Signing an International Contract? How to Choose Jurisdiction, Governing Law & Dispute Resolution – 2025 Guide.

Signing a deal across borders is exciting but don’t treat the fine print as mere boilerplate. Every party in an international agreement needs to think carefully about who decides disputes and which law governs. Jurisdiction and choice-of-law clauses may seem like standard add-ons, but experts warn they “deserve proper consideration” when parties sit in different countries. A bad choice can lead to delays, high costs or even an unenforceable judgment. In short, these provisions matter to everyone involved.

Contracts use jurisdiction clauses to fix which court (or courts) can hear disputes. By contrast, the governing law clause specifies which country’s laws will interpret the contract. For example, you might choose “courts of Country X” to settle any lawsuits, and say the contract is governed by Country Y’s law. Both must be clear. One lawyer sums it up: the venue (jurisdiction) decides which court has power, while the governing law decides what rules that court uses to resolve the case.

In practice, you can pick a neutral country or one of the parties’ home countries. But be careful. Not every court will honor your choice of court agreement. Some courts refuse if it would be unfair or impractical. For example, a Michigan court will respect a forum clause unless special factors intervene (like the forum is needed by statute; the other forum is too inconvenient, or the clause was signed under duress). Many other countries have similar exceptions. So even a clear forum selection clause can sometimes be set aside.

Likewise, almost every country lets parties choose their governing law if the language is clear. However, exceptions can apply. A chosen law may be ignored if it has no real connection to the deal, or if applying it would violate a fundamental public policy of a country that has greater interest. In short, try to pick up a law that makes sense: where the work will be done, where the parties live, or where enforcement is reliable.

Key considerations when choosing law or forum include: Where are the parties and performance? If most work happens in Country A (or most parties are from there), its courts or laws might be logical. Legal system & remedies: Is it a common-law or civil-law country? How easy is its courts? What damages can they award? Do winning parties get legal fees paid? - Fairness and rule-of-law: Does that country have honest, efficient courts? Are foreigners treated fairly, or is corruption a risk? - Enforceability: Will a judgment stick back home? A U.S. judgment, for instance, is hard to enforce abroad without treaties. (By contrast, arbitration awards have the New York Convention backing over 168 countries agree to enforce them.

These questions show there is no one size that fits all answers. But thinking through them keeps you on track. Focus on the key issues in your deal, not on unrelated topics. For example, freight terms (FOB/CIF) or tax details matter too, but a single blog can’t cover everything. Stick to the heart of the matter: who and what law will decide a fight.

Pick the Right Court (Jurisdiction Clause)

A jurisdiction clause names the court or courts that will hear disputes. You might pick, say, “the courts of England and Wales” or “exclusive jurisdiction of Tokyo courts.” This choice affects where lawsuits happen and what local rules apply.

In choosing a court, weigh convenience and fairness. Many companies pick a neutral forum (like arbitration in Singapore or Switzerland) to avoid bias. Or they pick the defendant’s home turf if that party has more at stake. Courts themselves consider practical factors too. A court may accept a case despite a clause if it seems unfair to force a plaintiff overseas or if the agreed forum cannot give relief. So never assume a foreign court will automatically reject the case; local rules can pull it back.

Importantly, think about enforcement. Even a victorious court judgment is worthless if it can’t be enforced where the other party has assets. There is no global treaty like the New York Convention for enforcing judgments. Some countries follow comity (courtesy) and recognize foreign judgments, but many allow defenses like improper service or public policy to block it. In practice, that means a Chinese company losing in Michigan might still walk away if Chinese courts refuse to enforce.

For stronger enforcement, consider arbitration: nearly every country party to your deal likely enforces arbitration awards under the New York Convention. (We’ll discuss this below.) But if you choose litigation, try to pick a jurisdiction where courts are reliable and where you can actually collect a judgment.

Pick the Right Law (Governing Law Clause)

The governing law clause says what legal rules interpret the contract. Choosing law is critical, because it affects contract terms, validity, and remedies. The chosen law also often dictates other choices, like venue or even the arbitration rules.

You are generally free to pick up any law connected to the deal. But a couple of pitfalls lurk:

·      Neutral laws may backfire- Choosing a neutral country’s law (say English law for a U.S.-China deal) seems fair, but if that law has no connection to your transaction, a court might not honor it. Also, picking a foreign law unwittingly imports its statutes. Civil-law countries have detailed codes: selecting German law, for instance, brings in German contract code terms you might not expect. U.S. lawyers know picking U.K. law will suddenly incorporate the Uniform Commercial Code (UCC) gap-fillers, similar to this effect.

·      Watch out for the CISG. If your contract is for the sale of goods and the parties are in countries that signed the UN Sales Convention (CISG), then the CISG may automatically apply. In over 100 countries, this happens unless you explicitly exclude it. A Michigan court, for example, would apply the CISG instead of Michigan’s UCC when both sides (U.S. and Canada in the example) are CISG signatories. The CISG’s terms (and gap-filling rules) differ from local law, so you could end up with unexpected obligations. Do not forget to opt out of CISG if you really want local law to prevail but weigh carefully; CISG can sometimes benefit both sides.

