Ensuring Enforceable Cross-Border Contracts When Expanding Abroad

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
4.5.2026 | ARROWS law firm

If you plan to expand your business into foreign markets, the legal protection of your obligations changes fundamentally. This article will guide you through how to ensure the enforceability of contracts, address legal obstacles, and build stability in countries where you do not know the local rules. Understanding the basic elements of the international legal framework will protect you from financial losses and legal disputes that can block export transactions for months or even years.

The illustrative image shows a lawyer consulting on the enforceability of contracts abroad.

Why the international legal environment differs fundamentally from the domestic market

When a business exports goods or services, it finds itself in a situation where the Czech legal system of the Czech Republic is no longer an automatic safeguard. A foreign business partner operates under a different legal system, follows different laws, and in the event of a dispute your case would be decided by a foreign court or arbitration under their rules.

One of the most common mistakes exporters make is assuming that they can agree things as they would at home—that once they agree on the price, they are done. In reality, the opposite is true. The larger and more valuable the transaction, the more crucial the legal details become.

The key difference lies in the choice of law and jurisdiction ( choice of law and jurisdiction ), which determine which laws will interpret the contract and which court or arbitral tribunal will decide. This is not a formality—it is what, in practice, determines whether you will be able to enforce payment, or whether you will spend years grappling with a foreign legal system and court proceedings you do not know at all.

The attorneys at ARROWS, a Prague-based law firm, know their way around these situations—we understand how to structure an international contract properly and how to prevent you from ending up in a legal trap you unintentionally set for yourself.

Legal framework of international trade: how cross-border contracts work

International trade is governed by several layers of the legal system. To understand the complexity, imagine three layers:

Domestic laws of both countries form the first layer of the legal framework. If you export to Germany, you cannot ignore German commercial law. If you export to Singapore, the sale is governed by Singapore law. Each country has its own rules on contract formation, liability for defects, time limits, and penalties.

The second layer consists of international conventions and standards. There are multinational agreements involving dozens of countries. The best known is the CISG (Convention on Contracts for the International Sale of Goods – the Vienna Convention on the International Sale of Goods).

This convention applies automatically to the sale of goods between traders from different countries unless the parties expressly state otherwise in the agreement. It contains rules on contract formation, making and accepting offers, liability for defects, and withdrawal from the contract.

The third layer is the contractual choice of law. Both parties may choose for themselves which legal system will apply. Typically, the law of a legally developed jurisdiction is chosen—for example, English law (common law), Swiss law, or the law of the Czech Republic.

The key point is that you must expressly agree this in the contract text. If you do not, the applicable law will be determined under private international law rules (e.g., under the Rome I Regulation for contractual obligations), which often follow the place of characteristic performance or the seller’s seat—something that may not always be advantageous for you.

The fourth layer is the choice between arbitration and state courts. If the parties agree on arbitration, the dispute is not decided by a state court but by a private arbitrator or tribunal. Arbitration is usually faster, more discreet, and its awards are more readily enforceable abroad thanks to the 1958 New York Convention, which has been signed by many countries worldwide.

The attorneys at ARROWS understand how to connect these layers correctly so that your contract is enforceable where you need it.

Most common questions on the legal framework of international trade

1. What happens if we do not specify in an international contract which law will apply?
    The court or arbitrator will then apply the relevant private international law rules to determine the applicable law (e.g., in the EU under the Rome I Regulation for contractual obligations). This means that, in practice, a law you did not plan for—and did not anticipate—may apply. This determination is not automatic and can lead to complex legal disputes. The attorneys at ARROWS can revise your contract so that the choice of law is clear and leaves no room for surprises.

2. Is the CISG mandatory? Do we have to use it?The Czech Republic is a contracting state to the CISG, so it applies automatically to the sale of goods between traders unless it is expressly excluded. If you sell machinery or materials to a foreign business partner, the CISG will apply by default—unless you state otherwise in the contract. In many cases, it is better to exclude the CISG and choose a specific legal system that better fits your needs.

