12
International commercial law and private
governance
Before retiring to draw conclusions from our Gulliverian travels through the
Western legal tradition, a further case study of jurisdictions existing in the same
space as other jurisdictions will assist. The lex mercatoria – the international
commercial law of merchants – is considered. Immediately, the criticism may
be levelled that the choice of the lex mercatoria suffers from a paradigmatic
weakness, despite its existence as a jurisdiction in competition with state com-
mercial law. After all, not all of the commercial world relies upon the distinct
lex mercatoria and surely commercial laws under various banners are the pre-
serve of societies with a degree of affluence and sophistication. The microeco-
nomic lex mercatoria has been chosen, however, because it illustrates the
potential for lived (not coerced) law with great historical survival value and
supranational success, minimally reliant upon the state. Together with contract
law, the lex mercatoria also lends itself to contemplation about the extent to
which laws can be codified or universalised amidst local diversities. (Deserving
of recall in this context are the concerns we saw expressed by the Historical
School of jurisprudence in the nineteenth century.) Not only relevant to private
relationships, we shall also see that the ‘private law’ of contract has encroached
into the province of the ‘public law’ of government. Commercial law trends and
concerns therefore extend beyond the account of merchants and economics.
12.1 The
lex mercatoria
12.1.1 Definition
The lex mercatoria derives from its customary and spontaneous nature. It is a
merchant-driven, historically developed body of law, independent of national
law
1
(or at least relegating domestic laws to the bottom of the list of sources),
governing the ‘international, commercial and financial legal order’.

against fraud, bribery, market manipulation, money laundering and also fun-
damental principles of environmental protection.
4
Capitalist if not Western
though these notions are, the term ‘universal’ may be used of them if it is
accepted that there can be a ‘universe’ signified by a particular industrial com-
munity, unconstrained by territory.
5
The modern lex mercatoria ‘provides a nearly complete potential for the res-
olution of international conflicts’, although national enforcement may be
required
6
in the event that customary or peer-based recognition is not accorded
275 International commercial law and private governance
International Law 129–91, 132, and his Dalhuisen on International Commercial, Financial and
Trade Law (Oxford: Hart Publishing, 2nd edn 2004), esp. pp. 193–4, and more generally
section 1, part III.
113
For his 20 principles, see Michael J. Mustill, ‘The New Lex Mercatoria: The First Twenty-five
Years’ (1988) 4 Arbitration International 86–119, 91. Klaus Peter Berger proposes 78 rules in
The Creeping Codification of the Lex Mercatoria (The Hague: Kluwer Law International, 1999),
pp. 278–311.
114
Dalhuisen, Trade Law, p. 194.
115
See Michael Douglas, ‘The Lex Mercatoria and the Culture of Transnational Industry’ (2006)
13 University of Miami International and Comparative Law Review 367–401, 380–1. On the
narrowness of these interests serving the ‘mercatocracy’, see A. Claire Cutler, ‘Globalization,
the Rule of Law, and the Modern Law Merchant: Medieval or Late Capitalist Associations?’
(2001) 8 Constellations 480–502, further illustrated in Ronald Charles Wolf, Trade, Aid, and

periods. The aim is to see how a functioning legal system can evolve and survive
with minimal state dependence. This occurs in a system featuring the interior
cultural generation of norms which are for the most part successfully objecti-
fied, if need be, with political enforcement on the exterior end of the Space Axis.
12.1.2 History
What would now be considered ‘transnational’ commercial law in the Western
tradition can be uncovered in ancient Athens and classical Rome. Those laws
were both emporial and customary.
12
The medieval lex mercatoria varied in
content in different locations, which is to be expected of any customary laws. Of
chief importance to the medieval lex mercatoria was its reliance upon ‘the
merchants themselves, who organized international fairs and markets, formed
mercantile courts, and established mercantile offices in the new urban commu-
nities that were springing up throughout western Europe’.
13
Even outside the
276 Competing Jurisdictions Case Studies
117
Dalhuisen, ‘Legal Orders’, 189–90.
118
Bruce L. Benson, quoted in Berger, Creeping Codification, p. 231.
119
Clive M. Schmitthoff, ‘Finality of Arbitral Awards and Judicial Review’ in Julian D. M. Lew
(ed.), Contemporary Problems in International Arbitration (London: Centre for Commercial
Law Studies, Queen Mary College, University of London, 1986), p. 230.
110
Dalhuisen, ‘Legal Orders’, 167–8.
111
Leon E. Trakman, The Law Merchant: The Evolution of Commercial Law (Littleton: Fred B.

