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The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

1. Introduction

2. In search of autonomy

2.1 The diminishing role of States
2.2 Solutions available within national law
2.2.1 Uniform law and its limitations
2.2.2 Uniform rules and principles
2.2.3 Situation specific standard contracts
2.3 A transnational regulatory order for contracts
2.3.1 International commercial arbitration (ICA)
2.3.2 Lex Mercatoria - and its essential link to arbitration
2.3.3 Codified general contract principles as lex mercatoria
2.3.4 Protective principles as a necessary part of lex mercatoria
2.4 The autonomous contract - an a-national solution, a summary

3. The problem of predictability

3.1 Predictability at a municipal level
3.2 Uniformity at an international level
3.2.1 The UN Convention on the Law of Treaties
3.2.2 Interpretation clauses within uniform laws

4. Alternative solutions

4.1 Independent supra-national interpretation tribunals
4.2 Authoritative reviews as co-ordinating guides
4.3 Limiting of sources for interpretation
4.4 Information technology solutions - transnational harmonising information and knowledge-bases
4.5 E-contract solutions?
4.6 Education

5. Summary

6. Endnote

Endnotes

Endnotes

Metadata

SiSU Metadata, document information

Manifest

SiSU Manifest, alternative outputs etc.

The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

Ralph Amissah

copy @ Lex Mercatoria

The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

3. The problem of predictability

3.1 Predictability at a municipal level
3.2 Uniformity at an international level
3.2.1 The UN Convention on the Law of Treaties
3.2.2 Interpretation clauses within uniform laws

However parties contractually structure their relations there is always the question of the interpretation of their contract and any "law" on which it is based whether municipal, uniform law, or rules and principles. The question is how to achieve the uniform application of uniform "law" and legal texts. It is necessary to understand the nature of the problem in order to discuss the viability of and to seek ways of achieving: uniform international contract law; an autonomous contract order; and the autonomous contract (in the third sense used in this paper) as a possible solution. Note that much in this section is an overview related to problems regarding the unification of international law.  113  it examines the nature of the problem of achieving a uniform global "legal" platform on which to base the autonomous contract and the problems associated with attaining a high degree of predictability for international commerce. Consider the following passage by Ole Lando:

"I believe that in many arbitrators, as in many lawyers, there are two conflicting attitudes. One wishes the law to be a perfect and stringent system of rules under which the good lawyer can always find the true and only solution. To apply the law is the same as to apply the theorems of mathematics. This will produce certainty and predictability for the citizen.

The other attitude tells the arbitrator that absolute predictability is not attainable. Each legal system has many gaps and the most provident legislator cannot close them all. Nor can he prevent new gaps from arising when social conditions change. No legal system provides certain solutions to all problems. Even the best lawyer in the most highly-developed country is often in doubt. Besides, predictability is only one of several legal values. Rules which create certainty also tend to bring about rigidity. They do not consider special circumstances and changing conditions. The legal process is not and can never be a mere syllogism. It is above all an effort to reach the most fair and appropriate decision. In this process which is often inventive the arbitrator will weigh the possible solutions against each other and make his choice."   114 

Uniform "law" has the potential to reduce transaction costs and increase world-wide predictability in international commerce. However, the success of an autonomous uniform international regulatory order is tied to its ability to provide for the risk management needs of the business community and has proved to be one of the most challenging, fascinating, and enduring problems. The selection of uniform laws and uniform rules is not enough, as this does not ensure their uniform application, without which the purpose of establishing uniform law is largely defeated. Pragmatically the issue of predictability may be regarded as one of degree. "Uniformity of application" is closely related to the "predictability" of a legal text and although not identical, their use has at times been interchanged in this writing. What degree of uniformity is necessary or acceptable in the ordering of relations, and what trade-offs are there in achieving or attaining this predictability? There is clearly a tension between certainty and flexibility - "rules which create certainty also tend to bring about rigidity."

