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Howarth, Richard J --- "Lex Mercatoria: can general principles of law govern international commercial contracts?" [2004] CanterLawRw 2; (2004) 10 Canterbury Law Review 36


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 LexMercatoria[5] 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.

II. Choice of Law in Contract

.. contracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect...[8]

Although contract general conditions can sometimes adopt a statutory character, it is generally accepted that contracts 'may create enforceable rights but do not create law'.[9] To identify the proper, or governing law of a contract it is necessary to 'identify a particular system of law as being that in accordance with which the parties to it intended [the] contract to be interpreted'.[10] However, the parties' intention may not always be clear or upheld, so in NZ, choice of law in contract doctrine has traditionally been grounded upon the three-tiered test put forward by Dicey and Morris in the 10th edition:

The term proper law of a contract means the system of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection.[11]

Express Choice

The first tier applies the parties' express choice. Lord Wright in the Privy Council case Vita Foods held that party autonomy in choice of law is paramount 'provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy'.[12] Choice of law may not be 'bona fide' when chosen simply to avoid an otherwise applicable law,[13] and in Regazzoni[14] the House of Lords held it was contrary to public policy to enforce an English law contract pertaining to jute export from India to South Africa when such trade was prohibited by India. In that case, Viscount Simonds concluded that '[j]ust as public policy avoids contracts which offend against our own law, so it will avoid at least some contracts which violate the laws of a foreign State, and it will do so because public policy demands that deference to international comity'.[15] Other grounds where express choice has not been upheld include a 'meaningless' choice of law,[16] and where the choice breaches mandatory laws of the forum. In applying this last exception, the High Court of Australia (HCA) in Akai struck down the parties' express choice of English law in favour of New South Wales law.[17] The decision has been subject to strong criticism: Nygh maintains that the judgment exemplifies an 'invidious feature of the classical [choice of law system allowing] judges to practise the "homewards trend" and surprise the hapless defendant with the application of the law of the forum even in the face of a choice of a foreign national law'.[18]

So could an express choice of the Lex Mercatoria be avoided because it is not a state system of law - or alternatively on the grounds of public policy? The Amin Rasheed decision[19] is typically cited as authority for excluding application of an a-national system of law under English conflict rules[20] but, as observed by De Ly, the decision 'requires application of a legal system without mentioning explicitly that the applicable legal system should be a national one'.[21] This question is studied in further detail below,[22] but suffice to say for now that the answer is by no means decisive.

Inferred Choice and Law of Closest Connection

If an express choice of law is not clear, an inferred choice may be drawn from 'the language and form of the contract';[23] or alternatively in the words of Lord Diplock: '[from] a common intention as to the system of law by reference to which their mutual rights and obligations under it are to be ascertained.'[24]

The approach has been criticised as an 'intention imposed by the court on parties who never gave the subject any thought'.[25] Furthermore, it has been argued that 'the language and form of the contract' is just one factor of the Bonython test, being 'the system of law ... with which the transaction has its closest and most real connection'.[26] Lord Wilberforce applied this test in the insurance case Amin Rasheed,[27] and after considering a range of connecting factors such as party nationalities (neither were English), the place of policy issuance and payments (Kuwait), currency adopted (sterling), and adoption of a Lloyd's 'standard' marine insurance contract which included several references to English law; concluded 'with no great confidence ... that English law is the proper law of the contract'.[28] Other connecting factors could include the place where negotiations were conducted and the country in whose language the contract is drawn up,[29] but it is plain that 'flexibility [of the doctrine] has been bought at the expense of extreme uncertainty and unpredictability'.[30] Furthermore, imprecision of the rule is compounded by the reality that some contracts just do not have any particular connection with a system of law:

...there are sometimes cases where it is quite indecisive. The circumstances do not point to one country only. They point equally to two countries or even to three. What then is a legal adviser to do? What is an arbitrator or a judge to do? Is he to toss up a coin and see which way it comes down?[31]

The Rome Convention on the Law Applicable to Contractual Obligations endeavours to narrow the field by presuming the law of closest connection to be the law of the place of characteristic performance.[32] However, this supposes that such a place is unambiguously definable,[33] so a fatal flaw remains -

as contracts become more international, traditional choice of law doctrine becomes less helpful. Accordingly could selection of the Lex Mercatoria in preference to a recognised state law circumvent problems of doctrine 'uncertainties, escape hatches and hidden discretions',[34] and thus 'avoid the surprises that lurk in the national laws whose application is often impossible to foresee at the time the parties structure an international transaction'?[35]

III. Lex Mercatoria:WhaT is it Really?

... the new law merchant which is emerging before our eyes is an entirely new phenomenon. When trying to understand it we must forget the Victorian predilection of orderliness but take it as what it was in the Middle Ages and what it will be again: unsystematic, complex and multiform, but of bewildering vigour, realism and originality.[36]

An Historical Evolution

Evolution of the Lex Mercatoria has arguably proceeded through four distinct phases to the present day: ancient maritime customs, Middle Age merchant guilds, nationalisation, and now the new law merchant. In recognising the intrinsic importance of the sea to international trade, the Greeks and Romans adopted the ' Sea Laws of Rhodes' as early as 300 BC. Diverse maritime laws then prevailed according to dominant naval authorities of the time,[37] through to the 14th century Consolato del Mare, being 'acollection of maritime customs laid down in the Consular Court of Barcelona [for acceptance] in commercial centres in the Mediterranean'.[38] However, it is the body of laws governing overland trade in the Middle Ages that is the true antecedent of the present doctrine. Merchants travelling to various markets, fairs and seaports developed their own laws and legal systems through guilds that 'were confirmed and given legal definition by the [local] mercantile courts'.[39] Underpinned by concepts of good faith, the law merchant was characterised by its uniformity: throughout Medieval Europe 'the leading principles and the most important rules were the same, or tended to become the same'.[40] In profiting from the trade through increased tax revenues and access to foreign goods, rulers and governments of the day were initially content to support the merchants' activities without interfering in their regulatory and self-disciplinary affairs.[41] However, from around the 16th century, 'national governments began to regard the autonomous law merchant as a tempting target for nationalisation'.[42] Accordingly, the law merchant was increasingly incorporated into municipal law, so that by the 19th century jurists asserted that municipal law was the only law that could govern international transactions.[43] Instead of jurists taking law from the law merchant, international traders now had to 'take their law from the courts and legislators - thus completely halting the dynamic evolution of the law merchant'.[44] The downside of nationalisation was that international traders now succumbed to the procedural rules and substantive laws of local jurisdictions that filtered the original merchant law through 'its own unique historical, cultural, and political experiences'.[45] However, increasing internationalisation and recognition of common legal problems in twentieth century global trade led 'renowned lawyers in the 1960s to promote the recognition of an autonomous commercial law that supposedly had grown independent from national systems of law'.[46] Differing from the old Lex Mercatoria that was eventually incorporated into national laws, the new 'autonomous' brand has generated an enormous level of debate among academics, jurists and internationalists. Elements of this debate justify closer study to try and determine the elusive nature of the re-birthed Lex Mercatoria.

What it is not...

Before considering elements and application of the new Lex Mercatoria, several possible misconceptions concerning the doctrine are briefly dealt with here.

a) Amiable Composition

Certain arbitration laws grant arbitrators the power to act as an 'amiable compositeur' in deciding a case ex aequo et bono. This means that the tribunal may 'rely on notions of justice and fairness in resolving disputes'.[47] Accordingly, such an 'equity' clause allows a common sense view to be taken that is not bound by legal technicalities.[48] However, it is important to clarify that deciding a case ex aequo et bono - where legal rights may be set aside - is not application of Lex Mercatoria, where 'legal rights must be enforced even if the result is considered unjust'.[49] Nevertheless, to further muddy the waters, at least one commentator maintains that in certain circumstances an ex aequo et bono decision may however be a source of Lex Mercatoria![50]

b) Jus Cogens

Jus Cogens is a peremptory norm of obligatory behaviour under international public law from which there may be no derogation. It concerns such acts as armed aggression, slavery and deliberate disruption of international telecommunications.[51] Although there is an analogy to the 'autonomous legal order' of Lex Mercatoria, Jus Cogens applies at State level as 'international public policy'[52] and accordingly would intrinsically subsume the legal regulation of international commercial transactions.

c) Self-Regulatory Rules of International Organisations

Self-regulatory rules of professional organisations are not considered formal sources of Lex Mercatoria. As substantive rules created within confines of the legal system pertinent to a particular body, they apply only to members of such an organisation.[53] This principle has been upheld in a decision by the German Supreme Court, holding that IATA[54] rules were only binding between IATA members, and could not be construed as custom since IATA is a private organisation.[55]

Party Autonomy

Underlying any standing of the Lex Mercatoria is the right of parties to determine the law governing the substance of their contract. As introduced earlier, the parties' express choice of law will be upheld subject to certain exceptions,[56] and party autonomy as a principle of law sustaining 'certainty, predictability and uniformity'[57] is commonly recognised and accepted in almost all national jurisdictions:

[D]espite their differences, common law, civil law and socialist countries have all equally been affected by the movement towards the rule allowing parties to choose the law to govern their contractual relations. This development has come about independently in every country and without any concerted effort by the nations of the world; it is the result of separate, contemporaneous and pragmatic evolution within the various national systems of conflict of laws.[58]

However, it is in arbitration that the parties may indulge in the widest reading of party autonomy, and arguably the most sweeping common law endorsement of the doctrine in the context of arbitral proceedings emanates from the House of Lords. In the Channel Tunnel case,[59] the French and English parties to the Channel Tunnel construction consortium had been unable to agree on the substantive law to apply to dispute resolution. Accordingly, reference was made to disputes being settled in arbitration according to principles common to English and French law, and if there were no relevant common principles, by general principles of international law.[60] Lord Mustill held that the courts would not interfere with the parties' choice of law and 'this conspicuously neutral, 'a-national' and extra-judicial structure may well have been the right choice for the special needs of the Channel Tunnel venture. But whether it was right or wrong, it is the choice which the parties have made.'[61]

Additionally, party autonomy is intrinsic to 'virtually all international conventions dealing with arbitration and contract law'.[62] For example, the 1985 UNCITRAL Model Law on International Commercial Arbitration (the Model Law) provides that '[t]he arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute',[63] with the 1980 Rome Convention on the Law Applicable to International Contracts stating that a 'contract shall be governed by the law chosen by the parties'.[64] These and other conventions are considered further below in the context of recognition and application of the Lex Mercatoria.

The Search for a Definition

As wryly observed by Nygh, 'before one can discuss whether [the Lex Mercatoria] exists, one must define it'.[65] Faced with an enormous range of views and variations on the theme, the approach must be put in perspective as just a starting point before consideration of more substantive material. Manifestation of the challenge is highlighted by the following sample definitions from authoritative academics:[66]

Lex Mercatoria is, at the least, a set of general principles and customary rules spontaneously referred to or elaborated in the framework of international trade without reference to a particular system of national law.[67]
An international body of law, founded on commercial understandings and contract practices of an international community composed principally of mercantile, shipping, insurance and banking enterprises of all countries.[68]
The rules which have been developed to regulate and facilitate international trade relations and the customs and practices which have attained universal (or at least very extensive) recognition in international trade.[69]
A system of usages consolidated by the practice of international merchants governing commerce on a customary basis.[70]

Evidently, the problem is that there are as many definitions as there are advocates, and in most cases the definition on its own helps little in furthering understanding and analysis of the doctrine. Furthermore, the definitions tend to endorse allegations made by critics of the Lex Mercatoria that the concept remains nebulous, uncertain, and without real substance.[71] However, not all definitions evoke impenetrability and frustration: a somewhat more pragmatic approach comes from Lowenfeld:

Lex Mercatoria is not that of a self-contained system covering all aspects of international commercial law to the exclusion of national law, but rather as a source of law made up of custom practice, convention, precedent - and many national laws. Lex Mercatoria ... can furnish an alternative to a conflict of laws search which is often artificial and inconclusive, and a way out of applying rules that are inconsistent with the needs and usages of international commerce and which were adopted by individual states with internal, not international transactions in mind.[72]

Professor Lowenfeld's views are impliedly endorsed by Nygh, in that 'Lex Mercatoria does not exclude the application of national law [and nor does it] have to provide an answer by itself to every question'.[73] However, in continuing to pursue the elusive concept of the Lex Mercatoria, a review of the essential characteristics and particular sources of such a body of law is appropriate.

Characteristics of Lex Mercatoria

Few commentators have addressed the fundamental, if not critical question of essential characteristics required of Lex Mercatoria as a credible body of law.[74] Berger, without further comment, refers to the 'desirable characteristics' as 1) universal character, 2) flexibility and dynamic ability to grow, 3) informality and speed, and 4) reliance on commercial custom and practice.[75] That does not help greatly, and arguably suffers from the same malady of vagueness and ambiguity as certain definitions cited above. Nygh assists more in identifying the essential features as: a) the system must be autonomous; b) the system must provide rules 'sufficient to decide a dispute'; and c) it must be a system of law.[76] Although possibly circular in nature, these characteristics are credible in that such criteria must be obligatory attributes of any legal system. Nygh observes that autonomy does not mean that Lex Mercatoria must be fully self-contained 'in the sense that it excludes national and international legislation' and further remarks that '[o]ne of the [LexMercatoria] sources [flows] from the comparison of national laws and assent given to a [particular] proposition at the international level'.[77] On the question of rules 'sufficient to decide a dispute', debate prevails: although Lord Mustill holds that rule universality is essential to credibility,[78] Lowenfeld maintains that 'universality depends on the universe the parties are acting within and that universe may be quite different for traders from Islamic countries compared to West European or North American contractors'.[79] The bottom line on essential characteristics of the LexMercatoria seems that for universal credibility, it must be 'a system of law' with standards no less than that attributable to a state legal system with international standing and authority.

Sources of Lex Mercatoria

In seeking the professed sources of Lex Mercatoria, it is evident that 'its most ardent protagonists are not completely agreed .. [80] However, some common elements emerge[81] which are considered here.

a) General Principles of Law

These are the principles of law shared by most national legal systems:[82] they are generally accepted by the parties to an international commercial transaction as being 'part of the regulatory framework of their transaction'.[83] The principles typically enunciated include good faith,pacta suntservanda,[84] estoppel and termination for substantial breach.[85] However, without more, these principles remain abstract and may lack 'the requisite degree of substance and certainty to be useful as legal principles'.[86] Nevertheless, such principles have been adopted to assist in resolution of certain international commercial arbitrations.[87]

b) Customs and Usages[88]

Customs and usages may be found in international rules and standard form contracts. The International Chamber of Commerce (ICC) promotes certain international rules: a pertinent example is the ICC INCOTERMS 2000 codifying rules for interpretation of trade terms.[89] A contract provision that such terms (eg FOB, CIF, etc) are governed by INCOTERMS would be an express agreement that the specified usage is applicable to the contract, and due to their trade-usage quality, 'an international arbitrator may apply the INCOTERMS in order to construe the contract before him even if the parties have not expressly agreed on their application'.[90] As argued by Lord Mustill however, such usage is 'commonly applied by courts and tribunals and there is nothing peculiar about the Lex Mercatoria in this respect'.[91] On the question of standard form contracts, such documents are prolifically used in a wide variety of applications. Hence, a standard form contract could only be a source of Lex Mercatoria if it has been widely accepted in the particular trading community.[92]

c) Uniform Laws and Principles of International Trade

The adoption by states of conventions promoted by institutions such as the United Nations Commission on International Trade Law (UNCITRAL) symbolises a prevailing international consensus on the particular legal principles. An example is the widely embraced UNCITRAL Model Law. Although it is arguable that 'such conventions can only be regarded as [a source of] Lex Mercatoria where a majority of States are signatories to them',[93] this stance tends to neglect consideration of the underlying uniform law development process which invariably entails a comparative law analysis of the principle national legal systems.[94] Hence, there are strong grounds for application of the principles as Lex Mercatoria even where few States have ratified the particular uniform law.

