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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by International Chamber of Commerce (ICC)
For several years a growing number of documents called “Non-circumvention & Non-disclosure Agreements”, “NC&ND Agreements”, “Commission Protection Guarantee”, or similar names, have been circulating among business firms engaged in international trade. Such agreements mainly cover situations where an occasional intermediary, who undertakes to provide certain services (e.g., communication of potential customers’ names, promotion of business), desires to be protected against the risk of being “circumvented” by the other party (and, consequently, not being paid for his services).
Since it appeared that there is need for a model contract covering this situation, the International Chamber of Commerce (ICC) decided in 1999 to draft a “Model occasional intermediary contract — Non-circumvention & Non-disclosure Agreement” (Publication 619) to which parties engaged in international trade could make reference for contracts of this type.
This initiative intended at the same time to react against an abusive practice consisting in presenting certain NCND agreements ICC products, such as, for instance, “ICC Covenant for Non-circumvention& Non-disclosure”, “ICC Non-circumvention & Non-disclosure Agreement” or “ICC NCND”. In certain cases reference has been made to non-existent ICC rules said to govern such an agreement (e.g., “ICC non-circumvention and non-disclosure rules”, “ICC 400 rules”, “International Chamber of Commerce Convention”). Most of these model agreements which can be found on the Internet are poorly drafted and do not adequately protect the respective interests of the parties.
By publishing, in the year 2000, the ICC Model Occasional Intermediary Contract (Non-circumvention & Non-disclosure agreement) which contains in part B a set of rules named “ICC General Conditions for Non-circumvention & Non-disclosure Agreements”, the ICC has officially established its own NCND Rules which automatically replace those of any document NCND agreement which refers to the ICC. This may give parties who inadvertently sign one of the above “fake” agreements, the possibility of invoking the application of to the ICC rules, which provide a fair and balanced contractual framework.
When updating this model contract it has been decided to take into account the growing diffusion of the term “NCND” and thus to change the main title of this model from “Occasional Intermediary Contract” to “Non-circumvention & Non-disclosure Agreement” and to put the term “Occasional Intermediary Contract” in the second part of the title. This inversion of title and sub-title should make the NCND agreement more recognizable, but does not change the substance of the matter, since a party providing a service under an NCND agreement is and remains an occasional intermediary.
The ICC Model Contract Occasional Intermediary (Non-circumvention Non-disclosure) is part of a set of model contracts in the field of international distribution, which at present cover the following situations:
Both the occasional intermediary and the commercial agent act as a middle-man, i.e., they promote the conclusion of contracts between a principal and a third party (while the distributor acts in his own name and for his own account as buyer-reseller). However, while the agent undertakes to actively and continuously promote business within the territory or toward a group of customers for which he is responsible, the occasional intermediary has in principle no such obligation: he may agree to promote a specific business or to inform the counterpart about business which may come to his notice, without any continuing obligation to develop the market. Moreover, the activity of an occasional intermediary may be limited to the simple supply of information about a possible business (names of potential customers, indication of a particular deal, etc.), while the commercial agent’s activity comprises necessarily the negotiation of contracts (in view of collecting orders) on behalf of the principal.
Considering these factors, there should be no difficulty in choosing between the model agency contract and the model NCND agreement. In case of doubt (e.g., when the intermediary, although not contractually bound to develop the market, in fact appears to promote business on a continuing basis), parties should check attentively if the rules on commercial agents (which in many countries have mandatory character) are applicable, and in case of a positive answer, they should prefer the agency model.
The model NCND agreement has been prepared on the assumption that it would apply to a cross-border relationship. However, this does not prevent parties from using the model with reference to domestic agreements, provided they check accurately to what extent it is compatible with the applicable national law and provided they make the necessary amendments (e.g., deleting provisions not applicable to domestic contracts).
The ICC Model Contract Occasional Intermediary is divided into two parts:
The main purpose of this division in two parts is to concentrate in the Special Conditions all (or almost all) aspects which need to be specified by the parties or which require a choice between different alternatives. This should make it easier for the parties to define the contents of their particular deal, without needing to modify any particular clause of the General Conditions.
The model has been designed on the assumption that parties would normally use both Parts A and B, with each part being drafted with the other part in mind.
