The Lex Mercatoria

Free «The Lex Mercatoria» Essay Sample

I. Introduction

The overall purpose of this essay is to explore the legal dimensions of the Lex Mercatoria in order to verify whether the Lex Mercatoria poses a real threat to the very existence of the conflict of laws, in view of the fact that the emergence of supranational norms has potential to make the choice of law rules and principles redundant. The aforesaid purpose of the research is to critically analyze and study various sources of the Lex Mercatoria and the conflict of laws. For this purpose, it is deemed wise to scrutinize both the academic scholarship and pertinent international and regional jurisprudence (statutory law, treaty law, and case law).

To that end, the thesis statement of this essay must be expressed as follows: the Lex Mercatoria poses no threat to the very existence of the conflict of laws because it is directed at the harmonization of available rules and principles of the conflict of laws, not on the creation of supranational norms.

II. Three Definition and Theories of Lex Mercatoria

Prior to making any conclusions with regard to the issues in question, it is found prudent to ascertain the nature of the Lex Mercatoria by way of reviewing the three definitions and theories of this phenomenon. Thus, in his recent publication, Cuniberti evaluates the Lex Mercatoria as one of the most miraculous elaborations in the framework of the international commercial law over the last fifty years. However, the aforesaid confession does not imply that the Lex Mercatoria has existed for fifty years. The fact is that Cuniberti refers to one of the three manifestations of the Lex Mercatoria. According to the scholar, the present-day Lex Mercatoria should be viewed as a new, spontaneously generated by the international community, ‘merchant law’ that proliferates in the shadow of national legal orders.

In addition to this, it is possible to identify two other versions of the Lex Mercatoria. Thus, in a very broad sense, the Lex Mercatoria may be understood as the body of commercial law applied by European traders in the Middle Ages. Another definition introduces the Lex Mercatoria as a ‘global law without a state’. To elaborate further, the concept of the Lex Mercatoria can be viewed in the context of a new Lex Mercatoria or, in other words, a flexible conglomeration of inform legal standards and rules that give birth to private international commercial law.

Besides, in some academic studies, it is possible to encounter the idea of a ‘new new Lex Mercatoria’, which is purposed to supersede the informal and amorphous new Lex Mercatoria with a well-structured and justified law system, reinforced by codified legal bodies, such as a very strongly institutionalized court-like mechanism of international arbitration, and widely-accepted UNIDROIT Principles of International and Commercial Law.

To sum up, the three definitions of the Lex Mercatoria are the following. First, the Lex Mercatoria is Medieval merchant law. Second, it is a new Lex Mercatoria – a present-day amorphous set of informal rules and standards applicable to international trade relationships. Third, the Lex Mercatoria is a new Lex Mercatoria – a forthcoming system of well-developed legal norms and principles of private international trade law, which is reinforced with codified legal bodies.

After the three definitions of the Lex Mercatoria have been provided, it is essential to review the key theories of the Lex Mercatoria. Returning back to the publication by Cuniberti, it may be appropriate to note that albeit the Lex Mercatoria has empirical roots, theoretical paradigms have substantially contributed to the formalization and expansion of the Lex Mercatoria as a legal phenomenon. As a matter of fact, Cuniberti provides new important theoretical insights into the nature of the Lex Mercatoria and, thus, assists in evaluating this phenomenon from different perspectives. According to Cuniberti, the Lex Mercatoria should be theorized as a phenomenon spontaneously generated by the international community. From this theoretical perspective, it is doable to explain why international contractual parties sometimes have recourse to an autonomous transnational law instead of seeking redress under their national law governing their contracts.

Putting the phenomenon of the Lex Mercatoria under scrutiny, Cuniberti verifies that there are several theories that aim at explaining the multiple facets of the Lex Mercatoria phenomenon. Thus, one theory is directed at the relationship between the Lex Mercatoria and freedom of contract. The key precept of this theory implies that the legislative systems of the majority of countries provide different instruments, permitting parties of the commercial agreements to elaborate private normative regimes. In this light, the freedom of contract is one of the aforesaid instruments. As a result of the entitlement to private ordering, the commercial parties do not always tend to develop circumstantial contracts for specific transactions, but they are more prone to have recourse to existent contractual models widely utilized in their field of business. From the theoretical perspective, the commercial parties’ reliance on the contractual forms is the key prerequisite to the development of the new Lex Mercatoria.

Representatives of the next theory of the Lex Mercatoria suggest that it may be viewed as a viable alternative to domestic commercial laws. This theory rests on two methods: 1) the list method; and 2) the functional method. This theory is enrooted in Goldman’s publications on the eventuality that transnational commerce has given birth not only to new transnational commercial law but also to an existent transnational legal order, which is autonomous from domestic laws and has large potential to relocate such laws to govern transactions in the domain of international business. In other words, Goldman and a variety of other theorists in this area postulate that business norms can probably be promoted to the level of law and can, consequently, be diected at the regulation of international business transactions independently from national laws.

