Choice of law and jurisdiction: which country's law governs your contract?

The governing law and jurisdiction clause usually sits at the very end of the contract and is rarely negotiated. Yet it decides which rules fill the gaps in the contract, how the limitations of liability are interpreted, and whether a dispute will be heard in Oslo, London or California. For a Norwegian business, the difference can amount to the entire cost of enforcing the contract.

What is the difference between choice of law and jurisdiction?

Choice of law decides which country’s law governs the contract. Jurisdiction decides which court or arbitral tribunal will hear a dispute. They are two different questions, governed by different rules.

The two are nevertheless connected. A Norwegian court can apply English law, and an English court can apply Norwegian law. But when a court has to apply foreign law, its content must often be proved through legal experts. That makes the case more expensive and the outcome less predictable. Choice of law and jurisdiction should therefore normally point to the same country.

Can the parties freely agree on choice of law and jurisdiction?

Yes. In commercial relationships, the general rule is that the parties may choose which country’s law applies and where disputes are to be resolved. Party autonomy on this point is well established in Norwegian law.

That freedom has limits. A choice of law cannot set aside rules that are mandatory regardless of which country’s law is chosen. Data protection rules are an important example. The GDPR applies to the processing of personal data irrespective of what the contract says about governing law. Consumers and employees also enjoy special protection, and a Norwegian court will not apply foreign law to the extent that the result conflicts with fundamental Norwegian legal principles.

Which country’s law applies when the contract is silent?

Where the contract says nothing about governing law, Norwegian law applies the law of the country with which the contract is most closely connected. The rule is non-statutory and dates back to the Irma-Mignon judgment in Rt. 1923 II p. 58. The court looks at all aspects of the contract, including where the parties are established, where performance is to take place, language, currency and where the contract was concluded.

International sales of goods are governed by a separate statute. Under Choice of Law in Sales Act § 4 in the Act on the Law Applicable to International Sales of Goods (kjøpslovvalgsloven), the general rule is that the law of the country where the seller was established when the order was received applies. If the seller receives the order in the buyer’s country, the buyer’s law applies. The parties may agree otherwise under Choice of Law in Sales Act § 3.

For services, software and SaaS there is no equivalent statute. The discretionary closest-connection test then applies. The outcome can be hard to predict, which is a good reason to agree on governing law expressly.

Does the Rome I Regulation apply in Norway?

No. The EU’s Rome I Regulation on the law applicable to contractual obligations is not part of the EEA Agreement and does not apply in Norway. Norwegian choice of law rules for contracts are mainly non-statutory. A 2018 report recommended codifying choice of law rules modelled on Rome I and Rome II, and the proposal was sent for public consultation by the Ministry of Justice and Public Security. No such act has been adopted to date.

The regulation is nevertheless important in practice. If a Norwegian business contracts with a party in the EU and the dispute ends up before a court in an EU Member State, that court will apply Rome I.

Where is the dispute resolved when the contract is silent?

Where the counterparty is established in the EU, Iceland or Switzerland, jurisdiction is determined by the Lugano Convention 2007. The Convention has the force of Norwegian law under Dispute Act § 4-8 in the Dispute Act (tvisteloven). The main rule in Lugano Convention Art. 2 is that defendants are to be sued where they are domiciled or have their seat. In contractual matters, proceedings may also be brought under Lugano Convention Art. 5 in the place of performance of the obligation. For the sale of goods, that is where the goods are to be delivered, and for services, where the services are to be provided.

Outside the scope of the Lugano Convention, the rules of the Dispute Act apply. Norwegian courts may hear the case where it has a sufficient connection to Norway under Dispute Act § 4-3. Actions concerning contractual relationships may be brought where the obligation has been or is to be performed, under Dispute Act § 4-5(2).

What are the requirements for a jurisdiction agreement?

An agreement that extends or limits the international jurisdiction of the Norwegian courts must be in writing under Dispute Act § 4-6(2). A jurisdiction agreement may either exclude other forums or be in addition to them.

