What Overseas Investors Should Know Before Signing a Commercial Contract Under English Law

ByBNW Staff

By Benny John, Director, Johns Law Partners’ commercial team

English law remains the governing law of choice for a large share of the world’s cross-border commercial contracts. Its appeal is well understood: a mature body of case law, predictable and commercially minded courts, respect for freedom of contract and a judiciary that is internationally trusted. For overseas investors entering the UK market, however, the very features that make English law attractive also make it unforgiving. The courts will, as a general rule, hold parties to the bargain they have actually made, not the bargain they thought they had made. Five issues merit particular attention before any signature is placed on a page.

1. Choose governing law and forum deliberately, and keep them aligned

A governing law clause and a dispute resolution clause do different jobs. The first determines which law interprets the contract; the second determines where, and before whom, disputes will be decided. Treating them as boilerplate is among the most common and costly errors in cross-border deals.

Investors should consider at the outset where a judgment or award may ultimately need to be enforced. An English court judgment is enforceable in a number of jurisdictions under the Hague Choice of Court Convention 2005, to which the UK is party in its own right following Brexit, but enforcement outside that framework can be slow and uncertain. Arbitration, by contrast, benefits from the New York Convention, under which awards are enforceable in over 170 states. Where the counterparty’s assets are overseas, arbitration seated in London will often be the more practical choice. The Arbitration Act 2025 has also clarified that, absent express agreement, the law governing an arbitration agreement is the law of the seat, reducing a long-standing source of uncertainty.

2. Understand that the written contract carries the weight

English courts interpret contracts objectively, giving words their natural and ordinary meaning in light of the commercial context. They are reluctant to rescue a party from a bad bargain. Two practical consequences follow.

First, entire agreement and non-reliance clauses are generally effective. Pre-contractual assurances given in meetings, presentations or correspondence may carry no legal weight unless they are written into the contract itself. Subject to the statutory reasonableness test under the Misrepresentation Act 1967, and to the rule that liability for fraud cannot be excluded, investors should assume that anything important and not in the document is not protected.

Second, English law does not impose a general duty of good faith on commercial parties. Investors accustomed to civil law systems, in which good faith is an implied term, should not assume the same safeguard applies. If good faith, cooperation or a duty to consult matters commercially, it should be drafted expressly and with precision.

3. Scrutinise termination, remedies and liability provisions

The commercial heart of most agreements lies in what happens when things go wrong. Investors should look closely at termination rights, whether for breach, insolvency or change of control, and at how any cure periods operate. Failure to follow a contractual termination procedure to the letter can itself place the terminating party in breach.

Limitation and exclusion clauses are broadly enforceable between commercial parties, but remain subject to the Unfair Contract Terms Act 1977 where applicable. Agreed damages provisions are assessed under the test in Cavendish Square Holding BV v Makdessi [2015] UKSC 67: a clause will be enforceable if it protects a legitimate interest and is not out of all proportion to that interest. Clauses imported from other legal systems, particularly those designed around penalty-style remedies, should be reviewed with that test in mind.

4. Be clear on what is, and is not, binding at the heads of terms stage

Investors frequently sign heads of terms, memoranda of understanding or letters of intent in the belief that they are non-binding, only to find that certain provisions, such as exclusivity, confidentiality or costs, were intended to bind, or that the document as a whole creates obligations. Whether an agreement is binding depends on the parties’ objective intention as expressed in the document and the surrounding circumstances. Documents intended to be non-binding should say so clearly, and provisions that are meant to bind should be identified expressly.

5. Factor in regulatory and compliance requirements early

Contractual analysis should not be conducted in isolation from regulation. Under the National Security and Investment Act 2021, acquisitions of control over qualifying entities in seventeen sensitive sectors, including defence, energy, transport and advanced technologies, require mandatory notification and clearance before completion, and the Government retains powers to call in other transactions. Completion without required approval can render the transaction void and expose the parties to significant penalties.

UK sanctions regimes, anti-money laundering requirements and the transparency and identity-verification obligations introduced by the Economic Crime and Corporate Transparency Act 2023 also bear on how investors structure and document their investments. Tax, including stamp duty and the treatment of cross-border payments, should be considered at the same time as the commercial terms, not after them.

A practical checklist before signing

  1. Confirm that governing law and dispute resolution provisions are consistent and enforceable where the counterparty holds assets.
  2. Ensure every commercially important assurance appears in the contract itself.
  3. Review termination, remedies and liability clauses against English law tests, not those of the investor’s home jurisdiction.
  4. Establish which pre-contractual documents are binding.
  5. Identify any regulatory clearance, sanctions or compliance requirements before exchange.
  6. Obtain English law advice before, not after, key terms are agreed.

Conclusion

English law offers overseas investors certainty and a sophisticated commercial framework, but that certainty depends on the contract being properly drafted for it. Early, specialist advice allows investors to negotiate from a position of understanding and to avoid disputes that are far easier to prevent than to resolve.

About Johns Law Partners

Johns Law Partners is a UK commercial law firm advising overseas investors and businesses on English law contracts, transactions and disputes. The firm offers a free 30-minute Zoom consultation. Fees are usually charged on an hourly basis, and fixed fees can be agreed. For enquiries, contact [email protected]

This article is for general information only and does not constitute legal advice. The law is stated as at 12/10/2026