Enforceability of Arbitral Awards Based on Lex Mercatoria

Abstract

THE controversy surrounding the existence, the credibility, even the validity of Lex Mercatoria has not dampened its increasing appeal as a choice of governing substantive law to an arbitration. While most parties disagree as to whether Lex Mercatoria actually represents a discrete body of law, most do agree that, if it does exist, it exists as an amalgam of most globally-accepted principles which govern international commercial relations: public international law, certain uniform laws, general principles of law, rules of international organizations, customs and usages of international trade, standard form contracts, and arbitral case law.1 As a microcosm of international commercial law, Lex Mercatoria is often an ideal, if not the only, choice when no single national law is acceptable. For example, in contracts between a private company and a governmental entity, no state law is likely to be ideal. The governmental party will resist being subject to another state's law, while the private party will be sceptical about receiving fair treatment in the other state's courts. At such an impasse, Lex Mercatoria can both adequately reflect the international character of the parties and the transaction, and solve the sometimes irresolute problem of choice of law. Further, by distilling internationally-accepted principles, it can avoid the effect of relatively unsophisticated national laws unsuited to international contracts. Finally, Lex Mercatoria is inherently flexible – as the law governing both the transaction and the dispute of resolutions arising thereunder. Despite its theoretical advantages, doubts abound as to the predictability and soundness of Lex Mercatoria. These doubts are reflected in the negligible number of reported arbitral awards where parties have specifically chosen Lex Mercatoria or, indeed, an extra-legal standard. However, as Lex Mercatoria undergoes more stringent definition, its appeal will increase and parties may well wonder whether contracts governed by Lex Mercatoria are enforceable, …