Rethinking the Commercial Law Treaty
65 Pages Posted: 5 Apr 2010 Last revised: 28 Jan 2011
In international commercial transactions, it is not always clear which state’s law will apply to govern a particular contract. Historically, states have sought to address this problem by means of two types of treaties. The first aims to solve the problem by bringing about the substantive unification of commercial law across multiple jurisdictions; once the law is everywhere the same, then it no longer matters which state’s law applies to govern the contract. The second aims to solve the problem in part by empowering the transacting parties to choose the law that will govern their contract; once these parties know that their choice of law will be respected by national courts, then the uncertainty as to the governing law goes away.
The conventional wisdom has long been that substantive unification represents the better approach to solving the problem of legal uncertainty. This Article challenges that conventional wisdom to argue that, in fact, a choice-of-law approach may be superior. It does so, first, by identifying weaknesses in the two rationales that have most frequently been advanced in favor of substantive commercial law treaties – that they are uniquely able to reduce transaction costs and that they offer law uniquely suited to the needs of international commercial transactions. The Article then explains how a choice-of-law treaty could lead to the development of better commercial law that more accurately captures the preferences of parties engaged in international commerce by facilitating the development of an international market for commercial law.
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