Defining the (new) lex mercatoria
Non-state rules cannot be equated with the lex mercatoria, however the two concepts are intrinsically linked and to understand this link a more in-depth discussion of the lex mercatoria is necessary. It is important to remember that there are (at least) two leges mercatoriae that are referred to in academic discussions. The first is the ancient lex mercatoria, which dates from at least the early Middle-Ages and, whose origins can be linked back even further to Roman law and the old maritime codes such as the Sea Law of Rhodes ( Lex Rhodia) which emerged around 800 BC. It can be defined as body of rules
and principles relating to merchants and mercantile transactions, distinct from the ordinary law of the land. Possessed of a certain uniformity in its essential features, it yet differed on minor points from place to place.>b From the 7th-9lh century onwards in Europe merchants were considered a distinct class and formed merchant courts on year markets and fairs where they resolved their own disputes according to their own rules with little outside interference.[1]
The second lex mcrcatoria is the new lex mcrcatoria that emerged in the middle of the 20,h century and is considered as a revival or continuation of the medieval lex mcrcatoria.
The term lex mcrcatoria is used interchangeably by many scholars to refer to both leges mercatoriae. This is often done for practical reasons but also for principled ones. Using the term lex mcrcatoria for both emphasises the continuity between the two. Although the lex mcrcatoria was less visible in the 17th- 19th century it did not disappear completely. There is thus only one lex mcrcatoria, which changed and developed over the centuries.
The lex mcrcatoria mainly emerged because of the rise in year markets, the creation of guild houses, the revival of the study of Roman law, and the increase in commerce after the fall of the Western Roman Empire. The concept of a transnational law different from more local regulations has roots in Roman law where the ins gentium had specific rules that governed relations between Roman citizens and non-Romans. The lex mcrcatoria governed a special class of people (merchants) in a specific place (such as a market/fair/ town/port), it was administered by merchant courts, and it was more relevant to the needs of international commerce than local laws & customs. Temporary merchant courts existed on markets and fairs, administered by merchants themselves whereas more permanent courts developed around guild houses focusing on the specific trade its members specialized in. The medieval lex mcrcatoria consisted mainly of the practices of trade guilds, customs, usages, and principles taken from previous decisions of merchant courts.
There is a tendency to romanticise the medieval lex mcrcatoria as a unified body of law, which was applied consistently throughout Europe. Although
Defining non-state rules 23 there is consensus that some form of the lex mercatoria existed, its coherence and extensiveness is disputed.[2] The lex mercatoria was not a complete and uniform body of law, but consisted of different sets of rules with strong regional differences. Some describe the medieval lex mercatoria as a North Italian concept, which spread from there to the rest of Europe, but never achieved any real unification across the different areas. Others state that the differences between customs were minor, and that it is thus possible to speak of a common lex mercatoria. Given the customary nature of the lex mercatoria, there is limited textual evidence that has survived and it is difficult to come to any firm conclusions regarding the coherence and universality of the lex mercatoria. The term lex mercatoria is used historically which means that there was an early awareness of its existence. One of the earlier references to the lex mercatoria can be found in the Little Red Book of Bristol, which was published in the 13th century.
The lex mercatoria slowly disappeared as unified national laws emerged with the rise of the nation state. The lex mercatoria was codified in civil law systems, whereas in England the lex mercatoria became a matter for the courts and was consequently absorbed in the common law. The absorption of the lex mercatoria in national laws made the latter better suited for (international) commerce, but ultimately contributed to the loss of the universal character of commercial law. The lex mercatoria did not disappear, but its presence diminished considerably and it was no longer applied independently but through the domestic court system.
The concept of the lex mercatoria was revived in the second half of the 20th century. This renewal came through merchants, ship owners, insurers,
and bankers who were confronted with more complex legal questions due to the increase in international trade, and who wished to increase predictability through legal harmonisation.[3] This issue generated interest from the scholarly community. The starting point of the study of the new lex mercatoria is an article written by professor Berthold Goldman in 1956 where he discusses the nationality of the Suez Canal Company, and argues that the Company was not of a specific nationality due to its organisation and global presence, and that it belonged to a transnational legal order and is subject to the international legal order.
This idea was further developed in the 1960s by authors such as Gold-staijn, Fragistas, and Goldman in France, and Clive Schmitthoff in the UK and led to a theory of the new lex mercatoria. The concept of this new lex mercatoria originates in the community of scholars and is based on their observations of mercantile practices in the 20th century. Goldman saw standard contract terms and the emergence of arbitration as important drivers behind the development of the new lex mercatoria.
The new lex mercatoria is a spill over effect from globalisation, which entrenched party autonomy and furthered private law making.
