Legal harmonisation through non-state rules
Edlund differentiates between three types of harmonisation:
- • Direct approach (purposefill legislation designed and enforced by legislators)
- • Indirect approach (harmonisation is not the intended goal, but it can be a by-product)
- • Party-autonomy approach (bottom-up approach, the parties themselves agree to use transnational rules)[1]
Harmonisation can thus be top down or bottom up. The direct approach is reflected in international conventions. They are drafted on purpose with the goal to unify the law. The second approach occurs for instance with the creation of standard terms and conditions by trade associations. They are not created on purpose to harmonise the law, but they can nonetheless contribute to this process. The third approach originates in the merchant community. Harmonisation through non-state rules could occur through the indirect approach (standard terms for instance) and the party autonomy approach (trade usages for example.)
Non-state rules are not drafted with the goal to be ratified by states. This leaves the drafters free to come up with the ‘best’ solution instead of the ‘most acceptable’ solution. The risks of lowest common denominator policy and minimal harmonisation arc more easily avoided. Non-state rules arc less expensive to draft. There is no need to organise a plenary conference and there is less need for extensive negotiations that are necessary to get states to agree to become a signatory. Non-state rules are more flexible and can accommodate different legal traditions more easily.
There are instances when non-state rules arc more effective in attracting support than conventions. UNCITRAL developed a convention for the use of Electronic Communications in International Contracts. This entered into force in 2013 and is ratified by eighteen states. UNCITRAL also developed model laws on Electronic Commerce and Electronic Signatures. 74 and 33 jurisdictions respectively have adopted these model laws. The scope of the instruments differs, but the convention builds upon the model laws
(which were published earlier) and provides updates to these.[2] Therefore, the three instruments are closely intertwined, yet the model laws have been more successful at attracting state support than the convention.
Non-state rules contribute in different ways to the harmonisation of law. Harmonisation can be achieved through the state, courts, and end users (such as businesses). States adopt model laws and through their implementation in domestic law, these bring harmonisation. Model contracts, trade usages, restatements of law, guidelines, and standard terms and conditions focus on merchants, legal professionals, and courts. The agency is on these stakeholders to use the non-state rules and through their usage, non-state rules become a bridge between different legal systems.
Harmonisation of law and the lex mcrcatoria are relatively unrelated: harmonisation is the drawing together of state laws whereas the lex mcrcatoria is a separate legal system that applies to international commerce. If one sees the lex mcrcatoria as an independent legal system, then this would exist independently of any national laws, and would have no influence on these; at least not more than a foreign state law would. It would be a uniform law but not one that has a harmonising effect on domestic commercial law. However, as the lex mcrcatoria does not exist in a vacuum and is (at least sometimes) applied in state courts there is a link between the lex mcrcatoria and domestic international commercial law. In the long term, this link could lead to harmonisation of the underlying legal principles. This can create a more similar understanding of the law between states, courts, legal professionals, businesses, and legal scholars, which in turn could lead to more uniform laws.
Whilst the above discussion might seem in favour of harmonisation through non-state rules, it is not to say that this is always the best option. This harmonisation is weaker than through international conventions because the usage of non-state rules is voluntary, and their application in courts is more modest. They are applied mainly in arbitration and as arbitral awards are usually confidential and are not binding precedents, the contribution of non-state rules to the harmonisation of law is weakened. Conventions have the advantage that they are not hindered by mandatory rules of domestic law and the limits imposed by international public policy. In some areas, like property law, that require absolute certainty, conventions arc a better method of achieving unification, whereas in areas that are deeply rooted in national traditions, the chances of a convention being successful arc minimal and other methods of harmonisation should be used.
Non-statc rules and international conventions are closely linked. In a state where a convention is not ratified it would be considered a non-statc rule. Schaffer and Pollack divide the interaction between soft law or non-state rules and hard law, which would include domestic law and ratified conventions in three theories.[3]
• Legal positivist view: hard law and soft law co-exist next to each other.
Hard law has a binding nature and is the preferred option. Soft law is not formally binding but can in the long-term lead to hard law.
- • Rationalist view: soft law and hard law are chosen for different situations. The preference is not always for hard law as it depends on the situation. Hard law and soft law can work together.
- • Constructivist approach: the law facilitates interactions that create links. Soft law can work better to build up these links because it has a more bottom up approach than hard law.
The legal positivist approach favours international conventions as the primary means of harmonisation and sees non-state rules as complimentary, but not as a full viable alternative to hard law. Domestic (and conventional) law is binding and non-state rules could form an inspiration or a first step for developing hard law. Non-statc rules are the ‘next best option’ if a hard law agreement is not (yet) possible. An example is model laws, which are soft law, but they are used to develop domestic law, which is binding.
The rational approach sees non-state rules and hard law as alternatives whereby some situations favour use of the one, and other situations use of the other. This approach would support the interaction of hard law and soft law where they build on one another. An example is the CISG, which is hard law, and the CISG Advisory Council, which is a private initiative that drafts opinions on how the CISG should be interpreted in order to achieve more uniformity. These opinions arc not binding but can be considered as influential. Non-statc rules thus build on existing hard law. Travaux préparatoires, guidelines, and practices precede the creation of hard law or build further upon an existing legal instrument. In this view, conventions should deliberately leave room for the development of custom, which can fill in the gaps of the instrument. General and ambiguous articles are a strength, because they allow the convention to organically develop beyond the original text. The usages and customs that develop out of the convention can inspire the drafters of future legal instruments who will then incorporate existing usages in their works.
