As international agreements, particularly those in the technology sector, continue to become more common, how can you increase your chances of a predictable interpretation should “breach of contract” become an Olympic contest for your organization?
A natural inclination is to push for U.S. law in your international agreements and call it a day if you can come to terms. New York is widely regarded as an international forum for international agreements, for example. But there are a few aspects to international law that you should consider when deciding how dispute resolution should be negotiated in your agreements:
- Not all foreign jurisdictions play nice with judgments issued by U.S. courts. For example, China will not enforce a U.S. court judgment. Accordingly, savvy Chinese companies are quick to jump on proposals to take, for example, New York law and choice of forum provisions because a judgment in any dispute would not be enforceable, and the U.S. entity would have to bring a new action on the merits in Chinese courts to seek enforcement. Not ideal.
- There are treaties and conventions between countries that can assist in contract disputes, if you know the lay of the land. Sticking with the example above, China is a party to a New York convention that requires the enforcement of foreign arbitral awards (subject, as always, to certain exceptions that if I dare enumerate would run afoul of providing legal advice on a blog . . . a cardinal sin for legal bloggers). This means that, although a New York judgment may be useless in China, an arbitration award is as good as gold. In fact, even if a lower court in China refuses to enforce an arbitration award, the issue is automatically referred to the highest court in China. Much more ideal.
- In this area of practice, detail can matter a great deal. Depending on the jurisdictions involved, there may be “magic words” or other specific provisions that can provide more assurance as to the proper handling of disputes in an international agreement. Once again, using the Chinese example above, it is helpful to state that an arbitrator can provide the equivalent of injunctive relief, typically phrased as “any interim or conservatory measure” to ensure the proper results.
Although international agreements may be increasingly commonplace in the rising global market, that doesn’t mean that every jurisdiction plays nice with one another. Ensuring that the positions you negotiated hard for in your agreement are actually enforceable (both from a practical sense and from a strictly legal sense) should be a major concern. We recommend involving local counsel or a law firm experienced with international transactions when negotiating with a jurisdiction with which you are not familiar.
This post is part of our recurring “Contract Corner” series, which provides analysis of specific contract terms and clauses that may raise particular issues or problems. Check out our prior Contract Corner posts for more on contracts, and be on the lookout for future posts in the series.