Selecting the Governing Substantive Law. In countries with strong federalist traditions, such as the United States, Australia, and Canada, parties must select the law of a particular State of the United States or of Australia or the law of a particular Province of Canada. In the United Kingdom, parties should select the law of England and Wales, or of Scotland. It would generally be a mistake to select the law “of the United States” or “of the United Kingdom,” although it is worthwhile to note that on occasion the contract might warrant the application, in whole or in part, of specialized law enacted by those nations. For example, the application of the U.S. Outer Continental Shelf Lands Act might be mandatory in some instances. In contrast, it would not be an error to select “the law of France,” as France has a single body of contract law. The contracting parties should thus be familiar with the role of local and national laws in a particular jurisdiction in selecting the correct governing law. Selecting the law of a particular jurisdiction as the governing or substantive law of the contract can be difficult. It is much easier to identify jurisdictions that should be avoided. The choice of law is very important because it may affect the enforceability of certain contractual provisions, provide some unintended benefit or remedy, or allocate legal duties and responsibilities in a manner significantly different than another jurisdiction. As a general observation, the parties should be especially cautious about the effect their choice of law may have on the enforceability of the indemnity or compliance provisions in the contract. For example, under the law of a number of states of the United States, the indemnity provisions may not be fully enforceable as written. Good examples are the states of Texas and Louisiana. Occasionally, the ultimate choice of substantive law may depend on the relative bargaining power of the parties or the nature of their respective roles in the underlying contract. For example, while the designated operator under a joint operating agreement might prefer that the governing law be the substantive law of Texas, a non-operating working interest owner might prefer the law of France or Brazil. They may agree upon one of them, or they may compromise with selecting a governing law that they are all comfortable with, such as the law of England and Wales. Contracting parties also need to be aware that they may not be able to avoid the application of certain laws of the country of...
