Why New York Law Governs Your Engagement

The published Know Your Customer policy on this site divides the firm's clients into two groups, and does it in the last section, where nobody reads.

In the policy's own words: if you are a resident of, or located within, the United Kingdom, the policy and any disputes arising out of it are governed by the laws of England and Wales, and the parties submit to the exclusive jurisdiction of the English courts. For all other clients, it is the laws of the State of New York and the federal laws of the United States, without regard to conflict of law principles, and the exclusive jurisdiction of the courts located in New York.

That clause governs the policy and the disputes arising out of it. It is also the only public statement this firm makes about which law it expects to be read under, which is why it deserves more attention than the fourteen sections above it get.

What a governing-law clause actually allocates

A choice of law is not a description of where a firm works. It is an allocation, made in advance, of every question that will later be contested.

Which body of law reads the words, and reads them how. Whether a duty is implied that neither party wrote down. What a limitation period is, and when it starts. Whether a limitation of liability survives. What good faith requires, if anything. Whether a term that looks reasonable is enforceable. None of that is administrative, and the reason it is settled at the outset is that it cannot be settled later without the answer being obviously self-interested.

The second clause does separate work. A governing-law clause chooses the rules. A jurisdiction clause chooses the room, the procedure, the cost, the language, the timetable and the distance a client has to travel to complain about us. They are frequently written as though they were one decision. They are two, and they can be, and often should be, sent to different places.

Why New York can be chosen by parties with nothing to do with it

New York legislated for this, which is the fact that explains its share of international finance documentation better than any account of its markets.

Section 5-1401 of the New York General Obligations Law provides that the parties to any contract relating to an obligation arising out of a transaction covering in the aggregate not less than two hundred and fifty thousand dollars may agree that the law of the state governs their rights and duties in whole or in part, whether or not the contract bears a reasonable relation to that state. Contracts for labour or personal services, and personal, family or household transactions, are excluded. Section 5-1402 completes the arrangement: where the transaction covers in the aggregate not less than one million dollars and the agreement contains both a New York choice of law under 5-1401 and a submission to the New York courts, a foreign corporation or non-resident may be sued there.

Most jurisdictions ask for a connection before they will lend their law to strangers. New York abolished that requirement by statute for transactions above a threshold, and then supplied the forum to match. The result is a body of commercial law that is chosen constantly by people with no other reason to be in the state, which in turn produces the decided cases that make it worth choosing. It is an unusually clear instance of a legal system being built as an export.

The asymmetry the clause does not disclose

Now the part that costs something to write down.

The two halves of the split are not equivalent, and the difference is in portability. A judgment has to be recognised somewhere else before it is worth anything to a claimant whose counterparty's assets are elsewhere. The United Kingdom is a contracting party to the 2005 Hague Convention on Choice of Court Agreements. The United States signed that convention on 19 January 2009 and has not ratified it. An exclusive English jurisdiction clause therefore sits inside a treaty framework for recognition among contracting states. An exclusive New York one does not.

Arbitration behaves differently, which is why so much international documentation ends in an arbitration clause rather than a jurisdiction clause. An award made under the 1958 New York Convention travels to the one hundred and seventy-two states party to it as at August 2026. The convention is named after the city; it is not a feature of choosing the city's courts.

So the honest reading of our own clause is this. For a client in the United Kingdom, the governing law and the forum are the client's own and are treaty-portable. For a client anywhere else, the governing law is a well-built export chosen partly because it is well built, and the forum is a court neither party lives near, reached under a convention the host state has not ratified.

What comes attached and is not written in the clause

Choosing United States law also imports the American sanctions perimeter as an operating condition of the engagement rather than as somebody else's regulatory problem. The policy already names the Office of Foreign Assets Control among the regimes it screens against.

The mechanism worth understanding is the one that catches people who have screened properly. Under OFAC's revised guidance of 13 August 2014, the property and interests in property of an entity owned fifty per cent or more, in the aggregate, directly or indirectly, by one or more blocked persons are themselves blocked, whether or not the entity appears on any list. Ownership aggregates across separate sanctions programmes. Indirect ownership passes down through chains of entities that are themselves fifty per cent or more owned. The rule addresses ownership and not control, so an entity controlled by blocked persons without the ownership threshold being met is not automatically caught, which is a gap rather than a comfort.

The consequence for diligence is exact. Screening a name against a list is not screening. Establishing the ownership chain behind the name is screening, and it is the part that requires work.

Verification of that chain in the United States is where the recent movement has been, and the direction is not the one most people assume. The New York LLC Transparency Act took effect on 1 January 2026, but following the narrowing of the federal reporting company definition it now reaches only limited liability companies formed under the law of a foreign country and authorised to do business in New York, which must file initial and annual beneficial ownership disclosures with the Department of State. Domestic entities are outside it. The full sequence is set out in The Register and the Deletion; the point here is narrower. The state whose law we have chosen holds ownership information about foreign-formed LLCs registered there and, in most cases, none about its own.

Nothing above is advice on any reader's own contracts, and it is not a statement of what any clause of theirs means. It is an account of ours.

Where a matter turns on establishing who actually stands behind a counterparty, that work sits under KYC & Enhanced Due Diligence and Litigation Support & Evidence; where it turns on which forum a dispute should be sent to at all, under Legal, Tax & Arbitration Coordination.