The clause buried at the bottom of every cross-border contract
The governing-law clause sits in the boilerplate near the end of the contract. It looks identical in every template. And it is the single most outcome-determinative clause in the whole agreement when something goes wrong.
If your contract says “governed by Delaware law, with exclusive jurisdiction in the Court of Chancery of the State of Delaware” and your contractor is in Manila, you have set up a dispute path that almost guarantees you will get a US judgment and then struggle to enforce it in the Philippines. If your contract says “governed by Philippine law, with exclusive jurisdiction in Makati” and your contractor breaches, you are headed to a Makati court that will read the contract in Tagalog-language briefs and apply Philippine commercial law to your IP assignment.
This guide walks through how US courts enforce these clauses, how foreign judgments travel back, and how to pick a combination that survives both sides of the relationship.
1. What the two clauses actually do
The two clauses are often written as one sentence but they answer two different questions.
Governing law. Whose substantive contract law applies to the agreement. This determines how courts interpret words like “material breach”, “consequential damages”, and “reasonable best efforts”.
Forum selection (or jurisdiction). Which court hears the dispute. This determines where you file, who your lawyer is, and what procedural rules apply.
You can mix them. A contract can be governed by New York law with exclusive jurisdiction in the courts of England. The English court will apply New York law as a question of foreign law, supported by expert evidence. This is common in international finance contracts.
For contractor agreements the simpler combination is usually best. Governing law and forum in the same jurisdiction so that the court applies its own home law.
2. The two Supreme Court cases that govern forum selection
US federal courts treat forum-selection clauses as presumptively enforceable. Two Supreme Court cases set the rule.
The Bremen v Zapata Off-Shore Co (1972)
A US drilling company and a German towing company contracted to tow a rig from Louisiana to Italy. The contract said disputes would go to the High Court of Justice in London. The rig was damaged in a storm and Zapata sued in admiralty in Tampa. The Supreme Court held the London forum-selection clause should be enforced.
Chief Justice Burger’s opinion is the cornerstone of US forum-selection law:
Such a clause should control absent a strong showing that it should be set aside.
The full opinion is on Justia at 407 US 1. The burden to escape a forum-selection clause is on the party seeking to avoid it, and the burden is “heavy”.
Carnival Cruise Lines v Shute (1991)
A Washington couple bought a cruise ticket with a forum-selection clause printed on the back that named Florida courts. Mrs Shute was injured on the cruise and sued in Washington. The Supreme Court enforced the clause even in a consumer adhesion contract. The opinion at 499 US 585 sets out the modern test:
Forum-selection clauses are generally enforceable in federal courts so long as they are fundamentally fair.
For a B2B contractor agreement, the contract is negotiated rather than adhesive, and the Bremen and Carnival Cruise standards almost always result in enforcement.
The exceptions that occasionally apply
A forum-selection clause can be set aside if:
- It was procured by fraud or overreaching
- Enforcement would contravene a strong public policy of the forum where suit is brought
- The chosen forum is so seriously inconvenient that the party would effectively be deprived of their day in court
In practice these are rare. For ordinary contractor agreements with sophisticated counterparties, US federal courts enforce the clause.
3. The Hague Choice of Court Convention and where the US stands
The Hague Convention of 30 June 2005 on Choice of Court Agreements is the international counterpart to the New York Convention for arbitration. Where it applies, a court designated in an exclusive choice-of-court agreement must hear the case, other courts must decline jurisdiction, and the resulting judgment must be recognised and enforced in all contracting states.
The Convention is in force in the European Union, the United Kingdom, Mexico, Singapore, Montenegro, Ukraine, and a handful of other states. The current status table is published by the Hague Conference on Private International Law and should be consulted for the up-to-date list.
The United States signed the Convention on 19 January 2009 but has not ratified it. We confirmed this against the HCCH status table. What this means in practice:
- A US-chosen forum is not automatically protected in a contracting state under the Convention from the US side
- A foreign judgment from a Convention state based on a Convention-style exclusive choice-of-court clause does not automatically travel to the US via the Convention either
- The framework reverts to state law on judgment recognition (covered below) and forum non conveniens doctrine in the chosen court
For US founders this is the practical takeaway. The Hague Convention is real but the US is not part of it yet. Cross-border judgment enforcement still depends on state law and treaty-free reciprocity.
4. How foreign judgments come into the United States
If you win a judgment against a US-based counterparty in a foreign court, you bring it to the US to collect. The framework is the Uniform Foreign-Country Money Judgments Recognition Act, drafted by the Uniform Law Commission.
The current 2005 version (UFCMJRA) has been adopted in roughly 27 states plus the District of Columbia. The earlier 1962 version is still in force in another 11 states. The full adoption picture is tracked by the Uniform Law Commission.
Under either version a US court will recognise a foreign money judgment if:
- The foreign court had personal and subject-matter jurisdiction
- The defendant received notice and an opportunity to be heard
- The judgment is not contrary to US public policy
- The judgment is final and conclusive
Notable exclusions: tax judgments, fines, family-support judgments, and any judgment from a court system that does not provide impartial tribunals or due process.
The 12 or so states that have adopted neither version apply common-law principles of comity that produce similar but less predictable results.
5. How US judgments travel to the contractor’s home country
This is the harder direction and the reason most experienced cross-border lawyers prefer arbitration for high-value contracts.
There is no treaty in force between the United States and most countries on the recognition of court judgments. A US court judgment exists only inside the US until a foreign court agrees to recognise and enforce it. Each jurisdiction has its own rules.
