The Development of New lex mercatoria in the context of Liberalisation, Privatisation and Globalisation

By Sonakshi Verma, NLU Jodhpur      

Editor’s Note:   Reforms in international commercial law have long been the centre of international efforts to facilitate international commercial transactions with lower costs to enterprises and higher legal certainty. As world trade and communications became increasingly interdependent, an intermediate period fostered the growth of a limited type of substantive international law, based primarily upon the common trade usages and practices among merchants, as well as such universally recognized legal principles. Lex mercatoria is a growing body of such international customary laws. However, its status as a legitimate source of law distinct and autonomous from national legal systems stands on debatable grounds with arguments both supporting and dissenting the same and hence remains uncertain.                                          

Introduction

Lex mercatoria is a growing body of international customary law. As world trade and communications became increasingly interdependent, an intermediate period fostered the growth of a limited type of substantive international law, based primarily upon the common trade usages and practices among merchants, as well as such universally recognized legal principles as pacta sunt servanda. This new law is quite appropriate in an increasingly interdependent global community, with enhanced technology and communications and a more harmonized social and political agenda. The new paradigm also facilitates the greatly increased volume of international business and accommodates the increased involvement of nation-states as parties to transnational business.

After the medieval age, there emerged a trend of rediscovering the international character of the commercial law and to move away from the restrictions of national law to a universal, international conception of international trade law. This trend was driven by the business community and is known as the new lex mercatoria. In the 1960’s, Berthold Goldman, Clive Schmitthoff and Aleksander Goldstajn were among the first to point at this development, and at its tendency to be autonomous.

Today, trade lawyers have the option of selecting something akin to ‘a-national’ contract law, rather than national law, to govern their relationships. They may do so, in part, to insulate their contract, and disputes that might arise, from the control of national judges. The centrality of the lex mercatoria as a mode of governance is partly enabled by the creeping codification of this law. The more traders and dispute resolvers actually use this law, of course, the more its autonomy – from national sources of law – is enhanced. Projects to unify and codify transnational contract law have proliferated in recent years. The most important of these are run by independent institutes of practitioners and academics, which have produced draft commercial codes of global and regional reach. Beginning in the 1970s, for example, the International Institute for the Unification of Private Law began work on what would become the UNIDROIT Principles of International Commercial Contracts, which purports to be a comprehensive code for international commerce.

The work is still in progress aiming to achieve a uniform and harmonised internationalised sales law.

Codification, unification and harmonisation

The international corporations have evidently declared ideological war on the “antiquated” nation state…the charge that materialism, modernisation and internationalism is the new liberal creed of corporate capitalism is a valid one. The implication is clear: the nation state as a political unit of democratic decision making must, in the interest of “progress” yield control to the new mercantile mini-powers. –Kari Levitt[i]

While the structure of the multinational corporation is a modern concept, designed to meet the requirements of a modern age, the nation state is a very old-fashioned idea and badly adapted to serve the needs of our present complex world.-George W. Ball[ii]

These two statements express a dominant theme of contemporary writings on international relations. International society, we are told, is increasingly rent between its economic and its political organisation. On the one hand, powerful economic and technical forces are creating a highly integrated transnational economy blurring the traditional significance of national boundaries.  On the other hand, the nation state continues to command men’s loyalties and to be the basic unit of political decision.[iii]

The word “Globalisation” is taken to mean the spread of a certain phenomenon to increasingly larger portions of the globe whereas the word “Transnationalism” subsumes globalisation in the sense that it also describes a process, and that it is concerned with the harmonisation of certain commercial activities. Where it differs is that it builds upon the logic of globalisation and refines it within a dynamic, multi-levelled analysis.[iv]

The Concept of a Transnational Political Economy

Going beyond boundaries or interests is the main essence of a Transnational Political Economy and it does so by initiating a harmonisation process among the three levels that comprises such an economy: individual, state/systemic, and structural. At the individual level are individual traders, commercial coalitions, and associations of individuals that transcend state boundaries (such as the International Chamber of Commerce, and UNIDROIT). Occupying the systemic level are states and all of the manifestations of their power, namely, their systems of municipal commercial law, private international commercial law. The structural level is conceived as a Grotian, normative construct that encompasses all of the constraints and opportunities that affect both individuals and states by virtue of operating within a capitalist system.[v]

