The application of codified non-state rules as lex mercatoria

Introduction

This chapter analyses how courts apply codified non-state rules as an expression or reflection of the lex mercatoria. The previous chapters demonstrated that courts apply uncodified non-state rules more frequently. This could be either as a source of law or to interpret the law or the contract. These arc mainly trade usages and general principles of law, which are also the two pillars of the lex mercatoria. The difficulty for courts is in uncovering the concrete substance of the lex mercatoria. Courts frequently turn to codified non-state rules for this purpose.

If the court or arbitral tribunal decides to apply non-state rules, either as the law governing the contract, as sources of domestic law, to interpret the contract, or as accepted principles of international commerce, the question arises how the court should apply these. The answer is relatively straightforward if the court or tribunal is applying codified non-state rules. These arc written down and there is a substantive body of guidelines and scholarly work to assist with the interpretation of these rules. The answer is more difficult when the court or tribunal is applying uncodified non-state rules. Their content is difficult to establish, they are not written down, and conflicting opinions make it difficult to understand how they should be applied and interpreted. Yet, in practice courts and tribunals apply uncodified non-state rules more frequently. Not only are usages and general principles recognised as a source of law in many domestic laws, but choice of law clauses also include uncodificd non-state rules more frequently.

It is rare for the parties to choose specific transnational commercial rules as the law governing the contract outside of the framework of trade associations where often the contract will contain a choice of law clause directly referencing the particular guidelines/rules of that association (usually in combination with a reference to an applicable domestic law such as English law.) Outside of trade associations, parties refer more often to uncodificd non-state rules in the contract, sometimes in conjunction with a state law.

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This chapter discusses application in both litigation and arbitration but for ease of language will mainly use the word court.

Choice of law clauses referencing uncodified non-state rules use different terminology. The terms that are used include lex mercatoria, general principles of law, principles of international commerce, principles of good faith and fair dealing, trade usages, and accepted trade practices. There is no clear distinction between these concepts, and it is also difficult to ascertain what the parties exactly have in mind when they include one of these terms in their contract. Applying uncodified non-state rules as the governing law can create difficulties because they arc incomplete and uncertain, therefore courts/tribunals need to fill the gaps, by for instance referring to a state law or codified non-state rules.

This chapter examines how courts apply uncodified non-state rules and analyses the tendency for dispute resolution bodies, courts and arbitral tribunals, to apply codified non-state rules when the contract calls for the application of the lex mercatoria, trade usages, or general principles of law. Codified non-state rules are written down and their content is thus easier to establish. Restatements of law specifically also have the advantage of being almost complete and therefore can govern the dispute (almost) autonomously. Section 2.4 discussed how general principles of law and trade usages arc the sources of the lex mercatoria. Therefore, this chapter uses the term lex mercatoria to refer to both the lex mercatoria and these sources.

This chapter has the aim of establishing how the legal authority of codified non-state rules is established when they are applied as lex mercatoria. This issue was already touched upon by the previous two chapters, which discussed that codified non-state rules are regularly applied as trade usages, as general principles of law, and as legal doctrine/scholarship. If they arc-applied as general principles of law or trade usages, then their legal authority comes from the status of general principles of law and trade usages as sources of domestic law. This chapter takes this discussion further and examines how codified non-state rules are applied as lex mercatoria, and how this increases the authority of these codified non-state rules because of their association with a recognised and established body of transnational commercial law.