3. Where is a dispute resolved if the parties do not agree on the choice of court?
    If this is not unified in the contract, in the EU the rules set out in Regulation (EU) No 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels I bis Regulation”) apply. Generally, the competent court is the court in the country where the defendant has its seat. For contractual obligations, there are special rules, for example at the place where the obligation that is the subject of the claim was to be performed.
    However, it is certainly not an automatic jurisdiction of the court in the claimant’s country unless the parties agree otherwise. This may be disadvantageous for you—one of the reasons to have a clear arbitration clause in an international contract is precisely that you determine the place and rules of decision-making yourselves. The attorneys at ARROWS can help you prepare the contract so that these threats move from paper into practical protection.

Enforceability of obligations abroad: from contract to court resolution

Having a contract is not the same as having payment secured. Enforceability is a long road.

Imagine the situation: You exported goods worth CZK 500,000 to Poland. The business partner took the goods but does not pay. You have a contract. What now?

The first step is reminders and negotiations. Usually, it starts with a payment reminder and negotiations. Without a written demand for payment with a deadline, you will not get any further.

The second step is dispute resolution. Now you choose: a) Will you go to a Polish court? That means you will conduct court proceedings in Poland under Polish rules. It takes months to years. You must hire a Polish lawyer.

Or b) Will you go to arbitration, if you agreed it in the contract? Arbitration is usually faster (months instead of years), but it also tends to be more expensive.

The third step is a court judgment or arbitral award. When you win, you have a decision. But that is still not payment. The decision only gives you the right to enforcement.

The fourth step is enforcement and debt recovery. You now need to enforce the decision in the debtor’s country. This means starting the process again—this time, however, you are the party with an enforceable decision. In the EU, this is relatively straightforward thanks to the Brussels I bis Regulation and other EU regulations that facilitate the recognition and enforcement of judgments, but in countries outside the EU it can be complicated.

In some countries, you must initiate court proceedings again (so-called exequatur proceedings) so that the local court recognises your foreign decision, and only then can you enforce it.

This entire journey takes months, sometimes years, and costs you thousands or tens of thousands of Czech crowns in legal fees.

That is why prevention is 100% better than dealing with the consequences. A properly structured international contract with a clear arbitration clause, well-designed contractual penalties, and regular monitoring of repayments will save you all of this pain. Lawyers from ARROWS advokátní kancelář help exporters precisely with this prevention—we structure contracts so that they are enforceable and so that the debtor is discouraged from defaulting.

Vetting a foreign business partner: what you need to know before you commit

Recently, the owner of an engineering company contacted us as he was about to ship goods worth CZK 2 million to a Turkish company. The Turkish company offered him a decent volume and long-term cooperation. The owner was excited. Fortunately, he approached us before signing the contract.

We requested basic information about the Turkish company. We found that the company was not legally or financially stable— it was not properly registered in the commercial register, it had no verified set of accounts, and the owner had been through several bankruptcies in the past. The owner would have shipped goods to an unknown entity with no certainty of getting his money back.

This is a typical scenario when a business partner is not vetted thoroughly enough.

Here is an overview of what you need to find out about a foreign partner:

  • Legal existence and registration: Is it a real legal entity registered in its country’s commercial register? In the EU, registers are generally accessible; outside the EU it is often more difficult.
  • Financial health: Are there any enforcement proceedings against the debtor? Are insolvency proceedings pending? Has it sold off its key assets? You need to find all of this out.
  • History and reputation: Has the company been involved in legal disputes? Are there court decisions against it? What is its reputation in the industry?
  • Ownership structure: Who owns the company? Is it a person or entity on sanctions lists or linked to high-risk jurisdictions?
  • Contractual capacity: Is it authorised to enter into contracts in the relevant sector? Is it subject to a regime requiring special permits?

In the EU, there are public registers that are often available online. In countries outside the EU, it is more complex and you usually need to hire a local lawyer to obtain the information for you.

ARROWS lawyers understand how business partners are vetted in different countries and how to interpret the information obtained. We can provide you with a basic legal due diligence review of your partner so that you do not face unforeseen issues.

Frequently asked questions about vetting a foreign business partner

1. Is it enough to obtain a credit report on the partner?
    A credit report gives you an overview of financial health, but not of legal risks and complete registration information. You should also find out whether the partner is involved in court disputes, whether it has unpaid fines, whether enforcement proceedings are pending against it, or whether it has been involved in insolvency proceedings. ARROWS lawyers can obtain a legal profile of the partner that provides a more comprehensive view.

