Over the past two weeks, I’ve reviewed two non-disclosure agreements (NDAs) for Northern Irish companies that are expanding to the US. I’ve written about NDAs in the past: NDAs and You: Perfect Together. The NDAs were well-drafted, but each contained the same mistake–something I’ve seen more than once: each selected the law of Northern Ireland to govern the NDA. Each company ‘was told’ (I’m not sure by whom) that selecting NI law was appropriate–and to be sure, I’ve seen the same mistake made by Irish companies. On the one hand, there is nothing wrong with selecting NI (or Irish) law to govern a NDA…if you don’t need to enforce that NDA in the US.
Most NDAs will include language that allows the disclosing party to obtain injunctive relief in the event the party receiving the confidential information threatens to disclose/breach the NDA or actually does so. Injunctive relief in the US allows a party to obtain an order requiring the other party to stop doing something or face court sanction; it is, in the most basic sense, a fast (but temporary) resolution to a legal issue that doesn’t require the time or incur the cost of full-blown litigation. But selecting a non-US law to govern an NDA can make enforcing that NDA more difficult than it should be.
Let’s take one of our NI companies–under the NDA, they would be disclosing their confidential information to a potential distributor in Virginia (for example). Therefore, if there is an actual or threatened breach of the NDA, that breach would most likely occur in Virginia. Meaning that the court with appropriate jurisdiction over a potential injunctive relief request also is in Virginia. If the NI company goes to court in Virginia to seek injunctive relief based on the NDA, and the NDA has NI (or Irish) law as the governing law, there is a very real/significant risk that the Virginia court would decline to take action, based on the idea that the Virginia court is not the appropriate venue for matters of NI law. The court could tell the NI party to have the dispute resolved in NI and then take the NI judgment back to the Virginia court to be perfected/enforced.
That’s a lot of time and expense–so much so it destroys the value of the injunctive relief option in the first instance, at least in my view. So, here’s my recommendation- select relevant U.S. law to govern your U.S.-focused NDA. It will make enforcement easier and more predictable.