Workshops

Eight workshops have been conducted as part of the project. They gathered experienced transactional lawyers who shared their expertise in contract drafting and contributed to the development of the questionnaire.

Singapore (28 May, 2025)

Participants: Mijung Kim, Dr Stanley Lai SC, Jonathan Lim, Olivier Monange, Welly Tantono, Gary Bell, Giuditta Cordero-Moss

These key observations emerged from the conversation:

Standardized clauses such as Entire Agreement, Force Majeure, or arbitration and choice of law clauses, designed to be reused across contracts, are often uncritically copied and pasted. Yet they can give rise to unintended nuances
For example, an Entire Agreement clause is meant to create contractual certainty specifying what constitutes the contract. However, uncertainties often arise in practice about the effects of the clause: a. Does it exclude implied terms? Generally, no, but in some English cases implied usages by customs were excluded; intrinsic implied terms (necessary and obvious) are not excluded; b. If there is a representation that was relied on, does the clause exclude liability for misrepresentation? c. In a joint venture, does the clause exclude imposition of a fiduciary relationship?
The governing law has a significant impact on the legal effect of contract clauses, for example of the Entire Agreement clause. When drafting the contract, the specificities of the applicable law should be discussed with litigation lawyers – for example, Californian law does not apply the 4 corners rule, even though it is common law.
An Entire Agreement clause will supersede a prior side agreement, but a later side agreement may be deemed to be an amendment and applied in spite of the clause. If the side agreement and the Entire Agreement have the same date, applicability depends on the governing law. Under French law, the intent of the parties shall be considered. If the side agreement was signed separately, for example, for reasons of confidentiality, it will be applied notwithstanding the Entire Agreement clause.
The clause is not the only parameter. Of importance is also what kind of evidence is allowed to lend clarity to the factual aspects of the transaction and words of the contract. Also access to discovery is relevant. Under Singaporean law, Entire Agreement clauses are not watertight: they do not prevent implying terms by matter of law, and there is some flexibility in addressing the context of the transaction.
Under Singaporean law, there is no general duty of good faith, but in some contexts it can be implied. An expressed good faith term (for example, a clause on negotiations in good faith) is upheld by Singaporean courts, but its effects do not come close to the effects of the duty of good faith under, for example, article 2 of the Swiss Code of Obligations. The different treatment of good faith under common law and civil law renders uncertain the effects of a good faith clause.
Clauses on reasonableness and good faith should be inserted in the contract irrespective of the governing law, because they respond to commercial expectations. They permit to bring the differences up to a higher management level where a commercial solution can be found.
Under English law, good faith is implied for long term relational contracts. However, its effects are not clear. Many common lawyers are reluctant to imply a duty of cooperation.
The effects of good faith may vary depending on the type of contract: in banking contracts, there may be an expectation of literal interpretation, while in joint venture contracts a contextual interpretation may be preferable.
When drafting the contract, including arbitration and choice of law clauses, enforceability should be considered. For example, an arbitration clause in a contract with intellectual property claims raises issues of arbitrability. Under Singaporean law the award is binding between the parties, but also the requirements of the law applicable to the contract must be met; under Indian law, intellectual property claims are not arbitrable.
The applicable law is important to determine the effects of the contract. If the choice is changed during the negotiations, the draft must be adjusted. With a different governing law, the same terms may become a completely different contract. For example, an indemnity clause providing for several liability may mean liability for the whole sum irrespective of the share of the debtor.
The contract is interpreted differently under the civil law and under the common law tradition. A civil law party may produce extensive extrinsic evidence such as correspondence, documentation exchanged during negotiations, etc.to prove the parties’ intentions, the purpose of the contract, etc. However, this will not be relevant if the common law governs, which relies on the plain meaning of the words.
The governing law is often chosen at the end of long negotiations, when the parties are tired. Its choice depends on the bargaining power. It may be tempting to simply pick a neutral law. Depending on the contract, certain laws may be more favourable to one party – for example, under French law commercial agents are entitled to compensation in case of termination.
There are examples of mixed choice of law clauses, where different laws apply depending on which party brings the claim. It is important to seek advise on dispute resolution clause to ensure that they are enforceable and to avoid jurisdictional fights.
It is not necessary to overthink the choice of law, the chosen law does not give all solutions. For example, although the chosen law (Indonesia) does not permit constructive trusts, the court applied the law of the place of the unjust enrichment (Singapore).
Local lawyers are usually requested to give an opinion on the compatibility of the contract with mandatory rules. They should address the enforceability of the contract and potential regulatory requirements. Everything else is irrelevant.
The scope of the opinion should be clarified between the client and the lawyer.
When acting as an advisor, the lawyer should also explain the peculiarities of the applicable law that the client may not be aware of. For example: penalty clauses should be avoided and instead formulated as liquidated damages under the common law; discovery may be required if the chosen law is Singapore.
When foreign law is proven to the court (Singapore), the expert report is detailed and explains all aspects, including also rules of contract construction. If foreign law is the object of direct submissions (in arbitration), the explanation should be equally rigorous.
When counsel and each of the arbitrators have each a different background and they plead and apply a foreign law, the accuracy of the application may be questioned.
There are recurring commercial issues, increasing number of international commercial courts, raising interest for the lex mercatoria. Tribunals should be given the power to decide ex aequo et bono (decide as amiable compositeurs), or to apply the lex mercatoria.
Standardised terms and concepts may have a specific meaning under certain laws (for example, Material Adverse Change clauses have been developed under the law of Delaware), yet the contract may be subject to a different law. Giving the tribunal the power to decide ex aequo et bono permits to consider these issues in an appropriate way.

