SOFT LAW CLAUSES AS A TOOL FOR MANAGING CONTRACTUAL RISK

Introduction

Let me start with a story.

Once upon a time, a company received an offer from a major multinational corporation. It was an exciting opportunity — potentially very profitable. The corporation sent over its contract and explained that this was \”their standard form\” and \”part of their internal procedures.\”

The agreement was long.

Nobody really read it.

Some assumed they would not understand all the legal language anyway. Others thought that, even if there were problematic provisions, they would probably never become relevant in practice.

And, after all, if anything went wrong, lawyers could always step in later.

Sound familiar?

As lawyers, we all know that clients tend to call us for two reasons.

Either before signing a contract — which is relatively inexpensive.

Or after signing it — which is considerably more interesting for lawyers, but significantly less enjoyable for clients.

Unfortunately, the second option remains surprisingly popular.

Unfortunately, this is not a hypothetical example. Situations like this happen every day.

As lawyers, one of our tasks is to remind clients that we are like contraception— use them before, not after.

And this brings me to today\’s topic.

Good contracts do not have to be long. More importantly, by making intelligent use of soft law instruments, we can help our clients manage risk and make international transactions easier, more predictable, and ultimately more successful.

What Is Soft Law?

One of the fascinating features of international commerce is that business has evolved much faster than legislation.

International trade requires rules that transcend national borders, yet conventional international law has developed only gradually. As a result, many practical needs of international business have been addressed not by governments, but by organizations such as UNIDROIT, UNCITRAL, the ICC, and the Hague Conference on Private International Law.

These organizations study commercial practice, compare legal systems, and develop rules that businesses can voluntarily adopt.

Unlike statutory law, soft law does not apply automatically.

It applies because parties decide that it should apply.

In other words, soft law operates not ex lege, but ex contractu.

And that is precisely what makes it so powerful.

Because instead of forcing one party to accept the other party\’s domestic law, soft law offers neutral, internationally accepted solutions that reflect best practices rather than national preferences.

Three Categories of Soft Law

Modern soft law instruments generally fall into three categories:

First, principles.

These are sets of legal rules drafted in a manner similar to legislation. They are structured in articles and provisions and provide comprehensive solutions to specific legal issues.

Second, guidance documents with recommendations.

These are practical tools. They do not merely explain the law; they provide advice based on decades of commercial experience and identify what may fairly be described as international best practice.

Third, model clauses.

These are perhaps the most practical instruments of all.

Someone else has already done the drafting for us.

The clause has been tested, refined, and accompanied by official commentary. We simply incorporate it into the contract.

Why Commentaries Matter

One feature deserves particular attention.

Modern soft law instruments are not just collections of rules. They are accompanied by extensive official commentaries.

This matters because the ultimate users of these rules are not academics.

They are business people.

Official commentary explains not only what a provision says, but why it exists and what purpose it serves.

It provides authentic guidance and often eliminates the need to navigate conflicting scholarly opinions or case law.

For practitioners, this is enormously valuable.

The UNIDROIT Principles

If there is one flagship example of soft law, it is undoubtedly the UNIDROIT Principles of International Commercial Contracts.

First published in 1994 and continuously updated since then, they have become something of a global common language for international contracting.

They address virtually every fundamental issue of contract law:

• contract formation;
• validity and interpretation;
• performance and non-performance;
• assignment of rights;
• set-off;
• limitation periods;
• multiple debtors and creditors;
• and many others.

Parties may incorporate the Principles entirely or selectively.

In some jurisdictions and in international arbitration, they may even serve as the governing law itself.

Their influence extends far beyond the text itself. Courts, arbitral tribunals and legal practitioners around the world increasingly rely upon them as persuasive authority.

Guidance Documents: From Theory to Practice

Over the years, international organizations have moved away from producing standard contract forms and have increasingly focused on practical guidance.

Modern guides are not textbooks.

They are based on experience.

They tell practitioners which issues should be addressed, what risks should be considered, and what solutions are regarded internationally as sound and balanced.

In many areas, these recommendations effectively represent global standards.

And, perhaps more importantly, they contribute to the harmonization of commercial practice.

Model Clauses: Small Provisions, Big Consequences

Personally, I believe model clauses are among the most underappreciated tools available to lawyers.

Negotiations are often difficult because parties naturally distrust solutions proposed by the other side.

A model clause changes the conversation.

Instead of saying:

\”This is my clause, and it protects my interests,\”

we can say:

\”This is an internationally recognized clause developed by the ICC.\”

The discussion immediately becomes less emotional and more objective.

Model clauses also provide an additional level of comfort.

They are professionally drafted.

They have been tested.

They reflect international trends.

And they reduce the risk of ambiguity or invalidity.

Perhaps the best-known examples are arbitration clauses.

By simply inserting the recommended wording of an arbitral institution, parties avoid years of litigation over whether they have actually agreed to arbitrate.

And that may sound obvious.

Yet some of the most sophisticated legal disputes in the world have started because someone decided to save thirty seconds by improvising an arbitration clause.

Lawyers have a special talent for spending five years litigating over something that could have been solved with a simple copy-and-paste.

The ICC: The Global Leader

No organization has contributed more to the development of model clauses than the International Chamber of Commerce in Paris.

Its Force Majeure Clause, Hardship Clause, Confidentiality Clause, Anti-Corruption Clause and Arbitration Clauses have become part of everyday international contracting.

For many lawyers, these instruments are no longer merely recommendations.

They have become the market standard.

And, if I may add one comparative law observation, one of the remarkable things about soft law is that it often helps bridge the gap between different legal traditions.

Civil lawyers sometimes believe that common law contracts are too long.

Common lawyers sometimes believe that civil law contracts are too short.

And both sides are convinced that the other side is doing it wrong.

I once heard someone say that under civil law, lawyers trust the legislator, while under common law, lawyers trust nobody — and therefore write everything down.

Which may explain why some common law contracts are so long that by the time you reach the force majeure clause, the force majeure event has already happened.

Fortunately, soft law offers a middle ground.

It allows us to rely not only on domestic legal traditions, but also on internationally accepted standards.

Conclusion

Soft law is not a single body of rules.

It is a toolbox.

A toolbox developed by international organizations, shaped by commercial practice, and made available to businesses around the world.

Its strength lies in flexibility.

Its legitimacy comes from expertise.

And its effectiveness depends largely on us — the lawyers who draft contracts and advise clients.

International business does not need more complexity.

It needs more certainty.

And perhaps one of the most effective ways to provide that certainty is to make greater use of the soft law instruments that are already available to us.

Because ultimately, our clients are not interested in legal theories.

They are interested in doing business.

And if soft law helps them do business more safely, more efficiently and with fewer disputes, then perhaps we should start using it more often than we do today.