Richard j howarth I. Introduction



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LEX MERCATORIA: CAN GENERAL PRINCIPLES OF LAW GOVERN INTERNATIONAL COMMERCIAL CONTRACTS?

Richard J Howarth*

I. Introduction


Municipal laws are ill-adapted to the regulatory needs of international trade and, in particular, to those of international sales. These laws, by and large, are antiquated and their applicability to international transactions is determined by a choice of law process that varies from country to country. The growth of international trade, therefore, makes some kind of unification necessary, but leaves open the question of what form of unification should be attempted.1

Logging on to a Singapore website from New Zealand (NZ), it is feasible (and would be quite unexceptional) to procure goods manufactured in China, warehoused in Malaysia, distributed from Indonesia, shipped by a freight company headquartered in the USA, and delivered to an Australian destination. Payment is effected in advance, and the goods never arrive. In the absence of clear contract conditions defining dispute procedure, and assuming that our disgruntled New Zealander is actually able to secure a party to file a claim against, which system of law would be applied in the courts or an arbitration tribunal? Conflict of law rules may well identify a foreign jurisdiction, which is unlikely to be of comfort to our unfortunate punter:

Merchants have traditionally been reluctant to submit their disputes to the Courts of a country foreign to them. They feared a bias against them on the part of the local Judge, but they were also apprehensive about any dispute resolution procedure that involved the application of unfamiliar law.2

Conflict of law rules can be particularly complex, which is exacerbated by a wide variation of rules between countries, often leading to frustrated commercial parties on the international stage and assertions that such rules have 'failed to provide the simplicity desired by the business community'.3 Furthermore, a party may not even find its own domestic law to be appropriate as 'no matter how far domestic law is concerned with and influenced by international matters, it develops within its own environment'.4 So can international parties to a contract choose not to apply a national system of law but rather adopt general principles of law unique to their particular commercial environment and transactions? The LexMercatoria5 has been defined as 'an autonomous legal order, created spontaneously by parties involved in international economic relations and existing independently of national legal orders'6 for which the impetus of its emergence is 'the need to transcend idiosyncrasies and uncertainties of national legal systems [and] the desire to escape complicated conflict of laws rules that apply in international disputes'.7 But does the Lex Mercatoria really exist in practice? This paper endeavours to address that question by first considering traditional choice of law in contract doctrine, next tracing the historical evolution of Lex Mercatoria and leading then to contemporary arguments concerning its very being. Recognition of Lex Mercatoria in a variety of contexts is then examined, including international conventions, uniform laws and principles, and international arbitration. A view of the uneasy relationship between Lex Mercatoria and the courts is considered in both civil code and common law jurisdictions, with a closer look at the NZ context. The penultimate section considers contemporary applications where the Lex Mercatoria appears relevant, leading to a final reflection on whether unification of international commercial law is inevitable.



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