Restatements of law

Restatements of law in international contract law aim to restate regional or global (commercial) contract law in the form of a set of principles and concrete rules. They are intended to be used by contracting parties as the applicable law but are also used for other purposes, such as to interpret international and transnational commercial law. The most successful example is the UNIDROIT Principles of International Commercial Contracts.^[1] Regional examples are the Principles of European Contract Law and the Principles of Latin American Contract Law. This section explores these three restatements to understand their functioning and their place as a source of law.

The UPICC were designed to create a neutral contract law for international business transactions. The first edition was published in 1994, the second edition in 1998, and the third in 2010. The drafters made a conscious decision not to seek approval from the UNIDROIT council. They were drafted outside the constraints of the institution and no formal approval from states was necessary. The UNIDROIT Council did formally approve the second and following editions of the Principles thus bringing them under the umbrella of the institution. The UPICC contain both general contract law principles and specific rules. The commentary on the Principles, are considered an intrinsic part of the document. They are a work of comparative study that mainly drew their inspiration from the UCC, the CISG, the

Dutch Civil Code, the Civil Code of Quebec, and the Restatement (Second) of the Law of Contracts and existing trade usages and general principles of commercial law.^[2] UNIDROIT cooperated with UNCITRAL to ensure that the UPICC were compatible with the CISG.

The UPICC are ‘intended to enunciate rules which are common to (most of) the existing legal systems and at the same time to select the solutions which seem best adapted to the special requirements of international trade?'’ The Principles arc based on existing law but also form an innovative approach to international commercial law. They are not merely descriptive of the current state of law but they also suggest how the law should develop. Therefore, the Principles use the authority of the current law and build upon this to provide a more unified approach suitable for international commerce.

They can derive authority from being included in the contract, either by reference or as the applicable law. Their legal authority beyond the contract is less clear. They are the first instrument of its kind in international contract law although there is the concept of restatements of law in the US. Therefore, there is some understanding as to the legal nature of the instrument. Restatements of Law in the US are highly persuasive for courts in the application and interpretation of the law; they also regularly serve as inspiration for policy makers. They are so persuasive because they are based on existing case law. This is a crucial difference with the UPICC which are the product of a comparative legal study between a range of jurisdictions.

Just like model contract terms the Principles could develop to become trade usages or like a model law they could develop into general legal principles. The UPICC can develop into accepted international commercial law practices. They would form a point of reference for contracting partners, legal counsel, and adjudicators and can be used to interpret the contract or the law. They would thus form an international commercial law doctrine.

There is an extensive and on-going discussion about whether the UPICC are considered part of the lex mercatoria. They could be used to describe the current state of certain parts of the lex mercatoria. They would thus be a reflection of the lex mercatoria. Caution is advisable: ‘It is not up to the Principles to advance themselves as general principles of law or as lex mercato-ria[...] The UNIDROIT standards will only be part of the lex mercatoria if they are recognised as such by the business community and its arbitrators.’^[3] Suffice to say opinions differ, from cautiously optimistic to negative. The inherent quality of the UPICC is not necessarily disputed, but their nature is different from that of the lex mercatoria. If the lex mcrcatoria restricted to uncodified non-state rules, the UPICC could not be part of this.

Concluding, the UPICC do not have a direct standing as a source of law. They are contractual rules. They also have a place as international commercial law doctrine or at the very least they could develop into this. They could also gain legal authority from being considered trade usages or custom. Bonell writes that it is not whether the Principles arc applicable in theory which should determine their legitimacy, but whether they are applied in practice. They would thus derive their legitimacy from their recognition and usage by the international business community, courts, and arbitral tribunals.

The Principles of European Contract Law (PECL) were developed by the Commission on European Contract Law (commonly referred to as the Lando Commission after its president Ole Lando) with the aim to enunciate the rules of contract law, which are common to European states. This commission was a private initiative and the work was done independently of the EU institutions although the European Commission showed some interest during the initial stages of the project. The work started in 1982 and the PECL were published between 1995 and 2003. The PECL, unlike the UNIDROIT Principles, arc annotated with a list of comparative references. As with the UPICC the authors did not merely use the most commonplace solution, they innovated on existing solutions. The PECL are intended for international and domestic contracts and for consumer contracts as well as for commercial contracts. Whereas the UPICC arc aimed at solely international commercial transactions the PECL are aimed at all contracts. The aim of the PECL is to create general principles and rules that could someday become part of the contract law of the member states. They are therefore aimed at harmonising domestic contract law as well as creating transnational contract law.