In recognising that Uniform Laws and Principles of International Trade represent key sources of Lex Mercatoria, this topic is addressed in some detail below.[95]

d) Arbitral Awards

Article 28(1) of the UNCITRAL Model Law states 'the arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance to dispute'. It has been generally recognised in international legal doctrine and arbitral practice that the words "rules of law" indicate that arbitrators may apply transnational legal principles such as the Lex Mercatoria.[96] Accordingly, international arbitrations performed under the Model Law and adopting a-national 'rules of law' offer a potential source of Lex Mercatoria, and some principles applied by ICC tribunals without reference to national law include performance and renegotiation in good faith, pacta sunt sevanda, rules offorce majeure, mitigation of damages, estoppel, and unenforceability of contracts contrary to international morality.[97] Unfortunately, the full potential goes unrealised: publication of ICC arbitrations is a notable exception[98] as arbitral awards are usually unreported for reasons of confidentiality,[99] the rules extracted from the limited reports are typically too general,[100] and although available reports can offer guidance, there is no binding authority to follow earlier decisions and applied principles.[101] However, within these limitations, it is strongly arguable that international arbitration 'provides a significant avenue for the exploration and amplification of the principles of Lex Mercatoria'.[102] The role that international arbitration plays in development of the Lex Mercatoria is studied in further detail below, including a review of selected arbitral awards.[103]

Extremities of Views: Reality or Rhetoric?

As observed by Medwig, '[t]he re-emergence of the law merchant has bred confusion and consternation within the academic legal world'.[104] Opponents to Lex Mercatoria typically found objections upon traditional positivist law theory demanding firm adherence to State authority. Consequently, a legal system requiring an arbitrator to derive a solution as a 'social engineer'[105] is firmly excluded: '[t]he reluctance of some to admit the Lex Mercatoria into the charmed circle of autonomous bodies of law stems from a jurisprudence of positivism, which emphasises legislation as the heart of law and minimises the role of custom'.[106] Adhering to the positivist theme, critics argue that 'there is no comprehensive and accessible body of rules of the law merchant that can, as an autonomous system, govern modern-day commercial disputes [and] parties are better advised not to choose the Lex Mercatoria as their governing law, unless they are prepared to have their arbitrators play the role of innovators'.[107] However, not all criticism is so balanced and considered, as revealed by some of the zealous rhetoric of 'fear and loathing'[108] levelled at the doctrine:

What this so-called law is or should be is a complete mystery [and it] is hardly necessary to emphasise that no such body of law exists.[109]
The concept of the 'lex' consistently put forward by its protagonists is that of a kind of disembodied law [..] which should nevertheless be binding on national courts.[110]
[T]he Lex Mercatoria is probably a 'myth' [and it] is surely an enigma.[111]
A state-free contract presents the paradox of the contrat sans loi - un marteau sans maître - which is, for this observer at least, a logical impossibility and an intellectual solecism.[112]

and a personal 'favourite':

The LexMercatoria is a sort of shadowy, optional, aleatory, international congeries of rules and principles.[113]

It is strongly arguable that the positivist reaction is largely unjustified; or at least blinkered. In response to assertions that Lex Mercatoria is not a proper system of law, Nygh holds that proof must lie in judicial recognition, and in '[a]pplying this test one has to admit that there is a growing recognition of the Lex Mercatoria, even if it has not yet reached the point of a positive conclusion'.[114] Furthermore, to the allegation that it is 'too vague and uncertain',[115] he identifies 'the growing body of international trade law'.[116] Additionally, Nygh claims that independence from the restraint of domestic legal systems can be advantageous as arbitrators applying LexMercatoria 'may take advantage of their freedom to select the better rule of law which [national] courts sometimes miss'.[117] However, in endeavouring to match the fervour of certain critics, Medwig bluntly asserts that the 'obvious and decisive answer to the positivist critique ... is that the law merchant exists despite what positivist theory holds',[118] and in passionately defending the doctrine, assails the positivists at a personal level:

The proponents of national systems of commercial laws are jealous of their shrinking jurisdictions and are reluctant to lose any more business to a-national systems. Countless judges, practitioners, and law school faculty have built careers on spurious notions of jurisprudence and doctrines which in application only create obstacles to trade. Neither the future development of private international law nor the continued growth of international trade should be held hostage to the narrow, pecuniary and ideological interests of domestic lawyers and bureaucrats.[119]

Irrespective of the relative merits of protagonist and positivist arguments, evidently the subject stirs up strong beliefs and extremes of passion that may not always respond to rational contemplation and argument.

Berger's 'Creeping Codification'

One of the prevailing criticisms of the Lex Mercatoria has been the difficulty of access and reference to authoritative legal principles and standards. The abstract nature of the Lex Mercatoria is a valid matter, and although certain international conventions and principles may go some distance towards addressing concern in selected application areas, such references 'have not succeeded in bringing the diverse sources of the Lex Mercatoria within the purview of one overarching set of laws to constitute an autonomous legal system'.[120] The same conclusion is applicable to isolated journal articles and certain arbitration decisions where specific principles may be developed and discussed:[121] '[t]he occasional law review article is no substitute for a code or, in common law jurisdictions, line of judicial opinions'.[122] At the same time, to be credible as anew and evolving system of law, any such scheme would need to avoid the inflexibility of formal legislation and precedents; allowing dynamic reviews, updates and additions of applied principles.

By the late 1990s these assertions were being addressed through a legal research programme at the University of Munster (Germany) seeking to create an open-end list of relevant rules, principles and standards of transnational commercial law. Led by Klaus Berger, a renowned protagonist of international commercial law unification and founding member of the 'Centre for Transnational Law' (CENTRAL),[123] the concept of 'creeping codification' of the Lex Mercatoria was born.[124] Today the programme is managed and published through the CENTRAL Transnational Law Database (TLDB),[125] where over seventy legal principles are established which are intended 'to provide international legal practice with the necessary working tool to ensure the application of the Lex Mercatoria in everyday arbitration and drafting practice without necessarily introducing the static element that is usually connected with any attempt to codify the law'.[126] Codification of the Lex Mercatoria through the TLDB is 'constantly updated but never completed':

[F]or each principle and rule, the TLDB provides the user with the black letter text and comprehensive references taken from international arbitral awards, domestic statutes, international conventions, standard contract forms, trade practices and usages, other sample clauses and academic sources.[127]

The wide-ranging referencing of source material assists with credibility and global acceptance of the published rules and principles. Accordingly, one of the major criticisms of the Lex Mercatoria has been answered: conceivably no longer does this 'allegedly unstructured and heterogeneous legal mass pose considerable problems for every-day legal practice because its contents are so hard to determine'.[128]

IV. Some Selected Uniform Laws and Principles of International Trade

In a shrinking world still obsessed with notions of state sovereignty and a proliferation of national laws passed in exercise thereof, international conventions represent the most forceful manifestations of solutions that transcend national borders in their applicability.[129]

The debate concerning applicability of uniform laws and principles to Lex Mercatoria has been raised earlier.[130] Lord Mustill has asserted that 'the fostering of the Lex Mercatoria has nothing to do with the harmonisation of the international trade law [as] the aim of the latter is to minimise the differences between the laws of individual nations [whereas] the debate on the Lex Mercatoria is about whether it can and does exist as a viable system'.[131] Stoecker further alleges that once uniform laws 'are incorporated into national laws then it is no longer necessary to resort to the Lex Mercatoria to find a suitable solution'.[132] Even certain protagonists adopt a purist stance: Goldman maintains that when the Lex Mercatoria penetrates national law through legislation, 'it loses its specific nature, because the mechanism changes it from a formal source of law, distinct from national law, into a mere substantive source of national law'.[133] However, with all due respect, the common thread here appears to smack of an irrational proposition that once a principle or law has been taken up by one legal system, it becomes exclusive and no longer 'available' to others. The protagonist Schmithoff has 'particularly emphasised the central role of international conventions for international business law as they express a more transnational approach',[134] and in support cites recognition of the Lex Mercatoria in the UNCITRAL Model Law.[135] Furthermore, the drafters of the UNIDROIT Principles of International Commercial Contracts ('The Principles') maintain that uniform law does not lose its originality by incorporation into a state legal system:

...uniform law, even after its incorporation into the various national systems, only formally becomes integrated into the latter, whereas from a substantive point of view it does not lose its original character of a special body of law autonomously developed at international level and intended to be applied in a uniform manner throughout the world.[136]

The concept of uniform law retaining original form and intent becomes vital when considering that adoption into national law may be subject to reservations, and then construed differently from the intent of the original drafters. Accordingly, it is argued that only the Lex Mercatoria can maintain the original autonomy and intent of a uniform law, which in any event 'should not be drafted in the idiom of any one legal system or family of legal systems'.[137] As concluded by Gopalan, 'a divorce of Lex Mercatoria from transnational commercial law is erroneous. The former is the quarry for the latter, and the latter often subsumes the former'.[138]

A review of some selected uniform laws and principles in the context of their relevance to the Lex Mercatoria follows.[139]

1958 New York Convention

The stated objectives of the United Nations sponsored[140] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) were to 'unify the laws regarding the enforcement of awards and to enhance the procedure for enforcement'.[141] Although drafted in 1958, ratification did not proceed in earnest until the 1970s. Now ratified by 134 countries,[142] the New York Convention 'has done more than any other development to promote and establish the international effectiveness and character of arbitration'.[143] Applying to awards made in a foreign Contracting State, 'a Contracting State must recognise and enforce such awards unless there is ground for refusal as provided in Article V of the Convention'.[144] Such grounds may include an award not being binding upon the parties, or which has been set aside by a competent authority of the country in which or under the law of which it is made. However the 'mere fact that the arbitrator has relied on the Lex Mercatoria to decide the substance of the dispute is not one of the reasons for refusal listed in the article'.[145] Accordingly, the New York Convention was relied upon in the English Court of Appeal (CA) when enforcing a Swiss arbitral award, where under ICC Arbitration Rules[146] the 'arbitrators determined that the proper law governing the substantive obligations of the parties was "internationally accepted principles of law governing contractual relations".'[147]

1965 Washington Convention (ICSID)

Mandated by the World Bank and created by an international treaty (the Washington Convention),[148] the International Centre for the Settlement of Investment Disputes (ICSID) provides facilities and performs supervisory functions enabling conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States 'effectively establish[ing] a supra-national method of dispute resolution'.[149] Procedurally, an ICSID arbitration is denationalised, being governed by international law (ie the Washington Convention itself and its rules) rather than any national system of law.[150] The applicable substantive law of the dispute is also dealt with by the Convention:

The Tribunal shall decide in accordance with such rules of law as may be agreed by the parties. In the absence of such agreements, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules of the conflict of laws) and such rules of international law as may be applicable.[151]

Although Lord Mustill has expressed doubts on the question,[152] by citing intentions of convention drafters Nygh maintains it is generally considered 'that the reference to "rules of law" instead of simply "law" indicates that an a-national system of law may be chosen'.[153] Furthermore, in the absence of party agreement where the tribunal applies State party domestic laws in conjunction with relevant rules of international law,' [i]t seems to be generally agreed that the rules of international law refer not only to the rules of public international law but also [to the] law merchant'.[154] However, once again, opinion is divided with Delaume asserting that 'the rules relevant to the process of determination are those found in the traditional systems of law to the exclusion of the Lex Mercatoria'.[155] In any event, it seems that tribunal discretion on this point may only be exercised where 'the laws of the host State [do] not conform with international law standards'.[156]

1980 Vienna Convention (CISG)

The UNCITRAL sponsored Vienna Convention on International Sale of Goods (CISG) was intended to replace its unsuccessful predecessor (the 1964 Hague Sales Convention) as 'the centrepiece of international harmonisation of trade law'.[157] Seeking to provide 'a single set of rules for international sale transactions in order to provide a degree of certainty'[158] not previously existing, the UNICITRAL drafters endeavoured to 'reconcile divergent common law and civil law concepts and to mediate differences within each of these major camps'.[159] Transactions governed by the CISG are determined by Article 1(1):

This Convention applies to contracts for the sale of goods between parties whose places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of international law lead to the application of the law of a Contracting State.

The upshot of Article 1(1 )(b) upon an international sales contract, where one party is based in a ratifying State and the law of such State is the proper law of the contract, is that the CISG will be the substantive law of the contract. The resulting effect is that, unless expressly excluded, the CISG governs any international sales contract entered into by a New Zealand company where New Zealand law is the governing law.[160] As observed by Webb, 'this could be at odds with the actual intent of the parties'.[161] The difficulty presented by a universal law aimed at satisfying the often conflicting requirements of global legal systems is that compromises are inevitable and sometimes cannot realistically be codified. Accordingly certain Articles raise the possibility of resort to national law; as exemplified by Article 7(2):

Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

Honnold observes that 'Article 7(2) presents a delicate balance between a) developing the Convention's general principles and b) recourse to domestic law, [where] civil law practice is generally hospitable to the first alternative and common law to the second'.[162] Clearly, such a choice would be influenced by the 'traditions and mindset of the tribunal',[163] but Honnold maintains further that 'a generous response to the invitation of Article 7(2) to develop the Convention through the "general principles on which it is based" is necessary to achieve the mandate of Article 7(1) to interpret the Convention with regard to "the need to promote uniformity in its application".'[164] Honnold's anxiety in relation to resorting too readily to national law is echoed by Berger in proclaiming that the principle embodied in the first part of Article 7(2) 'is of paramount importance for the evolution of the LexMercatoria as an 'open' legal system'.[165] However it is evident that the open textured nature of the CISG more closely resembles the civilian approach to drafting.[166] This means that common law adherents are likely to be less comfortable with such concepts as 'the general principles upon which it is based' than their civil code brethren who are inured to gap-filling problem solving 'by reasoning from such provisions by analogy'.[167] This may go some way to explaining why adoption of the CISG heavily favours Western European civil code jurisdictions as evidenced by reported cases.[168]

Notwithstanding the apparent reticence on the part of common law jurisdictions to embrace the CISG, the a-national Convention is nevertheless widely adopted,[169] is typically referred to by arbitration tribunals as a source of 'generally accepted principles of international trade' even where not adopted by concerned parties,[170] and accordingly represents a 'major building block in the construction of an international Lex Mercatoria'.[171]

1980 Rome Convention

The 1980 Rome Convention on the Law Applicable to Contractual Obligations (the Rome Convention) was promoted by the European Community (EC) 'to establish uniform rules concerning the law applicable to contractual obligations'[172] within Member States. Certain commentators have broached the ambiguity of Article 3(1) in referring to 'the law chosen by the parties'[173] without specifying that it be the law of a particular country; thus leaving it open to argue 'that the parties may choose to apply non-national law'.[174] Implied support for such an a-national view may arguably be derived from Article 18 of the Convention:

In the interpretation and application of the preceding uniform rules, regard shall be had to their international character and to the desirability of achieving uniformity in their interpretation and application.

