Escaping German standard terms law? A private international law puzzle

This post was contributed by Felix D. Pollmann (University of Münster) and draws on a chapter written with Jonathan L. T. Chu (Downing College, University of Cambridge) on “Standard Terms in Business-to-Business Contracts under English and German Law”, in Heiderhoff/Queirolo, Private International Law and the European Union: Developments in Contemporary Private Law (Editoriale Scientifica 2026), pp. 169–199, where complete citations for the positions summarised here, can be found. The chapter is available open access here.

The German law on standard terms (§§ 305–310 BGB, the “AGB law”) is often viewed as a weakness of German substantive law in international comparison. Applied to B2B contracts, it is widely seen as overly restrictive – barring clauses, particularly limitations and exclusions of liability, that are routine in international commerce. English law, by contrast, enjoys a strong reputation here. The natural question follows: can parties whose contract would otherwise be governed by German law escape the AGB law by private-international-law means? I will consider two routes– a partial choice of German law without its AGB law, or a wholesale choice of English law, each of which can be pursued before a court or an arbitral tribunal.

One point must be fixed at the outset, because the whole analysis turns on it. I am concerned with purely domestic B2B contracts in which all relevant elements (parties, subject-matter, performance) are located in Germany, the only outward-facing element the parties have introduced being the choice of a foreign law or forum. This is where the restrictive reputation of German standard-terms law bites hardest, and, as will become clear, where escape is most difficult: it is precisely the domestic character of the situation that triggers the central Art. 3(3) Rome I Regulation obstacle below. Genuinely international contracts raise easier questions, set aside here.

What the parties would be escaping

Under German law a clause counts as a standard term on strikingly easy terms: there is no requirement that the user habitually deploy it, and even one-off use is caught, provided it was drafted for repeated use. Conversely, removing a clause from the regime is demanding – genuine individual negotiation under § 305(1) 3 BGB requires the user to put the core of the clause up for serious discussion, which the courts generally accept only where the text actually changed. Confirmation clauses, invitations to comment, and even lengthy negotiation followed by legal review have all been held insufficient (cf. VII ZR 53/99; VII ZR 222/12). Contracting around the AGB law by individual negotiation is therefore unreliable.

But the most important reason parties want an escape is the AGB law’s content control. Under § 307 BGB a standard term is ineffective if it unreasonably disadvantages the other party – a test the courts apply in a generalised, supra-individual way that disregards the parties’ actual bargaining strength, and one heavily coloured by consumer-protection standards, since the prohibitions listed for consumer contracts in §§ 308–309 BGB are treated as indicative of unreasonableness between businesses too. Added to this is the guiding role of the dispositive law: a clause departing from the essential principles of the statutory provision it displaces is regularly deemed an unreasonable disadvantage (cf. V ZR 208/14; XI ZR 562/15). The room for the limitation and exclusion clauses commercial parties routinely want is correspondingly narrow. The question is whether choice of law can do the work instead.

Litigation: no exit, in German or English courts

Before a German court the relevant rule is Art. 3 Rome I Regulation. Two features close the door. First, Art. 3(1) permits a choice of the law of a country – a legal order as it stands. What the parties attempt here is something else: not a dépeçage under Art. 3(1) sentence 3, which assigns a severable part of the contract to a different country’s law (in its entirety), but the converse operation of applying only parts of a law to the whole contract. Art. 3(1) does not contemplate such cherry-picking; outside the dispositive space of the otherwise applicable law, individual provisions of the chosen law can no more be deselected than non-national rules can be selected. So, the tempting option – keep German law but drop the AGB law – is unavailable. In contrast, a choice of English law is in principle possible, since the Rome I Regulation applies as loi uniforme regardless of whether the chosen law is that of a Member State. But here the second feature bites, and the domestic setting becomes decisive: under Art. 3(3), where all elements relevant to the situation are located in a single country, the non-derogable provisions of that country continue to apply. Since the contract is purely domestic and the AGB law is domestically mandatory, it survives the choice of English law.

The result is no different before an English court even after Brexit. Since the Rome I Regulation has been retained as domestic law, Art. 3(1) still bars the partial choice of German law, and recital (15) of the Rome I Regulation confirms that a choice-of-court agreement does not internationalise an otherwise domestic situation for the purposes of Art. 3(3). An English court would be bound to apply the AGB law. Litigation offers no escape.

