Lex Mercatoria

By Ph.D. student ANA MERCEDES LÓPEZ RODRÍGUEZ

School of Law, Department of Private Law
University of Aarhus

Since the nineteen sixties legal scholars have been systematically discussing
the nature and function of a purported autonomous body of transnational
commercial rules called lex mercatoria.1 Discussions have been ardent and
the subject has become controversial. Whereas some authors have endlessly
noted the advantages of the lex mercatoria others have denied its existence.
In spite of the numerous academic contributions, the notion of the lex mer-
catoria still remains unknown to the majority of the business and legal
communities. This fact alone could be a good reason for reconsidering the
question of the lex mercatoria. Furthermore, recent developments such as
the process of economical globalization, the irruption of Internet trade, the
adoption of two bodies of codified principles of contract law (the Unidroit
Principles of International Commercial Contracts and the Principles of
European Contract Law) and the increasingly harmonization of contract
law in the EU, call for a fresh examination of the traditional regulation of
international contracts.

1. Historical background of Lex mercatoria

The notion of the lex mercatoria is not new. Goldman noted that it has its
precursor in the Roman ius gentium, the body of law that regulated the eco-
nomic relations between foreigners and Roman citizens.2 Other authors go
further back in time and trace the origins of the lex mercatoria in the An-
cient Egypt or in the Greek and Phoenician sea trade of the Old Ages.3 In
any case, it is in the law merchant of the Middle Ages where the historical
roots of the lex mercatoria can truly be found. The flourishing of interna-
tional economic relations in Western Europe at the beginning of the elev-
enth century caused the formation of the law merchant, a cosmopolitan mer-
cantile law based upon customs and applied to cross-border disputes by the
market tribunals of the various European trade centers. This law resulted
from the effort of the medieval trade community to overcome the fragmen-
tary and obsolete rules of feudal and Roman law which could not respond to
the needs of the new interlocal and international commerce. Merchants cre-
ated a superior law, which constituted a solid legal basis for the great expan-
sion of commerce in the Middle Ages. For almost eight hundred years uni-
form rules of law, those of the law merchant were applied throughout West-
ern Europe among traders.
With the raise of nationalisms and the codification period of the
19th century the law merchant was incorporated into the municipal laws of
1
Discussions began under the auspices of the London Conference on the Sources of
International Trade (1962) see Mustill, Liber Amicorum for Lord Wilberforce, Ox-
ford, 1987, p. 150.
2
Goldman, B., Forum Internationale, vol. 3, 1983, p. 3.
3
Schmitthoff, C., Chia-jui Cheng (ed.), Clive M. Schmitthoff's Select Essays on In-
ternational Trade Law, Martinus Nijhoff, 1988, pp. 20-37, at 23.

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each country. It became blended with the peculiarities of national law and
thus is lost its uniform character. As states took control over international
trade, the new national mercantile laws regulated economic relations and
cross-border disputes were solved by referring to private international law.
The development of international trade after the Second World
War showed some of the flaws of the traditional regulation of international
contracts. The complexity of private international law rules and the obsolete
character of domestic laws did not satisfy the simplicity and certainty re-
quired by the business community. States soon became aware of the impact
of a legal divided world upon international trade and they reacted by means
of international conventions and model laws, which harmonize private in-
ternational law or substantive law aspects of international transactions. Nu-
merous conventions and model laws have been adopted in the fields of arbi-
tration, factoring, leasing, letters of credit or sales until present time. The
process of negotiation and adoption of these conventions is nevertheless dif-
ficult and time-consuming. The different economical, social and legal back-
ground of the participating states enlarges the negotiating process into vari-
ous decades (e.g. the drafting of the 1980 Viena Convention on International
Sale Contracts, CISG, took over 20 years). Usually, reservations are allowed
in order to adopt a final text. This leads to partial harmonization, different
interpretations of the same convention, and to the risk of having a petrified
regulation, which cannot be revised to adapt it to the further developments
of international trade.
The supremacy of national law in international economic relations
began to be questioned by scholars in the early nineteen sixties. At the same
time, they noted the renaissance of the law merchant phenomenon. Just as
medieval merchants overcame feudal law, present time traders were adopt-
ing alternative solutions to avoid the application of national law to their
transactions. By means of standard clauses, self-regulatory contracts, trade
usages and, especially, by recourse to international commercial arbitration,
traders were creating their own regulatory framework independently from
national law, the so-called new lex mercatoria.4

