What legal jurisdiction is best for your software escrow agreement?
Clients often ask us which law is best for their software escrow agreement. To begin with, let’s get a better understanding to the difference between governing law and jurisdiction.
What is a governing law clause?
A software escrow agreement can be formed between companies which operate under different legal systems. The developer may be based in Sweden, the beneficiary in the USA and Escrow London as the escrow provider in the UK. This requires the parties to make an important decision under which legal system the agreement is governed.
A governing clause specifically sets out the choice of law which applies to the agreement, eliminating the need for any dispute around which country’s laws should be used when interpreting the agreement. These types of clauses are standard in all software escrow contracts and are usually found towards the end of the agreement.
What is a jurisdiction clause?
In a software escrow agreement, the governing law clause establishes which country’s laws apply to the agreement. The jurisdiction clause determines which country or state’s courts will hear the case if it ends up in court. For example, an agreement may be governed under the laws of Ireland where the jurisdiction will be in the courts of Dublin.
So how to determine which governing law and jurisdiction is right for your software escrow agreement?
It typically makes sense that if both the depositor and the beneficiary are located within the same country that this country’s laws are defined as the governing law and a court within that country will be listed for jurisdiction. For countries that have a state based legal system, usually the state’s laws are defined as the governing law and a court within that state would be the court of jurisdiction.
Where the depositor and the beneficiary are domiciled in different countries, the location of jurisdiction is usually negotiated between the parties. From our experience, we have found that the laws of England and Wales are often agreed upon as the governing law due to the perceived neutrality of the jurisdiction and the fact that many countries laws are based on English Common Law. Some major countries where the legal system is based on English Common Law include Australia, Canada, Hong Kong, India, The Rep. of Ireland, Northern Ireland, Israel, India, New Zealand, Singapore, South Africa and the USA.
Companies based in the European Union often prefer their agreements to be under the jurisdiction of an EU country. As the UK has left the EU, these companies are seeking alternative jurisdictions and usually nominate the laws of the Republic of Ireland or of the Netherlands for their agreements.
Software escrow agreements under US jurisdiction must accommodate provisions set out in Title 11 of the United States Bankruptcy Code in which the software escrow agreement is considered as supplementary to the license agreement.
Arbitration is typically included within software escrow agreements in order to settle disputes in relation to the trigger event. If the depositor disputes the declared release event, there is a provision set out in the agreement to nominate an arbitrator in a specific country to make a ruling as to whether a trigger event has occurred or not. The arbitrator may be nominated in a different city / country as the country of jurisdiction under the agreement.
Escrow London provides free software escrow agreement templates under most international jurisdictions including England and Wales, United States of America (most states), Canada, Australia, New Zealand, Singapore, Hong Kong and most European countries including Republic of Ireland, Netherlands, Germany, Spain and the Nordics.
Below are some governing law and jurisdiction clauses:
UK / England jurisdiction example:
This Agreement shall be exclusively governed by and construed in accordance with English Law without regard to the provisions regarding conflicts of law. Except as provided in Section 6, any dispute arising under or in relation to this Agreement shall be resolved exclusively by the courts of England, and the parties hereto irrevocably submit to the jurisdiction of such courts for such purposes.
USA jurisdiction example:
This Agreement shall be exclusively governed by and construed in accordance with the laws of the State of New York. Except as provided in Section 6, any dispute arising under or in relation to this Agreement shall be resolved exclusively by the state or federal courts located in New York City, New York, and the parties hereto irrevocably submit to the jurisdiction of such courts for such purposes.
Netherlands jurisdiction example:
This Agreement shall be exclusively governed by and construed in accordance with the laws of The Netherlands without regard to the provisions regarding conflicts of law. Except as provided in Section 6, any dispute arising under or in relation to this Agreement shall be resolved exclusively by a competent court in Amsterdam, and the parties hereto irrevocably submit to the jurisdiction of such courts for such purposes.
About Escrow London
Escrow London provides a range of SaaS and software escrow agreements to companies around the world. Our range of solutions include automated code deposits directly from GitHub and Bitbucket and business continuity within AWS, Microsoft Azure and Google Cloud Platform.
The Escrow London in-house legal team prides itself on their efficient legal process turning around red-line agreements usually during the same business day.
Feel free to contact us to learn more about our services and to request a template agreement under your preferred jurisdiction.