and is covered by legal privilege. It is necessary for English Lawyers to keep the information provided by client confidential as it is considered as basic human right and also provide comfort to the parties while discussing the case with their lawyer.



Clermont, K.M., 2014. Governing Law on Forum-Selection Agreements. Hastings LJ, 66, p.643.

Cuniberti, G., 2013. The international market for contracts: the most attractive contract laws. Nw. J. Int'l L. & Bus., 34, p.455.

Levy, L.W., 2017. The establishment clause: Religion and the First Amendment. UNC Press Books.

Moses, M.L., 2017. The principles and practice of international commercial arbitration. Cambridge University Press.

Woodward Jr, W.J., 2014. Legal Uncertainty and Abberant Contracts: The Choice of Law Clause. Chi.-Kent L. Rev., 89, p.197.

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