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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
The following pages contain an edited transcript of the discussions that took place amongst seminar participants after the presentation of papers on each of the pre-selected themes: (1) the Principles' role in international commercial arbitration (Y. Derains/E.A. Farnsworth), (2) the Principles as a means of interpreting/supplementing domestic law/international uniform law (M.J. Bonell/F. Dessemontet), (3) the Principles in relation to contracts involving states/intergovernmental organizations (K.H. Böckstiegel/J. Crawford & A. Sinclair), (4) the Principles as <i>lex contractus</i> with or without a choice-of-law clause (P. Lalive/J.D.M. Lew), (5) the Principles in relation to modern contract practice (M. Fontaine/H. Raeschke-Kessler), (6) the Principles in ICC arbitration practice (P. Mayer).
Also included in these discussions are the presentations made by participants representing arbitration institutions.
1
Mauro Ferrante
As mentioned by our speakers, it is difficult to ascertain to what extent the UNIDROIT Principles are referred to. At the Italian Arbitration Association, we attempted to conduct a survey on this question, but unfortunately it proved to be rather unfruitful, other than as I shall now mention. Whenever our organization receives a request, by telephone or otherwise, for information regarding the initiation of arbitration proceedings, we always initially ask for the complete text of the arbitration clause, so as to try at least to understand whether an ad hoc or an administered (and, if so, by whom?) arbitration is involved. In the last few months, in order better to assess each situation, I and my colleagues have begun to ask about the applicable law or rules too. In the few replies we have so far received, there is nothing of relevance to our present discussions.
There are however two cases that have been referred to our organization which I would like to mention.
The first turned out to have an ICC arbitration clause. It involved an Italian firm and an Argentinian firm. What is interesting about the arbitration clause is that it contains the following reference to the UNIDROIT Principles (I translate from the Italian): 'The present agreement is governed by the UNIDROIT Principles of International Commercial Contracts and, for whatever is not provided for therein, by Italian law.' It is frequently said that one of the main roles of the UNIDROIT Principles is to supplement or interpret national law on specific issues in an international fashion. In so doing, the Principles fulfil a residual function. In the quoted clause, it is the reverse: the 'applicable law' is the UNIDROIT Principles and Italian law is the subsidiary one.
The second case concerns a distribution contract between a German firm and an Italian firm. The applicable law in this case was Italian law. The will of the parties cannot be said to allow room specifically for the application of the UNIDROIT Principles. What of commercial usages? Some arbitrators try to expand their interpretation beyond a very strict analysis of what usages are, so as to include the UNIDROIT Principles. The facts of this case are that the German supplier terminated the distribution contract on the basis of a very specific contractual clause which, it claimed, entitled it to do so. The Italian party not only objected but also demanded damages, claiming the termination to be unjustified. There are two provisions in the Italian Civil Code that always [Page120:] apply whenever there is a claim for damages in the event of the termination of a contract: article 1223, relating to the amount of damages, and article 1227, concerning the concurrence of faulty acts on the part of the creditor that may influence the amount of damages. The second part of article 1227 states: 'Compensation is not due for damages that the creditor could have avoided by using ordinary diligence.' This was the point at issue, and cases already discussed today 1 show that it is not an isolated example. The distributor entered a very sizeable claim for damages covering loss of profit. The supplier argued that the claim was unacceptable, on the basis of Italian law, supported by the UNIDROIT Principles and international conventions. Reference was made to article 7.4.8(1) of the Principles: 'The non-performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party's taking reasonable steps.' Under the heading 'Duty of aggrieved party to mitigate harm', the accompanying comment states inter alia: 'The purpose of this article is to avoid the aggrieved party from passively sitting back and waiting to be compensated for harm which it could have avoided or reduced. Any harm that one party could have avoided by reasonable steps will not be compensated.'
