Lex mercatoria, soft law and a closer aproach of unidroit principles
| Author | Loredana Ioana Bucur |
| Pages | 292-312 |
292 LOREDANA IOANA BUCUR
LEX MERCATORIA, SOFT LAW AND A CLOSER APROACH
OF UNIDROIT PRINCIPLES
Loredana Ioana BUCUR
Abstract
Lex mercatoria or trade usages continue to be the core of the international legislation and
principles. Soft law is a new variation of lex mercatoria with certain particularities.
Soft law is an instrument usually considered as non-binding but nevertheless with much
potential for morphing into "hard law" in the future by two different ways: one is when declarations,
recommendations, etc. are the first step towards a treaty-making process, in which reference will be
made to the principles already stated in the soft law instruments or by the direct influence on the
practice of states including European Court of Justice, creating customary law. As i mentioned
before, soft law is a convenient option for negotiations that might otherwise stall if legally binding
commitments were sought, because the choice would not have been between a binding and a non-
binding text, but between a non-binding text and no text at all.
There is also the appearance of legality of the soft law because, due to the spreading of the
information, the citizens often assimilate the soft law instruments as if they were legal instruments
and slowly do not react against but moreover refer to these instruments frequently that ease the
process to become legal norms.
The article emphasize a complex analyze of lex mercatoria starting with historical approach,
juridical approach and also arguments against lex mercatoria.
The second part regards soft law from the social and comparative perspective. Also regards the
relation between soft law, treaties and trade usages wit a special aproach on the Principles on Choice
of Law in International Commercial Contracts, PECL and DCFR.
The last part describes the uniform and predictable frame under the UNIDROIT Principles.
Part.1. Lex Mercatoria
Chapter 1. Historical review on lex mercatoria
In 1622, Gerard Malynes1 defined the lex mercatoria in his famous
treatise 'Consuetudo Vel Lex Mercatoria, Or the Ancient Law-Merchant' as the
1 Malynes, Gerard, Consuetudo, Vel Lex Mercatoria or The Ancient Law-Merchant (1st. ed.,
1622). „I have intituled the Booke, according to the ancient name of Lex Mercatoria, and not Ius
Mercatorum; because it is a Customary Law approved by the authoritie of all Kingdomes and Commonweales,
and not a Law established by the Soueraigntie of any Prince, either in the first foundation or by continuance of
time”
Law Review vol. VIII, issue 2, Jul
y
-December 2018, pp. 292-312
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 293
'customary law of merchants, more ancient than any written law . .[and] built upon
the foundations of Reason and Justice'. In his Commentaries on the Laws of
England first published in the 18th century, Blackstone2 wrote that 'no municipal
laws can be sufficient to order and determine the very extensive and complicated
affairs of traffic and merchandise; neither can they have a proper authority for this
purpose. For which reason the affairs of commerce are regulated by a law of their
own, called the law merchant or lex mercatoria.' „In despite of their similarity,
there is an important intrinsic difference between these two views of the lex
mercatoria. While Malynes' view was still detached from any notion of the
sovereignty, Blackstone's approach was no longer truly transnational but was
directly linked to the powers of domestic legislatures. With the codification wave
of the 19th century, the ancient lex mercatoria was absorbed by the major codes of
that time, the old law merchant had fallen into oblivion.”3
In the late 19th and early 20th century, the enthusiasm for nationalism and the
industrial revolution led to the idea of a world private law ('Weltprivatrecht').
Analyzed through comparative research of the legal systems of the civilized
nations, the „world private law” should be superior to any domestic legal system
as structure and substantive content and also implemented through a treaty of
public law. Still, the idea was a „legal utopia” in the geo-political context of the
early 20th century, that was dominated by sovereignty and nationalism.
The rediscovery of the medieval law merchant through the works of
commercial lawyers4 after World War II brought also a great revival of the
borderless concept and universal trade law of nations. This notion had received a
great deal of attention and intellectual conceptualizing as early as the 17th century.
In the late 1950s and early 1960s, the concept of transnational commercial law
was revitalized by Berthold Goldman. An article by Goldman published in the 'Le
Monde' in 1956 and dealing with the nationality of the Suez Canal Company
marks the beginning of this process.5 In Goldman's view, this company was not of
Egyptian, English, French or mixed nationality even though it could be considered
as a juridical person of private law. Due to its particular capital structure, its
organization and its activities, he regarded this company as 'une société
internationale, relevant directement de l'ordre juridique international'. The status of the
Suez Canal Company, both in terms of its legal source and its legal nature, was in
his view 'essentially international'. Thus, in Goldman's view, the Suez Canal
2 https://en.wikipedia.org/wiki/Commentaries_on_the_Laws_of_England - consulted at
14.08.2018;
3 „ The New Law Merchant and the Global Market Place - A 21st Century Vi ew of Transnational
Commercial Law” - Professor Dr. Klaus Peter Berger, LL.M., Center for Transnational Law
(CENTRAL), University of Cologne, Germany
4 Goldman, 1964; Schmitthoff, 1964
5 Goldman, 'La Compagnie de Suez, Société Internationale', Le Monde, October 4, 1956, 3
294 LOREDANA IOANA BUCUR
Company, in despite of its 'necessarily territorial genesis and functioning', was of a
private law nature but of a transnational character.
He argued that the new lex mercatoria was in fact an 'ensemble' of general
principles and legal rules growing out of a process of spontaneous, institutional
lawmaking. This process is detached from domestic legal systems and escapes the
realm of domestic lawmakers which is limited to the territory of the respective
jurisdiction. Instead, the law is created within the community of merchants doing
cross-border trade and commerce, the societas mercatorum.6 This doctrine of an
autonomous, a-national legal order of transnational commercial law, of a 'third
legal system' was later developed and expanded by his academic pupils Philippe
Fouchard in the area of international commercial arbitration.