The pre-amble of the PECL eites five functions. First of all, they can be used as the choice of law in a contract, second they can be used as an inspiration by courts, third they can be used as a basis for harmonisation of contract law, fourth they represent a modern formulation of the lex mercatoria, and fifth they are a foundation for European legislation.¹⁽¹⁹ The last function has become the most important. The practical applicability of the PECL has been limited for several reasons. The Lando Commission no longer exists which means that there is no structural framework to update the PECL, although a working group has published some revisions.^[4] In contrast the UPICC, which were first published a year before the PECL, already had three updates. The lack of an institutional framework behind the PECL also means that they arc not promoted in a structured and consistent manner and this contributes to less frequent usage. Another reason is that the PECL have become a basis for further projects in European legal harmonisation and attention has shifted away from them.

What is the legal standing of the PECL? They could be used as contractual rules or the applicable law and derive their authority from the contract. Their value beyond that is subject to debate. The PECL were not prepared under the umbrella of an organisation, but that is in itself not a reason to disqualify the PECL as a source of law. They can form part of a European contract law doctrine and help with the study of legal systems and be a 'language of communication among students and scholars from different countries.'

They could of course develop into trade usages or general principles of law in the same way as the UPICC could. In practice they are used less frequently than the UPICC and therefore their development into trade usages and general principles is less likely. However, the PECL are contributing to the development of general principles of European contract law. This does not happen only through their usage by the business community or their application by the courts but also through serving as a foundation stone for the creation of a European contract law.

The PECL became one of main foundations for the (Draft) Common Frame of Reference ((D) CFR). In the early 2000s the European Commission published several reports that included reflections on the PECL and these formed the starting point of the DCFR.^[5] The Research Group on EC Private Law (Acquis Group) researched and published the Principles of Existing EC Contract Law (Acquis Principles) as a preliminary to the DCFR. The Study Group on a European Civil Code and the Acquis Group published the DCFR in 2009. Like the Lando Commission, these arc private groups consisting of individuals who were not appointed by their governments. There is an overlap in membership between the three groups.

The DCFR was to serve as the basis for the Common Frame of Reference (CFR). The exact scope and the legal authority the CFR will have is unclear. The (D) CFR is also intended as a basis for an eventual European civil code. If a European Civil Code is not feasible, then it could serve as a basis for (optional) contract law instruments and other legislation. The DCFR encompasses several other areas of private law (such as tort law) in addition to contract law.

In turn the DCFR was used to develop the proposal for a Regulation of the European Parliament and the Council on a Common European Sales Law (CESL). This proposal was published in October 2011. This instrument was intended to cover sale contracts. The CESL covered some areas, which are not included in the CISG (such as pre-contractual information duties, defects of consent, unfair contract terms, and electronic contracts). CESL was meant for consumer contracts and for business contracts if one of the contracting parties is a SME. It was to be an opt-in instrument. It had strong support from the European Parliament, but the backing from the European Council, the business community, consumer organisations, and national parliaments was weaker. The ICC issued a statement expressing concern about the lack of harmony between the CISG and the CESL.² And with the ICC one can wonder why not more consideration was given to the CISG as the majority of EU states have ratified this.

In 2014 the European Commission presented its Work Programme for 2015 and withdrew the proposal for the CESL. The Commission stated it withdrew the proposal to transform this in a proposed instrument on

The roles of non-state rules 83 ecommerce.^[6] The negative reactions of Member States made the viability of the CESL questionable. In June 2015 the European Commission began a public consultation for the development of this new instrument, which cumulated into a proposal for two new directives on ecommerce in December 2015. The PECL are thus serving to facilitate the Europeanisation of contract law. Their main legal and moral authority' stems from their contribution to European contract law, in academic writings and in legislation, rather than from their usage by courts to interpret and apply the law.

