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Businesses have a clear interest in shaping a legal environment that is conducive to international trade. That’s why they should take an active role in setting the rules that govern their own business operations, and not leave regulation entirely in the hands of governments. Today, most businesses engage in some degree of lobbying, and some businesses have public affairs executives to deal with regulatory issues. Very few companies employ specialists in self-regulation. Yet having high-quality business rules in place is one of the most effective ways to avoid harmful regulation. The International Chamber of Commerce has a central role in international trade. Founded in 1919, the ICC is the only business organization that covers the entire world, represents all business sectors, and includes companies and business associations of every size. The ICC issues nonsectoral rules, mechanisms, and standards for international business that are accepted globally. Companies worldwide incorporate ICC rules in binding contracts with foreign business partners. This contractual function is often overlooked by critics of business self-regulation who mistakenly believe that government intervention is always the answer. Contractual instruments produced by the ICC and other international organizations provide a flexible and neutral legal framework to facilitate negotiations between parties in different countries. They make commercial transactions between two or more legal jurisdictions easier and quicker, and save money too. ICC rules and standards are drafted by commissions constituted of experts drawn from member companies in every business field. The ICC’s rule-setting commissions cover a wide spectrum of issues including arbitration, banking, financial services and insurance, commercial law and practice, and marketing and advertising. TERMS OF THE TRADE The best-known ICC rules are Incoterms 2000 and the Uniform Customs and Practice for Documentary Credits (UCP 500). Like all ICC rules and voluntary codes, they are the product of extensive consultation with business users on every continent. Banks throughout the world use UCP 500 to finance billions of dollars of international trade every year. Just as widely adopted, Incoterms helps traders in different countries to understand each other. If a company based in Washington is setting up a sales contract with a company in Paris, for example, using Incoterms ensures that the two parties have a common understanding of the full implications of the contract. The parties would face such questions as: Who is responsible for clearing the goods for export? When does the risk of loss or damage to the goods pass from the seller to the buyer? Who nominates the carrier? All these issues are defined by Incoterms. Rather than going through a lengthy and expensive negotiating process trying to find answers to these questions, the parties can simply refer to one of the 13 Incoterms in their sales contract. By doing so, they agree on a flexible and well-documented set of rules to govern their transaction. Since the ICC first published Incoterms as a trademarked ICC product in 1936, they have been updated six times, most recently three years ago. They precisely define the responsibilities of buyer and seller and are recognized as the international standard by customs authorities and courts in all the major trading nations. The 2000 version takes account of international traders’ growing reliance on intermodal transport. For example, increased use of FCA (Free Carrier) has prompted the ICC to simplify delivery obligations under this term. A special group of experts designated by the ICC Commission on Commercial Law and Practice (CLP) stands ready to provide companies with answers on the interpretation of Incoterms. MODEL CONTRACTS Parties to an international contract may wish to take a step further and use a complete model contract such as the ICC Model International Sales Contract, which provides a reliable and equitable standard legal platform for the global export-import sector. For a minimal fee, the parties get a complete ready-to-use contract that has been carefully drafted by some of the best lawyers in the world to balance the interests of the seller and the buyer. ICC model contracts, like Incoterms, are updated and maintained by the ICC CLP Commission to give parties a neutral framework for their contractual relationships. These clauses are carefully drafted by the experts of the CLP Commission without bias for any particular legal system. ICC model clauses are translated into many languages and used in thousands of contracts every year. Indeed, you already may have signed an ICC model contract without knowing it, since the text is often copied into contracts without reference to the original author. The ICC supports this practice and has even attached a CD-ROM to all its model contracts to enable the parties to copy and paste the text and use it as they see fit. The idea behind ICC model clauses is to provide a sound legal basis upon which parties to international contracts can quickly establish an evenhanded agreement acceptable to both sides. They are constructed to protect the interests of all the parties, combining a single framework of rules with flexible provisions allowing the parties to insert their own requirements. The ICC believes that properly drafted contractual clauses can resolve the problems caused by divergences in contract laws. The European Commission’s plan to harmonize European contract laws could be very disruptive because companies base business decisions and models on current laws and regulations. What ICC supports, therefore, is the EC’s proposal to promote the use of standard contract clauses referencing key international instruments, such as the UNCITRAL Convention on Contracts for the International Sale of Goods (CISG). E-TERMS 2004 Another area where model clauses are very useful is B2B electronic contracting. As discussed in an earlier article (” Clearing Up E-Contracting Issues,” July 21, 2003, Page 19), electronic contracting is not a legal minefield, as many fear. Of course, companies will run up against occasional difficulties, but in practice disputes are relatively infrequent. Problems can mostly be avoided by carefully drafted clauses. The ICC formed this assessment by consulting companies of various sizes in different sectors on their experiences with electronic contracting. For example, one ICC member company with more than 400,000 employees, heavily engaged in electronic contracting, reported that it had never experienced an actual dispute as a result of using electronic communication (such as electronic data interchange (EDI), e-mail, telegram, telex, or telecopy) in contracting. Depending on region, size, and sector, companies have different needs and experiences with electronic business communication. But what they all can agree on is that business practices in electronic contracting are presently evolving and codification of these practices are premature. Unfortunately, governments do not seem to share this view. The United Nations Commission on International Trade Law (UNCITRAL) has started work on a convention on electronic contracting. The latest draft, which will be discussed at a meeting in New York in March 2004, sets out detailed provisions that seek to regulate companies’ use of data messages such as e-mails. The ICC, a close adviser to the United Nations, has been following UNCITRAL’s efforts on these issues, and has suggested that UNCITRAL focus its efforts on removing barriers to e-commerce in existing international conventions, rather than trying to solve the issues with more regulation. Meanwhile, the ICC is working on a self-regulatory instrument called E-terms 2004 that enhances legal certainty in electronic contracting by providing users with a package of voluntary model clauses, checklists, and guidance documents. Unlike the proposed UNCITRAL convention, self-regulatory instruments would have the advantage of faster deployment for business use. They could also be applied more flexibly; for example, a company could decide to use the instrument in all its electronic contracting, only in certain electronic contracts, or not at all. Finally, these instruments could be amended rapidly if problems arise over specific provisions. Incoterms and other successful business rules are based on a careful codification of international business practices. This foundation makes the rules easy to understand and to use anywhere in the world. Companies that allocate resources to help develop these tools are not just making a long-term investment in a business-friendly legal environment; they can also gain a strategic advantage by influencing the rules that govern their business transactions. Jonas Astrup is policy manager for the ICC Commission on Commercial Law and Practice, and the ICC Commission on Financial Services and Insurance. He can be contacted at [email protected]

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