Philip Jessup7 considered, in 1956, that the term “transnational law” includes all
law which regulates actions or events that transcend national frontiers. Both public
and private international law are included, as are other rules which do not wholly
fit into such standard categories". P. Jessup proposed that transnational law should
encompass and simultaneously challenge public and private international law
were the latter to maintain their explanatory and guiding potentials in an ever
more integrating world. Commercial lawyers seized this moment and engaged for
decades in a far-reaching enterprise of collecting, consolidating, codifying and
harmonizing the various laws governing international trade.
Clive Schmitthoff advocated for the strong tendency of the international trade
towards autonomous regulation.8 This development was promoted by
international contract drafting and international commercial arbitration, since both
areas are governed by the principle of party autonomy which leaves the necessary
room for the development of transnational legal structures. Schmitthoff's main
emphasis, however, was on the work and influence of international formulating
agencies:
„It is the formulating activity of these international agencies which inspires
hope for the ultimate emergence of a fully autonomous law of international trade.
Commercial life is a many-splendoured thing, and out of the complementary
activity of these international agencies must eventually arise the harmony of an
integrated autonomous international trade law.”
„For Schmitthoff, the progressive liaison and cooperation between these
institutions was 'the next step in the development of an autonomous law of
international trade' since, in his view, the advance of an autonomous law of
international trade depended 'on the willingness of the formulating agencies to
6 Goldman, Archives de philosophie du droit 1964, 189
7 Philip Jessup, Transnational Law (Yale University Press, 1956)
8 Schmitthoff, International Business Law: A New Law Merchant, Current Law and Social
Problems, 1961, p. 129; Schmitthoff, Rabelsz (1964), 747; Schmitthoff, in Horn/Schmitthoff (eds), The
Transnational Law of International Commercial Transactions, 1982, 19.
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 295
cooperate, to the benefit of all trading nations'. It is not surprising, therefore,
that Schmitthoff was the founding father of the United Nations Commission on
International Trade Law (UNCITRAL) in 1966. UNCITRAL has as one of its
primary tasks the furthering of the 'progressive harmonization and unification of the
law of international trade' by coordinating 'the work of organizations active in [this]
field and encouraging co-operation among them'. It plays a major part in the
'codification' of the principles and rules of transnational commercial law.”9
In 1964, Berthold Goldman published the first in a series of articles in which he
eventually argued that transnational commerce had generated not only a new
transnational commercial law, but an actual transnational legal order that was
autonomous from national laws and could displace such laws to govern
international business transactions. He considered that “business norms could be
elevated to the status of law and could, therefore, govern transactions
independently from national laws”.10
In 1971, the Secretariat of UNIDROIT presented its idea for the drafting of
general principles of international contract law in its Report to UNCITRAL on the
'Progressive codification of the law of international trade'.
In May 1994 UNIDROIT published the Principles of International Commercial
Contracts. A year later, the Commission on European Contract Law published Part
I of the Principles of European Contract Law. In December 1999 this Group
published a revised and expanded version of these Principles. The UNIDROIT
Working Group issued in 2016 the forth edition of the UNIDROIT Principles. In
1996, CENTRAL published its List of Principles, Rules and Standards of the Lex
Mercatoria. In 2015 the Hague Conference on Private International Law were
published Principles on Choise of Law in International Commercial Contract. The
list, together with comprehensive references from arbitral case law forms the core
of the lex mercatoria.
These developments reflect a new and dramatic change in the discussion on
the lex mercatoria: the extreme codification of transnational law'. „This reflects a
change of paradigm in international commercial law, a marked shift away from
formal rulemaking by international formulating agencies to private codification
efforts. The making of transnational commercial law is 'privatized'. In this
transnational context, however, 'codification' does not mean production but
'reproduction' of the law. Private Working Groups, even when they are acting
9 The New Law Merchant and the Global Market Place - A 21st Century View of Transnational
Commercial Law” - Professor Dr. Klaus Peter Berger, LL.M., Center for Transnational Law
(CENTRAL), University of Cologne, Germany
10 Berthold Goldman, Frontidres du Droit et < Lex Mercatoria >, 9 ARCH. DE PHILOSOPHIE DU
DROIT (1964); Berthold Goldman, La lex mercatoria dans les contrats et l'arbitrage internationaux: realit
etperspectives, Berthold Goldman, Nouvelles Riflexions sur la Lex Mercatoria, in Etudes de droit
International en l’honneur de PIERRE LALIVE (Helbing & Lichtenhahn SA, eds. 1993).
296 LOREDANA IOANA BUCUR
under the umbrella of a formulating agency, are not the lawmakers of the lex
mercatoria. The new lex mercatoria is created by the parties to international
commercial transactions and their arbitral tribunals. Thus, the UNIDROIT and
Lando-Principles are not 'Re-Statements' but 'Pre-Statements' of the new lex
mercatoria. [...] Much more than any other area of law, transnational law is living
law, developing at an enormous pace and requiring a flexible and readily
adaptable regulatory framework. This particular quality of modern civil law
resembles the 'ongoingness' and 'vitality' of the former ius commune. It would be a
mistake to capture this law in the tight meshes of a traditional codification.”11
Chapter 2. Lex Mercatoria – juridical aproach
Lex mercatoria can be analyzed either by its content or by its sources12. In its
works, Emmanuel Gaillard considers that „the specificity of transnational rules lies
in the fact that these rules are derived from various legal systems as opposed to a
single one, and more generally from various sources, rather than in their allegedly
differing content. In other words, their specificity is one of source, not of content.”13
Other aproaches considered lex mercatoria is to be found in lists (the elaboration
of such substantial list is that of UNIDROIT Principals, considering that provides the
neccesary predictibility of the outcome which is valued by the parties in
international commerce). Another concept of defining lex mercatoria by content of
transnational law is perciveed like a method of decision-making rather than as a list.