However, balanced against that is evidence of contrary material elsewhere in the Convention: absent a choice of law by the parties, Article 4(1) requires application of the 'law of the country with which [the contract] is most closely connected',[175] and virtually all other contextual references elucidate 'that the law applicable in the respective cases must necessarily be the law of a particular State'.[176] Lagarde endorses this view in maintaining that 'any attempt to apply a-national law under Article 3(1) would be regarded as a failure to express a choice with the result that the objective test of Article 4 applied'.[177] Although this position is accepted as correct by Dicey and Morris,[178] the Rome Convention has been criticised for this 'strange positivistic feature [which is] at odds with current commercial and judicial practice [and] has become an anachronism',[179] with Berger asserting that the Convention 'should be revised so as to allow for the parties' choice of a-national legal rules'.[180]

1985 UNCITRAL Model Law

The UNICITRAL Model Law was promulgated by the United Nations General Assembly 'to provide a standardised and universal set of rules suitable for use in any tribunal seeking to resolve any dispute irrespective of the national origins or status of the participants'.[181] Where parties adopt the standard, the Model Law is the delocalised law of the arbitration,[182] and as identified earlier,[183] the authority of parties to choose 'rules of law' to decide the substance of the dispute as permitted by Article 28(1) is generally accepted as sanctioning application of the Lex Mercatoria. However, if the parties have not made a choice of substantive law, Article 28(2) applies:

Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.

The obvious inference to draw from use of the word 'law' as opposed to the phrase 'rules of law' in Article 28(2) is that the law of a particular State must be applied.[184] But is the situation any different in practice? It is evident that most jurisdictions are reluctant to review an arbitral award on a question of law,[185] and if arbitration rules are accepted by the courts 'as not being contrary to mandatory provisions, then the courts have to accept the choice of the Lex Mercatoria governing the substantive issues of the dispute'.[186] Judicial authority for this view comes from the English CA Deutsche Schachtbau case cited earlier,[187] where in following a similarly worded provision of the ICC Arbitration Rules then in force[188] the arbitrators had applied an a-national proper law:

I can see no basis for concluding that the arbitrator's choice of proper law - a common denominator of principles underlying the laws of the various nations governing contractual relations - is outwith the scope of the choice which the parties left to the arbitrators.[189]

Perhaps the last word should go to the UNCITRAL-Secretariat, who agree 'that the parties can widen the scope of the arbitral tribunals' determination of the applicable law and that the term "law" should be interpreted in a broad sense, taking into account recent developments in international economic arbitration'.[190]

1994 UNIDROIT Principles

Article 1 of the UNIDROIT Charter identifies its principle purpose as being to 'examine ways of harmonising and co-ordinating the private laws of states and groups of states and to propose gradually for the adoption by various states of uniform rules of private law'. In developing the Principles of International Commercial Contracts (the Principles) as a 'system of rules especially tailored to the needs of international commercial transactions',[191] UNIDROIT took advantage of an extended drafting period[192] by 'independent scholars of international repute [to produce non-normative rules posing] no threat to national law [but] available as a resource to courts, arbitral tribunals and legislators'.[193] Accordingly, as an exercise in comparative law, the Principles can be described as an international commercial and non-binding 'balanced set of rules designed for use throughout the world irrespective of the legal traditions and the economic and political conditions of the countries in which they are to be applied'.[194]

The Preamble to the Principles states that' [t]hey may be applied when the parties have agreed that their contract be governed by [the] "Lex Mercatoria "...'. In the official Comments to the Principles, it is maintained that having 'recourse to [such] a systematic and well-defined set of rules'[195] helps to avoid uncertainty accompanying the use of such vague concepts as 'principles and rules of a supranational or transnational character'.[196] This would provide direct assistance to those wishing to 'interpret and supplement international instruments by reference to autonomous and internationally uniform principles'.[197] A relevant example is assistance with development of 'the general principles' in a functionary gap-filling role of the CISG, as discussed earlier. [198] A case in point arose in an Austrian arbitration award:[199] Article 78 of the CISG states that a party is entitled to interest on an award sum in arrears, but fails to specify the interest rate. By making reference to the UNIDROIT Principles,[200] the arbitrator fixed the applicable rate in accordance with internationally acceptable criteria. The Comments also advise that parties wishing to adopt the Principles should combine such reference in their contract with an arbitration agreement, as arbitrators 'are not necessarily bound by a particular domestic law'[201] with the result that the Principles would apply as the "rule of law" subject only to 'application of those rules of domestic law which are mandatory irrespective of which law governs the contract'.[202] Furthermore, it is not intended that the Principles are incorporated into domestic law as a convention or model law, so are not subject to debate concerning loss of identity as a source of Lex Mercatoria,[203] and as an autonomous self-contained and comprehensive set of rules impart a significant input to the development of a-national trade law:

...in international contracts, at least those where the parties do not designate the governing law, it may be fundamentally unfair to subject a contract to the laws of a particular State ... Perhaps [a new way] lies in the development of the LexMercatoria and in the preparation of comparative or transnational studies such as the excellent UNIDROIT Principles.[204]

1994 Mexican Convention

The 1994 Inter-American Convention on the Law Applicable to International Contracts (the Mexican Convention)[205] takes on board certain criticism of the Rome Convention.[206] The language of the Rome Convention is repeated in Article 7 in referring to the 'law chosen by the parties', and in dealing with absence of choice, Article 9(1) similarly refers to the 'law of the State with which it has the closest ties'. However, in determining the State with closest ties, the Article continues with providing that the 'court shall take into account the general principles of international commercial law recognised by international organisations.' More significantly, Article 10 provides:

In addition to the provisions in the foregoing articles, the guidelines, customs and principles of international commercial law as well as commercial usage and practices generally accepted shall apply in order to discharge the requirements of justice and equity in the particular case.

Nygh comments that the proviso in Article 9(1) is 'puzzling [as to] how the Lex Mercatoria ... can assist in finding the law of a State with closest ties'[207] although Berger surmises that' [t]he rule results from the general intention of the drafters to give parties before domestic courts the same liberty and freedom in the determination of the law applicable to their contract as they would enjoy before international arbitral tribunals'.[208] However, 'Article 10 clearly authorises the court to apply the Lex Mercatoria, even if the parties have not chosen it.. [209] Evidently, the inventive approach of the Mexico Convention is intended to build upon the innovations of the UNIDROIT Principles towards contemporary dispute resolution in international commercial transactions. It probably does not go as far as the Lex Mercatoria protagonists would like, but although '[a] certain degree of ambiguity remains',[210] the Convention nevertheless seeks to find an appropriate jurisdictional compromise palatable to national courts.[211]

1998 ICC Arbitration Rules

The ICC International Court of Arbitration is not governmental, but a creation of the International Chamber of Commerce.[212] The ICC Rules of Conciliation and Arbitration (the Rules) 'provide a code that is intended to be self-sufficient in the sense that it is capable of covering all aspects of arbitrations conducted under the rules, without the need for any recourse to any municipal system of law or any application to the courts of the forum'.[213] Hence in the same manner as for the UNCITRAL Model Law, in an arbitration governed by the Rules 'one can talk of arbitration which is "transnational" or "a-national"';[214] and as discussed earlier in the context of the Deutsche Schactbau case,[215] the a-national character may extend to the substantive law of the contract.[216] However, any doubt that may have lingered concerning legitimacy of choice by the arbitral tribunal of the Lex Mercatoria as the substantive law has been extinguished with the revised version of the Rules given effect on 1 January 1998. Article 17(1) provides that 'the parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate'.

Accordingly, by significantly amending the previous version of the Rules[217] to now permit arbitral application of the 'rules of law' deemed appropriate, the ICC has ensured that 'an arbitrator does not have to select choice of law rules but can proceed to a direct selection of the governing law'.[218]

2001 Cape Town Convention

The most recent Convention concerned with unification of commercial law is the 2001 Cape Town Convention on International Interests in Mobile Equipment (the Cape Town Convention). Co-sponsored by UNIDROIT and the International Aviation Organisation, the Convention is aimed at 'providing security interests in objects that move daily from one country to another..[219] Property rights are the 'most particular to a legal system. ... [The] common law recognises forms of security interest that do not fit within the traditional common law categories, while the [civil code] approach restricts the parties to a prescribed number of in rem interests, often resulting in a refusal to recognise mortgages on movables'.[220] As observed by Davies:

The asset cannot fully support the financing if the financier's rights to the asset cannot be enforced in the jurisdiction where it happens to be at the time of default, if the rights of other creditors have priority in that jurisdiction, if repossession is held up by a bankruptcy moratorium or if significant delays in enforcement are a probability. Given the mobility of the asset this is something of a lottery.[221]

Drawing on established chattel security systems such as the American Uniform Commercial Code (UCC)[222] and the Canadian Personal Property Security Act (PPSA),[223] the approach adopted is unusual in that a 'base' Convention is supplemented by an industry specific Protocol.[224] In applying to a certain class of mobile equipment, the Cape Town Convention and particular Protocol together lay down 'a transparent priority principle, ... a prompt enforcement principle [and] a bankruptcy enforcement principle'[225] representing 'a new Lex Mercatoria for international secured transactions'.[226] Achievement of twenty-six signatories to the Cape Town Convention and Aircraft Protocol within eighteen months of adoption verifies the success of the approach.[227]

V. Arbitral Recognition of Lex Mercatoria

Advocates within the business community believe that arbitration is preferable over litigation because arbitration is thought to be informal, faster, less costly, equitable, a way to avoid unfavourable publicity, relatively conciliatory, absorbs less management time, and is a way to get those dreaded lawyers ... out of the picture. Most importantly, arbitration is seen as providing the best chance to save the underlying business relationship.[228]

Why Arbitration?

Arbitration is a system of Alternative Dispute Resolution (ADR) by private tribunal constituted by agreement between the parties, and is viewed as being more efficient than litigation. As well as common factors applicable to all arbitrations,[229] additional factors support choice of arbitration for resolution of an international commercial dispute:[230] forum selection agreement avoids problems of jurisdiction; arbitral awards are relatively easy to enforce through the New York Convention;[231] if one party is a government (or government body) the potential problem of sovereign immunity is avoided; and arbitrators with relevant expertise can be chosen.[232] A further factor applicable to all arbitrations is peer pressure sanction through rules of professional institutions and bodies to help make sure parties comply with award terms.[233]

The Stateless Award

Where parties to an international arbitration adopt the UNCITRAL Model Law in a state where the Convention has been incorporated into national legislation, the law governing the arbitration procedure is domestic.[234] However, if an arbitral tribunal embraces rules that are not intended for incorporation into domestic legislation such as the ICC Arbitration Rules,[235] the governing law is delocalised and the resulting award is arguably 'stateless'. This raises the vexed question of enforceability in national courts, and as stated by De Ly, 'it should be clear that the parties themselves cannot denationalise arbitrations if no support for such construction can be found in the applicable law'.[236] This view is consistent with the Model Law itself where parties may agree on the procedure to be followed, subject to provisions of law of the arbitral seat.[237]

Lando maintains that arbitrations brought under ICC Arbitration Rules have no real allegiance to any country, so 'stateless awards exist and should be recognised as such'.[238] However he also acknowledges that mandatory rules of the forum country cannot be disregarded,[239] and special attention must be paid 'to the public policy of the country where enforcement of the awards is likely to be requested'.[240] Conversely, Goode raises several vigorous arguments against the propriety of the stateless award; including avoidance of multiple jeopardy, comity, and the point that provisions of the widely adopted New York Convention provide sufficient protection to arbitral parties' against the hostility of local courts in a number of jurisdictions to the concept of and awards'.[241] Award denationalisation is however recognised in France,[242] as well as Belgium, Switzerland and Sweden provided that no local interests are involved.[243] Contrastingly, English jurisprudence 'does not recognise the concept of arbitral procedures floating in the transnational firmament unconnected with any municipal system of law';[244] but in drawing support from the New York Convention, the USA appears to uphold the denationalised award. In a claim by Iran for award enforcement against an American company arising from the Iran - US Claims Tribunal, the US Court of Appeals for the Ninth Circuit found that 'although it is a close question, the fairest reading of the [New York] Convention itself appears to be that it applies to the enforcement of non-national awards'.[245]

Evidently, as with the Lex Mercatoria debate itself, arguments concerning award denationalisation are not going to be resolved anytime soon. However, irrespective of the approach regarding governing law, to avoid potential problems with award enforcement, the arbitration process must conform to minimum international standards[246] and respect the mandatory rules and public policy of the arbitral seat.

Lex Mercatoria as the Substantive Law of the Dispute

Although doubts continue to be raised concerning the stateless award, there is now little uncertainty regarding validity of Lex Mercatoria as the substantive law in international commercial arbitration. In fact, it is in arbitration 'that the Lex Mercatoria has achieved its greatest significance'.[247] Furthermore, it is arguable that international arbitration is the natural partner of the Lex Mercatoria: as well as uniform arbitration rules that unambiguously sanction selection of the "rule of law";[248] the arbitral tribunal has much more freedom of process than the courts, the grounds of judicial review are typically restricted, and under the New York Convention enforcement is available in all contracting states.[249] In addition, the CISG is now well established as a referable source of international sales doctrine for arbitral tribunals,[250] whilst the UNIDROIT Principles have become 'closely associated with international commercial arbitration and they have been applied or referred to in a growing number of awards'.[251] In summary, there is a persuasive line of reasoning that application of the LexMercatoria as the substantive law in international commercial arbitration can 'simply better effectuate the parties' intent than does a national court applying national law'.[252]

Arbitral Awards applying the Lex Mercatoria

Inherent problems of relying on arbitral awards as a source of Lex Mercatoria have been raised earlier,[253] and the lack of binding authority is arguably the most crucial limitation: '[t]o be applied consistently, concepts such as good faith performance of contracts and abuse of right require the flesh of precedent on their doctrinal bones'.[254] Nevertheless, arbitral awards remain a valuable resource in building up the merchant law, and in any event, such awards 'may have persuasive force of precedent based upon their merits'.[255] A brief review of selected arbitral awards follows in the context of their contribution to the Lex Mercatoria .[256]

a) General Principles of International Law

Qatar:[257] According to the parties' contract, disputes were to be settled in a manner 'consistent with the legal principles familiar to civilised nations'. The award was based on application of pacta sunt servanda as a general principle of law.

ICC Award No. 3327:[258] Involving a French company and an African state, the state refused to pay on grounds that it had never validly consented. The tribunal reasoned that 'by virtue of general principles of law that are part of Lex Mercatoria, the contract contained in the agreed form the substantial element of its validity, namely the consent of the defendant, and this in an explicit manner'.

ICC Award No. 3540:[259] In resolving a dispute between a French company and a Yugoslav subcontractor, the arbitrators referred expressly to theLex Mercatoria in finding the principle of set-off between a due debt and a related debt not yet due.

