UNIDROIT Principles Research Articles

Joint and several liability at the interface of national and international law and the FIDIC conditions of contract

Abstract The international terms of the 2017 FIDIC Red Book (reprinted and amended in 2022) state that, when the contractor is a joint venture (JV), all members are jointly and severally liable to the employer. These terms also establish certain procedural rules—the most important ones being the submission to the employer of the JV undertaking and the appointment of a leader. However, these international terms do not provide for substantive rules pertaining to the plurality of the JV members. These require reference to the applicable law that governs the construction contract. The applicable law can be domestic law, such as Qatari law, or an international soft law, such as the Unidroit Principles. Comparing these two possibly applicable laws, it becomes evident that there are no significant differences between the two regarding the substantive rules concerning a plurality of obligors. Furthermore, it is argued that the majority of these substantive legal rules, whether national or international, are inoperative in a construction contract incorporating the international terms of the FIDIC Red Book.

The Hell-or-High-Water Clause in Aircraft Leasing Contract: UNIDROIT Principles and the Indonesian Civil Code

This research analyses the hell-or-high-water clause in aircraft leasing contracts in the context of the principle of freedom of contract. Focusing on the review of the principle of freedom of contract based on UNIDROIT Principles of International Commercial Contract (UPICC) 2016 and Indonesian Civil Code, this research uses normative juridical method with analytical descriptive approach. The findings show that the hell-or-high-water clause has a high binding force, providing legal certainty, especially for the lessor. However, its application must be in line with the principle of freedom of contract regulated in UPICC 2016 and the Civil Code. The application of this clause is suggested to consider three limitations stipulated by the UPICC 2016: first, the principle of freedom of contract that allows businesses to choose partners and transaction terms; second, the exclusion of certain sectors in the public interest by the state; and third, mandatory rules that limit the content of the contract. Therefore, the hell-or-high-water clause should be applied with due regard to the implementation of the principle of freedom of contract as well as national law or the existence of compelling national regulations.

Changes of Paradigm in Private International Law of Contracts – A high-level comparison between 1989 and 2024, with tribute to the Unidroit Principles, the development of arbitration law and to Simplified Global Contracting

The article on German private law of contracts compares the state of private international law in Germany in 1989 with its state today, in 2024. It demonstrates a change of paradigm by looking at six selected parameters of relevance: (i) the respect of constitutional rights and European fundamental freedoms, (ii) the unitarian European character of private international law of contracts, subject to treaties, (iii) the dissemination of the CISG, (iv) the emergence of the the Unidroit Principles as a sound system of general principles and rules of international commercial contracts, (v) the development of international arbitration, and (vi) the emergence of internet and data platform based comparative legal research. Regarding the traditional private international law of contracts, as applied by European courts (of member states of the European Union), the author observes that more European uniformity has come at the cost of complexity. At the same time, the emergence and dissemination of the Unidroit Principles – described as “the biggest achievement of the international legal society since the year 534” – has enabled Simplified Global Contracting (i.e. the choice of the Unidroit Principles in combination with an arbitration clause) and thereby more freedom on a global level.

Contractual Liability and Compensation for Moral Harm

In Greece, the breach of contractual obligation is in principle disapproved by law, it crea­tes, however, only an obligation for the payment of compensation and not an additional obligation for the restoration of moral harm, because the sole non-performance of the contractual obligations cannot cause moral harm. Consequently, according to the Greek legislator, a possibility for the existence of a relevant pecuniary compensation does not exist. Pecuniary compensation for non-pecuniary damage is exceptio­nally recognized and only in cases defined by law (Art. 299 GCC). For example, it is recognized in the cases of infringement of the personality (Arts. 57, 59 GCC) and of tort, especially for the person who suffered an attack upon his health, honour, or chastity or who was deprived of his liberty (Art. 932 GCC). In case, however, the violation of the contractual obligation constitutes at the same time - and in­dependently from the existence of the contract - a tort, then it is settled case law in Greece that there is concurrence of contractual and delictual obligation. In that case, the provisions of tort (art. 914 ff. GCC) may apply, in which case, provided that moral harm is sustained, compensation for such moral harm may be sought. Deciding, however, whether the violation of the contractual obligation constitutes at the same time - and independently from the existence of the contract - a tort is not always easy. The tendency noted in the international texts aiming at the unification of law in Europe is the res­toration of moral harm also in cases of breach of a contract. For example, art. 9:501 of the Principles of European Contract Law, PECL and art. 7.4.2 of the Unidroit Principles provide for the possibility of the contracting party to request the restoration of non-pecuniary damage in cases of unjustifiable breach of a contract. Thus, the override of the prohibition set in art. 299 GCC attempted by the Greek doctrine and jurisprudence through the provisions about personality protection and the application of art. 932 GCC, where there is concurrence of contractual and delictual liability, is justified and confirms that art. 299 GCC was rightly criticized almost unanimously by the Greek doctrine already since its introduction as against the tradition of Greek Law and due to the non-lenient situations it causes.