Julian Lew considers lex mercatoria as beeing „created by and for the
participants in international trade and applied by arbitrators to settle international
trade disputes. The rules of the lex mercatoria are founded on usages developed in
international trade, standard clauses and contracts, uniform laws, general
principles of law and international instruments. Trade usages are undeniably
important in international trade and often included in standard contracts or
standard clauses. They are often drawn up by the commercial organisation of a
business sector and are used bythe members of that sector”14
As a conclusion, lex mercatoria is formed by a multitude of sources of
international trade law as it considers both national statutes, international
agreements, contractual clauses, trade usages, customary law, general principles of
law and codes of conduct.
Among national laws there has traditionaly been a split between common law and
civil law countries as to the acceptability of lex mercatoria. While in civil law
11 Idem infra 8
12 GILLES CUNIBERTI, in the article „Three teories of lex mercatoria” (published in Columbia
Journal of transnational law, 2014)
13 Emmanuel Gaillard, Transnational Law: A Legal System or a Method of Decision Making?, LCIA
Arbitration International, Vol. 17, No. 1, 2001, pg. 61
14 Ibidem 2, pg. 453
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 297
jurisdictions the principal si widely accepted, in common law countries such as
England, the general attitude remains negative.
A diferent question may arise: if we agree that lex mercatoria can be the rules
of law based on which the arbitrators can issue an award, is this award enforceable
when it reaches to the national court control?
As an answer, The International Law Association adopted a resolution at its
1992 Conference in Cairo, according to which arbitration awards “based on
transnational rules (general principles of law, principles common to several
jurisdictions, international law, usages of trade, etc) rather than a particular
national law” are enforceable (i) if the parties have agreed that the arbitrator may
apply transnational rules, or (ii) if the parties have remained silent concerning the
applicable law. Furthermore, decisions of national courts have confirmed the
principles of the resolution and the application of lex mercatoria.
Chapter 3. Arguments against lex mercatoria
Still, lex mercatoria was strongly argued in the doctrine, beeing considered in
early stage that „this theory was 'reinvented' by 'the powerful grand old professors
from France and Switzerland' in order to 'enable western companies to ensure - at
least statistically - their domination and their profits in their business relations with
ex-colonial governments'”15 and also was seen as a 'global law without a state'16 ,
an autonomous transnational commercial law that breaks with two classical
taboos: Private agreements cannot produce law without authorization or control
by the states and Law cannot exist and cannot be applied beyond the realm of
domestic states and international relations without a 'global rule of recognition.
Another argument against lex mercatoria is the relative vagueness and
ambiguity of the principles and rules which are said to constitute the new law
merchant.17
The new lex mercatoria does not offer rules of decision that can be compared to
national laws in terms of precision or comprehensiveness. If the true benefit parties
can (and should) expect from the law governing their contract is precise default
rules that enable them to reasonably assess their future obligations under that
contract, lex mercatoria seems, at best, woefully inadequate. As the purposes of
establishing lex mercatoria as a separate and distinct commercial law cannot be
met if it is defined as a decision-making method, the only remaining question,
15 Dezalay/Garth, Dealing in Virtue, 1996.
16 Teubner, Rechtshistorisches Journal 1996, 255 et seq.; Teubner, in Teubner (ed.), Global Law
without a State, 1997
17 This approach can be seen in
Sandrock, Otto, Arbitration Agreements and Groups of
Companies, in: Festschrift Pierre Lalive, Basel, Frankfurt a.M. 1993, at 625, where lex mercatoria is
argued in favour of the national laws that offer enough priciples and theories to determine the
juridical situations.
298 LOREDANA IOANA BUCUR
then, is whether lex mercatoria as a list of rules-that is, the new "codified" lex
mercatoria-can one day achieve the goal of precision and legal certainty well enough
to be considered satisfactory by commercial actors.
A critical question for assessing whether lex mercatoria could be a suitable
alternative to national laws is, therefore, whether it affords the necessary degree of
legal certainty that commercial parties require.
Part.2. Soft Law
Chapter 1. Social aproach of the soft law
Dinah L. Shelton tried to observe, in an independent aproach, the social
context that may lead to the conclusion that a soft law would be more easily
observede by beeing perceived as legitimate and fair instead of binding.
She considered that: „any community, efforts to resolve social problems do not
invariably take the form of law. Societies strive to maintain order, prevent and
resolve conflicts, and assure justice in the distribution and use of resources not
only through law, but through other means of action. Issues of justice may be
addressed through market mechanisms and private charity, while conflict
resolution can be promoted through education and information, as well as
negotiations outside legal institutions. Maintenance of order and societal values
can occur through moral sanctions, exclusions, and granting or withholding of
benefits, as well as by use of legal penalties and incentives. In the international
arena, just as at other levels of governance, law is one form of social control or
normative claim, but basic requirements of behavior also emerge from morality,
courtesy, and social custom reflecting the values of society. They form part of the
expectations of social discourse and compliance with such norms may be expected
and violations sanctioned.
Legal regulation, however, has become perhaps the most prevalent response to
social problems during the last century. Laws reflect the current needs and
recognize the present values of society. Law is often deemed a necessary, if usually
insufficient, basis for ordering behavior. The language of law, especially written
language, most precisely communicates expectations and produces reliance,
despite inevitable ambiguities and gaps. It exercises a pull toward compliance by
its very nature. Its enhanced value and the more serious consequences of non-
conformity lead to the generally accepted notion that fundamental fairness
requires some identification of what is meant by “law,” some degree of
transparency and understanding of the authoritative means of creating binding
norms and the relative importance among them. A law perceived as legitimate and
fair is more likely to be observed.”18
18 DINAH L. SHELTON, SOFT LAW, Handbook of International Law (forthcoming, Routledge
Press, 2008)
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 299
Chapter 2. Comparative definition
The term "soft law" refers to quasi-legal instruments which do not have any
legally binding force, or whose binding force is somewhat weaker than the binding force
of traditional law, often contrasted with soft law by being referred to as "hard law".
