Lex Mercatoria in International Arbitration
In the context of international commercial arbitration, Lex Mercatoria refers to a body of transnational commercial law that is not tied to any specific national legal system. The term, which is Latin for "merchant law," has its origins in the medieval period when merchants developed a system of customs and practices to govern their cross-border trade, which was then applied in their own specialized courts.
The "New Lex Mercatoria" has been resurrected in modern international arbitration as a way for parties to resolve disputes without having to choose a national law that might be unfamiliar or unfavorable to one of them. It is not a formal legal system with a legislature and courts, but rather a collection of principles, customs, and norms that have been developed and accepted by the international business community.
Key Characteristics and Sources of Lex Mercatoria
Lex Mercatoria is a dynamic and flexible body of law that is derived from various sources, including:
International Conventions and Model Laws: Instruments like the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the UNIDROIT Principles of International Commercial Contracts provide a harmonized set of rules.
General Principles of Law: Fundamental principles that are common to most legal systems, such as pacta sunt servanda (agreements must be kept), good faith, and the requirement to mitigate losses, are a core component.
Trade Usages and Customs: Established practices and traditions within specific industries or regions are considered authoritative.
Arbitral Awards: The decisions of international arbitrators, especially when published, contribute to the development and recognition of the principles of Lex Mercatoria.
Standard Form Contracts: Widely used and accepted standard contracts in international trade.
Role of Lex Mercatoria in International Arbitration
Lex Mercatoria plays a significant role in international arbitration for several reasons:
Party Autonomy: It allows parties to a contract to choose a neutral, a-national body of law to govern their dispute. This is particularly valuable when the parties are from different countries and are hesitant to subject their contract to the law of the other party's jurisdiction.
Flexibility and Adaptability: Unlike national legal systems, which can be rigid and slow to change, Lex Mercatoria is flexible and evolves with the needs of international commerce. This allows arbitrators to tailor their decisions to the unique circumstances of a case.
Commercial Realism: It is grounded in the actual practices and customs of international trade, making it a commercially realistic and practical alternative to national laws.
Efficiency: The focus on commercial practices and the avoidance of complex national procedural rules can lead to more efficient dispute resolution.
Application in Arbitration
Arbitral tribunals may apply Lex Mercatoria in several ways:
Explicit Choice by the Parties: The parties can explicitly state in their arbitration agreement that the dispute will be governed by Lex Mercatoria, "general principles of international commercial law," or similar terms.
Inferred Choice: An arbitral tribunal may infer the parties' intention to apply Lex Mercatoria based on the nature of their contract or their conduct.
Application by the Arbitrator: In some cases, and particularly if the parties have authorized the arbitrator to act as an amiable compositeur or to decide ex aequo et bono (based on what is just and fair), the arbitrator may apply principles of Lex Mercatoria to resolve the dispute.
Complementary Role: Even when a national law is chosen, an arbitrator may use Lex Mercatoria to fill gaps in the national law or to interpret its provisions in a commercially reasonable manner.
While the concept of Lex Mercatoria is widely accepted in international arbitration, its precise nature and legal status remain a subject of debate among scholars and practitioners. Nonetheless, its influence is undeniable, and it continues to provide a vital and flexible framework for resolving cross-border commercial disputes.
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