Unit VII. Do the unidroit Principles of International Commercial Contracts form a new lex mercatoria?

Party autonomy allows the parties to choose the law that shall be applicable to their contract. Especially in the context of arbitration, the question arises, as to whether the parties may also choose the lex mercatoria or "principles of transnational law" as applicable law to the contract. The answer is highly controversial, in particular because the possible user does not have recourse to a defined and concrete set of rules.

Not long ago in 1994, UNIDROIT (International Institute for the Unification of Private Law) published its "Principles of International Commercial Contracts". By its drafters and some commentators, these Principles were soon celebrated as the new lex mercatoria and an answer to the longlasting debate. Is there a good reason for this enthusiasm?

This essay will pursue the question of whether the UNIDROIT Principles (hereafter called "Principles") can really be considered as a new lex mercatoria. Starting with a historical description of the ancient lex mercatoria, it will then turn to the theory of a modern lex mercatoria and outline the debate concerning the lex mercatoria as being an autonomous body of law. In its second part, this paper will explain the idea of the Principles and examine them in light of the specific characteristics of a lex mercatoria and the criticism put forward against it. Hereby, it will be demonstrated that the Principles with their autonomous and yet non-binding character do not only meet the substantive requirements of a true law merchant, but that they also counter some of the main points of criticism against the modern lex mercatoria. As such, the Principles constitute a corner stone in the lex mercatoria debate and may become the heart of the new lex mercatoria.

The Modern Lex Mercatoria

Merchant law was not yet dead -- the will for world trade was stronger than the national restrictions and limitations of the commercial law: merchants created internationally legal structures and instruments that had to be recognized by national legal systems in order to reach a common base for international trade relations. Furthermore, non-governmental institutions like the International Chamber of Commerce (ICC) started in the 1920's to foster international trade law by developing uniform standard rules and procedures. 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. In the 1960's, Berthold Goldman, Clive Schmitthoff and Aleksander Goldstajn were among the first to point at this development, at this "new law merchant" and at its tendency to be autonomous.

It is not surprising that the idea of the lex mercatoria has been revitalized: businessmen involved in cross-border transactions were increasingly and still are dissatisfied with the unsuitability of some national laws for international commerce and with the results of the conflict of law rules which often appear arbitrary and impractical. A system of supra-national legal principles, it is felt, could oust the technicalities and "blind mechanisms" of national legal systems and could help escape the vagaries of national law. A common core of rules and principles would permeate the various legal systems and would thus provide a common frame of reference for negotiations between parties from different legal backgrounds. Furthermore, a growing body of commercial practices promises to be more flexible and adaptable to commercial needs than the domestic legal systems.

To many jurists, these reasons to promote a supra-national legal system were sound and convincing, and soon the idea of a new lex mercatoria found many admirers who picked up its elements and developed them further. Meanwhile, a number of distinguished authors adhere to the concept of the modern lex mercatoria. They see it as a growing body of uniform and a-national rules consisting of customs and usages of international trade and of those principles, concepts and institutions which are common to all or most of the states engaged in international trade. And it is the dynamic potential inherent in the merchant community and in all areas of modern international commercial law which they regard as the driving force behind the creation of this uniform body of transnational law.

The authors who advocate the modern lex mercatoria are numerous and as such, it is not surprising that their views about its status and shaping are not congruous in every detail. There is, for instance, disagreement in respect of the exact meaning of the term "modern lex mercatoria", i.e., the constituent sources of the lex mercatoria.

Some authors take a wide approach and equate the lex mercatoria with transnational commercial law. Hereby, they do not only classify international standard form contracts, general commercial practices, trade usages, customary law, codes of conduct, rules of international organisations and generally recognized principles of law as constituent elements of the lex mercatoria, but also international conventions and uniform laws. Other supporters of the lex mercatoria take a more narrow view in that they emphasize its customary, spontaneous and thus non-statutory nature. Accordingly, they exclude international conventions, uniform laws and other statutory law as a primary source of the lex mercatoria (although those may, of course, influence the general principles of commercial law).

Because the specific problems of transnational commercial custom which shape the controversial debate relating to the lex mercatoria (i.e., Is it a law? An autonomous legal order distinct from national legal systems? do not arise with respect to rules of state or interstate origin, the latter narrow view shall be followed for the purpose of this essay.