Is it possible in today’s fragmented world for a unified lex mercatoria to exist? Due to diverse legal systems and different understandings of contract law it is difficult to speak of a universal lex mercatoria. One of the reasons why it is unlikely that a truly global lex mercatoria exists is economic disparity. The development of the lex mercatoria is mainly restricted to developed liberal market states that have a significant amount of international trade. Merchants from nations that have less cross-border trade, because of a lack of economic development and/or state restrictions on international trade, are not involved in shaping the lex mercatoria in a meaningful way because of power disparity. This means that the lex mercatoria might be something which they participate in or have imposed on them, but they arc not equal
Defining non-state rules 25 co-creators. Thus, it is not truly the product of the global merchant community. The differences in legal culture also make it difficult to have one universal lex mercatoria. Therefore, there is no global and unified group of merchants that speak with one voice. Perhaps, it is thus better to speak of the lex mercatoria as a global phenomenon whose precise place, content, and uniformity differs between trades, regions, and communities.
Sceptics of the lex mercatoria might argue that the lex mercatoria cannot exist because only the state can create or enforce law.[4] This might have some validity as most judicial power rests with the nation state, but does not do justice to a cosmopolitan and globalised world that consists of fragmented communities and regions where more informal forms of law making exist both inside and outside international commerce. The law can have force if people believe it has force. If a majority of merchants treat the lex mercatoria as law, even when adhering to it goes against their personal interests, this means that the lex mercatoria is real no matter whether it is endorsed by the state.
There are several key issues that determine how we understand the lex mercatoria. The first key issue, which was discussed in the previous paragraphs, is whether the lex mercatoria exists. The second issue is understanding what the lex mercatoria is. Is the lex mercatoria a distinct legal order or is it part of an existing legal order (domestic or international)?
Berger analyses three separate theories on the perception of the lex mercatoria. The first sees the lex mercatoria as a mass of rules, which can be used to supplement the applicable law, the second defines the lex mercatoria as an autonomous law, and the third sees the lex mercatoria as an independent legal system. The third view confirms ‘the existence of transnational rules made up of usages and principles which would constitute a true juridical order specific to the operators of international commerce.’
The second theory is that of the lex mercatoria as an autonomous law. Goldman suggests that the lex mercatoria is an independent legal order, which is dependent upon national legal orders for its implementation. A major difference between the medieval lex mercatoria and the new lex mercatoria is that the first operated independently of national/regional laws, whereas now domestic law has final jurisdiction over international commercial transactions. The concept and the role of the state is drastically different from the Middle Ages, especially in how it exercises control over its territory and its role in the administration of private law. The role of the lexmercatoria changed as the role of the state changed. It is an autonomous law, but it is not a completely independent legal system. In 1924 the North Dakota Supreme Court stated that:
the law merchant is a system of law that does not rest exclusively on the institutions and local customs of any particular country, but consists of certain principles of equity and usages of trade which general convenience and a common sense of justice have established to regulate the dealings of merchants and mariners in all the commercial countries of the civilised world.[5]
The first view of the lex mercatoria is in line with traditional legal doctrine, which considers the lex mercatoria as ‘professional norms, social rules, customs, usages, contractual obligations, intra-organisation or inter-organisational agreements, arbitration awards - but not law.’ This theory emphasises that law is the expression of the will of states. In this theory the absence of a unified and independent merchant community combined with the lack of an opinio iuris make it difficult to justify that the lex mercatoria is (customary) law.
Berger forges the three approaches together by describing the lex mercatoria as ‘the totality of international trade usages which has the character of an independent legal system that derives its justification from acknowledgement by domestic laws’ The lex mercatoria is autonomous in its development, but is connected to domestic legal systems which determine when it can be applied. Businesses are at the core of the development of the lex mercatoria but the domestic law of that state determines its legitimacy within a specific state.
- [1] William Mitchell, An Essay on the Early History of the Law Merchant (Cambridge University Press 1904) 10. 2 Ibid, 25. 3 Harold J Berman, The Law of International Commercial Transactions (Lex Mcrcatoria) (1987) 2 Emory Journal of International Dispute Resolution 235,299. 4 William Mitchell, An Essay on the Early History of the Law Merchant (Cambridge University Press 1904) 22 and Harold J Berman, The Law of International Commercial Transactions (Lex Mcrcatoria) (1987) 2 Emory Journal of International Dispute Resolution 235, 240. 5 Ralf Michaels, 'The Re-statement of Non-State Law: The State, Choice of Law, and the Challenge from Global Legal Pluralism’ (2005) 51 Wayne Law Review 1209, 1231. 6 Klaus P Berger, 'The New Law Merchant and the Global Market Place’ (2000) 4 International Arbitration Law Review 92. 7 Roy Goode, 'Usage and its Reception in Transnational Commercial Law’ in Jacob S Ziegel and Shalow Lerner (editors), New Developments in International Commercial and Consumer Law, proceedings of the 8th Bienal Conference of the International Academy of Commercial and Consumer Law (Hart Publishingl998) 7.
