Reforming the law on standard form contracts and legal “flight” from German law

What legal flight through choice-of-law clauses means for the German debate about reforming the law on standard form contracts in commercial contract settings.

In her dissertation, Antonia Sommerfeld, a former research assistant at the Max Planck Institute for Comparative and International Private Law, examines the risk of legal flight, which is claimed as a reason for liberalising German law on standard form contracts in business transactions. Her research, which she submitted as her dissertation at the University of Hamburg, was honoured with prize funding from the Esche Schümann Commichau Foundation.

The German law of standard form contracts is much maligned, the premise being that it is too stringent compared to that of other countries and too remote from actual commercial practice. Thus German firms (it is said) are forced to “flee” by selecting the law of foreign jurisdictions to govern their commercial contracts. But so far there has been almost no response to a number of questions: How easy is it through choice-of-law clauses to escape having your form contracts scrutinized under German law, and How often is it actually done? How much of this “flight” from Germany does Germany’s standard form contract regime even cause? In the end, are favoured foreign-law “hide-out destinations” any more liberal? And what should the consequences of this “flight risk” be in terms of shaping form contract law in Germany? Dr. Antonia Sommerfeld delves into these questions and draws important conclusions for the current debate on reform. She demonstrates that the influence of German standard form contract law has been exaggerated as a trigger of “flight” from Germany in the commercial contracts setting, and that reforming that law alone will not promote greater reliance on German law in that area.