2. Concept and sources of the lex mercatoria

The lex mercatoria may be generally defined as the body of rules, different
in origin and content, created by the trade community to serve the needs of
international trade. A settled definition of the lex mercatoria upon which the
majority of the doctrine agrees cannot be found. There are as many possible
concepts of the lex mercatoria as there are authors having dealt with the sub-
ject. Usually, most definitions are based on the relation between the lex
mercatoria and national law or on the substantive quality of the lex mercato-
ria.
As regards the relation of the lex mercatoria vis à vis national law, a dis-
tinction may be made between an autonomist and a positivist concept. The
autonomist concept regards the lex mercatoria as having autonomous char-
acter, independent from any national system of law. Hence, it is "a set of

4
E.g. Schmitthoff, C.M., “Das neue Recht des Welthandels”, RabelsZ 28, 1964, pp.
47-77; Goldman, B., “Frontières du droit et lex mercatoria”, Arch.phil.dr. 9, 1964, p.
89 et seq.; Goldstajn, A., “The New Law Merchant”, J. Bus.L., 1961, p. 11; Kahn,
Ph., La vente commerciale internationale, 1961; Fouchard, Ph., L’arbitrage com-
mercial international, 1965; Stoufflet, J., Le credit documentaire, Paris, 1959.

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general principles, and customary rules spontaneously referred to or elabo-
rated in the framework of international trade, without reference to a particu-
lar national system of law."5 From a positivist approach the lex mercatoria is
defined as a body of rules, transnational in their origin, but which only ex-
ists by virtue of state laws, which give them effect. For the supporters of this
concept the lex mercatoria is "ultimately founded on national law."6
Concerning its substantive quality, there are three main concepts
of lex mercatoria.7 The first one conceives the lex mercatoria as an autono-
mous legal order. The second one characterizes it as a body of rules capable
of operating as an alternative to an otherwise applicable national law. Fi-
nally, a third concept describes the lex mercatoria as a conglomerate of us-
ages and expectations in international trade, which may complement the
otherwise applicable law.
The concept of the lex mercatoria is usually blended with other
concepts, which may be similar or alternative. Some authors, for instance,
refer to transnational law as a synonym of the lex mercatoria. Transnational
law, however, is a broad concept, which encompasses all law regulating
transboundaries actions or events, including public and private international
law and other rules not fitting into those categories.8 The lex mercatoria is a
much narrower concept “used to indicate that part of transnational commer-
cial law which is unwritten.”9
The question of the sources of the lex mercatoria is unsettled as
well. It depends on each definition of the lex mercatoria at hand. From a
positivist viewpoint Schmitthoff included mercantile customs formulated by
international bodies such as the International Chamber of Commerce (e.g.
INCOTERMS, rules for documentary credits) and international legislation.10
From an autonomist position, Goldman embodied the usages of interna-
tional trade and general principles of law as the genuine sources of the lex
mercatoria.11 Under this view, codified usages are part of the lex mercatoria
only if businessmen refer to them with such a degree of frequency that it
may be concluded that the reference is implicit.12 Lando proposed an en-
larged list of sources, which comprises public international law, uniform
laws, the general principles of law, the rules of international organizations,
standard form contracts and reported arbitral awards.13 Goode has noted that
some of these sources would not fall under a strictu sensu concept of lex
mercatoria. Accordingly, the lex mercatoria is by nature customary and
spontaneous and, therefore, it solely consists of customary commercial law,
customary rules of evidence and procedure and general principles of com-