London (13 March, 2025)

Participants: Kai Uwe Karl, Marleen Krueger, Andre Tan Oh, Paul Sills, Gergory Travaini, Giuditta Cordero-Moss

These key observations emerged from the conversation:

Boilerplate clauses are rarely drafted consciously in a specific contract. Clauses such as Entire Agreement will often find their way into the contract without anyone involved in the contract negotiations (on either side) ever putting any thoughts into what the clause means or how it should be read.
At the time of contract negotiations, the main focus will be on the enforceability of key contractual provisions that have a major impact on risk (such as LOLs).
Even arbitration clauses are often inserted as if they were boilerplate – although sometimes there are tailored arbitration clauses.
When a dispute arises, interpretation of contract, including boilerplate clauses, may become central.
The intention of the parties may be impossible to determine since boilerplate was not negotiated and may have been inserted decades earlier. The tribunal cannot devine what the parties have meant to achieve. The applicable law will then have an impact on the interpretation of the contract.
Example: Commissioning period, during which seller is not obliged to sell gas to buyer under the contract. Price fluctuations may make it interesting for seller to delay commencement of the project and take advantage of price fluctuations. Interpretation of the contract will be crucial - Asian lawyers may expect the contract to be flexible and adjustable to fluctuation of prices, Western lawyers may expect predictability.
In complex contracts, such as for the delivery of a hydro power plant, negotiations involve not only lawyers, but also commercial people and engineers, who may actively participate in negotiations regarding specific technical issues and/or draft key technical documentation. In case of a subsequent dispute, each of them will have different expectations in terms of how the applicable law may impact contract construction (ranging from not having considered this issue at all to an expectation that the applicable law will be key to interpreting the contract).
Drafters should be aware of the implications of the applicable law. However, accurate application of the law may be deemed to be less important in arbitration where there is no appeal on point of law.
Examples of possible interaction of contract terms with the applicable law:
LNG contracts, which are subject to frequent market fluctuations and force majeure events. If the parties agree that the Seller will “primarily” sell its LNG to the Buyer, with “all” sales to third parties subject to a profit-sharing mechanism, does that profit-sharing mechanism also apply to non-commercial or unplanned cargos that are being sold because of a force majeure event that falls within the Buyer’s sphere of responsibility?
A contract containing both a choice of law clause and a dispute resolution clause which also included a reference to the “applicable law”, was interpreted differently by the parties and the tribunal. The tribunal made a systematic interpretation of the contract based on the principle of separability – a principle of which the drafters most probably were unaware.
Clauses on gross negligence. Gross negligence is not a defined concept under English law.
In construction contracts, clauses on concurrent delay have specific meaning under English law and NY law, but not in many civil law systems.
Changing the applicable law last minute may have fundamental implications for the commercial bargain that the parties have struck. Examples:
Exclusion of liability clauses, which may be standard under US law, but may not be enforceable under English law.
Clauses that provide that each party bears its own costs in case of a dispute may be standard in US contracts, but are not enforceable under English law.
Clauses on punitive damages are not enforceable and/or capped under English law and many civil law jurisdictions.
Penalty clause: under French law, penalties may have deterrent character, under Belgian law they must reflect a genuine estimate of the damage.
Termination clause of a service agreement: Misunderstanding of the concept of a “mandate” and what could be claimed in terms of damages. Comon law v. civil law, in which a mandate can be revoked.
The scope of legal opinions depends on the instructions given to local counsel.
The parties may ask for an opinion on enforceability of a specific clause, such as whether a LOL clause is enforceable under local law. There may also be general queries in terms of, for example, the licenses that are required to execute a contract in a specific country.
While an assessment of all contractual provisions in light of local laws will be welcome, asking local lawyer how the contract will be construed implies knowledge by the local lawyer about all extrinsic elements that may be relevant. It is not likely that a local lawyer would accept rendering such a broad opinion. Similarly, it is not likely that a business would invest in a legal opinion to cover “boiler plate” clauses.