Transnational Political Economy begins from the assumption that these levels are becoming more integrated, or harmonised, both “horizontally” in their own right, and “vertically” as the distinction between these levels becomes blurred. Horizontal harmonisation refers to a process that affects the actors that are confined to a particular level. For instance, at the individual level, as the ICC promulgates uniform procedures, or standard contracts for the sale of a certain commodity. The actors involved in that community thereby become more integrated in their practice. Similarly, as states agree to more codes at the level of public international commercial law, their legislations become harmonised to a greater extent.[vi]

The concept of “vertical” harmonisation means the simultaneous harmonisation of the private and public spheres. One of the interesting aspects highlighted by Transnational Political Economy is that this methodology spotlights certain trends that are taking place at the different levels simultaneously. For instance, the ICC and various commodity and professional associations are formulating rules of conduct, standard codes, and model laws to govern certain aspects of international trade from the “bottom up” at the same time that states are relinquishing control over the same issues in public international commercial issues from the “top down”. The Transnational approach therefore seeks to incorporate the process of increasing globalisation and to take into account the dynamics of the international political economy in a multi-level framework.[vii]

The Century of Transition

The twentieth century can be characterised as the century of transition.[viii] One can observe five distinct significant legal transitions in the 20th century.

Firstly, a number of emerging markets are now in place with their legal systems in transition. A great deal of “harmonised law” was negotiated and drafted without participation of the majority of emerging markets, or at least, before the majority of these States assumed legal personality in public international law.[ix]

Secondly, after a period of nationalisation of legal systems in the first half of the 20th century in the second half of the century we have experienced a desire for harmonisation of law. Against this background, conflict of laws adequately served national legal interests, and “localisation of issues” and “localisation of disputes” were the main objectives of (private) international law. Thirdly, in the final decade of the 20th century, harmonisation of law entered a new era. Newly independent states or emerging economies are in the process of rewriting their laws. While national identity is important, an effort is also made to the effect that internationally recognised standards or harmonised law forms the bulk of this modern legislation. Accordingly we have a symbiosis of convergence of legal systems and the creation of more diversified national legal systems. Fourthly, an additional characteristic of this second half of the 20th century can be seen in the process of regional economic integration and the delegation of law-making to regional international organisations[x]

Finally, international arbitration has emerged as the preferred method for settlement of disputes in international business transactions. If there is an international convention relevant to the dispute, it should be given preference over the application of a national law. Further, where the dispute can most easily be resolved be resorting to the customs and usages of the particular trade or industry, such customs or usages should be the standard applied. Trade standards, which comprise the law of international trade, should be applied in preference and often in deference to the rules of national law. Accordingly for a considerable number of international trade disputes a new transnational legal order has emerged, which is, if not detached from existing legal systems, more liberal in its application than existing substantive law. It seems that there may soon be a movement in national courts which will follow non-judicial settlement of disputes methods by applying anational and extra-legal standards.[xi]

The battle of forms

Harmonisation, unification, codification and reform in international commercial law have long been the centre of international efforts to facilitate international commercial transactions with lower costs to enterprises and higher legal certainty. Started with the International Institute for Unification of Private Law in 1930,  the international efforts of commercial law harmonisation and unification found their fruits in the two main codes widely recognised and accepted by nations, the United Nation Convention on Contracts for the International Sale of Goods(CISG) and the UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principals).

The “battle of forms” has been one of the most common seen problems in international transactions nowadays, as well as among the most complicated areas of contract law. It refers to the situation when the merchants exchange letters, emails and (standard) forms that seem to form a contract but in fact they include contradictory or inconsistent standard terms. In most of the cases those conflicts of terms do not lead to litigation as the businessmen with commercial mind-set will prefer to settle those conflicts via give-and-take amicable methods. However if litigation is rendered, it will become very difficult to resolve.[xii]

International Trade and Harmonising The “Battle of Forms” Solutions

Harmonisation and unification of the private contract law in general is an inevitable call as a result of international trade development. With the booming development of international trade and investment, international transactions have soon become a large part of the whole economic activities. Accordingly, reducing international transaction costs and other barriers has become a key objective of both governments and private sectors, a means of which is to simplify international sales transactions by removal of legal barriers and increase legal certainty for international transactions. In this regard, creating a uniform private international law will bring about many substantial advantages. As Hackney concluded:[xiii]

 One need not be aware of all the vagaries of the foreign system, but only the one system of law that the whole world transacts business upon. This decreases the legal risk inherent in transacting business on an international scale and consequently creates more profitability in international trade.”

