The choice of the PICC as the proper law of the contract in Latin American jurisdictions: Chilean contract law as a sample study

Abstract

Abstract This article analyses a distinctive trend in Latin American conflict laws to enable the parties to choose the Unidroit Principles of International Commercial Contracts (PICC) as the proper law of the contract since this choice must be upheld by national courts. This provides an incentive for contracting parties linked to Latin American jurisdictions to adopt updated and fair rules that are inexistent in their domestic contract laws. This trend began with the 1994 Mexico Convention and has spread to the new conflict rules on contracts enacted in Latin America and even to the 2015 Hague Principles. Nowadays, the choice of the PICC to govern the substance of a contract might be upheld in the national courts of several Latin American countries. This solution is unique since it is not allowed in most jurisdictions, such as those of the European Union, which only accept ‘ordinary legal techniques’ for applying the PICC. There is now legal certainty that the PICC will be applied in arbitration and litigation in these Latin American jurisdictions, either via the ordinary legal techniques or via choosing the PICC as the rules of law governing a contract subject to judicial adjudication. This benefits parties that do not have in their domestic contract law some of the PICC’s solutions. Using Chilean contract law as a sample study, we will show that the PICC’s rules on the pre-contractual stage and on hardship are better suited than existing national laws to negotiate, conclude, and perform international commercial contracts.