A Demandeur-Centric Approach to Regime Design in Transnational Commercial Law

Article excerpt

I. INTRODUCTION

Recent scholarship on international agreement design has almost exclusively focused on the public international law area. (1) The literature on regime design in the area of international private law (2) lacks a solid theoretical foundation. Academic writing on public international law's state-centric approach is only amenable to crude transplantation and poses several puzzles in the international private law context. Resolving these puzzles is important because of the proliferafion of transnational commercial agreements in areas that were traditionally the province of domestic law. (3) This paper attempts to provide a starting point to address this theoretical vacuum. Part II argues that functionalist, liberal, and realist theories cannot fully explain transnational commercial law agreement design. Part III puts forth a demandeur-centric approach with the aid of examples that span the spectrum from hard law to sort law. Part IV concludes that agreement design in transnational commercial law is premised on demandeur preferences and relative power. Ultimately, the choice of structure boils down to which parties are the demandeurs of the agreement. (4) All else being equal, when the demandeurs are confident in their ability to achieve agreement, and enforcement requires minimal state involvement, they will opt for non-convention vehicles. (5) The choice of the convention form is predicated on their ability to co-opt states, when enforcement power is necessary.

II. THE INAPPROPRIATENESS OF THE PUBLIC INTERNATIONAL LAW LENS

Institutions in the private law area traditionally favored international conventions, assuming that because international conventions are binding, they are the strongest vehicle available. (6) The use of conventions has been intrinsically linked to an emphasis on the binding quality of the obligations. In contrast, non-convention vehicles have been employed when the progenitors did not intend the agreement to be legally binding. (7) Non-convention vehicles have also been chosen when there was little need for state involvement. (8)

Accordingly, the scholarly literature has inextricably linked conventions as vehicles of international legislation with the question of compliance. (9) While this focus may make sense in the public international law context, compliance has very little meaning in the private law area because many so-called binding conventions are dispositive. (10) Dispositive means that an actor's subsequent actions can render a convention non-binding. Parties are free to exclude the binding convention entirely or in part. Thus, while the traditional international law scholar would have concluded that the choice of a convention would enhance the "normative strength of the agreement and ... a state's sense of obligation," (11) reality does not support such a conclusion.

For example, the Vienna Convention on Contracts for the International Sale of Goods (CISG) has been the law of the United States since 1988. (12) Yet, it has had very little impact because most international contracts routinely exclude the convention's application. (13) The conventional explanation advanced for failed binding conventions, that states violate agreements when their interests conflict with the obligations embodied in the agreement, has no explanatory power for the failure of the CISG; few state interests of the United States conflict with CISG obligations, and the state plays little role in the 'success of such conventions. One might argue, however, that the United States has an interest in preserving the application of its own law to international contracts that would be subjected to the CISG, and that interest would conflict with the interest to ratify the CISG. This argument overlooks the role of party choice. Even if the United States has an interest in the application of its own domestic contracts law, there is no guarantee that its forbearance from ratifying the CISG would ensure that its domestic law would be applied to international contracts. …