SaaS vendor contracting under foreign law: risks and safeguards

You are a SaaS vendor. You have found a customer abroad. Everything is going well — the exchanges are fluid, the demonstration convincing. Then the contract arrives.

And there, buried in the terms, a clause catches your attention:

"This agreement shall be governed by the laws of Germany. Any dispute shall be submitted to the courts of Berlin."

Or Belgian law. Or US law. It does not matter. It is not your legal system. And the question arises: should you accept it?

Yes, it is permissible in B2B

Between businesses, you are free to agree on the governing law and the jurisdiction for dispute resolution. Nothing requires French law or French courts. In certain sectors — particularly when dealing with enterprise accounts or international customers — it is common for the customer to impose its own national law.

But this choice is never neutral. It has real consequences. And if you do not anticipate them, you are taking on risk.

What you risk without realising it

Accepting a foreign governing law is not simply changing a few words in the contract. It can fundamentally alter your position:

• You step outside your legal framework. What is valid under French law may be invalid elsewhere. Some jurisdictions regulate liability limitations and termination provisions very differently — or restrict them entirely.
• In the event of a dispute, you are at a disadvantage. You will need to instruct local counsel, often in the local language. You will need to defend your position before a foreign court. Costs, timelines and uncertainty all increase.
• Your standard clauses may become unenforceable. Your template agreement no longer applies as drafted. In some cases, it needs to be entirely rewritten.
• You lose control over local obligations. Limitation periods, liability rules, security requirements, indemnification — these are all areas where material differences exist between legal systems.

The impact on your DPA and GDPR compliance

A frequently overlooked point: when the agreement is governed by non-European law, the question of DPA compliance arises in addition to the governing law of the main contract. The GDPR applies whenever personal data of European residents is processed, regardless of the law governing the contract. But the coexistence of a US-law agreement and a GDPR-compliant DPA can create inconsistencies — particularly regarding data transfer mechanisms, liability provisions and audit rights. You should systematically verify that your DPA remains applicable and consistent with the governing law chosen for the main agreement.

Should you always refuse foreign law?

No. But you should consider the implications carefully. In some cases, you will need to make concessions. That is sometimes the cost of a strategic deal. Here is when it may be acceptable:

• The customer holds a strong negotiating position and will not accept any amendments.
• The contract is short-term, with limited exposure (POC, pilot, trial).
• You are advised by a lawyer who can assess the consequences of the foreign law in question.

In all cases, you need to understand what you are signing.

Practical steps to mitigate the risks

If you must accept foreign governing law, do not do so blindly. Here is what I recommend:

• Have the agreement reviewed by a lawyer familiar with the applicable law. They can identify risks that are not visible on the face of the document.
• Focus on the sensitive provisions: liability limitation, force majeure, termination, limitation periods, indemnification.
• Negotiate the dispute resolution mechanism. Consider a neutral jurisdiction or international arbitration, particularly if you want to avoid litigating abroad.
• Limit your exposure. Be precise about your obligations (obligation of means, not of result), your liability cap and the exclusions.

For a complementary perspective, see my article on adapting a contract to French law. For an overview of the key provisions in a SaaS agreement, see the SaaS contracting guide.

Conclusion

Accepting foreign governing law is not a dealbreaker, but it is a decision that must be made with full awareness of its consequences. The issue is not to refuse on principle, but to assess the impact on your key provisions and your ability to defend your position in the event of a dispute. If you are facing this situation, book a call.

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