International Chamber of Commerce (ICC)
by Klaus J Hopt
1. History, organization, activities
The International Chamber of Commerce (Internationale Handelskammer; Chambre de Commerce Internationale; official abbreviation: ICC) is proud to be the oldest globally active economic organization that encompasses all sectors of the economy. Its aims are the promotion of transborder trade as well as the support of undertakings facing the challenges and opportunities of globalization. The ICC promotes open borders for commerce and investments and stands for a market economy. It was founded in 1919 and has its seat in Paris. It works in various countries through national organizations called national committees. It has representations in more than 130 countries. Among its members are many of the most prominent companies, chambers of industry and commerce and business associations.
The three main activities of the ICC are the creation of voluntary rules and codes of conduct for transacting business, acting worldwide as an arbitration institution and promoting the interests of commerce and business in national and international politics.
Among the many sets of rules originating from the ICC, the Incoterms (Revision 2010) and the Uniform Customs and Practice for Documentary Credits, last revision 2007 (UCP 600), are the most well known. The Uniform Rules for Collection (Revision 1995) are also important for international trade. These three sets of rules are chosen here as examples among many others.
The International Court of Arbitration of the ICC, founded in 1923, is one of the oldest arbitration institutions in the world. In international business arbitration (arbitration (international)) it is the most important institution. The individual arbitration proceedings are conducted by arbitral tribunals that are chosen for each arbitration and act according to the Rules of Arbitration of the International Court of Arbitration (most recent version in force from 1 January 1998). In 2007, 599 new ICC proceedings were commenced. This has brought the number of ICC arbitrations since its establishment in 1923 to around 15,000.
The ICC promotes the interest of commerce and business in politics by numerous activities in the various sectors. These range from the fight against money laundering, corruption and trademark piracy to certifications and to all kinds of promotion of commerce and traffic. Two examples are the directive on whistle-blowing of 2008 and the warnings against overregulation and protectionism issued in 2009 when a wave of new laws was initiated in many countries in reaction to the financial crisis. The activities of the ICC are recorded in more detail in its annual reports.
2. Incoterms, Revision 2010
The Incoterms are the best known and most common commercial clauses worldwide. They were drawn up in 1936 by the ICC in Paris and were revised in 1953, 1967, 1976, 1980, 1990, 2000 and most recently in 2010. The reasons for the revision of 1990 were modern transport techniques, particularly container traffic, multimodal traffic and ro-ro transports, as well as electronic data transfer and the aim of greater transparency. The Incoterms 2000 built on the Incoterms 1990. While the number, the order and the composition of the 13 Incoterms remained the same, there were quite a number of important changes to the various clauses. The revision 2010 introduced two new clauses (DAT, Delivered at Terminal and DAP, Delivered at Place), while reducing the number of clauses to 11. Because of these changes, there are now no less than eight different versions of the Incoterms which are still used in commercial contracts. For example, if a contract contains the clause ‘CIF Hamburg’, it remains unclear which version is to cover the relationship between the parties. Therefore, where there is doubt, the version that is valid at the time of the conclusion of the contract shall prevail.
The Incoterms cover only the relationship between the seller and the buyer, and only the sales contract, with the exclusion of a possible carriage contract. Within this limited reach, the Incoterms regulate only certain issues, in particular certain duties and liabilities of the seller and the buyer, the transfer of risks and the distribution of the different risks and the liability; they do not, for example, regulate the transfer of ownership or warranties and exclusions of liability. These issues are governed by the applicable law. Trade usages and port practices also play an important role. The Incoterms are meant primarily for international trade, but they can also be used for national commerce; in the latter case, of course, without the clauses dealing with export and import.
The 11 Incoterms are organized in four groups: E-, F-, C- and D-clauses (named after the first letter of the relevant abbreviation; CIF is therefore a C-clause, FOB an F-clause). This sequence follows the course of the transaction, ie starting with the departure clause, which imposes only few duties on the seller, and ending with the different arrival clauses where the most extensive duties are imposed on the seller.
The only clause in the E-group is the clause ‘Ex works’ (EXW). It is a mere departure clause.
The three clauses of group F concern the main carriage (unpaid). The seller does not pay the carriage, but only delivers to the carrier, either ‘Free Carrier’ (FCA), ‘Free Alongside Ship’ (FAS) or ‘Free on Board’ (FOB), in all cases named places or ports of shipment. The relevant point of time for the transfer of risks and for paying costs under all F-clauses is delivery. The buyer may have an interest in taking over the carriage because of, for example, a discount calculated per quantity, foreign currency regulations or use of means of transportation of the country of import (called ‘FOB import’).