On the other hand, it is open to the parties to incorporate into their contract only Part B, the General Conditions. This will be the case whenever the parties make reference to the “ICC General Conditions for Non-circumvention & Non-disclosure Agreements” or, more generally, to ICC rules governing occasional intermediaries, NCND or similar agreements.
Of course, whenever Part B is applicable on its own (i.e., without Part A), any reference in Part B to the clauses in Part A would be deemed to refer instead to relevant specific terms, if any, agreed by the parties in their special contract; see Article 1.1 of the General Conditions (Part B).
Before describing the rights and obligations of the parties under this particular model contract, two principles of a more general character should be mentioned.
The first one, contained in Article 2, imposes upon the parties the obligation to perform the contract in accordance with good faith and fair dealing (Art. 2.1) and, furthermore, provides that the agreement and the statements made by the parties in connection with it are to be interpreted in good faith.
The second principle, contained in Article 1.2, provides that modifications to the contract must be made in writing. This rule, which has the obvious advantage of ensuring maximum certainty regarding the terms agreed between the parties, is however not absolute. In order to avoid abuses which may result from a strict application of this rule, the second sentence of Article 1.2 (which[Page7:]was taken from Article 29(2) of the 1980 Vienna Convention: United Nations Convention for the International Sales of Goods (CISG) goes on to say that a party may be precluded from invoking the requirement of writing if he has agreed to a modification of written terms orally or by conduct and the other party has relied on such oral agreement or conduct.
The very first point to be defined by the parties (after the indication of their names and addresses, of course) is the type of service that the intermediary is to provide. In fact it is essential that the parties clearly state whether or not the intermediary must supply names of possible customers or contacts, provide information about one or more specific deals, put the counterpart in contact with a third party, or negotiate a contract for the counterpart with such third party.
Box A of the Special Conditions is intended to guide the parties through a number of possible alternatives, such as:
It is impossible to foresee all the different types of services the intermediary may agree to provide to the counterpart. We will try to describe here some of the main situations which have been taken into account when preparing this model.
This first alternative is intended to cover the case where the intermediary’s activity is limited to a simple supply of information about one or more third parties (e.g., names and addresses of potential customers) or a particular deal (e.g., a tender), a service which does not necessarily imply direct contact between the intermediary and the third party.
In this context problems may arise with respect to the quality of the information communicated by the intermediary. Should the information be selected so that it meets the particular needs of the counterpart? Should the intermediary be obliged to give information which is not easily accessible (excluding, for example, names which can be found in standard publications)?
If the information appears to be useless or trivial, it would be unfair to request the counterpart to pay for it and/or to be bound to respect possible exclusive rights of the intermediary. On the other hand, a general rule requiring the information to have a certain “quality level” would probably leave too much leeway to counterparts seeking excuses not to pay the intermediary.
Considering all this, it was thought inappropriate to state a general rule on the characteristics (quality) of the information, trusting that the principle of good faith and fair dealing contained in Article 2.1 would offer sufficient guidance in cases where the level of the information is clearly inadequate.
Of course, if the parties want more precise rules on this matter, they may provide further specifications in Box A-10 (Other).
As regards the intermediary’s remuneration, if its obligation is limited to the supply of information, a lump sum — payable against the supply of such service, independently of the conclusion of a contract with the third party — may be an appropriate solution (see Box A-5.1 and A-5.2-A). However, parties may also agree on a commission with respect to the contract (if any) concluded with the third party introduced by the intermediary (see Box A-5.2-B).
This second alternative implies a more active involvement of the intermediary, who agrees to establish actual contact between the third party and the counterpart: the simple information that the third party could be interested in business with the counterpart would not amount to an actual “putting into contact”: see Article 4.4 of the General Conditions.
Parties may indicate whether or not the contact should be established merely for possible future business or for a particular deal with respect to which the NCND agreement is made (see Box A-1.2-A).
As concerns the remuneration, in this case, the normal solution will be to pay the intermediary only if the contract with the third party is concluded (but the parties may agree otherwise; see Box A-5.1).
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If the parties have agreed that the intermediary should assist the counterpart during negotiation (see Box A-1.2-B), it is assumed that the intermediary can actually help the counterpart in negotiating the contract with the third party, due to the intermediary’s knowledge of the third party, its good name or other means. According to Article 4.4 of the General Conditions, the intermediary’s obligation to assist the counterpart during contract negotiation implies that the intermediary undertakes reasonable efforts to help the counterpart until conclusion of the contract.
