No exclusion of private international law, INN.LAW

Peter Poleacov21 February 2025 (updated 7 October 2026)11 min

Background

The choice of law is one of the most important provisions in any international contract. The applicable law governs the drafting, negotiation, review, interpretation, and performance of the contract. The validity of individual clauses (limitation of liability, contractual penalties, and so on) also turns largely on the applicable law.

Exclusion of private international law

International contracts often contain a clause stipulating that the chosen law applies to the exclusion of private international law. Typical formulations look like this:

Negative examples

The contractual relationship is governed exclusively by German law, excluding the provisions of private international law. – from a well-known German contract and form book (current edition)
This contract is subject to German law, excluding the rules of private international law. – from another well-known German contract and form book (current edition)
German law applies, excluding the conflict-of-laws rules. – from a contract between two German (!) companies
This agreement is subject to German law, excluding the referral rules of private international law. – from a contract between two German (!) companies
The laws of the State of California govern this Agreement, without reference to conflict of laws rules.
[…] excluding its conflicts of law provisions.
[…] excluding its private international law rules.
[…] without regard to any conflict of law principles.
[…] without giving effect to any conflict of laws principles.

Explanation

Mallmann rightly suspects in his essay (see further reading) that the clause design ultimately goes back to Anglo-American contract practice, adopted uncritically.

The drafter of such a clause wants to make sure that there is no reference back to the law of the forum (renvoi) and no onward reference to the law of a third state. The legal system the parties chose is thus meant to actually apply.

This goal is supposed to be achieved by treating the choice of law as a substantive-law reference rather than a whole-law reference. A substantive-law reference points only to the substantive law of the respective state (“internal law”). In Germany, that includes the German Civil Code (Bürgerliches Gesetzbuch, BGB) and the German Commercial Code (Handelsgesetzbuch, HGB). A whole-law reference also covers the private international law of that state, for example the Rome I Regulation (Regulation (EC) No 593/2008).

At best, the exclusion repeats what already applies and is therefore superfluous.

It would make no sense for a court to first accept the parties’ choice of law as effective, then disregard it and reach a different outcome through private international law. Coyle has examined choice-of-law clauses in several scholarly works (see further reading). He concludes that the exclusion is unnecessary and contradictory.

The exclusion of private international law is also pointless where choice of law and jurisdiction are aligned.

1. Example case: choice of law and jurisdiction aligned

The parties have validly chosen German law. Jurisdiction lies in Germany.

I know of no decision in which a German court has read a choice of law without an exclusion of private international law as a whole-law reference. Even if a court did, no renvoi to the law of the forum and no onward reference to foreign law would be possible.

The question of substantive-law reference versus whole-law reference only arises when, from the deciding court’s perspective, foreign law is called upon to apply.

2. Example case: choice of law and jurisdiction diverge

The parties have validly chosen foreign law. Jurisdiction lies in Germany.

The private international law of the forum (lex fori) applies, here the Rome I Regulation. Under Article 20 Rome I Regulation, the parties’ choice of law covers only the substantive law of a state (substantive-law reference) and not its private international law. Any renvoi or onward reference is therefore already excluded.

That settles which law applies, not how the German court will establish its content. What that means in the proceedings is set out in “Best practice for handling foreign law”. There I cover everything from the court’s duty to investigate of its own motion to the expert opinion as a last resort.

Beyond that, an exclusion whose wording also reaches the forum’s private international law is a contradiction in itself. That private international law is precisely what grants the parties the freedom to choose the applicable law.

Details

Contrary to what the name suggests, private international law (abbreviated PIL, also called conflict of laws) is not international law but part of a state’s national law. It determines which national legal system applies to an international set of facts. What is international is the set of facts, not the law.

The EU member states (with the exception of Denmark) have harmonized their private international law. For contracts, Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (the Rome I Regulation) applies.

