Categories of non-state rules: uncodified

Non-state rules in international commercial law are not a singular entity. They have different origins, functions, and objectives. The first division is between codified and uncodified non-state rules as there arc some fundamental differences between the two categories. First, uncodificd rules are often recognised as a source in domestic law whereas codified non-state rules are usually not. Codified non-state rules often derive their legal authority at least partly from being connected with uncodificd non-state rules: they are used to interpret uncodified non-state rules. Second, their origin is different. Trade associations and international organisations create codified rules. Uncodificd non-state rules arc spontaneous creations by the merchant community, which are later affirmed by courts and arbitral tribunals. Third and most obviously, they are set up differently. Codified non-state rules are written down, certain, and precise, and drafted/distributed by an organisation/ group. Uncodificd rules are unwritten, their content is difficult to determine, and their interpretation is diffuse. No single organisation or group can claim responsibility for their administration.

Uncodificd non-state rules can be divided into two main categories: trade usages and general principles of law. The following paragraphs will briefly explore each category.

Trade usages, customs, and practices are characterised by their spontaneous creation from within the merchant community. In contractual relations custom, trade usages, and practices can assume different roles:

23 ICC : https://iccwbo.org/about-us/.

• • to define jargon, clarify ambiguities and explain technical terms
• • to add terms to the contract
• • to allow commercial meanings to control contrary lay definitions.¹*

General principles of law arc the second category of uncodified non-state rules. General principles of law exist on different levels of law. The concept exists in international law as the general principles recognised as a source of law by the International Court of Justice (ICJ).^[1] These are intended for state-to-state relations. In principle a private party cannot be found liable for violation of general principles of law as meant by article 38. Therefore, general principles in international commerce cannot be equated with general principles of law under article 38 and should be considered as a distinct concept.

General principles of law also exist in domestic legislations. They arc the general principles underlying the national law. These principles are not necessarily the same as those recognised in public international law. Not all domestic law principles are internationally accepted and therefore cannot be considered as international principles of commercial law. An example is good faith in the prc-contractual phase, which is a general principle in civil law but not in English common law. There are thus different types of general principles. The first arc general principles of law common to most nations, the second general principles of domestic law. A third type would be general principles of EU law as recognised by the European Court of Justice (ECJ).

General principles of international/transnational commercial law are a hybrid of principles that are derived from public international law and domestic laws and which arc applicable in international commercial transactions between private parties. General principles in international commerce transcend individual legal systems and have a transnational applicability. Examples of general principles of international commercial law are ‘pacta sunt servanda’ and ‘clausula rebus sic stantibus.’

Categories of non-state rules: codified

Codified non-state rules arc drafted by international organisations, trade associations, or private groups and can be divided in model laws, restatements of law, model contract clauses, and guides and opinions. They can be aimed at national legislators (model laws, restatements of law, guidelines), at the contracting parties (restatements of law, model clauses, guidelines) or at courts (restatements of law, guidelines).

International organisations develop model laws, which arc made available to states, usually accompanied by implementation guidelines. States adopt the model laws (possibly with changes). Model laws arc different from conventions which only permit a small number of reservations (if any) to be made and arc then ratified in their entirety whereas model laws can be adapted at will by the state. A successfill example is the Model Law on International Arbitration as legislation based on this model law has been adopted by 83 states.^[2] Other successfill model laws arc the UNCITRAL Model Law on Electronic Commerce, the UNCITRAL Model Law on Electronic Signatures, the UNCITRAL Model Law on Cross-Border Insolvency, and the UNIDROIT Model Law on leasing.

Model laws also exist within (federal) jurisdictions. In the United States the NCCUSL/ULC promotes increased legal uniformity through the development of model laws. Their most prominent work is the Uniform Commercial Code (UCC), which has the goal to harmonise the law on commercial transactions in the USA. Another example is the Uniform Electronic Transactions Act, which was adopted by 47 US states.

Model contracts and clauses are elaborated by international organisations or by trade associations. Model contracts are also called standard contracts although this name can cause confusion with standard adhesion contracts. The first are drafted by an outside source whereas the second type arc drafted in-house and contain the standard terms and conditions of the particular company. The standard contract discussed here is the model contract. Model contracts extend to the whole contract, part of the contract, or individual contractual terms.^[3] Parties can adopt model contracts in their entirety or adapt them to fit their specific needs.

The most well known international organisations that design model contracts for international commerce are UNCITRAL and the ICC. The ICC has a specialised commission dedicated to the development of model contracts. Examples include contracts on commercial agency, franchising, mergers, sale of goods, licencing, and turnkey transactions.

