Freedom of choice — art. 3 Rome I
Within the European Union, the law applicable to commercial contracts is determined by Regulation (EC) No 593/2008, known as Rome I. The courts of the member states apply the same conflict rules, so a German and a Polish court should in principle reach the same result. The starting point is party autonomy: a contract is governed by the law chosen by the parties (art. 3(1)). Any country’s law may be chosen — the regulation applies whether or not the chosen law is that of a member state (art. 2) — and it need not have any connection with the transaction.
The choice should be made expressly. The regulation also accepts a tacit choice that is “clearly demonstrated by the terms of the contract or the circumstances of the case”, but relying on that invites a dispute before the dispute: months are spent arguing about which law applies before anyone talks about the money. The parties may also agree on a different law at any time — even after conclusion of the contract or during proceedings (art. 3(2)).
No clause: the characteristic performer wins — art. 4
Where the contract is silent, Rome I chooses for the parties. A contract for the sale of goods is governed by the law of the country where the seller has its habitual residence, a contract for the provision of services by the law of the service provider’s country (art. 4(1)(a) and (b)). Contracts outside the catalogue follow the law of the party effecting the characteristic performance (art. 4(2)). In practice: the supplier or contractor “brings” its own law into the deal — a German machine manufacturer its German law, a Polish subcontractor its Polish law. Construction contracts are, as a rule, treated as service contracts under Rome I.
These default rules cannot be relied on blindly. The regulation contains an escape clause: where it is clear from all the circumstances that the contract is manifestly more closely connected with another country, the law of that other country applies (art. 4(3)). For works performed entirely in Germany, for a German employer, under German technical documentation, the outcome stops being obvious. That uncertainty — not the content of the default rules — is the main argument for an unambiguous clause.
Choice of law is not choice of court
A common misunderstanding: “we chose German law, so we litigate in Germany”. No — Rome I does not cover choice-of-court agreements or arbitration agreements at all (art. 1(2)(e)). Which court hears the dispute is decided by a separate regulation, (EU) No 1215/2012 (Brussels Ia). Without a jurisdiction clause, a party can generally be sued in the courts of its own state or at the place of performance — for the sale of goods, the place of delivery, for services, the place where they were provided (art. 7(1)). The parties may also agree on the courts of a chosen state (art. 25(1)).
The clauses can therefore drift apart: a dispute before a German court under Polish law is possible, but it means proving the content of foreign law, expert opinions and higher costs on both sides. That is why the governing law clause and the jurisdiction clause are aligned in one direction — law and courts of the same country, or a chosen law plus arbitration with an agreed seat. When an arbitration clause in a German contract actually holds is covered in our article on the arbitration clause. One more connection worth knowing: under recital 12 of Rome I, an agreement conferring exclusive jurisdiction on the courts of one state is one of the factors that may indicate a tacit choice of that state’s law.
The CISG trap: “German law” includes the Vienna Convention
In cross-border sales of goods between businesses, another instrument operates alongside Rome I: the United Nations Convention on Contracts for the International Sale of Goods (CISG). It applies automatically where the parties have their places of business in different contracting states (art. 1(1)(a) CISG) — and both Germany (since 1991) and Poland (since 1996) are contracting states, together with close to 100 countries.
The most common drafting error is the belief that a clause “this contract is governed by German law” excludes the convention. The opposite is true. German courts consistently hold that a choice of German law includes the CISG, because the convention is part of the German legal order — just as it is part of the Polish one. Whoever wants a sale governed purely by the BGB and HGB must exclude the convention expressly (art. 6 CISG), for example: “excluding the United Nations Convention on Contracts for the International Sale of Goods”.
Should you exclude it? That should be a decision, not a reflex. The differences matter — take defect notices. Under the CISG the buyer loses its remedies if it does not notify the seller of a lack of conformity within a reasonable time after discovery, at the latest within two years of handover (art. 39). Under pure German law, in a sale between merchants sec. 377 HGB applies: the buyer must examine the goods and give notice of defects without undue delay, which in practice means days, and a late notice means the goods are deemed approved. For a buyer the convention regime is usually milder, for a seller the stricter sec. 377 HGB is often the better deal. The same analysis is worth running for damages and termination rights — the answer depends on which side of the transaction you are on.
What the clause cannot change: overriding mandatory provisions — art. 9
Choice of law has limits. Rome I gives precedence to overriding mandatory provisions — rules regarded by a state as so crucial for safeguarding its public interests that they apply irrespective of the law otherwise applicable (art. 9). A practical example: posting workers. The German minimum wage binds employers established in Germany or abroad with respect to workers employed in Germany (sec. 20 MiLoG), and the same goes for the working conditions under the Posted Workers Act and holiday fund contributions — a clause “this contract is governed by Polish law” changes none of that. We cover this in detail in the article on SOKA-BAU when posting workers.
