Kyusung Lee Attorney at Law

A Practical Guide to Governing Law in International Contracts

Hello, I’m Attorney Kyusung Lee, a Korean-licensed lawyer specializing in international contracts and startup law.

When foreign companies sign contracts with Korean partners, they typically scrutinize payment terms and scope of work — but the Governing Law clause often goes unnoticed.

In practice, I have seen a single governing law clause completely change the outcome of a contract dispute. This post explains why it matters and what you can do about it.

Why Choose a Lawyer Who Understands Both Worlds?

A brief note on my background:

🎓 The Hotchkiss School (Connecticut, USA) 🎓 Brown University — Economics, Honors Graduate (Ivy League) 💼 Merrill Lynch (US investment bank) — early career ⚖️ Samsung Group Legal Team 📋 Korean Bar Association — Registered Startup Law Specialist

Having lived and worked in English-speaking environments, I understand not only Korean law but also the international business practices and legal conventions your counterparts operate under.

What Is “Governing Law” in an International Contract?

When two Korean companies have a dispute, Korean law automatically applies. But when the parties are from different countries, it’s a different story.

The Governing Law clause determines which country’s legal system will be used to interpret and enforce the contract. In international agreements, the parties typically choose one of the following:

• The law of the Korean party’s country
• The law of the foreign party’s country
• The law of a neutral third country

Why Does Governing Law Matter So Much?

The same contract language can produce completely different outcomes depending on which country’s law applies. Key issues that vary by jurisdiction include:

• Scope of damages recoverable • Whether termination rights are enforceable • Validity of limitation-of-liability clauses • Standards for breach of contract

In short: choosing the right governing law can be the difference between a contract that protects you and one that works against you.

How Is Governing Law Determined?

The Default: Agreement Between the Parties

Most international contracts allow the parties to freely choose the governing law. Korean law, the foreign party’s law, or the law of a neutral third country are all permissible.

Why Korean Law Is Usually Preferable for Korean Parties

Agreeing to a foreign governing law creates significant practical risks:

• Difficulty accurately understanding the applicable foreign statutes
• Limited knowledge of foreign case law and practice norms
• Higher costs and complexity in overseas litigation or arbitration

For these reasons, negotiating for Korean law as the governing law is typically the safest approach — and having a lawyer involved makes this negotiation far more effective.

⚠️ What If the Contract Has No Governing Law Clause?   If the contract is silent on governing law, it will be determined under private international law (Korean Act on Private International Law), taking into account factors such as the place of contracting, place of performance, and domicile of the parties.   This can make disputes significantly more complex and unpredictable.   ✔ Always include an explicit governing law clause in your international contracts.

What If You’re Stuck with an Unfavorable Governing Law?

If you have already agreed to a governing law that puts you at a disadvantage, there are still practical options:

📌 Incorporate ICC Incoterms for specific trade-related obligations 📌 Elect application of CISG (UN Convention on Contracts for International Sale of Goods) for specific issues   By applying internationally recognized frameworks to specific issues (shipping terms, risk allocation, damage scope), you can partially offset the disadvantages of an unfavorable governing law.

Theory vs. Practice: The Real Challenge of International Contracts

Understanding governing law in theory is very different from knowing how to apply it correctly in a contract. English-language contracts require simultaneous mastery of:

✔ Korean law ✔ English legal language ✔ International business practice   Without all three, even a well-intentioned contract can create serious legal exposure.

Before signing any international contract, it is strongly advisable to consult with a qualified attorney rather than relying solely on in-house review.

📞 Consultation: International Contracts & English-Language Agreements Attorney Kyusung Lee (Direct): 02-6264-7604 Email: kyusungii@gmail.com Website: http://www.kyusunglee.com

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