Also in this case, the remuneration will normally depend upon the conclusion of a contract with the third party, although the parties may agree otherwise.
In certain cases, the intermediary agrees to assist the counterpart also after conclusion of the contract, during its performance (see Box A-1.2-C). This solution may be agreed especially when the intermediary can, due to its relations with the third party or its particular knowledge of the local market, help the counterpart overcome possible problems arising during such stage. According to Article 4.4 of the General Conditions, the intermediary’s obligation to assist the counterpart during performance of the contract implies that the intermediary undertakes reasonable efforts to help the counterpart in overcoming problems which may arise during such stage. Of course, if the parties have in mind which actual services the intermediary should perform in this context, they should specify this in a more detailed way, if necessary by using Box A-10 (Other).
In this case, it is reasonable to expect that the intermediary’s right to remuneration will depend (at least partially) upon the performance of the contract by the third party.
Article 4.2 of the General Conditions provides that the type of services to be supplied by the intermediary must be clearly stated and that, if they are not sufficiently identified in the agreement, no obligation will arise on the side of the counterpart. The reason for this choice is that, if it appears impossible to clearly establish, on the basis of the contract or other written documents, what the intermediary is actually expected to do,1 it would be unfair to request the counterpart to undertake the corresponding obligations (not to circumvent the intermediary, not to disclose the information received, to pay for the service, etc.).2
Articles 4.3 and 4.4 provide, furthermore, for the integration of incomplete clauses, e.g., by stating that the simple indication that the intermediary is to supply information means it is not to give further services, such as assistance during negotiation (Article 4.3), and that the obligation to put the counterpart into contact with a third party means the intermediary must actually establish direct contact between the counterpart and the third party (Article 4.4).
The type of service to be provided by the intermediary must not be confused with the service itself, which will normally be made available only after conclusion of the contract, according to the conditions that may be agreed between the parties (particularly under A-2). For instance, if the intermediary is to supply the counterpart with a list of names of potential purchasers, the parties will first indicate the type of service to be provided3 (e.g., “a list of 10 potential German customers for the shoes manufactured by the Italian counterpart”), and the parties will furthermore agree4 how and when such information will be transmitted (e.g., the list will be handed over within 10 days after signature of the NCND agreement). And finally, after the agreement is signed, the list will be actually handed over to the counterpart.
Another example: an intermediary accepts to assist the counterpart in negotiating the contract with a customer of the intermediary’s country, the name of whom is already known to the seller. In this case, the parties will state in the NCND agreement the obligations of the intermediary (assistance during negotiation) but will not need to reserve the indication of the customer’s name for a later stage.
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When appointing an intermediary, the counterpart will normally accept to grant him a certain level of exclusivity with respect to the business he agrees to promote: this is, in a certain sense, the essence of his obligation not to “circumvent” the intermediary. However, the extent of such obligation (if any) may vary from case to case and should therefore be clearly defined by the parties.
In principle, by granting an exclusivity to somebody, the counterpart agrees to deal only with that party with respect to the activity entrusted to it. However, it is normal to agree upon exclusivity clauses having a more limited extension, such as clauses whereby the counterpart retains the right to have direct dealings within the ambit reserved to the intermediary (with or without payment of commission to the latter). In certain countries a distinction is made between granting a sole right (which means that the counterpart agrees not to appoint other intermediaries, but retains the right to deal on its own with respect to the activity entrusted to the intermediary) and an exclusive right (which implies that the counterpart should not at all interfere with the activity of the intermediary). Since this distinction is not universally accepted (and may be unknown in many jurisdictions), the ICC working party has preferred to use the term “exclusive”, it being understood that such term also covers situations where the exclusivity is not absolute, such as a “sole right”.5
With regard to exclusivity, the model contract provides several options in Box A-4 of the Special Conditions, as well as the “default rules”, contained in Article 7 of the General Conditions, applicable to the extent the parties have made no choice.
When choosing among the various options, a distinction should be made among three different aspects, each of which leaves room for several alternatives:
In setting out the various options in Box A-3 of the Special Conditions, a basic division has been made with respect to the first aspect (i.e., the scope to which the exclusivity refers) by distinguishing the following situations:
Within these three basic alternatives further options have been worked out, particularly as regards the extension of the exclusive rights and the intermediary’s remuneration. Of course, considering the great number of possible combinations, it has been possible to cover only the most common solutions. Parties wishing to choose further alternatives can have recourse to the option “other”, which has been provided in most cases as a further alternative.
