Lex mercatoria in international arbitration theory and practice

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Lex Mercatoria in International Arbitration

Theory and Practice

Volume I

Mert Elcin

Thesis submitted for assessment with a view to obtaining

the degree of Doctor of Laws of the European University Institute

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European University Institute

Department of Law

Lex Mercatoria in International Arbitration

Volume I

Mert Elcin

Thesis submitted for assessment with a view to obtaining

the degree of Doctor of Laws of the European University Institute

Examining Board

Prof. Fabrizio Cafaggi (EUI Supervisor) Prof. Francesco Francioni, EUI

Prof. Sandrine Clavel, Université de Versailles-Saint Quentin Prof. Fabrizio Marrella, Università ‘Cà Foscari’ di Venezia

No part of this thesis may be copied, reproduced or transmitted without prior permission of the author

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SUMMARY

This dissertation suggests a new theory of lex mercatoria that takes into account the complex and spontaneous order of international commerce. Since the emphasis is put on the nature of this order, the concept of lex mercatoria is examined as an ex post governance mechanism resolving contractual disputes with a view to maintaining and restoring the order of international commerce, without focusing on the traditional distinction of the doctrine between national and non-national legal rules applicable to the substance of such disputes in explaining the concept. The aim is to reflect lex mercatoria’s subtle effect on the practice of international arbitration, and to provide an explanation of lex mercatoria as a solution to the problems of the institution of international arbitration in terms of uncertainty and unpredictability of awards, rather than representing it as a factor aggravating those problems. Lex mercatoria is defined as the law of adjudication of the disputes arising from international commercial contracts on the basis of a few substantive and procedural principles, under which the reasonable expectations of the parties to a particular contract become the single source of their contractual rights, obligations and risk allocations. The argument is that lex mercatoria can be applied to both the choice of law analyses and the substance of the disputes in international arbitration. In choice of law analyses, lex mercatoria addresses specific difficulties relating to the conflict of laws through a principled decision making, such as the applicable conflict rules, and the interpretation of the parties’ intentions as to the applicable substantive rules. In its substantive application, lex mercatoria deals with, either as lex contractus or as lex fori, the interpretation, supplementation and correction of the contract as well as the applicable national laws in accordance with the basic principles, on which the order of international commerce rests.

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TABLE OF CONTENTS

1. INTRODUCTION ... 1

2. THE CONCEPT OF LEX MERCATORIA ... 11

a. The Evolution of Lex Mercatoria ... 11

i. Medieval Lex Mercatoria ... 11

1. The Realist Vision of Medieval Lex Mercatoria ... 12

2. The Romantic Vision of Medieval Lex Mercatoria ... 17

ii. Modern Lex Mercatoria Doctrine ... 23

1. Transnational Arbitration ... 23

2. Lex Mercatoria as an Autonomous legal system ... 30

a. Goldman and the Theory of Lex Mercatoria ... 30

b. Schmitthoff and the Theory of Law Merchant ... 33

3. Lex Mercatoria as a Method of Decision Making ... 37

b. A New Theory of Lex Mercatoria ... 43

i. Liberal Order of International Commerce ... 43

ii. Appropriate Legal Norms Governing the Contract... 55

iii. Dealing with Legal Uncertainty ... 59

iv. Confidence in a Legal System or a Decision Maker ... 67

v. Legal Character of Lex Mercatoria ... 73

c. Concluding Remarks... 79

3. SPHERE OF APPLICATION OF LEX MERCATORIA ... 81

a. Contractual Characteristics ... 85

i. Transactions Governed Through Legal Risk ... 87

ii. Transactions Governed Through Legal Uncertainty ... 91

b. Institutional Choice ... 97

i. Determination and Ascertainment of the Applicable Law ... 101

1. National Courts ... 101

2. International Arbitral Tribunals ... 105

ii. Relevance of Trade Usages ... 113

iii. Role of General Principles of Law ... 123

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iv. Influential Factors in Judicial Behavior ... 143

v. Lex mercatoria in the Context of Litigation and Arbitration ... 179

c. Concluding Remarks... 185

4. BASIC PRINCIPLES OF LEX MERCATORIA ... 189

a. Freedom of Contract ... 191

b. Sanctity of Contracts ... 197

c. Good faith and Fair Dealing ... 205

d. Procedural Principles ... 225

e. Concluding Remarks... 237

5. APPLICATION OF LEX MERCATORIA ... 239

a. Choice of Law Analyses ... 241

i. Choice of National Law ... 243

ii. Choice of Lex Mercatoria ... 257

iii. Absence of choice ... 273

1. Indirect Choice ... 274

2. Direct Choice ... 280

3. Implied Choice ... 294

iv. Amiable Composition ... 317

v. Concluding Remarks ... 335

b. Substance of the Dispute ... 337

i. Interpretation of the Contract ... 341

1. Common Intention of the Parties ... 342

2. Internal Context of the Contract ... 348

3. Extrinsic Factors ... 353

a. Subjective Considerations ... 353

a. Objective Considerations ... 364

4. Interpretative Presumptions ... 368

ii. Supplementation of the Contract ... 375

iii. Intervention in the Contract... 387

1. Different Concepts of Public Policy... 388

a. External Public Policy ... 389

b. European Public Policy ... 394

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2. Lex Mercatoria in Public Policy Considerations... 404

