FORMATIVE ASSESSMENT
PRIVATE INTERNATIONAL TRADE LAW
By Yash Bhargava
Foody UK Ltd (‘Foody’), an English company specializing in import and re-sale of foreign
exotic food produce, is negotiating a contract with Mushroom Plc (‘Mushroom’), a Chinese
company, to purchase 100kg of finest white truffle, an expensive underground grown
mushroom which is particularly popular in France where it is used in preparation of the
famous French truffle Christmas soufflé.
a) Foody would like to choose lex mercatoria as law applicable to its contract with
Mushroom. Advice Foody on whether such choice of applicable law is possible
and desirable.
MEANING OF LEX MERCATORIA (law merchant)
As opposed to the conventional view of the medieval law merchant which provided its six
characteristic qualities, including,
1) Objectivity;
2) Universality;
3) Reciprocity of Rights;
4) Participatory Adjudication;
5) Integration; and
6) Growth
The modern ‘new’ law merchant provides that the lex mercatoria is that part of transnational
commercial law which consists of the unwritten customs and practice of merchants, so far as
satisfying externally set criteria for validation. And it also comprises rules the object of which
is mainly, if not exclusively, transnational, and the origin is customary and thus spontaneous,
notwithstanding the possible intervention of interstate or state authorities in their elaboration
and/ or implementation.1
POSSIBILITY OF APPLICATION
Within the European Union, choice of law is governed by the Rome Regulation on the law
applicable to contractual obligations (Rome I), which plainly predicates the choice of a
national law, so that a purported choice of transnational commercial law or of the lex
mercatoria will at most amount to a contractual incorporation of such rules of transnational
1
Roy Goode, Herbert Kronke, Ewan Mckendrick, Transnational commercial law: text, cases, and materials, ( 2nd
edition, Oxford University Press, 2015) 44.
commercial law as can be identified, and these will enjoy contractual status only and
therefore be subject to domestic mandatory rules of the applicable law.
Article 9(2) of the United Nations Convention on Contracts for the International Sale of
Goods, 2010 (Vienna Sales Convention) provides:
‘(1) The parties are bound by any usage to which they have agreed and by any practices
which they have established between themselves.
(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to
their contract or its formation a usage of which the parties knew or ought to have known and
which in international trade is widely known to, and regularly observed by, parties to
contracts of the type involved in the particular trade concerned.’
Thus, Foodie can incorporate lex mercatoria as law applicable because both the afore
mentioned coventions empowers it for the same.
DESIRABILITY OF APPLICATION
As per my opinion, lex mercatoria poses a lot of limitations if chosen as the law applicable
to the contract, which are as follows,
Proving Normative Force
External validation of some kind, whether by legislation, jurisprudence, or doctrine, is an
essential prerequisite of a legal norm. As shown above, mere contracts cannot be law in the
full sense, for they do not derive from authority and do not themselves possess limiting
mandatory rules or lois de police. Just as contracts are not law, but derive their force from
external criteria for recognition, so also international trade usage cannot be self-validating
but depends for its recognition on conformity with certain legal norms.
Not a complete legal system
The lex mercatoria, consisting of general principles of law and international trade usage, is
not a complete legal system, so that it is futile for the parties to seek to designate it as the law
applicable to their contract. It is certainly the case that the lex mercatoria is not a complete
legal system. But that does not mean that to choose it as the applicable law is wholly
ineffective, merely that so far as its principles do not cover the question in dispute it will be
necessary to refer to some applicable national law.
Not an autonomous body of principles
It is objected that the lex mercatoria is not an autonomous body of principles, for it is
controlled by rules of public policy and mandatory rules of national law. This also is true,
but it does not follow that the lex mercatoria lacks normative force, merely that it is
subordinate to higher norms, in much the same way as principles laid down by the courts
may be affected by legislation.
Difficulty in using prior arbitral awards as precedents
The difficulty in using prior arbitral awards as precedents is that we know so little about the
facts and arguments. Often the reports do not show even the date of the contract in dispute,
though that may be highly relevant. The countries involved and the commercial background
to the dispute will usually be omitted for reasons of confidentiality, and it can be difficult
even to deduce the arguments advanced or to know to what extent the arbitral tribunal was
relying on its own knowledge rather than on evidence.
Thus, there is less desirability for choosing lex mercatoria as the law applicable to the
contract.
Submitted By:
Yash Bhargava
Student ID 77304966