In the context of contracts with occasional intermediaries, the common rule is not to grant the intermediary an exclusivity with respect to the promotional activity it is to perform. So, for example, if a manufacturer appoints an intermediary to look for customers in a certain country, the manufacturer will normally assume that the intermediary is non-exclusive and that he will remain free to appoint other intermediaries for the same type of business as well as to take direct contact with customers of that country.6
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For this reason the “default rule” in Article 7.1 of the General Conditions says that, unless otherwise agreed, the intermediary is appointed on a non-exclusive basis, i.e., that the counterpart remains free to appoint other intermediaries and to act on its own with respect to the activity the intermediary is to perform. In other words, if the parties do not complete Box A-3.1, the alternative under A-3.1-A will automatically apply, by virtue of Article 7.1 of the General Conditions.
The parties may, of course, agree otherwise, for example by stating in general terms that only the intermediary is entrusted with a certain task (for instance, to contact buyers for the counterpart’s products in Argentina, or to find a purchaser for a specific product of the counterpart anyplace in the world). In this case the counterpart agrees not to entrust other intermediaries with the same task (i.e., contacting buyers in Argentina or looking for a purchaser for the specific product the counterpart wishes to sell) and/or to refrain from taking the same action on its own.
In such a case the parties may fill in alternative B of Box A-3.1 and further state in the boxes under A.3.1-B the extension of the exclusive right, i.e., if the counterpart only agrees not to appoint other intermediaries for the same task or if the counterpart also undertakes not to act on its own for the same business.
Moreover, the parties may expressly state, under Box A-3.1-C, if the intermediary is entitled to remuneration for possible direct business by the counterpart falling within the scope of the activity entrusted to the intermediary. If the parties do not expressly agree on this point, the general rule of Article 5.6 will apply, according to which the intermediary is entitled to remuneration for direct deals made by the counterpart which fall under the intermediary’s exclusivity.
If the intermediary is to promote a specific deal with a given third party, it will normally be appointed to act on an exclusive basis as middle-man for such deal.
There may, however, be exceptions: for example, if the role of the intermediary is only to inform the counterpart about the deal or to establish a first contact, the counterpart may prefer to retain the right to appoint other intermediaries and/or to negotiate on its own with the third party.
Box A-3.2 takes into account the following alternatives with respect to this point:
Of course, between these two extremes there are many other solutions, which can be agreed by the parties, e.g., the counterpart may deal directly with the third party but may not appoint other intermediaries, and/or the intermediary must be kept informed about direct negotiation. In this case Box A-3.2-C (Other) can be used.
As regards the intermediary’s right to remuneration, since in this case the deal promoted by the intermediary is the very purpose of the agreement, there should be no doubt about its right to be paid for such business (to the extent remuneration has been agreed in general terms, of course). It may, however, be open to discussion if the remuneration should be a lump sum7 or a commission on the contract made with the third party and, in the latter case, if the right to remuneration should arise as a consequence of the conclusion of the contract as such or because of the intermediary’s actual intervention to this effect. For this reason, Box A-3.2 offers the choice between these two alternatives (A-3.2-i and A-3.2-ii).
As concerns possible exclusive rights of the intermediary with respect to third parties it has introduced to or put into contact with the counterpart, also sometimes called “customer protection”, Box A-3.2 offers the following alternatives:
If the parties choose the second alternative, they should decide if the customer protection should apply to all third parties introduced by the intermediary or only to third parties with whom the intermediary has created an actual contact (see Box A-3.3-B-1 for the two options).
Furthermore, parties should define in detail the actual extension of such exclusivity/protection with respect to direct dealings with the third party: the two extreme solutions set out in Box A-3.3-B-2 are, on one side, that the counterpart may deal directly with the third party8 or, on the other side, that it may deal with the third party only through the intermediary. Of course, other options may be considered (for example, requesting that the intermediary be informed in advance).