The next theory of the Lex Mercatoria stipulates that the Lex Mercatoria is beneficial in terms of international arbitration. This theory is titled as Drahozal’s signaling theory of Lex Mercatoria. Theorizing on the use of the Lex Mercatoria by commercial parties, Drahozal arrives at the conclusion that the explanation for commercial parties’ growing interest in the Lex Mercatoria may be deduced from the areas of international arbitration services.

Specifically, the scholar considers the Lex Mercatoria very suitable and advantageous in terms of international commercial arbitration as a means of alternative dispute resolution. He construes that publishing articles and standards on international arbitration issues constitute one of several ways for prospective arbitrators to convey information concerning their quality to potential clients. This implies that the Lex Mercatoria, as a set of informal commercial rules and standards, both encourages international commercial arbitration and is influenced by arbitrators as active developers of the Lex Mercatoria.

An agency theory of the Lex Mercatoria is another theoretical paradigm conceived to provide new important insights into the nature of the aforesaid phenomenon. As far as this theoretical framework is concerned, it needs to be emphasized that the Lex Mercatoria frequently instigates adjudicative discretion and private means of dispute settlement. In contrast to Drahozal’s theory of the Lex Mercatoria, which rotates around commercial parties as the core drivers of international arbitration, the agency theory of the Lex Mercatoria shifts the focus of theorizing on arbitrators themselves. That is, advocates of the latter theory are inclined to believe that international arbitrators constitute the driving force behind the proliferation and augmentation of the Lex Mercatoria.

To be more precise, Dezalay and Garth, the key proponents of the theory, argue that the Lex Mercatoria was developed in the 1960s by a number of European continental arbitrators in order to achieve the complete discretion in settling disputes between Western petroleum companies and newly independent countries of the Third World and, thus, to eventually succeed in promoting the interests of oil corporations.

Another theory of the Lex Mercatoria is widely known as a production cost theory of the Lex Mercatoria. The development and popularity of this theory stems from the efforts and incentives of the International Commercial Chamber (hereinafter referred to as the ICC) to promote the development and proliferation of the Lex Mercatoria. Returning back to Cuniberti’s research, it is possible to notice that the ICC has been exclusively active in encouraging the development of the Lex Mercatoria and its use in practice by international commercial parties. The ICC’s INCOTERMS is a very nice example of how the International Commercial Chamber promotes the utilization of the Lex Mercatoria in practice.

To sum up, the Lex Mercatoria may be generally defined as a conglomeration of universal principles and customary standards spontaneously developed or referred to in the framework of international trade, without having recourse to a specific domestic system of law; a regime for international trade, progressively and spontaneously produced by the societas mercatorum; a single body of law formed by the international commercial community; a hybrid legal system that rests on the sources of both domestic and international law.

III. Concept of Conflict of Law

After the three definitions of the Lex Mercatoria have been analyzed and the most prominent theories of the Lex Mercatoria have been evaluated, it is also essential to clarify the meaning of the term ‘conflict of law’. The latter category is frequently used as an opposition to the concept of the Lex Mercatoria, and, therefore, it is vital to know the peculiarities and distinguishable features of the conflict of law. To put it briefly, the notion of the conflict of law may be defined as a disparity between the laws of two or more legal jurisdictions with certain ties to a case, such as the consequence is dependent on which jurisdiction’s law will be applied to settle each issue in question.

As a matter of fact, the antagonism between the Lex Mercatoria and the conflict of law lies in the fact that one of the principal objectives of the Lex Mercatoria is to rule out the search for the appropriate law of the contract or, more universally, the rules of conflict of laws. In other words, the key rationale underlying the Lex Mercatoria is to eliminate the necessity to have recourse to the conflict of law rules. To continue, Juenger argues that the fundamental precepts of the conflict of laws originate from statism and positivism, whereas the present-day commercial practice experience strenuous efforts of the international commercial players to free it from state interference.

IV. Choice of Law Rules and Principles

As the foregoing discussion must suggest, the utilization of the conflict of laws entails the choice and application of an appropriate law. However, the choice of law cannot be carried out in a free and unrestricted manner. The conflict of laws sets forth a system of rules and principles that determine the process and outcome of the choice of law. The choice of law may be depicted as a procedural phase in the litigation (adjudication) of a case concerning the conflict of laws when it is essential to harmonize the discrepancies between the laws of various legal jurisdictions. The consequence of the conflict of laws lies in the potential requirement to the court of one jurisdiction to apply the law of different jurisdiction in lawsuits stemming from commercial law, tort, contract, etc.