There are several other private harmonisation initiatives in Europe such as the Trento Common Core Project that charts existing law in Member States to find a common core and the Preliminary Draft for a European Code by the Academy of European Private Lawyers. Currently there are no concrete plans to draw up a European contract law. The plans for this, along with the more ambitious plans for a European Civil Code, have been under discussion as far back as 1989 when the European Parliament initiated a study on this subject. This idea resurfaced on several occasions, yet there are important questions about its feasibility. One of the core areas of an eventual European Civil Code would most likely be contract law as mostexperts are in agreement that more sensitive areas such as family law should be left out, at least initially.^[7]

Following the publication of the UPICC and the PECL several other regional initiatives were launched focusing on the development of a restatement of law. These include the Principles of Asian Contract Law (PACL) and the Principles of Latin American Contract Law (PLACL). These instruments are private initiatives, mainly involving scholars from the region. The PLACL were published in 2017. They are developed by a group of legal scholars from various countries in Latin America. The pre-amble of PLACL states the purposes of the PLACL. These are similar to the pre-ambles of the UPICC and the PECL:

Article 1. Scope of application

• (1) These Principles set forth general rules applicable to domestic and international contracts, but not to consumer contracts.
• (2) These Principles apply when:

a. The parties subject themselves to them, in part or in full.

b. The parties have agreed that their contract be governed by general principles of law, the lex mercatoria, or the like.

Article 2. Functions

• (1) These Principles apply to interpret international uniform law instruments and domestic law governing the contract.
• (2) They may also be used as a model for national or international legislators.

It can be envisaged that the PLALC will take on similar roles as the PECL and UPICC. Their legal authority can be determined in the same way. They can get their authority from their inclusion in the contract, they can develop into trade usages and general principles of law, and they can serve as accepted

The roles of non-state rules 85 regional commercial practice and doctrine if they are applied by the courts, and they can be used as a foundation for the development of both domestic and regional contract law. Like the PECL they have no institutional support, and this could impact their future development. This impacts how well they can be promoted and how they can be updated to ensure they remain current. This could affect how frequently they are used as the PECL demonstrate. As a new instrument the development of the PLACL beyond contractual rules has not yet taken shape and it remains to be seen how they will be applied in practice.

