The nature of non-state rules and how to measure their legal authority

Defining non-state rules

Introduction

This chapter seeks to improve understanding of the fundamental nature of non-state rules and starts the discussion on how to measure their legal authority. The first half of the chapter examines the characteristics of non-state rules and explores how they are linked with the lex mercatoria. The second half of the chapter starts exploring the concept of legal authority in relation to non-state rules. Domestic law gets its legitimacy from the state, which also enforces the law. This is different for non-state rules, which are characterised by their voluntary nature. As such it is argued, the key to understanding the legal authority of non-state rules is to understand the transnational framework that gives these rules legitimacy; and that this in turn means that their legal authority is heavily dependent upon the support that they have from the merchant community, legal professionals, arbitral tribunals, and courts. The key to understanding that support is through analysing the application of non-state rules.

By way of further introduction, there arc a few important points to make about terminology. Non-state rules arc also called ‘soft law’. However, this term is mainly used in public international law. This makes the term less adequate for use in international commercial law as the understanding of soft law in international commercial law is not necessarily the same as in public international law. ‘Non-state rules’ is a more neutral concept as it does not imply that its elements all qualify as law. The word ‘rules’ is comprehensive enough to apply to all rules, including those whose status as a source of law is more debatable.

The phrase ‘non-state’ indicates the origin of the rules. They emanate from an origin other than a state legislator. State should be read in a broad way and includes regional and municipal authorities. Some non-state rules arc spontaneous creations that emerge from the merchant community whereas others arc created deliberately by organisations. The commonality as to their origin is that it lies outside the realm of the state. Therefore, ‘non-state ‘is the common denominator that unifies these rules. Non-state does not necessarily mean that there is no connection with the state, as these rules do not exist in a vacuum. They can be supported by state authorities in their usage and application through for instance their acceptance as a source of law.

Characteristics of non-state rules

Non-state rules are a diverse group of rules, instruments, and norms that on first sight do not have a great deal in common except that they all aim to facilitate international commerce. Legislations differentiate between different types of non-state rules. As an example, the Uniform Commercial Code (UCC) stipulates that the court, regardless of whether the parties have included them in the contract, should apply trade usages, but it only allows the UNIDROIT Principles of International Commercial Contracts to be applied as contractual rules at the request of the parties.

According to Abbot and Snidal ‘The realm of soft law begins once legal arrangements are weakened along one or more of the dimensions of obligation, precision, and delegation." This article was written in the context of public international law but these three dimensions can define non-state rules in international commercial law.

The first dimension is obligation.^[1] The obligation of non-state rules is overall weaker than that of state law although it is not absent. Trade usages for instance will be applied unless the parties contract out of them. Moreover, as the contract can be considered to have the quality of law between the parties’, contractual provisions (which may include non-state rules) can cancel variable rules of the applicable domestic law. It is hence, not so that non-state rules have no obligatory force, whether that is through law or through the contract, but that overall, this force is weaker and based on the consent of the parties. Non-state rules must be contracted into or can be contracted out of depending on their status in domestic law. Therefore, ultimately the parties control their application.

The second dimension from Abbott and Snidal’s model is precision. Uncodified non-state rules are imprecise. Their exact content is, unwritten, flexible, and not easy to establish. On the other hand, codified non-state rules are precise and their content is clear as they are written down and extensive commentary exists on how they should be applied and interpreted.

The final dimension is delegation. Non-state rules are not initiated by the state. This does not mean that states have no role in the creation of non-state rules as international organisations are financed by states. Furthermore, states can push for the creation of new rules or for the revising of current ones by

Defining non-state rules 21 instigating or financing a project. However, the involvement of the state is indirect, and the state delegates the creation of the instruments to others. In most cases non-state rules are either spontaneous creations by the merchant community or are created through a private initiative by an (international) organisation.

In conclusion, following Abbot and Snidal’s characterisation, non-state rules are legal arrangements that are weakened along one or more of the dimensions of obligation, precision, and delegation. Non-state rules are weakened along at least two of these dimensions. All non-state rules are weakened along the dimension of delegation, as they arc not created by a state, whereas codified non-state rules create weak obligations as they usually need to be contracted into and uncodificd non-state rules are less precise.

Non-state rules serve several functions. They are aimed at states, courts, and businesses. For businesses they can serve to provide a neutral law of the contract, contribute to drafting the contract, and ensure the contract is suitable for international transactions. For states they can serve as a model for harmonising the law, for shaping the law, and ensuring the law is fit for international transactions. For courts they contribute to a transnational interpretation of the law, ensure that the law is applied in a predictable manner for international transactions, and provide the court with further tools to understand the intentions of the parties. Block-Lieb identifies three important functions of non-state rules: gap filling, socialising, and advocacy.^[2] They fill gaps in the law by building on existing legal instruments, advising on interpretation, and through providing additional rules. They socialise companies, states, and individuals by helping to develop a common legal language across time and space. They advocate the need for legal harmonisation and the creation of new laws through demonstrating possible ways forward.

• [1] Kenneth W Abbott and Duncan Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421,422. 2 Parts of this analysis appeared first in Johanna Hoekstra, ‘The Normative Influence of the UNI DROIT Principles of International Commercial Law on Courts’ (2019) 23 The Vindobona Journal of International Commercial Law and Arbitration 54. 3 Jacques Ghestin, ‘La notion de contrat’ (1990) 12 Periodicals Archive Online 7,10 See also : Article 1134 of the French Civil Code : ‘Les conventions légalement formées tiennent lieu de loi à ceux les ont faits.’
• [2] Susan Block-Lieb, ‘Soft and Hard Strategies: the Role of Business in the Crafting of International Commercial Law’ (2019) 40 Michigan Journal of International Law 433, 473. 2 Harold J Berman, The Law of International Commercial Transactions (Lex Mercatoria), (1987) 2 Emory Journal of International Dispute Resolution 235, 238 Although it can be argued that the ancient shipping rolls are separate from the lex mercatoria that developed through year markets and fairs and focused mainly on land trade.