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Review Essays of Academic, Professional & Technical Books in the Humanities & Sciences


International Business Law

The Creeping Codification of the New Lex Mercatoria, 2nd Revised Edition by Klaus Peter Berger (Kluwer Law International) This greatly revised edition of an influential 1999 book consolidates its authoritative advocacy of the New Lex Mercatoria (NLM). Since the publication of the first edition, self-regulation and private governance in international business have gained world-wide recognition. Three dynamic commercial law initiatives in particular demonstrate that, in spite of the long-lasting dispute about the nature and dogmatic underpinnings of NLM, legal theory and international practice have accepted that transnational business law is open to the 'codification' of its contents. The UNIDROIT Principles of International Commercial Contracts, the Principles of European Contract Law, and (most recently and dramatically) the TransLex Principles all draw their legal conclusions from observing the real-life phenomena surrounding regional and global integration of markets and foreign direct investment. This new edition presents an advanced elaboration of the author's 'Creeping Codification' thesis based on the TransLex Principles, an Internet-based method using an ongoing, spontaneous, and dynamic codification process which is never completed. The TransLex Principles contain black-letter texts of 128 principles and rules of the NLM with comprehensive, constantly updated comparative law references from domestic statutes, court decisions, doctrine, arbitral awards, and uniform laws. An annex to this book contains a synopsis of the wealth of materials available on the TransLex web site as well as a rare personal account of one of the fathers"of the NLM, Philippe Kahn. International legal practitioners and academics alike have long complained about the inadequate legal framework for international trade and commerce. This book, with its far-reaching theoretical and methodological analysis of the doctrine of an autonomous transnational economic law, clearly opens the way to an independent and workable third legal system alongside domestic law and public international law. It offers international practitioners (contract negotiators, arbitrators, attorneys and other representatives of the parties in international arbitration proceedings) with a powerful and reliable instrument to apply transnational commercial law in daily legal practice.

Excerpt: Unification and creation of the law on the transnational plane are neither fashionable phenomena nor are they mere indications of the 'trends of the time'. Instead, they reflect the commercial realities of modern international business practice. The increasing number of Codes of Conduct and other instruments of private governance2 show that the privatization of rule- and law-making has become a reality in international business. The Academic DCFR3 and the Resolution of the EU Parliament of December 12, 20074, which puts particular emphasis on the nonbinding, soft law character of the DCFR, prove that even within the work towards a European Civil Code, the persuasive force of a compilation of non-statutory legal principles has been accepted as an efficient means to achieve the ambitious goal of the unification of European private law.

International business has always shown a tendency to favour practice-made rules of a transnational character. Thus, in the international construction industry, a suggestion has been made that a 'neutral lex mercatoria' should be applied in public sector procurement in order to create a true 'level playing field' for competition for public work and to test the prospects for a general informal harmonization of international construction law'. Arbitral case law also confirms that the transnational spirit of international arbitration provides fertile ground for the application of this concept in international commercial practice and that international arbitrators become increasingly aware of this phenomenon. The development of a 'lex petrolia' for the international oil industry', a 'lex numerica' or 'lex informatica' for international data interchanges, 'lex sportiva' for international sports law or a 'lex constructionis' for the international construction industry reveals that the transnationalization of commercial law has already transcended the traditional boundaries of general contract lawn.

Legal theory has to take account of this phenomenon in order to avoid any claims that it is out of touch with reality or antiquated. Therefore, modern conflict of laws doctrine faces the formidable task of redefining the relationship between autonomous international commercial law on one side and domestic law on the other. Formulating this task also reflects the paradox of traditional conflict of laws doctrine. It was private international law, withdrawn from the competence of domestic legislatures by Savigny and handed over to legal science and the courts for further development. Their economic inefficiency and the resulting legal uncertainty triggered the autonomous and decentralized evolution of the law through the international community of merchants.

In spite of the comprehensive and all-embracing approach towards the NLM as an autonomous 'third' legal system between domestic laws and public international law, every attempt to deal with transnational commercial law, as the basic and most controversial question of international commercial law, remains no more than an 'approach towards a new understanding'  of transnational commercial law. It is true that the discussion on the existence of an autonomous transnational commercial law raises a multitude of methodical, theoretical and practical issues which touch upon basic notions of legal theory and transnational decision-making. This Study has shown that the dogmatic arguments against the NLM 'are fading away'.

