Netherlands high court allows parties to pick the best law per topic

The Dutch Supreme Court has confirmed that parties may make a partial choice of law under Article 3(1) of the Rome I Regulation, including a choice for a specific segment of a state’s legal system, such as the US Carriage of Goods by Sea Act (US COGSA), alongside a general choice for Dutch law. This is a useful clarification for drafting complex commercial contracts, well beyond maritime transport.

Case in brief

The dispute arose from a bill containing both a general choice for Dutch law and a clause declaring the US COGSA applicable for carriage to and from US ports (i.e. the paramount clause). The Supreme Court upheld the Court of Appeal’s view that, for voyages involving US ports, the US COGSA applies by virtue of a valid partial choice of law. Dutch law then has only supplementary effect for that part of the contract.

Rome I

Rome I is the EU’s common rulebook for deciding which of a country’s laws apply to private cross border contracts. It lets contractual parties agree on the governing law. EU courts generally respect that choice, creating predictability across EU member states. If a choice of law is not made, Rome I supplies default rules to pick a law based on the type of contract.

Partial choices of law

Article 3(1) Rome I permits parties to select the applicable law “for the contract as a whole or for only a part of it.” Having different parts of an international agreement governed and subject to the laws of different countries is called dépeçage. The Supreme Court makes explicit that it is possible to designate a part of a state’s legal system (e.g. US COGSA) as the governing law for a defined segment of the contract. As a result, any conflicting mandatory rules of the otherwise chosen law (i.e. Dutch law) do not displace the partial law chosen for that segment.

Restrictions

There are a few restrictions on the free partial choice of law:

• The Advocate General’s opinion to the Supreme Court points out that it is generally accepted that partition of choices of law must be logically coherent to avoid contradictory outcomes. The gaps may be filled by the law that would apply by default under Article 4 of Rome I.
• Another restriction is overriding mandatory law. These are provisions considered so crucial for a country’s public interests (e.g. political, social, or economic) that the provisions can apply to any case within their scope, regardless of the law chosen for the contract. Such rules override the chosen law in exceptional situations involving fundamental public interests or human rights.
• The court of the forum (i.e. the court of the country where the proceedings are brought) may decide not to apply provisions of the chosen foreign law if these provisions are manifestly incompatible with the public policy of the forum. “Manifestly” implies that there must be a clear and serious conflict. It must be evident that application of the foreign provision is unacceptable to the fundamental principles of the national law of the forum.

When is dépeçage sensible (and when not)?

Splitting a contract can do justice to the distinct dynamics and legal requirements of a complex cross border agreement. There is, however, a boundary: parties cannot assemble a free form patchwork of rules if doing so would disrupt the logical coherence of the legal construct or the core objectives of the rules involved. Classic examples of incoherence include subjecting termination or rescission to different laws depending on which party invokes it. 

There is a strong argument that, if parties make an explicit partial choice of law but a single, isolated  carve out proves impermissible, their main choice of law should continue to govern the remainder of the agreement. Recourse to the law that would apply by default should only be sought if the parties' choice of law is unworkable in its entirety. This approach better reflects the principle of party autonomy that underlies Rome I.

Broader implications for cross border agreements

The key takeaway for commercial contracting is that parties have significant freedom to make partial choices of law, provided they maintain coherence. Dépeçage is particularly useful where a contract naturally breaks into distinct phases or topics. Examples include separating delivery from onsite installation in a mixed agreement with a purchase part and a construction part, carving out a discrete topic that one law regulates in detail (e.g. interest under Dutch law where the otherwise applicable law restricts or forbids interest), applying different laws to a framework agreement and its call-off contracts, or designating uniform regimes from international instruments (e.g. the CISG) for defined segments. By contrast, carve-outs that splice core remedial concepts or remedies between competing systems tend to create incoherence and should be avoided.

Conclusion

For contracts where different legal regimes are desirable for certain segments, parties may consider using a general governing law clause combined with targeted carve outs for those specific segments. The contract should specify the precise foreign law chosen for each carve out and clarify that the general law only applies supplementarily. This approach is supported by the Supreme Court’s ruling on dépeçage under Rome I. It is important, however, that any partial choice of law is logically coherent and does not conflict with overriding mandatory provisions or the public policy of the forum country. 

For more information on contracting and litigation in the EU and the Netherlands, contact these CMS experts: Aukje Haan, Sem Blans.