THE BOTTOM LINE
- “Choice of Law” clauses are critical, not boilerplate. A Dutch court has paused a major dispute to determine the exact meaning of such a clause under foreign law, a move that could change the entire basis of the case.
- Local project, foreign law? A Dutch company undertaking construction on its own soil may find itself subject to foreign regulations if its contract with an international partner specifies a different governing law.
- Procedural delays increase costs. The need to argue the interpretation of a single clause under Bulgarian law adds a significant layer of complexity, time, and expense for both parties before the core commercial dispute can even be addressed.
THE DETAILS
This case involves a dispute between a Bulgarian construction company, Dora Construction, and a Dutch logistics firm, STPL Logistics. Dora was contracted to build several high-spec storage bunkers at STPL’s facility in the Netherlands. After completion, Dora sued for an unpaid invoice of over €135,000. In response, STPL filed a counterclaim for nearly €452,000, alleging that the construction was defective and failed to meet crucial Dutch safety standards (specifically, the PGS 15 guideline for hazardous materials storage).
The entire case now hinges on a single clause in the construction agreement. Article 15 of the contract states that for any issues not explicitly covered, “the relevant provisions of the Bulgarian legislation shall apply.” Dora argues this means the work should be judged against Bulgarian standards, which it claims to have met. STPL’s multi-hundred-thousand-euro counterclaim, however, is entirely dependent on the application of Dutch safety law. The court is now faced with a pivotal question: which country’s rules define a “job well done”?
Before tackling the merits of the defective work claims, the Dutch court pressed pause. It first confirmed its own jurisdiction to hear the case, as the defendant (STPL) is based in the Netherlands. However, on the critical question of applicable law, the court turned to the EU’s Rome I Regulation. This regulation dictates that the validity and interpretation of a choice-of-law clause must be assessed under the law it purports to choose. Therefore, to understand what Article 15 means, the court has ordered both parties to submit legal arguments on how that specific text is interpreted under Bulgarian law. The outcome will determine the legal benchmark for the entire project and likely decide the fate of the half-million-euro dispute.
SOURCE
Source: Rechtbank Zeeland-West-Brabant