The four C-clauses also concern the main carriage, but only if the seller pays. The seller only pays either costs and freight (CRF) or costs, insurance and freight (CIF), both to the named port of destination. Under the clause ‘Carriage Paid To’ (CPT), the costs of the transport to the named place of destination are also paid by the seller, in certain cases even including the insurance premium (‘Carriage and Insurance Paid To’, CIP). The points in time for the transfer of risks and the paying of costs are consistently different under all C-clauses (called ‘two-point clauses’). The seller may have an interest in taking over the carriage because of, for example, a discount calculated per quantity, foreign currency regulations or use of means of transportation of the country of export (called ‘CIF export’). The C-clauses are not arrival clauses, even if the insurance is paid by the seller. This is because the seller performs its contractual duties in the shipment country, namely the dispatch country.
All three clauses of the D-group are arrival clauses: ‘Delivered at Terminal’ (DAT), ‘Delivered at Place’ (DAP), and ‘Delivered Duty Paid’ (DDP), and, depending on the clause, with the addition: named terminal or named place of destination. The D-clauses correspond to arrival contracts.
The Incoterms are not legal norms. Only exceptionally can they be considered a commercial usage in the sense of the law, eg Art 346 of the German Commercial Code. Therefore, they are applicable only if and insofar as the parties to the contract have agreed to incorporate them into the contract. The Incoterms are pre-formulated contract terms. Their incorporation into the contract must be proven. If German law is applicable, the Incoterms are considered to be standard contract terms and are subject to the general rules on standard contract terms under the German Civil Code (Bürgerliches Gesetzbuch (BGB)). These rules are more restrictive than in many other countries insofar as they scrutinize, for example, both the applicability and the substantive content of standard contract terms. In exceptional cases this can create difficulties. Even if the Incoterms are not incorporated into the contract, they may contribute to the interpretation of a relevant commercial usage, and sometimes they are even fully congruent with such a usage. As to contract law, it is not the case that each group of the Incoterms corresponds to a certain contract type. Instead, departure contracts, shipment contracts and long distance or arrival contracts are to be found in each of the various groups.
Incoterms are meant by their aim and by the will of the parties to be interpreted in an internationally uniform manner. It is recommended to the parties to make reference to a specific version of them, eg English or another language version and the version of a specific year, such as ‘Incoterms 2010 cif’. If there is no such specific reference and if there is doubt, the Incoterms 2010 in the English version are applicable. The agreement on Incoterms does not by the same token mean that the ICC arbitration has been agreed upon. If and insofar as possible, the same terms as found in the UN sales law have been used in the Incoterms (sale of goods, international (uniform law)).
3. Uniform Customs and Practice for Documentary Credits, Revision 2007
The Uniform Customs and Practice for Documentary Credits (documentary credit or standby letter of credit), abbreviated as UCP, were published by the ICC in 1933 and are based on an agreement of the banking associations. They have been revised several times, in 1951, 1962, 1974, 1983, 1993 (called the UCP 500) and 2007 (called the UCP 600). There is also a Supplement for Electronic Presentation (eUCP). The supplement to the UCP 600 version is more or less the same as the one for the UCP 500 version. The eUCP are not a revision of the UCP but a supplement in order to accommodate presentation of electronic records alone or in combination with paper documents. The preparatory work for the UCP 600 began in 2003 and came to an end in 2006. The implementation date was 1 July 2007.
The general objective of the UCP 600 was to address developments in the banking, transport and insurance industries since 1993. Language and style were checked for consistent application and interpretation. This was necessary since, according to the ICC, around 70 per cent of the documents presented under letters of credit were rejected on their first presentation, the banks reacted by introducing a discrepancy fee and in a number of cases there was even litigation. The inclusion of 13 definitions (Art 2) and 12 interpretations (Art 3) aim at more uniformity and helped to reduce the number of articles from 49 to 39.
Apart from many definitions and interpretation rules, the UCP contain, inter alia, the following rules. As to applicability, it is stated that the rules apply to any documentary credit when the text of the credit expressly indicates that it is subject to these rules. A credit by its nature is a separate transaction from the sale or other contract on which it may be based. Banks deal with documents and not with the goods, services or performance to which the documents may relate. The rules relate to the undertakings of the issuing bank and the confirming bank. The bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. Only when the bank determines that a presentation complies must it honour or negotiate. The UCP contain detailed rules on how to proceed if there are discrepant documents, and they regulate in detail the various relevant documents, such as the commercial invoice, the sea, land and air transport documents and the insurance documents. Finally, there are a number of disclaimers. However, the UCP can only be fully understood if one knows the economic and legal background of the letter of credit and more generally of the banking transaction.
