This Agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales.
This clause specifies that:
1) English law applies: The agreement, as well as any related dispute or claim, will be governed by and interpreted according to the laws of England and Wales. These governing laws apply both to contractual issues arising directly under the agreement terms as well as any non-contractual issues indirectly related to its establishment, purpose or subject matter.
2) Scope of application: The governing law provision extends not only to disputes that clearly arise directly from breach of the agreement terms (contractual disputes) but also to any other issues indirectly connected to the contract's formation, objective or focus (non-contractual disputes). The chosen law applies broadly.
The key purposes and benefits of selecting a governing law are:
1) Legal certainty: Choosing a specific legal system helps avoid ambiguity or uncertainty over which principles apply in interpreting obligations or handling any disputes under an agreement. The parties know definitively which law governs their contract.
2) Predictability: Opting for a familiar and selected legal system allows parties to better anticipate how terms may be construed or how disputes might be resolved according to established precedent and procedures. Outcomes become more predictable.
3) Practicality: Designating the law of a particular jurisdiction makes any litigation or proceedings more convenient and accessible for the parties. They can operate within a familiar legal framework.
4) Containment: Specifying a single governing law helps prevent issues escalating across different legal systems with conflicting rules. All matters are confined to interpretation and application of one chosen law.
5) Consistency: Selecting a governing law promotes consistent understanding and operation of an agreement across jurisdictions. A single set of legal principles applies regardless of where questions arise or proceedings occur. Interpretation does not depend on location.
In summary, a governing law clause aims to provide certainty, predictability and consistency in handling and enforcing the agreement by designating a particular law to apply in all circumstances. It implies issues will be confined to one system rather than escalating across conflicting laws in different places. However, for the clause to function, the choice of law must be a proper and enforceable one, and its scope of application must be clearly specified according to the parties' intentions for their contract. These clauses ultimately represent efforts to make business across borders workable through mutually agreed and reasonable rules rather than unpredictability. They define a common framework for understanding to shared benefit.
Early commercial contracts lacked explicit governing law clauses, relying on informal local rules. As cross-border trade grew, confusion and unpredictability reigned without contained mechanism for uniform interpretation across jurisdictions.
By the 19th century, some contracts specified governing law, seeking predictability. However, private choices could be overruled by local rules if perceived contrary to public policy. Legislating solutions seemed to curb commercial freedom. Parties sought clarity through compromise but reserved discretion. Ad hoc application of mismatched laws across borders proved unworkable at scale.
Into the early 20th century, governing law clauses spread but remained discretionary and subordinate to local law. Strict rules were avoided to enable opportunity, but legal uncertainty impeded it. A single law was logical but depended on reasonable selection and voluntary adoption. Courts were local, interpreting based primarily on place rather than party choice. But cross-border disputes highlighted the problem.
Mid-century, governing law clauses expanded, enabled by legislation valuing private ordering and efficiency. However, exclusive choice-of-law could be denied where impossible locally or evading mandatory rules. While business benefited from contained predictable disputes and uniform law, public and private interests competed. The proper law was one acceptable wherever issues arose. Issues of unfairness or imbalance remained.
Today, governing law clauses are ubiquitous but effect varies globally. Legislation promotes party autonomy but also protects against misuse. Choice depends on place and relationship. Uniform rules seem logical but can curb regulatory standards or access to justice. Local law may re-apply where inaccessible or unreasonable. Exclusive clauses aim for clarity but require accommodation.
Overall, governing law clauses show increasing efforts to enable workable agreements through selected applicable rules. But private choice depends on public permission and reasonable exercise. Partnership implies compromising competitive interests for shared gains. At their best, these clauses represent mutually agreed, balanced and fair understanding - choice reflects shared interests, not unilateral advantage. They define a framework to operate within rather than without.
While governing law clauses recognize the benefits of predictable contained rules, parties ultimately remain subject to location and circumstance. No universal approach exists. Tensions persist between autonomy, oversight and practicality. However, good faith selection of proper law for shared benefit is recognized as enabling to business where rigid imposition of will is not. Governing law should imply governance through cooperation.
In summary, the spread of governing law clauses reflects the demand for cross-border legal order but through collaborative compromise more than strict control. They represent increasing efforts to build mutually workable rules, balancing public and private interests. Overall, these clauses reflect the challenge of designing shared systems of fair opportunity and administration across borders where strict unilateral mechanisms falter and absolutism collapses into unworkability. At best, they point to consensual constitutionalism over rigid codification. Governing implies understanding as much as regulation - shared interests over supremacy.