How do you decide on which country to have the jurisdiction in when licensing software to international companies?

Hi, We are licensing some software for internal purposes to a company in Germany. The German company wants to have the jurisdiction in Germany in case we have to go to court; I want to have the jurisdiction in the US. 1) What can be a good argument to have the jurisdiction in the US (e.g., I do not speak German)? 2) if there is a problem, and I do not show up in the court in Germany and I do not pay the fine. Can this be enforced in the US? Can I get in trouble if I want to operate our company in Germany? How these situations are resolved? Thanks!


I'm not an expert on German law, so please take everything with a grain of salt.

This is never an easy issue because there aren't many persuasive arguments on either side. What usually ends up happening is that the parties defer to a neutral jurisdiction, typically New York law/New York courts or English Law/London courts. The reason being that most major companies worldwide usually have some nexus to either New York or London, so it's something they can agree to.

Your best argument for requesting US law is that you are a US company, and the fact that most German companies are still sometimes subject to US law. (Many online companies offer only US terms and conditions, so German companies just have to agree to it sometimes.)

I would avoid at all costs agreeing to German law or jurisdiction. Civil law (Europe) is very different than common law (England, US, Canada, Australia etc.) both in terms of the law and procedures. If they won't agree to New York, then push England. If that fails, then delete the governing law provision altogether and you can fight it out if and when a situation in which matters arises.

To answer your second question, if you agree to German law and a judgment is rendered against you: (1) having a German judgment against you if you don't have any assets in Germany is a bit useless, as there is nothing to seize if you refuse to pay. They can seek to have the judgment recognized in US courts. This is an expensive process and most companies won't go through the effort because effectively they have to relitigate the matter in the US to get the enforcement order. However, they can do so if they are so inclined. (2) If a judgment is rendered against your company, then my presumption is that as a director or officer, you can encounter issues in Germany if you ever try to enter. This is where I'm least knowledgeable but I'd guess that if a judgement of a court is ignored, then eventually the directors and officers can be subject to criminal proceedings for contempt. If that happens, you could be arrested in Germany if you ever try to enter. I'm just guessing at that last part, but you don't want to go down that road, even if I'm entirely wrong.


Answered 10 years ago

I am a corporate and IP lawyer in Israel and I represented Israeli and US companies that had businesses all over the world including in places like Croatia, Germany, India etc.
I cannot answer questions with respect to the laws of the US or Germany, but I can tell you what we did in my firm in similar cases:
The most common solution is to find a third country that will be "equally bad" for litigation for both parties, usually we picked the UK.
Another solution is to say that if the German side is suing, it must do it in the US and vise versa - if the American company is suing, it must do it in Germany.
You can also determine that no courts will be involved and you will settle all disputes in an arbitration. There are a lot of options here, you just need to be creative.
If you have followup questions, please give me a call and I will be happy to help in the limitations mentioned above.

Answered 9 years ago

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