Volume 42 | Number 3 Summer 2007
Page 2 of 7
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Over recent decades we can see the emergence of a new transnational commercial law. It consists of international conventions, model laws, and statements of principle (or standards). A recent compilation consists of some sixty instruments divided into twelve subject areas as diverse as contract law, electronic commerce, sales, agency and distribution, international credit transfers and bank payment undertakings, secured transactions, cross-border insolvency, conflict of laws, international civil procedure, and international commercial arbitration.1 Even this comprehensive collection is not exhaustive, as will be evident from later discussion.
The new transnational commercial law is driven by international institutions ranging from UNCITRAL, UNIDROIT, and the World Bank; regional governmental or economic bodies like the European Union or MERCOSUR; specialist international bodies such as the Basel Committees on Banking Supervision and Payment and Settlement Systems, and the International Organization of Securities Commissions (IOSCO); and industry bodies such as the International Chamber of Commerce (ICC).2 There is a great deal of overlap in the application of their work in practice. Take, for instance, the area of transnational financial law: the Financial Stability Forum brings together national authorities responsible for financial stability around the world. In order to further its aims, the Forum advances a compendium of twelve key standards concerning transparency of policy making in the financial system, sound institutional and market infrastructure, and adequate financial regulation.3 The standards are drawn from a range of international bodies, including the International Monetary Fund (standards on macroeconomic policy and data transparency), the World Bank (insolvency and credit guidelines), Organisation for Economic Co-operation and Development (principles of corporate governance), the Basel Committee, IOSCO, and Financial Action Task Force on Money Laundering. As well as providing a fine overview of the area, Professor Mario Giovanoli has argued that the new transnational financial law is mainly stand-alone “soft law,” independent of any international framework of binding legal rules and sometimes lacking the degree of precision indispensable to a legally enforceable rule.4
In addition to classifying the new transnational commercial law according to its subject matter or institutional source, one may classify it by the juridical nature of the instrument. Thus it is possible to divide transnational commercial law into principles (or standards), model laws, and international conventions. A very longstanding set of principles is the Uniform Customs and Practice for Documentary Credits, first published by the ICC in 1933. However, such principles of transnational commercial law extend well beyond trade. The well known UNIDROIT Principles of International Commercial Contracts are mentioned at greater length below.5 The standards collected by the Financial Stability Forum have been referred to. In the area of dispute settlement there are the ALI/UNIDROIT Principles of Transnational Civil Procedure.6 The lex mercatoria is more difficult to identify, as we shall see, but it consists of principles like good faith, reasonableness, the duty to negotiate, set-off, and the obligation to compensate on expropriation. Among the model laws of transnational commercial law—a second category of instrument—are those of UNCITRAL, which now has Model Laws on International Commercial Arbitration, Cross-Border Insolvency, and International Credit Transfers.7 The model laws used by bodies like the World Bank and IMF in their technical assistance work are not always publicly available nor are records of which countries have adopted them and in what form. In effect, these World Bank Model Laws extend beyond the financial sector to matters such as insolvency and security. As to international conventions relating to transnational commercial law, these began in the first part of the twentieth century. To take just the financial area, conventions were drawn up for a Uniform Law on Bills of Exchange and Promissory Notes and a Uniform Law Concerning Cheques.8 International conventions from recent decades include the United Nations Convention on Contracts for the International Sale of Goods (CISG) (1980)9, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) (1958)10 and the United Nations Convention on the Assignment of Receivables in International Trade (2001).11
It is possible to explore how these different types of instrument are given force. First, uniform principles have effect in as much as they are consciously invoked by parties engaged in international transactions (primarily by incorporation by reference in their contracts) or by those settling disputes between such parties (primarily arbitrators). Thus, the Uniform Customs and Practice for Documentary Credits are widely incorporated by international banks in the letters of credit they issue. Although the confidentiality of arbitration proceedings makes it difficult to be definite about the matter, it seems that international arbitrators are making increasing reference, if only informally, to the UNIDROIT Principles of International Commercial Contracts. Secondly, as the name suggests, a model law is designed for adoption by national legislatures. While it is not always easy to determine whether a model law has been adopted since it may be dressed up as local law reform, it is evident that the UNCITRAL Model Law on Cross-Border Insolvency is being widely implemented. Thirdly, a convention is a treaty, to which states can choose to be a party. Model laws can obviously be modified in their adoption or adopted in part, whereas parties to a convention must enter reservations if there are to be departures from it. The New York Convention has had almost universal success and is one explanation for the popularity of international commercial arbitration – by contrast to the situation with foreign court judgments, almost every country is committed to enforcing foreign arbitral awards.
The purpose of this essay is not so much to describe the institutions or to analyse the substantive provisions of the new transnational commercial law. Rather what this essay explores is whether it can be said that there is any legal theory which helps explain the emergence of this new transnational commercial law and its adoption by national systems. This essay suggests that there are several bodies of legal theory which throw light on these two issues. The first uses globalisation as an explanatory factor. It arises in particular in accounts of the new lex mercatoria and also in explanations of the emergence of the uniform principles, model laws, and international conventions drawn up under the auspices of bodies such as UNCITRAL, UNIDROIT, the World Bank, and the ICC. A second is rule of law theory, which is especially popular with the World Bank and related bodies like the IMF. According to this strand of thinking, economic development demands a legal system which protects contractual and property rights both in terms of substantive rules and judicial administration. A legal system built on the rule of law is said to do this. One aspect of the rule of law is a substantive law which reflects the principles of the new transnational commercial law. A third body of theory plays to market forces. Countries fall along a spectrum from pro-creditor to pro-debtor in terms of their commercial laws. Where countries are on the spectrum turns in part on whether they have adopted the legal standards, codes, and principles of the new transnational commercial law. Whether a country is pro-creditor or pro-debtor feeds into market assessments of its economy and that influences the behaviour of foreign investors. Finally, there is the theory which helps explain the adoption of the conventions, model laws, and standards. One aspect of this is whether the legal principles incorporated in them have resonance with legal practitioners and institutions so that they use them to structure commercial transactions. Another aspect is legal transplant theory, which bears on whether these codes and standards are implemented by national legislation. Legal transplant theory is only part of the explanation for successful adoptions, for, as we will see, there must also be the political will within each jurisdiction to enact these into law.