Importance of the applicable law clause in an international contract
The applicable law clause is the section in an international contract which indicates the law that will govern said agreement, in case of breach or disagreement between the parties.
It is very important to define the applicable law from the moment in which the negotiations of the pact are being carried out, but in many cases it is usually forgotten.
Its relevance comes mainly from the fact that the increase or not in the costs for the legal process depends on it. Also, it defines if there has been a breach in some aspect of the contract or if the party will be entitled to receive compensation, among other issues.
For the election of this one you have the option of the law of a part (in our case, the Spanish law), the law of the counterpart or that of a third State.
When it comes to selecting the legislation, the relevant aspects must be considered, depending on the type of contract, in order to weigh the law of which nation is best.
To illustrate better, in the case of a distribution agreement, there are nations that protect the distributor, such is the case of Portugal and Germany. In turn, countries such as Italy, France and the United Kingdom back the main one.
It should also be said that when the international contract is executed between two nations of the European Union, it is guided by the Rome I Regulation, which indicates that in the absence of this clause the contract is governed by the legislation of the country with the closest link, for example in the case of sale is the country where the seller has his habitual residence.
We hope that this information has been very useful, any necessary clarification regarding this and other topics do not hesitate to contact us.