·      Legal system nuances. Consider common law vs civil-law approaches. Common-law (e.g. UK, U.S.) relies on case law; civil law (e.g. Germany, France) follows codes. Remedies vary: some countries may not allow punitive damages or require liquidated damages to be “reasonable” by statute. Know those differences.

In short, choose a law you trust, and that reflects how you want disputes resolved. Ask: Has the chosen law recognized the type of agreement we’re making? Are remedies adequate? Will we need local counsel to enforce judgments? If nothing obvious fits, businesses often choose respected neutral laws (England, Singapore, or Switzerland) because their courts have commercial expertise. But remember the code/CISG issues above.

Key questions for governing law include: Where are the parties located? Where will performance occur? What kind of legal system is it? What damages/remedies and fee rules will apply? Will a foreign judgment or award be honored there? Experts advise checking these before deciding, because the choice of law drives almost every other dispute resolution choice.

Dispute Resolution: Court or Arbitration?

Even after picking up jurisdiction and law, you need a dispute resolution clause: courts, arbitration, or a mix. This clause tells how a legal fight will actually happen.

·      Litigation (courts) is familiar: one party sues in the chosen court. It can be cheaper upfront (no arbitrator fees) and allows appeals. But it is public, often slow, and courts only exist in specific countries. Crucially, as noted above, enforcing a court judgment in another country can be a headache. There is no global court-judgment treaty, so you rely on each country’s goodwill.

·      Arbitration is a private process where an arbitrator or panel hears the case. It is usually more expensive (parties pay for all arbitrators), but it tends to be faster and more confidential. Importantly, enforcement of arbitration awards is far easier globally. Because over 168 countries (including most trading nations) are parties to the New York Convention, an arbitration award can be recognized and enforced almost anywhere. (The U.S. also has a regional treaty, the Panama Convention, with American countries for further help.) The U.S. Supreme Court even noted that the policy favoring international arbitration has “special force” in global commerce.

Arbitration also lets you pick a neutral seat (legal home) and institution (like ICC, LCIA, SIAC, etc.), which some parties prefer. For smaller deals, though, court litigation might be more cost-effective. Sometimes parties agree that if the dispute is minor, they go to a regular court to save on arbitrator fees.

It depends on your deal value and needs: For high-value or complex contracts, the benefits of arbitration (speed, expertise, confidentiality, enforceability) often outweigh the costs. For low-value deals, litigation may suffice. Some contracts even include tiered clauses, e.g. negotiation or mediation first, then arbitration or court if that fails. This can help settle things early. But use caution: mandatory negotiation/mediation clauses can also be used to stall proceedings. If you do include a “try to resolve amicably” step, make it short and narrow so it doesn’t become a blockade.

Drafting an Effective Arbitration Clause

If you choose arbitration, don’t just copy a generic clause. Specificity is key to avoid confusion or delays. A good arbitration clause should specify:

1.    Arbitration Rules and Tribunal: Name the arbitration of institution or rules (e.g. ICC Rules, UNCITRAL Rules, etc.).

2.    Seat (Legal Place): Choose the arbitration seat (city/country). This determines the law governing the arbitration procedure and makes that country’s courts support (and enforce) the arbitration. Ensure the seat is in a country that upholds the New York Convention.

3.     Procedural Law: If needed, state which procedure of law applies (often the law of the seat). Number of Arbitrators: Specify how many arbitrators (often one or three) and how they will be appointed.

4.    Language: Clearly state the language of the proceedings. (English is common, but if parties aren’t fluent, you might pick another language or allow translation.) Remember: if arbitration is in Korea, you can pick English. But if you must litigate in a Korean court, a court might insist on Korean, they can refuse proceedings in English.

5.     Exclusivity: Confirm that arbitration is the exclusive remedy (so one party can’t sue in court at the same time)

By spelling out these details, you prevent the tribunal from having to figure them out later, which saves time and costs.

Alternative Dispute Resolution (ADR)

Sometimes parties include optional ADR like mediation before arbitration or court. Mediation can work: an independent mediator helps you negotiate a settlement. If it succeeds, both sides save the cost of formal proceedings. If you do this, build in short timelines and one-shot efforts to avoid endless “meetings before trial” that never end. If parties want quick negotiation, it might be better to do it voluntarily when a dispute arises, instead of forcing it through the contract.

Practical Tips- Stay Focused and Clear

1.    Keep it clear and unambiguous- Use simple, specific language. Avoid vague terms. State exactly which laws and courts you mean. Experts advise “using clear, unambiguous terms” to reduce future disputes.

2.    Spell out inclusions- List the country fully (e.g. “Courts of the Republic of Singapore”) to avoid doubt. If a country has multiple systems (like the UK), don’t just say “courts of the UK” or courts might strike it down as too vague.

3.    Consider multiple jurisdictions- Sometimes contracts allow filing in either party’s country as a fallback. Or they allow arbitration as an alternative. But be clear about whether multiple venues are exclusive or non-exclusive.

