Explainer
Governing Law and Jurisdiction Clauses
The two clauses at the back of every contract that decide whether a dispute is worth pursuing at all.
In short
Governing law decides which body of law interprets the contract. Jurisdiction decides which courts hear the dispute. They are separate choices, both belong in the contract, and neither displaces Australian statutory protections for conduct connected with Australia.
Next step: if you are signing an overseas supplier's terms, have the dispute clauses read before you sign. Ask us to review them.
These two clauses sit at the back of the contract, get skimmed, and then decide everything about whether a dispute is worth pursuing. A perfectly drafted agreement that funnels you into a court on the other side of the world is, commercially, an unenforceable agreement.
Two different questions
| Clause | Question it answers | Typical wording |
|---|---|---|
| Governing law | Whose law interprets this contract? | "This agreement is governed by the laws of New South Wales." |
| Jurisdiction | Whose courts hear a dispute? | "The parties submit to the exclusive jurisdiction of the courts of New South Wales." |
They usually match, and they should unless there is a deliberate reason not to. A contract governed by Singapore law but litigated in Sydney means an Australian court receiving expert evidence on Singapore law — slow and expensive.
Exclusive vs non-exclusive jurisdiction
- Exclusive — both parties agree to litigate only in the nominated courts. Predictable, and it prevents the other side opening a second front elsewhere.
- Non-exclusive — the nominated courts are available but not compulsory. This sounds flexible and usually favours the stronger party, who can pick the venue that suits them.
If you are the smaller party, exclusive jurisdiction in your own state is normally the better outcome. Non-exclusive wording means you could be sued anywhere the other side can establish a connection.
What these clauses cannot do
A governing law clause is not a way out of Australian statute. Where conduct is connected with Australia, protections such as the consumer guarantees and the unfair contract terms regime can apply regardless of the law nominated in the document. The High Court confirmed the point in Karpik v Carnival plc, where a class action waiver in terms nominating US law was held unfair and void.
Other things a foreign law clause will not displace:
- The misleading and deceptive conduct provisions of the Australian Consumer Law
- Australian employment entitlements for work performed in Australia — see the National Employment Standards
- Australian privacy obligations for handling the personal information of Australians
- Mandatory industry codes that apply by force of statute, such as the franchising code
Practical positions to take
- Default: the law and courts of the state where your business actually operates.
- Interstate counterparty: either state is workable. Australian contract law is substantially uniform, so the argument is about travel and lawyers, not outcomes. Trade it for something you care about more.
- Overseas counterparty, low value: push for Australia; if you cannot get it, price the risk in and accept that enforcement may be impractical.
- Overseas counterparty, high value: consider arbitration seated in Australia or Singapore. Arbitral awards are enforceable across most trading nations under the New York Convention, often more readily than a foreign court judgment.
- Always: check whether the clause also tries to waive class actions, impose a short claim deadline, or require notice in an impractical form.
Where this bites in real deals
Software and SaaS subscriptions from overseas vendors, offshore development and outsourcing agreements, international distribution and reseller terms, equipment supply from overseas manufacturers, and payment platform terms. In each case the dispute clause is usually presented as non-negotiable boilerplate — and is more often negotiable than the counterparty's sales team suggests. See business contracts and SaaS terms of service.
Frequently asked questions
Do I need both clauses?
Yes. Naming the law but not the courts leaves the venue to be fought over later, which is exactly the fight you wanted to avoid.
Which Australian state is best?
Where you operate. The substantive law is very similar across states; the difference is cost and convenience.
What if the contract is silent?
A court applies conflict of laws rules to work out the proper law and whether it is the appropriate forum. That is an expensive preliminary argument before anyone reaches the merits.
Is arbitration better than court?
For cross-border contracts it often is, because awards are widely enforceable. For domestic contracts, courts are usually cheaper and faster.
Can I be sued overseas despite an Australian jurisdiction clause?
Proceedings can be started, but an exclusive Australian jurisdiction clause gives you strong grounds to have them stayed. Get advice immediately rather than ignoring the papers.
Two ways to start
Get a fixed fee before any work starts.
Answer a few short questions, attach your documents if you have them, and a senior lawyer replies with the scope and the price.
Know what you need? Request a fixed-fee quote and upload your documents. Not sure of scope? Book a short call with a senior lawyer instead.