Contributions of Ernst Rabel and Charles Sukurs

In respect of the battle of the forms, Hondius and Mahe witnessed that general conditions are often used in international trade, it is appropriate that the solution is sought on an international rather than a national level. Ernst Rabel, the lifeline of the project for unifying the law of international sales, contended that the law should provide an “infrastructure” for standard form contracts, and gave a number of reasons why a uniform law would be useful when the parties employ standard form contracts:[xiv]

“The law would fill in the gaps left by the standard form contracts; it would unify the mandatory law which could not be touched by the standard form contracts; it would suppress differences in the interpretation of standard form contracts due to different mentalities of various national legislators; it would be useful as a basis for the law of standard form contracts; it would influence arbitration; and it would be useful as a general law, as opposed to the diversities of national legislation.”

Another empirical evidence of the need for harmonising the battle of forms has been shown by Professor Charles Sukurs in the case of Canada and the US bilateral trade. While arguing that increasing trade between both countries gave rise to private conflicts, especially in the battle of forms problem where each country offers every distinct solution in its legal system, Sukurs suggested that vertical uniformity would eliminate the jurisdictional lines between domestic and international law.[xv]

what is lex mercatoria?

Lex mercatoria is derived from the Latin phrase “law of merchants and is the body of commercial law used by merchants throughout Europe during the medieval period. It evolved as a system of custom and best practice, which was enforced through a system of merchant courts along the main trade routes.[xvi]

Gap-filling of international commercial contracts may be achieved by the application of the so-called lex mercatoria or, in other words, the law merchant. There is no international consensus on the exact meaning of lex mercatoria, except that everyone seems to agree to what lex mercatoria is not. By such a negative inference it is possible to conclude that lex mercatoria is not national legislation but rather an anational system of principles and rules generally accepted in international commerce.[xvii]

The Concept of lex mercatoria

The traditional view of private international commercial law is that: “Any contract that is not a contract between states in their capacity as subjects of international law is based on the municipal law of some country”.[xviii] The object of the court, or arbitral tribunal, under this framework is to give effect to the express choice of law of the parties to a contract, and in absence of such an expressed choice, to determine the “proper” law of the contract through conflict of laws rules. The presumption is that a contract may not “float” independent of any municipal system of law; rights can be acquired only under a particular municipal system of law, and therefore must be enforced with reference to that system. In the traditional view, therefore, the state is the ultimate authority over a contract, be it within a purely domestic, or an international context.[xix]

There are two different approaches to this concept: Positivist and Autonomist.

The Positivist Perspective

Clive M. Schmitthoff is the principal advocate of the positivist conception of the lex mercatoria. He argues that it has its origins in the Medieval “law merchant”, but in principle only. According to him, the modern lex mercatoria is a “new law merchant”, which is the third stage of an historical process that blends features of the previous two. In the first, pre-national, stage in Europe, the “law merchant” consisted of a “body of truly international customary rules governing the cosmopolitan community of international merchants”[xx] on the high seas and in the conduct of fairs. The third stage, according to Schmitthoff, consists of a reversion to the principle of a truly international commercial law. He stated, “we are beginning to rediscover the international character of commercial law… the general trend of commercial law everywhere is to move away from the restrictions of national law to a universal, international conception of the law of international trade”.[xxi]

The Autonomist Perspective

The autonomous view sees the lex mercatoria as a universal body of substantive, anational rules which have been articulated by the international commercial community and which exist independently of any municipal system. According to this view, international commerce has a “sui generis character that warrants a special, separate regime of governance”.[xxii] This autonomous order is seen to rest on three pillars: the every-day practices of the international business community, the codified usages in international conventions, and the general principles of law. Codified usages and international conventions are seen to form the formal part of the lex mercatoria because they are legitimated and can be enforced. This order is seen to form substantive transnational rules. Distilled from a vast literature, these general principles among many others have been enumerated by Lord Justice Mustill[xxiii]:

  • Pacta sunt servanda (contracts should be enforced according to their terms)
  • Abus de droit (unfair and unconscionable contracts should not be enforced)
  • “Gold clause” agreements are valid and enforceable
  • One party may be released from its obligations is there is a fundamental breach by the other
  • Damages for breach of contract are limited to the foreseeable consequences of the breach
  • A Party must act promptly to enforce its rights, lest lose them by waiver