ICC Award No. 8365:[260] The tribunal, in applying the LexMercatoria, listed eight principles and rules that in its view form part of the merchant law.[261]

b) Common Principles of National and International Law

Aminoil:[262] The following clause was in the 1973 agreement between the parties: '[t]aking into account of the different nationalities between the parties, the agreements between them shall be given effect, and must be interpreted and applied, in conformity with the principles common to the laws of Kuwait and of the State of New York, USA, and in the absence of such common principles, then in conformity with the principles of law normally recognised by civilised states in general, including those which have been applied by international tribunals'. Accordingly, established Kuwaiti practice, the fact that Kuwait had publicly proclaimed public international law a part of Kuwaiti law, and the wording of the arbitration clause all served to persuade the arbitrators to apply the Lex Mercatoria. Topco:[263] The choice of law clause identified Libyan law to the extent such principles are common to those of international law, and absent such conformity, general principles of law. In the case, the Libyan principle confirming the binding force of contracts was found to conform to the international law principle of pacta sunt servanda.

c) Customs and Usages

ICC Award No. 3130:[264] An arbitrator interpreted a C & F sales agreement by applying the ICC INCOTERMS[265] provision. Even though the parties had not expressly incorporated such codification, they must have 'signed the (disputed) contract with full understanding of the characteristics of an international C & F sales agreement'.

d) Application of UNIDROIT Principles

Ad Hoc Award:[266] The parties chose New Zealand domestic law to govern the contract, but the tribunal had to determine the legal significance of the parties' behaviour post-contract concerning contract interpretation. As New Zealand law was in a 'somewhat unsettled state', the tribunal ruled that it would refer to the Principles for assistance in observing that 'there would be no more definitive contemporary statement governing the interpretation of the contractual terms'.

Russian Award:[267] In a contract providing for application of both German and Russian law and of the 'general principles of the Lex Mercatoria', the tribunal applied the Principles.

Lausanne Award:[268] In a satellite provisioning contract involving six legal systems over three continents, conflicting provisions concerning applicable law (English or Swiss) resulted in parties' agreement to have the Principles applied by the tribunal.

Stockholm Award:[269] No applicable law defined in a contract between European and Chinese companies was interpreted by the tribunal as excluding application of any domestic law. Hence, the Principles applied as 'rules of law' were considered the most appropriate.

ICC Award No. 7110:[270] A series of contracts between an English supplier and a Middle Eastern government agency were silent on applicable law; referring only to ICC arbitration 'according to natural justice'. In concluding that the parties intended application of general legal rules and principles, the tribunal applied the Principles as embodying such rules and principles, as well as being endorsed by a wide international consensus.

Arthur Andersen:[271] In a high-profile dispute concerning break-up of the global businesses of Andersen Consulting and Arthur Andersen spanning some 75 countries, the arbitral tribunal applied the Principles as a 'reliable source of international commercial law in international arbitration'.

From this brief appraisal, it is evident that the Principles are playing an increasing role in international arbitration with certain believing that they 'constitute a cornerstone in the Lex Mercatoria debate and may become the heart of the new Lex Mercatoria'.[272] However, as acknowledged by Sinclair, UNIDROIT does not claim to be 'the legislative source of the Lex Mercatoria and the Principles do not claim to codify it'.[273]

VI. Lex Mercatoria and the Courts

It is open in all cases for parties to make such agreement as they please as to incorporating the provisions of any foreign law with their contracts.[274]

How far is a national court likely to go towards recognising the Lex Mercatoria as a legitimate 'foreign law'? Although the doctrine appears well established in arbitral jurisprudence, the likelihood of a state court deferring to party autonomy and actually applying a transnational law to the exclusion of recognised state law seems remote: '[a]pplying the Lex Mercatoria in a national court... would mean rendering part of a State's sovereignty into the invisible hands of a constantly changing community of merchants who make up rules according to their needs. A law merchant developed in such a fashion could at times go against the interest of a State or its government'.[275] However, it is evident that many national courts do recognise the doctrine, and the question is 'where to draw the line between the unavoidable involvement of national legal systems and the right of parties to go outside them'.[276]

Civil Code Comfort

Civil law jurisdictions have traditionally been 'liberal in their treatment of the Lex Mercatoria' .[277] As alluded to earlier, this is possibly because civil jurists can closely identify with a legal concept leaving much to interpretation; happily relying on a degree of 'gap-filling' to construe the underlying purpose.[278] Accordingly, Article 1496 of the French 1981 New Code of Civil Procedure (NCPC) has clearly been influenced by a liberal and tolerant approach to a-national arbitration, with similar approaches adopted by other civil code jurisdictions.[279] The relevant French legislation reads:[280]

The arbitrator shall settle the dispute in accordance with the rules of law (règles de droit) which the parties have chosen, and in the absence of such a choice, in accordance with those rules of law which he considers appropriate.

Nygh points out that use of the words 'règles de droit’ is significant as the French word 'droit’, unlike 'loi' does not confine the scope to 'law emanating from a sovereign authority but includes rules of moral or social force'.[281] Furthermore, the provision can give recognition to awards based on Lex Mercatoria even where 'the parties have not agreed on a decision based upon these sources'.[282]

Although certain commentators have raised doubts that the French code can be subject to such foregoing analysis,[283] the proof lies in judicial interpretation. In the Compania Valenciana case,[284] the French Supreme Court (SC)[285] upheld a decision of the Court of Appeal[286] in refusing to set aside an ICC award[287] on the grounds of applying the Lex Mercatoria in the absence of choice of law by the parties. In doing so the French judiciary imposed their own interpretation of the pertinent ICC Arbitration Rule 13(3): this stated that failing any indication by parties as to applicable law, the arbitrators shall 'apply the proper law under the rule of conflict that they deem applicable'.[288] The Court of Appeal however concluded that 'application of the Lex Mercatoria was consistent with the terms of reference because the arbitrator had applied the proper law, having indicated that Spanish, New York and English law would frustrate the contracting parties' tacit will'.[289] Expression of the 'French courts' restraint in setting aside awards based upon the Lex Mercatoria '[290] was evident in cases arising from awards predating the NCPC. In an ICC award[291] arising from a claim for partial remuneration following termination of an agency agreement, the ICC arbitrators had based their award not on any specific legal principle but on the 'general principles of obligation generally applicable in international trade'.[292] The French Supreme Court[293] upheld the Court of Appeal decision in affirming that the arbitrators had determined 'applicable law and had stayed within their jurisdiction'.[294] Subsequently, the Norsolor award[295] involving French and Turkish parties attracted attention from both the French and Austrian Supreme Courts.[296] Concerning once again termination of an agency contract, the tribunal opted for the Lex Mercatoria[297] and 'specifically the principles of "good faith" and "fair dealing”'[298] in finding contract termination unjustified. The French Supreme Court upheld enforcement of the Court of Appeal decision to implement the award 'upon failing to find a violation of public policy';[299] whilst in simultaneous proceedings the Austrian Supreme Court reversed the lower Court of Appeal decision by finding the application of Lex Mercatoria justified:[300] 'no mandatory provisions of either French or Turkish law [were violated so] the award was thus enforceable'.[301]

Accordingly, Lex Mercatoria was not just recognised, but enforced in both the French and Austrian Supreme Courts in the context of the Norsolor award. Also, in each case discussed here the award was enforced where arbitrators elected the Lex Mercatoria: evidently party autonomy concerning choice of the law merchant as the 'rule of law' must also prevail.[302]

Common Law Unease

It is very rare that common law courts even mention the Lex Mercatoria. Only two pertinent cases have been identified, with both references made in obiter: Lord Mustill mentioned the doctrine to clarify the distinction between matters of procedure and substantive law in the context of the stateless award,[303] and very recently in the High Court of Australia Kirby J discussed the Law Merchant in the context of an internet defamation case.[304] Furthermore, civil code legislative 'gap-filling' is alien to most non-civilian jurists,[305] and common law jurisdictions can be reticent about incorporating transnational commercial law Conventions into domestic law. In spite of playing a key role in CISG drafting, some 23 years later the United Kingdom is yet to embrace the Convention: '[i]t is safe to assume that [such reluctance] has taken its cue from the coolness and, in some cases, hostility of members of the legal profession and the judiciary who worry that ratification may jeopardise London's pre-eminent role as an international arbitration and litigation centre'.[306] However, even though common law courts do not apply the Lex Mercatoria, and the concept of a-national law is unfamiliar to many, 'it is a different matter when enforcing arbitral awards in the national courts'.[307]

Traditionally, English Courts held that arbitral clauses not governed by state law were unenforceable. In 1924 an arbitration clause purporting to exclude the Court's supervisory jurisdiction was found by Scrutton L.J. to be contrary to public policy - 'there must be no Alsatia in England where the King's writ does not run'.[308]

Similarly, some 40 years later in a reinsurance case concerning validity of an arbitration clause providing that the tribunal would not be bound by the 'strict rules of the law',[309] Megaw J upheld the conventional English position:' [i]t is the policy of the law in this country that, in the conduct of arbitrations, arbitrators must in general apply a fixed and recognisable system of law'.[310] Conversely, in considering the same arbitration clause in the Eagle Star Insurance case,[311] a differently constituted English Court of Appeal[312] found there was nothing 'in public policy to make this clause void. [... ] It only ousts [legal] technicalities and strict constructions. That is what equity did in the old days. And it is what arbitrators may properly do today under such a clause as this'.[313] Although the clause did not adopt the LexMercatoria as the substantive law of the contract, the decision has been viewed 'as having heralded a sea change' in the common law approach to arbitration agreements.[314] However, in giving 'a broad nod and a wink to the proponents of the LexMercatoria’,[315] and accordingly ending 'years of English hostility towards a-national standards',[316] Donaldson M.R. in the Deutsche Schachtbau case[317] accepted that by choosing to arbitrate under the ICC Arbitration Rules,[318] 'the parties have left proper law to be decided by the arbitrators and have not in terms confined the choice to national systems of law'.[319] Hence the Court had no doubtthat 'enforcement of the award would not be contrary to public policy',[320] and as the award validly fell under the New York Convention, enforcement in England was mandatory.[321] Deutsche Schachtbau concerned enforcement of a foreign award in England, but only a short time elapsed before 'support of a similar hands-off rule as regards international arbitral awards made in England'[322] was expressed by the English CA.[323] The 'clearest indication of a "hands-offapproach' then came from Lord Mustill in the Channel Tunnel case,[324] and if any doubts lingered concerning the stance of English jurisprudence on the Lex Mercatoria, these were arguably dispelled by the passing of the Arbitration Act 1996 providing that 'if the parties so agree [the arbitral tribunal shall decide the dispute] in accordance with such other considerations as are agreed by them or determined by the tribunal'.[325] As observed by D'Arcy et al, '[i]t may be that "such other considerations" include the Lex Mercatoria'.

There seems no relevant Australian case law on recognition of the Lex Mercatoria as substantive law in an international arbitration. Pertinent journal articles by Australian commentators cite English case law,[327] and with reference made to 'Anglo-Australian jurisprudence'[328] on the matter there is a reasonable presumption that the English approach would be followed in Australia:

There would appear to be no ground of public policy [to prevent Deutsche Schachtbau being] applied, and any foreign award decided by reference to such principles for the substantive law of the dispute would also be recognised and enforced in New South Wales, particularly where the parties had agreed to such a substantive legal regime at the outset.[329]

Australia, unlike England, has adopted the CISG,[330] but few pertinent cases acknowledge let alone apply the uniform sales law.[331] In commenting on several recent cases where the CISG should have been applied but was essentially ignored,[332] the Pace web site editor, Dr Bruno Zeller, is very scathing of Australian jurists' attitude towards the CISG: '[I]t appears that the CISG has not fallen on fertile ground in Australia [and it is] astounding to note that the defence argued that the CISG is not applicable...'[333] As lamented by Ziegel,' [t]he fact that a country is a CISG member does not entitle one to assume that the Convention plays an important role in its international trade'.[334] The UNIDROIT Principles fare no better: just four decisions are identified as making reference to the international commercial doctrine,[335] with most citing Article 1.7 where '[e] ach party must act in accordance with good faith and fair dealing in international trade'. In Hughes,[336] Finn J observed that 'more open recognition [of the Principles] in our own contract law is now warranted... notwithstanding the significant adjustments this would occasion to some of contract law's apparent orthodoxies'.[337] In the US, Courts have traditionally been reluctant to overturn arbitral awards on legal grounds, with 'a powerful and consistent pro-enforcement bias in both public policy and case law'.[338] This 'pro-enforcement bias' is embodied in the US Court of Appeals Gould case discussed earlier,[339] which 'only strengthen[s] the likelihood that US courts will respect the parties' choice of a non-national standard to govern the merits of their dispute'.[340] Nevertheless, the US fares little better in upholding the common law jurisdiction track record concerning CISG case law,[341] with just one reference to the UNIDROIT Principles.[342]

As observed by Stoecker, 'the existence ... of the Lex Mercatoria will largely depend on its acceptance and application in national courts',[343] and from this brief review it seems that common law jurisdictions are generally willing to enforce an arbitration award where the Lex Mercatoria has been adopted as the substantive law of the dispute. However, it remains arguable that such recognition is more akin to a 'hands-off’ policy where 'courts will let parties who have chosen a-national law [to] "sleep in the bed" they have made for themselves'.[344]

The New Zealand Position

With heavy dependence on export trading, it is clear that 'in this small country ... international trade and commercial relationships are of critical importance'.[345] However, as a common law jurisdiction, New Zealand has continued taking a lead from England on questions of commercial law and applicable international legal policy: '[b]eing realistic, the law of contract in this country, other than as specifically reshaped by statute, is likely to remain the law of England'.[346] Nonetheless, a facet of discreet dissent prevails: for example, unlike England, New Zealand has adopted the CISG; albeit taking some 15 years to do so.[347] Although the degree of reference to international uniform law and principle remains pitiful by civil code standards,[348] there is evidence of such doctrine having some influence in New Zealand Courts.[349] Even prior to adoption of the CISG, Hammond J had made obiter reference in the High Court (HC) to grounds of fundamental breach under the uniform law;[350] and in the Court of Appeal Dreux Holdings case,[351] Blanchard J postulated that 'New Zealand domestic contract law should be generally consistent with the best international practice' .[352] In citing both the CISG and UNIDROIT Principles as substantive reasons (amongst others) to 'depart from the House of Lords'[353] on the question of admissibility of evidence of subsequent conduct to determine contract meaning, their Honours[354] held that 'it is permissible to have regard to the evidence of the conduct of the parties following the completion of the contract'.[355] Conversely, the rule concerning admissibility of evidence regarding pre -contract negotiations came under scrutiny by the Court of Appeal in Yoshimoto.[356] Thomas J cited the Convention where 'due consideration is to be given to all relevant circumstances of the case including the negotiations',[357] and further considered the view of McLauchlin that 'it would be odd if it were the law of New Zealand that evidence of the parties' negotiations and subjective intentions were admissible to aid the interpretation of international sales contracts but not [domestic] contracts'.[358] Unlike the earlier Dreux Holdings case however, the opportunity was not embraced to harmonise 'the interpretation rules for domestic contracts with the Convention's rules for international sales',[359] as the Court of Appeal did 'not think it would be permitted to do so by the Privy Council'.[360] In fact, this concern was not without foundation, as the casedid go to the Privy Council on appeal,[361] and although not decided on this point, their Lordships did not think that it was a suitable occasion for re-examining the law on exclusion of evidence of pre-contractual negotiations. As reiterated by Lord Hoffmann, '[a]ll a court can do is to decide what the final contract means'.[362] It seems that interests of harmonising domestic and international contract law in New Zealand presented the Court of Appeal with quite valid grounds to depart from English ruling on this issue,[363] and with the Privy Council's jurisdiction no longer extending to New Zealand, this opportunity may yet arise.