a. Conditions of Illegality ... 410

b. Consequences of Illegality ... 444

iv. Concluding Remarks ... 459

c. Several Instances of Substantive Application ... 463

i. Duty of Cooperation ... 469

1. Sources of Abstractions ... 469

a. National Laws ... 469

b. International Instruments ... 472

c. Contracting Practices ... 475

2. Arbitral Decision Making ... 481

a. Basis of Cooperation ... 481

b. Costs of Cooperation ... 494

3. Concluding Remarks ... 504

ii. Duty to Achieve a Certain Result and Duty of Best Efforts... 507

a. Interpretation of Best Efforts Obligations ... 530

b. Supplementation with Best Efforts Obligations ... 540

iii. Force Majeure ... 545

a. Requirements of Force Majeure Excuse ... 571

b. Effects of Force Majeure Excuse ... 587

iv. Hardship ... 603

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a. Risk Allocation ... 625

b. Renegotiation ... 640

v. Right to terminate the contract ... 651

a. Circumstances Justifying Termination ... 695

b. Termination Process ... 706

c. Effect of Termination ... 714

vi. Damages for non-performance ... 721

a. Principle of Full Compensation ... 765

b. Established Limitations to the Amount of Damages ... 772

1. Causation ... 772

2. Foreseeability ... 774

3. Certainty ... 777

4. Mitigation ... 782

5. Contribution ... 789

c. Contractual Limitations to the Amount of Damages ... 796

d. Particularities of State Party Disputes ... 805

6. CONCLUSION ... 849

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1. INTRODUCTION

This dissertation is intended to be a contribution to the theory and practice of lex mercatoria in the context of international arbitration. “Lex mercatoria” literally means “law merchant”. Although the views on lex mercatoria in the modern doctrine as to its terminology and legal nature diverge widely, it is generally conceived as a response to the problems resulting from the application of national laws to the disputes arising from international contracts. The traditional bipartite distinction between national legal systems, which deal with contractual disputes between private parties in a domestic setting, and international legal order, which is relevant mainly to the resolution of disputes between the states, has posed the question of how the contractual disputes between private parties in cross-border dealings or between a private party and a state should be resolved. Under this distinction, international commercial law has to be based on a paradigm of control by the national legal systems. According to this traditional paradigm, the conflict of laws rules, which are also of national origin, are to be applied to determine which national substantive law will govern the resolution of the disputes arising from international contracts.

Lex mercatoria doctrine, which consists of various and divergent theories, attempts to break this paradigm on the basis of the argument that those conflict of laws rules and national substantive laws are usually inadequate to solve the problems of international contracts and their application leads to inappropriate, uncertain or unpredictable consequences. Thus, there is some similarity in the starting points of all theories on lex mercatoria. It is frequently defined as a transnational law applicable to international contracts, instead of a national law. The most important aspect and distinctive nature of this law is usually considered to be its sources. Unlike a national substantive law, lex mercatoria does not arise from the functioning of a legal system created within the confines of a single state. The sources of lex mercatoria are found in non-national or international legal sources, and commonly include trade usages and customs, general principles of law, uniform laws and international conventions regulating international commerce, public international law, comparative analysis of national laws, rules and standard contracts issued by international organizations, and published arbitral awards. However, the list of sources constituting lex mercatoria varies greatly depending on the individual theory expressed under the doctrine of lex mercatoria. Some theories express the view that lex mercatoria is a form of regulating international commerce by the sole efforts of international merchants, who have developed their own legal norms according to their needs and expectations and, thus, exclude those sources, which contain the efforts of states to regulate this field, such as international conventions and uniform laws. Others view lex mercatoria as the product of joint efforts of international merchants and states to regulate international commerce in an economically sensible way.

Moreover, some theories maintain that lex mercatoria is an autonomous legal system alongside national laws and public international law. Some of those are based on the idea of self-regulation, where international merchants make their own rules, adjudicate their disputes according to those rules, and enforce the decisions rendered pursuant to those rules through their own reputation or fairness based mechanisms, outside of the national legal systems. Others present it as a method of substantive decision making in the resolution of contractual disputes, whereby the decision maker may ignore inappropriate rules of national legal systems on the basis of a comparative analysis of national laws. They emphasize the heterogeneous nature of the community of international merchants, where self-enforcement mechanisms may not perform satisfactorily, and adopt a different approach, under which lex mercatoria depends on national legal systems with respect to its enforcement due to the monopoly of

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national legal systems in coercive enforcement of legal rules, thereby basing the legal nature of lex mercatoria ultimately on its enforceability by the national courts.

There is no authority to decisively define lex mercatoria and regulate international commercial law, due to the heterogeneous nature of both international mercantile community and international community of states. Thus, one can find a different understanding of lex mercatoria in almost any single doctrinal writing, arbitral award or court decision. The debate seems endless, considering that the concept of lex mercatoria has its origins in medieval times or, for some, even in Roman law. Apparently, no one will ever be able to say the last word on this concept. The existence of this debate for centuries shows that there has always been some degree of discontent with the way international commerce has been regulated under the traditional paradigm. This discontent has compelled many circles to devise ideas and arguments on the basis of the concept of lex mercatoria, some of which have indeed had practical effects on the regulation of the international commerce. However, in the modern doctrine of lex mercatoria, the discourses commonly combine theoretical, practical and ideological arguments into a single theory, which makes it harder to see to what extent they reflect actual and valid policy considerations.

This dissertation aims at presenting the concept of lex mercatoria in all its complexity and seeks its traces in the practice of international arbitration. In the end, this dissertation is one of those many attempts in the doctrine at answering the questions, which are likely to be asked by anyone, who encounters the concept for the first time: What is lex mercatoria? When does it apply? How does it apply? Nevertheless, the approach of this dissertation to answering these basic questions differs to some extent from those adopted by majority of the theories on lex mercatoria in the doctrine. Lex mercatoria is examined outside of its traditional confines, which are partly created by the doctrine itself, in order to reflect both lex mercatoria’s rather hidden existence in the arbitral practice and an understanding of lex mercatoria as a solution to the problems of the institution of international arbitration in terms of uncertainty and unpredictability of awards, rather than as a factor aggravating those problems. Thus, those questions are answered on the basis of a new theory of lex mercatoria and the practice of international arbitration.

The answer to the question of what is lex mercatoria undoubtedly requires a research into the historical evolution of the concept of lex mercatoria. For that purpose, the historical predecessor of the modern lex mercatoria, namely medieval lex mercatoria, is examined within its political and legal background. For the majority of the authors of modern theories on lex mercatoria, medieval lex mercatoria represents the romantic ideal of an autonomous and uniform law created by and for international merchants, independent from the contemporary legal framework. In this understanding, medieval lex mercatoria is an evidence of the viability and adequacy of an independent and exclusively mercantile legal system as a solution to problems of foreign trade. There are also others, who question this romantic vision and search for a realist understanding of medieval lex mercatoria. They highlight the importance of the consideration of political background in the historical sources, some of which cannot be regarded merely as historical statements, but also involving theoretical claims within a controversial legal discussion. Above all, the historical research concerning the medieval lex mercatoria shows that how certain procedural privileges granted to the merchants in order to adapt judicial proceedings to the needs of cross-border trade had implications for the law applicable to the substance of the contractual disputes in an era, where the idea of substantive law itself was in the process of creation through different schemes of law.