Traditionally, the term "soft law" is associated with international law, although
more recently it has been transferred to other branches of domestic law as well.19
By another doctrinal aproach, „Soft law is a type of social rather than legal
norm. While there is no accepted definition of “soft law,” it usually refers to any
written international instrument, other than a treaty, containing principles, norms,
standards, or other statements of expected behavior. Soft law “expresses a
preference and not an obligation that state should act, or should refrain from
acting, in a specified manner.” This “expressed preference” for certain behavior
aims to achieve functional cooperation among states to reach international goals”.20
As we may see, the term seems similar with lex mercatoria. Still, seemed to be
neccesary another wording to incorporate as well various kinds of quasi-legal
instruments of the European Union: "codes of conduct", "guidelines",
"communications" etc. In the area of law of the European Union, soft law
instruments are often used to indicate how the European Commission intends to
use its powers and perform its tasks within its area of competence. The resolutions
and recommendations of the Council of Europe are also soft law. These represent
the views of the Parliamentary Assembly of the Council of Europe, but are not
legally binding for the 28 member states.
Although lex mercatoria was suposed to be a sponatneous process, soft law
displays more an organized processes, beeing created through highly organized
hybrid private-public decision making processes. Using the wording „new lex
mercatoria” may blur the distinction between private and public as well as
between spontaneous and organized processes, developing in the interstices of the
relations between intergovernmental agencies and organizations (UNCITRAL,
UNIDROIT, IMO) and private, highly organized, bodies (ICC, ILA).21
Soft law has an important normative component, even though it is considered
as being created outside of formal law and being factbased, flexible, and practice
focused, evolving out of the needs of businesses party to international business
transactions. Also, the strong normative power rezide also from the recognition by
arbitration tribunals as describing how businesses actually construct deals and as
evidence of bad faith conduct.
19 https://en.wikipedia.org/wiki/Soft_law
20 DINAH L. SHELTON, SOFT LAW, Handbook of International Law (forthcoming, Routledge
Press, 2008)
21 Larry A. DiMatteo, Soft law and the principle of fair and equitable decision making in
international contract arbitration, link http://cisgw3.law.pace.edu/cisg/biblio/dimatteo7.pdf
300 LOREDANA IOANA BUCUR
This ‘social phenomenon’ is what was previously addressed as the” new lex
mercatoria”. However, the difficulty jurists have in recognizing and categorizing
the many laws and norms subsumed in the notion of „global pluralism” can be
traced to a more simple explanation the difficulty in dealing with the international
and complex nature of commercial transactions. The continued specialization of
the world’s market economy and the variety of producers of soft law instruments
has led to a wealth of soft law sources.
In is considered in the doctrine the much of the lex mercatoria remains a
matter of soft law. Arbitration panels are in many ways a close remnant of the
merchant tribunals. The lex mercatoria is a source of law that fits well in the more
informal rules of evidence and the varied expertise found in arbitration panels.
Commercial arbitrators are necessarily more informed on the lex mercatoria than
are trial judges that must deal with a variety of subjects, both commercial and
noncommercial.
Chapter 3. Primary and secondary soft law
Common forms of soft law includes normative resolutions of international
organizations, concluding texts of summit meetings or international conferences,
recommendations of treaty bodies overseeing compliance with treaty obligations,
bilateral or multilateral memoranda of understanding, executive political
agreements, and guidelines or codes of conduct adopted in a variety of contexts. In
some instances a given text may be hard law for some states and soft law for
others. A decision of the European Court of Human Rights or the Inter-American
Court of Human Rights, for instance, is legally binding on the state or states
participating in the proceedings but not on other states parties to the relevant
human rights treaty. The jurisprudence of both courts is authoritative and may be
preclusive or persuasive in domestic courts of all member states, but it is not
legally binding on them. It is also a feature of soft law that it may address non-state
actors, including business entities, international organizations, nongovernmental
organizations and individuals, while treaties rarely impose direct obligations on
any entities other than states. As a general matter, soft law may be categorized as
primary and secondary.
Primary soft law consists of those normative texts not adopted in treaty form
that are addressed to the international community as a whole or to the entire
membership of the adopting institution or organization. Such an instrument may
declare new norms, often as an intended precursor to 5 adoption of a later treaty,
or it may reaffirm or further elaborate norms previously set forth in binding or
non-binding texts. The UN Standard Minimum Rules for the Treatment of
Prisoners, adopted by the First United Nations Congress on the Prevention of
Crime and Treatment of Offenders, 1955, and approved by the UN Economic and
Social Council in 1957, is an example of a primary declarative text.
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 301
Secondary soft law includes the recommendations and general comments of
international supervisory organs, the jurisprudence of courts and commissions,
decisions of special rapporteurs and other ad hoc bodies, and the resolutions of
political organs of international organizations applying primary norms. Most of this
secondary soft law is pronounced by institutions whose existence and jurisdiction is derived
from a treaty and who apply norms contained in the same treaty. Secondary soft law has
expanded in large part as a consequence of the proliferation of primary treaty
standards and monitoring institutions created to supervise state compliance with treaty
obligations. Sometimes the underlying treaty is quite general in nature. The Charter
of the Organization of American States provided the framework for the OAS
General Assembly to constitute the Inter-American Commission on Human and
confer upon it the authority to supervise compliance with the rights and duties
contained in the American Declaration of the Rights and Duties of Man, including
the power to make recommendations to specific states. Thus, an institution
established by soft law received a mandate to apply primary soft law to create
secondary soft law.