Nevertheless, there is ongoing evidence that the New Zealand Courts are a little more ready to acknowledge CISG applicability than their Australian counterparts. Concerning an appeal arising from a contract dispute between New Zealand and English parties,[364] Thomas J drew support from good faith doctrine in the CISG and UNIDROIT Principles[365] in finding 'it would be open to Bobux to assert that the parties' obligations under the contract are subject to an obligation to act in good faith'.[366] However, the Court of Appeal majority dismissed the appeal on alternative grounds without addressing the question of good faith 'on which we make no comment'.[367] The most recent case-in-point arose between New Zealand and French parties[368] and concerned alleged breach of Article 35(1) of the CISG where '[t]he seller must deliver goods which are of the quantity, quality and description required by the contract...'. The New Zealand plaintiff successfully applied the CISG where the defendant had 'failed to deliver appliances which were of the quality required by the distribution arrangement, namely that they would be of merchantable quality'.[369]

The UNCITRAL Model Law was adopted into New Zealand law with passing of the 1996 Arbitration Act (the Act); putting into legislative effect the principle of party autonomy upheld by the Court of Appeal in the CBI NZ case:[370] '.. there are no public policy reasons which would justify curial intervention contrary to the original agreement of the parties where it is alleged in an international commercial arbitration [... ] that there are errors of law on the face of the award'.[371] Schedule 1 of the Act corresponds largely to the Model Law;[372] with no change being made to the original Article 28 permitting parties to choose 'such rules of law [... ] as applicable to the substance of the dispute'.[373] This raises the possibility that parties to international arbitration in New Zealand could choose to apply the Lex Mercatoria as the substantive law of the dispute:

Those legislatures who have modernised their arbitration laws in recent years and the drafters of the UNCITRAL Model Law on International Commercial Arbitration have included in their laws special conflicts of laws rules which allow the arbitrator to apply the 'rules of law' instead of 'the law'. It is generally recognised in international legal doctrine and arbitral practice that this terminology indicates that arbitrators may apply transnational legal principles such as the Lex Mercatoria?[374]

This supposition is yet to be put to the test.[375] Judge Willy hypothesises that in such eventuality the award could be open to challenge on public policy grounds:[376] '[an] arbitral award may be set aside by the High Court only if the High Court finds that the award is in conflict with the public policy of New Zealand' .[377] However, in view of pertinent findings of courts in England and USA as well as our own Court of Appeal,[378] there would appear to be ample precedent of sufficiently persuasive authority to hold that 'enforcement of the award would not be contrary to public policy'.[379]

VII. Borderless International Transactions: Some Contemporary Applications

International Merchants want to do business.... If difficulties arise and they have to ask a lawyer for assistance, they are often surprised at the lawyer raising ... the question of which national law governs the contract. They will reply that they have bought goods FOB or CIF and the seller has not performed; they will ask the lawyer whether it really matters which national law applies to this contract as the rights and obligations arising under it are universally understood and they may even admit that their mind never adverted to this preliminary legal question.[380]

The practical reality of twenty-first century international trade is that the combined effect of relentless growth, technology advances and volatile global politics 'simply demand a reconstituted law merchant capable of accommodating the multinational aspects of contemporary commerce'.[381] This argument is briefly contemplated here in the context of worldwide evolution towards a borderless trading and contracting environment - and the Internet.

The International Merchant

Evolving from momentous technology advances in the latter part of the twentieth century, the reducing real cost of transportation and near universal adoption of advanced telecommunication techniques in facilitating international commerce and finance are leading to a seamless global trading environment. Hand-in-hand with this regime is the emergence of new legal problems that rest uneasily with application of national law. Some of these problems are being actively addressed. For example, the Cape Town Convention[382] enabling generation of an international securities register is a bold move embracing an international legal quandary where 'the lack of an international system of law in this area [is] a negative factor in decisions by lenders to sell on credit or take security interests in movables of a kind generally moved from one State to another'.[383] Furthermore, the CISG and UNIDROIT Principles have gone some way towards provision of a-national laws and principles for application to 'conventional' international transactions. However, as international transactions embrace increasingly specialist applications, 'there may be substantial advantages in uniform law within a restricted field'.[384] An example lies in application of intellectual property law where 'licensing practices are identical worldwide and most municipal laws are silent on details [so] the ideal conditions are met for a transnational body of law to come into existence'.[385] Other examples include international equity trading, and cross-border insolvencies of large multinationals.[386]

International Infrastructure Projects

International infrastructure construction projects frequently embrace multinational parties; thus raising the question of an a-national approach to cross-border dispute resolution. The Chunnel construction project is one example, where in failing to agree on the applicable substantive law, the parties chose common principles of French and English law supplemented by general principles of international law.[387] However, the domain of international telecommunications is where the stiffest challenge can be posed to conventional choice of law doctrine. Satellite projects are one illustration, but the test of accommodating six legal systems over three continents[388] is shadowed by the challenge posed by certain submarine cable system construction contracts. The purchasing group for the 39,000km SEA-ME-WEA3 Submarine Cable Network included 37 parties from 33 countries, and a supply consortium of four principle multinational companies constructed the system.[389] Although choice of law was fortunately not an issue in this particular contract,[390] the project is cited here as illustrating fallibility of choice of law doctrine - to find the 'law of closest connection' is completely meaningless in this context.

Without entering into further discussion on the merits of applying a-national law for choice of law reasons alone, another argument can originate from specialist construction techniques and technology. Continuing with the submarine cable industry as an example, a significant component of system construction is marine installation of the submarine plant,[391] for which highly specialised techniques and practices have evolved over more than a century.[392] Developed through precedent and experience, these customs are invariably reflected in very particular legal and commercial conditions incorporated in the construction contract. It is strongly arguable that these unique conditions constitute a form of custom-derived Lex Mercatoria to which a controlling national law could contribute little in the event of pertinent judicial or arbitral intervention.[393]

The Internet

In spite of over-investment in the technology during the latter part of the twentieth century leading to the 'cyber-stock meltdown of 2000',[394] the Internet remains today an everyday part of many people's lives. As a media completely transparent to national borders, there are strong arguments why the Internet is ripe for application of a-national law:[395]

.. the Internet is global. As such, it knows no geographic boundaries. Its basic lack of locality suggests the need for a formulation of new legal rules to address the absence of congruence between cyberspace and the boundaries and laws of any given jurisdiction.

Kirby J grappled with the legal complexities of the Internet in a recent High Court of Australia defamation case.[396] Although not concerning commercial application, the general principles equally apply, so are worthy of brief examination here. The majority[397] in its 'refusal to recognise the Internet as truly revolutionary global technology'[398] simply likened its reach and dissemination attributes to that of radio and television. However, Kirby J recognised the revolutionary nature of the technology as justifying atypical judicial consideration:

.. the Internet is too flexible a structure to be controlled by a myriad of national laws, purportedly applied with no more justification than is provided by the content of such laws, usually devised long before the Internet arrived. ... In the face of [its global, ubiquitous and reactive characteristics], simply to apply old rules, created on the assumptions of geographical boundaries, would encourage an inappropriate and usually ineffective grab for extra-territorial jurisdiction.[399]

Defamation is only one legal issue of many that arise from burgeoning international use and application of the Internet. Hence, there is an increasingly urgent need to develop harmonised legal norms to avoid the otherwise ubiquitous consequence of 'different online and offline laws for contract, consumer protection, defamation, or trademark infringement'.[400] As lamented by Tobin and Myburgh, until the "horse and buggy" approach taken by the majority in the Dow Jones[401] case 'remains the only form of transport, the full potential of the electronic highway cannot and will not be realised'.[402]

VIII. Concluding Remarks

The law merchant is still a diffuse and fragmented body of law. It will grow with the growth of uniform laws, international trade customs and usages, and with the increasing number of reported awards, but it will never reach the level of the copious and well-organised national legal systems.[403]

Such was the view of one of the leading protagonists of the Lex Mercatoria in 1985.[404] Does it remain valid today? Has the Lex Mercatoria now achieved validity as an autonomous system of a-national law? Perhaps not quite yet, but the question must be considered in the context of mankind's time-honoured resistance to new concepts and ideas. The birth of the world's great religions was invariably succeeded by persecution of its disciples; Galileo's theory that the earth orbited the sun (and not the other way round) was considered heresy by fellow scholars; the telephone and motor-car were viewed contemporaneously as 'mere novelties' that would never catch on; and arguably the most (in)famous prophecy of all is credited to the then President of IBM:[405] 'I think there is a world market for maybe five computers.' Certainly the English common law legal system did not magically evolve overnight, and civil code jurisdictions are subject to continuous development and refinement: '[a]ll national legal systems have once been imperfect and many still are’.[406] So why should the Lex Mercatoria be any different in concept? It is quite simply at an earlier stage of maturity, and derives its binding force not from 'prevailing public and moral or community values [as for common law and equity, but from] recognition of and adherence to standards or norms by the business community and various state authorities'.[407] There is a certain fallacy in even trying to equate the Lex Mercatoria with national legal jurisprudence. What objective test can be applied to determine when a certain set of general principles, customs and usages constitute a system of law when potentially, each unique commercial setting may develop its own set of norms? Notwithstanding criticisms concerning issues of definition and clarity, it is evident that the Lex Mercatoria finds growing acceptance and application in international arbitration. Protagonists of this trend have received a boost from the UNIDROIT Principles that can be adopted as the substantive law of the dispute in arbitral settings without serious risk of imprecision and ambiguity. The neutral legal environment further ensures that all parties are on an equal footing: 'nobody has the advantage of having the case pleaded and decided by his own law and nobody has the handicap of seeing it governed by a foreign law'.[408]

To reject the Lex Mercatoria outright quite simply fails to consider international commercial realities. Although the doctrine relies on national legal systems for recognition and enforcement of arbitral decisions, this is no different in principle to local judicial consideration of any foreign decision. Similar rules apply, and why should comity principles be approached differently simply because a sovereign state is not involved? The Lex Mercatoria demands of the jurist a broad perspective towards understanding the relationship between law and commerce, and recognition that the traditional approach to 'conflict of laws and national substantive laws may be inappropriate to regulate international business law, [which] should be a warning for legislators [and] judges to take account of international business life'.[409]

The medieval law merchant has gone through something of a rebirth over the last few decades with the emergence of a 'third' legal order that lies somewhere between national laws and public international law. The current debate does not so much concern the very existence of the LexMercatoria. The real test is if and when recognition will extend to judicial acceptance of the doctrine as a choice of substantive law where the court is selected as the dispute resolution forum. Principles of state sovereignty remain a formidable hurdle against this step, but as global business practices in commerce and communications become increasingly transparent, and progressively more independent of particular domestic regimes, the Lex Mercatoria may yet develop into 'a truly autonomous independent legal order'.[410]


[*] Richard is currently employed as General Counsel for Alcatel, South-East Asia, and is based in Singapore.

[1] Bernard Audit, 'The Vienna Sales Convention and the Lex Mercatoria' in Thomas Carbonneau (editor), Lex Mercatoria and Arbitration (1998), 173-174.

[2] Whitmore Gray, 'Globalisation of Contract Law: Rules for Commercial Contracts in the 21st Century' [1996] New Zealand Law Journal 52, 52.

[3] Cristoph Stoecker, 'The Lex Mercatoria: To what Extent does it Exist?' (1990) 7 Journal International Arbitration 101, 101.

[4] Francis Rose (editor), LexMercatoria: Essays on International Commercial Law in Honour of Francis Reynolds (2000) xiv.

[5] Literally, the latin term means 'law merchant'. The terms Lex Mercatoria, merchant law and law merchant as well as a-national law are hereafter used interchangeably without significance.

[6] W.L.Craig, W.W. Park and J Paulsson, International Chamber of Commerce Arbitration (1990) para 35.1.

[7] LisaM Sarzin, 'The Extent to which the Unidroit Principles of International Commercial Contracts Contribute to the Evolution of Transnational Trade Law' [1997] AUIntLawJl 8; [1997] Australian International Law Journal 112, 120-121.

[8] Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] 1 AC 50, 65 per Lord Diplock.

[9] Filip De Ly, International Business Law and Lex Mercatoria (1992) 134.

[10] See above n 8, 60.

[11] J.H.C. Morris (General Editor), Dicey and Morris on the Conflict of Laws (1980) 747: Rule 145. The test as set out in the 10th edition remains valid for New Zealand law. Later editions refer to Article 4(1) of the Rome Convention to which New Zealand cannot be a signatory. See p 53 below, 1980 Rome Convention.

[12] Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277, 290.

[13] Golden Acres Ltd v Queensland Estates Ltd [1969] Qd R 378.

[14] Regazzoni v K C Sethia Ltd [1958] AC 301.

[15] Ibid, 319.

[16] Compagnie D'Armement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC 572, where in a maritime contract the governing law was stated to be the flag of the vessel. However, a number of boats were used involving flags from some 6 different countries.

[17] Akai Pty Ltd v The Peoples Insurance Co (1996) 141 ALR374. The HCA applied s.8 of the Insurance Contracts Act 1984; the effect of which was to override any choice of law clause. This meant the proper law of the contract was NSW law.

[18] Peter Nygh, Autonomy in International Contracts (1999) 185.

[19] See above n 8.

[20] See above n 18, 186.

[21] See above n 9, 78 (fn 91). Nygh also queries (ibid) as to whatthe House of Lords meant by their reference to 'law' in the case.

[22] See VI. Lex Mercatoria and the Courts at p 63 below.

[23] Peter Nygh, Conflict of Laws in Australia(1995) 294.

[24] See above, n 8, 61.

[25] See above, n 18, 108.

[26] Bonython v Commonwealth [1951] AC 201, 219 per Lord Simonds.

[27] See above, n 8.

[28] Ibid, 71-72. Lord Wilberforce was critical of Lord Diplock's 'inferred choice' approach, and although both arrived at the same conclusion that English law was the proper law of the contract, Lord Diplock enjoyed the support of the majority.

[29] Barnard, Laurette, 'Choice of Law in International Contracts - The Objective Proper Law Reconsidered' (1996) 2 New Zealand Business Law Quarterly 27, 30.

[30] Ibid, 34.

[31] Coast Lines Ltd vHudig and Veder Chartering N. V. [1972] 2 QB 34, 44 per Lord Denning MR.

[32] Article 4(2). See p 53 below, 1980 Rome Convention, for a contextual review of the Convention, which is uniquely applicable to members of the European Union.

[33] 'Characteristic Performance' is a civil code concept, and is not a recognised doctrine under common law.

[34] See above, n 18, 185 quoting F K Juenger, Choice of Law andMultistate Justice (1993) 195.

[35] Michael T Medwig, 'The New Law Merchant: Legal Rhetoric and Commercial Reality' (1993) 24 Law and Policy in International Business 589, 601.

[36] De Ly, see above n 9, 210 quoting C. Schmitthoff, 'The Unification of the Law of International Trade' [1968] Journal of Business Law 112.

[37] See above n 3, 102. Such laws included the 9th Century Maritime Law, the 11th Century Amalphian Tables, the 12h Century Rolls of Oleron and the 1350 laws of Wisby.

[38] Ibid.

[39] Ibid.

[40] See above n 35, 592 quoting W Mitchell, An Essay on the Early History of the Law Merchant (1904).

[41] See above n 3, 103.

[42] See above n 35, 593.

[43] Ibid.

[44] Ibid, 594.

[45] Ibid, 595.

[46] See above n 3, 104. The 'renowned lawyers' included Clive Schmitthoff (Germany), see opening quote to this section; Berthold Goldman (France); Philippe Kahn (France); J F Lalive (France) and Langen (South Africa).

[47] Okezie Chukwumerije, Choice of Law in International Commercial Arbitration (1994) 117.