• [1] UNIDROIT developed two further sets of Principles: the ALI/UNIDROIT Principles ofTransnational Civil Procedure (the ELI/UNIDROIT Principles of Transnational Civil Procedure are currently underdevelopment) and the Principles of Reinsurance Contract Law (PRICL) Parts of this analysis of the UNIDROIT Principles appeared before in: Johanna Hoekstra, 'The Normative Influence of the UNIDROIT Principles of International Commercial Law on Courts’ (2019) 23 The Vindobona Journal of International Commercial Law and Arbitration 54. 2 David Oser, The Unidroit Principles of International Commercial Contracts: A Governing Law (Martinus Nijhoff 2008) 2. 3 They were updated in 2016 with regards to long term contracts: http://www.unidroit.org/english/governments/councildocuments/2016session/ cd-95-03-e.pdf. 4 Michael Joachim Bonell, ‘The Law Governing International Commercial Contracts and the Actual Role of the UNIDROIT Principiles’ (2018) 23 Uniform Law Review 15, 21.
• [2] Louis Marques, International Uniform Commercial Law: Towards a Progressive Consciousness (Ashgate, Aidershot 2005) 3. 2 Stefan Eberhard, Les Sanctions de L’Inexécution du Contrat et les Principes Unidroit (Cedidac UNIL Centre du Droit Lausanne 2005) 7. 3 Michael Joachim Bonell, ‘The Unidroit Principles of International Commercial Contracts: towards a new lex mercatoria?’ [1997] International Business Law Journal 145,146. 4 Ibid,147. 5 Jan Ramberg, International Commercial Transactions (ICC Kluwer Law International Norstedts Juridik AB, 1998) 21. 6 David Oser, The Unidroit Principles of International Commercial Contracts: A Governing Law (Martinus Nijhoff 2008) 47.
• [3] Hans van Houtte, The Laws of International Trade {Sweet & Maxwell 1995) 184. 2 The relationship between the UNIDROIT Principles and the lex mercatoria is further explored in chapter 10. 3 Michael Joachim Bonell, 'The UNIDROIT Principles and Transnational Law’ (2000) 5 Uniform Law Review, 199, 200. 4 Ole Lando, 'The Common Core of European Private Law and the Principles of European Contract Law’ ( 1998) 21 Hastings International and Comparative Law Review 809,819. 5 Part I, dealing with performance, non-performance and remedies, was published in 1995. A revised version of Part I alongside Part II was published in 1998. Part III deals with issues of assignment, assumption, statutes of limitation, procedural issues, capitalisation of interest and the effects of illegality and was published in 2003. Part III is published separately whereas Part I and II are integrated into one document. 6 David Oser, The Unidroit Principles of International Commercial Contracts: A Governing Law (Martinus Nijhoff2008) 3.
• [4] Jan M Smits, ‘Convergence of Private Law in Europe ‘in Esin Örucü and David Nelken (Editors), Comparative Law, A Handbook (Hart Publishing 2007) 233. 2 Principes Contractuels Communs - Projet de Cadre Commun de Référence (Association Henri Capitant des Amis de la Culture Juridique Française & Société de Législation Comparé, 2008). These revisions were made by several members of the Study Group towards a European Civil Code, but this was done independently from this group. 3 Michael Joachim Bondi, ‘The CISG, European Contract Law and the Development of a World Contract Law’ (2008) 56 American Journal of Comparative Law 1, 11/12. 4 David Oser, The Unidroit Principles of International Commercial Contracts: A Governing Law (Martinus Nijhoff 2008) 122. 5 Jan M Smits, ‘Convergence of Private Law in Europe’ in Esin Örucü and David Nelken (Editors), Comparative Law, A Handbook (Hart Publishing 2007) 233.
• [5] Communication to the European Parliament and the Council - A more coherent European contract law- An action plan (COM (2003) 68 of 12 February 2003 Communication from the Commission to the Council and the European Parliament on European contract law [COM (2001) 398 ■ Official Journal C 255 of 13.9.2001. 2 http://www.acquis-group.org/< 3 CESL: http://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX:52011DC0636. 4 Viktor Elod Cserep, ‘E Pluribus Unum - Out of Many, One Common European Sales Law’ (2017) 29 Pace International Law Review 199. 5 ICC Position on the EC Proposal for Common European Sales Law: http://www. iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2012/ICC-Position-on-the-EC-proposal-for-a-Common-European-Sales-Law/. 6 The United Kingdom, Malta, and Ireland have not ratified the CISG. 7 See: http://www.epln.law.ed.ac.uk/2015/01 /07/proposal-for-a-common-european-sales-law-withdrawn/.
• [6] http://www.europarl.europa.cu/EPRS/EPRS-Briefing- 545732-Commissions-2015-work-program me-FIN A L.pd f. 2 Public consultation on contract rules for online purchases of digital content and tangible goods http://ec.europa.eu/justice/newsroom/contract/opinion/150609_en.htin In December 2015 the Commission adopted two proposals for directives: one on the supply of digital content and one on the online sales of goods. http://europa.eu/rapid/press-release_IP-15-6264_en.htm Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services has now been adopted. The directive for the online sale of goods was expanded to cover the sale of goods in general (so as not to create two distinct regimes): Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC (Text with EEA relevance.). 3 http://www.common-core.org/ 4 http://www.eurcontrats.eu/site2/. 5 The Private Law Systems in the EU: Discrimination on Grounds of Nationality and the Need for a European Civil Code, Working Paper, Directorate General for Research, p3 http://www.europarl.europa.eu/workingpapers/juri/pdf/103_cn.pdf. 6 The question whether the EU has the legal competence to unify contract law falls outside of the scope of this book. For a debate on this see for instance: Esther van Schagen, ‘The Proposal for a Common European Sales Law: How its Drafting Process Might Affect the Optional Instrument’s Added Value for Contract Parties and its Success’ in A Keirse and M Loos (editors), Alternative Ways to Ins Commune (Intersentia 2012).
• [7] For a further discussion of this see: Jan M Smits, ‘European Private Law: A Plea for a Spontaneous Legal Order’ in Deirdre M Curtin, Jan M Smits et al. (editors), European Integration and Law: Four Contributions to Celebrate the 25ú' Anniversary of Maastricht University’s Faculty of Law (Antwerp-Oxford 2006) Pierre Legrand, ‘Against a European Civil Code’ (1997) 60 Modern Law Review 44 Hugh Collins, The European Civil Code: The Way Forward (Cambridge University Press 2008) Geraint Howells, European Contract Law Reform and European Consumer Law -■ Two Related but Distinct Regimes (2011) 7 European Review of Contract Law 173, 176. 2 Rodrigo Momberg & Stefan Vogenauer, the Principles of Latin American Contract Law: Text, Translation, and Introduction (2018) 23 Uniform Law Review 144, 153/154 This article contains the full draft in Spanish and the translation in English of the PLACL.