Arbitration: a wider door, but four locks on it

Arbitration is where conventional wisdom locates the escape. For a tribunal seated in Germany, the prevailing view is that the relevant conflicts rule is not Art. 3 Rome I Regulation but § 1051(1) ZPO, which directs the tribunal to apply the “legislative provisions” chosen by the parties – wider than Art. 3(1)’s “law”, and wide enough on its face to permit a choice of German law without its AGB law. Two escape routes therefore present themselves before an arbitral tribunal: the partial choice of German law without the AGB law, and the wholesale choice of English law. Four successive obstacles, each capable on its own of defeating the partial strategy, stand in the way — and, as will emerge, they bear on the two routes very differently.

First, the priority of § 1051 over Art. 3 is contested and unresolved by the CJEU; a minority of scholars would give the Rome I Regulation primacy, reimposing the Art. 3(1) and (3) limits, relying on a strict interpretation of the wording of Art. 1(2)(e) Rome I Regulation which on its face only excludes the arbitration agreement itself from application (cf. Mankowski, “Schiedsgerichte und die Rom I-VO”, RIW 2018, 1). On this minority view the limits fall on both routes alike, since Art. 3(1) equally bars the partial German choice and Art. 3(3) equally overrides a choice of English law in a domestic case. Second, even granting § 1051, several scholars treat the ratio of Art. 3(3) as a general principle of private international law, requiring the AGB law to apply to a domestic dispute regardless of the parties’ choice (cf. Valdini, “Gesetzesreform durch die Hintertür?”, ZIP 2017, 7). Third, the arbitration agreement itself may fall – and here, unlike at the merits stage, the AGB law cannot be designated away. Its validity is governed by § 1059(2) no. 1(a) ZPO: the arbitration agreement is invalid under the law to which the parties have subjected it or, failing such indication, under German law. Unlike § 1051, the provision speaks of law, not “legislative provisions” – the validity of the arbitration agreement is therefore tested against a national law taken as it stands, and a partial designation of German law minus its AGB law has no purchase at this level. The AGB law re-enters through that door.

The fourth obstacle is decisive, and is where I part from the optimistic literature. Suppose every prior concern is overcome and the arbitral tribunal applies German law without its AGB law. What controls the clauses now? It is common ground that residual control runs through the general clauses, § 242 BGB (good faith principle) and § 138 BGB (prevention against transactions offending common decency). Some scholars assume this residual control is gentler than § 307 BGB (cf. Pfeiffer, “Anm. zu BGH: Der Ausschluss des AGB-Rechts im Rahmen einer Schiedsvereinbarung”, NJW 2025, 866). I submit this assumption to be mistaken, for a historical reason: German standard terms law was built by the courts out of §§ 242, 138 BGB before it was ever codified, first in the dedicated AGB-Gesetz and then in §§ 305–310 BGB where it is still to be found today. The strict control is not an artefact of the specific provisions; it flows just as readily from the general clauses they were distilled from. Excluding the AGB law does not lower the level of scrutiny – it merely routes the same scrutiny through §§ 242, 138 (my view is shared, among others, by Pamp, “Das Leitbild des angemessenen Vertrags in der Konkretisierung der Rechtsprechung”, ZIP 2025, 3113). Crucially, none of this touches a choice of English law in its entirety: there the applicable controls are English law’s own. It is the partial choice – German law without the AGB law – that collapses; the wholesale choice of English law survives this obstacle untouched.

For an arbitral tribunal seated in England the picture is essentially the same. Section 46(1)(b) of the Arbitration Act 1996 corresponds to § 1051 ZPO and, after Brexit, undisputedly governs in place of Art. 3. The same fourth obstacle therefore bites: a choice of German law minus its AGB law meets the residual §§ 242, 138 BGB control just as before, while a wholesale choice of English law escapes it.

Conclusion

The strategy of keeping German law but excising its AGB law fails or is gravely uncertain on every path examined: before a German court it is barred outright, and before an arbitral tribunal it founders, at the latest, on the residual control exercised through §§ 242, 138 BGB. The only route with real prospects is the more drastic one: choosing English law in its entirety and arbitrating, which escapes that residual control altogether. Even this route is not certain – it remains exposed to the argument that Art. 3(3)’s domestic-override applies in arbitration as a general principle of private international law – but it is the only candidate that survives the decisive fourth obstacle. The honest conclusion is that, short of the drastic step of abandoning German law altogether, German commercial parties seeking dependable limitation and exclusion clauses in their domestic contracts are left waiting for legislative reform or a jurisprudential shift.