Academic journal article Law and Policy in International Business

The New Law Merchant: Legal Rhetoric and Commercial Reality

Academic journal article Law and Policy in International Business

The New Law Merchant: Legal Rhetoric and Commercial Reality

Article excerpt


Notwithstanding the differences in the political, economic and legal

systems of the world a new law merchant is rapidly developing

in the world of international trade. It is time that recognition

be given to the existence of an autonomous commercial law that

has grown independent of the national systems of law.(1)

Aleksander Goldstajn wrote the passage quoted above in 1961, yet many lawyers still deny the new law merchant the recognition it merits.

The new law merchant is a manifestation of the commercial community's growing disenchantment with national legal systems. Over the last century, merchants have slowly begun to extricate their commercial disputes from the tangled regulatory web of the national legal order. Evidence of merchant hostility towards state institutions is not hard to find. Some of the largest American companies, for example, have such ill feelings about litigation that they have pledged themselves to "negotiate and settle [disputes] early before litigation takes on a life of its own."(2) On a transnational level, the problem is much worse, especially in the United States, which other nations view as a "horrid land of litigation."(3) In order to escape the labyrinth of conflicting national laws, international merchants submit their disputes to a-national arbitral bodies, and increasingly, arbitrators are resolving disputes by applying an a-national body of private customary law--the law merchant.

The law merchant is spoken of under a number of names, including international, transnational, or supranational commercial law; international customs or usages; general principles of international commercial law; and lex mercatoria.(4) Regardless of the label, the same phenomenon--a set of rules encompassing the trading practices of the international merchant community--is being described.(5) However, "[t]he criterion for determining the ambit of lex mercatoria . . . does not solely reside in the object of its constituent elements, but also in its origin and its customary, and thus spontaneous, nature."(6)

Legislated national law is becoming ever more irrelevant to the development of international commerce, much to the chagrin of many lawyers, jurists, and legal scholars who have built careers mastering the intricacies of national legal systems. While some lawyers have welcomed the return of the law merchant, others have vehemently denied its very existence. This Note explores the arguments on both sides of the law merchant controversy and advocates the continued growth of this new autonomous legal order.


A. The Medieval Law Merchant and Commercial Self-Regulation

Before the emergence of modern regulatory states, international trade occurred within a self-regulating framework of customary law free from government interference. This private customary law of international trade is what has been known as the law merchant or lex mercatoria.(7) The members of the international merchant community voluntarily and cooperatively created, adjudicated, and enforced this law.(8) The law merchant regulated merchant conduct without the coercive assistance of state governments.(9) The merchant judges, like modern arbitrators, relied on their knowledge of commercial custom and on their familiarity with the evolving needs of commerce to resolve disputes.(10)

A great imaginative leap is needed in order to understand how the role of a merchant jurist differs from the role envisioned for judges under our present positivist conception of the judiciary. One must begin by observing that merchants are guided by rules that they know how to follow but are unable to state.(11) The merchant jurist's function is to articulate these pre-existing rules that merchants observe in practice but might be unable to express. His task is to tell merchants what rule ought to have informed their expectations, not because anyone had told them that this was the rule, but because this was the established custom that they ought to have known. …

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