Dave
I'm not surprised that a US business wants its contracts to be subject to US
law - I've found that this is a standard response.
"Just a quick query: when dealing with US-based companies with regard to,
say, contract software development, how do you limit your liability with
respect to US litigation laws?"
Limiting your exposure has at least two steps:
First, ideally your contract should include clauses which limit your
liability in certain circumstances anyway, such as saying that the other
party will be responsible for ABC and that you will not be responsible for
XYZ.
Second, if there is a dispute, that's where the relevant law comes in. Some
options:
* agree that US law will apply to the contract, and take the risk that
there will never be a dispute arising out of the contract.
* take out litigation insurance. A good insurance broker will be able
to let you know the costs of various types of policies and the cover
available.
* agree that US law will apply to the contract, but don't exclude the
New Zealand courts from having jurisdiction to hear a dispute. This means
that the dispute could be heard in New Zealand and the courts here would
apply US law. To explain further, most jurisdiction clauses in contracts
will say something to the effect of "this contract is governed by the laws
of New Zealand and is subject to the exclusive jurisdiction of the New
Zealand courts." If the contract is to be governed by US law, try not to
include a clause saying like the contract is "subject to the exclusive
jurisdiction of the US courts".
* keep trying to negotiate for New Zealand law to apply and New
Zealand courts to have exclusive jurisdiction.
" I have heard of the International Arbitration Association, but I'm not
sure
if anyone uses it... They may or may not have a NZ office - they don't
appear to have much of an Internet presence. Has anyone heard of it or of a
comparable international trade dispute arbitrator? I'd like to offer my
client an alternative to choosing either NZ or US law as the basis for the
contract."
The International Arbitration Association is an association of qualified
arbitrators, such as retired judges, industry specialists, senior lawyers
and the like. I think that it's based in London, but it has members from
around the world.
If you include a clause saying that any disputes have to be heard by an
arbitrator, then (in most situations) disputes must be heard by an
arbitrator and can't be heard in a court. It is open for you to agree:
* where the arbitration will be held (eg country and city);
* who the arbitrator will be (or for a formula to appoint the
arbitrator, such by asking the President of the New Zealand Software to
appoint a suitable arbitrator)
* the law that will apply to any disputes
Most western countries around the world have adopted similar laws about how
arbitrations will be held to ensure consistency between trading nations.
The rules can get a bit complex so it wouldn't hurt to find out more about
them and their effect before including an arbitration clause in contracts.
There are pros and cons of including arbitration clauses in contracts and
they largely depend on the nature of your business and what your goals are.
There is a lot more that I could say on these topics, but I don't want to
perpetuate the myth that lawyers talk too much! Hope this (limited)
information helps.
Jane Montgomery
Senior Associate
Buddle Findlay
P O Box 322
Christchurch
Direct phone: 64 3 371 3517
Fax: 64 3 379 5659
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