Some comments may be made on the decision-making process and discretion in relation to rules and principles. An attempt to base a legal system on rules alone would create gaps. Discretion is required, which is applied through principles of law, which are more holistic constraining legal standards. Ronald Dworkin  115  appears to distinguish them in two ways. (i) Whereas a rule is either applicable or not, principles do not operate in this all or nothing way, having a dimension and weight, they can apply to varying extents. (ii) Rules cannot conflict, either they apply or they do not, whereas principles may conflict with each other.  116  Some principles will be more pervasive than others.  117  Their relative importance may vary according to the circumstances in which they are to be applied. The work of the legal craftsman being to know when and how they are to be applied in a given factual situation, according to the different considerations and relationships between particular conflicting circumstances, and in so doing arrive at the "correct" legal solution.

76

Complete predictability in a legal or regulatory regime is not attainable - this is a charge that can be levelled against all legal systems including those of sovereign states. At a national level the nature of legal reasoning and application of particular rules of law and principles is understood by its practitioners, and certified by supreme authority. Consider the comment of John Honnold:

"Perfect clarity and predictability in law, as most of you know all too well, is not for this world ... Nevertheless, within a single domestic system it usually has been possible to keep uncertainty within tolerable limits so that nearly everyone prefers law to anarchy."  118 

This issue is important enough to merit special consideration. (i) Ignoring evidentiary problems, total predictability is unattainable even at a domestic level where we are confined to the workings of legal reasoning, without admitting the possibility of extraneous influences. The nature of the decision-making process, in this case, in the application of rules and principles with various sources of law for appropriate guidance  119  has all the hallmarks of a highly complex system, indeed in the nature of the chaoplexic.  120  The fact that decisions stem from deterministic processes does not mean jurists can predict all their meanderings. The application of simple deterministic axioms  121  to subtly differing sets of circumstance can lead to complex results that often cannot be predicted with certainty. Simple sets of principles and rules applied give rise to extremely complicated patterns that never quite repeat themselves. (ii) Even within a single national jurisdiction, whether or not they should, extraneous influences will play a role in the decision-making process. There will be differences in the basic ideologies and beliefs of the adjudicators, and these will sometimes have an effect on the decision-making process. The diversity of basic ideology, views and politics accepted within a democracy, together with the different social, economic and cultural backgrounds of adjudicators guarantee a difference in their basic assumptions that cannot be excluded from playing a role in their application of discretion and in the weighing of principles. Even Dworkin's super-judge Hercules is not unaffected. In a democracy accepting the pluralism of views, there is no single set of background characteristics that may be used to define such a being.

80

Absolute predictability does not exist at a purely domestic level. These problems are compounded in the context of the application of a uniform law by different judiciaries.

"Even within a common set of rules and concepts, the habits of mind of lawyers in different legal systems, no doubt reinforced by rules of civil procedure, are too deeply ingrained to achieve practical uniformity in approach ... the instinct of civil lawyers is to turn to rules contained in the code, whereas English lawyers turn principally to the terms of the contract. The difference between legal systems about what constitutes a good argument, what has intellectual strength and integrity, will prove hard to abolish..."  122 

Adjudicators (especially within national courts) are faced with formidable compounded complexity where attempting to apply a uniform law in a uniform manner, that will frequently prove difficult to satisfactorily overcome, even where assuming that there is no problem of access to information. These are a consequence of their different legal traditions, which have different technical rules of procedure, rely on different sources for authority and respect different reasoning as legally sound. (There are also additional extraneous influences resulting from their different cultures and ideologies).

84

Where dealing with uniform law, the way of discovering the rights and duties of contracting parties is by its interpretation, and that of the parties' contract. Herbert Briggs in The Law of Nations; Cases, Documents and Notes   123  on the interpretation of treaties states:

"Practically all treatises on international law have sections on the so-called 'canons of interpretation' of treaties. Analysis reveals that the canons consist largely of the application of the principles of logic, equity, and common sense to the text of a treaty in an endeavour to discover its 'clear' or 'natural' meaning."

The UN Convention on the Law of Treaties 1969 (in force 1980) is considered to be a codification of existing public international law with regard to the interpretation of treaties.  124 

The relevant articles on interpretation are Article 31 and 32. Article 31 instructs that a "treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." Article 32 instructing that reference be made to its travaux préparatoires and circumstances of its conclusion to confirm the meaning resulting through application of Article 31, and resolve any ambiguity, or that which is manifestly absurd or unreasonable. Article 31(2) takes into account agreements made by the parties as to its interpretation on the conclusion of the treaty. Article 31(3)(a) and (b) instruct the taking into account of any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions, including that which is evidenced by a practice in its application by the parties; Article 31(3)(c) makes any relevant rules of international law applicable in the relations between the parties; Article 31(4) states that the application of a special meaning shall be given to a term if it is established that the parties so intended.

