Choice of law means quite simply what law will be applied. In the EU the relevant legislation is the Rome Convention.
Under the Rome Convention (Article 3(1)) the parties to a contract can choose the law of the contract that applies either expressly or impliedly. If however no choice has been made then the contract will be governed by the law of the country with which the agreement is most closely connected (Article 4(1)). The ‘country with which the agreement is most closely connected’ is the country in which the party who is to effect the ‘chracteristic performance’ of the contract resides, where the party is a company this will be the country in which it has it’s registered office. ‘Characteristic performace’ is the performance for which money is due i.e. the provision of the services or delivery of goods etc.
Article 7 of the Rome Convention makes it clear that where the country of jurisdiction has mandatory laws that relate to the dispute and there are conflicting laws within the country chosen under a contract (as ‘choice of law’) the laws of the country of jurisdiction prevail. An example of such mandatory laws would be the Unfair Terms in Consumer Contracts Regulations 1999 etc.
Where a party to a contract is a consumer Article 5 dictates that said consumer cannot be deprived of protection under mandatory laws of his or her country of residence for example UCTA 1977 etc.