Chapter 4. The relationship between soft law, treaties and custom
Despite their limited juridical effect, non-binding instruments have an essential
and growing role in international relations and in the development of international
law. In practice, non-binding norms are often the precursor to treaty negotiations
and sometimes stimulate state practice leading to the formation of customary
international law. In fact, soft law has many roles to play in relation to hard law. A
non-binding normative instrument may do one or more of the following:
(1) codify pre-existing customary international law, helping to provide greater
precision through the written text;
(2) crystallize a trend towards a particular norm, overriding the views of
dissenters and persuading those who have little or no relevant state practice to
acquiesce in the development of the norm;
(3) precede and help form new customary international law;
(4) consolidate political opinion around the need for action on a new problem,
fostering consensus that may lead to treaty negotiations or further soft law;
(5) fill in gaps in existing treaties in force;
(6) form part of the subsequent state practice that can be utilized to interpret
treaties;
(7) provide guidance or a model for domestic laws, without international
obligation,
(8) substitute for legal obligation when on-going relations make formal treaties
too costly and time-consuming or otherwise unnecessary or politically
unaccepable.
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Non-binding norms have a potentially large impact on the development of
international law. Customary law, for example, one of the two main sources of
international legal obligation, requires compliance (state practice) not only as a
result of the obligation, but as a constitutive, essential part of the process by which
the law is formed. In recent years, non-binding instruments sometimes have
provided the necessary statement of legal obligation (opinio juris) to evidence the
emergent custom and have assisted to establish the content of the norm. The
process of drafting and voting for non-binding normative instruments also or
alternatively may be considered a form of state practice.
Soft law texts also may be drafted to consolidate a trend towards changes in
customary law or stamp with approval one among conflicting positions on a legal
issue.
Compliance with entirely new non-binding norms also can lead to the
formation of customary international law. In recent years, non-binding
instruments sometimes have provided the necessary statement of legal obligation
(opinio juris) to precede or accompany States practice, assisting in establishing the
content of the norm.
The relationship between soft law and treaties is also complex. In probably the
large majority of instances, soft law texts are linked in one way or another to
binding instruments. First, as the fourth category above summarizes, soft law can
initiate a process of building consensus towards binding obligations needed to
resolve a new problem. Examples of this are seen in the preambles to numerous
multilateral agreements concluded in recent years, which refer to relevant non-
binding normative instruments as precedents.
In the field of human rights, for example, regional and global treaties almost
without exception invoke the Universal Declaration of Human Rights as a
normative precursor. The Declaration itself states by its own terms that it was
intended as “a common standard of achievement” that could lead to binding
agreement. In fact, in the human rights field, nearly all recent multilateral
conventions at the global level have been preceded by adoption of a non-binding
declaration.
The European Union has turned to soft law to introduce some flexibility into
its regulatory system in the face of adhesion by new member states with weaker
economies and political institutions. The EC thus has moved to deregulate and
“simplify,” ostensibly to remove “outdated” and “unnecessary” regulation, in the
process advocating ‘soft law’ as an alternative to traditional regulatory
instruments such as directives.
The result has been controversial, especially as a means to improve the
deteriorating working environment in Central and Eastern Europe. Critics say that
this could be an example of moving from hard law to soft law in order to weaken
pre-existing standards. Others note that nonbinding rules of conduct have in fact
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 303
had operational effects in European law. In the social field, formally non-binding
rules emerged through the Open Method of Co-ordination. Although EU soft law
has no formal sanctions and is not justiciable, it employs non-binding objectives
and guidelines to bring about changes in social policy, relying on shaming,
diffusion of the norms through discourse, deliberation, learning and networks to
induce compliance. Soft law is used because social policy and welfare standards
are particularly critical to governments and traditionally the exclusive domain of
national legislatures. States are very reluctant to turn over competence in these
matters, especially where there is no pre-existing formula or agreed standards. The
EU cannot insist on uniform measures but must ensure easy and rapid revisability
of norms and objectives.
Using data from 107 countries, one study sought to explain why countries
comply with soft law standards. The results showed reputational considerations
were significant, but also found a consistent positive effect of democratic systems
on implementation In some instances, compliance with non-binding norms and
instruments is extremely good and probably would not have been better if the
norms were contained in a binding text. In fact, in many cases the choice would
not have been between a binding and a non-binding text, but between a non-
binding text and no text at all.
The growing complexity of the international legal system is reflected in the
increasing variety of forms of commitment adopted to regulate state and non-state
behavior in regard to an ever-growing number of transnational problems. The
various international actors create and implement a range of international
commitments, some of which are in legal form, others of which are contained in
non-binding instruments. The lack of a binding form may reduce the options for
enforcement in the short term (ie, no litigation), but this does not deny that there
can exist sincere and deeply held expectations of compliance with the norms
contained in the non-binding form.22
Chapter 5. Non-binding – as expressed in the Principles on Choice of Law in
International Commercial Contracts, PECL and DCFR
On characteristic of the soft law is the „non-binding forece” of the Principles.
The explanations from the preface of the principles and also the principles itself
provides an acurate explanation of „soft law” without using this wording:
„The preface of the publication of the Principles on Choice of Law in
International Commercial Contracts (the “Hague Principles”), the first normative
soft-law instrument developed and approved by the Hague Conference on Private
International Law. The Hague Principles are not formally binding; they provide a
comprehensive blueprint to guide users in the creation, reform, or interpretation of
22 DINAH L. SHELTON, SOFT LAW, Handbook of International Law (forthcoming, Routledge
Press, 2008)
304 LOREDANA IOANA BUCUR
choice of law regimes at the national, regional, or international level. The Hague
Principles have already proven their usefulness in early 2015, when they served as
a model to the legislator of Paraguay in promulgating a law on the Law Applicable
to International Contracts. The Permanent Bureau hopes that other jurisdictions
will follow this pioneering initiative, reaffirming the usefulness of the Hague
Principles as an inspiring international standard, which has, as a further most
encouraging sign of their approval by the international legal community, received
UNCITRAL’s endorsement in July 2015. [...]