São Paulo (19 February, 2025)

Participants: Marina Coppola, Patrícia de Figueiredo Ferraz, Karin Yamauti Hatanaka, Carlos Lima, Claudio Mattos, Thiago Moreira, Francisco Müssnich, Juliana Pela, Arthur B. Penteado, Débora Visconte, Cristiano Zanetti, Giuditta Cordero-Moss

These key observations emerged from the conversation:

Contract drafting often starts from a form (based on earlier deals, existing standards, coming from clients). Inherited clauses are not necessarily accepted as such. Not all boilerplate clauses are harmless.
Boilerplate clauses are often not discussed at all during contract negotiations. There is a desire not to deviate from the model, and clauses are negotiated only if it is clear that they may have an economic impact. However, when a dispute arises, they are invoked to reinforce a positions.
Some boilerplate clauses do not make sense and are only inserted into the contract out of habit.
Boilerplate clauses should be looked at only after the deal has been structured. The starting point of the negotiations should be the price, which will shape the strategy in the transaction.
Boilerplate clauses should not be underestimated and considered as ineffective just because they were not negotiated. They tend to repeat themselves because the parties expect behaviour to be similar. Use of forms and carrying over of language that may not be applicable to a certain jurisdiction is not a problem of the boilerplate, but of the counsel who has not reviewed the document properly. There should be a litigation lawyer advising on the drafting of the contract.
Generally, boilerplate clauses are enforceable, but not always. Example: waiver of moral rights in authorship contracts may be null under the governing law; board approval as condition precedent violates the prohibition of potestative conditions; put option against the target company as an exit for private equity funds may violate company law’s restriction on purchase of own shares.
Also the parties’ conduct can affect the enforceability of boilerplate clauses. Entire Agreement clause.
In construction contracts, basic concepts in the branch should be understood by parties and arbitrators. Example:No Oral Amendments clauses are important to avoid small changes during the project; contractual procedures for claims should be clear; cap of liability.
Boilerplate clauses are written under the common law influence, but each party may understand their effects on the basis of its own expectations. Example: reasonable efforts, best efforts and other qualifications.
Important clauses are written as clearly as possible. They are the result of a compromise. Only in few cases it is necessary to go to court or arbitrate.
Being aware of the interaction of the clauses with the governing law is a competitive advantage in negotiations. It may be unnecessary to spend time on negotiating issues which are regulated by the applicable law. Example: Non-compete; sole discretion (potestative clause); termination by convenience; waiver of IP rights to developed work products.
In certain fields, it is imperative to draft contracts on the basis of the governing law. Example:Commercial agency, employment.
Applicable law may affect clear clauses. Example: “As is” transaction with very few R&W on the business, buyer’s due diligence based on information provided by the seller, a critical pending lawsuit was not disclosed. Even though the contract has no indemnity relating to pending litigations, the seller may be in breach of pre-contractual duty of information in negotiations.
Being aware of the governing law permits to draft the contract in a way compatible with mandatory rules. Example: time bar for claims can be drafted to be compatible with statutory limitation; on demand bank guarantees can be enforceable even though under the applicable law they are accessory of the main obligations.
Spelling out in the contract the business context of a certain clause may help justifying arrangements that apparently violate principles such as abuse of right, unjust enrichment, public order. Example: Fiduciary assignment of shares in a company as security for financing, followed by shareholders’ waiver of subrogation rights. It can be acceptable if accompanied by a representation that it is not unjust enrichment for the company, because it is part of the financing arrangement; right to terminate on substantial completion.
Sometimes, clauses are inserted without the certainty that they are enforceable under the governing law. Example: claw back, drag along, liquidated damages.
Criteria for predictability and enforceability are more articulated in sectors such as construction, capital markets.
The Economic Freedom Act empowers parties to agree on contract terms as they deem fit and to interpret them strictly. It may be difficult to argue that written clauses are not binding according to their terms – traditional principles such as abuse of right and public order are important in literature, but, sometimes, lawyers do not consider court practice when they draft the contracts.
Lawyers should only subject contracts to the law they are authorized to exercise, and also write them in their own language. Sometimes a two language version is imposed.
If the contract is written in English, legal concepts in the own language may be added to clarify the meaning. However, not always the definition is understood uniformly.
Sometimes, the client or the circumstances require that a foreign law is chosen. Example: issues where the own law is not sufficiently developed (trade secrets, shipping, aviation, insurance); construction contracts should be subject to the law of the place of performance (also reflecting the mindset of the constructor).
Contracts should be revised by lawyers who know the applicable law.
Legal opinions on the validity and binding effects of the contracts are usually not qualified. Clients may accept some general qualifications on the rules of interpretation, the role of good faith, bankruptcy rules.
Legal opinions should have a restricted scope, as the lawyers’ responsibility is unlimited.
In capital market transactions legal opinions are usual. Sometimes they regard specific issues. Example: Whether contracts are assigned automatically in a carve out transaction.
In another kind of opinion, subject to client-attorney privilege, lawyers may be more detailed and expose all risks in the enforcement of the various clauses.