The legal norms applicable by the choice of law are usually known as the proper law. The problem and uniqueness of the conflict of laws lies in the existence of several different sysstems of rules and principles regulating the choice of law. Thus, the Hague Principles constitute one of many frameworks of choice of law rules and principles. Article 3 of the Hague Principles stipulates that under the Hague Principles: “the law chosen by the parties may be rules of law that are generally accepted on an international, supranational or regional level as a neutral and balanced set of rules, unless the law of the forum provides otherwise.” In view of the above, it needs to be explained that the Hague Principles justify the application of supranational sets of rules (non-state law) as long as it does not contradict to the law of the forum.

The scope of the Hague Principles is prescribed in Article 1. According to Article 1 of the Hague Principles, the aforesaid principles are applicable to the choice of law in international contracts where every contractual party is operating in the exercise of its profession or trade. It needs to be noted that the Hague Principles do not apply to employment and consumer contracts. Also, Article 1 (2) of the Hague Principles prescribes that, for the purposes of these Principles, a contract must be deemed international unless the contractual parties have their establishments in the same sovereign state and the relationship between them, as well as all other pertinent elements notwithstanding the chosen law, are linked only with that sovereign state.

Another conglomeration of choice of law rules and principles is offered by the American Law Institute. In its ‘Intellectual property: principles governing jurisdiction, choice of law, and judgment in transnational disputes’, the American Law Institute states that the choice of law procedure must be based on the principle of territoriality. That is, the choice of law principle of territoriality entails that the law applicable to designate the existence, duration, validity, attributes, and encroachment of intellectual property rights and the legal remedies for the encroachment is the law of each state of registration; ‘for other intellectual property rights, the law of each State for which protection is sought’.

To elaborate further, the UNIDROIT Principles must also be considered a specific set of choice of law principles and rules. However, in contrast to other sets of choice of law principles and rules, the UNIDRIOT Principles have potential to be viewed instrumental in the harmonization of the conflict of laws. In his comprehensive research, Bonell contends that the UNIDROIT Principles are conceived not only to supply commercial parties with proper law but also to ‘interpret or supplement international uniform law instruments’. The unique nature of the UNIDROIT Principles lies in the fact that they can be applied to international commercial contracts in the absence of the choice of law.

Analyzing the multiple facets of the choice of law, Ehrenzweig comes to the conclusion that various choices of law rules and principles are conceived to safeguard the defendant against unfairly deals under the law of the forum. This means that the choice of law rules and principles is directed not only at the facilitation of international commercial relationships but also on the protection of the defendant’s right and interests under the conditions of impossibility to utilize the law of the forum.

Any Questions?

Call us:


E-Mail:

Live Chat

V. Definition of Supranational Norms

The foregoing analysis unravels the imminent antagonism between the Lex Mercatoria and the conflict of laws. However, there is one point where the areas of the two antagonistic phenomena overlap. This point should be associated with the elaboration and proliferation of supranational norms. The idea of supranational norms is particularly reflected in the above-mentioned UNIDROIT Principles, which are designed not only to reconcile the conflicts of laws but also to harmonize commercial law by way of interpreting and complementing international uniform law.

Scrutinizing the phenomenon of supranational norms, it is important to highlight that supranational norms constitute supranational law, which is a form of international law, according to which specific mutual rights and interests of sovereign nations are limited and restricted. The main discrepancy between the supranational law and public international law is based on the fact that the former stipulates the creation of a common tribunal for all nations, which explicitly submit their right to grant judicial awards (decisions) by treaty. The key objective of supranational law is to ensure that the nations take active part in the supranational organization’s policy making and have real access to the supranational organization’s court.

VI. Definition of Harmonization

Elaborating on the analysis of the issues in question, it is also essential to ascertain the dimensions of harmonization as a legal phenomenon. First and foremost, it is possible to agree with Briggs that the process of harmonization of commercial law is directed at altering the infrastructure and superstructure of the conflict of laws in order to make the choice of law easier. Another scholar is prone to believe that the process of harmonization embodies the rationale of private international law and, thus, cannot be separated from private international law.

Taking into consideration arguments of various scholars, it is possible to make inference that the phenomenon of harmonization of law does not aim at creating a new authority of law on a specific domain of knowledge: the measures of harmonization cannot exceed what is necessary. Also, it is interesting to note the fundamental difference between the processes of harmonization and unification of law is discerned in the Kamba case: ‘unlike unification which contemplates the substitution of two or more legal systems with one single system, harmonization of law arises exclusively in comparative law literature… Harmonization seeks to effect an approximation or co-ordination of different legal provision or systems by eliminating major differences and creating minimum requirements or standards’.

Your request should consist of 5 char min.