Common drafting mistakes that expose EU-Arab transactions to unnecessary legal risk.
Cross-border contracts between European and Arab parties are the legal foundation of an increasingly important commercial relationship. Yet practitioners on both sides continue to make avoidable drafting errors that create ambiguity, undermine enforceability, and expose their organisations to unnecessary risk. Drawing on guidance from leading international law firms and arbitration institutions, this article examines the most common mistakes and how to avoid them.
Mistake One: Treating Governing Law as Boilerplate
The governing law clause is arguably the most consequential provision in any cross-border contract. It determines how the contract will be interpreted, what implied terms apply, what remedies are available for breach, and how disputes will be resolved. Yet as practitioners and scholars consistently observe, governing law and jurisdiction clauses often receive less attention than the substantive commercial terms because they appear in the boilerplate sections towards the end of the contract.
Without a properly drafted governing law clause, parties to an international contract risk costly disputes about how specific clauses should be interpreted, what rights and obligations exist, and whether a breach has occurred. Within the EU, the Rome I Regulation provides structured rules for determining applicable law when parties have not made an express choice, but the Rome I framework does not apply in Arab jurisdictions, meaning that an omitted governing law clause creates even greater uncertainty in EU-Arab transactions.
Mistake Two: Assuming Foreign Governing Law Will Be Enforced in Arab Courts
One of the most common and consequential errors is the assumption that a choice of foreign governing law will be upheld if a dispute is litigated in an Arab court. In the UAE, for example, choosing a foreign governing law is permissible in principle. However, UAE courts will only uphold this choice to the extent that the foreign law does not contradict Islamic Sharia, public order, or the morals of the UAE.
Critically, when a dispute comes before a UAE court, the party invoking the foreign law bears the burden of proving the existence and content of that law. UAE courts have ruled in several instances that UAE law will apply instead of the selected foreign law, such as English law, on the basis that the parties failed to present satisfactory evidence of the foreign law’s provisions. This is a trap that catches European legal teams who assume that naming English or German law in the contract is sufficient.
Mistake Three: Confusing Governing Law with Jurisdiction
A surprisingly common drafting error is the failure to distinguish between governing law and jurisdiction. Governing law determines the legal rules that will be applied to interpret the contract and resolve disputes. Jurisdiction determines which court or tribunal is empowered to hear the case. Although the two often appear together, they are entirely separate legal choices.
A contract may be governed by English law but subject to arbitration in Paris, or governed by UAE law but subject to the jurisdiction of the DIFC courts. Conflating these concepts or drafting ambiguous clauses that create uncertainty about either choice is a recipe for procedural disputes that consume time and resources before the substantive issues are even addressed.
Mistake Four: Using Domestic Templates for International Transactions
European in-house legal teams frequently apply domestic contract templates to cross-border transactions with Arab counterparties, making minimal adaptations beyond translating key terms. This approach fails to account for fundamental differences in legal concepts, enforcement mechanisms, and commercial practices.
For example, penalty clauses that are enforceable in many Arab jurisdictions may be unenforceable under English law, which treats them as void. Conversely, limitation of liability clauses that are standard in European commercial contracts may be interpreted differently under Arab civil codes. Indemnification provisions, which are a cornerstone of common law contracting, may not have direct equivalents in civil law jurisdictions that follow the French or Egyptian legal tradition.
Mistake Five: Failing to Include an Arbitration Clause
The enforcement of court judgments across EU-Arab borders remains challenging. While European judgments benefit from the Brussels Regulation within the EU, there is no equivalent framework for mutual recognition of judgments between EU member states and Arab countries. Some bilateral agreements exist, but coverage is patchy and enforcement is uncertain.
International arbitration, by contrast, benefits from the New York Convention, to which both all EU member states and all six GCC countries are signatories. An arbitral award rendered in a New York Convention jurisdiction is enforceable in over 170 countries, making arbitration the significantly more reliable enforcement mechanism for EU-Arab transactions.
Despite this clear advantage, many EU-Arab contracts either omit dispute resolution clauses entirely or include poorly drafted arbitration clauses that fail to specify the administering institution, the number of arbitrators, the seat of arbitration, or the language of proceedings. These omissions create avoidable uncertainty that can delay or frustrate dispute resolution.
Mistake Six: Ignoring Currency and Payment Mechanism Risks
Cross-border contracts between EU and Arab parties typically involve multiple currencies, and the choice of payment currency, conversion mechanisms, and payment routing can have significant legal implications. Contracts should specify the currency of payment, the applicable exchange rate mechanism, the consequences of currency controls or restrictions, and the banking channels through which payments will be made.
Given the heightened sanctions compliance environment, payment routing through correspondent banking relationships must be carefully structured to avoid inadvertent sanctions violations. Contracts should include representations around sanctions compliance and clear termination rights if payment becomes impossible due to sanctions-related banking restrictions.
Getting It Right
The common thread across these mistakes is a failure to approach cross-border contracts between European and Arab parties as genuinely international instruments that require expertise in both legal traditions. General counsels on both sides should invest in specialist cross-border drafting capabilities, engage local counsel in the counterparty’s jurisdiction early in the negotiation process, and conduct enforceability assessments before finalising contract terms.
The EU-Arab Legal Summit in June 2026 will bring together general counsels, senior partners, and dispute resolution specialists from both regions to discuss practical approaches to cross-border contracting. For practitioners who advise on EU-Arab transactions, the summit offers a unique opportunity to learn from peers who navigate these challenges every day.
The EU-Arab Legal Summit takes place on 4 June 2026 in The Hague, Netherlands. For more information, visit our website or contact the organising team.