89

"The more successful the activities of UNCITRAL  125  "the more it extends its activities in the field of international trade relations, the more necessary the uniform interpretation of the uniform rules will be."   126 

Modern uniform laws and principles increasingly contain their own interpretation clauses, which increasingly provide for the taking into account of their international character, and the need to promote uniformity in their application.   127  The CISG provision on interpretation - Article 7:

(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

The UNIDROIT Principles provision on the "interpretation and supplementation of the Principles" - Article 1.6:

(1) In the interpretation of these Principles, regard is to be had to their international character and to their purposes including the need to promote uniformity in their application.

(2) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles.

Most scholarly writing to date has centred on the CISG , though much of the discussion there holds true generally for all uniform law. It is instructive to read Honnold's text Uniform Words and Uniform Application  128  prepared with input from 16 professors to get an idea of the dimension of the problem faced, as seen through the eyes of scholars representing each of the major legal systems. The professors agreed that to achieve the uniform application of texts it was necessary to look at writings in other jurisdictions, and to look beyond the traditional national sources and methods of interpretation. They also agreed that this was a Convention duty imposed upon Contracting States.  129  Relevant sources were identified as: (a) The legislative history. (b) Rulings world-wide. (c) The official and other commentaries. (d) Scholarly writings. However, perhaps not surprisingly, despite such forward thinking as to how uniformity might be achieved, success so far has been limited and a number of questions have been raised. Where a particularly novel solution is employed by a court, is it to be followed elsewhere? Where a solution thought to be inappropriate is adopted, is this to be followed, must it be distinguished, or can it simply be ignored? If there is much text generated on a particular uniform law, how much is it necessary to cover, and what should be approached first and what relative weight should be given the different sources? Courts will still have a tendency to look first to domestic decisions and writings. In one sense ICA with an international arbitral panel provides a better balance in having a more international perspective as to how the uniform law should be applied. This will allow arbitrators to reach a reasonable conclusion in the circumstances, taking into account their multi-national perspective of the uniform law. Such a method of reaching a reasonable decision, though more flexible, has its measure of predictability where the approach is understood. It may be what a significant proportion of the international business community that chooses ICA are after. A distinction is to be made between world-wide predictability in application, and predictability on a national scale. Where national law is applied by its national court "A" that looks first to its domestic writings, it may have a clear - predictable manner of application, even if not in the spirit of the Convention. Another nation "B", may apply the uniform law in a different way that is equally predictable, being perfectly consistent internally. This however defeats much of the purpose of the uniform law. The court of nation "B", applying the national law of state "A", is much more likely to take seriously the treaty obligation undertaken by that state,  130  and much the same is the case where a nation fails in its Convention obligations as to its implementation of a uniform law.  131  The question both as regards the adoption of uniform substantive law, and attempting to achieve its uniform application is not so much whether or not a country has a perfectly good and modern contract law tradition, and should definitely not be whether it is felt that the effort could be improved upon. The question should be how far is it possible to end up with a common understanding and application of a uniform text, so as to achieve a uniform and predictable law, at as international a level as possible, and thereby facilitate international commerce by simplifying it.

Among the solutions levelled at the problem is the greater dissemination of information, including making use of information technology to ensure that writings are commonly known world-wide. Efforts have been started by UNCITRAL , UNIDROIT and some academic institutions.  132  But assuming successful updating and dissemination of relevant international texts, if much writing is generated, whether in the form of decisions or literature, there is an information management challenge. What does one look at, if one has to be selective, and in any event, what weight should be given to any given legal writing?  133  And according to whose legal methodology and practice should they be applied? And the question, is this really the best way to promote the development of uniform law?


 113. For more detailed reading see Goode (1991) pp. 54-74. For an English law perspective on uniform statutes see F.A. Mann, Uniform Statutes in English Law in P.V. Baker (ed.) The Law Quarterly Review (London, 1983) Vol. 99 pp. 376-406.