The UCP in their entirety are neither customary law nor commercial usage, though this is a matter of controversy. This is already so because they have been changed several times. The German Federal Court has not yet issued a judgment on this, but this is the general opinion in legal literature. But many rules contained in the UCP, in particular the principle of the independence of the credit from the underlying contract to which the documents relate, must be considered to a large part to be commercial usage in the sense of Art 346 of the German Commercial Code. As such, they govern the contract without the need of being incorporated into it by agreement of the parties and are not subject to the requirements of and control under the German law on standard contract terms.
But apart from these exceptional cases, the UCP in their entirety are standard contract terms (BGH 19 November 1959, WM1960, 38 at 40). It follows that they are applicable only if they are incorporated by agreement of the parties to the contract. Yet among merchants, the agreement to include the UCP need not be concluded expressly. If and insofar as the UCP are standard contract terms, the scrutiny of both the applicability and the substantive content of standard contract terms under German law takes place even though in practice this does not create great problems.
The UCP are meant by their aim and by the will of the parties to be interpreted in an internationally uniform manner, ie without taking into consideration national laws. This means that gaps should be filled by interpretation of the UCP themselves. National legal rules are applicable only as a supplementary source. This corresponds to the interpretation practice of the Banking Commission of the ICC.
4. Uniform Rules for Collections, Revision 1995
The Uniform Rules for Collections, abbreviated as URC, were published by the ICC in 1956 and revised in 1967, 1978 and 1995. They were recommended for application from 1996 on. The documents to be collected can be payment documents or commercial papers. The Revision 1995 takes into consideration, inter alia, the use of technical means and has made certain adaptations of the rules.
The URC contain, first, general rules and definitions, such as the definition of collection. Then they contain rules, inter alia, on the form and structure of collections, including the mandate to collect, the form of presentation of the document, extensive treatment of liability and responsibility and finally rules on payments, including interest, fees and costs.
The URC are standard contract terms like the UCP, though occasionally it has been claimed that they are trade usages in their entirety. As a consequence, it is disputed under German law whether certain rules of the UCP are valid under the German law on standard contract terms.
5. Rules of Arbitration of the International Court of Arbitration in Paris, Version 1998
ICC arbitration is institutional arbitration. This stands as an important difference from the so-called ad hoc arbitrations; in those, the parties and the arbitral tribunal themselves must agree on which rules should be applicable to the arbitration. The ICC rules of arbitration cover the whole course of the arbitration ranging from beginning to conclusion by an award which is subsequently to be deposited with the Secretariat. The arbitration institution, ie the International Court of Arbitration and its Secretariat in Paris, support and control the procedure. This leads to procedural uniformity. This uniformity, the formal control (without control of the substance) and the professionalism of the institution are why ICC arbitration is used all over the world.
The ICC Rules of Arbitration regulate, inter alia, the commencement of the arbitration, the arbitral tribunal and its composition, the procedural steps to be followed by the arbitrators (particularly in case of multiparty arbitrations), the award and the decision as to the costs of the arbitration. Annexes contain the statutes of the International Court of Arbitration, the internal rules of the court and rules on the arbitration costs and fees. It is of particular importance for the parties and arbitrators to be familiar with the latter in advance.
Claus-Wilhelm Canaris, Bankvertragsrecht (2nd edn, 1981) 1088 ff (Inkasso) and (3rd edn, 1988) 925 ff (Akkreditiv); Babett Stapel, Die Einheitlichen Richtlinien und Gebräuche für Dokumentenakkreditive der Internationalen Handelskammer in der Fassung von 1993 (1997); International Chamber of Commerce, Incoterms 2000 (1999); Jens Bredow and Bodo Seiffert, Incoterms 2000 (2000); Michael W Bühler and Thomas H Webster, Handbook of ICC Arbitration (2005); Yves Derains and Eric A Schwartz, A Guide to the ICC Rules of Arbitration (2nd edn, 2005); Herbert Schimansky, Hermann-Josef Bunte and Hans-Jürgen Lwowski (eds), Bankrechts-Handbuch (3rd edn, 2007) § 119 Inkassogeschäft and § 120 Grundlagen des Akkreditivgeschäfts; Rolf A Schütze, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (6th edn, 2008); Christoph Graf von Bernstorff, Incoterms® 2010 (2010); Rolf Trittmann, ‘Schiedsklauseln, Schiedsvertrag’ in Klaus J Hopt (ed), Vertrags- und Formularbuch zum Handels-, Gesellschafts- und Bankrecht (4th edn, 2011) 760; Adolf Baumbach, Klaus J Hopt and Hanno Merkt, Handelsgesetzbuch mit GmbH & Co, Handelsklauseln, Bank- und Börsenrecht, Transportrecht (ohne Seerecht) (35th edn, 2011).