5
Goldman, B., Contemporary Problems in International Commercial Arbitration,
Julian D.M. Lew (ed.), 1986, pp. 113-125, at 116.
6
Schmitthoff, C.M., op.cit., p. 223.
7
Berger, K.P., The creeping codification of the lex mercatoria, Kluwer Law Interna-
tional 1999, p. 40 et seq.; Craig, WL., Park, WW., Paulsson, J., International Cham-
ber of Commerce Arbitration, 2nd. edition, 1994, Oceana Publications, p. 603 et seq.
8
The term was first used by Philip C. Jessup in his work Transnational law; Goode,
R., New Developments in International and Consumer Law, Ziegel, J.S. (ed.), Hart
Publishing, Oxford, 1998, pp. 3-35, at 4.
9
Goode, R., ibidem.
10
Schmitthoff, C.M., op.cit., p. 34.
11
Goldman, B., op.cit., p. 114.
12
Ibidem.
13
Lando, O., 34 I.C.L.Q., 1984, pp. 747 et seq., p. 748.

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mercial law, including international public policy.14 Under this position, the
various sources named by Lando would, collectively, make up transnational
commercial law.15

3. The theory of the lex mercatoria

The theory of the lex mercatoria is controversial. Some authors have even
denied its existence.16 The opponents of the lex mercatoria affirm that it
lacks generality and predictability and that it is vague and incomplete.17 Fur-
thermore, it is underlined that the lex mercatoria does not have any binding
force, since it has not been enacted by a Parliament or endorsed in an inter-
national convention.18 Nevertheless, the objection on the lex mercatoria’s
lack of binding force is overcome the theory of legal pluralism. Social
groups, such as the community of merchants, are also capable of producing
legal rules.19 Moreover, in the past years, arbitrators have applied the lex
mercatoria and it has been recognized by national laws and in case law (see
infra).
It is stressed that the lex mercatoria lacks generality due to the ex-
isting diversity of standard contracts and trade usages. Hence, each standard
contract and trade usage reflects the sense of justice of the different trades or
professions, being too diverse to constitute a homogeneous legal source.20
Likewise, the solutions reached by arbitrators in the application and, possi-
bly, in the creation of the lex mercatoria only concern the dispute in ques-
tion, not being extrapolable to the generality of international trade.21 Few
awards are published, making the outcome of future disputes difficult to
predict. Accordingly, "the development of a consistent body of legal princi-
ples [...] requires disclosure of the facts and reasons underlying arbitral deci-
sion making. Without such disclosure, businessmen and arbitrators are un-
able to look to precedent for guidance, and arbitrators cannot be expected to
apply commercial customary law principles consistently."22
The lex mercatoria is furthermore accused of being vague and in-
complete. It has been claimed that there are very few general principles of
trade law that can be universally recognized; those very few are so basic and
fundamental as to be useless.23 Even the proponents of the lex mercatoria
have admitted that it is incomplete. Indeed, the lex mercatoria does not pro-
vide an answer for legal issues such as validity, capacity or contract form.24
In any case, the major obstacle to the theory of the lex mercatoria
is its lack of binding force. The lex mercatoria falls from the traditional
definition of law. It does not result from the command of a sovereign as it
has not been enacted by a Parliament or endorsed in an international
convention. From the point of view of legal pluralism, however, it is argued
14
Goode, R., op.cit. , p. 4.
15
Ibid, p. 6.
16
E.g. Mann, F.A., 33 I.C.L.Q., 1984, pp. 193-198
17
E.g. Kropholler, J., IPR, § 11 I.3
18
E.g. Schlosser, RIW, 1982, p. 867.
19
Goldman, B., op.cit., pp. 20-23.
20
Mustill, op.cit., p. 157.
21
On the legal value of arbitral case law see e.g. Brækhus, S., Sjørett, voldgift og
lovvalg: artikler 1979-1988, Oslo: Universitetsforlaget, 1998, p. 198 et seq.
22
Cremades, B. and Plehn, S., Boston University International Law Journal, vol. 2,
1984, pp. 317-348, p. 336.
23
Mustill, op.cit., p.156.
24
Goldman, B., Journal de Droit International (Clunet), 1979, pp. 475-505, p. 479.

