How to Enforce International Business Contracts in New York

Without an express choice of law clause, a court will apply conflict-of-laws rules to determine which jurisdiction's substantive law controls, and this determination is unpredictable; from my experience, I have seen this threshold dispute consume more time and money than the underlying merits of the claim itself. The UCC governs commercial contracts in U.S. .tates, but it does not apply internationally unless explicitly incorporated, and many civil-law jurisdictions instead follow the CISG, which has different rules on offer, acceptance, and remedies. Specifying governing law is not optional; it is foundational to the enforceability of international business contracts, as our International Business Contracts guide discusses in detail.

Arbitration is often preferred because arbitral awards are more readily enforceable across borders under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which over 170 countries have ratified. Litigation in national courts creates a different problem: a judgment from the Southern District of New York cannot automatically be enforced in Singapore or Germany, but requires a separate recognition proceeding wherever the debtor holds assets. Arbitration bypasses much of this friction, though it carries real trade-offs in discovery scope, appeal rights, and arbitrator cost that must factor into your decision.

Letters of credit, documentary collections, and escrow each allocate payment risk differently, and the right choice depends on which party bears the greater credit risk of the other's default. The key differences are:

• Letter of credit: Bank pays seller on document presentation, independent of any buyer dispute. Protects the seller; buyer bears issuance fee.
• Documentary collection: Bank releases shipping documents upon payment or draft acceptance. Less expensive, but if the buyer refuses, the seller must reship or store goods at additional cost.
• Escrow: Neutral party holds funds until performance is confirmed. Disputes over release conditions frequently generate separate litigation.

If the contract price is stated in a foreign currency but your costs are in U.S. .ollars, exchange rate movements can materially affect the deal's economics before payment arrives. A currency adjustment clause (CAC) adjusts the price if the rate moves beyond a specified band, while locking in a specific currency and payment date eliminates the exposure entirely. For transactions with long lead times, hedging through forward contracts or options may be necessary, though it adds its own administrative complexity.

New York courts, particularly the Commercial Division of the New York Supreme Court, enforce international business contracts as written unless an agreement violates public policy or is unconscionable, and this predictability is a primary reason why international parties commonly designate New York as their forum. However, a New York judgment is only half the challenge: enforcing it against a foreign defendant requires locating U.S. .ssets or initiating recognition proceedings in the defendant's home country, and if neither condition is met, the judgment may be practically worthless. An arbitral award under the New York Convention is far more likely to be recognized and enforced abroad, and our International Dispute Resolution team helps clients evaluate this trade-off at the contracting stage, before a dispute forces the decision.

A well-structured international business contract addresses six core risk categories, each a negotiated allocation of risk that, if omitted, leaves an ambiguity for courts or arbitrators to fill in ways neither party anticipated. See our International Business Contracts resource for a full analysis of how these provisions interact with your enforcement strategy.

Damages are the default remedy for breach, but they are difficult to prove and enforce across borders. Consider negotiating liquidated damages clauses for predictable recovery, retention of title clauses for protection against buyer insolvency, and pre-dispute negotiation clauses to reduce costs before arbitration begins. Our Breach of Contract Litigation team advises clients on which remedies are realistically enforceable given the counterparty's jurisdiction and asset profile.

As you finalize negotiations, prioritize three steps: select governing law and dispute forum before negotiations begin; structure payment terms to match your credit risk tolerance, using letters of credit or escrow for unfamiliar counterparties; and have your attorney review the draft for ambiguities in performance standards, force majeure scope, and liability caps before you sign.