Business Contracts Is the choice of the law of the Netherlands valid?

[BGBCC1994]

Spanish Company A with habitual residence in Bilbao (Spain) agrees on a contract with Spanish company B, whose habitual residence is in Madrid (Spain). All the material elements of the contract are linked to Spain except for the fact that the parties of this contract, for reasons unknown, choose the law of the Netherlands as the law governing the contract. Company B breaches the contract and company A sues company B in the Courts of Madrid.

 

[army judge]

Spanish Company A with habitual residence in Bilbao (Spain) agrees on a contract with Spanish company B, whose habitual residence is in Madrid (Spain). All the material elements of the contract are linked to Spain except for the fact that the parties of this contract, for reasons unknown, choose the law of the Netherlands as the law governing the contract. Company B breaches the contract and company A sues company B in the Courts of Madrid.

We are a US based and focused forum.
Sorry, you need to see an "abogado" in Spain.

 

[Michael Wechsler]

Parties can generally agree to any forum to adjudicate a claim. There is no law of which I am aware in the US (nor in the European Union) that generally restricts what is called a "choice of law" clause to anywhere they wish. Simply because companies may have their headquarters or business in one country doesn't mean they can't agree to adjudicate a matter in another country or in the same country but using the law of another country. Here's one reason I can consider -- the parties are contracting for products or services that may be produced or primarily take place in the country in the choice of forum law clause. After all, if the contract has a significant portion being performed in the Netherlands, then the proper law to use regarding how it is performed is using the law of the land where the services being performed.

You'll obviously need to check that Spain has no such restriction just to be sure but I'd be very surprised. What I would be concerned about if one of the parties was my client is this special choice of forum. I wouldn't even hesitate to ask about the reason for this clause but I'm guessing it's related to the products or services under the contract.

Spanish Company A with habitual residence in Bilbao (Spain) agrees on a contract with Spanish company B, whose habitual residence is in Madrid (Spain). All the material elements of the contract are linked to Spain except for the fact that the parties of this contract, for reasons unknown, choose the law of the Netherlands as the law governing the contract. Company B breaches the contract and company A sues company B in the Courts of Madrid.