Your business might be working with parties overseas, and you may sometimes need to share confidential information with parties overseas while conducting business.
But when doing so, how do you prevent your confidential information from being distributed? The best way to do this is through a Non-Disclosure Agreement (NDA).
In this article, we’ll take you through the basics of NDAs—what an NDA is, how NDAs are enforced internationally as well as answer other frequently asked questions in regard to enforcing NDAs overseas.
Read along!
What is an NDA?
A Non-Disclosure Agreement (NDA), otherwise known as a confidentiality agreement, is a document designed to protect a business’s confidential information. In essence, NDAs are agreements signed by two or more parties that state that they’re prevented from sharing confidential information with any third parties outside of the business relationship.
NDAs are commonly used by businesses dealing with parties overseas as it’s especially crucial to protect business information internationally. If your business has employees that are located overseas, you should make sure to include clauses in their employment contract outlining the legislation that will govern any breach of an NDA.
For further information about NDAs, you should read our blog about the 10 Things To Know About Non-Disclosure Agreements. Furthermore, you can use our non-disclosure agreement template for your business.
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What are the benefits of using an NDA internationally for your business?
NDAs are often mentioned in the mainstream media as they play a significant role in regard to preventing confidential information from being distributed. With the world becoming a global economy, the use of international NDAs is increasing in popularity, and their use is inevitable for the majority of businesses.
With this in mind, it’s important to recognise the need to protect your information if a breach of an NDA occurs overseas. In relation to breaches of NDAs, you should be aware of the top 5 enforceability issues for NDAs. A common issue that arises with the enforcement of NDAs is jurisdiction issues, and these issues vary depending on which state or country you intend to enforce your NDA.
How are NDAs enforced internationally?
NDAs can be enforced internationally depending on the jurisdiction and the laws that will apply to the NDA. There is a general understanding that each overseas party your business is engaging with will have its own rules and jurisdiction regarding the enforcement of NDAs. Therefore, you need to ensure that your NDA specifies the jurisdiction and the governing law that will be enforcing the NDA.
You should note that the governing law and jurisdiction can be from different countries. For example, you can have an NDA with an overseas party where the governing law is Australian law, but the jurisdiction is New Zealand. In regards to NDAs, the laws governing an NDA is the country’s legislation that applies to the NDA.
Whereas jurisdiction refers to the location of the court hearing if there is a breach of the NDA. It’s generally preferable for Australian law to govern the NDA you have with an overseas party. However, this may not be possible if the overseas party refuses to accept this and they want the NDA to be governed by the legislation of their own country.
Where an overseas party insists that an NDA should be governed by the legislation of their own country, you should attempt to reach an agreement with them to make the jurisdiction Australian.
For example, if you’re doing business with a Singaporean company, the NDA may agree that Singaporean law will apply, but the matter will be ruled by an Australian court as the jurisdiction that has been chosen is Australia’s.
When an NDA is being created, it’s crucial for both parties to have a sufficient understanding of the governing law and jurisdiction to avoid confusion if there is a breach of confidentiality. To simplify matters, parties will typically agree to choose the same jurisdiction and governing law to apply. The advantage of this is that it provides greater certainty of the outcome, convenience and requires fewer hurdles.
However, you should be aware that there’s nothing preventing you from choosing different locations for these two criteria. These two sections of jurisdiction and governing law should be separate and clear. NDAs do this to allow a compromise between international parties if the parties don’t wish to follow only one jurisdiction.
It is important to ensure that lawyers from both jurisdictions have reviewed the NDA and approved its enforcement.
What happens if there is a breach of an NDA?
Arbitration or judgement may be available if an overseas party breaches your NDA. Therefore, if there is a breach, this could require you to pursue action in your jurisdiction and then have the action enforced in the other party’s country as a separate lawsuit.
Despite agreeing to the governing law and jurisdiction that will apply if an NDA is breached, issues can arise between you and the overseas party. In these situations, you can use International Commercial Arbitration to resolve the dispute between your business and the overseas party. This process allows a third party to make an enforceable decision in relation to the dispute between you and the overseas party.
This process is commonly used by Australian businesses that are engaging with overseas parties. This is because decisions made during international commercial arbitration are enforceable across a large number of jurisdictions. Therefore, you should include a clause in your NDA in relation to International Arbitration, and you should include information regarding how an arbitrator will be selected.
You should be aware that any decision made through international arbitration can only be enforced if the overseas party has also signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. You should ensure that the overseas party that you’re engaging with is a part of this award before you include an international arbitration clause in your NDA.
Conclusion
Overseas NDAs are a growing space and require careful inspection before engaging business. The enforcement and remedies available if there is a breach of an NDA will vary depending on the jurisdiction. You should be aware that international litigation can be particularly expensive and time-consuming.
If you’re still unsure about how to enforce an NDA overseas or if you require assistance to create an NDA, you should hire a lawyer. You should also hire a lawyer to ensure that the NDA that you will be using in relation to the overseas party is clear and concise.
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