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The romantic vision of medieval lex mercatoria was more influential in the emergence of the modern lex mercatoria doctrine after the Second World War, because the proponents of modern lex mercatoria doctrine used the concept not only as historical evidence, but also as the basis of theoretical and political claims of lex mercatoria as an autonomous legal system. This first generation of the proponents of modern lex mercatoria did not solely rely on the medieval lex mercatoria to support their claims, but also on the practice of transnational arbitration in the disputes arising from the contracts between states and foreign investors since the beginning of twentieth century. The transnational arbitration has served as a model, whereby the procedural privileges granted to the investors in state party disputes have had implications on the law applicable to the substance of the dispute. The practice of transnational arbitration has demonstrated the flexibility of arbitral proceedings and the possibility of avoiding the application of a national law, i.e. the law of host states, by referring to non-national legal sources. In this regard, theories of two of the founding fathers of modern lex mercatoria doctrine, namely Berthold Goldman and Clive Schmitthoff, are examined in detail. Their political and theoretical discourses on lex mercatoria have contributed to the modern regulation and practice of international arbitration as understood in the following decades.

The second generation of the proponents of modern lex mercatoria, since the beginning of 1990s, has been able to dispense with theoretical and political claims as to the nature of lex mercatoria, and instead focused on the practical issues, such as the conditions and circumstances under which it should be applied. This approach is concerned with lex mercatoria as a method of substantive decision making in international arbitration, and the various techniques derived from comparative analysis, enabling the arbitrators to disregard the outdated and idiosyncratic rules that may be found in the national legal systems. The method of decision making based on general principles of law and comparative analysis has been supported by the availability of extensive and accessible sources, i.e. international restatements of contract principles; the UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles), adopted in 1994, enlarged in 2004 and further expanded with new sections in 2010, and the Principles of European Contract Law (PECL), published in 1995, and followed by Part II in 1999 and the final Part III in 2003.

The modern lex mercatoria doctrine has effectively highlighted the necessity of the flexibility and practicality of approach in the resolution of contractual disputes in the order of international commerce. However, by arguing that lex mercatoria in practice, either as a legal system or as a method of decision making, may act as an equivalent to the national laws, the modern lex mercatoria doctrine has implicitly set the stabilization of normative expectations as an aim for lex mercatoria to have an ex ante effect on the incentives and behaviors of international merchants as well as their contracts, similar to the effect of national laws on their subjects. This approach has led to a vexing problem, since lex mercatoria constantly fails to achieve this aim set by the doctrine. Lex mercatoria exists in an order, where no authority may effectively claim to assume control over the normative expectations of international merchants, in a similar manner to those in the national legal systems.

The first generation of the proponents of lex mercatoria has suggested either that the community of international merchants may act as the authority, or that such an authority can be devised through international conventions or organizations, while the second generation of the proponents of lex mercatoria have mostly disregarded the question of such an authority in the order of international commerce, due to their practical approach that focuses on ex post

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process of decision making. The heterogeneous nature of the mercantile community in the order of international commerce, the limited success of international initiatives in stabilizing the normative expectations through harmonization of national laws, and the risk of arbitrariness in the ex post decision making in the absence of an authority lead to reasonable doubts about the claim of the modern doctrine that lex mercatoria is more appropriate, in its content or methodology, than national legal systems, for the resolution of disputes, particularly in the context of international arbitration, where the flexibility of decision making itself is susceptible to considerable uncertainty and criticisms. Thus, the modern lex mercatoria doctrine has still not been able to provide a satisfactory answer to the problems created by the uncertainty of the contents and methodology of lex mercatoria and, perhaps inadvertently, has presented lex mercatoria as potentially exacerbating the problem of uncertainty inherent in the institution of arbitration as a result of the finality of awards and the limited scope of review of awards by the national courts.

Both the doctrine’s presentation of lex mercatoria as a common ground for international merchants and the criticisms against lex mercatoria on the basis of its uncertainty originate in a failure to see the distinct nature of the legal order conceivably relevant to the concept of lex mercatoria. Despite the absence of an authority in charge of stabilizing the normative expectations of contracting parties and regulating their contracts, there is a going order of actions in the context of international commerce for centuries. The dissertation suggests a new theory of lex mercatoria, which accounts for the character of the spontaneous order of international commerce, mainly on the basis of a Hayekian insight into legal theory. The actions take place in the order of international commerce, where nobody has perfect knowledge about this order, but this order is still capable of enabling the individuals to make feasible plans for their particular purposes, through its spontaneity that disperses the bits of incomplete knowledge throughout the order, and allows the individuals to utilize their knowledge of particular circumstances of time and place. This spontaneous order arises as a state of affairs, in which a multiplicity of elements of various kinds, such as states, various organizations and merchants, are so related to each other that the individuals in this order may learn from their acquaintance with some spatial or temporal part of the whole to form reasonable expectations as to the success and effectiveness of their actions. This is an order of such complexity that can be designed neither as a whole, nor by shaping each part separately without regard to the rest, but only by consistently adhering to certain basic principles that establish abstract relations among the multiplicity of those elements.

Unlike a legal system mainly functioning through an organization stabilizing normative expectations ex ante, i.e. before an individual act, lex mercatoria functions through a judicial process ex post, i.e. after a particular contractual dispute disturbs the order of international commerce, due to its spontaneous and complex nature. Thus, the concept of lex mercatoria should be based on a judicial mechanism, whereby the decision maker exercises an abstract reasoning in order to determine and enforce the reasonable expectations of the parties to a particular contract in the context of the spontaneous order of international commerce. Due to its ex post nature, lex mercatoria is necessarily uncertain from an ex ante perspective. In the absence of an organization, which could acquire enough of the dispersed knowledge in the order of international commerce to provide legal structures stabilizing normative expectations, lex mercatoria is in the form of a few basic principles, which constitute the basis of the going order of international commerce and enable the contracting parties and the ex post decision makers to determine, at an abstract level, the reasonableness of expectations in the particular circumstances. It does not manifest itself in already articulated forms, but it has to be discovered and articulated by the ex post decision maker through “a technique of thought”,

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which materializes with new constellations of circumstances. Lex mercatoria requires the decision maker to decide the case as one of a kind, which might occur anywhere and at any time, and in a manner, which should maximize the possibility of expectations of the elements in the order being fulfilled, matched and not conflicting, in line with their common interest in the ability to make feasible plans for the achievement of their particular purposes, without impeding the very order providing this ability.