2. What if, during the transaction, I find out that the information about the partner was false?
    If the partner company concealed or provided untrue information about its legal situation, you have a legal claim for compensation, but you must assert it and, as a rule, prove it in court proceedings. This can be complicated. It is better to have a solid contract that includes representations and warranties from the partner regarding its legal status.

3. As a small company, I can’t afford legal due diligence on every partner. How do others handle this?
    Many companies use rating services that aggregate publicly available information. But for larger transactions, proper legal due diligence is worth it. ARROWS lawyers offer simple and efficient legal due diligence on partners, which you can incorporate even into smaller projects without major costs. Contact office@arws.cz and we will explain the different options.

Arbitration vs. state courts: how to choose the right solution

In international trade, you will often face the question: should we choose arbitration or state courts?

This is not a minor detail. It is a fundamental choice that can cost you millions of Czech crowns and months of time.

Arbitration has the following characteristics:

  • It is usually faster (a decision is issued within months up to one year).
  • It is more discreet—the process and the decision are not public.
  • The decision is easier to enforce abroad thanks to the New York Convention.
  • It is generally more expensive (you must pay the arbitrators, venue rental, and an administrative fee).
  • You have limited appeal options—the decision is practically final.
  • You can choose an arbitrator with expertise in the relevant field (technical, commercial, legal).

State courts are characterised by these aspects:

  • They usually take a long time (one to three years, sometimes longer).
  • They are public—records are often accessible.
  • Appeal mechanisms are available, so you have more chances to overturn the outcome.
  • They usually cost less at the outset, but the duration may surprise you.
  • They are tied to the local legal tradition and language—if you have limited knowledge of local law, you are at a disadvantage.
  • Enforceability of the decision depends on the local enforcement system.

For exporters, arbitration is usually more suitable for higher-value transactions. Arbitration is advantageous for exporters because you can choose the seat (often neutral, such as Zurich, London, or Stockholm), you can choose the arbitrator, and the decision is more readily enforceable abroad.

Lawyers from ARROWS advokátní kancelář will help you set up the contract correctly— with a clear arbitration clause, identification of the arbitration rules (e.g., ICC Arbitration Rules, UNCITRAL Rules), and a definition of jurisdiction.

Security and insurance in international trade: how to protect against risk

Exporting goods worth millions means bearing risks. Not all of them can be solved legally—you need to insure against them or otherwise secure coverage.

Export credit and export insurance are key. State agencies in the Czech Republic—specifically the Czech Export Bank (ČEB)—provide financial services, and the Export Guarantee and Insurance Corporation (EGAP) offers export insurance to protect you against the risk that a foreign partner fails to pay, as well as against political and war risks in the destination country. This is very valuable for a large exporter—you have certainty of repayment even if something goes wrong.

Bank guarantees and letters of credit: If you want to secure payment, you can have your partner’s bank issue a bank guarantee or agree on payment via a letter of credit. This means it is the bank that undertakes to pay you, not the business partner. This increases your security.

Product liability insurance is also important. If you export goods that could cause damage to a third party (for example, a machine with a technical defect), you must have product liability insurance. In many countries, this is mandatory.

Insurance for goods in transit: Goods are at risk during transport – they may spoil, be lost, or be damaged. The carrier usually bears only limited liability. Therefore, you should arrange insurance for the goods (cargo insurance).

The lawyers at ARROWS advokátní kancelář understand how to properly structure insurance and which legal clauses your insurance contract should contain so that you are truly protected. Insurance without the correct legal structure may not help you in the event of a dispute.

International regulation and compliance: customs duties, taxes, embargoes

When you export goods, your legal tasks are not finished. You must comply with a number of administrative obligations:

It is necessary to comply with customs regulations and proper classification. Goods must be correctly classified under the Harmonized Commodity Description and Coding System (HS codes). Incorrect classification exposes you to fines and detention of the goods.

Taxes and VAT: In the EU, the supply of goods to another EU Member State or export outside the EU is exempt from VAT provided certain conditions are met – but you must meet them and properly document them. If you neglect this, the Financial Administration may assess VAT retroactively and impose a penalty.

It is also important to monitor embargoes and controls. If you export to certain countries (for example, Russia, Iran, North Korea), you must comply with international embargoes and sanctions. Breaching an embargo exposes you to substantial fines and criminal liability.