[48] Leo D'Arcy, Carole Murray and Barbara Cleave, Schmitthoff's Export Trade: The Law and Practice of International Trade (10th ed, 2000) 479.

[49] See above n 18, 182 quoting Berthold Goldman, Lex Mercatoria (1983) 11.

[50] Klaus Peter Berger, The Creeping Codification of the Lex Mercatoria (1999) 59. The author bases his hypothesis where the decision-making practice of an international arbitrator acting ex acquo et bono is founded on a comparative analysis of the legal systems involved, and 'the authorisation to decide as amiable compositeurin no way excludes a competence to determine the mutual rights of the parties according to a certain legal system'.

[51] Keith Highet, 'The Enigma of the Lex Mercatoria' (1989) 63 Tulane Law Review 613, 626-7.

[52] Ibid.

[53] See above n 9, 171.

[54] International Air Transport Association, an international airline organisation with over 160 members.

[55] See n 9, 189, German Supreme Court, January 20, 1983; reported in European Transport Law (ETL) (1984) 535.

[56] See the discussion above at p 37 of Express Choice.

[57] See above n 47, 108, quoting J Lew, Applicable Law in International Commercial Arbitration: A Study in Commercial Arbitration Awards (1978) 75.

[58] Ibid.

[59] Channel Tunnel Group Ltd v Balfour Beatty Constructions Ltd [1993] AC 334

[60] M P Furmston, 'Unidroit General Principles for International Commercial Contracts' (1996) 10 Journal of Contemporary Law 11, 12-13.

[61] See above n 59, 368. Lord Mustill shortly after emphasised his position inCoppée-Lavalin SA/NVv Ken-Ren Chemicals and Fertilizers Ltd (in liq.) [1994] 2 All ER 449 where at 458 he reiterated that 'National Courts should within very broad limits recognise and give effect to any agreement between the parties, express or tacit, as to the way in which the arbitration should be conducted'.

[62] See above n 47, 108.

[63] Article 28(1).

[64] Article 3.

[65] See above n 18, 177.

[66] The following definitions, although attributed by footnote to the original sources, are taken respectively from Stoecker (see above, n 3, 105-106) for the first two, and Sarzin (see above n 7, 115; fns 7 & 8) for the second two.

[67] B. Goldmann, 'The Applicable Law: General Principles of the Law - the Lex Mercatoria' in Lew (editor), Contemporary Problems in International Arbitration (1986) 116.

[68] Bermann & Kaufmann, 'The Law of International Commercial Transactions' [1978] Harvard International Law Journal 221, 273.

[69] J Lew, Applicable Law in International Commercial Arbitration: A Study in Commercial Arbitration Awards (1978) 436.

[70] Tita, 'A Challenge for World Trade Organisations' [1995] Journal of World Trade Law84.

[71] See the discussion of critics below at page 46, Extremities of Views: Reality or Rhetoric?

[72] Andreas F Lowenfeld, 'Lex Mercatoria: An Arbitrator's View', in T Carbonneau (editor), Lex Mercatoria and Arbitration (1998) 84-85.

[73] See above n 18, 178.

[74] See De Ly: see above n 9, 78-79 for a review of the limited (and principally German) academic writings on this question.

[75] See above n 50, 231 in quoting B L Benson, 'The Spontaneous Evolution of Commercial Law', (1989) 5 Southern Economic Journal 644, 654.

[76] See above n 18, 180-182.

[77] Ibid, 180.

[78] Ibid, 181 in quoting Lord Mustill, 'The New Lex Mercatoria: The First Twenty-Five Years' inM Bos and I Brownlie (editors), Liber Amicorum for Lord Wilberforce (1987) 156-157.

[79] See above, n 72, 86.

[80] See above n 47, 111.

[81] Ibid, 111-112.

[82] That is, common law, civil law, Islamic law and customary law: ibid, 112.

[83] Ibid.

[84] Agreements are to be kept.

[85] Chukwumerije, see above n 47, 112; and Ole Lando, 'The Lex Mercatoria in International Commercial Arbitration' (1985) 34 International and Comparative Law Quarterly 747, 750.

[86] See above, n 7, 118.

[87] For example, the principle of good faith: see the discussion below at p 64, Civil Code Comfort, concerning the Norsolor award.

[88] Certain commentators maintain a subtle distinction between the definitions of the terms 'customs' and 'usage' in this context. In this paper, however, such a distinction is ignored.

[89] INCOTERMS were first published in 1936. The latest edition, in force on January 1, 2000 is known as ICC No. 560: International Commerce Commission Website <http://www.iccwbo.org> at 17 October 2003.

[90] See above, n 50, 68 (fn 245) in citing ICC Awards No. 3130, Clunet 1981, 931 and No. 3894, Clunet 1981, 987.

[91] See above n 47, 113 in citing Lord Mustill, 'The New Lex Mercatoria: The First Twenty- Five Years' above n 78, 157.

[92] For example, standard form contracts in the insurance industry (cf Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] 1 AC 50).

[93] See above, n 7, 117.

[94] See footnote 82.

[95] See the following section, p 49 et seq.

[96] See above, n 50, 79-80.

[97] See above, n 6 621-631.

[98] Since 1974, arbitral awards rendered under the auspices of the ICC are published in the Journal du Droit International (Clunet), and since 1976 in the Yearbook of Commercial Arbitration: Berger; see above n 50, 63.

[99] Usually one of the reasons why parties prefer arbitration to litigation.

[100] Possibly due more to the reporting than to the actual decision.

[101] See also De Ly; see above n 9, 202-203 for discussion of the inherent problems of reliance upon arbitral awards as a source of Lex Mercatoria.

[102] See above n 7, 119. However, this view is not universally shared. Lord Mustill considers that only 'if a consensus could be reached in the business and the arbitration community that awards based on the Lex Mercatoria would have a binding force, could those awards then be a source of the Lex Mercatoria': see above n 3, in citing Lord Mustill, 'The New Lex Mercatoria: The First Twenty-Five Years' above n 78, 161.

[103] See p 58 below, V. Arbitral Recognition of Lex Mercatoria.

[104] See above n 35, 602.

[105] Lando, above n 85, 752.

[106] See above n 35, 614 in quoting HJ Berman & FJ Dasser, 'The "New" Law Merchant and the "Old" Sources, Content, and Legitimacy' in TE Carbonneau (editor), LexMercatoria and Arbitration: A Discussion of the New Law Merchant (1990).

[107] See above n 47, 116-117.

[108] See above n 35, 602.

[109] M Hunter, 'Lex Mercatoria -Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v R'As Al Khaimah National Oil Co.' [1987] Lloyds Maritime and Commercial Law Quarterly 277, 278/9 quoting Mann, 'Private Arbitration and Public Policy' (1985) 4 CivilJustice Quarterly 257, 264.

[110] Ian Turley, 'Commercial Litigation, Arbitration and Mediation in Australia' (1997) 27 Australian Business Law Review 409, 410.

[111] See above n 51, 628.

[112] Ibid, 613-614.

[113] Ibid, 618.

[114] See above n 18, 183. For discussion of the judicial position see p 63 below, VI. Lex Mercatoria and the Courts.

[115] Ibid.

[116] Ibid. For a review of such trade law see the next section at p 49 et seq, IV. Some Selected Uniform Laws and Principles of International Trade.

[117] Ibid, 184-5.

[118] See above, n 35, 603.

[119] Ibid, 616.

[120] See above n 7, 116.

[121] See, for example, the reference to ICC Award No. 8365 below at page 62.

[122] See above n 50,213, quoting B.S. Selden, 'Lex Mercatoria in European and US Trade Practice: Time to Take a Closer Look' (1995) 2 Annual Survey of International and Comparative Law 111, 119.

[123] CENTRAL was established at the University of Munster, Germany and moved to the University of Cologne from May 1, 2002.

[124] The original work is comprehensively documented in Berger's textThe Creeping Codification of the Lex Mercatoria (see above n 50).

[125] The CENTRAL TLDB of Lex Mercatoria principles, rules and standards is maintained on the Transnational Law database website <http://www.tldb.de/> at 16 October 2003.

[126] See above, n 50, 233.

[127] From website <http://www.tldb.de/> (menu item 'About the TLDB'), above n 125.

[128] See above, n 50, 217.

[129] Sandeep Gopalan, 'Transnational Commercial Law: The Way Forward' (2003) 18American University International Law Review 803, 811/2.

[130] See p 45 above, c) Uniform Laws and Principles of International Trade

[131] See above n 129, 810 in citing Lord Mustill, The New Lex Mercatoria: The First Twenty- Five Years' above n 78, 152-153.

[132] See above n 3, 120.

[133] See above n 7, 124 quoting B Goldman, 'Lex Mercatoria' (1983) 3Forum International 1, 13.

[134] See above n 9, 203.

[135] Ibid, and see Sources of Lex Mercatoria: c) Uniform Laws andPrinciples of International Trade in the previous section and the more detailed discussion below at p 54 of the 1985 UNCITRAL Model Law.

[136] UNIDROIT, Principles of International Commercial Contracts (1994) 5.

[137] Malcolm Clarke, 'The Carrier's Duty of Seaworthiness under the Hague Rules' in Francis Rose (editor), Lex Mercatoria: Essays on International Commercial Law in Honour of Francis Reynolds (2000) 127.

[138] See above n 129, 811.

[139] The order of review is purely chronological, and is intended as a representative selection only. Furthermore, no significance should be attached to the absence of a particular uniform law or principle in the context of this paper. For example, a notable exclusion is the 1998 Principles of European Contract Law that is not discussed here due to its similarity in concept to the UNIDROIT Principles but limited in applicability to members of the European Community.

[140] The draft convention was promoted by the United Nations Economic and Social Council (ECOSOC).

[141] See above n 47, 17.

[142] Including England and Australia (1975) and New Zealand (1983): United Nations Commission on International Trade Law <http://www.uncitral . org/en-index.html> at 20 October 2003.

[143] Michael Pryles, 'Choice of Law Issues in International Arbitration' (1997) 15 Arbitrator 260, 262.

[144] Lando, above n 85, 761.

[145] Ibid.

[146] Seep 57 below, 1998 ICC Arbitration Rules.

[147] Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v R’As Al Khaimah National Oil Co [1987] 3 WLR 1023, 1031/2. See pages 54 and 67 below for further discussion of this case.

[148] The Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (18 March 1965). The Convention was adopted into NZ law by the Arbitration (International Investment Disputes) Act 1979.

[149] Arthur Tompkins, 'A Practical Guide to International Commercial Arbitration' [1991] New Zealand Law Journal 274.

[150] D ARWilliams, 'Arbitration' [1989] New Zealand Recent Law Review 331, 331. See also the discussion below at p 59, The Stateless Award.

[151] Article 42(1).

[152] See above n 18, 192-193 citing Lord Mustill, 'The NewLex Mercatoria: The First Twenty- Five Years' above n 78, 151.

[153] Ibid, 193. Lando (see above, n 85) is under no doubt (at 759) that '[t]he parties are entitled to agree on a non-national law such as the Lex Mercatoria'.

[154] See above n 144, 759.

[155] Georges R Delaume, 'Comparative Analysis as a Basis of Law in State Contracts: The Myth of the Lex Mercatoria' (1989) 63 Tulane Law Review 575, 591.

[156] See above n 47, 161.

[157] See above n 48, 688.

[158] Duncan Webb,'A New Set of Rules for International Sales' [1995]New ZealandLaw Journal 85, 85.

[159] Jacob S Ziegel, 'The Future of the International Sales Convention from a Common Law Perspective' (2000) 6 New Zealand Business Law Quarterly 336, 339. Gopalan notes (see above n 129, 826) that '[d]elegations from sixty-two countries had met at the Vienna conference'.

[160] New Zealand adopted the CISG with theSale of Goods (United Nations Convention) Act 1994 and the Sale of Goods (United Nations Convention) Act Commencement Order 1995 giving effect to the Convention as part of NZ law from 1 October 1995.

[161] See above n 158, 86.

[162] John O Honnold, Uniform Law for International Sales (1999) 109.

[163] Ibid.

[164] Ibid, 110.

[165] See above n 50, 148.

[166] See above n 158, 87.

[167] Ibid.

[168] Seeaboven 159,341: according to Ziegel, during the period 1988-1998, only 21 outof568 court decisions citing CISG provisions arose from common law jurisdictions. See below at p 63 et seq, VI. Lex Mercatoria and the Courts for discussion of some particular cases.

[169] Sixty-two states have signed the Convention: <http://www.uncitral.org/en-index.html> at 20 October 2003, above n 142.

[170] M J Bonell, 'The UNIDROIT Principles and Transnational Law' in Klaus P Berger (editor), The Practice of Transnational Law (2001) at 31: reference to ICC Award No. 8502 of 1996 where both the CISG and UNIDROIT Principles evidenced 'admitted practices under international trade law'.

[171] Seeaboven 159, 341.

[172] Preamble to Rome Convention.

[173] Article 3(1) of Rome Convention: 'A contract shall be governed by the law chosen by the parties ...'

[174] Nygh: see above n 18, 186. See also Berger: above n 50, 179 for similar comments.

[175] See the discussion at p 37 above in II. Choice of Law in Contract.

[176] Michael Joachim Bonell, An International Restatement of Contract Law (199 4) 121. Other references include Art. 1: '...choice between the laws of different countries'; Art. 2: '...law of a Contracting State'; Art. 3(3): '...foreign law...'; Art. 5(2): '...law of the country in which [the consumer] has his habitual residence'.

[177] See above n 18, 187 citing Lagarde, 'Le nouveau droit international privé des contrats', (1991) 80 Revue Critique de Droit International Law Privé 288, 300/1.

[178] Lawrence Collins (General Editor), Dicey andMorris on the Conflict of Laws (2000) 1223: the Rome Convention 'does not sanction the choice or application of a non-national system of law, such as the Lex Mercatoria or general principles of law'.

[179] See above n 176, 123, quoting F K Juenger, 'The Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and Comparisons' (1994) 42 American Journal of Comparative Law 601, 603-4.

[180] See above n 50, 88-9.

[181] See above n 149, 275.

[182] However, the law is domestic where the Convention is ratified by the State: see below at p 59, V. Arbitral Recognition of Lex Mercatoria: The Stateless Award.

[183] See above at p 46, Arbitral Awards.

[184] For citing of this view, see Bonell: see above n 176, 129; Pryles: see above n 143, 274.

[185] Seeaboven 176, 129-130: Bonell observes that'the mere fact that arbitrators may decide to disregard any national law and instead to apply a-national rules ... would not be sufficient to set aside the award'.

[186] Seeaboven 3, 119.

[187] See p 50 above, 1958 New York Convention, and n 147 above.

[188] Article 13.3: '...the arbitrator shall apply the law designated as the proper law by the rule of conflict which he deems appropriate'.

[189] See above n 147, 1035 per Sir John Donaldson MR.

[190] See above n 50, 81; citing at footnote 331: UN Doc. A/CN.9/SR.326, para 33.

[191] See above n 136, viii.

[192] The task was initiated in the early 1970s: see above n 176, 17.

[193] Roy Goode, 'Insularity or Leadership? The Role of the United Kingdom in the Harmonisation of Commercial Law' (2001) 50 International and Comparative Law Quarterly 751, 763. Input came from 'more than 70 specialists from all major legal systems including former socialist, Latin American and Asian countries': see above n 7, 135. A useful and concise background to the development of the Principles is given by M P Furmston: see above n 60.