Emergence of the new lex mercatoria

International trade historically has been subject to numerous domestic legal systems, mainly by virtue of the rules of private international law. The disputes arising out of international sales contracts have been settled at times according to the lex loci contractus, or the lex loci solutionis, or the lex fori. This diversity of the various legal systems applied has hindered the evolution of a strong, distinct and uniform modern lex mercatoria. Such legal diversity creates legal uncertainty and imposes additional transactional costs to the contracting parties.[xxiv]

The idea of a unified international trade law represents the revival of an ancient trend towards unification that can be traced to the Middle Ages and which had given rise to the “law merchant”. Historically, international trade law developed in three stages: the old “law merchant”, its integration into municipal systems of law and, finally, the emergence of the new “law merchant”.[xxv]

 The new “law merchant”, common to both capitalist and socialist economies, is being established with the participation of all sides, thus giving international commercial law its best chance ever to achieve uniformity. There have long been many loud calls for the creation of a “new law merchant” in order to overcome the “anarchy upon which international relationships are based.” At the end of the 1920’s, Ernst Rabel suggested to the Governing Council of the International Institute for the Unification of Private Law (UNIDROIT) that it start the work for the unification of the law of international sales of goods. It has to be noted, however, that while the old “law merchant” had developed from usage and practice, the new “law merchant” is the result of careful and, at times, political deliberations and compromises by large international organisations and diplomats.[xxvi]

UNIDROIT decided to appoint a commission with the task of working towards that goal and, in 1935, the first draft of a uniform law on the sale of goods was produced. The events of World War II interrupted the development of this work, but in 1951, a new draft uniform law was presented in a conference at The Hague. Work toward a unified sales law picked up momentum and more drafts followed. Eventually, on April 1964, twenty-eight States took part in a Diplomatic Conference held at The Hague and approved two Conventions, creating the Uniform Law on the International Sale of Goods (ULIS), and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF).[xxvii]

Those two Hague Conventions did not achieve the desired result of unification of sales law. This failure has been largely attributed to the limited role played by Third World and Socialist countries in the contributions towards the Conventions. The efforts for unification of the substantive law of sales on an international level continued; however, and, in 1966, the United Nations established the United Nations Commission on International Trade Law (UNCITRAL), giving it the task of promoting the progressive harmonisation and unification of international trade law. Thus, signalling a new approach to the formulation of modern international trade law.[xxviii]

“The [CISG] resulted from work instituted in 1968 by the United Nations Commission on International Trade Law. Ten years of work in UNCITRAL produced the 1978 UNCITRAL Draft Convention.” This draft was laid before a Diplomatic Conference held in Vienna in 1980, which unanimously approved the current uniform rules.”[xxix]

The CISG as lex mercatoria

The United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG] represents the most recent attempt to unify or harmonize international sales law. The Convention creates a uniform law for the international sale of goods.

The unification of sales law stems from numerous sources. These sources include the increase in economic and legal unions, most noticeably in Europe, the use of “neutral” country laws, and the increased recognition of general principles of contract law. The most profound evidence of the move toward the unification of sales law is the adoption of the CISG. The development of a new jurisprudence to interpret and bolster the CISG is likely to have important consequences for the enforcement of international sales contracts by arbitral tribunals.[xxx]

In many ways, international commercial law or the lex mercatoria can be seen as the world’s first uniform law, albeit in an uncodified form. Merchants have long developed usage and practices that have given them the ability to communicate with one another without distractions presented by the nuances of culture, language, and national legal systems. Successful sales law unification entails a body of rule that is event-specific and void of unnecessary legalese. Arbitrators are more likely to make decisions based upon pro-arbitration norms, such as equity and fairness, than on any predisposition toward a domestic law. The concise and nonlegal language of the CISG provides arbitrators a source of such supranational rules of commerce.[xxxi]

The Difficulties of Achieving Uniform Private International Law

Many commentators are now suggesting that the Vienna Convention on the International Sale of Goods, ten years after it has come into force, might be failing to accomplish its task of bringing uniformity and predictability to international sales law. Some commentators argue that the Convention not only fails at its goal of bringing uniformity, but actually harms this goal.[xxxii]

