Key Risks in International Commercial Agreements

Cross-border commercial contracts carry unique risks that domestic agreements do not. Identifying and mitigating these risks early is essential for protecting long-term business interests across international markets.

International commercial agreements — whether supply contracts, distribution agreements, joint venture arrangements, or service agreements — are among the most legally complex instruments that businesses encounter. Unlike domestic contracts, they must navigate differences in legal systems, enforceability standards, cultural expectations, and regulatory environments simultaneously.

Choice of Law and Jurisdiction

One of the most consequential decisions in any international commercial agreement is the selection of governing law and dispute resolution forum. Many parties approach this as a formality — it is anything but. The chosen governing law will determine how contractual terms are interpreted, what implied terms apply, and what remedies are available upon breach.

Similarly, the choice of jurisdiction or arbitral seat will determine where disputes are heard, what procedural rules apply, and critically — how easily any award or judgment can be enforced against the counterparty's assets. A judgment obtained in one jurisdiction may be unenforceable in another without specific treaty arrangements or comity principles.

Force Majeure and Material Adverse Change Clauses

Recent global events have dramatically heightened awareness of force majeure provisions. Yet many international contracts contain force majeure clauses that are poorly drafted, jurisdictionally mismatched, or simply inadequate for the operational reality they purport to address. Understanding how force majeure is interpreted under the governing law — rather than how it reads on paper — is essential.

Currency and Payment Risk

International agreements denominated in foreign currencies expose parties to foreign exchange risk that can fundamentally alter the economics of a transaction. Well-drafted international agreements address currency risk explicitly, whether through choice of invoicing currency, hedging obligations, or adjustment mechanisms.

Representations, Warranties, and Indemnities

The scope and survival periods of representations and warranties vary significantly between common law and civil law jurisdictions. What is customary in an Anglo-American transaction may be unusual or unenforceable in a French, German, or Japanese context. Understanding these differences before signing is essential.

Anti-Corruption and Sanctions Compliance

International commercial agreements often involve counterparties in jurisdictions with heightened corruption risk or sanctions exposure. Robust anti-corruption warranties, compliance representations, and termination rights are essential protective provisions for any business subject to the FCPA, UK Bribery Act, or equivalent legislation.

For expert review and drafting of your international commercial agreements, contact our team.