The main aim of this analysis is to clarify the content of the term lex mercatoria, what was its way of development and to briefly describe the general attitude of the courts (as authorities of law enforcement) towards it. It is important to know the history and the reason for the creation of lex mercatoria, the later codification, and also its place in the legal world. Furthermore, it is essential to analyse the purpose of the International Court of Arbitration, which plays a significant role in the use of merchant law nowadays and, at last, to discover how important the merchant law is today.
Lex mercatoria is generally defined as the body of rules of international commerce which have been developed by the customs in the field of commerce and affirmed by the national courts. This definition was also mentioned in the argumentation of the International Court of Arbitration in Paris in the final decision of case number 9246 from March 8, 1996.
The term lex mercatoria comes from Latin and means „merchant law“. This term had been used during the medieval times by merchants in Europe to name the body of commercial law.
The history and development of lex mercatoria
The formation of lex mercatoria is deeply rooted in the ancient times. It is associated with the oversea trade which was conducted mainly in the area of Greece, Egypt, Phoenicia, and especially Rome.
Rome is the place where a separated law, called ius gentium, was created. The main reason of the creation of this law was the expansion of the Roman Empire and the fact that the existed law could not cover anymore all the newly created legal relationships, especially in the area of trade. Initially, it was a law which was applied to the legal relationships between the foreigners and the Roman citizens, later on just among the Roman citizens, and gradually ius gentium in fact disappeared in practice. This was caused by the changes which occurred during those times in Rome´s history when all the free people in Rome gained the citizenship and it was no more as unique as before. However according to the law it remained a part of the legal institutions of ius civile. (Rozehnalová, 1994, p.13-14)
Ius gentium implied flexible rights, adaptable business rules and customs. After the fall of the Roman Empire, the states were able to create their own rules relating to the principle of territoriality. This principle means that each state has its own law which every person located on its territory has to obey according to the principle of sovereignty (Prusák, 1997, p.58-59). The Law of the Roman Empire, along with commercial practice, was later reproduced by the Byzantine Empire and some Arabic countries.
There were many factors which influenced lex mercatoria in the medieval times: the ending influence of the Arabic Empire in the Mediterranean, the blossoming of the port cities, crusades, the general revival of trade in Europe, and the migration of the merchants who were using the trade rights and commercial practices of their own territory, and the creation of a new social class – the middle class.
The medieval feudal law did not govern the situations where some problems associated with international trade could occur; it were the gild institutions and the merchants who gave rise to a special law of international trade because they needed to ensure their trade. Lex mercatoria consisted of the business practices agreed by traders in a particular area.
During 12th and 13th century, the establishment of the special courts in the areas where markets were held to solve trade disputes and apply lex mercatoria took place in France, Italy, and England. (Rozehnalová, 1994, p.198). These arbitrations were provided by the most respected persons from among the traders to ensure that each case would be understood and judged primarily by the known customs and traditions, thus lex mercatoria was applied in a specific territory. It is a consequence of the fact that the cases were analysed by respected persons from the countries mentioned above.
In the case of identified defaults and violations of law, there were imposed monetary fines. The merchants usually payed a fine, because they wanted to maintain their good reputation, which was at that time of the utmost importance. Otherwise, they would loose their trade partners or - which was worse - they could be excluded from the community which protected them. (Mangels, 1999)
Lex mercatoria was a special area of law governing only a part of the legal system and a specific type of relationships, mainly the trade relationships. It was different from the feudal law or canonic law, which were more general.
The modern times
The negative impact on trade and lex mercatoria by the passing of time was influenced by the export promotion, minimalisation of the import, and the ban on determining the rules of trade. In the modern times, there came the submission to the absolutistic rules and incorporation of lex mercatoria into the national law of the states.
Lex mercatoria was from those times considered as a part of the international law, while the standards were superior to the national legislation. The modern merchant law is different from the law of the codification, but similar to what prevailed earlier.
Despite the existence of many codifications, one of the most remarkable kinds of code is the Uniform Commercial Code (hereinafter „UCC“), which is however not codificated in a European sense. „In its Section 1-103, the UCC makes it very clear that it promotes not only custom but also the common law, equity and the law merchant besides it.“ (Dalhuisen, 2012)
The sources of the merchant law are created by the practice of courts or international organizations, not as being the subject of the legislative activity of a state. This law has been created by the means of the legal standards different from the national law, as well as from the international public law.
The modern lex mercatoria is „the law immanent in principle, created by the international market place and its participants itself, where necessary supported by treaty law (like the Vienna Convention on the International Sale of Goods), and in practice formed and operating much like public international law with its different sources, as may be shown particularly in its foreign investment law branch.“ (Dalhuisen, 2012)
Some words about the International Court of Arbitration in Paris
All along the history, a number of special courts dealing with the international commercial law cases by using the merchant law have been created. The International Court of Arbitration as a part of the International Chamber of Commerce (hereinafter „ICC“) is the mostly recognised court of its kind in the world nowadays. The ICC is a global international chamber of commerce. It is an organization that promotes and supports global trade. As a global business organization formed by its member states, it facilitates the development of business affairs internationally. The ICC International Court of Arbitration has had its seat in Paris since 1923, when it was established.
It is important to mark the reasons why the seat of arbitration matters. „A seat of arbitration must respond to the needs of the business community and the users of international arbitration.“ (Paris Association webpage, Paris International arbitration). For being ensured that Paris was the right choice, we can use the following arguments. Firstly, it is a seat that is a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Secondly, it is a seat whose laws favour arbitration and whose courts actively support, rather than interfere with, the arbitral process. It is also a seat that respects the parties’ intentions regarding their choice of procedure and applicable law. Finally, it is a seat that has the required professional and structural resources for a rapid, legally secure and efficient process. (Paris Association webpage, Paris International arbitration).
The merchant law is today more pragmatic than before. It moves from case to case on the basis of practical needs, even though, nowadays, it is much more governed by the legal rules and principles than before. „Established principles and practices freely operate besides any statutory or treaty texts and may prevail over it in appropriate cases.“ (Dalhuisen, 2012)
Lex mercatoria still plays an important role because good faith is not always enough. Sometimes, traders should keep in mind that a trading relationship based simply on trust might be insufficient or might not offer an adequate protection in comparison with the enacted law that is enforceable.
By Monika Martišková
This article will be published in issue 5.2 of the magazine. All references used can be found at the end of that issue.