Parties are free to choose the applicable law. This internationally recognized principle of party autonomy in choice of law flows from freedom of contract. It is expressly set out, for instance, in Article 3(1) sentence 1 Rome I Regulation: “A contract shall be governed by the law chosen by the parties.” The Rome I Regulation also applies where the parties choose the law of a jurisdiction that is not bound by it, such as a US state, see Article 2 Rome I Regulation.

For contractual obligations, the solution already follows from Article 20 Rome I Regulation (see also Section 1051(1) sentence 2 of the German Code of Civil Procedure, Zivilprozessordnung, ZPO for arbitration). The law of a state applicable under the Rome I Regulation covers only its substantive law (substantive-law reference) and not its private international law. Any renvoi to the law of the forum or onward reference to the law of another state is thereby excluded. A clarifying exclusion of private international law is superfluous.

For non-contractual obligations, the same legal consequence follows from Article 24 of Regulation (EC) No 864/2007 (Rome II Regulation).

Purely German private international law also provides, in Article 4(2) sentence 2 of the Introductory Act to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuche, EGBGB), that the parties’ choice of law covers only the substantive law and not the private international law of a state. This applies unless the Rome I Regulation, the Rome II Regulation, one of the other EU regulations listed in Article 3 No. 1 EGBGB, or an international agreement (Article 3 No. 2 EGBGB) takes precedence.

Interpretation and validity of the choice-of-law clause

In most cases, the exclusion is meant to reach only the conflict-of-laws rules of the chosen law. Article 20 Rome I Regulation excludes those anyway, so the exclusion is merely superfluous. Read literally, however, it often also reaches the private international law that makes the choice of law possible in the first place. Parties to an international contract that choose German law “excluding the conflict-of-laws rules” literally also exclude Article 3(1) Rome I Regulation before a German court. The parties cannot dispose of that provision, since their choice of law takes effect only by virtue of it. Much the same applies before a US court, because the Uniform Commercial Code (U.C.C.), too, allows contrary agreements only to a limited extent for certain conflict-of-laws rules, see U.C.C. § 1-301(c).

The court therefore has to interpret such a clause, which can lead to interpretation issues in a dispute. The obvious reading is a plain substantive-law reference.

Whether the parties’ consent to the choice of law is valid despite such an exclusion is determined by the chosen law (Article 3(5) in conjunction with Article 10(1) Rome I Regulation). Where German law is chosen, a pre-formulated exclusion will already fail the transparency requirement under Section 307(1) sentence 2 BGB. As a rule, however, only the exclusion is then invalid, because its wording can be severed from the choice of law. The choice of law itself remains valid under Section 306(1) BGB.

Only in exceptional cases, for instance where the exclusion cannot be severed from the choice of law, does the entire clause fall away. Ironically, a legal system other than the one chosen then applies.

Conclusion

The exclusion of private international law makes no sense. At best it is superfluous, and it can trigger disputes about the interpretation and validity of the choice-of-law clause.

Gruson is even more critical in his essay (see further reading):

Coyle summarizes his findings (see further reading) as follows:

And in the accompanying footnote:

A second reflex, the same mistake

Drafting the choice-of-law clause this way solves the conflict-of-laws problem. In a sale of goods, it opens the next question, and that one is handled just as reflexively.

The CISG is substantive law of every contracting state. A party that chooses German law therefore chooses the CISG along with it; “substantive laws” includes it rather than excluding it. Article 6 CISG allows the parties to exclude the CISG. Only an express exclusion is safe. Under Article 1(1)(a) CISG, the Convention applies automatically between parties whose places of business are in different contracting states. US courts accept an exclusion only where the parties clearly indicate an intent to be bound by an alternative source of law. That both sides argued New York law throughout their briefs was not enough for a US federal court to rule out the CISG.¹

That does not mean you should exclude it. A reflexive exclusion is no better thought through than a reflexive conflict-of-laws exclusion. The CISG is designed for international sales and is largely modifiable. In negotiations, it is often a more neutral basis than a national sales law that one side does not know. You should take this decision, not avoid it. If you decide against the CISG, say so expressly in the contract: