TFPD_03: ICC rule making – it takes the time it takes


Trade Finance Paradigm #3: ICC rule making – it takes the time it takes

 

The next of the eight Trade Finance Paradigms is: ICC rule making – it takes the time it takes.

 

The making or revision of ICC rules is very time consuming. For example the ISBP revision: The decision to initiate the revision was taken at the ICC Banking Commission Meeting in Brussels 23-24 November 2009. It is expected (hoped by many) that a final draft will be approved at the ICC Banking Commission Meeting in Lisbon April this year. In other words something that looks like 3 ½ years.

 

There have been voices that such task must be completed in far less time. 6 months has been mentioned. Naturally such statement is instantly shot to the ground by the hardcore LC people. This cannot be done! ICC Rules simply takes the time it takes (Quoting a Danish commercial for cheese). It is interesting of course to take a closer look at why a “simple” revision of ICC rules / practices takes this long … and evaluate whether or not it will in fact be possible to drastically reduce the “revision time.”

 

First of all – why does it take this long? In fact the answer is simple – and complex:

 

Again; the ISBP revision as an example. The organization that is being set up is huge:

* You have the “Drafting Group.” A group of approx. 12 people that (re)draft the paragraphs according to the comments received from the ICC National Committees.

* Then you have the “Consulting Group.” A group with the purpose of furnishing the Drafting Group with practices and a first line of comments to the newly (re)drafted paragraphs.

* Then you have the ICC National Committees who are to comment on the various drafts circulated by the Drafting Group. In many countries there are working groups that must meet to discuss and draft the comments from the ICC National Committee.

* Then you have the ICC Banking Commission who will comment (discuss) at each meeting – and finally take a vote on the final draft.

Finally you have other ICC Commissions – like the Transport Commission and the Insurance Commission who may be asked to comment on specific topics.

 

So – the organization is indeed huge. Many people are involved – many many hours are “invested” into the process. And – only few (if any?) actually receive any kind of payment for the work done.

 

Adding to the above that the rules drafted by the ICC Banking Commission are really complex – and any change or just a simple re-wording need to be considered carefully, it is hardly surprising that these revisions takes a long time.

 

The next good question is if 3 ½ year of drafting provides a better result than 6 months of drafting? The answer is: perhaps!

 

As mentioned these are complex rules – and any change must be considered carefully.

However when a revision goes on for a long time something strange starts to happen: Some of the drafted texts are going in circles. Slowly they are returning to where they started.

What also happens in such process is that new ideas start popping up, and new text is added in order to capture these ideas. New ideas are great! However provisions found in the UCP 600 and the ISBP simply take time to mature. One example to this effect from the ISBP revision is regarding the issue of original and copy documents. At the ICC Banking Commission Meeting in Doha March 2012 a new approach was taken: A document that is not a copy is an original. Now ISBP Draft 5 is out for comments – and the cover note included the following statement:

 

Quote

1. Paragraph A27) – Originals and Copies

 

In Draft 4, paragraph A25) the Drafting Group suggested a new text:

 

“A document will be considered to be an original unless it indicates that it is a copy.”

 

Based on feedback from some national committees, the Outstanding Issues document highlighted a possible change in the text to read “A document bearing an apparently original signature, mark, stamp or label of the issuer will be considered to be an original unless it states that it is a copy.” A total of 25 (out of 32) national committees who voted on this issue indicated a preference for this new wording. However, there are some comments that the text includes wording such as “apparently” which can cause ambiguity as it is not always possible to make an accurate assessment of originality given the advancements in technology.

 

Therefore, paragraph A27) in the attached draft offers three potential alternatives for your consideration and the Drafting Group is looking for comments to indicate the preferred option. The option with the most votes will be incorporated into the next draft.

 

Depending on the option chosen, this may impact the content of paragraph A29) (d) (iv).

Unquote

 

Given that a final version should be up for a vote April 2013 – it is really late to have such complex issue outstanding….

 

In other words when a revision goes on for a long time there are pros and cons, and frankly I have a hard time clearly answering the question if the fact that it takes longer time makes the final result better…

 

So – does this mean that nothing can be changed – and that the paradigm is right: ICC rule making – it really takes the time it takes? Here my answer is clear: No it does not mean that! As I have illustrated the current process is time consuming and cumbersome – and it must be possible to do it better and faster!

 

There is one factor that makes it difficult to reduce the time considerably: The organization of the ICC! ICC Rules must reflect “practice” – and must be bases on consensus; i.e. the final product must be 1) voted for by the relevant ICC Commission, and 2) acceptable to a vast majority of ICC National Committees.

 

However – this is not the real obstacle. The real obstacle lies in the current paradigm. ICC rules are viewed as EITHER “a work in progress” (i.e. unfinished) OR final and published – in a tangible book! There must be a “result:” An in force date - a book launch – copies sold – seminars held …. the works!

 

In my view this is the real obstacle. This is what make it impossible to just fix what does not work – or add what is missing. Instead the whole process must be started. The whole machinery must be set in motion.

 

If the time a revision of ICC rules takes are to be effectively reduced, it must be based on a change of paradigm: ICC rules must be viewed as “work in progress” – where it is possible to make updates and changes to one article/paragraph without changing the whole thing.

Going back 15 years – this would have been close to impossible, but with today’s technology – and the fact that everyone is online all the time – it is indeed possible today! 

 

So here is a suggestion – totally free of charge:

 

ICC rules must be available online! In my previous blog post (ICC can only make money by high priced publications and hard protected copyrights – part 2 of 2) I suggested that ICC information should be available using the Spotify model. In such scenario it would be easy to have the ICC rules available online.

 

The world is changing – and changing fast, so it makes no sense anymore to have rules that are only revised every 10 years or more. Therefore the ICC rules should be “version based” – i.e. it must be possible to correct one article/paragraph and change the version of the set of rules from “version 1.0” to “version 1.1”.

 

But then one could argue that the ICC would loose income as no books are being sold in the ICC Bookstore. It is true that in such scenario not many books would be sold, BUT surely there are other revenue streams – for example:

 

A system like the Spotify model would widen the range of potential users (buyers) – for example to include the commercial parties. There would be a better possibility to offer additional services; like seminars (which would be relevant for each new version), advisory and resolution services and much more. More – and better – content, means a wider reach means more members … means higher income.

 

In any case – there may be many models – but I would argue that the only way to effectively reduce the time a revision of ICC rules takes would be to change paradigm: It must be viewed as a work in progress. It never stops!

 

Take care of each other – and the LC!

 

Kim

 

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