Contracting Out of National Law: An Empirical Look at the New Law Merchant

31 Pages Posted: 19 Jul 2011

Date Written: July, 18 2011

Abstract

A hotly debated topic in the international arbitration literature is the ability of parties to contract to have their dispute resolved without consideration of any national law whatsoever - on the basis of “general principles of international trade law,” the “lex mercatoria,” the “new law merchant,” “transnational commercial law,” or the like. An extensive scholarly literature explores the theory of transnational commercial law and seeks to derive its governing principles from international arbitration awards and other sources. Arbitration rules permit parties to contract for application of transnational law to resolve their disputes, and national courts have enforced awards made by arbitrators on the basis of transnational law.

Implicit in the views of both supporters and critics of the new law merchant is an empirical assumption: that a significant number of parties contract for application of transnational law in lieu of national law in their international commercial contracts. This Article examines that assumption empirically and finds little support for it. Few parties contract out of national law (whether for better or for worse) by agreeing to have their dispute resolved using principles of transnational law. Even when parties do rely on transnational law, they often do so to supplement rather than displace national law. Procedural reasons, rather than substantive reasons, seem to predominate when parties to international contracts choose between arbitration and litigation.

Keywords: Arbitration, Dispute Resolution, Contracts, Lex Mercatoria

JEL Classification: K12, K41

Suggested Citation

Drahozal, Christopher R., Contracting Out of National Law: An Empirical Look at the New Law Merchant (July, 18 2011). Notre Dame Law Review, Vol. 80, No. 2, 2005. Available at SSRN: https://ssrn.com/abstract=1888583

Christopher R. Drahozal (Contact Author)

University of Kansas School of Law ( email )

Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States
785-864-9239 (Phone)
785-864-5054 (Fax)

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