Export control goods: Certain goods (dual-use items, military technologies) are subject to export controls and require a permit. If you export something that requires a licence without having one, you face legal sanctions.

Also pay attention to GDPR and data protection. If you export and share customer data with a foreign partner, you must comply with the GDPR or local data protection rules.

These are all matters that are not legally trivial, and non-compliance can cost you thousands to millions of Czech crowns.

The lawyers at ARROWS are experienced in exporter compliance and will help you set up internal processes so that you are not caught off guard by an inspection by the Financial Administration, the Customs Administration, or export control authorities.

Most common questions on international regulation and compliance

1. To whom do I report the export of goods, and what obligations do I have?
    If you supply goods to another EU Member State (so-called intra-Community supply), you must report it in your VAT return and in the recapitulative statement. If you export goods outside the EU, you report it to the Customs Administration as part of the customs procedure.
    The key point is that you must have documentation proving that the goods actually left. The lawyers at ARROWS will help you set up internal processes so that you always have supporting documents and the risk of inspections by the Financial Administration is minimal.

2. What happens if we export goods that are subject to an embargo?
    This is a very serious breach of regulations and may be classified as a criminal offence. You face a fine, seizure of the goods, and potentially criminal liability for the responsible persons. An obligation is an obligation strictly – “I didn’t know” usually will not save you. This is one of the reasons why a major exporter should retain a lawyer to oversee compliance.

3. Do I have to hire a local lawyer in every country I export to?
    Not always, but for larger transactions it pays off. A local lawyer will explain local laws, the tax regime, regulation, and common business practices. ARROWS advokátní kancelář, through the ARROWS International network, can reach out to local lawyers in various countries to arrange consultations and support for your expansion. Contact office@arws.cz and ask how it works.

Structure of an international commercial contract: what it must include

A properly structured international contract should include the following key provisions:

  • Parties and their registered offices: They must be clearly identified with their official registered office address and legal form (GmbH, Ltd., s.r.o., etc.).
  • Subject matter and specifications: What exactly is being sold? What parameters must it meet? What is considered compliance?
  • Price and payment terms: What is the price? What is the method and deadline for payment? Can the price be changed? What if there is a delay?
  • Delivery and risk: When and where will the goods be handed over? Who will bear the risk in transit? This is usually governed by .
  • Liability for defects: For how long is the seller obliged to guarantee quality? What remedies are available? Can the buyer return the goods?
  • Choice of law: Which national law will govern the interpretation of the contract? Typically English, Swiss, German, or Czech.
  • Dispute resolution: Arbitration or state courts? Which arbitration rules? Where will the matter be resolved?
  • Liability and mandatory insurance: What liability does the seller have for damages? What scope of insurance?
  • Confidentiality and intellectual property: If the contract includes licensing elements or confidential know-how, this must be clearly defined.
  • Boilerplate provisions: How can the contract be amended? How long does it last? How is it terminated? What if force majeure occurs (war, pandemic)?

A contract that lacks these elements can only be treated as a preliminary agreement, not as a legally binding commitment. In the event of discrepancies, you lack a legal basis and both parties can simply interpret the agreement in their own way.

The lawyers at ARROWS advokátní kancelář will prepare international commercial contracts for you that cover all of these elements and provide you with legal certainty.

Potential issues

How ARROWS helps (office@arws.cz)

No specified choice of law and court jurisdiction: A dispute over which law applies drags on for months, and you are left in uncertainty.

We will ensure your contract explicitly specifies the governing law (e.g., Czech, English, or Swiss) and the dispute resolution mechanism (arbitration, court jurisdiction). If a dispute arises, you will have a clear roadmap.

Lack of knowledge of the foreign partner’s financial or legal situation: You shipped the goods and are now finding out the partner is on the verge of insolvency.

We will arrange legal due diligence of the foreign business partner, including a review of legal history, financial health, and reputation. We will flag risks before you commit.

Invalid or unenforceable arbitration clause: You chose arbitration, but when a dispute arises, the parties argue over whether the clause is legally binding at all.

We will set up your arbitration clause in line with top international practice (ICC, UNCITRAL or LCIA Arbitration Rules) so that it is enforceable in any country.

Problems enforcing a decision abroad: You have a decision against a foreign debtor, but you have no way to enforce it. They hide behind local laws.