Vienna (9 December, 2024)

Panelists: Ivo Deskovic, Semiha Melis Mani, Amanda Neil, Michael Weibel, Tugce Yalcin, Giuditta Cordero-Moss

These key observations emerged from the conversation:

Boilerplate clauses are often used to meet expectations such as: (i) lowering transaction costs; (ii) furthering predictability and consistency; (iii) relying on combined wisdom.
The use of boilerplate clauses can be explained out of: (i) bounded rationality – standardised wording as a shortcut towards a more complete contract; (ii) organizational routine – taking advantages of data bases, etc.; (iii) stickiness and path dependency; (iv) agency costs.
In reality, the use of boilerplate clauses can lead to textual black holes – wording the effects of which are not clearly or uniformly understood, and that nevertheless is repeated in different contracts. An example is the use of pari passu clauses in bond issues. These clauses have migrated from corporate bonds to sovereign bonds, despite the differences between the two situations (such as the lack of insolvency procedures for sovereigns):
1. Sovereign bonds typically contain clauses choosing English or New York law and English or New York courts. Traditionally, these courts have interpreted pari passu clauses as the market had expected, i.e., as a promise that there would be no other obligations with higher ranking;
2. In the case of Peru bonds, the Brussels Court of Appeal (2020) interpreted them as containing a rateable payment obligation, i.e., as an obligation for the state to pay all creditors pro rata, whenever a payment is effected;
3. After that, this interpretation was followed by courts in New York and Argentina;
4. The ICMA Standard Clause was amended in May 2015 and expressly excludes any obligation to effect an equal or rateable payment.
Boilerplate clauses are often perceived as a reliable precedent that does not need being revised.
Boilerplate clauses should be (and often are) carefully considered, because they permit to control the contract. Careful consideration of boilerplate clauses is also necessary to explain them to the parties.
In contract management, negotiations or disputes, boilerplate clauses are relied upon more than it would be expected e.g., if the contract requires notification prior to termination, and notice was not sent.
The governing law is often chosen at a late stage of the negotiations, although it may have significant impact on the effects of contract language. Examples: Delay Damages, article 8.8 of FIDIC: “DD shall be the only damages for delay, save for fraud, gross negligence, etc.”; Construction contract: “DD shall be limited to xxx Eur”. To be interpreted as cap? Or as proper liquidated damages, i.e. as the total amount due under all circumstances?
1. Under Austrian law, failing express agreement, further damages (such as loss of profit) may be claimed;
2. Under Italian law, it is the opposite;
3. Under CISG (for supply agreements), liquidated damages are not regulated;
The governing law has an impact also on the interpretation of the contract due to the role of good faith - for example, liquidated damages clauses:
1. Under German law, the clause is not interpreted as excluding recovery of further damages;
2. Under common law tradition, the clause will be interpreted literally unless there is an express obligation to interpret in good faith; even explicit mention of good faith must be supplemented by a clear description of what is meant, otherwise courts will interpret it restrictively;
3. Article 7 of the CISG is generally interpreted as if good faith is applicable also to the interpretation of the contract, and probably good faith is given a scope closer to the civil law tradition;
4. In Middle East jurisdictions, the court may amend the liquidated damages clause to ensure that the amount of damages corresponds to the amount of the suffered prejudice; in some jurisdictions, the courts can only reduce the agreed amount, in others they can increase it as well (thus affecting any agreed cap on liability).
Choice of law clauses are often very carefully considered, mainly out of two criteria:
