On 17 March 2025, the Australian Government published Model Clauses to help government purchasers manage vendor relationships when procuring AI technology based systems and services. The Model Clauses cover issues relevant to private-sector procurement and are a useful guide for companies developing vendor terms in the AI space.
The Artificial Intelligence (AI) Model Clauses (Model Clauses) were developed by Australia’s Digital Transformation Agency (DTA). They align closely with Australia’s technology-related regulations in the fields of privacy, cybersecurity, and IP. This updated version (version 2.0) expands the earlier version’s scope to address a broader range of use cases and better align with AI-specific rules that have emerged in other jurisdictions. The Model Clauses create obligations to govern relationships between entities delivering AI products and services (Seller), and government entities acquiring such products and services (Buyer).
The Model Clauses envision two main use cases:
- Buyer procures services where the Seller will use AI Systems as part of the services it is providing to Buyer.
- Buyer develops bespoke AI tool with assistance from Seller, who is a third-party developer of the AI System used to develop the tool.
Additional clauses also are planned to cover procurement of software from Seller with embedded or integrated AI technologies. According to the DTA, these are being developed as part of work on a larger effort to develop a model agreement for Software and Cloud on the government procurement platform. Though this use case is not yet specifically covered, many of the Model Clauses’ existing provisions can be applied to these types of relationships.
Similarly, while the Model Clauses are designed to cover procurement of bespoke AI systems, they can be used where off-the-shelf AI systems are procured as the fundamental concepts driving contracting considerations in the AI space would apply in this scenario as well.
Contracting entities are not required to adopt whole sections when making use of the Model Clauses. They are intended to be adapted on a case-by-case basis as supplemental clauses to larger agreements. Their modularity allows them to be adapted to various scenarios and are a good guide of the protections the Australian Government expects to cover AI technologies.
Contents of the Model Clauses
The Model Clauses cover topics that will be familiar to compliance professionals working in the AI space. They explicitly target core principles such as fairness, privacy, accountability, safety, and explainability, and assign responsibilities for compliance tasks that are emerging in AI-specific regulations around the world (Australia does not currently have a comprehensive AI legal framework similar to the EU AI Act or the Colorado AI Act).
The Model Clauses create baseline compliance mechanisms that should be adjusted as appropriate to accommodate the particularities of the scenario to which they are applied. Some provisions are drafted with placeholders, making them easier to adapt to specific use cases or legal obligations in jurisdictions with more developed AI-specific laws (e.g., specifying the scope of a “banned AI system”). Companies can rely on the Model Clauses’ extensive drafting notes for guidance on how provisions can be adjusted at the implementation stage to accommodate particularities. However, while the DTA encourages procurement teams to pick and choose provisions applicable to the relationship, individual provisions should not be adjusted beyond the placeholders or as advised in the drafting notes.
What companies should do now
Though the Model Clauses are designed to assist with public procurement of AI-technology based systems and services, they provide a useful guide of regulator expectations when managing risk of AI development and deployment. Private-sector companies can seek to incorporate the Model Clauses into their own agreements to similarly manage risk.
While the Model Clauses target compliance with Australian laws, which may defer from the laws in jurisdiction relevant to the relationship, these laws constitute a mature legal framework that is likely to be similar to applicable laws.
Finally, other organizations and the European Commission have published model clauses for use when procuring AI systems. However, the Model Clauses offer some advantages, including that they are designed to cover a broader range of issues areas, such their data protection compliance provisions scoped to Australia’s Privacy law and their cybersecurity provisions that overlap and correspond with the separate Cyber Risk Model Clauses.
It is possible to extract significant implicit compliance advantages from the Model Clauses regardless of where core processing of the relationship occurs. Companies should assess the extent to which Model Clauses align with the provisions in their AI-related third-party agreements and consider whether to add provisions from the Model Clauses to their templates for such agreements to fill gaps.
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