Numerous scholars have raised the general problem of ambiguous text of CISG as well as its interpretation trouble, which are inherent in attempts to draft a uniform international law with binding effect. This problem is particularly evident in the case of the battle of forms problem. It is also witnessed that the courts, especially those from the Common Law countries, in most of the cases interpret CISG through the lens of their domestic law without consideration of either the “autonomous interpretation” requirement under CISG, or international CISG case law. Consequently these “homesick courts” distort the CISG rules and principles in a plenty of battle of form cases, ranging from divergent solutions based on multi-interpretation of CISG, to the negligence of parts of CISG, or the reference to CISG as a support only, or even the total disregard of CISG existence.[xxxiii] The “nationalistic interpretation” by the courts is hazardous to the uniform application objective of CISG, due to its encouragement of forum shopping. This also causes another problem which jeopardises the gap-filling mechanism under CISG: the courts are overusing their domestic law and their domestic concepts to “fill the gaps” of CISG even when CISG already offers either specific or general principles to regulate such problems.[xxxiv]

Given the development of modern sales transaction, featured by the economies of scale, and the rapidly increasing practice of contracting by electronic data interchange (EDI), the relatively strict last shot rule under CISG has been more and more criticised by both scholars and practitioners as an out-of-fashion solution. However, the Convention, being in place for nearly 30 years, neither provide a mechanism for updating its provisions nor international tribunal competent to resolve conflicting interpretations of important provisions.[xxxv]

Filling the gaps in cisg: unidroit principles and pecl

Two more recent documents can be regarded as companions to the CISG: the UNIDROIT Principles of International Commercial Contracts (promulgated in 1994), and the Principles of European Contract Law (PECL) (complete and revised version 1998).

Unlike the CISG, which is a uniform sales law adopted by countries that account for over two-thirds of all world trade in goods, the PECL are a set of principles whose objective is to provide general rules of contract law in the European Union, and will apply when the parties have agreed to incorporate them into their contract or that their contract is to be governed by them.

The UNIDROIT Principles and the PECL were written by persons learned in this field of law, who had been associated with the drafting of the uniform law. Although both instruments are broader than the CISG in scope, each in different ways, they are “Restatements” that include provisions derived from the CISG (as well as other sources). Both “Restatements” take cognisance of insights derived from the text of the CISG, from scholarly commentaries on the CISG, from cases that have interpreted the CISG, and from other sources.[xxxvi]

UNIDROIT Principles have indicated that they can provide valuable assistance in filling gaps in the CISG. The UNIDROIT Principles, and arguably the PECL, can and should be utilised in interpreting problematic CISG provisions. Both instruments can help interpret the Convention. Certain provisions in the Principles and the PECL bear a striking similarity to their CISG counterparts and can be regarded as “fleshing out bones” already present in the skeletal structure of the uniform law. Where, as is often the case, either the UNIDROIT Principles or the PECL dovetail with or approximate the CISG, the relevant comparatives can be helpful to the CISG researcher. The general affinity of the CISG to its companion Restatements demands such a comparative approach, especially where it can be shown that their respective provisions share a common intent. The proper introduction of the UNIDROIT Principles and the PECL into the gap-filling mechanism of the CISG aids in reducing the need to turn to the rules of private international law; this is a positive step towards uniformity.[xxxvii]

General Principles of International Law: UNIDROIT Principles

In May 1994, after almost fifteen years of preparation the International Institute for the Unification of Private Law (UNIDROIT), seated in Rome produced the official text of the Principles of International Commercial Contracts. As stated in the Preamble the Principles aim to establish “general rules” of international commercial contracts. It represents a system of rules of contract law which are common to existing national legal systems or best adapted to the special requirements of international commercial transactions.[xxxviii]

The UNIDROIT Principles as law merchant

For the Principles to be a new lex mercatoria, they first of all they have to meet the characteristics of a true law merchant. Recalling the main features of the substantive law merchant of the Middle Ages, one would therefore have to expect the Principles to be transnational, based on a common origin, a faithful reflection of the mercantile customs and particularly responsive to commercial needs. There is no doubt that the Principles fulfil the criterion of being “transnational” and “based on common origin”. The Principles neither belong to any national legal system nor do they reflect the rules and principles of one single national legal order. Instead, they are detached from any national legal context. They were designed to be applicable to international contracts throughout the world irrespective of legal tradition or economic and political environment. The search for legal ideas and principles common to the various national and international legal systems was thoroughly done by means of comparative analysis, and for each article, many different national approaches were considered.[xxxix]