1. Power and convenience: drafters choose the law they know better – it gives an advantage during negotiations and under a dispute. For example, contracts in an emerging market that are initially regulated by the local law, may be subject to the company’s own law when the market becomes more international;
2. Strategic implications: Drafters do not necessarily choose the law they are qualified to practice. For example, choice of a non-EU law is made to minimize risk that the contractual relationship be subject to EU-mandatory law on protection of the commercial agent (knowing, however, that this may not be a perfect solution); choice of Dutch law when an originally US financing arrangement was moved to Europe, based on considerations of the advantages of less extensive documentation which is supplemented by terms implied by law.
Governing law is usually expected to have an impact on the interpretation and effects of the contract.
Choice of governing law that was not envisaged during drafting would entail amendment of the contract – for example, a contract drafted under Austrian law and regulating consequential losses, would need to be redrafted if Slovenian law were chosen. In some areas, such as maritime law, mandatory rules may not be avoided by choice of law.
In some contracts, such as construction, the contractor does not have the bargaining power to choose the governing law. It is then necessary to understand the governing law and adjust the contract. For example, FIDIC contracts may be challenged under German law’s rules on general contract terms – it may then be necessary to redraft certain clauses, with extensive explanations; in some jurisdictions, a special power of attorney is needed to validly sign an arbitration clause.
When a contract is drafted under a foreign law, ideally local lawyers are involved from the beginning and participate in the evaluation of each clause, covering not only issues of mandatory law, but also market practice, scope of liability, interpretation of the contract.
Examples where a legal opinion turned out not to be sufficient: intentionally ambiguous clauses on tax – pre-contractual exchanges clarifying the interpretation of the clauses could not be relied on due to the parole evidence rule; Pay-when-paid clauses are acceptable under some laws, but have to meet standards of reasonableness under other laws; dispute resolution clauses regulating dispute boards are enforceable in some jurisdictions, not enforceable in others, and redundant in yet others where adjudication is mandatory.
Depending on the sector, legal opinions may be limited to some issues. For sovereign bonds, for example, where there is high confidence among lenders on how the terms are going to be construed (as choice of English or New York law and courts is standardised), legal opinions focus on enforceability of the claim.
Choice between common law and civil law depends on whether the party is likely to insist on accurate application of contract terms (typically, the seller), or to invoke external circumstances (typically, the buyer).
The civil law requirement of reasonableness is commercially viable, as courts are empowered to balance the opposed interests – as opposed to regulating all in a contract, which is an unrealistic goal.
The common law contract practice of regulating everything in the contract is convenient – however, it requires proper contract drafting and good discipline.
The difference between the two legal traditions may be overstated – in sovereign bonds, for example, common law courts do not necessarily enforce the terms of the bond literally – for example, when sovereign debt of developing countries is bought on the secondary market at a low price, the court will not accept to enforce the bonds at their face value.

Paris (22 February, 2024)

Participants: Guillaume Briant, Fabien Gélinas, Pierrick Le Goff, Gisèle Stephens-Chu, Francisco Trebucq, Diego Fernández Arroyo, Giuditta Cordero-Moss (Panelists); Karolina Czarnecka, Olga Mouraviova, Erik Thyness (Commentators)

These key observations emerged from the conversation:

Contracts are increasingly written in English even when they are subject to French law. When English legal terms are used, there may be difficulties in matching them with the corresponding French legal institutions, that may have a different scope or different effects. For example, exclusion of “damages for consequential losses”. How does this fit with the French “dommages indirects” and “immatériels”? The dichotomy between causation and remoteness (foreseeability).
Other examples are “indemnification”, “compensation”, “novation”, that may have different assumptions and effects under different laws; “Representations and Warranties”, where breach may have different effects depending on the governing law.
Under French law, a “clause pénale” is allowed and the parties may agree on the payment of sums higher than the estimated loss, as a deterrent against non-performance. Therefore, it is not necessary to use the terminology “liquidated damages”, a language based on the traditional English law requirement that the agreed amount be a genuine estimate of damages, and not a penalty (although, after the Cavendish case, under English law, too, the deterrent function is recognized and penalty clauses are enforceable, as long as they correspond to the innocent party’s interest in performance). Nevertheless, the language is used.
According to art 1231-5 of the French code civil, a clause pénale excludes any further damages (subject to the judge’s power to adjust it in case of manifest discrepancy (“pouvoir modérateur”). Nevertheless, contracts often specify that the liquidated damages are “in full satisfaction of all liabilities.”
The clause pénale has a third purpose in addition to acting as a deterrent and as compensation of loss: it works as a limitation of liability. If a clause is classified as a limitation of liability, it may be subject to the applicable law’s restrictions – for example, under Italian law, a limitation of liability is not valid in case of gross negligence or willful misconduct.
Arbitral tribunals may be inclined to apply the requirements and restrictions contained in the governing law. Would they also exercise their pouvoir moderateur in the same way as judges would?
The uncertainties created by the transposition of English legal terms, as well as by the complex picture within the governing law, induce contract drafters to be detailed. For example, they write lists of damages that are excluded – indirectly creating further uncertainty if the clause contains a catch all provision covering any “other” indirect damages, although some of the damages mentioned in the list are not indirect. The need to regulate new types of losses, such as data security breaches.
A similar need to create certainty leads drafters to write lists of events that exclude liability for non-performance in force majeure clauses – although they could rely on the default statutory rule in systems of civil law.
The detailed drafting suggests that disputes will be solved only on the basis of the language of the contract, making the applicable law redundant (“contrat sans loi”). However, arbitral tribunals sometimes depart from the solution suggested by the wording of a clause, if a systematic reading of the contract points at a different solution.
The governing law may instruct to consider the intentions of the parties first, and look objectively at the contract language only if a common intention may not be established. Arbitral tribunals sometimes depart from the interpretation criteria set out in the applicable law, coming to results that were not expected by the parties.
Arbitral tribunals sometimes look at the governing law to determine the scope of the contract’s obligations – in a case where damages were requested based on bad faith conduct of one party, the arbitral tribunal based its determination on the governing law’s definition of good faith, notwithstanding that the contract defined good faith. The challenge for excess of power was dismissed (in France?).
A high level of detail may be user-friendly, as it avoids the necessity to look for regulation in other sources. On the other hand, a high level of detail may render the contract complicated and require pedagogical efforts by counsels (in a Norwegian M&A case, a lawyer was condemned for malpractice for not having explained the contract to his client).
A contract may attempt, particularly in not highly developed legal systems, to insulate itself from the applicable law. It can attempt to protect itself against changes in law by introducing stabilization clauses. In some industries, such as construction and energy, standard contracts may aim at replacing the governing law.
In the end, however, even a contrat sans loi will need to be interpreted, and the interpretation rules of the governing law will apply. Also the principles of public policy will be considered – in some countries, the principle of good faith is part of public policy.
A significant issue influencing contract drafting is the principle of good faith. In common law systems, it is completely excluded in the phase of negotiations and formation of contracts; in the phase of performance, in many common law systems it may be an overarching principle, particularly in branches such as insurance and employment. In England, although not an overarching principle, it is increasingly recognized, but as a modest requirement - basically imposing honesty and compliance with branch standards. Under other systems, such as Canada, it is an overarching principle, but not a duty, although there are some specific duties, such as the good faith exercise of contractual discretion. In civil law systems, there is a wide range from the modest requirement of having not to behave in bad faith, to a full duty of cooperation with the other party. The drafter of a contract needs to be aware of which of these variants of good faith applies by default in case the contract is silent. Furthermore, in some legal systems, a good faith clause will be deemed to be redundant, whereas in others it will be interpreted as excluding good faith in the other contexts.
A drafter needs to consider not only the governing law, but also the international matrix. A study to be published shows that, out of 163 awards mentioning good faith, two thirds did not make reference to a specific law. They did not make reference to a specific transnational standard either. Mainly, good faith was used to escape from a literal application of the contract.
Often, the recitals are used to give context for the interpretation of the contract. Without recitals, it may be necessary to call witnesses to explain the parties’ intention. However, this may be restricted by Entire Agreement clauses.
Often, the drafting lawyers are not concerned with the prospects that their contract may be interpreted by lawyers with a different legal background. The drafters are mainly concerned with regulating the agreed deal in a clear way. Issues of interpretation under the governing law are pushed to legal expert witnesses.
When drafting contracts under a foreign law, lawyers may, in various phases of the drafting (typically, at the beginning and at the end), request legal opinions to ensure compliance with mandatory rules, but often it is not practical to re-open an issue that was agreed upon by the operatives. Drafters may be forced to make a leap of faith, rather than seeking the perfect clause.
Often, a certain level of ambiguity may be preferrable to opening an issue in negotiations.
Often, the governing law is invoked to escape from a literal application of the contract. Civil law systems give a series of mechanisms, such as force majeure, hardship, change of circumstances, unconscionability. Common law systems are stricter, and drafters cannot rely on a default rule, but need to stipulate these mechanisms.
The parties are concerned to varying degrees with the effects of the contract under the governing law. Not all parties are sophisticated, and even sophisticated parties do not have the same degree of awareness for all types of contracts. Often, the parties are more concerned with the dispute resolution mechanism (arbitration), than with the governing law – the assumption being that an arbitral tribunal will apply the law in a more flexible and commercially oriented way than a court.
Often, the governing law is used as a bargaining chip or chosen quite at random. Parties try to regulate everything in the contract and do not always reflect on the implications of the governing law.