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vention. From the point of view of legal pluralism, however, it is argued that
the lex mercatoria certainly belongs to the domain of "law". The concept of
"law" largely departs from the notion of sanction and social organizations
are capable of producing its own rules.25
Kassis has objected such position and claimed that legal rules
have an obligatory character. The rules enacted by the legislator have an in-
trinsic binding force, whereas customary rules require the so-called opinio
iuris, the feeling to be bound. This does not occur in the case of the pur-
ported rules of the lex mercatoria. Trade usages are a product of party
autonomy; they are contractual practices generally observed and used as a
proof of the will of the parties. The latter may therefore exclude their appli-
cation by an express stipulation in the contract.26 The proponents of the lex
mercatoria have counter-attacked such statement by noting that the societas
mercatorum has mechanisms of coercion to obtain compliance with its rules
such as black lists, damage to commercial reputation or withdrawal from
trade associations' members' rights.27 As a result, merchants actually feel
bound to observe the rules of the lex mercatoria.
Finally, it has been underlined that even if some of its elements
may be described as legal rules, the lex mercatoria does not have the quality
of a legal system. The societas mercatorum cannot present its convictions
and notions in a systematic order, as there is not a single international com-
munity of merchants but a plurality instead.28 At the most, there are only
principia mercatoria.29

4. Lex mercatoria as the applicable law to international contracts

The applicable law to a contract is the legal framework that gives expression
and content to the will of the parties under the contract.30 Traditionally, only
national law may function as the applicable law to international contracts.
The Permanent Court of International Justice in the Serbian and Brazilian
Loans Case already held that "any contract which is not a contract between
states in their capacity as subjects of international law is based on the mu-
nicipal law of some country".31 Normally, private international law rules to
which national courts are bound lead to the application of national law, for
instance, Art. 3 1980 Rome Convention on the Law Applicable to Contrac-
tual Obligations.32 A choice of law clause for the lex mercatoria is inter-

25
Goldman, B., Archives de philosophie du droit, v. 9, 1964, pp. 177-192, p. 192.
26
Kassis, A., Théorie Générale des Usages du Commerce, Librairie Générale de
Droit et de Jurisprudence, Paris, 1984, p. 165 et seq.
27
Berger, K.P., op.cit., p. 29.
28
Lagarde, P., Études Goldman, LITEC, Paris, 1983, pp. 125-150, p. 139: "il semble
que ce soient seulement des îlots d'organisation qui apparaissent dans le commerce
international, non une organisation unique."
29
Highet, K., Lex Mercatoria and Arbitration, Thomas Carbonneau, (ed.), Rev. ed.,
1998, Juris Publishing, Kluwer Law International, p. 134: "The concept of principia
mercatoria more correctly reflects the nature, application, and content of the law
merchant than any suggestion that it amounts to an inchoate or undiscovered legal
system that exists outside national jurisdictions."
30
Von Hoffmann, B., Contract Conflicts, Ed. P. North, 1982, p. 222.
31
Publications of the Permanent Court of International Justice, series A (Nos. 20-1)
(Judgments Nos. 14 and 15), at p. 41, quoted by Schmitthoff, C.M., op.cit., p. 474.
32
OJ L 266, 9 Oct. 1980; Lagarde, P., Rev. crit. dr. internat. privé, 80 (2), 1991, pp.
287-340, p. 300.