Apart from being transnational and common in origin, the Principles also pay special attention to usages and customs when determining the rights and duties of the parties to each individual contract. Indeed, the openness to usages is even considered as an essential element and underlying idea of the Principles. Art. 1.8 in the general terms of the Principles provides in essence that usages may not only be binding when they have been agreed upon between the parties, but also in the absence of any such agreement. The Principles refer to usages also in several other articles. With this openness to customs and usages the Principles become responsive to new commercial practices, legal instruments and devices developed by the merchant community.[xl]

The Principles are also very “user-friendly”: They are neutral, short and concise, clearly arranged and with its simple language, explanations and practical examples easily understandable. They not only offer a lingua franca to facilitate negotiations and therefore cross-border trade, but they also render unnecessary the time-consuming search for the foreign legal rules or “general international principles” (in the case that those were chosen as applicable law). One must conclude that the Principles are not only transnational, based on a common origin and responsive to practices and usages, but also very adaptable to commercial needs and the world of international trade; hence, they fulfil the criteria of a law merchant.[xli]

Harmonisation at Supranational Level: The PECL 1999

The Lando Commission is a way to approach the complex issue of Europeanisation of Private Law. It has become one of the most noted ‘non-governmental’ unification projects within private law. For more than twenty years an ever growing number of legal academics drawn from all the Member States of the European Community has been working on behalf of this project, elaborating common European principles of contract law : The Principles of European Contract Law (PECL).[xlii]

It is an initiative to harmonise contract law, which is similar to UNIDROIT Principles but at supra-national level which was fostered by Professor Ole Lando. In terms of the battle of forms problem, PECL provides quite similar solution based on the knock-out rule.

In order to understand the possible contribution of PECL in the harmonising the solution to battle of forms problem, one should note that the main purpose of PECL is to serve as a first draft of a part of a European Civil Code. Therefore, the work on PECL, with the drafters’ full awareness of the co-existence of CISG and UNIDROIT Principles, reflects the common will within Europe of a Europeanisation of contract law by way of “from below. In bench-marking both set of principles, where UNIDROIT Principles are confined to “international” and “commercial” contracts, the European Principles apply to all contracts, including domestic transactions and those between merchants and consumers. As a lex mercatoria, it is submitted that PECL seems to be an unnecessary duplication and may not contribute as much as UNIDROIT Principles and CISG to the battle of forms harmonisation at international scale. However, as a potential infant of a European Civil Code, it will likely contribute much to the vertical uniformity of the solution to the battle of forms within European Union, with the similar binding effect as CISG.[xliii]

Conclusion

Since the idea of a new lex mercatoria was introduced some decades ago, it has kindled a highly controversial debate between those in favour and those against the lex mercatoria. With the popularity of international commercial arbitration and the recent efforts and projects of harmonizing international contract law, this debate has regained its importance. Authors and commentators are divided into two camps – “mercatorists” and “anti-mercatorists”. Their controversy culminates in the question as to whether the lex mercatoria is a true body of law distinct and autonomous from national legal systems and whether as such, the parties to a contract can validly choose the lex mercatoria as the law governing their contract by including a choice of law clause referring to the lex mercatoria (general principles of international commercial law or alike) as the proper law of the contract.

Many authors doubt that there is such a new lex mercatoria in the sense of an international commercial law autonomous from any state law. At least, they deny that it exists in any useful sense and that it is beneficial for solving commercial disputes. Several arguments are put forward to support this view: The main point of criticism refers to the lex mercatoria as not being a “law”. The lex mercatoria not only lacks a methodological base and a legal system supporting it and is dependent on national legal systems to work efficiently, moreover, it does not have any state authority from which it can derive its binding force.

The authors in favour of the lex mercatoria, in contrast, defend the lex mercatoria as being a law: The refusal of the “anti-mercatorists” to accept it as an autonomous body of law stems from a jurisprudence of positivism which is based on the theory that all law is derived from the will of the sovereign state.. Hence, legislation is seen as the heart of law, whereas the role of custom is minimized. Other than the legal positivists the “mercatorists” start their concept of the lex mercatoria from the fundamental idea that in general, law can emerge independently. As Lando puts it, “the binding force of the lex mercatoria does not depend on the fact that it is made and promulgated by State authorities but that it is recognised as an autonomous norm system by the business community and by State authorities”.