 114. Lando (1987) p. 111.

 115. Ronald Dworkin, Laws Empire (Harvard, 1986); Hard Cases in Harvard Law Review (1988). For a short summary see Wayne Morrison, Jurisprudence: from the Greeks to post-modernism (London, 1997) pp. 415-448.

 116. E.g. pacta sunt servanda and the narrow clausula rebus sic stantibus .

 117. E.g. pacta sunt servanda and good faith under the UNIDROIT and EU Principles and their interpretation clauses.

 118. Honnold (1992) p. 11.

 119. In the common law system based on the earlier authoritative legal reasoning of binding precedent and persuasive authority.

 120. Word coined by John Horgan in The End of Science (London, 1996) to cover the related fields of chaos and complexity. Chaos theory is a branch of mathematics and physics. Sometimes described as the edge of chaos, what is studied here is not randomness or disorder. Chaoplexity examines non-linear systems in which simple sets of deterministic rules can lead to highly complicated (detailed) results, which cannot be predicted accurately. A good introduction to the subject chaos is provided by James Gleick, Chaos: Making a New Science (New York, 1987).

 121. Such as those provided by Dworkin in explaining the application of rules and principles (to determine judicial outcomes).

 122. Hugh Collins, European Private Law and Cultural Identity of States in European Review of Private Law 3 (1995) pp. 353 at 356, 357-58, citation used by Christian Joerges, The Process of European Integration and the 'Denationalization' of Private Law in Børge Dahl & Ruth Nielsen (ed.), (1996) pp. 73-90, p. 82.

 123. Herbert Briggs, The Law of Nations; Cases, Documents and Notes (New York, 1952) on p. 897.

 124. Lord Diplock in Fothergill v Monarch Airlines [1981], A.C. 251, 282 or see ‹http://itl.irv.uit.no/trade_law/papers/England.Fothergill.v.Monarch.Airlines.HL.1980.html#ecs85›. Also Mann (London, 1983) at p. 379.

 125. And other international organisations such as UNIDROIT - footnote added.

 126. Réczei (1992), p. 6.

 127. Examples: The United Nations Convention on Contracts for the International Sale of Goods 1980, Article 7; The UNIDROIT Principles of International Commercial Contracts 1994, Article 1.6; The Principles of European Contract Law 1998 Article 1.106; The United Nations Convention on the Carriage of Goods by Sea (The Hamburg Rules) 1978, Article 3; The United Nations Convention on the Limitation Period in the International Sale of Goods 1974 and 1978, Article 7; UN Model Law on Electronic Commerce 1996, Article 3; UNIDROIT Convention on International Factoring 1988, Article 4; UNIDROIT Convention on International Financial Leasing 1988¸ Article 6; also EC Convention on the Law Applicable to Contractual Obligations 1980, Article 18.

 128. Honnold, Uniform words and uniform applications. Uniform Words and Uniform Application: The 1980 Sales Convention and International Juridical Practice in Einheitliches Kaufrecht und nationales Obligationenrecht . Referate Diskussionen der Fachtagung. am 16/17-2-1987, hrsg. von Peter Schlechtriem (Baden-Baden, 1987) pp. 115-147.

 129. Under Article 7. See also footnote 126.

 130. To take account of its international nature and the need to promote uniformity in international trade.

 131. For an example based on the probable international treatment of Norway's singular and controversial transformation of the CISG see Viggo Hagstrøm, Kjøpsrettskonvensjon, Norsk Kjøpslov og Internasjonal Rettsenhet in Tidsskrift for Rettsvitenskap (1995) pp. 561-588 on p. 569 and Joseph Lookofsky, Understanding the CISG in Scandinavia (Copenhagen, 1996) on p. 5, 13, and 105. Compare Kai Krüger's argument in Komparativ rettsmetode - observasjoner vedrørende prinsipper for rettsanvendelse i Europa nord og sør - illustrert ved tilfellet Norge og Italia in Jussens Venner (1996) pp. 281-312 on p. 312.

 132. For further information on such projects and information sources, see ITL the International Trade Law Monitor by Amissah at ‹http://itl.irv.uit.no/trade_law/

 133. Coming as they do from different: states; genre of writing; sources and levels of authority.


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