autonomous generators of their own law. It is an illustration of how central a
lived law can be to a society (or at least a subculture) concerned with virtue and
reputation,
18
as opposed to the anomie of distantly imposed state law. Despite
the interior, cultural allegiance on the Space Axis inspired by the lex mercatoria,
it also possessed an exterior, political quality. It became increasingly reduced to
writing and subject to impartial adjudication with emerging forms of mercan-
tile courts.
19
There was a European universality to this law amidst its diversity,
akin to the ius commune. Medieval legislation reflected the local customs. ‘Each
country, it may almost be said each town, had its own variety of Law Merchant,
yet all were but varieties of the same species. Everywhere the leading principles
and the most important rules were the same, or tended to become the same.’
20
Merchants spoke different languages and hailed from different cultures. Trust
did not, of course, follow automatically. The legal rules of the lex mercatoria
helped to overcome these differences – to reconcile yet maintain the plurality –
by entrenching mercantile custom in uniform codes, seeking those customs
which were constant and able to sustain high-level commerce. With the inter-
nationalisation of seaborne trade and commerce in the fifteenth and sixteenth
centuries, and the opening up of the New World from the Atlantic, there was
increased demand for uniform commercial and maritime laws. The prototypi-
cal state sovereignty manifesting around that time, we have already seen, had
the effect of consolidating the political commonalities amongst provinces into
277 International commercial law and private governance
Elizabeth Basile et al., Lex Mercatoria and Legal Pluralism: A Late Thirteenth-century Treatise
and its Afterlife (Cambridge, MA: The Ames Foundation, 1998).
114

example, into the common law of England? Was it simply a creature of custom
which developed within the common law? Was it part of the ius gentium (law of
nations) which recognised a universal lex mercatoria?
24
It is not so important for our purposes whether, for example, the English
common law received the mercantile law principles from an outside system
into its own system or whether those norms emanated from its society. Either
is allowed by the broad definition of ‘law’ adopted in this book, being
norms which, for one reason or another, achieve authority or receive allegiance.
Day-to-day authority is what is vital. Significantly, the authority of the lex mer-
catoria was firmly grounded in the community it served. A cosmopolitan com-
mercial tradition in Europe had given rise to similar issues which were dealt
with in similarly principled manners across territorial jurisdictions.
25
Transactional documents reflected uniformity in character and design. Pro-
ceedings before lex mercatoria tribunals commonly featured oral adjudica-
tion, informal testimonies, judicial notice of trade custom together with speedy
resolution of the dispute.
12.1.3 The nature of the ‘new’
lex mercatoria
Whilst the lex mercatoria has been around for at least 900 years or even longer,
back to classical Greek and Roman times, it has undergone, as is to be expected,
substantial transformations. It is problematical whether the perceived continu-
ity has survived the disjunctures over time. Clive M. Schmitthoff considered
278 Competing Jurisdictions Case Studies
121
Trakman, Law Merchant, pp. 11, 21.
122
See Stephen E. Sachs, ‘From St Ives to Cyberspace: The Modern Distortion of the Medieval
“Law Merchant” ’ (2006) 21 American University International Law Review 685–812 and Emily