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

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.

Application of UNIDROIT Principles in International Trade Contracts in Indonesia

This research explains the application of UNIDROIT principles in international trade contracts in Indonesia. This research uses normative legal methods, which examine the legal principles written in statutory regulations. The UNIDROIT principles, which are considered global guidelines in international private law, are used as a framework in this research. The research results show that UNIDROIT principles, such as freedom of contract, good faith and compliance, legal certainty, contract formation, obligations of the parties, dispute resolution, have played an important role in creating a stable and reliable legal environment in international trade contracts in Indonesia . These principles help increase trust between parties involved in cross-border trade transactions and facilitate the resolution of disputes in a peaceful and efficient manner. from this research, it can be concluded that the application of UNIDROIT principles has provided great benefits for business people in Indonesia, both in terms of increasing legal certainty and facilitating sustainable international trade. However, to maximize the benefits of implementing UNIDROIT principles, concrete steps are needed such as ratification of the UPICCs, adjustments to national contract law, and strengthening of legal infrastructure. Thus, this research provides a comprehensive view of the importance of applying UNIDROIT principles in the context of international trade contracts in Indonesia.

The UNIDROIT Principles of International Commercial Contracts as a System of Transnational Contract Law: Two Recent Arbitral Awards

The UNIDROIT Principles of International Commercial Contracts as a System of Transnational Contract Law: Two Recent Arbitral Awards

가상자산의 物件性 여부 및 물권법 법리에의 포섭 가능성에 관한 논의

Whether virtual assets can be regarded as a ‘thing’ or ‘property has been widely discussed, because it can be a prerequisite to whether legal theories in property law and in bankruptcy law would be applied to virtual assets. Although financial regulatory Acts on virtual asset law are being legislated around the world, few countries have legislated how virtual assets will be understood in civil law. In this situation, Liechtenstein has in 2019 and Switzerland has in 2021 partially regulated civil legal issues of virtual assets in their Acts and UNIDROIT adopted its principles on digital assets in 2023. Liechtenstein’s TVTG(Token- und VT-Dienstleister-Gesetz) does not recognize virtual assets (tokens) as a thing, but restricts the concept and legal effects of tokens only within the Act. The Act distinguishes between de facto powers of disposition and justified right of disposition, but a person who has de facto power over a VT-key is considered to have legitimate right over the tokens associated with that key. In addition the disposal of tokens does not depend on the existence of a legal title (principle of abstraction), while the so-called causality principle prevails in Liechtenstein property law. If a token is disposed of without a legal title or if an initially existing legal title later ceases to exist, the legal transaction must be rescinded ex-nunc in accordance with the law of unjust enrichment. Considering the characteristics that the VT-system fulfills the registration function and has a high level of reliability, the possibility of acquisition in good faith is recognized. A significant part on civil legal issues in the DLT(Distributed Ledger Technologie) Act of Switzerland relates to ‘register uncertificated security’ (Registerwertrecht) which dematerializes securities using distributed ledger technology. The Swiss legislators additionally reviewed whether cryptocurrency could be considered a thing and concluded that it is unreasonable to extend the concept of natural forces to cryptocurrencies such as Bitcoin and that legal status on the blockchain can be claimed only to the participants in the blockchain system. Considering that cryptocurrency is not recognized as movable property, it is recognized as a type of intangible property. However, the Act recognized the right to separation for crypto-assets in general. This provision is enacted because it was practically necessary to determine whether crypto-assets belong to the bankruptcy estate when the wallet provider goes bankrupt. The DLT Act does not recognize general crypto-assets as a thing, but the right to separation of crypto-assets is recognized under certain conditions. The UNIDROIT Principles treat digital assets as being susceptible to being the subject of proprietary rights, without addressing whether they are considered ‘property’ under the other law of a State. The Principles don’t prescribe the specific requirements for a valid right of ownership in a digital asset or for it’s valid transfer. Instead, the principles provide a detailed definition of control, which assumes a role that is a functional equivalent to that of ‘possession’ of movables. However, ‘possession’ in this context is a purely factual matter and not a legal concept. But the concept of control serves as a necessary requirement for qualifying for protection as an innocent acquirer of a digital asset and as a method of third-party effectiveness and a basis of priority of security rights in a digital asset. It should be noted that a security right in a digital asset that is made effective against third parties by control has priority over a security right in the digital asset that is made effective against third parties only by a method other than control. A proprietary right in the digital asset remains effective on insolvency, but difficulties are expected if the insolvent person might refuse to reveal the password. In conclusion considering the char