[194] See above n 136, The Principles consist of a Preamble and 119 Articles distributed among seven chapters: (1) General Provisions; (2) Formation; (3) Validity; (4) Interpretation; (5) Content; (6) Performance and (7) Non-Performance. The UNIDROIT text provides official interpretative Comments to each Article. Note also that work is currently in process to expand the Principles to include issues of agency, assignment, third-party rights, set-off, limitation of actions, and waiver: Anthony Sinclair, 'Using the Unidroit Principles of International Commercial Contracts in International Commercial Arbitration' (2003) 6 InternationalArbitration Law Review 65, 65.

[195] Ibid, 4.

[196] Ibid. As observed by Bonell (see above, n 176, 14); 'in the absence of a sufficiently precise definition of the nature and content of such general principles or of the supposed Lex Mercatoria such a choice risks producing even greater uncertainty and unpredictability'.

[197] See above n 136.

[198] See the discussion in the context of Article 7 of the CISG at page 52 above.

[199] Arbitral Award of 15 June 1994 of the International Court of Arbitration of the Vienna Federal Chamber of Commerce. Reported by Gray: see above n 2, 53.

[200] Article 7.4.9: 'Interest for Failure to Pay Money'.

[201] See above n 136, 3.

[202] Ibid.

[203] See the discussion at p 49 above in the introduction to IV. Some Selected Uniform Laws and Principles of International Trade.

[204] See above n 143, 262. Arbitral and case law reference to the UNIDROIT Principles is addressed below at p 58 et seq in V. Arbitral Recognition of Lex Mercatoria and VI. Lex Mercatoria and the Courts. A regularly updated web-site with arbitral and case-law reference to the Principles is the Unilex on CISG and UNIDROIT principles website <http://www.unilex.info> at 22 October 2003.

[205] As adopted at the Fifth Inter-American Specialised Conference on Private International Law of the Organisation of American States, held in Mexico City.

[206] See the discussion at p 53 above, 1980 Rome Convention.

[207] See above n 18, 188.

[208] See above n 50, 88. A third view considers that the 'second sentence [of Article 9(1)] reflects an unbridled eclecticism that vacillates between geography and teleology': Gonzalo Parra-Aranguren, 'Conflict of Law Aspects on the Unidroit Principles of International Commercial Contracts' (1995) 69 Tulane Law Review. 1239, 1251 in quoting (at footnote 64) Juenger, above n 179, 611.

[209] See above n 18, 188. A similar view is expressed by Berger: ibid, 100.

[210] Ibid.

[211] As remarked by Jeunger, '[w]hile the [Inter-American Convention] can be faulted for mixing together the oil of supranationality and the water of positive laws, one can expect, in the natural course of things, the oil to rise and the water to sink': Parra-Aranguren, above n 208, 1251 quoting (at footnote 64) Juenger, above n 179, 611.

[212] The Paris based ICC Court of Arbitration has emerged as the dominant provider of international arbitration services: see above n 35, 596.

[213] Bank Mellat v Hellinki Techniki SA [1984] QB 291, 304 per Kerr LJ.

[214] See above n 48, 478. See further discussion at p 59 below, The Stateless Award.

[215] See above n 147.

[216] That is, according to Article 13.3 of the Rules then in operation. See the discussion at p 54 above in 1985 UNCITRAL Model Law, and n 188.

[217] Article 13.3: ibid.

[218] See above n 143, 274.

[219] Roy Goode, 'Insularity or Leadership? The Role of the United Kingdom in the Harmonisation of Commercial Law' (2001) 50 International and Comparative Law Quarterly 751, 753. The author notes (ibid) that '[i]t is estimated that over the next 10 years more than 1000 commercial satellites will be launched valued at $US 5 billion and that over the next 20 years expenditure on the financing of new aircraft alone will exceed $US 1 trillion'.

[220] See above n 129, 827-829.

[221] Iwan Davies, 'The New Lex Mercatoria: International Interests in Mobile Equipment' (2003) 52 International and Comparative Law Quarterly 151, 166 in quoting McGairl, 'The Proposed UNIDROIT Convention: International Law for Asset Finance (Aircraft)' (1999) 2 Uniform Law Review 439, 440.

[222] Article 9.

[223] The PPSA has been enacted separately in each Canadian province; the most recent (and last) being the Newfoundland PPSA 1999. The NZ PPSA 1999 is also modelled on the Canadian standard.

[224] As the first such Protocol, the "Aircraft Protocol" was adopted concurrently with the base Convention.

[225] See above n 221, 174.

[226] Ibid, 154.

[227] List of signatories available at the International Institute for the Unification of Private Law website <http://www.unidroit.org/english/implement/i-main.htm> at 30 August 2003.

[228] See above n 35, 596, in quoting Meason & Smith, 'Non-Lawyers in International Commercial Arbitration: Gathering Splinters on the Bench' (1991) 12N orthwesternJournal of International Law and Business 24, 27/8.

[229] See opening quote to this Section: ibid.

[230] For discussion on what makes arbitration 'international', see H van Houtte, International Arbitration and National Adjudication' in C C A Voskuil and J A Wade, Hague-Zagreb Essays 4 on the Law of International Trade (1983) 322-3.

[231] See above at p 50, 1958 New York Convention.

[232] For detailed discussion of these factors, see D A RWilliams, 'The Further Development of International Commercial Arbitration through the Undroit Principles of International Commercial Contracts' (1996) 2 New Zealand Business Law Quarterly 7, 8-9; De Ly (see above n 9, 83); Nygh (see above n 18, 191-6).

[233] As noted by Medwig (see above n 35, 611) '[t]he power of trade associations, exchanges, and arbitral institutions to deny recalcitrant parties benefits, membership, or access, and to blacklist them, gives them the ability to inflict substantial economic harm'.

[234] This applies in New Zealand where the Model Law has been substantially incorporated into the 1996 Arbitration Act (see discussion below in section VI: Lex Mercatoria and the Courts, sub-section The NZ Position). It would also apply of course where any nationally sourced arbitration rules have been adopted.

[235] See p 57 above, 1998 ICC Arbitration Rules.

[236] See above n 9, 87.

[237] That is, the lexfori arbitri: Article 19.

[238] See above n 105, 762. Lando further quotes Pierre Lalive, 'Les règles de conflit de lois appliqués au fond du litige par l'arbitre international siègeant en Suisse' [1976] Revue de l'Arbitrage 155, 159; in that '[t]o have the law of the place of arbitration or any other national law govern this reference is to force the arbitration into a procrustean bed into which none of the parties would ever have laid it': ibid.

[239] For example, concerning bribery, corruption and trading restrictions with certain states.

[240] See above n 105, 766.

[241] See above n 242, 245-268.

[242] Perhaps unsurprisingly, as Paris is the home of the ICC. However, Sir Roy Goode, 'The Role of the Lex Loci Arbitri in International Commercial Arbitration' in Francis Rose (editor), Lex Mercatoria: Essays on International Commercial Law in Honour of Francis Reynolds (2000) 267 notes that 'France is almost alone in its advocacy of the stateless award and is believed to be unique in not even allowing its courts to invoke the setting aside of an award in the court of origin as a ground for refusing recognition and enforcement in France'.

[243] See above n 9, 89-90.

[244] See above n 213, 301. Dicey and Morris endorse this position (see above n 178, 605): 'the theory of de-localisation has found little support in England'.

[245] Ministry of Defence of the Islamic Republic of Iran v Gould Inc. [1989] USCA9 949; 887 F2d 1357, 1365 (9th Cir. 1989) as cited by D Rivkin, 'Enforceability of Arbitral Awards Based on Lex Mercatoria' (1993) 9 Arbitration International 67, 83. The Court relied on 'the fact that the Article V defences [of the Convention] seemed to apply to both arbitration awards under municipal domestic law or those pursuant to the parties' own choice of law'.

[246] Such as those incorporated into the UNCITRAL Model Law or the ICC Arbitration Rules.

[247] See above n 18, 191.

[248] That is, the Washington Convention (ICSID), UNCITRAL Model Law and ICC Arbitration Rules. See above at pp 51, 54 and 57 respectively.

[249] See p 50 above, 1958 New York Convention. Furthermore D Rivkin, 'Enforceability of Arbitral Awards Based on Lex Mercatoria' (1993) 9 Arbitration International 67 notes (at 84) that as the Convention has been interpreted in the Gould case as enabling enforcement of an award 'governed by non-nationalprocedural law [then awards] substantively decided according to a-national principles should not encounter difficulties'. See also the discussion below on enforceability in section VI: Lex Mercatoria and the Courts.

[250] See p 51 above, 1980 Vienna Convention (CISG).

[251] Anthony C Sinclair, 'Using the Unidroit Principles of International Commercial Contracts in International Commercial Arbitration' (2003) 6 International Arbitration Law Review 65, 66. See also p 55 above, 1994 UNIDROIT Principles, and p 62 below, Application of UNIDROIT Principles.

[252] See above n 6, 293.

[253] See p 46 above, Arbitral Awards.

[254] William W Park, 'National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration' (1989) 63 Tulane Law Review 647, 673.

[255] See above n 9, 203.

[256] Most of the reported decisions are drawn from various articles and books, with certain web-sites dedicated to reporting arbitral awards. As the arbitral reference itself may be an insufficient citation, in all cases the original source of the decision is given in the footnote. The order of citation generally adopted is: names of parties (if known), arbitral tribunal (if known), published report (if known), date (if known); original source.

[257] Petroleum Development (Qatar) Ltdv Ruler of Qatar(1951) 18 ILR 161, April 1950: Rivkin; see above n 249, 68.

[258] ICC Award No. 3327, [1982] J.D.I. 971, 1981: Medwig; see above n 35, 606.

[259] ICC Award No. 3540, [1981] Clunet 914: De Ly; see above n 9, 263-4.

[260] ICC Award No. 8365, [1997] Clunet 1078, 1996: Berger; see above n 50, 215.

[261] Ibid, at footnote 160. The principles listed in the award are: 1. pacta sunt servanda; 2. good faith; 3. duty to negotiate in good faith; 4. resolution of contract in case of substantial breach by one of the parties; 5. prohibition to prevent the performance of one's own obligation through a wilful act; 6. venire contra factum proprium; 7. interpretation of contracts according to the principle of 'ut res magis valeat quam pereat’ and 8. principle of implied consent by conduct.

[262] Government of the State of Kuwait v American Independent Oil Company (Aminoil) (1982) XXI I.L.M. 976: Rivkin; see above n 249, 69-70.

[263] Texaco Overseas Petroleum Co (US); California Asiatic Oil Company (US) v Government of Libyan Arab Republic (1978) 17 ILM 3: Rivkin; see above n 249, 70-1.

[264] ICC Award No. 3130, [1981] J.D.I. 931, 1980: Medwig; see above n 35, 605.

[265] See p 45 above, Customs and Usages.

[266] Ad Hoc Award (Auckland, NZ), unreported, 1995: Sinclair; see above n 251, 72. A full discussion of this arbitration and application of the Principles is found in Williams: see above n 232, 17-21.

[267] International Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, 5 November 2002, <http://www.unilex.info> above n 204.

[268] Arbitration Court of the Lausanne Chamber of Commerce and Industry, 31 January 2003, <http://www.unilex.info> above n 204.

[269] Arbitration Institute of the Stockholm Chamber of Commerce: Stockholm Court, 2001, <http://www.unilex.info> above n 204.

[270] ICC Award No. 7110, (1999) 10 ICArb Bull 39, 49: Sinclair, see above n 251, 69-70.

[271] Andersen Consulting v Arthur Andersen, ICC Award No. 9797, (2001) 12 ICArb Bull 88: Sinclair, see above n 251, 70.

[272] See above n 251, 71 quoting G. Baron, 'Do the UNIDROIT Principles of International Commercial Contracts Form a New Lex Mercatoria?’ (1999) 15 Arbitration International 115, 116. Note that 69 international arbitrations are reported as having applied the Principles: <http://www.unilex.info> above n 204.

[273] See above n 251, 71.

[274] Jacobs v Credit Lyonnais (1884) 12 QBD 589, 599 per Bowen LJ.

[275] See above n 3 , 108.

[276] See above n 18, 173.

[277] See above n 47, 132.

[278] See p 51 above, 1980 Vienna Convention (CISG). See also John O Honnold, above n 162, 104-5 for brief discussion of 'gap-filling' approach taken by several European national codes.

[279] Other similar legislation includes Article 1054 of the Dutch Code of Civil Procedure: above n 9, 250; Article 187(1) of the Swiss Law on Conflict of Laws: ibid, 251; 1986 amendments to Portuguese arbitration law: Patrick Brazil, 'UNIDROIT Principles of International Commercial Contracts in the Context of International Commercial Arbitration' (1996) 11 International Arbitration Report 31, 37; 1993 amendments to the Mexican Commercial Code: ibid.

[280] Sub-Article 1496(1)oftheNCPC. English translation by Ngyh: seeaboven 18, 193.

[281] See above n 18, 193. As further noted by Nygh, both ‘loi' and 'droit’ translate into 'law' in English, hence explaining why some English lawyers insist that only a national system is indicated.

[282] Seeaboven 105, 757.

[283] See De Ly: see above n 9, 249-250 and footnote 224 citing 'dissenting' authors.

[284] Compania Valenciana de Cementos SA v Primary Coal Inc [1991] Mealey's International Arbitration Report7 (Judgement No. 1534 PRF, 22 October 1991, Courde Cassation-France)

[285] Translated as 'Cour de Cassation'.

[286] Court of Appeal translates as 'Cour d'Appel’.

[287] Compania Valenciana de Cementos S.A. v Primary Coal Inc., ICC Award No. 5953, [1990] Clunet 1056, 1 September 1988: see above n 9, 261-2; see above n 47, 131-2.

[288] As the Rules then stated: the 1998 version now applies; see p 57 above, 1998 ICC Arbitration Rules.

[289] See above n 9, 261 De Ly however raises the rhetorical question as to why 'faced with an ICC arbitration, one may wonder whether more weight should not [have been given by the French Court] to article 13(3) of the ICC Arbitration Rules than to article 1496 NCPC’: ibid, 262.

[290] Ibid, 262.

[291] Fougerolles (France) v Banque du Proche Orient (Lebanon). ICC award; citation not available, but discussed by De Ly: see above n 9, 255-6; Medwig: see above n 35, 607; Rivkin: see above n 249, 78.

[292] See above n 249, 78.

[293] Fougerolles (France) v Banque du Proche Orient (Lebanon) 1982] 109 Journal du Droit International(Clunet) 931 (Cour de Cassation - France)

[294] See above n 9, 255.

[295] Palbalk Ticaret Ltd Sirketi v Norsolor S.A., ICC Award No. 3131, [1984] Yearbook of Commercial Arbitration 109, 26 Oct. 1979; De Ly: see above n 9, 256-258; Medwig: see above n 35, 607-09; Rivkin: see above n 249, 77- 8; Stoecker: see above n 3, 123.

[296] The arbitral tribunal had its seat in Austria, and enforcement was sought in France.

[297] In applying Article 13(3) of the ICC Arbitration Rules, the arbitrators stated that they 'considered it was appropriate, given the international nature of the agreement, to put aside any compelling reference to a specific legislation, be it French or Turkish, and to apply the international Lex Mercatoria': above, n 3, 123.

[298] See above n 249, 77.

[299] Ibid, Norsolor SA v Palbalk Ticaret Ltd Sirketi (1985) XXIV ILM 360 (Cour de Cassation - France). Note that this decision is also consistent with NCPC Article 1498 that provides 'an arbitral award shall be recognised in France if [... ] this recognition is not manifestly contrary to international public policy'.