Who is to decide the legitimacy of this concept? There are valid arguments in support of each side which brings us to no definite conclusion. Hence the status of lex mercatoria as a legitimate source of law distinct and autonomous from national legal systems stands on debatable grounds with arguments both supporting and dissenting the same and hence remains uncertain.

Edited by Kanchi Kaushik

[i] The Hinterland Economy, Canadian Forum, July-August 1970, Vol. 50 P. 163

[ii] The Promise of the Multinational Corporation, Fortune, June 1967 Vol. 6 P. 80

[iii] Robert Gilpin, The Politics of Transnational Economic Relations, available at jstore.com

[iv] Silvia Fazio, The harmonisation of international commercial law, Kluwer Law International

[v]Jarrod Wiener, The “Transnational” Political Economy:- A Framework for Analysis. Available at lexmercatoria.org

[vi]Ibid

[vii] Ibid

[viii]Dr. Loukas Mistelis, Is Harmonisation a Necessary Evil? The Future of Harmonisation and New Sources of International Trade Law, available at www.cisg.law.pace.edu

[ix] Supra at 8

[x] Ibid

[xi] Ibid

[xii] Nguyen Trung Nam, Future of Harmonisation and Unification in Contract Law Regarding “Battle of Forms, available at www.cisg.law.pace.adu

[xiii] Ibid

[xiv] J. Hellner, The UN Convention on International Sale of Goods – an Outsider’s View, available at www.cisg.law.pace.edu

[xv] Supra at 7

[xvi] Aleksandar Goldstajn, Usages of Trade and Other Autonomous Rules of International Trade According to the UN (1980) Sales Convention available at www.cisg.law.pace.edu

[xvii] Jan Ramberg, International Commercial Transactions, Kluwer Law International P. 20

[xviii] P.M. North and J.J. Fawcett, Cheshire and North’s Private International Law, 11th. ed.,

Butterworths, London, 1987

[xix] Supra Note 4

[xx] Filip De Ly, International Business Law and Lex Mercatoria, North-Holland, London, 1992, p.58.

[xxi] Schmitthoff, The Unification of the Law of International Trade, Journal of Business Law, 1968

[xxii] Schmitthoff, International Business Law: A New Law Merchant, CISG Database

[xxiii] Supra Note 4

[xxiv] John Felemegas, Uniform Law for the International Sale of Goods, available at www.cisg.law.pace.edu

[xxv] Harold J. Berman and Colin Koffman, The Law of International Commercial Transactions(Lex Mercatoria), available at www.heinonline.org

[xxvi] Supra at 24

[xxvii] Supra at 15

[xxviii] John Honnold, The United Nations Commission on International Trade Law: Mission and Methods, available at www.cisg.law.pace.edu

[xxix] Luiz Gustavo Meira Moser, Albert H. Kritzer, The 1980 UN Convention (CISG), And The Vis Moot: An inseparable relationship, vol. 24, pace international law review

[xxx] Larry A. DiMatteo et al. International Sales Law: A Critical Analysis of CISG Jurisprudence, (Cambridge University Press:2005)

[xxxi] Lord Justice Mustill, The New Lex Mercatoria: The First Twenty Five Years, 4 ARB. INT’L 86, 108

[xxxii] Philip Hackney, Is the United Nation Convention on International Sale of Goods Achieving Uniformity?, Louisiana Law Review (Winter 2001) 473-486

[xxxiii] Guiliani v. Invar Manufacturing 2007 WL 2758802,

[xxxiv] Ole Lando, The Lex Mercatoria in International Commercial Arbitration, available at www.journals.canbridge.org

[xxxv] Supra at 6

[xxxvi] Supra at 17

[xxxvii] Supra at 15

[xxxviii] Klaus Peter Berger, The Lex Mercatoria Doctrine and the UNIDROIT Principles of International Commercial Contracts available at www.heinonline.org

[xxxix] Gesa Baron, Do the UNIDROIT Principles of International Commercial Contracts form a new lex mercatoria? CISG Database, Pace Institute of International Commercial Law

[xl] M. J. Bonell, An International Restatement of Contract Law, CISG Database, Pace Institute of International Commercial Law

[xli] Supra at 29

[xlii] Kristina Riedl, The Work of the Lando Commission From an Alternative Viewpoint, available at www.cisg.law.pace.edu

[xliii] Supra at 42

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