Cross-Border US-Asia · Memo

Choice-of-Law Clauses for US-Asia SaaS Deals

Choice-of-law clauses in US-Asia SaaS deals carry more freight than counsel often assume. I will walk through the drafting choices, the public-policy carve-outs, and the forum questions that shape what the clause actually does.

A US-headquartered SaaS provider closing a deal with a Singapore-based customer (or Tokyo, Seoul, Hong Kong, Taipei) faces a drafting choice in the governing-law clause that is not academic. The choice affects the substantive contract analysis, the enforceability of clauses that may be permissible under one regime and not another, the recovery mechanics if the customer breaches, and the practical question of where any dispute will actually be resolved.

The candidates

For a US-Asia SaaS deal, the realistic candidates for governing law are: (a) the law of a US state (typically California, Delaware, or New York), (b) the law of the customer's jurisdiction (Singapore, Japan, Korea, etc.), (c) the law of a neutral commercial jurisdiction (England and Wales is the most common; Singapore and Hong Kong also serve this role in Asia), or (d) public international law or trade-usage frameworks (rare in commercial SaaS but seen in certain regulated industries).

The drafting trade-offs:

• US state law. Familiar to the US provider's counsel, well-developed body of SaaS-related decisional law, predictable. Disadvantages: the customer's counsel may not be admitted in the US state, the customer's local regulators may require certain protections that US state law does not provide, and the practical enforcement against the customer's assets in the customer's jurisdiction is harder.
• Customer's jurisdiction law. Favorable to the customer, easier for local-court enforcement, may align with mandatory consumer or data-protection protections in the customer's jurisdiction. Disadvantages: less familiar to the US provider's counsel, possibly more protective of the customer in ways the US provider did not anticipate.
• England and Wales law. The traditional neutral choice for cross-border commercial deals. Well-developed commercial law, sophisticated courts, English-language proceedings. Disadvantages: cost of litigation, the customer's local regulators may still apply mandatory law regardless of choice.
• Singapore law. Increasingly common as a neutral choice for Asia-Pacific deals. Singapore International Commercial Court provides English-language commercial dispute resolution. Singapore International Arbitration Centre is well-regarded.
• Hong Kong law. Less popular than it was a decade ago due to political developments, but still a common choice for deals with mainland China connections.

The public-policy carve-out

Choice-of-law clauses are subject to public-policy limits in every jurisdiction. The customer's local regulators will apply mandatory local law regardless of the contract's choice. For US-Asia SaaS deals, the categories where mandatory local law typically overrides contract choice:

• Consumer protection law (where the customer or end users are consumers).
• Data protection law (Singapore PDPA, Japan APPI, Korea PIPA, mainland China PIPL, Hong Kong PDPO, all impose obligations that cannot be contracted around).
• Tax law (cross-border withholding, VAT/GST/JCT obligations).
• Regulatory law for specific sectors (banking, healthcare, telecom).
• Employment law (where the customer is hiring US-based personnel through the contract).

Counsel drafting the choice-of-law clause should not assume that designating US state law eliminates the customer's local-law exposure. The mandatory local rules will apply to the operational aspects of the deal. The choice-of-law clause governs the contractual analysis (interpretation, breach, damages), not the regulatory overlay.

The forum question

Governing law and forum selection are separate decisions. A contract can specify governing law of California and forum of Singapore (or vice versa). The drafting moves I see:

1. Choice of law plus court-of-jurisdiction forum. The parties choose a US state for governing law and a US court (or the customer's local court) for forum. This works when both parties have meaningful presence in the relevant jurisdictions.
2. Choice of law plus arbitration. The parties choose a US state for governing law and arbitration in a neutral forum (Singapore, Hong Kong, London). This is the more common structure for substantive cross-border deals.
3. Hybrid clause. The parties allow the plaintiff to choose between court and arbitration, or specify different forums for different categories of claims. This can be useful but should be drafted carefully to avoid conflicts.

The arbitration choice has significant practical implications. The New York Convention provides for enforcement of arbitral awards in over one hundred sixty signatory jurisdictions, including the US, Singapore, Japan, Korea, China, India, and most of Europe. Enforcement of a US court judgment in many Asian jurisdictions is more cumbersome and depends on bilateral treaties or local recognition law. For a US provider seeking realistic enforceability against a customer in Asia, arbitration in a New York Convention jurisdiction is often the more practical choice.

The drafting moves I make

For a substantive US-Asia SaaS deal, the choice-of-law/forum structure I commonly draft:

• Governing law: California (or Delaware, depending on the provider's preference). The provider's counsel is familiar with this law, the contract's substantive analysis is predictable.
• Forum: Arbitration under the Singapore International Arbitration Centre rules, seated in Singapore, in English, before three arbitrators. The Singapore arbitration is enforceable globally under the New York Convention and is faster than most national court systems.
• Carve-outs: Either party may seek injunctive relief in any court of competent jurisdiction. This preserves the ability to obtain emergency relief without waiting for the arbitral tribunal to be constituted.
• Mandatory local law: A representation that each party will comply with applicable law in its jurisdiction, with the regulatory overlay treated separately from the contractual analysis.

The Hague Convention overlay

The Hague Convention on Choice of Court Agreements (2005) provides for recognition of judgments rendered by courts designated in exclusive choice-of-court agreements. The US ratified the convention in 2019 and it entered into force in the US in 2022. Singapore, Mexico, and several European jurisdictions are also parties. For deals between parties in Hague Convention jurisdictions, a court-jurisdiction clause may be more enforceable than it was a decade ago. Japan and Korea are not parties (as of the date of this memo), so the Hague Convention does not currently help with judgments rendered between US courts and those jurisdictions. Counsel should track the convention's expanding membership.

The CISG default

One trap for counsel new to cross-border drafting: the UN Convention on Contracts for the International Sale of Goods (CISG) applies by default to contracts for the sale of goods between parties in different contracting states, including the US and many Asian jurisdictions, unless the parties opt out. For SaaS contracts, the goods/services distinction usually places SaaS outside the CISG's scope. But the drafting move is to opt out expressly, with language such as: 'The United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement.' The express opt-out eliminates any uncertainty about CISG application to deliverables that might be characterized as goods.

Practical recommendations

For most US-Asia SaaS deals, the workable structure is California or Delaware governing law, arbitration in Singapore or Hong Kong under SIAC or HKIAC rules, with carve-outs for injunctive relief and an express CISG opt-out. The customer's local mandatory law applies operationally regardless of choice, and the data-protection regime in particular requires substantive engagement.

For deals where the customer is a small business or where the dollar size does not justify arbitration in a neutral forum, an alternative structure is California governing law with California court forum, accepting that practical enforcement against the customer's local assets may be limited. The provider's recovery on a small breach may be the customer's continued ability to pay rather than the judgment itself.

Outcomes in cross-border SaaS disputes depend on the contract's specific drafting, the enforcement mechanics in the relevant jurisdictions, and the parties' practical exposure to each other. The clause that reads identically on paper can produce very different outcomes when activated. Counsel should walk the enforcement path before drafting, not after.

Sergei Tokmakov, Esq., CA Bar #279869. This memo is attorney commentary on legal questions and is not legal advice. Reading it does not create an attorney-client relationship. Past matter outcomes depend on facts and the responding party; nothing here is a prediction of result.