Emily O’Connor, ICC, Director of Trade + Investment

After decades of gradual progress in the digitalization of the international paper-based trading environment, momentum is building at a gratifying pace. The evolution of the global legal enabling environment through awareness and adoption of the UNICTRAL Model Law on Electronic Transferable Records (MLETR)  — evidenced significantly by the recent landmark adoption of the UK’s Electronic Trade Documents Act, which over time will enable many commonly used trade documents to be used electronically — is a heartening contemporary example.  

But the global trading community is still at an early stage of the journey and there are many avenues to be explored, in particular with a view to ensuring that the benefits of digitalization are available to traders of all sizes, from large corporations to SMEs, all over the world.  Progress in world trade has been hampered over many years by a widespread lack of resources that would allow companies to use digital trade to do business more safely, securely and efficiently, with small companies being especially disadvantaged.

Providing practical tools to help SMEs benefit from participation in international trade is one of the fundamental missions of the International Chamber of Commerce (ICC), and the driver behind a new project to develop a set of freestanding ICC Model Contract Clauses on Digitalization.  

Born of a collaboration between ICC’s Global Commission on Commercial Law and Practice and the ICC Digital Standards Initiative (DSI) in Singapore, these new ICC model clauses will be able to be incorporated into a range of commercial contracts, enabling and empowering businesses to digitalize trade in their respective areas and reap the resulting productivity and efficiency gains.

Building on the success of free, practical ICC model contract clauses such as the ICC Force Majeure and Hardship Clauses, and in light of recent legislative developments, the model clauses will be adaptable in local jurisdictions to enable participants in international trade to maximize benefits.  Take in a more birds’-eye view, widespread use of the clauses will drive the pace of global adoption of digital solutions by providing for contractual obligations regarding the use of digital technologies to cascade through companies’ global value chains.

The newly-constituted ICC Working Group preparing the model clauses comprises experts from some 15 jurisdictions with a range of different views and experiences in the global trade ecosystem to ensure a balanced and practical approach in the selection of topics and drafting.

 Key principles guiding the work include

  • Focus on the primary SME audience: many SMEs have been engaged in international trade while not having access to legal advice to allow them to adapt their existing terms and conditions to accommodate digitalization.  Bigger companies take for granted the ability to afford to hire legal counsel to prepare bespoke legal clauses on digitalization topics from contract formation through to delivery of services. The ICC model clauses will make this possibility available widely for a constituency that was formerly shut out.
  • Simple and balanced drafting: like all ICC model contract and clauses, the ICC Model Contract Clauses on Digitalization will be drafted in a balanced way that does not favor any party to a transaction and in a clear and accessible style understandable by traders of all backgrounds.
  • Inclusive and practical scope: the Working Group will do a bit of crystal ball-gazing to see what topics will stay relevant over time.  The aim is not to cover every issue, but to choose an inclusive set of fundamental building block topics that will allow use by as wide an audience as possible and produce a strong legacy benefit for trading parties.

As the development of the global digital trading environment picks up pace, so the range of topics that the model clauses might address expands. Some topics that will be considered for possible inclusion are digital contract formation

  • how to ensure that contracts are entered into and executed in a timely fashion
    • how to enforce contracts
    • how services will be delivered digitally
    • how data will be dealt with
    • how parties will deal with performance interruptions, and
    • immutability and security of information (as in the context of smart contracts or distributed ledger technology.

As the picture of global digitalization becomes brighter day by day, the ICC looks forward to helping bring traders of all sizes, everywhere, into the light.