Under this theory of lex mercatoria, the restrictive approach of the modern doctrine to the sources of lex mercatoria is no longer adopted. The diversity of elements in the order of international commerce indicates that the sources of lex mercatoria cannot be limited to non-national or transnon-national rules, general principles of law, or comparative law, but it may include any material that may have a bearing on the reasonable expectations of the parties in a particular case, such as trade usages, contracting practices, general principles of law, national laws, public international law, and private international law, without making a distinction on the basis of its national or non-national character. Thus, probably, the most concrete difference of the theory of lex mercatoria, as advanced in this dissertation, from other theories so far emerged in the doctrine of modern lex mercatoria is the proposition that a particular national law may become a source of lex mercatoria in a particular case. This proposition indicates the possibility that lex mercatoria may require the decision maker to apply a particular national law, but the application of such a national law may no longer be treated as an activity of the relevant legal system, because he is not required to apply that law by that legal system, but by the reasonable expectations of the parties to a particular contract. It also indicates that lex mercatoria is not merely related to a question of applicable law to an international contract in the sense of a choice between a national law and transnational law as the governing law of the contract, although it has been traditionally understood as being so, but, in more general terms, how a dispute arising from an international commercial contract should be resolved with a view to maintaining and restoring the spontaneous order of international commerce, regardless of the conceptual distinctions between national and non-national legal sources.

The theoretical arguments surrounding modern lex mercatoria doctrine have consistently emphasized flexibility and adaptability of ex post judicial processes in the order of international commerce, but they have also limited the sources of lex mercatoria in the search for such mechanisms that stabilize the expectations in the order of international commerce in order to deal with the uncertainty arising from the absence of an effective authority in this order. The understanding of lex mercatoria in this dissertation embraces uncertainty and conceives it as a means for achieving fair and just outcomes in the disputes arising from international contracts. In this context, the fairness and justice mean the restoration of the order of international commerce, which has been disturbed by a particular dispute, and require the resolution of that dispute in a manner that maximizes the expectations of the elements of that order, which enables them to make feasible plans for the achievement of their individual purposes. In this understanding, lex mercatoria is neither a legal system nor a method of substantive decision making. It is the law of adjudication of the disputes arising from international contracts, on the basis of a few basic principles, which apply to the procedure of the decision making, the choice of law analyses and the substance of the dispute, thereby leading to the application of a body of more specific rules appropriate for a particular contract.

Under this theory, there are two conditions for the applicability of lex mercatoria. First, lex mercatoria as the law of principled adjudication applies when there are residual questions of

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contractual rights, obligations and risk allocations arising from the imperfect knowledge of the parties, i.e. incompleteness of contractual clauses and default rules chosen by the parties. In the dissertation, international contracts are roughly divided into two categories on the basis of their characteristics. The first category comprises discrete and short term contracts, where the interests of parties are antagonistic and depend on the routine enforcement of contractual entitlements. In this category, the applicability of lex mercatoria is at minimum. The second category essentially covers “relational contracts”, which involve not merely an exchange but also a relationship between the contracting parties. They require context-specific legal norms, and utilization of the knowledge of particular circumstances of time and place. These contracts typically have longer duration, more complexity or innovation and contain such clauses that contain vague standards. The complexity or innovation may arise from the circumstances surrounding the transactions, such as when many legal systems are involved in the scope of transaction, from the status of the parties, such as when there is a contract between a private individual and a state or state enterprise, or from the atypical nature of the transaction. Lex mercatoria is mainly applicable to the resolution of disputes arising from this category of contracts.

The applicability of lex mercatoria ultimately depends on the fulfillment of the second condition, which is the sufficient capacity of the decision maker for abstract reasoning. In this regard, the parties’ choice between litigation and arbitration plays the most determinative role. Lex mercatoria can be seen to a great extent as a privilege of international arbitration, which is granted by national legal systems through their policies favoring finality of arbitral awards and flexibility of procedures. Under this dissertation, “international arbitration” means the arbitration proceedings which owe no allegiance to any specific trade, and deals not only with cross-border private disputes but also state party disputes.1 International arbitration mainly takes place ad hoc or in the context of such institutions as International Centre for Settlement of Investment Disputes (ICSID), Iran-United States Claims Tribunal, International Chamber of Commerce (ICC), American Arbitration Association (AAA), London Court of International Arbitration (LCIA), Arbitration Institute of the Stockholm Chamber of Commerce (SCC), or Chamber of Arbitration of Milan.

In the context of international arbitration, there is the issue of what motivates the reasoning of arbitrators and influences their judicial behavior in the absence of an organized hierarchy of an effective appeal mechanism focusing on and ensuring the full compliance of the awards with some kind of lex fori. The national court’s review of international arbitral awards mostly focuses on two issues: whether the procedural manner in which the arbitral award is rendered is in compliance with the parties’ intentions and the procedural public policy, and whether the enforcement of the award creates a situation that is unacceptable for the substantive public

1_{It should be noted that, there are two forms arbitration as far as international commercial contracts are} concerned, namely “international arbitration” and “trade association arbitration”. In “trade association arbitration”, disputes among the members of a certain trade association are resolved by arbitral tribunals consisting of other members. It is different in certain aspects from “international arbitration”. In particular, trade association arbitration can be characterized by the existence of appeal mechanisms for arbitral awards, coherent and accessible case law for the members, effective reputation based enforcement mechanisms, homogenous nature of the relevant mercantile community and short-term nature of the relevant transactions. These differences in the context of trade association arbitration severely limit the application of lex mercatoria. However, as far as legal enforcement is concerned, there is no difference between trade association arbitration and international arbitration in institutional terms, and the awards rendered by trade association tribunals is not treated differently when it comes to the enforcement of arbitral award by the national legal systems. Therefore, trade association arbitration is not examined separately with regard to the sphere of application of lex mercatoria.

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policy in the relevant legal system. Similarly, there is no authority to direct the arbitrators to resolve the disputes in accordance with lex mercatoria; in other words, with a concern for the preservation and restoration of the order of international commerce. The increased capacity of international arbitral tribunals for abstract reasoning leads to discussions about the factors, which may potentially be influential on their judicial behavior. The reasoning of arbitrators may be motivated by their reputation in the arbitration market and the prospect of future reappointments. Indeed, since there are many gray areas with regard to the independence, impartiality and the disclosure requirements of the arbitrators, the personal and professional links among the arbitrators, the parties, their counsels, the arbitral institutions and even political powers may become influential on the judicial behavior of the arbitrators. In this context, the arbitrators’ judicial behavior arguably reflects either a tendency to “split the difference” between the parties in order to increase their chances of reappointment, or a concern for demonstrating their professional competence in rendering an award, retaining a sensitivity to the needs of speed, economy and proper case management in arbitration, in order to strengthen their reputation in the arbitration market.

