Party Autonomy and Private-Law Making in Private International Law: The Lex Mercatoria that Isn't

Abstract:     
This essay discusses "non-state norms" from the perspective of American conflicts law. Commonly referred to as the "new lex mercatoria," these norms are drafted by various international or intra-national non-governmental organizations and are proposed for incorporation by contracting parties or for application by arbitrators, with or without the parties' prior consent.

Understandably, these norms are popular among many arbitrators who tend to place them on the same footing as law. Current U.S. arbitration law uncritically permits this treatment to the extent it does not allow judicial review of an arbitrator's choice of law (or non-law). The fact that, unlike the law of most countries, American law generally enforces pre-dispute arbitration clauses in consumer contracts and most employment contracts can further exacerbate the situation. In contrast, in contracts that are not subject to arbitration, American courts apply non-state norms only to the extent they have been expressly incorporated into the contract and only if their application would not displace non-waivable rules of the law that would otherwise govern the contract.

This essay applauds the latter position of American conflicts law but suggests that U.S. arbitration law should be reformed so as to provide needed protection to consumers, employees, and other presumptively weak parties.

Keywords: conflict of laws, choice of law, private international law, arbitration, lex mercatoria, cyberspace, U.C.C., party autonomy, freedom of contract, contracts, Unidroit, consumer contracts, employment contracts, insurance contracts, non-state norms, commercial usages, commercial customs

JEL Classifications: K13, K21, K34, K40, N40

Working Paper Series