Under Lugano Convention Art. 23, a jurisdiction agreement is exclusive unless the parties have agreed otherwise. The agreement must be in writing or evidenced in writing, follow practices the parties have established between themselves, or accord with trade usage. Electronic communication that provides a durable record of the agreement is equivalent to writing. Standard terms accepted with a click online can therefore be binding.

Towards consumers, a jurisdiction agreement entered into before the dispute arose is not binding on the consumer, under Dispute Act § 4-6(3).

What do US terms with state law mean for you?

Many SaaS contracts from US vendors provide that the law of California, Delaware or Washington applies and that disputes are to be resolved by the courts there. For a Norwegian customer, this means in practice that suing the vendor is rarely realistic. The cost of litigating in the United States is often out of proportion to the claim.

There is also a side that is easily overlooked. A US judgment normally has no legal force in Norway, because there is no agreement on mutual recognition between the two countries. If, however, the parties have agreed on jurisdiction before a specific foreign court, the judgment is recognised in Norway under Dispute Act § 19-16(2). A jurisdiction clause in the vendor’s favour can thus make a US judgment against you enforceable here.

The chosen state law also affects how key terms are interpreted. Concepts such as “consequential damages” and “indemnification” have a different content from the corresponding Norwegian concepts, and the limitation of liability in the SaaS contract may have a different reach than you expect. The same vendor will often also transfer personal data to the United States, which is covered in the article on the Data Privacy Framework and transfers to the US.

Should you choose the courts or arbitration?

The courts are normally cheapest and allow for an appeal. Arbitration is normally faster, gives the parties influence over who decides the case, and offers better prospects of enforcing the decision abroad. The choice depends on who the counterparty is and where its assets are.

The most important advantage of arbitration in international relationships is the New York Convention 1958. Norway has been a party since 1961, and more than 170 states have joined, among them the United States, the United Kingdom and China. An arbitral award rendered in Norway can therefore be enforced in far more countries than a Norwegian judgment. Under Arbitration Act §§ 45 and 46 in the Arbitration Act (voldgiftsloven), foreign arbitral awards are also recognised in Norway, subject to a few grounds for refusal.

The choice of law clause decides which rules apply. The jurisdiction clause decides whether you can enforce them in practice.

Two aspects of arbitration are often misunderstood. Under Arbitration Act § 5, arbitration is not confidential unless the parties have agreed so. And under Arbitration Act § 11, an arbitration agreement entered into before the dispute arose is not binding on a consumer. A valid arbitration agreement means that a Norwegian court must dismiss an action on the same matter if the counterparty so requests, under Arbitration Act § 7.

How should a choice of law and jurisdiction clause be worded?

A good clause is short, unambiguous and covers both governing law and jurisdiction. It should state that Norwegian law applies and that disputes are to be decided by a named district court, for example Oslo District Court, or by arbitration under specified rules with its seat in Norway. References to “international principles” or several alternative forums create uncertainty and should be avoided.

The clause must also fit the rest of the contract. A contract written in English on an Anglo-American model, but governed by Norwegian law, can give rise to doubts about interpretation. This is a typical weakness of contracts drafted with AI, as discussed in the article on vibe lawyering. In an NDA you should also make sure that you can seek an interim injunction before a Norwegian court, even if disputes are otherwise to go to arbitration.

What should the business do?

1. Agree on choice of law and jurisdiction expressly in all contracts with foreign parties, and in important contracts between Norwegian parties as well.
2. Make choice of law and jurisdiction point to the same country, preferably Norway.
3. Consider where the counterparty has assets. If they are outside the Lugano states, arbitration should be considered.
4. Read the vendor’s standard terms and assess what the chosen state law and a US forum mean for liability and enforcement.
5. Negotiate Norwegian law and jurisdiction for large or long-term purchases. Many vendors have separate terms for European customers.
6. Include confidentiality expressly if you choose arbitration and want the dispute kept out of public view.

Choice of law and jurisdiction cost little to agree, but a great deal to put right once a dispute has arisen. See more articles on the topic page on contracts.

Questions and answers

Next legal review: 1 April 2027