Soft Law for Solid Contracts? A Comparative Analysis of the Value of the UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law to the Process of Contract Law Harmonization

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I. INTRODUCTION

The globalization phenomenon constantly confronts legislative bodies all over the world with one urgent question: How to draft new laws and adjust existing rules to secure their effectiveness in times of "global marketplaces" with internationally operating corporations and individuals? The expansions of transnational business interactions, the worldwide accessibility of goods and services over the internet, and the borderless lifestyles and habits of consumers are far ahead of the legal rules created to govern international transactions. Globalization on this sector calls for more international legal coherence and perhaps even the unification of domestic and supranational trade laws. (1)

Accordingly, there are many "internationalization" efforts that have been and continue to be promoted across various institutional levels covering a number of legal areas, especially in the area of contract law. (2) Harmonizing, i.e. making more congruent, international contract law under various legal forums is the basis of an internationalization of law that arose in response to the eroding importance of borders in today's business world. Two innovative non-legislative contributions to this process have been presented: the UNIDROIT Principles of International Commercial Contracts, (3) provided by the UNIDROIT Institute for the Unification of Private Law, and the Principles of European Contract Law, (4) which were published by the Commission on European Contract Law.

This article will discuss the legislative motives and political and economic arguments that underlie ongoing activities in contract law harmonization, and it will introduce the major institutions pursuing this goal (section II). This article will then give an overview of and compare the UNIDROIT and European Principles as two of the most extensive non-legislative efforts, examining whether their approach is an effective and favorable alternative to institutional solutions (section III). Finally, the passing of the first 10 years after the first publication of the two sets of Principles and the recent release of an extended version of the UNIDROIT Principles provide an occasion to discuss how effective this soft law has proven towards the harmonizing of international contract law, and whether it makes sense to apply and further develop both sets of Principles in tandem (section IV).

In some parts of the discussion and analysis, slight emphasis will be placed on the state of affairs in Western Europe. This is due to the comparably high level of synchrony in contract law in the European Union as well as the region's significant share in international trade,

II. HARMONIZATION AND UNIFICATION OF INTERNATIONAL CONTRACT LAW

A. Why Harmonize International Contract Law?

The convergence of the ways business is being done in different countries and regions of the world is an almost automatic result of the globalization of deals and markets. Quality standards in manufacturing and services in South East Asia must meet the expectations of European companies that outsource production facilities; business customs in the Arab World must adapt to the ways investors from North America negotiate; young market economies in Eastern Europe must secure a system where parties can rely on investor-friendly, efficient and fair bureaucracies. In this context, the establishment of a legal environment that ensures conditions such as equal protection of intellectual property rights or globally reliable enforcement of foreign judgments is one of many steps necessary to disburden cross-border business interaction.

A reliable contractual fixation of the relationship between two or more parties doing business with each other poses a crucial condition for the success of any such transaction. This is because, ideally, a contract authoritatively determines the parties' obligations regarding the deal, and it is the evidential basis of any actions taken if the contract fails. …