Financial market regulation and private law: a new frontier of transnational commercial law

Abstract Global financial markets are among the most extensively regulated markets in the world economy. This poses significant challenges from a private law perspective when regulatory rules interfere with private rights and obligations. This article examines the potential of transnational commercial law (TCL) to provide for a private law framework suited to the regulatory reality in global financial markets. The article finds that, while regulatory aspects are generally excluded from TCL instruments, notable exceptions to this general rule occur. Based on an analysis of the approaches undertaken in the Unidroit Convention of Substantive Rules for Intermediated Securities (Geneva Convention), including the accompanying Legislative Guide, the Unidroit Principles on the Operation of Close-Out Netting Provisions and the UNCITRAL Model Law on Secured Transactions, the article maps out three methods that allow for a reconciliation of private and regulatory rules: (i) the adoption of a flexible private law system including default and conflict rules; (ii) the use of opening clauses to allow deviations from TCL rules in accordance with international regulatory standards; and (iii) a codificatory approach through the development of a comprehensive and systematic legal framework consisting of both private law and regulatory rules. Finally, the article addresses potential obstacles and objections that future TCL instruments will face when addressing regulatory aspects. Overall, the article argues that an efficient financial market requires a foreseeable set of private law rules that—considering the continuous expansion of regulatory law—must address the pressing issues deriving from the interrelation of regulation and private law. However, the adaption of TCL instruments should be limited to common-sense financial market regulation that, even if differing from State to State, generally follows globally shared regulatory goals.

When the goose stops laying golden eggs: supervening loss of trust in long-term contracts under the PICC

PurposeThe purpose of this paper is to examine the supervening loss of inter-organisational trust in long-term commercial contracts. The underlying research question is whether contract law – the legal institution regulating economic exchanges – should intervene and enable a party to a long-term commercial contract to extricate itself from a situation where a relationship of trust has broken down irretrievably.Design/methodology/approachThis paper uses doctrinal methodology and theoretical conceptualisation to answer the underlying research question. The legal instrument chosen for analysis purposes is the UNIDROIT Principles of International Commercial Contracts. This paper also draws on extant literature on inter-organisational trust (including conceptual and empirical studies) to support the arguments and propositions. Furthermore, this study proceeds to assess the substantive justifiability of the proposed remedial measure using four normative values: legal certainty and predictability, protection of the performance interest, economic efficiency and the preservation of the relation.FindingsThe central argument put forward in this paper is the reformulation of draft Article 6.3.1 proposed by the UNIDROIT Working Group on Long-Term Contracts, which confers a novel right to terminate for a compelling reason. This paper presents a multidimensional model of inter-organisational trust that would serve as the conceptual framework for the proposed reformulation of the provision and establishes a coherent juridical basis for the legal solution that would accord with the Principles of International Commercial Contracts’ general remedial scheme. As for the normative assessment, this paper demonstrates that the proposed remedial measure would significantly promote efficient outcomes and positively serve the norms of legal certainty, protection of the performance interest and the preservation of the relation.Originality/valueThis paper addresses the lacuna in current legal scholarship in relation to the adverse socio-economic effects following trust violation and deterioration in inter-organisational relationships. Additionally, the propositions and findings should contribute to the workings of the UNIDROIT in adopting new rules and principles that would serve the special requirements of cross-border trade.