I.8 As their title suggests, the Principles do not constitute a formally binding
instrument such as a Convention that States are obliged to directly apply or
incorporate into their domestic law. Nor is this instrument a model law that States
are encouraged to enact. Rather, it is a non-binding set of principles, which the
Hague Conference encourages States to incorporate into their domestic choice of
law regimes in a manner appropriate for the circumstances of each State. In this
way, the Principles can guide the reform of domestic law on choice of law and
operate alongside existing instruments on the subject (see Rome I Regulation and
Mexico City Convention both of which embrace and apply the concept of party
autonomy).
I.9 As a non-binding instrument, the Principles differ from other instruments
developed by the Hague Conference. While the Hague Conference does not
exclude the possibility of developing a binding instrument in the future, it
considers that an advisory set of non-binding principles is more appropriate at the
present time in promoting the acceptance of the principle of party autonomy for
choice of law in international contracts and the development of well-crafted legal
regimes that apply that principle in a balanced and workable manner. As the
Principles influence law reform, they should encourage continuing harmonisation
among States in their treatment of this topic and, perhaps, bring about
circumstances in which a binding instrument would be appropriate.
I.10 While the promulgation of non-binding principles is novel for the Hague
Conference, such instruments are relatively common. Indeed, the Principles add to
a growing number of non-binding instruments of other organisations that have
achieved success in developing and harmonising law. See, e.g., the influence of the
UNIDROIT Principles and the PECL on the development of contract law.”23
PECL
Similar provisions can be found in Principles of European Contract Law
(PECL)
Article 1:101 - Application of the Principles
1) These Principles are intended to be applied as general rules of contract law
in the European Communities.
23 http://www.ejtn.eu/PageFiles/12473/Hague%20Principles%20with%20comment.pdf
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 305
(2) These Principles will apply when the parties have agreed to incorporate
them into their contract or that their contract is to be governed by them.
(3) These Principles may be applied when the parties: (a) have agreed that their
contract is to be governed by "general principles of law", the "lex mercatoria" or the
like; or (b) have not chosen any system or rules of law to govern their contract.
(4) These Principles may provide a solution to the issue raised where the
system or rules of law applicable do not do so.
The PECL were inspired by the United Nations Convention on Contracts for
the International Sale of Goods (CISG) from 1980; however, they are a so-called Soft
Law, such as the American Restatement of the Law of Contract, which is supposed
to restate the Common Law of the United States. Therefore, the PECL do not
represent a legally enforceable regulation: "The term 'soft law' is a blanket term for
all sorts of rules, which are not enforced on behalf of the state, but are seen, for
example, as goals to be achieved.
In the formulation of the PECL the Lando Commission also used various
European legal systems. In comparing these legal systems, there are often
considerable differences with regard to certain regulations.
In this manner, the PECL succeed in bridging the gap between the civil law of the
European continent and the common law of the Anglo-American system by offering
egulations which were created to reconcile the divergent views of two systems.
At the same time, the PECL provide assistance to judges in national courts and
arbitrators in arbitration proceedings deciding cross-border issues. Should there
not result any satisfactory solution from the national laws, "the Court [...] may
adopt the solution provided by the Principles knowing that it represents the
common core of the European systems."
Written in a language known to all parties and using a uniform terminology,
the PECL also serve as a "... basis for any future European Code of
Contracts", consistent with the above-mentioned EU resolutions, which may
eventually replace separate national laws.
These law principles, the Lex mercatoria, on which a court can then make its
decision to settle the disputes of the parties, are composed of the "laws of several
systems, the work of the legal writers and the published arbitral awards," and thus
the entirety of the international legal practices in a special field of law. Thus, the
PECL are, like the Unidroit Principles or the CISG, also part of the Lex
Mercatoria.
The PECL were created, as was the case with the CISG and the Unidroit
Principles, with the intention to be an example for existing and future national legal
systems.
Regulations under these soft laws were integrated in the new laws of various
Central European and East European states. For example, parts of regulations of
306 LOREDANA IOANA BUCUR
the PECL became part of the German Civil Code (BGB) in the course of the reform
of the law of obligations in 2002.24
DCFR
Principles, Definitions and Model Rules of European Private Law Draft
Common Frame of Reference (DCFR) Outline Edition. Prepared by the Study
Group on a European Civil Code and the Research Group on EC Private Law
(Acquis Group) Based in part on a revised version of the Principles of European
Contract Law.
The DCFR contains ‘principles, definitions and model rules’25
Meaning of ‘principles’. The European Commission’s communications
concerning the CFR do not elaborate on the concept of ‘principles’. The word is
susceptible to different interpretations. It is sometimes used, in the present context,
as a synonym for rules which do not have the force of law. This is how it appears
to be used, for example, in the ‘Principles’ of European Contract Law (PECL). The
word appears to be used in a similar sense in the Unidroit Principles of
International Commercial Contracts. In this sense the DCFR can be said to consist
of principles and definitions. It is essentially of the same nature as those other
instruments in relation to which the word ‘principles’ has become familiar.
Alternatively, the word ‘principles’ might be reserved for those rules which are of a
more general nature, such as those on freedom of contract or good faith. In this sense
the DCFR’s model rules could be said to include principles.
The greatest part of the DCFR consists of ‘model rules’. The adjective ‘model’
indicates that the rules are not put forward as having any normative force but are
soft law rules of the kind contained in the Principles of European Contract Law
and similar publications. Whether particular rules might be used as a model for
legislation, for example, for the improvement of the internal coherence of the
acquis communautaire is for others to decide.
