UNIDROIT Principles of International Commercial Contracts Use in International Contract Practice

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UNIDROIT Principles of International Commercial
ContractsUse in International Contract
Practice
Seminar co-sponsored by the Chamber of Commerce
Santiago and the Center for Arbitration and
Mediation (CAM) Santiago, 13 June 2007 Herbert
Kronke, Secretary-General UNIDROIT h.kronke_at_unidro
it.org
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THE UNIDROIT PRINCIPLES AS A GUIDELINE IN
CONTRACT NEGOTIATION

• The UNIDROIT Principles are particularly useful
  to parties when negotiating and drafting
  international contracts
• Available in all major languages of the world,
  they
• help parties to overcome linguistic barriers
• serve as a checklist of issues parties may wish
  to address in their contract
• serve as model clauses parties may wish to
  incorporate in their contract (with or without
  adaptation)

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THE UNIDROIT PRINCIPLES AS THE LAW GOVERNING
THE CONTRACT

• There are a number of reasons why parties may
  wish to choose the UNIDROIT Principles as the law
  governing their contract
• neither party is strong enough to impose its own
  domestic law
• parties cannot agree on the choice of the
  domestic law of a third country
• the UNIDROIT Principles provide a comprehensive
  set of rules governing the most important areas
  of contract law
• the UNIDROIT Principles, written in a clear and
  non-technical terminology, are easier to
  understand than most domestic laws
• the UNIDROIT Principles, prepared with the
  participation of experts from the same
  countries/regions of the parties, let parties
  feel immediately comfortable with them

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REFERENCE TO THE UNIDROIT CONTRACT PRINCIPLES IN
MODEL CONTRACTS RECOMMENDED BY THEINTERNATIONAL
CHAMBER OF COMMERCE AND THEINTERNATIONAL TRADE
CENTRE (WTO/UNCTAD) I

• Unless otherwise agreed in writing any
  questions relating to this
• Agreement shall be governed by the rules and
  principles of law generally
• recognised in international trade as applicable
  to international contract
• with occasional intermediaries together with the
  Unidroit Principles of
• International Commercial Contracts.
• Cf. Art. 13.1 of the 1999 ICC Model Occasional
  Intermediary Contract 
• This Agreement is governed by the rules and
  principles of law generally
• recognised in international trade together with
  the Unidroit Principles of
• International Commercial Contracts. 
• Cf. Art. 32A of the 2000 ICC Model International
  Franchising Contract

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REFERENCE TO THE UNIDROIT CONTRACT PRINCIPLES IN
MODEL CONTRACTS RECOMMENDED BY THEINTERNATIONAL
CHAMBER OF COMMERCE AND THEINTERNATIONAL TRADE
CENTRE (WTO/UNCTAD)II

• Any questions relating to this contract which
  are not expressly or
• implicitly settled by the provisions contained in
  this contract shall be
• governed, in the following order
• (a) by the principles of law generally recognized
  in international trade as applicable to
  international agency distributorship
  selective distributorship merger and
  acquisition contracts,
• (b) by the relevant trade usages, and
• (c) by the UNIDROIT Principles of International
  Commercial Contracts, with the exclusion of
  national laws.
• Cf. Art. 24.1 A of the 2002 ICC Model Commercial
  Agency Contract, Art. 24.1 of the 2002 ICC Model
  Distributorship ContractSole ImporterDistributor
  , Art. 23.1 A of the 2004 ICC Model Selective
  Distributorship Contract, and Art. 18.1 B of the
  2004 ICC Model Mergers Acquisitions Contract

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REFERENCE TO THE UNIDROIT CONTRACT PRINCIPLES IN
MODEL CONTRACTS RECOMMENDED BY THEINTERNATIONAL
CHAMBER OF COMMERCE AND THEINTERNATIONAL TRADE
CENTRE (WTO/UNCTAD) III