The UNIDROIT Principles and Similar Non-State Codifications in the Case Law of the Highest Courts of Russia

The UNIDROIT Principles and Similar Non-State Codifications in the Case Law of the Highest Courts of Russia

Međunarodni institut za unifikaciju privatnog prava i ugovorno pravo reosiguranja

Within the International Institute for the Unification of Private Law (UNIDROIT), the idea of working on an instrument of reinsurance contract law existed since the 30’s in the twentieth century. However, the final realization of this project happened only in 2019 with the publication of the Principles of Reinsurance Contract Law and in cooperation with the so-called PRICL Project Group. This harmonization endeavor is special in many ways, considering that in addition to the application of a specific bottom-up method of law creation, there was also an innovative approach in the use of a successful soft law regulation - the UNIDROIT Principles for International Commercial Contracts as lex generalis in relation to the new adopted regulation for the field of reinsurance. The author analyzes the relationship between the two mentioned acts in general, but also regarding the crisis caused by the COVID-19 virus pandemic. The paper also analyzes the contribution of the Principles of Reinsurance Contract Law to legal certainty and the characteristic role that the International Institute for the Unification of Private Law plays in the process of legal harmonization, and more specifically in the process of reinsurance contract law harmonization.

SHAREHOLDERS’ AGREEMENTS AND UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS

The article examines the issue of the foreign law as an applicable law of shareholders’ agreement at companies established under the laws of Ukraine. The emergence of shareholders’ agreement in the legal system of Ukraine, as well as the changes that have taken place during the last decades regarding the possibility of applying foreign law to contractual corporate relations, have been studied. Because of authority of English common law among Ukrainian legal practitioners, there is an attitude among them to choose it as the foreign law that will be applied to shareholders’ agreement. At the same time, there are significant differences in the basic principles of common law and continental legal family, which includes the legal system of Ukraine. On the other hand, the law of Ukraine will remain the applicable law for the rest of corporate relations in the relevant companies insofar as it is its lex societatis (i.e. everything with except of obligations of the parties to the shareholders’ agreement). Taking into account all the above, a conclusion was made to introduce a document equidistant from both legal systems and able to ensure a high quality regulation of general issues of contract law, namely the UNIDROIT Principles of International Commercial Contracts, among instruments providing regulation of relations under shareholders’ agreement. It is proposed to use one of the standard UNIDROIT clauses in order to determine the hierarchy between the provisions of foreign national law and the UNIDROIT Principles, as well as their correlation with the provisions of the shareholders’ agreement itself. It was also concluded that the UNIDROIT Principles might be applied to shareholders’ agreement even in the absence of a foreign element to establish a regulation of a contractual relations at the level of the best international standards.

Assignment of Contracts: Italian Law and the UNIDROIT Principles of International Commercial Contracts in Parallel

In contemporary business relations, the possibility for one party to a contract to transfer all of its rights and obligations under the contract to a third party by way of a voluntary act is of great utility. While the possibility to do this generally exists in jurisdictions across Europe, the rules by which it must be done can differ under the relevant national laws, not to mention the fact that a specific legal regime is not articulated in most civil codes. Against this background, this paper compares the approaches taken in Italian law and the uniform rules elaborated at an international level in the UNIDROIT Principles of International Commercial Contracts.

Specific Performance – and the International Unification of Sales Law

Over the past decades, several approaches have been tried in the process of the unification of contract law to regulate the entitlement to performance in kind, but there is still no generally accepted solution. The Vienna Sales Convention, like its predecessors, resolves the question by a quasi-conflict of laws rule, essentially making the award of specific performance dependent upon the law of the forum, thereby undermining the results of unification. Other sources, such as the UNIDROIT Principles, provide autonomous rules that specify in detail the conditions under which it may be claimed. The Draft Common European Sales Law, continues to attach primary importance to the provision of performance in kind, obviously also bearing in mind the interests of consumers.