Similar limits protect consumers: a choice of law may not deprive a consumer of the protection of the non-derogable rules of the state of their habitual residence (art. 6(2)). And where all elements of the situation are located in one country, choosing a foreign law does not displace that country’s rules which cannot be derogated from by agreement (art. 3(3)) — a purely domestic contract cannot be “moved abroad” by a clause alone.
What the chosen law covers — including limitation
The scope of the applicable law is broad: it governs interpretation, performance, the consequences of breach, the various ways of extinguishing obligations, and prescription and limitation of actions (art. 12(1)). The last point is underrated: by choosing German law you also choose German limitation periods — the standard period is three years calculated from the end of the year, with many exceptions, which we discuss in the article on limitation periods in Germany.
Form is regulated liberally: a contract is formally valid if it satisfies the requirements of the law governing it or of the law of the country where it was concluded (art. 11(1)). The validity of the choice-of-law clause itself is assessed under the law that would govern it if the clause were valid (art. 10(1)) — the regulation avoids the chicken-and-egg problem this way.
VOB/B, standard terms and the battle of forms
Two practical errors to finish with. First: “we chose German law, so the VOB/B applies”. No — the VOB/B is not a statute but a set of standard contract terms that must be incorporated into the contract separately. Choosing German law gives you the BGB rules on works and construction contracts, nothing more. Whoever wants VOB/B accounting must say so expressly.
Second: a governing law clause hidden only in general terms and conditions. Where both sides use their own forms, each pointing to a different law — the classic battle of forms — the clauses may cancel each other out and the dispute falls back on the default rules of art. 4. It is safer to put the choice of law in the signed contract document itself, not only in the standard terms, and to check that the other side’s order confirmation does not smuggle in its own terms with a different clause.
The governing law clause — checklist before signing
One law for the whole contract, designated expressly — no formulas like “applicable European regulations”. A conscious decision on the CISG: express exclusion or deliberate retention, depending on your role in the transaction. A jurisdiction or arbitration clause aligned with the chosen law. In a bilingual contract, a prevailing language version, with legal terms read through the lens of the chosen system. The choice of law in the main document, not only in the standard terms. And a check that the other side’s order confirmation does not refer to its own terms with a different clause.
Frequently asked questions
Can we choose a law other than German law in a contract with a German partner?
Yes. Rome I allows the choice of any country’s law and that choice binds German courts as well. Just remember that litigating before a German court under foreign law means proving the content of that law and higher costs.
Which law applies if the contract says nothing?
A sale of goods is governed by the seller’s law, services by the service provider’s law (art. 4 Rome I). A court may still apply another country’s law if the contract is manifestly more closely connected with it — the outcome can be hard to predict.
Does choosing German law exclude the CISG?
No. The CISG is part of German law, so an ordinary choice-of-law clause includes it. An exclusion must be express, for example “excluding the UN Convention on Contracts for the International Sale of Goods”.
Does the governing law clause decide which court hears the dispute?
No. Jurisdiction is governed separately by the Brussels Ia Regulation, and choice-of-court agreements are excluded from Rome I. You need a separate jurisdiction or arbitration clause — ideally aligned with the chosen law.
Can we avoid the German minimum wage by choosing another law?
No. Overriding mandatory provisions — such as sec. 20 MiLoG or the conditions under the Posted Workers Act — apply irrespective of the law chosen in the contract (art. 9 Rome I).
Which law governs limitation periods?
The law chosen for the contract — the applicable law covers prescription and limitation (art. 12(1)(d) Rome I). Choosing German law therefore means German limitation periods.
Can the applicable law be changed after the contract is signed?
Yes, the parties may subject the contract to a different law at any time (art. 3(2) Rome I). For evidential reasons the change should be recorded in a written amendment.
This overview is based on Regulation (EC) No 593/2008 (Rome I) — in particular art. 1(2)(e), 2, 3, 4, 6, 9, 10, 11 and 12 and recital 12, Regulation (EU) No 1215/2012 (Brussels Ia) — art. 7(1) and 25(1), the UN Convention on Contracts for the International Sale of Goods (CISG) — art. 1, 6 and 39, as well as sec. 377 HGB and sec. 20 MiLoG. Legal position: July 2026. This article is for information purposes and does not replace legal advice in an individual case.