4.    Review local laws and treaties- Check if any mandatory local rules (for example, consumer protection laws or competition rules) could override your clauses. Also check bilateral treaties: some countries limit choice-of-law (e.g. some CISG signatories' default to CISG in sales contracts unless exempted).

5.    Get legal advice- International contract law is tricky. Use lawyers who know both jurisdictions. For instance, an international lawyer can spot issues like requiring a litigant to post security in foreign courts or whether one party may have to bribe to win- yes, these happen. They’ll help balance the law, forum, language and procedure to fit your deal.

6.    Think in advance. Imagine a dispute and run through how it would play out. Who will be arbitrators? Will they understand your industry? Does the chosen country have judges who handle foreign-language contracts? (Many U.S. lawyers are surprised to learn that Korean courts operate entirely in Korean. In that case, you must hire local counsel. Anticipating problems can save a lot of pain later.

Global Perspective: Why “One Size” Fails

Remember that international means global. Don’t assume your home-country rules follow you overseas. Every country has its own quirks. For example, liquidated damages clauses are treated very differently: some civil-law states automatically enforce them, even as a penalty, whereas U.S. law (and CISG) requires them to be reasonable or they get struck down. Similarly, limitations-of-liability clauses may be enforceable in the U.S. but not in many European or Asian courts. These differences aren’t covered by a single treaty.

Even the language in contracts matters. A Chinese company might assume its deal is in Chinese but if the contract says nothing, many Chinese courts will simply proceed in Chinese (ignoring an “English language” clause). Only arbitration reliably lets you use English in most places.

On top of that, consider time zones, cultural expectations, and how paperwork is served. If one party thinks, “Hey, we did email service, we’re done,” but the other law requires personal service; you get stuck. All these global factors underline why you must tailor each clause. Using your domestic playbook without adaptation can backfire abroad. Think of these choices not as paperwork formalities, but as strategic tools.

It Depends on Your Deal (Wrapping Up)

There is no perfect answer that fits every international contract. The “right” jurisdiction, law, and resolution method ultimately depends on you, on the nature of the deal, the countries involved, and how much risk each party can bear. A finance company in New York and an exporter in Brazil will have different priorities than two EU manufacturers.

However, the process is the same: identify your goals (speed, confidentiality, cost, enforceability) and risks, then match your clauses to those needs. Use the insights above as a checklist. If uncertainty persists, an expert review can save millions of dollars (or weeks of legal wrangling) later. As one practitioner warns, failing to consider factors like governing law, forum, language, and arbitration “can cost an arm and a leg and lead to disastrous outcomes.”

In 2025 and beyond, cross-border businesses keep growing. Don’t let an oversight in your contract leave your deal up in the air. Plan, get advice, and draft your jurisdiction, law, and dispute clauses in the right way for your global contract.

Frequently Asked Questions

1. What is jurisdiction in an international contract?

Jurisdiction defines which court or legal body has the authority to hear and resolve disputes. In cross-border contracts, it decides where a lawsuit would be filed if problems arise.

2. What is the difference between jurisdiction and governing law?

·      Jurisdiction = Where the dispute will be heard (the forum).

·      Governing law = Which country's legal rules will be used to interpret the contract.

You can choose different countries for each.

3. How do I choose the best jurisdiction for my international contract?

Consider:

·      Where both parties are located

·      How fair and efficient the courts are

·      Ease of enforcement of judgments

·      Language and legal costs

·      Neutrality and political stability

4. What is the safest governing law to choose?

Popular and trusted options include:

·      English law (widely used, clear rules)

·      New York law (common in financial deals)

·      Singapore law (growing in popularity)

These are seen as business-friendly and neutral.

5. Is arbitration better than court litigation?

Often yes, especially internationally. Arbitration is:

·      Confidential

·      Faster than court

·      Enforceable in 168+ countries under the New York Convention

But it can be more expensive due to arbitrator fees.

6. Can I choose any country’s law as governing law?

Generally, yes, but:

·      It must have a reasonable connection to the deal.

·      Some courts may reject the choice if it violates public policy.

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ABOUT THE AUTHOR

This blog is authored by Shridansh Tripathi, a second-year law student at the Department of Legal Studies and Research, Barkatullah University, Bhopal.

Reviewed by Gaurav Saxena a corporate lawyer focusing on company law, commercial agreements, and compliance strategy. He is the Founder of SolvLegal and a dual-degree professional with expertise in Law and Engineering. A graduate of the University of Lucknow, he has a deep understanding of Contract Law, Corporate Law, Intellectual Property Rights, Information Technology Law, and Data Privacy.

REVIEWED BY Yashvardhan Singh, a technology-driven legal professional specialising in contracts, corporate compliance, and data-privacy frameworks at SolvLegal.

https://www.linkedin.com/in/yashvardhan-singh-2949b52a1/

DISCLAIMER

The information provided in this article is for general educational purposes and does not constitute legal advice. Readers are encouraged to seek professional counsel before acting on any information herein. SolvLegal and the author disclaims any liability arising from reliance on this content.