New York (8 February, 2024)

Participants: Myrna Barakat Friedman, Gregory Classon, Richard Gray, Mark Kantor, Lisa Love, Franco Ferrari, Giuditta Cordero-Moss

These key observations emerged from the conversation:

As an arbitrator, having a contract drafting background contributes to better appreciating the wording and what led to it – for example, incremental additions made by the parties, leading to poorly drafted, but highly negotiated clauses;

There are various reasons for inconsistent understanding of contract language: not only the legal frame may differ, but also the understanding of the parties’ intentions. Arbitrators with litigation background have different understanding of the parties’ intentions than arbitrators with contract drafting background;
Not only differences in the substantive law, but also regarding procedural and conflict of laws issues can lead to unexpected and inconsistent results – for example, the Kabab-Ji case;
The parties’ intentions and the legal effects of the contract terms should be assessed according to the applicable law; however, there may be flexibility in the application of the applicable law – for example, estoppel exceptions to effects that an Entire Agreement Clause would have at law. Also the CISG opens for flexibility;
Contract drafting should be clear and contain qualifications in order to avoid misunderstandings and cater for various eventualities – for example, No assignment clause in a merger contract, where one of the parties established a subsidiary to place the new activity. Does this fall within the prohibition of assignment? What is “assignment”? It may also be necessary to add qualifications for when consent can be witheld;
Negotiating with non-English native speaking parties may lead to doubts about whether the contract terms reflect their intentions. Depending on the applicable law, witness statements may be needed to clarify the parties’ intentions, or the terms will be given an objective meaning. The Contra proferentem rule should not be applied when contracts have been negotiated;
A number of contract clauses that are useful under common law contracts are not necessary under civil law contracts – for example, representations and warranties, choice of law clause specifying that conflict rules shall not be regarded. There is a risk that the arbitrator will try to give them a meaning even though they do not have one under the chosen civilian law;
It is necessary to consider the risk that a poorly drafted clause creates problems in the implementation of the contract. If the risk is not high, it is not necessary to spend much time on the drafting;
Choice of the applicable law determines who writes the contracts, as ideally the contract should be written by a lawyer qualified under the applicable law – for example, when New York law had the requirement of reasonable contacts to allow jurisdiction on international contracts, most financial contracts were subject to English law and drafted by English lawyers. Since New York courts may allow international claims, New York law is chosen more often and New York lawyers draft the contracts. However, standard contracts are written to function under any applicable law;
The applicable law has an impact on interpretation, as interpretative principles are given to solve built in ambiguities – for example, contracts that are to be interpreted literally, such as financial contracts, choose New York or English law;
Legal opinions cover whether a contract is legally valid, binding and enforceable according to its terms. However, it does not explain how the terms are to be understood – for example, in a mortgage in which the amount was stated wrongly due to a clerical error, the legal opinion does not cover what are the consequences of the error.

Rome (15 December, 2023)

Participants: Gianluca Buoro, Filippo Innocenti, Edoardo Marcenaro, Edgar Miller, Peter Arnt Nielsen, Giuditta Cordero-Moss.