The constructivist approach is the most bottom-up approach (whereas the legal positivist view is the most top down) and would favour the building of a common legal culture in international commerce through the use of non-state rules by the business community. This common legal culture would create general principles and usages of international commerce, which then influence domestic law. This common legal culture could influence how new laws arc drafted and how courts apply the law. This method of interaction will ultimately lead to stronger harmonisation as it unifies the principles underlying the law and not just the concrete rules. It is a more gradual approach and it will take tar longer to see any harmonising effects.
The relationship between hard law and soft law is always varying and the interaction between the two mainly depends on the interaction between the power and interests of the actors. In international commerce, these actors include the state, the business community, arbitrators, and legal professionals. Although the state undoubtedly has the most power it does not necessarily have the most vested interest, and therefore the state is content to leave considerable agency to the other actors in the process. States can facilitate the use of soft law by allowing for its usage (whether out of lack of interest or for other reasons) and merchants can use their agency to create and use non-state rules. Organisations can create and promote non-state rules. Arbitrators (and sometimes state courts) can apply non-state rules. Researchers and legal professionals can propagate the use of different types of law, including non-state rules. These actors thus all have an influence on the creation, development, and the use of non-state rules and how these are used vis a vis hard law.
Conclusion: the role of non-state rules in the harmonisation of international commercial law
To understand the place of non-state rules in international commercial law it is crucial to understand how they contribute to legal harmonisation. This helps to understand their legal authority because a) it leads to a fuller understanding of the nature of non-state rules and b) it sheds further light upon their usage and application. Harmonisation contributes to more uniformity between domestic international commercial laws and their underlying principles. One of the methods for achieving this harmonisation is the creation of uniform law. The resulting uniform law is transnational commercial law. Thus, it could be said that legal harmonisation is focused on international commercial laws (that is to say the domestic international commercial law of each state) so these develop in the same direction. Unification is focused on
1
Gregory C Schaffer and Mark A Pollack, ‘Hard vs Soft Law: Alternatives, Complements and Antagonists in International Governance’ (2010) 94 Minnesota Law Review 706, 799.
The place of non-state rules 59 transnational commercial law, a uniform law that is the same across different states. In practice the two terms are often used interchangeably.
Harmonisation of international commercial law should lead to more legal security in international commerce. The need for this is sometimes questioned, as there is a lack of empirical evidence that diverging laws hamper international trade, however many governments, scholars, and international organisations are convinced of this necessity. International conventions are not displaced by mandatory laws and thus lead to more uniformity than non-state rules do. They are expensive to draft and are often based on lowest common denominator policy. Harmonisation through non-state rules is cheaper and more flexible. However, they lead to less uniformity because of their voluntary nature, which means they arc applied less frequently and less consistently. They arc applied mainly in arbitration and as arbitral awards arc confidential this hampers their contribution to legal harmonisation.
Harmonisation through non-state rules is bottom-up and the agency to use them is with the international business community (including businesses and arbitrators) as well as the courts that apply them. This chapter demonstrated that support and application are necessary for non-state rules to contribute to harmonisation. If they are not used frequently and consistently then their contribution is limited. This would impact their perceived authority, as it is precisely that usage and application that provides legitimacy to non-state rules in the transnational legal sphere. This would then become a self-perpetuating cycle where they are not applied frequently because they are not perceived as having legal authority and therefore do not contribute to legal harmonisation which in turn again impacts how their authority is perceived. Thus, usage and application are key to enhance the contribution of non-state rules to legal harmonisation and through this contribution, enhance their legal authority. As their usage is voluntary this leads to an understanding of the support that they have within the international business community and this contributes to understanding their legal authority.
- [1] Hans H Edlund, ‘The Concept of Unification and Harmonization’ in Morten M Fogt (editor), Unification and Harmonization of International Commercial Law: Interaction or Deharmonization? (Wolters Kluwer Law & Business 2012) 11. 2 Henry Deeb Gabriel, ‘The UNIDROIT Principles of International Commercial Contracts: An American Perspective on the Principles and Their Use’ (2012) 17 Uniform Law Review 507, 526. 3 UN Convention on the Use of Electronic Communications in International Contracts (2005) For full text see: http://www.uncitral.org/pdf/english/texts/electcom/06-57452_ Ebook.pdf. 4 For full text see: http://www.uncitral.org/pdf/english/texts/electcom/05-89450_ Ebook.pdf. 5 For full text see: http://www.uncitral.org/pdf/english/texts/electcom/ml-elecsig-e.pdf.
- [2] ‘The Convention is intended to strengthen the harmonisation of the rules regarding electronic commerce and foster uniformity in the domestic enactment of UNCITRAL model laws relating to electronic commerce, as well as to update and complement certain provisions of those model laws in light of recent practice.’ http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/ 2005Convention.html. 2 Lord Justice Mustill, ‘Contemporary Problems in International Commercial Arbitration: A Response’ (1989) 17 International Business Lawyer 161,162. 3 Herbert Kronke, ‘International Uniform Commercial Law Conventions: advantages, disadvantages, criteria for choice’ (2000) 5 Uniform Law Review 13, 20.
- [3] Gregory C Schaffer and Mark A Pollack, ‘Hard vs Soft Law: Alternatives, Complements and Antagonists in International Governance’ (2010) 94 Minnesota Law Review 706, 707. 2 Ibid. 3 See: http://www.cisgac.com/. 4 Clive M Schmitthoff, ‘The Unification or Harmonisation of Law by Means of Standard Contracts and General Conditions’ (1986) 17 International & Comparative Law Quarterly 551, 569.