Some headline examples for the contractor-heavy countries:
- India. Section 13 and 44A of the Code of Civil Procedure, 1908 governs foreign judgment enforcement. Judgments from “reciprocating territories” (which the US is not) require a fresh suit on the judgment. This typically adds 2 to 4 years.
- Philippines. A US judgment is “presumptive evidence of a right” under Rule 39 Section 48 of the Rules of Court. It still requires a fresh action and the foreign defendant can raise defences.
- Brazil. Foreign judgments must be homologated by the Superior Tribunal of Justice before enforcement. A separate proceeding in Brazil.
- United Kingdom. Common-law action on the judgment is possible. Hague 2019 Judgments Convention is in force in the UK and EU but the US is not a party.
- European Union. The Brussels Recast Regulation only covers EU member-state judgments. US judgments require national-law procedures.
The pattern is clear. A US judgment is a starting point for enforcement abroad, not the end. By contrast an arbitral award under the New York Convention travels to 170-plus countries with much lower friction. We cover that in the companion piece on arbitration vs litigation.
6. Choosing a governing law that is actually predictable
A governing law is useful only to the extent that you, your contractor, and a court can readily figure out what it says. The bodies of law that meet this test for cross-border contractor agreements are short.
Delaware law. Vast body of corporate, commercial, and equitable precedent. The Court of Chancery hears high-stakes contract disputes routinely. Specific performance and equitable remedies are well-developed.
New York law. Strong for finance and IP-heavy agreements. New York courts respect choice-of-law clauses for transactions of $250,000 or more even without other New York contacts under New York General Obligations Law Section 5-1401.
English law. The default global commercial law. Practitioners in every major financial centre understand it. London Commercial Court is well-regarded internationally. Useful when neither party is in the US.
Singapore law. Increasingly popular for Asia-facing contracts. The Singapore International Commercial Court applies English-style commercial principles.
What to avoid: choosing the contractor’s home-country law to be friendly. You will end up paying foreign counsel to advise on every dispute, and you will not understand your own contract on the merits.
The other trap: choosing a US state with which neither party has any contact. New York’s Section 5-1401 specifically allows it for high-value contracts, but Delaware courts may apply forum non conveniens to push back. Pick a state where either party has real contacts or use the New York 5-1401 rule.
7. Forum selection in practice
Once you have your governing law, the forum clause has three live options.
Exclusive jurisdiction in the chosen US state. Simplest and cleanest. Works well if the contractor has any US presence, US bank account, or US assets you could attach. Less effective if you ever need to chase the contractor at home.
Exclusive jurisdiction in the contractor’s home country. Cleanest enforcement against the contractor. Worst experience for you as the US party. Rarely chosen.
Arbitration. A neutral seat, an institutional rule set, and the New York Convention behind you. Most cross-border contractor agreements above a certain value default to this. See our arbitration vs litigation guide for the trade-off.
For US founders working with international contractors, a reasonable default for moderate-value agreements is Delaware governing law with exclusive jurisdiction in Delaware state and federal courts. For agreements with material IP or sums over $250,000, arbitration with a seat in New York or Singapore is the better path.
8. Drafting language that actually works
A clean governing-law and forum clause for a US-international contractor agreement reads something like:
This Agreement and any dispute arising out of or in connection with it shall be governed by and construed in accordance with the laws of the State of Delaware, United States, without regard to its conflict of laws principles. Each party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in New Castle County, Delaware for any dispute arising out of or in connection with this Agreement, and waives any objection based on forum non conveniens.
Three things that matter in that sentence:
- The “without regard to conflict of laws principles” tail prevents a court from applying a different state’s law through choice-of-law rules
- “Exclusive jurisdiction” plus a waiver of forum non conveniens prevents the contractor from forum-shopping
- Naming a specific county pre-empts venue fights inside the chosen state
If you are using arbitration the parallel clause looks like:
Any dispute arising out of or in connection with this Agreement shall be finally resolved by arbitration under the Rules of the Singapore International Arbitration Centre. The seat of arbitration shall be Singapore. The language of the arbitration shall be English. The number of arbitrators shall be one for disputes under USD 500,000 and three for disputes at or above USD 500,000.
The arbitration clause is short but every element matters. Seat determines which national arbitration law applies and which courts supervise. Language and number of arbitrators control cost and pace.
9. The decision in three steps
- Does the contractor have any US presence or US assets? If yes, US court with US governing law is the default. If no, lean toward arbitration.
- Is the dispute risk material? For IP-heavy agreements, payments over $250,000, or recurring engagements, arbitration is worth the higher upfront cost. For smaller one-off SOWs, court is fine.
- Which body of law do you want your in-house team or counsel to operate in? Delaware, New York, or English law. Do not pick the contractor’s home-country law for friendliness.
These three questions resolve most of the drafting choices. Beyond that the clause is largely standardised across the industry.
For the underlying enforceability of the signature on the contract, see our ESIGN Act and UETA guide. For the boilerplate immediately above governing law, see our piece on force majeure clauses.
A short note on Omnivoo’s Contract Management
Omnivoo’s Contract Management product issues every contractor agreement with a default governing-law and forum clause appropriate to the contractor’s country and the agreement value. The defaults are Delaware governing law with exclusive jurisdiction for agreements under $250,000, and SIAC arbitration seated in Singapore for higher-value or IP-heavy work. Both options are configurable per contract and per contractor.
If you would like us to review your current clause language for a specific country, talk to our team and we will walk through what is enforceable on each side and where the gaps are.