These key observations emerged from the conversation:

Boilerplate clauses are often written with the expectation that they have a uniform meaning, but the negotiations show that the other party has a different understanding. Example: No-assignment clause in a lease agreement, one party expects that consent cannot be withheld if the tenant offers joint liability with the prospective sub-tenant, performance guarantee, no change in activity; the other party expects that consent can be withheld because of a dispute on a different matter.
Drafters' expectations may lead to qualification of contract terms that may be seem unnecessary to parties with different legal background. Example: drafters from common law request qualifications (“reasonably”, “material”) without regard to the applicable law, which may imply these restrictions.
Drafters have become so used to seeing common law terms and formulations, that clauses are inserted even though they only repeat what is implied by law. Example: severability clause.
Contract terms may defeat expectations based on the legal culture. Example: Sandbagging clauses, permitting the buyer to invoke breach of R&W for circumstances that the buyer was aware of or discovered during the DD. Anti-sandbagging clauses reflect the civil law approach. Example: no contra proferentem clause affirming that the parties jointly negotiated and drafted the terms.
Contract terms may stipulate that the requirements of law have been met. Example: to permit specific performance: acknowledgement that there is no adequate remedy at law, a breach will cause irreparable injury, damages are not an adequate remedy and equitable relief is necessary.
Contract terms may have different effects depending on the applicable law. Example: Liquidated damages can be reduced by the courts, courts may require proof of loss.
Arbitrators are more commercially oriented than judges and look at the substance to the detriment of formal requirements not only laid down in the law, but also in the contract. Example (i): Entire agreement clause does not prevent looking at previous exchanges between the parties to establish the parties’ intentions. Example (ii): contractually agreed form requirements for notices are disregarded, if the information has been effectively communicated.
Even courts may reflect international trade practice notwithstanding the applicable law. Example: on demand guarantees notwithstanding civil code on accessory guarantee.
Using technical legal terms without a specific legal meaning under the governing law may create unexpected situations. Example: stipulating that an exclusion of liability clause is not applicable in case of gross negligence – English law does not differentiate between negligence and gross negligence.
The more detailed the clause, the less room for discretion. Example: ICC Force Majeure clauses v. article 79 CISG. Ultimately, arbitrators decide on the basis of the specific circumstances.
Transnational principles may be invoked to meet specific circumstances. Example: UPICC’s rules on hardship to avoid terminating a contract under Covid. Example: reasonableness to prevent payment of liquidated damages for failure to convene the Board of Directors during summer vacations.

Oslo (13 November, 2023)

Participants: Nanette Arvesen, Camilla Bråfelt, Harald Hellebust, Ola Nisja, Svein Gerhard Simonnæs, Giuditta Cordero-Moss.

These key observations emerged from the conversation:

Boilerplate clauses should always be considered in the light of the applicable law.
Attention should be given to what they are meant to achieve and whether this is appropriate in the given transaction.
In practice, often boilerplate clause are not sufficiently considered (e.g. : Entire Agreement clauses in a set of contracts).
When they are drafted without the due attention, boilerplate clauses may have undesired effects (e.g.: deadlines are not met if notifications do not comply with the clause on Notices; hold harmless clause may lead to unexpected liability if the beneficiary is to pay punitive damages).
The contract is likely to be supplemented by the applicable law.
A contract may have legal effects that it does not expressly regulate, if they follow from the applicable law (e.g: right to withhold performance in case of the other party’s default, in spite of Sole Remedy clause).
Sufficiently clear contract terms may produce effects different from those that would be reached under the applicable law.
The applicable law may prevent that a boilerplate clause leads to unintended results.
As long as the negotiations and the contract make clear that the parties intended to achieve a certain result, even effects at the outside boundaries of what the parties have accepted and agreed as outside boundariesare acceptable.
Contracts should be drafted on the basis of an applicable law agreed in advance, for example in a Term Sheet.
Unexpected changes in circumstances can lead to choosing a different applicable law when the contract is already drafted: not always there is the time or the bargaining power to revisit the draft.
The terms included in the contracts should be written in a way that their content is understandable and operative under any applicable law.
Contracts may be drafted even though they are subject to a foreign law, as long as their compliance with the applicable law’s mandatory rules is ensured (request local counsel’s opinion).
A local counsel’s legal opinion may cover, in addition to compliance with mandatory rules of the applicable law, also the contract’s effects under the applicable law as far as they are different from the effects under the drafter’ law. This assumes a thorough explanation of which effects would be expected under the drafter’s law.
Arbitral tribunals are expected to solve disputes on the basis of their expertise and should seek commercially viable solutions.
It is not desirable that arbitral tribunals disregard the applicable law, it would lead to unforeseeable results.