The ICC MODEL TURNKEY CONTRACT FOR MAJOR PROJECTS was published in 2007 and was well received in the international contracting world. That form was published by the ICC Commission on Commercial Law and Practice which is, like ICC, in business for business, and acts as a focus group for all parties to international transactions.

In recent years, the Commission on Commercial Law and Practice has published a number of model forms of contracts. The forms have covered a wide range of international transactions, including the turnkey supply of an industrial plant, and have all been distinguished by the imperative that they be fair to all parties to the transaction involved, as ICC represents all parties to all transactions.

Globalization and its corollary of increased competition are bringing about changes in the ways companies organize themselves, including the outsourcing of non-strategic activities, the creation of networks and increased recourse to subcontracting.

As a result, subcontracting has become a standard practice in all business organizations and projects and hence, accounts for a substantial portion of the economy as a whole in many countries.

This, and the consequences in terms of employment and credit, explains why many jurisdictions regulate the way subcontracting agreements are structured and/or financed by public policy rules. For example “pay when paid” clauses are voidable in a number of countries and payment guarantees for the subcontractor can be conditions of validity of the subcontract which cannot be contracted out.

Parties to an international subcontracting agreement should accordingly exercise the highest vigilance in the verification of applicable public policy rules in all jurisdictions concerned by the project at hand.

This is all the more necessary as there is no internationally accepted common legal definition and delineation of the concept of subcontracting. The delineation between subcontract and sale agreements can, in particular, vary considerably from country to country.

The aim of ICC in producing this form of contract is to meet the need for a fairer and more balanced contract between the parties to subcontracts in major construction projects, while recognizing the desire of all parties for price and scope certainty, the need for swift and effective dispute resolution, the need for complete, responsible and informed allocation of risks, “like for like” tenders, and true competition internationally. ICC is of the view that contracts which are unfairly biased in favour of one party or the other will eventually create more problems than they solve.

The Subcontract Drafting Group has chosen to draft this Model form as a “back-toback” contract to the Main Contract between the Employer and the Main Contractor, such “back-to-back” or “flowdown” contractual technique being one of the common legal methods of subcontracting. As the concept of subcontract supposes that a main contract exists, the parties will be well advised to verify, in all circumstances, whether [Page10:]or not an approval and/or notification of the Employer should be secured on the Subcontract or Subcontractor. The Subcontract Drafting Group has given close attention to possible interfaces between the main and the subcontract in order to take into account the protection of the interests of the three parties – the Employer, Main Contractor and Subcontractor.

While this Subcontract uses some of the language of its parent Turnkey contract, the Subcontract Drafting Group hopes that the form will be flexible enough to be a real option as a subcontract to any other standard form of contract and has been thought out with this in mind.

In line with this objective of generality, the Subcontract Drafting Group has deliberately elected not to recommend one or the other various operational delineation methods which exist in various industry traditions such as tables of split of works or RASI (Responsibility, Approval, Support and Inform) distributions of items of work.

Parties should in each case ensure that a bespoke delimitation of their respective responsibilities and a method of resolution of unavoidable delimitation issues are included in their agreement. The Subcontract Drafting Group has earmarked suggested Appendix 1 as the place where the parties should include such provisions, according to the applicable best industry practices.