Through the normative prism: a critical appraisal of the PICC’s provisions on anticipatory non-performance

Abstract The position of the Unidroit Principles of International Commercial Contracts (PICC) as a potential unifying influence and resource within the global competitive market for law is indelibly linked to the justifiability and desirability of the black letter rules embodied in the instrument. This article critically analyses the PICC’s provisions on anticipatory non-performance using two common law-oriented normative paradigms: economic efficiency and relational norms. It argues that the PICC’s remedial scheme for anticipatory non-performance satisfies the normative prescriptions of economic analysis of law in that the self-help measures available represent majoritarian default rules and facilitate early mitigation of loss, thereby maximizing the parties’ net exchange surplus. Furthermore, the article contends that the PICC’s remedial scheme is sensitive to the relational nature of commercial contracts such that it fosters the parties’ commitment, communication, cooperation, and trust, which are vital values in developing and maintaining relational assets.

Exemption clauses: a comparative review of the Unidroit Principles and the Qatar Civil Code

Abstract This article deals with exemption clauses and specifically with respect to their definition, types, and validity. It tackles clauses that exempt the obligor from liability for his or his employees’ non-performance. The article presents and analyses the legal provisions on exemption clauses under the Unidroit Principles and the Qatar Civil Code and discusses the case law made under these legislative instruments. In addition, the article draws a comparison between the legal texts at issue in order to conclude with a solution that best serves the parties’ interests.

Good Faith Principles in International Business Contract Law

This study aims to analyze the principles of good faith in international business contract law. The results showed that the principle of good faith is an honest transaction which has 3 main elements, namely: First, good faith and honest transactions as the basic principles underlying the contract; Second, the principles of good faith and honest transactions in the UPICCS (UNIDROIT Principles of International Commercial Contracts) emphasize the practice of international trade; Third, the principles of good faith and honest transactions are compelling. The objective is to encourage the application of the principles of good faith and fair dealing in all international commercial transactions. The manifestation of efforts to promote legal harmonization can be seen when contracts or national laws do not find the necessary rules, or there is a legal vacuum (gaps), so the principles of UNIDROIT (The International Institute for the Unification of Private Law) can be used as a reference.

Port Closure Due to the Covid-19 Pandemic in the Law of Carriage of Goods By Sea and Unidroit Principles of International Commercial Contracts

Port closure as an effort to slow the spread of the Covid-19 virus has had various impacts, such as port congestion which has led to delays and drastically increased transportation costs. This study examines the impacts caused by port closures and legal remedies that can be taken based on international sea transport law. Losses due to port closures cannot be borne by the carrier based on the conventions of sea shipping law as long as the carrier can prove that the fault was not his own. The closure of the port can be categorized as a hardship, in which there are fundamental changes that affect the agreement, namely the increase in shipping costs and delays. efforts that can be made based on the UPICC are renegotiation, and if it fails, the parties can seek a dispute settlement through the courts. In implementing the agreement, the parties must prioritize the principle of good faith and prove that the losses incurred and losses did not originate from themselves.

Contract with open terms in Scotland: A comparative legal perspective

The article focuses on contracts with open terms, that is, contracts in which the parties deliberately leave one or more terms open for future negotiations or unilateral supplementation by one of the parties (or a third party). In our paper, we refer to contracts with open terms in which an open term is subject to negotiations. Such contracts are not recognised by most jurisdictions (including as being too vague), but the Scottish legal system is sometimes argued to be an exception. In attempting to confirm this claim, it is found that the device called “a contract with open terms” is unknown to Scottish law, so a special comparative legal method is proposed to find an analogue on the Scottish “legal map”. This approach reveals that contracts with open terms in Scotland are concealed under several different names (most notably “agreement to agree”). It shows that although there is no uniform and consistent approach to such contracts, there are three tests which the courts use to answer the central question about such contracts, namely whether a contract with open terms is enforceable: the test for the essentiality of an open term, the test for whether an open term can be objectively implemented and the test for whether the parties have an intention to create legal relations. This analysis is accompanied by a comparative commentary describing how similar issues are dealt with in the UNIDROIT Principles and in another (besides Scotland) jurisdiction to which recognition of contracts with open terms is attributed, namely Russia. On the basis of the research carried out, a preferred order of application of the tests is proposed. The study of the topic is also preceded by a reference to the history and general characteristics of the Scottish legal system. In the course of this topic, we show that Scotland cannot be defined precisely enough through its generic characteristics as a mixed jurisdiction. In turning to the study of Scotland as an individual jurisdiction, it is noted that this system over time has begun to exhibit fewer and fewer of the attributes of a continental European family country.