Chapter 6. Radical view of Anna di Robilant
According the opinion of Anna Di Robilant26, the soft law is the „professional
project of the new generation of arbitrators which emerged in the 1980s. Soft law is
the professional jargon of the “Young Technocrats” whose expert knowledge and
technical competence replaced the aura and the charisma of the “Grand Old
Men.”27 Similarly, the notion that soft forms of legality function as an efficient
facilitative language permeates the professional and political project of the Lando
Commission. One of the main purposes underlying the Principles of European
24 https://en.wikipedia.org/wiki/Principles_of_European_Contract_Law
25 https://www.law.kuleuven.be/personal/mstorme/2009_02_DCFR_OutlineEdition.pdf
26 Anna di Robilant: Genealogies of Soft Law, Scandinavian Studies In Law © 1999-2015
27 Yves Dezalay & Bryant G. Garth, Dealing in Virtue: International commercial arbitration and
the construction of a transnational legal order (1996)
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 307
Contract Law (PECL) is to provide a common European language for academics
and practitioners. The PECL are meant to create a purportedly neutral, accessible
and efficient discursive framework for the debate on contract law. [...] Soft law is
seen as a global lingua franca organically springing from the consciousness and
the needs of the various global guilds, villages and corporations. The proliferation
of soft legal regimes opens up new space for a highly personalized and privatized
law. The global “mercatocracy” shapes the basic norms governing property,
contract and dispute resolution to fit its need for autonomy, informality, flexibility and
efficiency. Similarly, in the hands of marginalized groups seeking social change, soft
law becomes a tool for empowerment and emancipation, reflecting their peculiar
lived experience and special needs. [...] On the one hand, the expansion of soft law
signifies a drift towards global unification. Soft legal tools harmonize, unify and
globalize law. For instance, soft commercial law is the product of the efforts of the
unification movement advanced by social forces committed to the facilitation of
transnational capital expansion. On the other hand, the multiplication of soft legal
regimes mirrors the complexity of global legal pluralism where multiple regional
legal orders coexist with specialized legal regimes.”28
Part 3. Emphasis on UNIDROIT Principles
Chapter 1. Uniform and predictable frame
The international forums were always preocupated to create an uniform or
predictable frame for the commercial contracts, as a key point in the developement
of the trade and economy. In this respect we may distinguish two aproaches:
One relates to the need of an „uniform law” for the international sale og
goods, that began in 1930 at the International Institute for the Unification of Private
Law (UNIDROIT29) in Rome and now is in force as”The United Nations
Convention on Contracts for the International Sale of Goods”, prepared by the
United Nations Commission on International Trade Law (UNCITRAL30) and
adopted by a diplomatic conference on 11 April 1980 (known as CISG, Vienna,
1980), ratified by 89 states adressed in the convention as Contracting States.
28 Anna di Robilant: Genealogies of Soft Law, Scandinavian Studies In Law © 1999-2015, pg 243
si urm.
29 UNIDROIT (international Institute for the Unification of Private law is an independent
organisation, established in 1926 as auxiliary organism of Societes des Nations. The institute was re-
established in 1940 based on an interstate agreement which represent its statute. Romania is member
of UNIDROIT since 1927.
30 By the resolution 2205/1966 the Unitaed Nations (ONU) established the United Nations
Commission on International Trade Law to draft international conventions, model laws, uniform
rules, guides in drafting international contract etc.
308 LOREDANA IOANA BUCUR
The other is emphasise as „uniform principles” – UNIDROIT PRINCIPLES of
International Commercial Contracts addopted by International Institute for the
Unification of Private Law, 2016 beeing the forth eddition. As opposed to the
uniform law, wich is applicable to the international contracts for sale of goods with
the force of the national law, the UNIDROIT Principles applies, as we may see in
the Preamble (purpose of the Principles), „when the parties have agreed that their
contract be governed by them, [..] when the parties have agreed that their contract
be governed by general principles of law, the lex mercatoria or the like, [...] when the
parties have not chosen any law to govern their contract.” Also „they may be used to
interpret or supplement international uniform law instruments. They may be used
to interpret or supplement domestic law. They may serve as a model for national
and international legislators.” As a first conclusion, the UNIDROIT PRINCIPLES
are seen as applicable law only when the parties provides so or when they choose
general principles of law or lex mercatoria.
The UNIDROIT Principles of International Commercial Contracts have been
praised as 'an authentical expression of what is usually called "lex mercatoria"' and
as 'a kind of ratio scripta of an emerging supranational legal order -a modern lex
mercatoria'.
Creating a system of transnational commercial law as a modern law of
international trade was stongly promoted by international contract drafting and
international commercial arbitration, since both areas are governed by the
principle of party autonomy which leaves the necessary room for the development
of transnational legal structures.
The Convention on International Sell of Goods (CISG) was the result of
complicated international negotiation between fifty states coming from all legal
traditions and, in order to reach a form acceptable to all of them, the ompromise
was a heavy reliance on legal standards rather than specific rules wich also generated
vague rules. Therefore, it is interesting to note that many parties to international
sales specifically exclude application of the CISG from the possible sources of law
for their contracts.
The CISG is a hard law in disputes between parties from contracting States as
well as in disputes where only one of the parties is from a contracting State when
conflict-of-law rules direct the court to the CISG signatory state. However, unless
restricted by the arbitration agreement or procedural rules, arbitral panels are free
recently in a number of cases, particularly in China where arbitral panels have
increasingly seen the CISG as a reasonable source for commercial contract rules.
Like the lex mercatoria, the CISG’s value is as a persuasive authority and not as a
binding law31.
31 Larry A. DiMatteo, Soft law and the principle of fair and equitable decision making in
international contract arbitration, pg. 24, link http://cisgw3.law.pace.edu/cisg/biblio/dimatteo7.pdf
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 309
Chapter 2. Closer aproach on UNIDROIT Principles
The concept of ‘commercial’ contracts should be understood as broadly as
possible since the Principles are flexible enough to be applied to international
service, leasing and licensing agreements as well as finance, banking, insurance
and other transactions.
As with the CISG, the Principles only apply to international, as opposed to,
domestic agreements. Furthermore, the Principles are, generally speaking, the
same as or similar to the relevant CISG provisions. This similarity is due to the fact
that the CISG was one of a number of instruments examined by UNIDROIT in
drafting the Principles. Because of its broad similarity to the CISG, the Principles
may be used to interpret not only the CISG but also to supplement the deficiencies
or gaps that appear in the CISG.
