In 1994, when the first version of the UNIDROIT Principles of International Commercial Contracts-the 'Red Book', as it then was-appeared on the scene, many in governments and academia were sceptical, some even hostile. What, they asked, was the nature of this instrument? If it were soft law, wasn't that a contradiction in itself? Shouldn't intergovernmental organizations produce solid binding conventions, rather than squander taxpayers' money on such an endeavour? As for lex mercatoria , put together by law professors and a few senior judges under the auspices of an intergovernmental organization, wasn't that a doomed attempt to ring-fence practitioners' discretion to find the rules of the law merchant considered to be most appropriate for the case at hand.

Amid this ferment, it was-if my information is correct-Pierre Lalive who took the initiative, and the ICC Institute of International Business Law that provided the stage, for a high-level symposium to present the 1994 version of the Principles to the international legal community. From then on, the going was easy and the Principles turned out to be one of the few success stories in the history of the modernization of transnational commercial law, and domestic law too.

The frantic attempts to define the nature of the Principles-general principles of law, lex mercatoria , international restatement?-quickly subsided as the extent of their acceptance by both legislators and arbitral tribunals became apparent. To my mind, Pierre Karrer's definition of the Principles as both restatement and pre-statement, reflecting the fact that they encapsulate the average of both existing and desirable modern and functional solutions, is certainly the most felicitous. Law reformers from Argentina to the Russian Federation, from China to Estonia, from Mexico to Germany, and from the Netherlands to Vietnam, have, in one way or another, tapped the Principles' reservoir of state-of-the-art solutions and the underlying research material. The most recent example was the submission of a draft Uniform Act on contract law based on the Principles to the organs of the OHADA, the organization of mainly francophone West African countries.1

Meanwhile, UNIDROIT's work has been continuing and the results are to be seen in the new version of the Principles, adopted by the organization's Governing Council in April 2004. This version adds sixty-five new articles and five new chapters dealing with the authority of agents; third party rights; set-off; the assignment of rights, transfer of obligations and assignment of contracts; and, fifthly, limitation periods. Issues relating to several, if not all, of these areas are very likely to be encountered in arbitrations where the parties have not drafted a complete contract and a perfect choice-of-law clause, which, of course, is by no means unusual in practice. In addition, two articles on inconsistent behaviour and release by agreement have been added and, where necessary, amendments have been made to adapt existing rules to the practice of electronic contracting. Most of these amendments were made in the comments, and the fact that so few had to be made to the black letter rules testifies to the farsightedness and quality of the work embodied in the previous version of the Principles.

The 2004 edition of the Principles is by no means the end of our journey. UNIDROIT's work goes on and we are already looking ahead to a further version of the Principles some years hence. As for the new topics envisaged for the future, one will undoubtedly be the question of turning back the clock to undo things done on the basis of a contract subsequently found to be deficient-in other words, the law of restitution or unjust enrichment, depending on how the particular legal system apprehends the problem. Following the functional approach of harmonizing and modernizing transnational commercial law and heeding the lessons from the past that neutral language is a better starting point than established legal concepts, the new Working Group will probably look into the matter under the heading 'unwinding of failed contracts'. Joint liability also deserves attention. The topics chosen will depend much on the willingness of practitioners and business associations to become actively involved in the process. Indeed, the issue of restitution or unjust enrichment was raised by a distinguished arbitrator who at the time was sitting in an arbitration where everything had to be undone. Countless transfers of assets had taken place, and the main issue was not how to interpret the performance or non-performance of the contract, but what to do now that everything had broken down.

Our continuing work on the Contract Principles is justified not least by the prospect of their greater use in the coming years. One of the main arguments raised in opposition to the Principles-that conflict-of-law rules, such as Article 3 of the Rome Convention on the Law Applicable to Contractual Obligations, implicitly refer to State law-is rapidly losing force. In the wake of the 1994 Inter-American Convention on the Law Applicable to International Contracts, providing for the application of 'the guidelines, customs, and principles of international commercial law as well as commercial usage and practices generally accepted', it is likely that the future Rome I Regulation will provide for the parties' freedom to select a body of rules such as the UNIDROIT Principles. This is a welcome development, for-to use the words of Horacio Grigera Naón at the 2001 seminar on the Principles organized by UNIDROIT and the ICC International Court of Arbitration-the UNIDROIT Principles are 'intrinsically good' and 'stand for sound and appropriate cultural compromises'.2

In this context, the present publication, containing informed reflections on the recent additions to the UNIDROIT Contract Principles as well as illustrations of the use of the Principles in contract practice and international disputes, is an important contribution towards an enlightened understanding of international commercial practice and dispute resolution.

1
This work was carried out by Professor Marcel Fontaine, a member of the UNIDROIT Working Group on the Principles.

2
H. Grigera Naón, 'Closing Remarks' in UNIDROIT Principles of International Commercial Contracts: Reflections on their Use in International Arbitration, ICC ICArb. Bull. 2002 Special Supplement (Paris: ICC Publishing, 2002) 149 at 150.