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preted as a mere incorporation of the usages of international trade into the
contract, subject to the mandatory rules of the otherwise applicable law.33
Such hegemony of national law and private international law in
the regulation of international contracts has been proven to be against the
certainty and simplicity required by international trade for different reasons.
Firstly, the localization of international contracts within a particular national
system is arbitrary. Most international transactions present connections of
equal importance with several legal orders. Moreover, some of these trans-
actions take place in the major trade centers and are more closely connected
to the transnational scene than to a single state, e.g. Euro-bonds. In the case
of electronic commerce, it may be complicated to locate the transaction
within the physical territory of a state because the Internet, which plays a
central role in this type of trade, is an immaterial marketplace. Secondly,
private international law rules are complex and their outcome often uncer-
tain. In the event of a dispute the final result will depend on where proceed-
ings are brought. National courts practice in many cases a homeward trend,
which leads to the application of the lex fori. Furthermore, national law is
not suitable for contracts between public bodies and private undertakers.
The applications of the public body’s own national law is not desirable. The
State in question may change the law to the detriment of the private party.
Likewise, a State is rarely willing to be submitted to a foreign law. Finally,
national law is primarily enacted to regulate domestic transactions and does
not take into account the needs of international trade. Sometimes, the appli-
cable law is foreign to the judge and/or the parties and requiring information
on its contents is cumbersome.
In the field of international commercial arbitration disputes are
usually solved by the application of non-national rules, alone or in combina-
tion with municipal law. International commercial arbitrators are not usually
bound to any particular national private international law rules, as their ju-
risdiction is based on the will of the parties and not upon the sovereignty of
a state. They are in many cases allowed to apply non-national law if the par-
ties so choose or in the absence of choice of the applicable law, e.g. Art. 17
ICC Arbitration Rules, Art. 33 of the UNCITRAL Rules on International
Commercial Arbitration, Art. 28 of the UNCITRAL Model Law on Arbitra-
tion, or Art.VII of the 1961 European Arbitration Rules. Other recent rules
on arbitration allow the arbitrator to directly find the substantive law appli-
cable to the dispute without previous recourse to private international law
e.g. Art.1496 of the French New Code of Civil Procedure or Art.1054 of the
Dutch Arbitration Act. When awards based on the lex mercatoria have been
subject to recognition or enforcement before national courts, the choice of
substantive law by the arbitrators has not been questioned. It could neither
be shown that the awards were ultra vires nor that the awards violated the
forum's public policy which otherwise would have jeopardized their recog-
nition under Art.V of the 1958 New York Convention.34 In this regard, the

33
Ibid, p. 301; On the distiction between kollisionsrechtliche Verweisung and ma-
teriellrechtliche Verweisung (ægte og uægte partshenvisning) see Lando, O., 189
Collected Courses, Vol.VI, 1984, pp. 255-256; Dicey & Morris, 13th ed., v.II, pp.
1226-1227; Kropholler, J., Internationales Privatrecht, 3rd. edition, Tübingen, 1997,
§ 40 I, pp. 268-269; Arnt Nielsen, P., International privat- og procesret, Jurist- og
Økonomforbundets Forlag, 1997, pp. 483-484.
34
E.g. the Norsolor Case, ICC award No. 3131, XII Yearbook of Commercial Arbi-
tration, 1983, pp. 109-111; the Rakoil Case (deutsche Schachtbau- und Tiefbohrge-

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1992 ILA Resolution recommends the validity and enforceability of awards
based on transnational rules where the parties have so chosen or when they
have remained silent as to the applicable law.35
It may be therefore concluded that the existence of the lex merca-
toria is supported by the practice of international commercial arbitration in
isolation from any doctrinal debate. Three are the foundations for this exis-
tence; the principle of party autonomy, the principle of good faith and the
use of arbitration.36

5. New sources for the lex mercatoria?

During the last few years important changes have taken place in the field of
contract law. Two sets of codified general contract principles have entered
the international arena, the UNIDROIT Principles of International Commer-
cial Contracts (1994) and the European Principles of Contract Law, Parts I
and II (1999). They fulfill two ambitious programmes carried out by,
respectively, the UNIDROIT and the Commission on European Contract
Law, also known as the “Lando Commission“ in honor of its founder and
chairman, the Danish professor Ole Lando. The UNIDROIT Principles (UP)
only apply to international commercial contracts, whereas the European
Principles (PECL) may be also applied to national contracts and non-
commercial agreements, such as consumer contracts.37
Both sets of principles contain rules that cover most aspects of
contract law. The rules are endorsed with a very well defined content and a
precise and clear language. The Principles do not have a precise role, in the
sense that they are capable of serving different purposes. Hence, they may
function as means of interpreting the applicable domestic or international
uniform law, as a model for national and international legislators and as the
governing law to the contract.38 Neither the UP nor the PECL are binding.
They are the work of eminent specialists in the area of contract law, but they
are not endorsed in an international convention or the like.
Some scholars have begun to speak of the Principles as new
sources for the lex mercatoria. For instance, regarding the UP, it has been
affirmed that “in view of the fact that the Principles represent a system of
rules intended to enunciate principles which are common to the existing na-
tional legal systems and best adapted to the special requirements of interna-
tional commercial contracts, they could be considered as a sort of modern
‘ius commune’or what is commonly called ‘lex mercatoria‘.”39 Being so, the
lex mercatoria could be now served by rules that are predictable, consistent
and complete, thereby tackling the traditional critiques against its vague-
ness, incompleteness and lack of foreseeability. As an author has put it, "the
great importance of the UP is that the volume exists. It can be taken to court,

