Governing Law & Jurisdiction Clause template clause

    Updated: 25 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] - Governing Law and Jurisdiction

    1. This Agreement and any dispute or claim arising out of or in connection with it shall be governed by and construed in accordance with the laws of [country, e.g. the Netherlands], excluding the United Nations Convention on Contracts for the International Sale of Goods (CISG).

    2. All disputes arising out of or in connection with this Agreement shall be submitted exclusively to the competent courts in [city / district], unless mandatory rules of jurisdiction provide otherwise.

    3. Notwithstanding paragraph 2, the Parties may by mutual agreement submit a dispute to:
    (a) mediation, in accordance with the mediation rules of [organisation, e.g. the ICC or CEDR];
    (b) arbitration administered by [institution, e.g. the ICC International Court of Arbitration or the London Court of International Arbitration], under its then-current rules.

    4. The commencement of proceedings under this Article shall not relieve either Party of its obligation to perform its outstanding obligations under this Agreement, insofar as those obligations are not the subject of the dispute.

    5. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect. The Parties shall negotiate in good faith to replace the invalid or unenforceable provision with a valid provision that achieves, to the greatest extent possible, the economic and commercial objectives of the original provision.

    What does this clause mean?

    A governing law clause determines which country's laws apply to the contract. Without an explicit choice, courts apply conflict-of-law rules (such as the Rome I Regulation in the EU) to determine the applicable law, which can produce unpredictable results, especially in cross-border transactions.

    The forum selection clause designates which court has jurisdiction over disputes. Combined with the governing law clause, it prevents a dispute from ending up in an unexpected jurisdiction. According to World Commerce & Contracting, businesses lose an average of 9.2% of annual revenue due to poor contract management. An unclear forum selection that leads to expensive litigation abroad contributes directly to that figure.

    Paragraph 5 is a severability clause: if a court strikes down one provision, the rest of the contract survives. Without it, a single invalid clause could jeopardise the entire agreement.

    When should you use this clause?

    Include a governing law clause in every commercial contract, even in purely domestic agreements. It eliminates ambiguity and provides certainty. In cross-border contracts, it is indispensable: without a choice of law, courts apply complex conflict-of-law rules that can lead to outcomes neither party anticipated.

    Always pair the governing law clause with a forum selection clause. Research by Weshare (2025) shows that 95% of organisations lack full visibility into their contractual obligations. A contract without a clear jurisdiction clause is an additional risk factor when a dispute arises. Record the governing law and forum for each contract in your contract management system so you know immediately where you stand.

    Customize these elements

    • 1In cross-border contracts, choose the legal system you know best and that is most favourable to your position
    • 2Exclude the CISG explicitly if you do not want it to apply; omitting the exclusion means it applies automatically in international sales between parties from signatory states
    • 3Consider arbitration instead of state courts for high-value contracts or disputes involving trade secrets
    • 4Select a jurisdiction that is logistically convenient for both parties, unless there is a strategic reason for a specific court

    Sources

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