Trade associations are important players in this area. Trade Associations draft model contracts specifically for their branch. An example of such an organisation is the ISDA (International Swaps and Derivatives Association), which creates legal definitions of contractual terms and model contracts. Other examples arc FIDIC (International Federation of Consulting Engineers) which designs model contracts for civil engineers, the JCT (Joint Contracts Tribunal) which drafts model building contracts, and BIMCO (Baltic and International Maritime Council), which creates model charter-parties. Model contracts elaborated by trade associations can be biased towards the seller or service provider as these form the membership of the association. They are thus considered less neutral than those model clauses drafted by the ICC, UNCITRAL, or other organisations that have a broader membership basis and mission.

The Incoterms (an acronym for International Commercial Terms) are developed by the ICC based on existing trade terms. The Incoterms were first published in 1923 and are updated frequently. The latest version (the Incoterms 2020) was published in September 2019. The ICC did not invent these trade terms and therefore defining them is not restricted to the ICC. The contract should specify that the included trade term is an Incoterm and which version should be applied.

Throughout the years the ICC has developed new trade terms, cither based on existing ones or on the perceived need for these in international commerce whereas other terms arc omitted in the newer versions because they are not used frequently. Incoterms omitted in the 2010 update were DES (Delivery Ex Ship) and DDU (Delivery Duty Unpaid). In the 2020 version Delivery At Terminal was removed. It is of course still possible to include these terms in a contract, but the parties would need to make sure to refer to the earlier version of the Incoterms to ensure a predictable interpretation. Usage of the Incoterms is widespread.

Trade terms divide the responsibilities between the buyer and the seller with regards to transportation of goods and transfer of risk.^[4] Each trade term is shortened to three letters. The Incoterms arc traditionally divided in three or four categories (the first two are often placed together) that represent increasing responsibilities for the seller:

• • Ex- works (place of delivery). The buyer collects the goods at the named place and arranges for transport from there. The obligation of the seller is to make the goods available at the place of delivery, which is usually the premises of the seller.
• • F terms: FCA (Free Carrier place of delivery) FAS (Free Alongside Ship), and FOB (Free on Board). The seller delivers the goods to the first carrier at the named place (FCA), to the dock alongside the named ship (FAS), or on board the ship (FOB)
• • C terms: CFR (Cost and Freight), CIF (Cost, Insurance, and Freight), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To). Under these C terms the seller is responsible for shipping the goods to the named destination. The seller assumes the costs associated with the carriage of goods. Under CIF and CIP, the seller also assumes the responsibility and the costs for insuring the goods.
• • D terms: DPU (Delivery at Place Unloaded), DAP (Delivery At Place), and DDP (Delivery Duty Paid). The seller takes responsibility to deliver the goods at the named place unloaded (DPU), at the named place ready for unloading (DAP), or to the named place including all imports/ duties paid for (DDP).

The 2020 version of the Incoterms changed the categorisation. It places the terms in two categories: those can be used for any type of transportation (EXW, FCA, CPT, CIP, DPU, DAP, DDP) and those that are only for carriage by ship (FOB, FAS, CFR, and CIF.)

The Uniform Customs and Practice (UCP) are developed by the ICC. They were first published in 1933. They are a set of contractual terms aimed at standardising letters of credits. The ICC Banking Commission revises them regularly. The UCP 600 is the latest version and was published in 2007. The UCP are ‘technical, complete, regularly updated and lead to diverging jurisprudence.’¹^ The latter is because they are applied in different jurisdictions. The UCP are not comprehensive and therefore they need to be supplemented by the applicable law.

The UCP were developed out of existing practices in documentary credit and thus have a customary basis. Their acceptance was not immediately widespread because the first version of the UCP did not consider the laws and practices of some important financial hubs like the UK and the US where bankers consequently continued to use their own practices.^[5] Subsequent versions of the UCP remedied this and the UCP have achieved world wide acceptance.

Restatements of law are drafted by international organisations. They are codified non-state rules that offer principles and rules for contractual relations. They put in mind a model law in their design, but instead of being aimed at states they arc aimed at the contracting partners. The concept resembles that of the restatements of law drafted by the American Law Institute (ALI). They consist of principles and rules that restate existing law and usages whilst at the same time adapting these to the needs of international commerce. The number of restatements is small although their impact is significant. The most prominent ones are the UNIDROIT Principles of International Commercial Contracts (UPICC), the Principles of European Contract Law (PECL,) and the Principles of Latin American Contract Law (PLACL).

