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The Relevance of the Academic Model for the Modern Lex Mercatoria

[Jan H. Dalhuisen is Professor at King’s College in London, the Miranda Chair of Transnational Financial Law at the Catholic University in Lisbon, and is Visiting Professor at UC Berkeley] Professor Dalhuisen is guest-blogging with us this week on the transnationalization of private law. Links to his other posts can be found under "Related Posts" below. The Codification idea, the DCFR as the EU attempt at codification, the EU jurisdiction in the area of private law formation, and especially the force and meaning of the academic model in the law need to be further considered if we are to acquire a better perspective on the formation of private law at the transnational level and therefore on the modern lex mercatoria. It was already said that private law including commercial law had been thought of as being transnational until the 19^th Century especially on the European Continent.  This was confirmed by the general acceptance of the Roman law as superior customary law even though in commerce there was local law but it was not nationalistic, it was often regional or municipal and could operate cross border. The laws in the Channel ports between France and England and across the Alps between France and Italy were already mentioned. Again, the dominance of national states since the early 19^th Century changed all that. The right insight was here that law moved with society and its values. The latter had already been accepted in the natural law school which philosophy was now, however, rejected because of its universalist claims.  Instead the law was nationalized everywhere.  Moving with society soon meant on the European Continent a monopoly for national legislators. Overriding principles were out, custom was suspect.  Party autonomy depended on the license of the state. Even in England, the law was henceforth thought to issue from the sovereign (Austin), albeit still mainly through the courts. Other sources of law, custom in particular became here also of dubious value. Only in commerce its value was still acknowledged but the status in particular of international custom became unclear. In this atmosphere, it became also axiomatic that property law operated per country.  If one bicycled from Basel to Strasbourg, the bicycle went through three different legal regimes of ownership. The law of assignment was no less seen as an expression of a national culture. It seemed unnecessary if not bizarre in economic systems that were largely the same.  The codes underscored this but it is important to understand that the codification movement had two different prongs. The early codification in France (1804) was product of Enlightenment and largely a cleaning out exercise which was found to be best conducted at the level of the state. It was a question of greater transparency and efficiency and lesser transaction costs. Nationalism was not a key element and this allowed the French code to spread fast through neighbouring countries. The fact that other sources of law were eliminated was foremost pragmatic. The German Code which came about hundred years later was conceptually very different and the product of German nationalism and idealism. It claimed for the state the deeper insights in the human condition and the ability through its academies to best regulate human behaviour. Codification is here an academic model and its system acquired a mystical and irrational element.  The claim was that the result was complete, represented the reality of human relationships and had the answer in it to all questions present, past and future.  It could as such not be questioned because it was the law imposed by the state. All other sources of law were subjugated to it. They had no independent status because they were not considered legitimate without governmental recognition.

The Modern Lex Mercatoria and International Arbitration

[Jan H. Dalhuisen is Professor at King’s College in London, the Miranda Chair of Transnational Financial Law at the Catholic University in Lisbon, and is Visiting Professor at UC Berkeley] Professor Dalhuisen is guest-blogging with us this week on the transnationalization of private law. Links to his other posts can be found under "Related Posts" below. With the model of a transnational commercial and financial legal order and its own lex mercatoria in mind, it is quite easy to explain what modern international commercial arbitration is and is not, or no longer. It is denationalized or delocalised to start with. Thus the arbitration clause is separated from the rest of the contract and derives its recognition and power from this transnational order as do therefore arbitrators, whose status derives institutionally also from that order.  Indeed the separation and Kompetenz-Kompetenz principles are themselves matters of transnational law. So are the concepts of jurisdiction and arbitrability in international arbitrations, the authority of arbitrators to find the applicable law even if regulatory, and the rules of procedure and evidence. I said earlier that arbitrators act here like equity judges when developing the substance of the lex mercatoria further. The award itself is based in the transnational order also, so is its enforceability even if in the practicalities, recognition is still necessary in the states where enforcement is sought as they (for very good reasons) maintain the monopoly of enforcement powers on their territories and still want a minimum of control. The seat of the arbitration and its laws have here no longer much relevance except in aid of the international arbitration taking place on its territories unless a true public interest of the country of the seat became involved. Naturally, it should guard against a cowboy culture in arbitration on its territory or ban or dissolve any meetings in its country for public policy reasons in appropriate cases, but not much more. Injunctions could not go beyond this either. This approach is long borne out by the fact that even annulment of an award at the seat is no longer decisive in the transnational legal order and does not rule out recognition of the awards elsewhere or resumption of the same case in another country. Once the double exequatur was abolished by the New York Convention, the writing was on the wall and only those who still believe that all law emanates from states still hold to the old truths in this regard.