The judicial behavior of arbitral tribunals under these circumstances may sometimes seem unprincipled and leading to compromise awards, either between the claims of the parties, or between the due process and efficiency. Thus, the fact that international arbitrators have the sufficient capacity to apply lex mercatoria does not mean that they will always utilize their capacity for abstract reasoning to apply lex mercatoria thereby maximizing the expectations of the elements of the order of international commerce. Even so, lex mercatoria theoretically reveals the significance of achieving justice in a particular case and of capitalizing on knowledge, which cannot be transmitted through a chain of command to authorities in organizations to stabilize normative expectations ex ante, for the functioning of the spontaneous order of international commerce. These theoretical revelations should motivate the reasoning of arbitral tribunals, rather than their reputation, income or personal connections to the circle of arbitrators, major law firms, political powers or arbitral institutions. The arbitrators should give effect to the reasonable expectations of the parties in a particular case, even if they consider themselves as service provides in the competitive market of arbitral services, as long as they are concerned with the impression they make on all participants in the process, including the various elements in the order of international commerce. The dissertation suggests that the proper understanding of the concept of lex mercatoria may motivate the arbitrators’ reasoning and influence their judicial behavior by explicating the reason why the determination and enforcement of reasonable expectations of the parties to a particular contractual dispute matters and, thereby, guide them in achieving justice in a particular case through a principled exercise of an abstract reasoning that maximizes the possibility of correspondence of expectations in the order of international commerce.

Under this theory of lex mercatoria, the question of how lex mercatoria applies can no longer be answered solely on the basis of the methodology a decision maker refers to non-national legal sources in the resolution of substantive issues. Lex mercatoria, as the law of principled adjudication of contractual disputes, has a far greater significance in the order of international commerce than what would be expected from a mere option in the choice of law analyses. Under the modern lex mercatoria doctrine, the application of lex mercatoria in practice is generally sought in judicial decisions, which contain references to the terms, such as “lex mercatoria”, “general principles of law”, “comparative law” or “international trade usages”, in resolving the substance of the dispute. Such labeling does not reflect the practical application of lex mercatoria, since it neglects the potential effect of lex mercatoria through the discretionary power or abstract reasoning of the decision maker on the cases even where a

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national substantive law is applied and there is no reference to such terms. Lex mercatoria, as the law of principled adjudication, should not be limited to the considerations of national or non-national legal sources, since it is capable of permeating into the whole of adjudication process. When lex mercatoria is applicable, any national law, either alone or in combination with other national or non-national sources, may become a material to the ultimate purpose of the decision maker, which is to give effect to the reasonable expectations of the parties to a particular contract. It can be said that, in many cases, the arbitral tribunals actually apply lex mercatoria, as the law of principled adjudication, even without a proper understanding of the concept, as a result of their concern for giving effect to the reasonable expectations of the parties to a particular contract and by utilizing the finality and the flexibility of decision making, provided by the arbitration laws and rules, with regard to the determination of the applicable law, the ascertainment of its content, and the manner of its application to a particular dispute. The argument of the dissertation is that the arbitrators should be aware of the function of lex mercatoria in the preservation and restoration of the order of international commerce and, thus, follow its basic principles in rendering a final and binding decision. The basic principles of lex mercatoria constitute the abstract schemata of thought that guides the decision maker resolving contractual disputes. First, the principle of freedom of contract requires the decision maker to respect the rules articulated by the parties in the contractual clauses and through their choice of a set of default rules, whether it is a national law or not, and refrain from imposing a different contract on the parties. The second basic principle is sanctity of contracts, which forms the basis of every contractual relationship. It is mainly a presumption leaning against the existence of any right of unilateral termination or modification of the contract by the parties. It dictates that the violation of the obligations arising from the articulated rules, which consists of the terms of the contract and the default rules chosen by the parties, will have consequences unless there is a valid reason under those rules or on the basis of the qualifying function of basic principle of good faith and fair dealing. The third basic principle is good faith and fair dealing under lex mercatoria, which denotes a contextual approach to the interpretation, supplementation and correction of the articulated rules. The function of the principle of good faith and fair dealing under lex mercatoria is to deal with the residual questions by providing a substantive framework for the decision maker’s determination of such expectations that the parties in a transaction would have reasonably formed on the basis of their knowledge of the particular circumstances of time and place. The principle of good faith and fair dealing requires the decision maker to exercise the technique of thought that characterizes the application of lex mercatoria in the choice of law analyses, in the interpretation and supplementation of the articulated rules, and in the public policy considerations.

The basic principles of lex mercatoria also include some procedural safeguards that directly relate to the institution of international arbitration. Those safeguards are based on the premise that the utilization of the knowledge of particular circumstances of time and place is only possible if the decisions depending on such knowledge are made with the active cooperation of the actual holder of that knowledge. They ensure the meaningful utilization of knowledge and the integrity of judicial process. They arise from both the procedural public policy contents and the consensual nature of arbitration. These are the principle of due process, which mainly consists of the parties’ rights to a reasonable opportunity to be heard with regard to the issues of fact and law and to equal treatment in both the constitution of the tribunal and the later proceedings, the prohibition of fraud, corruption or perjured evidence, and the decision maker’s duty to comply with his mission, which, in most cases, includes his obligation to render a reasoned award.

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On the basis of those basic principles of lex mercatoria, the dissertation demonstrates how lex mercatoria is applied in the choice of law analyses, and to the substance of the dispute. In the choice of law analyses, lex mercatoria represents the possibility for the arbitrators to resolve specific difficulties relating to the conflict of laws through a principled decision making, such as the applicable conflict of laws rules, and the interpretation of the parties’ intentions as to the applicable law. The application of lex mercatoria at the conflict of laws stage results in two situations on the basis of the particular circumstances of the case, as far as the relevance of lex mercatoria to the substance of the dispute is concerned: Firstly, lex mercatoria as lex contractus may govern the substance of the dispute to the exclusion of any particular national law, while the articulated rules are limited to those expressed in the contract. Secondly, lex mercatoria as lex fori may govern the substance of the dispute in addition to the contractual terms and the rules of a national law, which become applicable either as a result of the choice of the parties or pursuant to the application the technique of thought under lex mercatoria to the choice of law analyses.