sellschaft mbH at al. v. The Government of the State of R'as Al Khaimah and The
R'as Al Khaimah Oil Company), [1987] 2 All ER, pp. 769-784.
35
Resolution on Transnational Rules adopted at the 65th International Law Associa-
tion Conference in Cairo on April 26, 1992.
36
Dasser, F., Internationale Schiedsgerichte und lex mercatoria, Schulthess Poly-
graphischer Verlag AG, Zürich 1989, p.46; Goldstajn, A., Festschrift für Clive M.
Schmitthoff, Athenäum Verlag, Frankfurt (M), 1973, p. 171.
37
Bonell, M.J., Uniform Law Review, vol. 2, 1996.
38
See: the Preamble of the UNIDROIT Principles of International Commercial Con-
tracts, Rome, 1994 and art. 1:101 of the European Principles.
39
Bonell, M.J., 40 Am.J.Comp.L, 1992, p. 629.

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it can be referred to page and article number, and persons who are referred
to its provisions can locate and review them without difficulty. This alone is
a great contribution towards making lex mercatoria definite and provable.”40
There are a considerable number of examples where the legal
community has acknowledged the UP. Accordingly, the UP have been ap-
plied by arbitrators on several occasions and recognized by national courts.41
Likewise, the 1994 Mexico Convention endorses on its arts. 9 and 10 that
the principles of international commercial law recognized by international
organizations shall be considered to ascertaining the applicable law to the
contract. These references include the UP, for so was expressly noted during
the sessions of the Conference that approved the Convention.42
In any case, being the product of academic research, the charac-
terization of the UP and PECL as a whole as lex mercatoria depends on their
recognition by those involved in international trade. Only “when the actors
on the international trade stage, the parties to contracts, the arbitrators and
possibly judges start to use the Principles, the latter may, in due course,
grow into a part of the lex mercatoria.“43 This has been made clear in some
arbitral awards, in which the arbitrators found that some of the UP provi-
sions did not yet reflect a current practice of international trade.44

6. The lex mercatoria: a European insight

From its very beginning the strategy of the Community has been to promote
economic integration through legal harmonization. The original version of
the Treaty of Rome already provided for harmonization in various provi-
sions e.g. Art.27, regarding customs, Art. 54.3. g) on certain companies and
general provisions like Art.3. h), Art. 100 or Art. 235. Ever since the Single
Market Programme of 1985 the Community has actively intervened in the
field of private law by the enactment of many harmonizing acts, including

40
Selden, B.S., 2 Golden Gate University School of Law.
41
The UP have been applied in at least 30 cases, including national courts decisions
e.g. United States District Court, S.D. California, 7 Dec. 1998, Ministry of Defense
and Support for the Armed Forces of the Islamic Republic of Iran v Cubic Defense
Systems Inc., which held that the application of the UP in a previous arbitral award
as a source of “general principles of international law and trade usages“ without an
express authorization by the parties thereof constituted no violation of Article
V(1)(c) of the 1958 New York Convention; www.UNIDROIT.org/principles.
42
See, Parra Aranguren, G., 69 Tulane Law Review, 1995, pp. 1239-1252.
43
Boele-Woelki, K., Uniform Law Review, 1996, v. 4, p. 652 et seq., p. 659; also,
Goldman, B, op.cit., p. 114, on the quality as lex mercatoria of standard contracts
and general clauses established under the auspices of an international organisation.
44
ICC Award No.7375, Int'l Arb. Rep., 1996; see Berger, K.P., Uniform Law Re-
view 2000-1, p. 169, ICC Award No. 8873, Journal du droit international 1998,
1017; see http://www.unidroit.org/english/principles/caselaw/caselaw-main.htm.