Weekday News Wrap: Thursday, April 5, 2012

As an advance group of UN peacekeepers arrived in Syria for talks on the monitoring of the ceasefire, violence erupted again. Russia is seeking more influence in the Syrian situation, and has invited the Syrian foreign minister and representatives of the Syrian opposition for separate talks in Moscow, on 10 April and 17-18 April respectively. Russia also urges other states not...

The Modern Lex Mercatoria and its Legitimacy

[Jan H. Dalhuisen is Professor at King’s College in London, the Miranda Chair of Transnational Financial Law at the Catholic University in Lisbon, and is Visiting Professor at UC Berkeley] Professor Dalhuisen is guest-blogging with us this week on the transnationalization of private law. Links to his other posts can be found under "Related Posts" below. What kind of legitimacy does the new lex mercatoria have? It is founded in fundamental principle, therefore in basic values, even in commerce very important, and otherwise in custom and practices themselves highly participatory, in party autonomy or in generally accepted principle of a more practical nature. It is not true that the law in commerce and finance is value-lite. Is that enough for its international legitimacy or should it go through some democratic process which suggests that even in international transactions there should be some scrutiny at state level or through parliaments? It is an argument that superficially appeals to many but is in error. First, historically, private law was hardly the product of a democratic process, Roman law never was nor were hardly the great modern 19^th Century civil codes. More importantly, even now, the common law is formulated by the courts. We also accept in conflicts law the law of any country and do not commonly enquire into the democratic legitimacy of national laws either. The argument concerns in particular policy and values and many believe that they can only emerge at the level of a (democratic) legislator but it would be a sad day indeed if values, social values in particular, could only enter private law though statutory amendment.  This would mostly be a long wait. Rather, it is well known that courts and practitioners in the daily application of the law move the law forward all the time and follow evolving fundamental principle.

The Notions of Certainty, Finality and Predictability

[Jan H. Dalhuisen is Professor at King’s College in London, the Miranda Chair of Transnational Financial Law at the Catholic University in Lisbon, and is Visiting Professor at UC Berkeley] Professor Dalhuisen is guest-blogging with us this week on the transnationalization of private law. Links to his other posts can be found under "Related Posts" below. Reliance on transnational immanent law formation, even if supported by some treaty law, coupled with the concept of a dynamic contract and movable property law, naturally raises issues of legal certainty under the modern lex mercatoria even if the question of the hierarchy of norms is sorted out. In this connection it is often argued that there is at least certainty when domestic law is applied to international cases pursuant to the canons of conflicts of law, but this certainty, even if it results, can be of such a low quality that it destroys everything. It was already said that domestic law is seldom meant for international transactions and does not mean to serve their needs or dynamics. In any event, it cannot cover whole portfolios of assets in different countries, nor international cash flows or the movement of assets trans-border. Combinations of national laws must then be used about which there remains much doubt. The result risks remaining not only unsuitable, but indeed also uncertain. Even if this is all true, there nevertheless remains the question of certainty under the new lex mercatoria to consider. Certainty itself is ephemeral in the law. We would not need ever more lawyers if it could be attained. There remains much doubt in the application of all law because the factual configurations differ all the time and we can have certainty only in pure repeat, therefore perhaps in conveyancing or in most traffic offenses, but not much else in a fast moving world. The cry for certainty is therefore ignorant of the world in which we live and is childish, as has often been pointed out (to start with Jerome Frank) but especially in transactions and payments, there is an overriding and public policy need for finality.

Weekday News Wrap: Wednesday, April 4, 2012

A part of the Syrian peace plan, brokered at the behest of Kofi Annan, includes the deployment of 250 UN peacekeepers for a ceasefire monitoring mission, scheduled for arrival in Syria in the next 48 hours. Russia accuses the "Friends of Syria" group that met in Istanbul over the weekend of undermining the UN Special Envoy Kofi Annan's peace plan. After bombs...

York University Faculty Torpedo $60 Million International Law Donation

The faculty of Osgoode Hall Law School at York University in Toronto are either pretty gutsy, or totally insane...

Matt Bors Says It All