The application of lex mercatoria to the substance of the dispute denotes three activities of the decision maker: interpretation, supplementation and correction of the contract. In these activities, the reasonable expectations of the parties to a particular contract become the single source of their contractual rights, obligations and risk allocations. Thus, when interpreting or supplementing the contract through a contextual approach or correcting the contract on the basis of public policy considerations, the decision maker applying lex mercatoria interprets, supplements and corrects not only the terms of the contract, but also the national laws applicable to the contract, in the process, not for the purpose of the development of the particular national legal systems, but for maximizing the possibility of expectations of the elements of the order being fulfilled, matched and not conflicting. By means of these activities, the decision maker reveals and enforces the law between the parties to a particular contract, in order to give effect to the reasonable expectations of the parties in accordance with the abstract relations constituting the spontaneous order of international commerce. The last part of the dissertation is devoted to the analyses of several instances of substantive application of lex mercatoria; (i) duty of cooperation, (ii) duty to achieve a specific result and duty of best effort, (iii) force majeure, (iv) hardship, (v) right to terminate the contract, and (vi) damages for non-performance. For these analyses, the dissertation identifies three sources for abstractions that should motivate the reasoning of the decision maker in applying to the substance of the dispute whatever rules or standards of contractual, national or transnational origin. These sources are national contract laws, international instruments relating to international commercial contracts, and contracting practices in the order of international commerce. The abstractions from these sources usually, but not necessarily, indicate the general principles of law. Even if the decision maker cannot articulate a general principle of law through such abstractions, the abstract reasoning is still important since it constitutes the background for the decision making on the basis of the application of lex mercatoria to the substance of the dispute either as lex fori or lex contractus. In those analyses, the arbitral awards are examined in the background of these sources of abstractions that should determine the reasoning of the decision maker applying lex mercatoria. Where possible and relevant, the arbitral awards and dissenting opinions are cited extensively in order to demonstrate to what extent the approaches of the arbitrators reflect the abstract reasoning and the principled decision making set forth by this theory of lex mercatoria in relation to those selected issues. The analysis of arbitral awards in this background also seeks the signs of the impression of splitting the difference and puts forward some possible explanations for such an impression.

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The dissertation analyzes the practice of the international arbitration under its own theory of lex mercatoria. It should be noted that only a small fraction of awards are published due to the concerns of confidentiality. Moreover, even when published, the awards are usually made available only in excerpts, so there is the danger that the reasoning of the arbitral tribunal is not reflected in full and some excerpts may be out of context. Although, in many published awards, it is possible to observe the indications of lex mercatoria, as suggested in this dissertation, it can be plausibly argued that they do not necessarily constitute the approach of majority of arbitral tribunals in international arbitration. Thus, the dissertation seeks to avoid such generalizations that would picture lex mercatoria as the default law in the practice of international arbitration. Nevertheless, the two conditions for the applicability of lex mercatoria are established quite strongly and explicitly in the practice. The residual questions commonly arise in the context of international contracts, and the finality and flexibility in decision making in the international arbitration are recognized in the modern regulation of international arbitration by the majority of the national legal systems through international conventions and arbitration laws. In this context, the theory of lex mercatoria, as suggested by this dissertation, at least represents a potential that is available to the arbitrators, and some published awards, even if their reliability may be questionable, can be considered as the evidence of the actual use of this potential in practice.

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2. THE CONCEPT OF LEX MERCATORIA

a. The Evolution of Lex Mercatoria

i. Medieval Lex Mercatoria

Medieval lex mercatoria represents a symbol for some legal scholars, who have sought from the Middle Ages evidence of an independent and exclusively mercantile law as a solution to problems of cross-border commerce. In their view, this law differed from the municipal laws of contemporary jurisdictions in that it was created autonomously by merchants and expressed in their customs, reflecting unwritten usages rather than the written command of a sovereign legislator. As the product of the cosmopolitan merchant community, it was universal, consisting of substantive principles and convenient procedures to govern commerce across borders. It came to represent the romantic ideal of an autonomous and uniform law created by and for international merchants, independent from the contemporary legal framework in the modern world.

There are also others who have questioned this “romantic” vision and sought for a more “realist” vision of medieval lex mercatoria. The different perspectives on medieval lex mercatoria result from the historical sources, which mention the phrase “lex mercatoria” or its variants in their contents. These sources can bluntly be divided into two categories in respect of their date of origin. In the pre-seventeenth century sources, the phrase “lex mercatoria” was not used in the sense of a system of substantive law. The historical research conducted into this category of sources suggests that lex mercatoria was not a substantive, but a procedural law, and it was not transnational or uniform. In the historical sources from seventeenth century and later, the phrase “lex mercatoria” mostly reflects a romanticized picture of early medieval lex mercatoria due to the political backgrounds of these sources, which should be taken into account when reaching conclusions about the nature of medieval lex mercatoria. Thus, a proper understanding of the context, from which these historical sources emerged, becomes imperative and a research that fails to provide such an understanding of the historical context may come to some misleading conclusions about the nature of medieval lex mercatoria.

It can be said that modern lex mercatoria doctrine mostly bases its historical account on the second category of sources while neglecting their political and historical context. Thus, the accuracy of different historical accounts of lex mercatoria was taken with suspicion by some writers of modern era. It is noted that the origins of the “new law merchant” have been discussed by many authors, but have rarely been subject to thorough analysis and the subject has largely remained obscure since there is hardly any evidence to determine whether the medieval law merchant had autonomous standing apart from the local municipal law.2 In the end, the controversy about the nature of medieval lex mercatoria affects the concept of modern lex mercatoria, which has become representing both the romantic ideal of an autonomous and uniform law created by and for merchants, independent from the contemporary legal framework, and the realist understanding of an emerging set of specialized legal norms, procedures, and institutions within the contemporary legal framework.3

2_{De Ly Filip, International business law and lex mercatoria, T.M.C. Asser Instituut, 1992, at 17} 3

Michaels, Ralf, the True Lex Mercatoria: Private Law Beyond the State, Indiana Journal of Global Legal Studies, 14 (2007), at 448

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1. The Realist Vision of Medieval Lex Mercatoria

It is observed from the pre-seventeenth century sources that the phrase “lex mercatoria” was not used in the sense of a system of substantive law. Some historical research focusing on the pre-seventeenth century sources presents an understanding of medieval lex mercatoria in which the substantive law aspect cannot or can hardly be found. However, before understanding the nature of medieval lex mercatoria as reflected in the pre-seventeenth century sources, the general system of substantive law as applied in the territories where these sources emerged should be examined.