to the lex mercatoria is to emphasise general principles of norm generation by,
and application of the norms in, industrialised communities of importers and
exporters. In these communities, there is a universality to the lex mercatoria,
generally conceived, although not grounded in dogmatic rules. Whilst many
principles of state commercial laws can be found in lex mercatoria principles,
many of those state laws originate in merchant custom.
29
Therefore national
legal systems are not as crucial to the modern lex mercatoria as might otherwise
be thought.
Further to our earlier introduction of the concept of lex mercatoria in
section 12.1.1 above, the modern lex mercatoria has been described as a body
of international legal practice with a system of norms which is open to judi-
cial decisions. These principles exist relatively independently from national
laws
30
and public international law, in party autonomy and usage.
31
None-
theless, there may be elements of lex mercatoria in public international law,
uniform laws and general principles, rules of international organisations,
standard form contracts and arbitral awards.
32
The lex mercatoria may refer to
the laws of individual states simply ‘as a quarry from which to draw the
raw materials for generalised rules’, within the ‘strong family resemblance
between laws of developed trading states’.
33
Similar quarries for the lex mer-
catoria exist in scholarly discourse, arbitral awards, and international har-

and interior allegiance.
For a general, globalist jurisprudence, concerned to develop concepts which,
to use William Twining’s concept, ‘travel well’ across jurisdictions,
34
the exem-
plary and precedent value of the lex mercatoria should be obvious within the
universality of the industrialised community it serves.
12.1.4 Codification
The lex mercatoria has been subjected to codification initiatives. Codification
represents an attempt to simplify laws into a readily understandable and usable
form. It is an aid to capitalist relations which seek certainty. Uniformity is also
a leveller. With greater uniformity across jurisdictions, finding a way to do
something across borders becomes less the preserve of the rich who can afford
specialist multi-jurisdictional lawyers.
35
Mystery and uncertainty, which the
evolution and interpretation of uncodified norms might otherwise seem to
possess in the hands of the legally educated or experienced, are sought to be
removed through the normative deforestation of codification. The utility of
codification is not without danger to the legal ecosystem. The German histori-
cal school of jurisprudence has taught that codification poses threats to a flexi-
ble and organic system of norms,
36
with lessons for the lex mercatoria. Such
initiatives need to avoid the temptation to state in absolutist terms what consti-
tutes the doctrines of the lex mercatoria, which evolves like all social systems
with references to the past, drawing upon experiences.
Two major codification initiatives are now explored. These initiatives con-
tinue the aim of the United Nations Commission on International Trade Law
(UNCITRAL) originating in the 1960s. First, lex mercatoria developments are

They may be used to interpret or supplement international uniform law
instruments.
They may serve as a model for national and international legislators.
38
These principles apply to ‘all contracts which are concluded with a view towards
the direct or indirect making of profits and which are related to the cross-border
movement of goods, currencies, services, technologies or other financial or eco-
nomic assets, provided that no “typical element of consumer transactions” can
be ascertained’.
39
The UNIDROIT Principles embody the modern lex mercatoria, without the
hubris of believing law to be only what is written in the code.
40
Rather than being
regarded as a field of law ripe for codification in the orthodox sense, Klaus Peter
Berger has described these international economic law developments under the
rubric of a ‘creeping codification’ of the lex mercatoria. A middle way is sought
through the dichotomy of fixed, certain doctrines and the flexible openness of
equitable processes
41
– abandoning the now largely discredited Napoleonic ideal
of a self-contained code. The UNIDROIT Principles have been applied by the
International Chamber of Commerce as governing law and as a supplement or
interpretive aid to domestic law and international conventions.
42
This follows a trend for contracts to refer to common principles of law from
a multiplicity of jurisdictions, reflecting the home jurisdictions of the parties to
the contract. For example, an article of a contract between Iran and the National
Iranian Oil Company of one part, and nine other nations of the other part, has
referred to ‘the principles of law common to Iran and the several nations in