• (1) This Agreement is governed by the laws of
  specify country.
• (2) The Agreement shall be performed in a spirit
  of good faith and fair dealing.
• (3) In the interpretation and application of the
  Parties rights and obligations under this
  Agreement, due weight shall be given to
  applicable practices in international trade. When
  defining these practices, reference shall be made
  inter alia to the Unidroit Principles of
  International Commercial Contracts. ....
•  
• Cf. Art. 31 of the 2004 ITC Contractual Joint
  Venture Model Agreements
• Bibliography
• Mourre E. Jolivet, La réception des Principes
  dUnidroit dans les contrats modèles de la
• Chambre de Commerce Internationale, in Uniform
  Law Review 2004, p. 275 et seq. (pp. 281
• 283 285 287)
• J.-P. Vulliéty, Le contrat-type pour les Joint
  Ventures contractuelles du Centre du Commerce
• International au regard des Principes dUnidroit
  et dautres norms dunification du droit des
• contrats, Uniform Law Review, 2004, pp. 295-314.
• M.J. Bonell, An International Restatement of
  Contract Law, 3rd ed. Transnational Publishers,
• 2005, pp. 276-278.

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HOW TO CHOOSE THE UNIDROIT PRINCIPLES AS THE LAW
GOVERNING THE CONTRACT

• Parties wishing to choose the UNIDROIT Principles
  as the law governing their contract may do so in
  different ways
• They can
• choose the UNIDROIT Principles as the sole law
  governing the contract
• This Contract shall be governed by the UNIDROIT
  Principles 2004 except as to Articles
• choose the UNIDROIT Principles together with a
  particular domestic law for questions not
  expressly settled by the UNIDROIT Principles
• This Contract shall be governed by the UNIDROIT
  Principles 2004 except as to Articles
  supplemented when necessary by the law of
  jurisdiction x

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EXAMPLES OF ACTUAL CONTRACT PRACTICE

• An example of the first approach is the
  Membership Agreement of COVISINT, an electronic
  market place recently set up among
  DaimlerChrysler, Ford, General Motors, Nissan,
  Peugeot and Renault providing
• The Product Agreement shall be construed in
  accordance with the UNIDROIT Principles of
  International Commercial Contracts, with the
  exception of Section 4.6 Contra proferentem
  rule which is excluded due to the difficulty of
  providing explicit language to cover each
  possible interpretation that may arise in a
  multi-national legal structure.

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EXAMPLES OF ACTUAL CONTRACT PRACTICE

• An example of the second approach is a letter of
  intent negotiated by a Korean and a French-owned
  Hong Kong based company
• The agreements contained in this document shall
  be governed by the Principles of International
  Commercial Contracts Should it become
  necessary to rely in addition on a national law,
  this will be the law of Hong Kong.

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CHOICE OF LAW CLAUSE IN FAVOUR OF UNIDROIT
PRINCIPLES TO BE COMBINED WITH ARBITRATION
AGREEMENT

• Parties choosing the UNIDROIT Principles as the
  law governing their contract should combine such
  choice with an arbitration agreement
• In fact, given the non-binding nature of the
  UNIDROIT Principles
• Courts may not be willing to apply the UNIDROIT
  Principles as the law governing the contract to
  the exclusion of any domestic law
• Arbitral tribunals are generally prepared to
  apply rules of law such as the UNIDROIT
  Principles either because so requested by the
  parties or because they themselves consider them
  appropriate

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THE POTENTIAL ROLE OF THE UPICC IN DRAFTING
CONTRACTS BETWEEN CHILEAN AND FOREIGN BUSINESSES

• Industries and Trade Branches with Significant
  Proportions of International Business
• Specific Needs and Specific Experiences in
  Contract Drafting
• Disputed Matters in Major Litigation and
  Arbitration Cases Chilean v. Foreign Parties
• Chapters and Individual Provisions of UPICC of
  Particular Interest for Chilean Parties
  (Examples)