In England, the general system of substantive law began to be created in the twelfth century. The English monarchy of the twelfth century was more centralized than any of the other monarchies of Europe. Therefore, the twelfth-century monarchs in England were able to establish a system of central royal courts.4 The author of a short treatise entitled “Lex Mercatoria”, which was written in the late thirteenth century in England and the earliest known treatment of lex mercatoria, described it as the daughter of the common law which was applied by central royal courts. The author wrote that the common law endowed lex mercatoria with certain privileges in certain places, namely cities, fairs, seaports, market-towns and boroughs. 5 Within these sites, mercantile law was always to be applied, unless both parties openly and expressly agreed on the common law.6 The most significant and distinctive feature of those sites was the existence of a special jurisdiction.7

It is observed that there were many references to the “ley marchaunt” or “lex mercatoria” to indicate that medieval English lawyers regarded it as something different from the common law.8 However, it is argued that the distinction between systems of law during the middle ages was usually made in procedural terms, due to the fact that medieval lawyers believed that substantive justice was immutable, invariable and unattainable on earth. The quality of justice depended on the available mechanisms and procedures.9 Therefore, it is deemed doubtful whether any distinctions were made at all between lex mercatoria and common law with regard to their substantive content. Moreover, most of the medieval literature consists in codes of mercantile procedure observed in particular cities, and towns and, far from being a universal law throughout the world, they had many local variations. The medieval sources support the idea that the law merchant was not so much a corpus of mercantile practice or commercial law, but an expeditious procedure especially adapted for the needs of merchants.10

4_{Donahue Jr., Charles, Private Law without the State and During its Formation, American Journal of} Comparative Law, 56 (2008), at 550

5_{Basile, Mary E., Jane F. Bestor, Daniel R. Coquillette & Charles Donahue, Lex Mercatoria and Legal} Pluralism: A Late Thirteenth-Century Treatise and its Afterlife, The Ames Foundation of Harvard Law School, 1st ed., 1998, at 27

6_{Ibid., at 24} 7

Fortunati, Maura, The Fairs between Lex Mercatoria and Ius Mercatorum, in Vito Piergiovanni (ed.), From Lex Mercatoria to Commercial Law, Berlin: Duncker & Humblot, 2005, at 146

8_{Baker, John H., Law Merchant and the Common Law before 1700, Cambridge Law Journal, 38 (1979), at 299} 9

Ibid., at 300 10_{Ibid., at 301}

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Hence, it is argued that lex mercatoria in the late thirteenth-century England was connected to a royal privilege, which partially freed the merchants from the jurisdiction of central royal courts thereby exempting merchants from rigid law of evidence of the common law. The law of evidence was also among the main subjects of the treatise “Lex mercatoria”. Similarly, the law book Fleta, a general treatise on English law compiled in around 1290, mentioned lex mercatoria as a royal privilege exempting all merchants trading in England from the archaic legal procedures.11 Fleta provided that the plaintiff is granted a privilege by royal grace that under certain circumstances, namely disputes arising in towns or at markets and between merchants, he may bring forward proof according to lex mercatoria.12

On the other hand, the limited substantive aspect of medieval lex mercatoria was also mentioned in royal documents of England, such as Carta Mercatoria and Statute of Staples, which clearly described lex mercatoria as the proper means of deciding certain mercantile cases.13 Carta Mercatoria, issued by Edward I in 1303, promised foreign merchants, who complain before merchant courts in England, speedy justice without delay according to the Law Merchant touching all and singular complaints which can be determined by the same law with the exception that in contractual disputes, proof and inquiry should be made according to the usages and customs of the fairs and markets where the contract had been made.14 The Statute of the Staple, issued by Edward III in 1353, provided that the merchants coming to the staple towns “shall be ruled by the Law-Merchant, of all Things touching the Staple, and not by the common Law of the Land, nor by Usage of Cities, Boroughs, or other Towns.”15 In essence, these documents guaranteed a more rapid method of dispute resolution, which followed either the vague concept of “Law Merchant” in a sense of substantive justice or the various usages and customs of the commercial towns and fairs under certain circumstances. In England, the fair court of St. Ives provided the primary sources for the study of medieval lex mercatoria, since the activity of the St. Ives court was uniquely well documented. The surviving rolls are dated between 1270 and 1324. 16 It is argued that no source contains as complete a description of a medieval English fair as the St. Ives rolls.17 It was observed from the rolls that the term “lex mercatoria” was rarely mentioned in St. Ives records. Only eleven records of the entire set of court rolls contain the phrase “secundum legem mercatoriam”

11_{Volckart, Oliver and Antje Mangels, Are the Roots of the Modern Lex Mercatoria Really Medieval?, Southern} Economic Journal, 65-3 (1999), at 443 fn. 44

12

Cordes, Albrecht, The search for a medieval Lex mercatoria, Oxford University Comparative Law Forum, 5 (2003), at ouclf.iuscomp.org, text after note 17

13_{Sachs, Stephen E., From St. Ives to Cyberspace: The Modern Distortion of the Medieval ‘Law Merchant’,} American University International Law Review, 21 (2006), at 780

14

Mitchell, William, An essay on the early history of the law merchant, New York: Franklin, (Originally published Cambridge, 1904) 1976, at 6

16_{The Selden Society published a significant number of the rolls in facing-page translation. Although the cases} are selective, the extracts were chosen with a view of elucidating law merchant practiced at St. Ives. Gross, Charles (ed.), Select Cases Concerning the Law Merchant A.D. 1270-1638, Vol. I, Local Courts, London: B. Quaritch, Selden Society 23, 1908, PREFACE

17

Sachs, Stephen E., From St. Ives to Cyberspace: The Modern Distortion of the Medieval ‘Law Merchant’, American University International Law Review, 21 (2006), at 685

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(according to law merchant) or its variants.18 Moreover, since the king and abbot exercised significant influence over the principles applied in the fair court of St. Ives, customary principles were often combined with these authorities.19 Therefore, the rules applied by the fair courts were not merely grounded in the will of the merchant community; the abbot’s dictates, the king’s statutes, the residents’ customs, the suitors’ sense of justice participated in an organic law, as observed from the rolls of the court of St. Ives.20 The St. Ives rolls also show that coercive power of the abbot to enforce decisions, to collect damages, and to assess fines was exercised routinely. The court was part of the abbey’s patrimony, which included the manor of Slepe in which the village was located.21

Due to the procedural exemptions, the merchants in England were able to exercise some independent judicial authority in mercantile courts. The treatise “Lex Mercatoria” stated that, in market courts, “every judgment ought to be rendered by merchants of the same court and not by the mayor or by the seneschal of the market.”22

Statute of Staples further allowed the foreign merchants on the juries.23 The court rolls of St. Ives also recorded some occasions that “thereupon all the merchants of the said fair, both natives and foreigners, to whom judgments belong according to the law merchant, having been called for this purpose and consulted, say that” how an issue can be resolved “according to the law merchant”.24