[300] Norsolor SA vPalbalk Ticaret Ltd Sirketi (1984) IX Yearbook of Commercial Arbitration 159 (Austrian Supreme Court).

[301] See above n 249, 77.

[302] This sub-section primarily addresses the development of judicial recognition in England, where most pertinent case law has evolved, and the status in Australia and USA. The NZ position towards the Lex Mercatoria is considered in the following sub-section.

[303] Coppée-Lavalin SA/NV v Ken-Ren Chemicals and Fertilizers Ltd (in liq.) [1994] 2 All ER 449 where (at 459) Lord Mustill clarified that' [t]here is another doctrine ... which asserts a single unified " Lex Mercatoria" governing the substantive rights and duties of the parties to certain types of international transaction, to the exclusion of national substantive laws. This concept has no bearing on the present dispute which is concerned only with matters of procedure, and I say nothing about it.'

[304] Dow Jones & Co Inc v Gutnick (2002) 77 ALJR 255, 274-6: see below at p 74, The Internet for discussion of this case.

[305] ... with one predictable exception. In Buchanan & Co v Babco Forwarding and Shipping [1978] AC 141, in construing an act of Parliament that implemented an international convention, Lord Denning held the dissenting view in concluding that the legislation was subject to a 'gap', and that English courts should follow the approach of courts on the Continent [... ] and fill the gap so as to carry out the purpose of the legislation. The majority commented adversely on the 'gap-filling' approach: Honnold; see above n 162, 104-5.

[306] See above n 159, 343. Goode (see above n 193, 756-8) also laments the poor UK record in this area and cites reasons of a) prevailing legal profession attitude that English law is superior to all else; b) lack of industry pressure; c) lack of parliamentary time, and d) 'the most potent factor of all is that ... we have long ceased to take an interest in servicing even our own general law. ... Our commercial legislation, like our water pipes, our railways and our underground, suffers from under-investment and patchwork adjustments which in the end costmore than if we had done a proper job': ibid, 758.

[307] See above n 3, 108.

[308] Czarnikov v Roth Smidt and Co [1922] 2 KB 478, 488 (Alsatia being a London borough which used to be a refuge for criminals).

[309] Orion Compania Espanola de Seguros v Belfort Maatschappij voor Algemene Verzekgringeen [1962] 2 Lloyd's Rep 257, 262.

[310] Ibid, 264.

[311] Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd [1978] 1 Lloyd's Rep 357

[312] Lord Denning MR, Goff and Shaw LJJ.

[313] See above n 311, 362 per Lord Denning MR, who added that 'I am prepared to hold that this arbitration clause, in all its provisions, is valid and of full effect...'

[314] J Kodwo Bentil, 'Commercial Arbitrators Authorised not to Apply Strict Rules of Law and Judicial Review' [1992] Journal of Business Law 26, 32 quoting Andrew Rogers J, 'Contemporary Problems in International Commercial Arbitration' (1989) 17 International Business Lawyer 156, 156.

[315] See above n 109, 279.

[316] See above n 249, 76.

[317] See above n 147. See the earlier discussion of this case at p 50 above, 1958 New York Convention, and p 54, 1985 UNCITRAL Model Law.

[318] Article 13(3) of the rules then applying: see also Civil Code Comfort at p 64 above.

[319] See above n 147, 1035.

[320] Ibid.

[321] This case has generated an enormous amount of academic comment, with notably little criticism of the decision. As well as sources cited above, see for example De Ly: see above n 9, 260-1; Stoecker: see above n 3, 123-4; Medwig: see above n 35, 609-10; Williams: see above n 232, 17; M P Furmston: see above n 60, 12; and Duncan Miller, 'Public Policy in International Commercial Arbitrations in Australia' (1993) 9 Arbitration International 167, 185.

[322] See above n 18, 195 (footnote 112).

[323] Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd [1990] 1 WLR 153. Note, however, that a curious statement was made in obiter by Parker LJ that appears to contradict the decision of this case, even though his was not construed as a dissenting judgment: see discussion by Bentil; see above n 314 which concludes that the unanimous CA in Eagle Star (see above n 311) represents stronger judicial precedent in the context of this case.

[324] Channel Tunnel Group Ltd v Balfour Beatty Constructions Ltd [1993] AC 334. See the discussion of Party Autonomy at p 42 above.

[325] Sub-Article 46(1)(b). Goode notes (see above n 193, 758) that the Arbitration Act 1996 embodies 'much of the philosophy of the Model Law'.

[326] See above n 48, 479.

[327] Miller, above n 321, 184-5; Pryles: see above n 143, 262.

[328] Pryles: ibid, 266.

[329] Miller: see above n 327, 187.

[330] Australia ratified the Convention in March 1988. All Australian states have since adopted the CISG into their domestic law.

[331] The Pace University Law School web site records just 7 cases: <http://www.cisg.law.pace.edu> at 22 October 2003; including Downs Investments Pty Ltd v Perwaja Steel SDN BHD [2000] QSC 421 and Roder Zelt-und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd [1995] FCA 1221; (1995) 57 FCR 216 where the CISG was actually applied. For comment on the latter case concerning Australian and German parties, see Jacob Zieger, 'Comment on Roder Zelt-und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd' in Stephanie C Krawczyk (editor), Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999) 53.

[332] PlaycorpPtyLtdvTaiyoKogyoLimited[2003] VSC 108;GinzaPteLtdvVistaCorporation Pty Ltd [2003] WASC 11

[333] Editorial remarks by Dr Bruno Zeller on the case Playcorp Pty Ltd v Taiyo Kogyo Limited [2003] VSC 108: <http://cisgw3.law.pace.edu/cases/030424a2.htm l> . On the case Ginza Pte Ltd v Vista Corporation Pty Ltd [2003] WASC 11 Dr Zeller commented that '[t]his case is characterised by a lack of basic understanding of the CISG. It is disappointing to note that relevant international case law or academic writing has not been used' <http:// cisgw3.law.pace.edu/cases/030117a2.htm l> , above n 331.

[334] See above n 159, 340. See also the discussion at p 51 above, 1980 Vienna Convention (CISG), concerning the reticence of common law jurisdictions to embrace the CISG.

[335] Taken from <http://www.unilex.info> above n 204: three decisions are unreported; the fourth being Hughes Aircraft Systems International v Air services Australia [1997] FCA 558; (1997) 146 ALR 1.

[336] Ibid.

[337] Ibid, 37.

[338] See above note n 249, 82. See in particular the US Supreme Court decision of Scherck v Alberto-Culver Co [1974] USSC 173; 417 US 506 (1974) where at 515 Mr Justice Stewart held 'a contractual provision specifying in advance the forum for litigating disputes and the law to be applied is an almost indispensable precondition to achieving the orderliness and predictability essential to any international business transaction. Such a provision obviates the danger that contract dispute might be submitted to a forum hostile to the interests of one of the parties or unfamiliar with the problem area involved'.

[339] See p 59 above, The Stateless Award, and footnotes 245 and 249 in particular.

[340] See above n 249, 84.

[341] 31 US cases reported to date have either adopted the CISG as the substantive law of the dispute or simply referred to the CISG in citing support: <http://www.unilex.info> above n 204.

[342] Ministry of Defence and Support for the Armed Forces of the Islamic Republic of Iran v Cubic Defense Systems, Inc [1998] US District Court (SD California): <http://www.unilex.info> above n 204.

[343] See above n3, 105.

[344] See above n 18, 196. Similar sentiments were expressed by Lord Mustill in the Channel Tunnel case, above n 59.

[345] Attorney-General v Mobil Oil NZ Ltd [1989] 2 NZLR 649, 668.

[346] Yoshimoto v Canterbury Golf International Ltd [2000] NZCA 350; [2001] 1 NZLR 523, 548 per Thomas J.

[347] See the previous section, Common Law Unease, and n 160.

[348] See, for example, p 51 above, 1980 Vienna Convention (CISG); and n 168 in particular.

[349] The Pace University Law School web site records nine NZ cases where the CISG has been referred to; albeit most in obiter: <http://www.cisg.law.pace.edu> above n 331.

[350] Crump v Wala [1994] 2 NZLR 331, 338: 'the Vienna Sales Convention provide[s] that a buyer can only avoid a contract where the seller has committed a fundamental breach of his obligations: see [...] CISG, art 49(1)(a)'.

[351] Attorney-General v Dreux Holdings Ltd (1996) 7 TCLR 617

[352] Ibid, 627.

[353] Ibid, 641.

[354] Richard P, Thomas, Keith, Blanchard JJ.

[355] See above n 351, 644. The pertinent international references were cited by Thomas J, 642: '...art 8(3) of the [CISG] accepts that in determining the intent of a party due consideration is to be given to, among other things "any subsequent conduct of the parties". [...] Similarly, art 4.3(c) of the UNIDROIT Principles [...] permits regard to be had to "the conduct of the parties subsequent to the conclusion of the contract".' See also the discussion at p 62 above of the NZ Ad Hoc arbitration award addressing this same issue.

[356] See above n 346.

[357] Ibid, 547 citing the CISG, sub-Article 8(3). The UNIDROIT Principles were also cited (ibid) where 'art 4.3 provides that [... ] regard should be had to all the circumstances including "preliminary negotiations between the parties".'

[358] McLauchlin, David, ' A Contract Contradiction'(1999) 3 0 Victoria University of Wellington Law Review 175, 193: cited in Yoshimoto; see above n 346, 547 per Thomas J.

[359] Ibid.

[360] See above n 346, 547-8.

[361] Canterbury Golf International v Yoshimoto [2002] UKPC 40

[362] Ibid, para 28.

[363] This is particularly relevant in the light of NZ's adoption of the CISG, whereas England has not.

[364] Bobux Marketing Ltd v Raynor Marketing Ltd [2001] NZCA 348; [2002] 1 NZLR 506

[365] Ibid, 515: 'art 1.7 of the 1994 [UNIDROIT Principles] provides that "each party must act in accordance with good faith and fair dealing in international trade" and further that, "the parties may not exclude or limit this duty". Similarly, art 7(1) of the [CISG] states that in the interpretation of the Convention regard is to be had, inter alia, to the "observance of good faith in international trade".'

[366] Ibid, 517.

[367] Ibid, 524; per Keith and Blanchard JJ. Note that in Wellington City Council v Body Corporate 51702 [2002] NZCA 191; [2002] 3 NZLR 486 the CA then effectively closed the door for the time-being on the 'good faith' question in holding (at 495/6) that '[g]ood faith [...] is essentially a subjective concept [so there is] no sufficiently certain objective criterion by means of which the Court can decide whether either party is in breach of the good faith obligation. The Court is unable in such cases to resolve the question whether a particular negotiating stance was adopted in good faith'.

[368] International Housewares (New Zealand) v SEBSA, unreported, Master Lang, 31 March 2003, Auckland HC, CP395-SD01 <http://cisgw3.law.pace.edu/cases/030331n6.html> above n 331.

[369] Ibid, para 45.

[370] CBI NZ Ltd v Badger Chiyoda [1989] 2 NZLR 669. Under the Act, parties to an international arbitration must specifically elect for recourse to the courts in their agreement (per the Second Schedule, Article 5).

[371] Ibid, 688. Similarly, in the Mobil Oil case (above n 345), the CA saw (at 668) 'no reason for departing from those principles of international commercial comity' in ordering a stay of proceedings initiated by the Crown in objecting to the arbitral jurisdiction of the 1965 Washington Convention (ICSID). The Crown had contended 'that the issue as to whether [a certain clause in the Crown's agreement with Mobil Oil] contravened the provisions of the Commerce Act should be decided in the courts of NZ': See above n 150, 332.

[372] The preamble to Schedule 1 of the Act states: '[t]he provisions of this Schedule correspond, for the most part, to the provisions of the Model Law. [...] Certain changes have been made to amend or supplement the provisions of the Model Law in its application to New Zealand. The original numbering of the articles of the Model Law and their paragraphs has been retained'.

[373] 1996 Arbitration Act, Schedule 1, sub-Article 28(1), emphasis added, and see the discussion of the significance of the words 'rule of law' at p 54 above.

[374] See above n 50, 79-80.

[375] Judge Willy, author of Arbitration inNew Zealand (2003) is 'not aware of any arbitration which has taken place in NZ where a party wished to rely upon "rules of law" which do not correspond to any recognised state law': personal correspondence with the author (28 August 2003).

[376] Ibid.

[377] 1996 Arbitration Act, Schedule 1, sub-Article 34(2)(b)(ii).

[378] See the preceding discussion concerning the CBI NZ case, and the discussion of Common Law Unease at p 66 above.

[379] Deutsche Schachtbau case per Donaldson M.R of the English CA: see above, n 147, 1035.

[380] See above n 35, 616 quoting C M Schmitthoff, Select Essays on International Trade Law (1988)233-4.

[381] Ibid, 615.

[382] See p 58 above, 2001 Cape Town Convention.

[383] See above n 129, 834.

[384] See above n 193, 752.

[385] Dessemontet, François, 'Conflict of Laws for Intellectual Property in Cyberspace' (2001) 18 Journal of International Arbitration 487, 497. Two examples are given by the author: 1) the right of an exclusive licensee to sue for infringement is now recognised in most jurisdictions; and 2) the privileged position of the truly exclusive licensee correlates with his obligation to use the invention, trademark, design, model or copyrighted work.

[386] See above n 193, 753.

[387] See p 42 above, P arty Autonomy.

[388] See p 63 above, Lausanne Award.

[389] The individual suppliers are headquartered variously in France, USA and Japan with manufacturing plants collectively located in all continents of the world. Constructed during the late 1990s, the network includes '39 landing points in 33 countries and 4 continents from Western Europe (including Germany and France) to the Far East (including China, Japan and Singapore) and to Australia': SEA-ME-WE3 website: <www.smw3.com> at 10 September 2003.

[390] The parties chose English law to rule the contract, and no dispute arose that resulted in judicial or arbitral intervention (the source of this information being the author's personal knowledge of the industry).

[391] Comprising mainly of cable, and submarine repeaters (ie amplifiers of the optical or electrical signal).

[392] The first submarine telegraph cable was laid across the Atlantic in 1866 by the 'Great Eastern'.

[393] In support of this theme, Berger has pointed to development of a lex petrolia for the international oil industry, a lex numerica for international data interchange and a lex constructionis for the international construction industry: see above n 50, 230.

[394] Hughes, Justin, 'The Internet and the Persistence of Law' (2003) 44 BC Law Review359, 361.

[395] See above n 304, para 113 per Kirby J, citing Fitzgerald and Fitzgerald, Cyberlaw(2002).

[396] Ibid.

[397] Gleeson CJ, Callinan, Gaudron, Gummow, Hayne and McHugh JJ.

[398] Rosemary Tobin and Paul Myburgh, 'Horse and Buggy on the Electronic Highway: Transnational Internet Defamation in the High Court of Australia' (2003) 9New Zealand Business Law Quarterly 151, 159/160.

[399] See above n 304, para 118-9.

[400] See above n 394, 373.

[401] See above n304

[402] See above n 398, 161.

[403] See above n 105, 752.

[404] Ibid (the Dane, Ole Lando).

[405] Thomas John Watson, Sr (1874-1956).

[406] See above n 105, 755.

[407] See above n 327, 185.

[408] See above n 105, 748.

[409] See above n 9, 288.

[410] See above n 7, 128.


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