- [2] Emily Kadens argues against the existence of a coherent and unified medieval lex mercatoria on the ground that the evidence for such a legal system is flimsy. Looking at court decisions, texts written on merchants during that period, and other material, Kadens concludes that there most probably was not a lex mercatoria in the sense that is understood now. She notes that there was no real reason for the existence of an extensive lex mercatoria because commerce was usually done face to face and thus gave rise to less disputes, merchants used brokers and local agents when travelling to foreign cities who would inform them of local customs and laws. (Emily Kadens, ‘The Myth of the Customary Law Merchant’ (2012) 90 Texas Law Review 1153. 2 Roy Goode, ‘Usage and its Reception in Transnational Commercial Law’ in Jacob S Ziegel and Shalow Lerner (editors), New Developments in International Commercial and Consumer Law, proceedings of the 8th Bienal Conference of the International Academy of Commercial and Consumer Law (Hart Publishingl998) 7. 3 William Mitchell, An Essay on the Early History ofthe Law Merchant (Cambridge University Press 1904) 7. 4 Ibid. 5 Little Red Book of Bristol: https://archive.org/details/littleredbookbr02enggoog. 6 Lord Mansfield in the case of Pillans and Rose v. van Mierop and Hopkins [1765] 3 Burr 1663 (QB) 'rules of the law merchant are questions of law to be decided by the courts rather than matters of custom to be proven by the parties and such rules apply to all persons.’ 7 Harold J Berman, The Law of International Commercial Transactions (Lex Mercatoria) (1987) 2 Emory Journal of International Dispute Resolution 235, 243. 8 Ibid, 299-300.'
- [3] Ibid, 243. 2 This article appeared in the newspaper Le Monde on the 4lh of October 1956. An English translation and a scan of the original article can be found at: http://www.trans-lex. org/9/. 3 Klaus Peter Berger, ‘Berthold Goldman and the Dijon School: The rebirth of the Lex Mercatoria’ http://www.trans-lex.org/000001. See also for instance: Clive M Schmitthoff, ‘The Unification of the Law of International Trade’ (1964 Handelshôgskolan Gôteburg, Skrifter) reproduced in Chia-Jui Cheng (editor), Clive M Schmitthoff, Select Essays on International Trade ( 1988 Marinus Nijhoff Publishers) 170 Berthold Goldman, ‘Frontières du Droit et Lex Mercatoria’ (1964) Archives du Philosophie du Droit. 4 Berthold Goldman, ‘The Applicable Law: General Principles of Law- Lex Mercatoria’ in J.D.M Lew (editor) ‘ Contemporary Problems in Arbitration’ (1987 Springer) 113. 5 Ross Cranston, ‘A Theory tor International Commercial Law?’ (2006) http://biblio. juridicas.unam.mx/libros/5/2332/18.pdf 253,261. 6 Gunther Teubner, ‘Global Bukowina: Legal Pluralism in the World Society’ in Gunther Teubner (editor), Global Law without a State (1997 Brookfield) 19.
- [4] Klaus Peter Berger, The Creeping Codification of the Lex Mercatoria (Kluwer Law International 1999) 102. 2 Ibid, 106. 3 Ibid 40. 4 Louis Marques, International Uniform Commercial Law: towards a progressive consciousness (Ashgate Aidershot 2005) 11. 5 Berthold Goldman, ‘Lex Mercatoria: Lecture’ Forum Internationale 3, (Kluwer 1983) 22/23. 6 Clive Schmitthoff, ‘The Unification of the Law of International Trade’ in Clive Schmitthoff, The Sources of the Law of International Trade (Frederick A. Praeger 1964).
- [5] Bank of Conway i>. Stary eta! 51 N.D. 399,200 N.W. 505 (1924). 2 Gunther Teubner, ‘Breaking Frames: Economic Globalization and the Emergence of lex mercatoria’ (2002) 5 European Journal of Social Theory 199, 206. 3 Harold J Berman, The Law of International Commercial Transactions (Lex Mercatoria) (1987) 2 Emory Journal of International Dispute Resolution 235, 304. 4 Gunther Teubner, ‘Global Bukowina: Legal Pluralism in the World Society’ in Gunther Teubner (editor), Global Law without a State (Brookfield 1997) 9. 5 Klaus Peter Berger, The Creeping Codification of the Lex Mercatoria (Kluwer Law International 1999) 40.
