Determining Choice of Law in International Commercial Contracts: Challenges and Solutions

Abstract

Determining the applicable law in international trade contracts remains a critical challenge because cross-border transactions involve diverse legal systems. Differences between civil law and common law traditions, public policy exceptions, and difficulties in enforcing foreign judgments or arbitral awards create uncertainty for contracting parties. This study aims to examine practical and theoretical frameworks for determining applicable law and to identify mechanisms that strengthen predictability, fairness, and enforceability in international commerce. Its novelty lies in contextualizing choice-of-law mechanisms within digital globalization, where rapidly evolving commercial practices, electronic transactions, and borderless business relationships increasingly test conventional conflict-of-laws principles. Using a doctrinal legal research method, the study analyzes international legal instruments, relevant legal doctrines, scholarly interpretations, comparative principles, selected cases, and sector-specific contractual practices. The results demonstrate that formulated choice-of-law clauses significantly reduce interpretative disputes and provide guidance for courts, arbitral tribunals, and contracting parties. International arbitration also offers a strategic mechanism for managing jurisdictional differences and improving cross-border enforceability. Nevertheless, contractual autonomy cannot operate independently of mandatory rules and public policy limitations. The study concludes that greater harmonization of legal standards, precise contractual drafting, and informed selection of dispute-resolution mechanisms are essential to promote justice, efficiency, and legal certainty in international trade.