The merchants in the court of St Ives were suitors and the abbot’s steward presided over them. Although the steward presided over the court, the suitors found the judgment or declared the law.25

18

Ibid., at 730: Amisius v. Ralph 1 Gross, Charles (ed.), Select Cases Concerning the Law Merchant A.D. 1270-1638, Vol. I, Local Courts, London: B. Quaritch, Selden Society 23, 1908, at 5 concerning the number of oath-helpers required to claim the attachment of goods; Fulham v. Francis (St. Ives Fair Ct. 1311), at 89 concerning whether servants may provide oath in their master’s place; Yarmouth v. Fick (St. Ives Fair Ct. 1300), at 81 and Fairhead v. Tankus (St. Ives Fair Ct. 1295), at 71 concerning the time period after which the goods may be sold to satisfy a debt; Tempsford v. Chaplain (St. Ives Fair Ct. 1291), at 45 concerning the conclusion of a sale through the payment of earnest money; Saddington v. Laungbaurgh (St. Ives Fair Ct. 1287), at 22 concerning the need for pledges in a wager of law; Darlington v. Burser (St. Ives Fair Ct. 1302), at 85-86 concerning the need to specify the regnal year in which an offense occurred; Hoppman v. Welborne (St. Ives Fair Ct. 1302), at 86-87 concerning the admissibility of a sealed writing of debt; Bedford v. Reading (St. Ives Fair Ct. 1312), at 91 concerning the king’s claim to fraudulently marketed licorice; Legge v. Mildenhall (St. Ives Fair Ct. 1291), at 46-47 and Bishop v. Godsbirth (St. Ives Fair Ct. 1315), at 97 concerning the right of a third-party butcher to intervene in sales of meat and fish.

19

The administration of the fair was in large part subject to the authority of the king of England and of the abbey of Ramsey, a powerful and wealthy monastic foundation that held both the St. Ives fair and the manor of Slepe in which the village was located. The abbey of Ramsey received a charter from Henry I granting the right to hold an annual fair at St. Ives in 1110, and the terms of the charter included the customary rights to take tolls in the fair and to hold a court to govern it. Gross, Charles (ed.), Select Cases Concerning the Law Merchant A.D. 1270-1638, Vol. I, Local Courts, London: B. Quaritch, Selden Society 23, 1908, at XVII

21_{Ibid., at 699}

22_{Basile, Mary E., Jane F. Bestor, Daniel R. Coquillette & Charles Donahue, Lex Mercatoria and Legal} Pluralism: A Late Thirteenth-Century Treatise and its Afterlife, The Ames Foundation of Harvard Law School, 1st ed., 1998, at 20 in the original text of the treatise

23

Constable, Marianne, The Law of the Other: The Mixed Jury and Changing Conceptions of Citizenship, Law, and Knowledge, University Of Chicago Press; 1st ed., 1994, at 99

24_{Fulham v. Francis (St. Ives Fair Ct. 1311), in Gross, Charles (ed.), Select Cases Concerning the Law Merchant} A.D. 1270-1638, Vol. I, Local Courts, London: B. Quaritch, Selden Society 23, 1908, at 90.

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Thus, the medieval lex mercatoria in England was a general phrase for whatever law was appropriate to mercantile transactions, emerging from procedural exemptions and not necessarily a term for a specific body of principles actually applied to them.26 As a result of procedural exemptions, the content of substantive law was constantly changing along with the mercantile customs applied to the case. In a context that the common law itself was little more than a series of technical rules of evidence and procedure, lex mercatoria indicated merely a different set of similar rules, established to ensure speedy justice for the foreign merchant and enforced in mercantile courts.27 On the substantive side, it consisted of customs and equity, but it was not an organized body of rules, which had the quality of an autonomous legal system.28 Moreover, the medieval lex mercatoria in England was apparently well integrated into the contemporary legal framework. Despite the existence of local courts to hear mercantile pleas, the king retained some jurisdiction over fairs and markets. It is observed that, in the rolls of the Common Pleas for the fourteenth and fifteenth centuries, there are many commercial cases involving city tradesmen and merchants, in addition to the foreign names, which imply the cross border character of some of the businesses.29

In the continental Europe, the effort at building a system of substantive law focused on Roman law in the medieval period.30 This effort was problematical in its relations to existing power structures. There was some connection with the Holy Roman Emperor, but, such a connection later became controversial when Roman lawyers sought to bring their ideas into monarchies, which did not recognize the authority of the emperor. Nevertheless, it is argued that the effort with Roman law succeeded because the church needed it to fill out its legal system, and because kingdoms and communities, principally in southern Europe, were willing to accept the learning of Roman lawyers as a default law. 31

The influence of Roman law on the understanding of law to be applied to mercantile matters can be observed in Benvenuto Stracca’s De Mercatura 1st

ed. 1553, which is generally thought to be the first comprehensive treatise on the medieval mercantile law.32 De Mercatura described a separate set of mercantile courts which varied in their procedures from those that employed long-form Romano-canonical procedure. De Mercatura was composed of a series of short treatises on various aspects of the law merchant and did not provide a systematic exposition of commercial law.33 It mainly provided a guide of sources for the voluminous works of Roman law from the point of view of merchant courts and merchant cases and some discussion on mercantile morality.34 Since mercantile courts were sometimes unprincipled,

26

Sachs, Stephen E., From St. Ives to Cyberspace: The Modern Distortion of the Medieval ‘Law Merchant’, American University International Law Review, 21 (2006), at 788

27_{Isaacs, Nathan, The Merchant and His Law, Journal of Political Economy, 23 (1915), at 530}

28_{Goode, Roy, Usage and its Reception in Transnational Commercial Law, International and Comparative Law} Quarterly, 46-1 (1997), at 5

29_{Baker, John H., Law Merchant and the Common Law before 1700, Cambridge Law Journal, 38 (1979), at 302} 30_{Donahue Jr., Charles, Private Law without the State and During its Formation, American Journal of} Comparative Law, 56 (2008), at 562

31_{Ibid., at 562} 32

Donahue, Jr., Charles, Benvenuto Stracca’s De Mercatura: Was There a Lex Mercatoria in Sixteenth-Century Italy?, in Vito Piergiovanni (ed.), From lex mercatoria to commercial law, Berlin: Duncker & Humblot, 2005, at 76

33

Ibid., at 80 34_{Ibid., at 106}