The Foundations of Referring to Lex Mercatoria by Arbitrators in International Commercial Contracts

Abstract

Lex Mercatoria (transnational commercial law) has emerged and evolved as a spontaneous legal system beyond the legislative power of national governments, and today, nearly the entire international commercial community is well-acquainted with this self-sufficient legal framework. A review of some of the laws of leading countries in international trade, as well as model arbitration laws in the last decade, demonstrates the acceptance of Lex Mercatoria’s applicability as the governing law of international contracts, especially when the parties have explicitly agreed to apply such rules. However, a matter that invites reflection is whether arbitrators are authorized to make decisions based on Lex Mercatoria when the parties have remained silent on the choice of governing law or even when they have selected a specific national law as the governing law of the contract. Generally, an examination of the decisions rendered in numerous cases adjudicated by international commercial arbitration tribunals reveals that arbitrators tend to apply the principles and rules of this transnational legal system even in the absence of Lex Mercatoria being chosen as the governing law of the contract.