At the same time, the discussion on the viability of a transnational commercial legal system needs to be objectified. While any outright rejection of the theory fails to take into account commercial realities, any emphatic acclamation of the concept of commercial transnationalism lacks persuasiveness in that it fails to provide verifiable legal arguments. This resembles the initial scientific treatment of the phenomenon of reception of law in the early ius commune. At that time, there was a similar concern that the new legal situation would attract 'illusionists and visionaries' 17. With respect to the NLM, this danger is increased by a sometimes lax and careless treatment of the concept of an autonomous world trade law. This is especially true with respect to the 'negative choice of law' of the parties. Without a further inquiry into the motives and the will of the parties, the assumption of a `negative choice' amounts to a fictitious agreement on the applicable law. This idea is often misused, even in international arbitral practice, to indicate the parties' will to have their contract transnationalized, thereby justifying the application of the NLM. The NLM doctrine, the respect of which for the autonomy of the parties is one of its most prominent features, would be doomed to fail from the outset if its application would be based on such a violation of the will of the parties.

It has been emphasized in the Introduction to this Study that they need `definitive' and 'provable' legal standards to negotiate their agreements or to resolve disputes, thereby reducing transaction costs. Legal theory and legal practice alike, however, are confronted with the codification dilemma in the field of transnational commercial law. The NLM is a law in action' and depends upon a maximum degree of flexibility and openness. Its rules and principles cannot be fixed in 'statutory' form in the proper sense. The UNIDROIT Principles as well as the Principles of European Contract Law drafted by the Lando Commission reveal this dilemma. They provide a serious new indication for the consolidation of legal convictions pertaining to the existence of a transnational commercial legal system21. The great importance of these collections is that they exist. They can be taken to the court or the arbitral tribunal, can be referred to by page and article number, and people who are referred to their provisions can locate and review them without difficulty. At the same time, however, they do not present the flexible codification method that takes account of the peculiar character of the NLM which' being an open legal system, requires a codification technique that corresponds till the highly dynamic nature of the NLM.

The alternative presented in this Study is the idea of 'Creeping Codification of the NLM through the TransLex Principles. This innovative approach is intended to provide international legal practice with an easily, freely and globally accessible Web-based platform to allow for the application of the NLM in everyday arbitration and drafting practice. If the '[t]he Internet is becoming the town square for the global village of tomorrow' (Bill Gates 2003) then the World Wide Web must be regarded as the ideal forum for the codification of the NLM. It is the online character of the TransLex Principles which avoids the 'petrification' of the law that necessarily goes along with any traditional codification process. Unlike domestic law-making procedures, the Creeping Codification of the NLM is an ongoing, spontaneous and dynamic process which is never completed. This process requires a codification technique with a corresponding openness and dynamism. This dynamism can be guaranteed only through the use of the Internet. The open-access public domain created by the Internet, combined with modern database technology, provides the ideal substratum for the constant development and enrichment of the NLM through the process of Creeping Codification.

That process must not be confused with the traditional notion of codification by domestic legislatures. There is not and cannot be a single 'legislator' of the NLM which is created 'bottom up' by the community of merchants. Rather, by putting the principles and rules of the NLM in the form of black-letter rules with a synopsis of the relevant comparative law references, the TransLex Principles establish a presumption, i.e. prima facie evidence, that the principles and rules reproduced in the list do in fact form part of the NLM. With this approach, the TransLex Principles aim at alleviating the burden of arbitrators and contract lawyers who need to be concerned, in their daily work and in every single case, with the 'validity' and 'application-worthiness' of a particular principle or rule of the NLM.

Today, in an age of self-regulation and private governance, 'Cartesian pragmatism' prevails over theoretic trench fighting about the nature and doctrinal underpinnings of the NLM doctrine. In economics, the 'Economics of Governance theory concludes that private ordering is central to the performance of any economy regardless of the particular conditions of lawfulness because in many instances, business actors can devise more satisfactory solutions to their problems and disputes than can professionals (lawmakers, courts) who are constrained to apply general rules on the basis of limited knowledge of the problem or the dispute.

As a consequence of these new legal and economic developments, the traditional theory of legal sources which is centred around the notion of sovereignty of the state is being replaced by a legal pluralism which accepts that society's ability for self-organization and self-coordination is more than a mere factual pattern without independent legal significance.

In this age of private governance and legal pluralism, the NLM is not a myth or dream of the future. Today, transnational commercial law, the New Lex Mercatoria, is a fact of life.


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