A contract with a Ukrainian counterparty contains the line: “All disputes under this Agreement shall be settled by arbitration under the ICC Rules; the seat of arbitration is London.” Simple question: which state’s law governs the contract itself?
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The correct answer is that no law has been chosen. A forum clause is not, by itself, a choice of law — and the Hague Principles on Choice of Law say so in as many words. What follows: what the instrument is, which of its rules matter to whoever drafts such clauses, and why a Ukrainian court and an arbitral tribunal will read the very same choice differently.
In short: a court or arbitration clause is not, by itself, a choice of law (Art. 4 of the Hague Principles), so the governing law has to be chosen expressly, in a clause of its own. International commercial arbitration can apply the UNIDROIT Principles as the governing law, while a Ukrainian court will apply the law of a State and treat them as contract terms. The decision to use non-State rules has to be taken together with the choice of forum.
What the instrument is, and why it is not law
The Hague Principles on Choice of Law in International Commercial Contracts were approved by the Hague Conference on Private International Law on 19 March 2015. They are not a convention: there is nothing to ratify, and they bind no one.
They work in three other ways. As a drafting model. As a reference point when a court or tribunal has to construe an unclear clause. As a template for national legislators. Much the same role the UNIDROIT Principles of International Commercial Contracts play in practice.
Ukraine is a Member of the Hague Conference. The Principles have not been transposed into Ukrainian legislation, and were never meant to be: their value is not in binding force but in giving ready answers to questions national statutes tend to skip.
Four rules that matter to the drafter
- No connection is required (Art. 2(4)). A Ukrainian and a Turkish company may submit their contract to Swiss law while having nothing in Switzerland. Ukrainian law does not object — but the point still has to be defended in negotiations more often than it should.
- Different parts, different laws (Art. 2(2)). The contract can be split: security submitted to the law of the asset’s location, the rest to the chosen law. Article 5 of the Ukrainian Private International Law Act permits this too, but requires a partial choice to be expressly stated.
- Choosing a forum is not choosing a law (Art. 4). The most frequent defect in the contracts that reach us. “Arbitration in London” does not make the law English; absent a choice, the governing law is determined by conflict rules, and the outcome can surprise both sides.
- The choice-of-law clause survives the contract (Art. 7). Invalidity of the main contract does not by itself invalidate the choice of law — otherwise there would be nothing left to determine the consequences of that invalidity.
Drafting a choice-of-law clause for an arbitration-bound contract? Show us the wording — we will say how a court and a tribunal would each read it, and close the fork.
The fork: a court and a tribunal read your choice differently
This is where the Principles earn their keep in a Ukrainian setting.
Article 3 allows the parties to choose not the law of a State but “rules of law” — a generally accepted, neutral and balanced set of rules, such as the UNIDROIT Principles. With one reservation: unless the law of the forum provides otherwise. In Ukraine it does provide otherwise — differently for each of the two forums.
| Ukrainian court | International commercial arbitration | |
|---|---|---|
| What may be chosen | “law” — the legal order of a State (Art. 5 of the Private International Law Act) | “rules of law” chosen by the parties (Art. 28(1) of the Law on International Commercial Arbitration) |
| UNIDROIT Principles as the governing law | No. The court will apply the law of a State and treat the set of rules as contract terms — within mandatory rules | Yes. The wording “rules of law” is wider and covers it directly |
The consequence is practical and not cheap: the decision to use non-State rules has to be taken together with the choice of forum, not separately. Choose the UNIDROIT Principles and a Ukrainian court in the same contract, and you end up with something other than the contract you drafted. What an arbitration clause does once a dispute is real, we showed on a dispute with a Chinese counterparty.
What to do about it
- Keep the choice of law as its own clause, not buried in the disputes section — harder to confuse, harder to lose both at once.
- State it expressly: “this Agreement is governed by the law of [State].” Article 5(2) of the Ukrainian Act also accepts a choice that clearly follows from the terms, but the burden of showing it is yours.
- If you want a split, spell it out separately and unambiguously, or it will not work.
- If you want non-State rules, align that with the arbitration clause in one package.
- Check overriding mandatory rules and public policy: Article 11 of the Principles and its Ukrainian analogues cut into the chosen law however clearly you chose it.
Originally published on 15 September 2016. Rewritten and expanded in August 2026; the law is stated as at that date.