We will secure representation for you in the recognition and enforcement of a foreign decision, and coordinate with local enforcement officers and lawyers so you can pursue the debtor even abroad.

Non-compliance with compliance and regulation (customs, taxes, embargoes, export controls): The tax authority or customs administration imposes a fine because you breached a regulation you were not aware of.

We will conduct a compliance audit of your export process, set up internal procedures, and train your teams so that you remain compliant with Czech legislation and the laws of the destination country.

Final summary

Export trade brings opportunity, but also legal complexity that cannot be ignored. Properly structured legal protection is not a cost—it is an investment in the security of your transactions and assets.

Key points you should focus on:

  • Every international contract must clearly specify the choice of law and the dispute resolution method. Without this, you end up in legal uncertainty when problems arise.
  • Due diligence of a foreign business partner is essential. If millions are at stake, you should know who you are dealing with.
  • Arbitration is usually more suitable for exporters than state courts – it is faster and more readily enforceable abroad.
  • Compliance (customs, taxes, embargoes, export controls) is not a formality – breaches can lead to fines and criminal liability.
  • Insurance and security (export insurance, bank guarantees, cargo insurance) protect you against risks that cannot be solved purely through legal means.

If you are dealing with these issues or planning to expand abroad, it will not be just about legal templates—it will be about the future of your business. Our attorneys in Prague at ARROWS have deep experience in international trade and can help you not only draft contracts, but also set up the entire legal framework for your export activities.

Contact us at office@arws.cz – we will advise you on which steps are most important for your situation.

Frequently asked questions on legal stability and enforceability in international trade

1. Should our international contract include an arbitration clause even if it is not clear that a dispute will arise?
    Yes. An arbitration clause is a safeguard. If you do not have one and a dispute arises, you may have no way to add it (because both parties must agree). If you include an arbitration clause upfront, you have certainty that any dispute will be resolved quickly, discreetly, and in a way that is enforceable abroad. ARROWS attorneys can help you draft it properly so that it is recognized in every country.

2. How does enforceability of decisions differ within the EU and outside it?
    Within the EU, ordinary court judgments are enforced under the Brussels I bis Regulation—an application for recognition and enforcement is simply filed in the country where the debtor has assets, and the court will recognize it if the conditions are met.
    Outside the EU, it is more complicated—you need to obtain “exequatur” (recognition and enforcement), which may involve new court proceedings. That is why arbitration is often better outside the EU, because it is governed by the New York Convention (signed by more than 170 countries) and is easier to enforce.

3. What if I export and the partner comes to me saying they want to return the goods because they claim they are defective?
    In the EU, consumer protection law applies automatically (if the partner is a consumer); otherwise, the law designated by the contract applies, or subsidiarily the CISG or private international law rules. You must distinguish whether it is truly a defect or simply a change of mind.
    The contract should clearly define what is considered a defect, how long the buyer has to make a claim, and what remedies are available to you. Without this in the contract, you have a problem—the partner may interpret the situation in their own way. ARROWS attorneys structure contracts so that your rights are clear.

4. What are the biggest mistakes made by new exporters?
    Among the biggest mistakes is that exporters do not have a written contract at all, or they agree it only verbally. That is not always legally binding, or it is difficult to prove.
    Another mistake is having a contract without a defined choice of law and arbitration, so in a dispute everyone thinks something different. Exporters also often fail to vet the business partner and send millions to an unknown entity, or ignore compliance and therefore remain unaware of customs, tax, or regulatory obligations. All of these mistakes can be avoided with a lawyer.

5. How long does it take to prepare an international contract with ARROWS?
    It depends on the complexity. We can prepare simple commercial contracts within a week. More complex projects with multiple parties, licensing, or technology may take longer. The most important thing is having a lawyer who understands international trade and knows the practical issues. Contact office@arws.cz to arrange a consultation—we will explain the timeline.

6. If we export to multiple countries, should we have special contracts prepared for each country?
    It is not necessary to have a completely different contract for each country. You should have a master template that you adapt to local legal conditions and market practice.
    Some elements (arbitration, choice of law, dispute resolution) repeat, while others (specific regulation, tax conditions) differ. ARROWS attorneys can help you create a contract template that you can then adapt. And if it is a more complex multi-country project, we have partners in those jurisdictions who can assist with local adaptation.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the subject matter based on the legal status as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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