Guides and legal opinions are a fourth category of codified non-state rules. These include best practice guides, interpretation advice, arbitral case law digests, legal opinions, and other similar type documents. They are written by international organisations, trade branch associations, study groups, scholars, think thanks, or (groups of) individual (s.)

• [1] Harold J Berman, ‘Towards an Integrative Jurisprudence: Politics, Morality, History’ (1988) 76 California Law Review 779, 784. 2 Statute of the International Court of Justice Article 38: The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: [...] c. the general principles of law recognized by civilized nations [...]. 3 Giudetta Cordero-Moss, ‘The Transnational Law of Contracts: What It Can and What It Cannot Achieve’ in Todd Weiler and Freya Baetens (editors), New Directions in International Economic Law: In Memoriam Thomas Wälde, (Martinas Nijhoff2011), 61-63. 4 Ibid. 5 See for instance the webpage of the EU: http://eur-lex.europa.cu/legal-content/EN/TXT/?uri=URISERV:l 14533.
• [2] For full list of states see: http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbi-tration_status.html. 2 Legislation based on this model law has been adopted by 64 states. http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/ 1996Model_status.html. 3 Legislation based on this model law has been adopted by 32 states. http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/ 2001 Model_stat us. ht m I. 4 Legislation based on this model law has been adopted by 40 states. http://www. uncitral.org/uncitral/en/uncitral_texts/insolvency/1997Model_status. html. 5 http://www.unidroit.org/instrumcnts/leasing/model-law. 6 The National Conference of Commissioners on Uniform State Laws (NCCUSL) is also known as the Uniform Law Commission (ULC) and was established in 1892. Its goal is to provide states with ‘non-partisan, well-conceived, and well drafted legislation that brings clarity and stability to critical areas of state statutory law.’ 7 Clive M Schmitthoff, ‘The Unification or Harmonisation of Law by Means of Standard Contracts and General Conditions’ (1986) 17 International & Comparative Law Quarterly 551, 551.
• [3] Ibid, 556. 2 The ICC Commission on Commercial Law and Practice (CLP). 3 ISDA http://www2.isda.org/. 4 FIDIC: http://fidic.org/ JCT https://www.jctltd.co.uk/ BIMCO: https://www.bimco.org/. 5 Clive M Schmitthoff, ‘The Unification or Harmonisation of Law by Means of Standard Contracts and General Conditions’ (1986) 17 International & Comparative Law Quarterly 551,553.
• [4] The parties can of course adapt the Incoterms if they wish to do so. 2 There are other trade terms, but these do not fall under the ICC Incoterms. An example is FIS (Free In Store) where the seller assumes all costs and responsibilities including unloading the goods at the premise of the buyer. 3 The ICC Banking Commission also issues guides and supplements to the UCP. Among these are the International Standard Banking Practice (ISBP) and the eUCP. The ISBP are ‘a checklist of back practices worldwide for checking documents ti nder the UCP’according to the ICC (http://www.iccwbo.org/About ICC/Policy-Commissions/ Banking/Task-forces/International-Standard-Banking-Practice-(ISBP)/). In 2002 the ICC Banking Commission developed the eUCP: The Uniform Customs and Practice for Documentary Credits for Electronic Presentation. They refer back to the UCP and are not intended as a standalone instrument. They merely facilitate the electronic presentation of the documents for the documentary credit. The eUCP declare in article 2e: 'a Credit subject to the eUCP (“eUCP credit”) is also subject to the UCP without express incorporation of the UCP’
• [5] Pierre-Alain Gourion, Georges Peyrard and Nicolas Soubeyrand, Droit du Commerce International (Fourth edition, L.G.D.J. Lextenso Editions 2008) 94. 2 Hans van Houtte, The Laws of International Trade (Sweet & Maxwell 1995) 265. 3 Ibid, 266. 4 The American Law Institute (ALI) is, in its own words, ‘the leading, independent organisation in the United States producing scholarly work to clarify, modernize, and otherwise improve the law.’ ALI was founded in 1923 and is composed of 3,000 elected members who are judges, legal scholars, and lawyers. Their most well known works are the Restatements of Law. These are treatises that extract general principles of law from current case law. They are not binding, but they are highly persuasive. 5 The Principles of Asian Contract Law arc currently under development. See for instance: Jungjoon Ka, ‘Introduction to PACL’ in (2014) Tony Angelo, Luca Castellani &Yves-Louis Sage (editors) Contributions to the Study oflnternational Trade/ADRin the South Pacific 55 Shiyuan Han, ‘Principles of Asian Contract Law: An Endeavor of Regional Harmonization of Contract Law in East Asia (2013) 58 Villanova Law Review 589.