Governing law and dispute resolution: what to agree in your contract

The contract ends with a familiar line: English law, arbitration in London. But that does not yet tell you who will decide a dispute, what the process will involve or where you can enforce the decision.

These terms are connected, so assess them together. The article covers business-to-business contracts. Where a point depends on a particular country’s law, the article says so.

1. Three different questions

The rules

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Which law applies?

The rules used to interpret the contract, assess a breach and determine its consequences.

Governing law

The proceedings

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Who decides the dispute?

A court or arbitrators. Which procedure applies and which language the proceedings use.

Court or arbitration

Enforcement

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Where can you recover?

Which country has assets available for enforcement and what it takes to reach them.

Enforcing the decision

Choosing English law does not by itself choose the English courts. And a decision in your favour does not mean you have received the money.

The distinction between choosing the law and choosing a court or arbitration is expressly explained in the Hague Principles, paragraph I.7. They are non-binding guidance, not law. The practical point is straightforward: address each question separately, then check that the answers work together.

2. What governing law changes

Governing law determines how the contract works legally. For example, whether liability can be limited, whether an email is enough to change the price and when a breach permits you to stop work. The same wording can have different consequences under different laws.

So a proposal to “keep English law, it is standard” needs to be considered alongside the rest of the contract. This site already covers limits on liability, payment terms and ending a contract, with explanations based on the law of England and Wales.

A governing-law clause does not displace every mandatory rule of another country. Depending on the deal, personal data rules or payment restrictions may also matter. Article 11 of the Hague Principles recognises that some rules apply regardless of the chosen law and that fundamental public-policy principles can also limit its effect.

What to discuss before signing. Do you understand how the chosen law affects the key terms? Who could assess a dispute under that law? Does the approach fit the scale of the deal? Writing the contract in English does not answer those questions.

3. Court or arbitration

A court hears a dispute within a country’s judicial system. In international commercial arbitration, appointed arbitrators decide it under agreed rules. International commercial arbitration is distinct from Russia’s state commercial courts, which are also called “arbitrazh” courts.

Exclusive and non-exclusive jurisdiction have different effects. An exclusive choice of court generally establishes one court route for the disputes it covers. A non-exclusive choice allows additional options. The precise effect depends on the wording and applicable rules. The 2005 Hague Choice of Court Convention provides a separate regime for exclusive choice of court agreements where its conditions are met.

Do not choose arbitration solely on the promise that it is always faster, cheaper or completely confidential. Those claims need to be checked against the rules and circumstances. Both courts and arbitration should be assessed against the likely dispute, not just the total contract price.

4. What an arbitration clause needs to address

“Arbitration in London” does not explain the whole process. The wording does not necessarily make the clause invalid, but it leaves questions better settled before a dispute. The recommended clauses from the London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) show which points to address.

Example questions to ask about a short clause. This is not wording ready to use in every contract.

01 Institution and rules

Who administers the dispute and which rules govern the proceedings. A reference to London does not by itself mean LCIA arbitration.

02 Legal seat

The arbitration’s legal connection to a particular country. It determines the procedural law and the courts’ supervisory role.

03 Number of arbitrators

One or three, taking account of the complexity and value of a possible dispute.

04 Language

The language of the proceedings and whether contracts, emails and other evidence may need to be translated.

05 Law of the clause

The law governing the arbitration agreement itself. This is distinct from the law of the main contract.

Legal seat: London+Hearing: online

These arrangements are compatible. Under Article 16.3 of the LCIA Rules, holding hearings elsewhere or remotely does not change the legal seat of arbitration.

Do not combine clauses from two templates without checking how they work together: one may send every dispute to court while another sends the same disputes to arbitration. Applying to a court for urgent relief can, however, be compatible with arbitration. Agree what each clause is intended to do.

5. Where to enforce the decision

Suppose the customer stops paying. Before accepting the proposed court or arbitration clause, establish where it has assets that could, in principle, be available for enforcement. A company’s registered address does not prove that its money and assets are in the same country.

Example: a commercial debt in US dollars. The other company is not paying voluntarily.

1. 01

   Establish the claim

   The contract, the work completed, the basis for payment and compliance with agreed procedures.

2. 02

   Obtain a decision

   Bring the claim before a competent court or arbitral tribunal and prove it.

3. 03

   Pursue enforcement

   Follow the required process where available assets are located. If the decision is foreign, check the recognition procedure.

A judgment or award is only as useful as your ability to enforce it where the assets are.

The New York Convention matters for foreign arbitral awards. It requires contracting states to recognise and enforce such awards and allows refusal only on limited grounds. Local law governs the enforcement procedure. Check the country’s participation, its reservations and the conditions for applying the Convention. It does not guarantee that the debtor has assets.

International treaties or national rules may apply to court judgments. For example, the 2005 Hague Convention and the 2019 Judgments Convention have different scopes. Both countries being parties is not enough: the type of dispute, the grounds for recognition and the dates when the relevant regime applies also matter.

If the deal involves a Russian company or another connection to sanctions restrictions, separately check access to the process, the ability to pay lawyers and arbitration costs, and enforcement. Articles 248.1 and 248.2 of Russia’s Arbitrazh Procedure Code provide for cases where a Russian court may hear a dispute despite a foreign forum clause and prohibit the other party from starting or continuing proceedings abroad. The statutory grounds and current case law need to be checked for the particular situation.

6. What to propose in negotiations

To make a recommendation, I need the draft contract, details of the parties, the deal’s value and structure, the likely location of assets and the most plausible problems: non-payment, a service stopping, product rights or something else. Those facts allow the options to be compared and specific wording proposed.

If a dispute has already arisen, check the clause, mandatory negotiation steps, notices and deadlines again before bringing a claim. This article is about agreeing contract terms; it does not replace an assessment of an existing dispute.

Sources

1. HCCH Principles on Choice of Law in International Commercial Contracts, I.7–I.9 and Article 11: choice of law, the separate choice of court or arbitration, and overriding mandatory rules.
2. 2005 Hague Convention on Choice of Court Agreements, Articles 1–3 and 16: scope, exclusions and dates of application.
3. 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, Articles 5, 7, 13, 16 and 29.
4. 1958 New York Convention, text published by WIPO, Articles I and III–V: application, procedure and grounds for refusal.
5. LCIA Arbitration Rules 2020, Article 16: the legal seat, hearings and the law of the arbitration agreement.
6. LCIA Recommended Clauses: the elements of the recommended clause.
7. ICC Arbitration Clause: drafting the clause and additional provisions.
8. Arbitration Act 2025, section 1 and section 17(4), the commencement regulations and the official explanatory notes, paragraphs 12 and 50.
9. Arbitrazh Procedure Code of the Russian Federation (in Russian), Articles 248.1 and 248.2: disputes involving persons subject to restrictive measures.

A general discussion of international commercial contract terms. A specific recommendation depends on the contract, the parties, the countries and the circumstances of the deal.