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contract law where several directives have been issued.45 This has led to a
"communitarisation" of contract law.46
The intervention of the Community in the field of private law has
been fragmentary and it is not well coordinated. Furthermore, in those areas,
which still remain unharmonized, recourse has to be made to private interna-
tional law rules e.g. the Rome Convention. This leads to a paradox; whereas
law has been one of the main tools for European integration, the latter is, at
the same time, a great obstacle for the completion of the internal market. As
contracts are the main legal tool used in the circulation of goods and ser-
vices, the existence of fifteen different contract laws within the European
Union may hamper the optimal functioning of the internal market. Increased
transaction costs due to the necessary legal advice on foreign contract law
and uncertainty as to the outcome of possible future disputes hold many
traders away from the European market and keep them within their own na-
tional boundaries.47 Ultimately, consumers end up paying the price of legal
uncertainty.
The heterogeneous regulation of contracts in the national, communi-
tary and international context has given rise to a discussion on the need of a
common basis for contract law in Europe. For some time the debate on har-
monization of contract law has been merely academic, with an almost non-
existent political back up. Only two resolutions of the European Parliament
in 1989 and 1994, respectively, called for work to be started on the possibil-
ity of drawing up a common European Code of Contract Law.48 However,
over the past three years the issue on harmonization of contract law has been
impregnated of a political character. Indeed, in 1999 the conclusions of the
European Council held in Tampere requested ”as regards substantive law an
overall study on the need to approximate Member States legislation in civil
matters in order to eliminate obstacles to the good functioning of civil pro-
ceedings” (para. 39).49 Moreover, in its resolution of 16 March 2000 the
European Parliament again insisted on ”that greater harmonisation of civil
law has become essential in the internal market” and requested the Commis-
sion to undertake a study in this area. Finally, the European Commission
published in 11th July 2001 a Communication to the Council and the Euro-
pean Parliament on European Contract Law,50 seeking information from all
interested parties as to whether the co-existence of different national contract
laws hinders the functioning of the internal market (para. 72) and if so which

45
E.g. Council Directive 93/13/EEC on unfair terms in consumer contracts, OJ L
095, 21/04/1993, p. 0029-0034, Council Directive 86/653/EEC on self-employed
commercial agents, OJ L 382, 31/12/1986 p. 0017-0021, Council Directive
85/577/EEC on Doorstep Sales, OJ L 372, 31/12/1985 p. 0031 – 0033, Council Di-
rective 87/102/EEC on consumer credit, OJ L 042, 12/02/1987 p. 0048-0053, Coun-
cil Directive 90/314/EEC on package tours, OJ L 158, 23/06/1990 p. 0059-0064, or
Directive 94/47/EC on time share, OJ L 280 , 29/10/1994 p. 0083 – 0087.
46
Benacchio, G., Diritto Privato della Comunità Europea, CEDAM, Padova, 1998,
p. 9.
47
Lando, O., International Contracts and Conflicts of Laws, Petar Sarcevic (ed.),
Kluwer, 1990, pp. 1-13, p. 2.
48
OJ C 158, 26.6.1989, p. 400 (Resolution A2-157/89); OJ C 205, 25.7.1994, p. 158
(Resolution A3-0329/94).
49
Presidency conclusions, Tampere European Council 15 and 16 October 1999, SI
(1999) 800.
50
COM (2001) 398 final, 11th July 2001.