Tthe UNIDROIT Principles may be incorporated into contracts as if they were
the governing law or indeed the terms of the contract subject to any exclusion or
modification agreed to by the parties. Furthermore, the Principles may be applied
by judges and arbitrators so as to provide a solution to an issue when it proves
impossible to establish the relevant rule of the applicable law. In this regard, it has
been suggested that they ‘probably represent the most accurate description to date
of the emerging international consensus about the rules that are most suitable to
international trade law’.
The Principles basically reflect concepts of contract law to be found in nearly
all legal systems of the world. As stated by Article 1.4 of the Principles: ‘Nothing in
these Principles shall restrict the application of mandatory rules, whether of
national, international or supranational origin, which are applicable in accordance
with the relevant rules of private international law.’ Hence, the proper law that
strictly speaking governs an international commercial contract will be determined
by the rules of private international law of a particular forum or in the case of sale
of goods, the Hague Convention of the Law Applicable to Contracts for the
International Sale of Goods (1985). Generally speaking, the rules of private
international law of most countries enable application of the domestic law of a
State expressly or inferentially chosen by the parties or the system of law with
which the transaction has its closest and most real connection.32
Whilst the courts of some forums have given limited recognition to general
principles of international trade law, it will normally be the case that judges are
obliged to apply the proper law as determined by rules of private international law
or an applicable convention even if parties have expressly agreed that the
Principles are to govern their contract. However, as suggested by the Preamble to
the Principles, judges could use the Principles to assist in the interpretation of
32 Peter Gillies and Gabriël Moens, International Trade and Business: Law, Policy and Ethics Ed.
Cavendish Publishing Pty Limited, 1998, reprinted 2000, pg.79-83
310 LOREDANA IOANA BUCUR
international uniform law instruments and also use the principles to provide a
solution to an issue raised when it proves impossible to establish the relevant rule
of the applicable law where, for example, the law of a given State is obscure,
underdeveloped or simply difficult to ascertain.
The UNIDROIT Principles are a most impressive multinational promulgation
of rules for international commercial contracts which have many uses. Because the
Principles are not legally binding, they are easily capable of modification in the future
to reflect changes in international trade practice. Article 1.5 allows parties to
exclude or derogate from or vary the Principles except where they are mandatory.
For example, the duty of good faith and fair dealing and some aspects of validity
cannot be excluded or limited. In their capacity as a model for national
legislators, the Principles have already influenced the drafting of recent national
codifications such as the Civil Code of Quebec, the Commercial Code of Mexico
and the Dutch Civil Code. Indeed, countries closer to Australian shores such as
Indonesia and Vietnam may derive significant use from the Principles in drafting
basic contract law particularly given the fact that the Principles are free from any
political or particular jurisprudential persuasion. This can only benefit Australian
ties with such Asian countries particularly given the growing economic need for
trade with Asian countries.
Because the Principles have no mandatory force of law, they will ordinarily
not be recognised by court forums as the applicable law. Therefore, parties who
contractually incorporate the Principles as the governing law and/or the terms of
their contract, should always include an arbitration clause so as to ensure that any
dispute goes to arbitration. Arbitrators are generally not obliged to apply a
particular domestic law or convention whereby the UNIDROIT Principles should
be applied as the party’s choice of law in Arbitration Tribunals. In the event of
gaps in the Principles, it is submitted that a choice of law clause resembling the
suggested draft in Comment 4 to Article 1.6 should be included as a matter of
prudence.
CONCLUSIONS
The historical context as well as the present context is dominated by
international contracts and international relasions. But, since the national
legislations are insuficient and the international provisions are hard to approve
considering the various legal systems, the middle way is represented by lex
mercatoria and soft law.
The procedural context for lex mercatoria or soft law to be applicable is the
freedom of the parties to choose the rules of law and furthermore, the posibility of
the arbitrators or of the national judges to choose the rules of law.
Also national legislations provide expresly that the trade usages are applicable.
The arbitrators and the national judges may always look at the transnational
Lex Mercatoria, Soft Law and a closer aproach of UNIDROIT Principles 311
principles of private international law to aid them in their selection. The only
overriding requirements that may limit the freedom of the arbitrators are those of
genuinely international public policy.
The transnational law it is not only a well structured and detailed set of legal
rules and principles but also a self-organized process of the creation of law. This
inherent flexibility allows the lex mercatoria to react quickly to the changes of the
patterns of international commercial transactions which are taking place today.
The codification process is a long term work that brings more stability,
predictibility and easier evidence but on the other hand slows the reaction towards
the market needs and tends to transform and absorb a free spirit law into common
provisions of laws.
One question suiteble to be adressed under the soft law is if transnational law
is building a new regime (or regimes) of substantive law existing alongside state law or
is it mainly a procedural, coordinating law, linking state and other legal regimes to serve
transnational networks? Does it point towards a gradual transnational unification of
regulation, or must it remain a vast array of intersecting, often conflicting
regulatory regimes?
Soft law is an instrument ussualy considered as non-binding but nevertheless
with much potential for morphing into "hard law" in the future by two different
ways: one is when declarations, recommendations, etc. are the first step towards a
treaty-making process, in which reference will be made to the principles already
stated in the soft law instruments or by the direct influence on the practice of states
including European Court of Justice, creating customary law. As i mentioned
before, soft law is a convenient option for negotiations that might otherwise stall if
legally binding commitments were sought, because the choice would not have
been between a binding and a non-binding text, but between a non-binding text
and no text at all.
There is also the appearance of legality of the soft law because, due to the
spreading of the information, the citizens often assimilate the soft law instruments
as if they were legal instruments and slowly do not react against but moreover
refer to these instruments frequently that ease the process to become legal norms.
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