Also with regard to the remuneration for direct business with “protected customers”, two options are proposed under Box A-3.3-B.3: remuneration for all future contracts with the “protected” third party, or only on contracts concluded through the intermediary’s actual intervention. Other possible options (to be put under “Other”) may be envisaged with regard to further aspects, such as, for example, the amount of remuneration (which could be different on successive deals or be subject to agreement on a case-by-case basis).
The “default rules” applicable in the absence of a specific agreement are the following:
The reason for choosing these principles as a standard solution is that it appears reasonable to grant a customer protection to the extent the intermediary’s involvement in creating a contact with the third party is of a certain importance and provided the purpose of the NCND agreement is not limited to a single deal. But, of course, these are mere presumptions which leave the parties free to make a different choice if they consider the standard solution inappropriate.
As regards the actual significance of the notion of “customer protection” with respect to the right of the counterpart to deal with the “protected” third party, the “default solution” set out in Article 7.3 of the General Conditions is that the counterpart is free to make direct contact with the third party, provided it pays the remuneration which may be due to the intermediary on the business made with the third party. This solution seems more appropriate (as a general rule) than the stricter one, which prohibits any contact without the actual participation of the intermediary in the negotiation.
Another important aspect, which the parties should discuss in advance, is whether and to what extent the intermediary should refrain from acting for competitors of the counterpart.
Of course, the right solution can be found only by the parties themselves, taking into account the particular circumstances of their agreement. So, for instance, there may be situations where it would be inappropriate to let the intermediary make contact with competitors of the counterpart (particularly if the actual situation implies that the intermediary will come to know confidential information, which should not be passed to competitors, or if the activity of the intermediary cannot be carried out correctly in the interest of two competing counterparts), while in other cases this aspect may be of no particular importance for the counterpart.
Box A-4 contains the two main alternatives:
If the first alternative is chosen, Box A-4-B provides several further options regarding the extent of the non-competition obligation, which may cover the intermediary’s promotional activity in general or only certain third parties or deals.
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If the parties do not expressly agree on the intermediary’s non-competition obligation, the general rule, contained in Article 8, says that the intermediary will be bound not to act for competitors of the counterpart to the extent it has been granted an exclusive right on certain business.
This means, for example, that:
However, even when the intermediary may act for competitors of the counterpart, such freedom is not unlimited, because it must in any case respect certain minimum requirements as to confidentiality and fair dealing. In order to clarify this point, Article 8.2 of the General Conditions expressly states that the intermediary must in any case refrain from using confidential information obtained from the counterpart or from otherwise taking advantage of its relationship with the counterpart when dealing with the latter’s competitors.
With respect to the intermediary’s remuneration, the parties may choose between several alternatives, which have been indicated in Box A-5 of the Special Conditions with the purpose of helping the parties to select the most appropriate solution.
A first option regards the type of remuneration. Although the most common type of remuneration is a commission on the value of the business (contract) entered into through the intermediary’s intervention, parties can also agree on a lump sum. The latter may be appropriate in cases of simple communication of information and, more generally, when the parties wish to limit the extent of their collaboration to a very first stage (e.g., simple introduction of a third party).
Box A-5-1 gives a choice between the various alternatives: lump sum, commission, other.
As to the amount of the intermediary’s remuneration, parties may fill in the spaces left open in Box A-5-1 (lump sum, fixed rate of commission) or state that the remuneration is to be agreed upon case by case. The latter solution has the advantage of being flexible; however, it may give rise to substantial problems if the parties do not agree on the remuneration, and should therefore be further specified.9
As far as the rate of commission is concerned, Box A-3.1 only provides for a fixed rate. However, this does not prevent parties from agreeing on more sophisticated solutions, such as different rates of commission according to the amount of the contract. So, it is usual for big deals to agree upon a variable commission (e.g., 5% up to 500,000 USD; 3% from 500,000 to 2,000.000 USD; 2% on the amount exceeding 2,000.000 USD). If the parties choose this solution, they should clearly define which situations should be considered as a single deal and which are to be considered separately for the purpose of such calculation.
It is very unlikely that the parties would not agree on the amount of the remuneration, or at least on a system for determining it. In order to prevent uncertainty, Article 5.1 of the General Conditions states that if no amount of remuneration (or at least the criteria for determining it) is agreed in writing, the intermediary will not be entitled to payment. In fact, in the very unlikely case that the parties do not fix the amount of remuneration (or the criteria for its future determination), it is reasonable to assume that the intermediary does not expect to be paid by the counterpart for its services (for example, because it will be paid by the third party, or because it expects other economic benefits from the deal).
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It is important that the parties decide whether the intermediary should be paid for the simple fact that it has performed certain services (e.g., to communicate information, to put the counterpart into contact with a third party), independently of the result obtained, or if, on the contrary, it should be paid only if and to the extent its activity has led to the conclusion of a contract with a third party.
If the parties choose the first solution, they should complete the first alternative in Box A-5-2 (remuneration for the performance of services as such). In this case the remuneration will be due even if no contract has been concluded with the third party, provided the intermediary has fulfilled its obligations under the NCND agreement.
If the parties choose the second alternative (remuneration depending on the conclusion of a contract with a third party), which is by far the most common solution for agreements of this type, they should complete option B under A-5-2. In this case the intermediary will be paid only if and to the extent a contract with the third party introduced by it has been concluded.
If the parties have not made an express choice, the following presumptions shall apply according to article 5.2 of the General Conditions:
The parties may, of course, also choose intermediate solutions, e.g., that payment will be due only if the contract has been concluded through the actual intervention of the intermediary (see Boxes A-3.2-ii and A-3.3-B-3). They may also agree on mixed solutions, for instance by providing for payment of a commission if the contract with the third party is concluded and reimbursement of certain expenses if no result is obtained. In this case they should draft an appropriate clause, which may be put in Box A-10 (Other).
When the remuneration is due with respect to a contract concluded with a third party, the parties may wish to put a time limit within which such contract must be concluded.
For this purpose, Box A5.2-A offers a choice between several alternatives: conclusion of the contract within a period of time from signing of the NCND agreement, before expiration of the NCND agreement, other.
If no choice is made, the general rule contained in the last sentence of Article 5.5 of the General Conditions will apply, according to which the right to remuneration will expire any case the contract with the third party has not been concluded before the expiration or termination of the NCND agreement.
Moreover, in order to prevent abuses, Article 5.5 of the General Conditions states that the commission shall be due even if the contract has been concluded after the above-mentioned time limit, if it appears that the conclusion of the contract with the third party has been intentionally delayed by the counterpart for the purpose of avoiding payment to the intermediary. Of course, in such an exceptional case, it will be for the intermediary to prove that the delay has been intentional.
Another important point to be decided is whether the intermediary should be entitled to remuneration on business entered into by the counterpart, without the intermediary’s intervention, with third parties introduced by the intermediary or falling within the scope of its activity, particularly as concerns subsequent contracts with third parties introduced by the intermediary.
This aspect has been already examined in paragraph 6(c) of the Introduction.
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According to Article 6 of the General Conditions, each party has an obligation not to disclose any confidential information obtained in the context of the NCND agreement, such as names of customers; sources for contracts; business opportunities made available by the intermediary; or, on the other side, information given by the counterpart about its marketing organization, pricing policies, commercial strategies, etc.
This non-disclosure obligation arises only with respect to information which is actually confidential: it is in particular understood that the parties’ right to disclose or use information which is in the public domain is not affected.
Box A-6 gives the parties the opportunity to expressly state which information they consider confidential. If they do not do so, in principle only information which has been supplied to the other party with the indication that it is confidential will be considered as such.
However, this is not to be regarded as an absolute rule:
If parties prefer to include a more detailed clause on confidentiality, they may incorporate by reference the ICC Model Confidentiality Clause 2006 (ICC Publication n. 664)
The model contract contains only the option of a contract for a fixed term, thus excluding a contract for an indefinite term, considering that such solution is almost never used for this type of agreement. In Box A-6 of the Special Conditions the parties may indicate the duration (or expiry date) of the agreement, as well as the conditions for its renewal. If nothing has been agreed, the contract is deemed to be made for a period of one year (Article 11.1). Moreover, Article 11.2 states some supplementary rules applicable when the parties have agreed that the agreement will be automatically renewed.
The possibility of an earlier termination of the agreement (before its expiry) in case of substantial breach or exceptional circumstances is foreseen in Article 12.
