Notes on the Main Issues of Cloud Computing Contracts (prepared by the UNCITRAL secretariat, 2019)
Part two. Drafting a contract
O. Choice of law and choice of forum clauses
Freedom of contract usually allows parties to choose the law that will be applicable to their contract and the jurisdiction or forum where disputes will be considered. The mandatory law (e.g., data protection law) may, however, override the choice of law and the choice of forum clauses made by the contracting parties, depending on the subject of the dispute. In addition, regardless of the choice of law and choice of forum, more than one mandatory law (e.g., data protection law, insolvency law), including from different jurisdictions, may be applicable to the contract.
Considerations involved in choosing the applicable law and forum
The choice of law and choice of forum clauses are interconnected. Whether the selected and agreed-upon law will ultimately apply depends on the forum in which the choice-of-law clause is presented to a court or another adjudicating body, e.g., an arbitral tribunal. It is the law of that forum that will determine whether the clause is valid and whether the forum will respect the choice of applicable law made by the parties. Because of the importance of the forum law for the fate of the choice of law clause, a contract with such a clause usually also includes a choice of forum clause.
In choosing the forum, the parties usually consider the impact of the chosen or otherwise applicable law and the extent to which a judicial decision made in that forum would be recognized and enforceable in the countries where enforcement would likely be sought. Preserving flexibility in enforcement options may be an important consideration, especially in the cloud computing settings where many factors that parties usually take into account in formulating choice of law and choice of forum clauses may be uncertain, including the location of assets involved in the provision of services and the location of the provider and the customer.
Mandatory law and forum
The law and the forum of a particular jurisdiction may be mandatory on various grounds, for example:
(a) The accessibility of the cloud computing services in the territory of a particular State may be sufficient for the application of the data protection law of that State;
(b) The nationality or residence of the affected data subject or the contracting parties, in particular the data controller, may trigger the application of the law of that data subject or the party; and
(c) The law of the place in which the activity originated (the location of the equipment) or to which the activity is directed for the purpose of extracting benefits may trigger the application of the law of that place. The use of a given country
top-level domain associated with a particular place, a local language in the website, pricing in local currency and local contact points are among the factors that might be taken into account in making such determination.
Provider or customer home law and forum
Contracts for standardized commoditized multi-subscriber cloud solutions often specify that they are governed by the law of the provider's principal place of business or place of establishment. They typically grant the courts of that country exclusive jurisdiction over any disputes arising out of the contract. The customer may prefer the law and jurisdiction of its own country. Public institutions would face significant restrictions on their ability to consent to the law and jurisdiction of foreign countries. Providers that operate in multiple jurisdictions may be flexible as regards accepting the choice of the law and forum of the country where the customer is located.
The parties may also specify various choice of law and forum options for different aspects of the contract. They may also opt for a defendant's jurisdiction to eliminate the home forum advantage for a plaintiff and thus encourage informal resolution of disputes.
No choice of law or forum
The parties may prefer no choice of law or forum clause in their contract, leaving the question open for later discussion if and when needed. That might be considered the only viable solution in some cases. ODR may also be part of the solution for the questions of jurisdiction and applicable law. Read more.