The lex mercatoria and international contracts: a challenge for international commercial arbitration?

The quest for a third legal order stems from many jurists' conviction that neither municipal law nor international law is appropriate or suitable for dealing with international commercial disputes when parties from different countries are involved. In their view, a national legal system may not be sensitive to the expectations of a disputing party from a different national legal background, and international law proper may not be adequate to deal with cross-border commercial transactions. Thus, a third legal order, popularly known as the lex mercatoria, which is neither national nor international law but a mixture with the characteristics of both, is an attractive option. Although the lex mercatoria had its existence at the dawn of human civilization' and was practiced widely in the Middle Ages,' it remained buried until recently when some scholars of international repute started advocating its suitability for application to modem international commercial relations. There is now vast literature on the subject,' as it has attracted a great deal of attention from jurists of different countries. There are still some perennial issues of the lex mercatoria, however, that have created controversies amongst the jurists. For example, relatively scant attention has been paid in the literature to the issue of the lex mnercatoria's applicability to State contracts. This study is not thus yet another piece on the ler mercatoria. The purpose of this article is to evaluate these issues afresh in the light of recent developments. It must be noted that this discussion concentrates on the lex ,nercatoria primarily as a body of substantive law applicable to international commercial contracts, including State contracts. This article mainly examines the lex mercatoria in the context of international commercial arbitration.