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Enforcing NDAs in International Transactions

Practical Insights

May 23, 2022

 

Non-Disclosure Agreements, or NDAs, are intended and designed to assure the confidentiality of shared proprietary information. Confidential information disclosed without an NDA in place raises the risk of misappropriation. This risk is especially heightened when dealing with foreign counterparties given the legal and practical challenges of enforcing rights against them. So how can you best structure an NDA to assure its enforceability against a foreign counterparty?

Will Your Standard Form of NDA Work?

'confidential' stamp imprintYour standard form of NDA most likely provides for the law of your local jurisdiction to apply and for any dispute to be resolved in the local or federal courts in that jurisdiction- that makes sense, right? You want home court advantage when enforcing your rights and in particular the ability to obtain injunctive relief at the earliest opportunity. But if you are dealing with a foreign entity, say a prospective co-manufacturer or licensee in China, with no offices, activities or assets in the United States, can you enforce the NDA in the U.S.? Under this scenario you will likely have to bring an action in your preferred jurisdiction, obtain a judgment, and then take it to a foreign court for enforcement, where the outcome and timing are unclear.

Establishing an Effective Enforcement Strategy in your NDA

So if you are dealing with a foreign counterparty with few contacts to the United States, there are a number of good reasons to consider international arbitration as an effective enforcement alternative.

  • Enforcement by International Treaty. Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Arbitration Convention, contracting states must recognize and enforce foreign arbitral awards in the same way they do domestic awards, with certain limited exceptions. With over 150 signed parties, the New York Arbitration Convention gives foreign arbitration awards recognition as enforceable judgments in national courts.
  • Choice of Arbitral Tribunals. There are any number of internationally accepted arbitral tribunals to choose from depending on where you are doing business:
    • United States – JAMS: Mediation, Arbitration and ADR Services

      Paris – International Court of the International Chamber of Commerce (ICC)

      London – London International Court of Arbitration (LCIA)

      Singapore – Singapore International Arbitration Centre (SIAC)

      Hong Kong – Hong Kong International Arbitration Centre (HKIAC)

    Many of these tribunals have offices in various locations.
  • Governing Law and Venue Flexibility. Arbitration will also give you the flexibility to establish the choice of law you prefer, where the arbitration will occur, and which tribunal will govern. For instance, the clause could provide for California law to apply in an arbitration conducted in South Korea under arbitration rules of the Singapore International Arbitration Centre. In many cases you will need this kind of flexibility when negotiating with a sophisticated foreign counterparty.
  • Availability of Equitable Relief. Arbitrators can award injunctive relief and other provisional relief when properly authorized. Unlike a court of law, however, which derives its equitable powers from the government it serves, an arbitrator has no inherent right to grant equitable relief. Instead, these powers are conferred on an arbitrator or tribunal by the arbitration clause included in your NDA. For this reason, an arbitration clause intended for use in an NDA needs to be carefully crafted to assure the arbitrator is given the powers it needs to provide the remedies you will likely seek. Even if you are awarded injunctive relief by an arbitrator, there is a risk the public policies of the laws of the country in which you are seeking enforcement may preclude or limit enforcement of the injunctive relief.

For more information, please contact:

David Longinotti

415-995-5041 Direct Phone
415-995-3481 Fax

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