Signing a contract with a foreign partner opens opportunities but also involves specific risks: legal differences, language barriers, jurisdictional issues. Some clauses become essential to protect your business. Here are the 5 you must never forget.
1. Governing Law (Applicable Law)
The clause that determines which national law governs the contract in case of dispute.
Example (EN):
"This Agreement shall be governed by and construed in accordance with the laws of Italy, without regard to its conflict of law principles."
Translation (IT):
"Il presente Contratto è regolato e interpretato secondo la legge italiana, esclusi i principi sui conflitti di legge."
Why it matters: Avoids ambiguity about which legal system applies. Without it, the judge will have to determine it using complex rules.
2. Jurisdiction (Competent Court)
Specifies which court is competent to decide any disputes.
Exclusive Jurisdiction
"The courts of Milan, Italy, shall have exclusive jurisdiction..."
Only that court can decide. Protects against parallel lawsuits abroad.
Non-Exclusive Jurisdiction
"The courts of Milan shall have non-exclusive jurisdiction..."
You can also choose other competent courts. More flexible but riskier.
3. Arbitration Clause
Alternative to court: disputes are decided by a private arbitration panel.
Advantages of International Arbitration:
- ✓ Neutrality (neither your country nor theirs)
- ✓ Confidentiality (not public)
- ✓ Global recognition (New York Convention)
- ✓ Faster enforcement compared to foreign judgments
Example ICC Arbitration:
"All disputes arising out of or in connection with this contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with said Rules. The place of arbitration shall be Milan, Italy. The language of arbitration shall be English."
4. Force Majeure
Governs extraordinary and unforeseeable events (wars, pandemics, natural disasters) that make contract performance impossible.
Key elements to include:
- Precise definition of events (not generic)
- Obligation to notify promptly
- Suspension or termination of contract?
- Cost allocation during suspension
Attention: The COVID-19 pandemic showed how strategic this clause is. Many companies had underestimated it.
5. Intellectual Property Rights
Essential in licensing, distribution, JV, R&D contracts. Must clarify:
- Who owns trademarks, patents, know-how
- What the licensee/distributor can do (use, sublicense, modify?)
- Territories covered by the license
- What happens to IP developed during collaboration
- Protection of confidential information
⚠️ Common Mistake
Not specifying who owns jointly-developed intellectual property can lead to costly disputes. Always clarify, even if it seems obvious.
Bonus: Other Important Clauses
Limitation of Liability
Limits recoverable damages (e.g. direct damages only, maximum cap)
Confidentiality / NDA
Protection of confidential information exchanged
Termination Rights
Conditions and procedures for early termination
Anti-Corruption / Compliance
Obligations to comply with anti-corruption laws (FCPA, UKBA, 231/2001)
💡 Legal English: My Competitive Advantage
Having worked as in-house counsel at Bayer and EI Towers, I've managed international contracts daily. I offer:
- ✓ Drafting and review of contracts in English
- ✓ Direct negotiation with foreign counterparties
- ✓ Accurate legal translation
- ✓ Knowledge of standard international clauses (ICC, IBA, etc.)
For a Valtellinese or Lombardy SME that exports, having a lawyer who speaks the language of international business is a real competitive advantage.