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option would be the most appropriate to solve such problem (para. 73). Four
options were suggested by the Communication (para. 46):
I. To leave the solution of any identified problems to the market
II. To promote the development of non-binding common contract law
principles, useful for contracting parties in drafting their contracts, national
courts and arbitrators in their decisions and national legislators when draw-
ing up legislative initiatives
III. To review and improve existing EC legislation in the area of contract
law to make it more coherent or to adapt it to cover situations not foreseen at
the time of adoption
IV. To adopt a new comprehensive legislation at EC level e.g. a European
Contract Code
The idea of a European Contract Code (option IV) meets strong cultural,
political and legal difficulties.51 Consequently, other less interfering alterna-
tives are to be preferred. Amongst them is the notion of optional harmoniza-
tion. This has been described as the process of unification that takes place
from below, in the sense that it is not imposed by legislative means.52 In this
way, it is up to the different actors involved in intra-community trade to
contribute to a further unification.53 Diverse "private" projects have already
taken the initiative of setting up a common background for the unification of
private law in Europe e.g. the Pavia Group on a European Contract Code,
the European Civil Code Group, the Trento Project on the Common Core of
European Private Law and the Commission on European Contract Law,
drafter of the PECL.
It has been suggested that the PECL may function as a sort of European
Restatement of contract law (option II)54 or that they may be enacted as a
Model Law like the UCC.55 Both possibilities present certain flaws. Na-
tional laws giving effect to model laws are often enacted in somewhat al-
tered versions. The uniformity achieved is thus limited.56 It follows that a
European Uniform Contract Code adopted by means of a model law would
demand the uniform interpretation of a Supreme Court. The ECJ could func-
tion as such, but its competence would require a legal basis, which currently
is doubtful. As regards the Restatement method, the viability of a European
construction of national contract law in the light of the PECL "requires a
solid dogmatic groundwork in the respective European jurisdictions."57 It is
not clear whether courts within the EU will interpret national provisions
contra legem.58

51
Such as Euroscepticism, feasibility of reaching an agreement covering all areas of
private law, legal petrification or a doubtful legal basis for accomplishing unifica-
tion.
52
The latter is called mandatory unification.
53
Lando, O., European Review of Private Law, vol. 1, 2000, pp. 59-69.
54
Lando, O., New Perspectives for a Common Law of Europe, Cappelletti (ed.),
1978, p. 267 et seq.
55
See e.g. Schmid, Ch.U., Evolutionary Perspectives and Projects on Harmonisa-
tion of Private Law in the EU, Feiden, S. and Schmid, Ch.U. (eds.), EUI Working
Paper Law No. 99/7, pp. 103-124, p. 124.
56
Reimann, M., 3 Maastrich Journal of European and Comparative Law, 1996, pp.
217-234, at p. 228.
57
Berger, K.P., European Review of Private Law, vol. 1, 2001, pp. 21-34, p. 32.
58
See Case 192/94, ECR I 1281, Corte Inglés S.A. v Cristina Blázquez Rivero;
Lando, O., EUI Working Paper Law No. 99/7, pp. 11-29, at p. 25.

RETTID 2002 55
Another alternative could be to let the PECL contribute to the approxima-
tion of contract law in Europe through market forces and the lex mercatoria
doctrine (option I). The PECL could function as the governing law of intra-
community contracts if the parties so choose. This option would require an
amendment to or an extensive interpretation of the Rome Convention Art.
3.59 The American counterpart of the Rome Convention, the 1994 Mexico
Convention, empowers the judge to apply non-national rules that are espe-
cially designed to cope with the needs of international trade.60 By allowing
the parties to choose the PECL as applicable law traders may obtain the
flexibility, practicability and legal certainty international transactions re-
quire.61 The latter could be further consolidated when the two Protocols that
endorse the competence of the ECJ to interpret the Rome Convention enter
into force or when the Rome Convention is transformed into a EC Regula-
tion. Ultimately, the interplay between the PECL and national laws may
bring national contract laws closer together.
As to option III, no one seems to deny the need to simplify and consoli-
date the legal conglomerate produced by the Community in the field of con-
tract law. This is however, an entirely different pursuit from that of under-
taking the harmonization of the whole area of contract law.

59
Boele-Woelki, K., op.cit., p. 676.
60
Juenger, F.K., 45 Am.J.Com.L., 1997, pp. 195-208, p. 204.
61
Berger, K.P., op.cit., p. 154.

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