This model form has been based on the assumption that it will not be governed by a specific national law, but only by the provisions of the contract itself and the principles of law generally recognized in international trade as applicable to contracts with occasional intermediaries (also called ≪lex mercatoria≫). Consequently, Article 13.1 of the General Conditions provides that the contract is to be governed by the “rules and principles of law generally recognized in international trade as applicable to international contracts with occasional intermediaries”, together with the UNIDROIT Principles on International Commercial Contracts. This means that questions not covered by the contract will be governed by the general principles of the “lex mercatoria”, together with the rules contained in the UNIDROIT principles.
The working party is conscious that these principles are very general and may not always give clear guidance in case of a dispute. However, a reference to national laws — which in most cases have no specific rules on occasional intermediaries engaged in international commerce — can imply the application of rules for domestic intermediaries (e.g., brokers) which may be very different from what the parties expect (e.g., unforeseen requirements or time bars for claiming commission).
Considering this risk, it was thought that the possible disadvantage resulting from the application of rather flexible and general rules is counterbalanced by the greater certainty of a uniform set of contractual rules and by the reference to a set of rules on contracts, like the Unidroit Principles of International Commercial Contracts10 which offer a reasonably foreseeable legal framework for most issues which may arise.
In any case, if the parties wish nevertheless to submit the contract to a particular national law, they may do so by completing Box A-8.
It should further be remembered that there may be situations where certain ordre public rules are to be respected, which must be taken into account whatever the law governing the NCND[Page15:]agreement. So, for example there are in certain countries rules which require local intermediaries to obtain prior government authorization for the exercise of their activity. Parties should therefore check the existence of rules of this type before entering into an NCND contract.
As concerns the resolution of disputes, the standard solution under Article 13.2, which will automatically apply if not otherwise agreed, is ICC arbitration, but other alternatives (such as jurisdiction of ordinary courts) can be chosen in Box A-9.
If the parties choose litigation, they may indicate, under Box A-9, the forum (city, country) which will have jurisdiction. They may also determine if such jurisdiction should be exclusive, i.e., if they wish to exclude the jurisdiction of any other court.11 If the parties choose option A-9-B (Litigation — ordinary courts) without indicating the forum, ordinary courts will have jurisdiction according to the applicable procedural rules.
1 Numerous examples of clauses which do not sufficiently identify the services to be supplied by the intermediary are found in NCND agreements available on the Internet, e.g., “any business transaction whatsoever, done through, via and/or with the cooperation of either parties to this agreement”.
2 Moreover, in many jurisdictions a contract which does not sufficiently define the obligations of the parties may be considered un-enforceable.
3 Under A-1.1, first alternative, if the Special Conditions are used.
4 Under A-2, if the Special Conditions are used.
5 See Article 7.5 General Conditions. This means that, when the model contract makes reference to a situation where the intermediary is "exclusive", it also covers cases where the protection granted to the intermediary is not absolute, e.g., where the counterpart retains the right to deal directly in competition with the intermediary. So, for instance, the rule contained in Article 5.6 of the General Conditions according to which the intermediary is entitled to remuneration on direct sales by the counterpart if the intermediary has been granted an exclusive right, will also apply to the case of a “sole” intermediary, i.e., when the counterpart has retained the right to make direct deals (unless the parties have agreed otherwise, by expressly excluding the right to remuneration with respect to such direct sales).
6 This is a typical difference between occasional intermediaries and commercial agents. A commercial agent is normally responsible for promoting business on a continuing basis within a given territory or toward a particular group of customers and will therefore be granted a sole or exclusive rights (as well as a commission on direct sales) with respect to business made by the principal in the area for which the intermediary is responsible.
7 This option is rather unlikely, and has therefore not been expressly indicated in A-3.2. However, it cannot be excluded in principle, e.g., if the parties prefer to agree in advance on remuneration payable independently of the result of the intermediary’s intervention (in this case parties may have recourse to Box A-3.2-iii (Other)).
8 This solution is not necessarily in contradiction with the protection of the intermediary, if he is granted remuneration on contracts with such third party.
9 E.g., by fixing an amount applicable in case of disagreement, or by leaving its determination, in case no agreement can be reached, to a neutral third party (or arbitrator).
10 The text of the Unidroit Principles 2010 can be found in Appendix 2.
11 It should be noted that within the European Union (and with respect to some other European countries like Switzerland and Norway), where the 1968 Brussels Convention or the 1988 Lugano Convention on jurisdiction apply, the choice of forum will be considered exclusive if the parties have given no further indication (see Art. 17(1) of the above conventions).