It is interesting to note that the supplier referred also to international conventions, specifically the Uniform Law on the International Sale of Goods of 1964 and especially the 1980 Vienna Sales Convention, which followed it and was more precise on this point, i.e.: 'A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit,2 resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.'3
Mention should finally be made of a decision of the Italian Court of Cassation in 1982,4 even before the UNIDROIT Principles were adopted and the Vienna Sales Convention entered into force in Italy.5 According to this decision, which concerned an agency agreement, lost profit consists of the economic profit that the harmed party would have acquired until the date set for the expiry of the agreement, after deduction, pursuant to article 1227(2) of the Civil Code, of any profit the agent could have earned from any activity obtained through ordinary diligence to replace the one that had been terminated.
It is not possible to evaluate the impact of the above arguments on the arbitrator, because the case ended with an amicable settlement between the parties. One may at least guess that they contributed towards the reaching of an amicable settlement.
Robert von Mehren
I would like to consider this problem from the point of view of the drafter of a contract. What does a draftsman have in mind when making a choice of law? First of all, it is obvious that the draftsman has a wider control over the choice of law when opting for arbitration than he would if he were to go before a national court. One of the things a drafter necessarily seeks is a choice of law which would be favourable to his party in the circumstances that are likely to exist if a controversy were to arise. Mitigation of loss is found, for example, in the law of the State of New York. It is also found, as already mentioned, in the UNIDROIT Principles. What choice will the draftsman make? I submit that there is a great deal to be said for choosing the law of the State of New York, because this will provide a whole series of decisions in which courts will have [Page121:] analysed the specific content of the law in various circumstances, other than simply in relation to the mitigation principle. In many instances, it is therefore probably highly preferable for the draftsman to choose a specific national law and find within that law those principles which will have universal consideration that he would like to apply to his case.
Felix Dasser
I have a few short comments. First of all, with regard to the presentation by Mr Derains, although I fully agree with the conclusions he drew, I have difficulty agreeing with his premise that we do not have a <i>lex fori</i>. With the exception of a few very awkward cases, this is not true. If I have an arbitration in Switzerland, it is obvious that chapter 12 of the Swiss Private International Law Act is applicable. And that will be the lex fori (or <i>lex arbitri</i>) in the same way that other countries have their local arbitration laws. It just so happens that modern arbitral laws, while still being local national law, offer more leeway than the traditional lex fori in state court proceedings. So there is, in effect, not much control over arbitrators, but this is simply because the national lex fori has so decreed.
Secondly, we have heard that the UNIDROIT Principles are to be equated with the expression <i>lex mercatoria</i>. This is true and not true, depending on what is understood by lex mercatoria. If it means the rules created by merchants as a reflection of international commercial custom, then it is not true. I do not consider the UNIDROIT Principles to be an embodiment of trade custom. If, on the other hand, lex mercatoria is understood as embodying general principles of law and as having been created for merchants for legal reasons on the basis of comparative study, then of course I think it is true.
Finally, I think it is quite obvious that arbitrators should look to the UNIDROIT Principles for guidance. The Principles allow for a large degree of flexibility and this is what arbitrators generally want and what they should be looking for. Some years ago, I tried to quantify such flexibility by looking at the wording of the Principles and discovered that they may be as much as three or four times more flexible than other texts such as the German Bürgerliches Gesetzbuch or the general part of the Swiss Code of Obligations. Take, for example, article 5.2 of the UNIDROIT Principles, which lists reasonableness as one of the sources of implied obligations. What is reasonable is anybody's guess. There is vast scope for interpretation here, depending upon the circumstances, the people and many other factors. This may suit arbitrators, but is a nightmare for counsel and parties, as they cannot know in advance what the arbitrators will decide. Maybe this is a reason why parties have rarely chosen the Principles so far. It is more the arbitrators who refer to them for guidance.
Klaus Peter Berger
I should like to consider a practical matter concerning the use of lex mercatoria and the UNIDROIT Principles in arbitration, referred to very briefly by Professor Farnsworth, namely that of terminology. It is true that in our survey we received many replies from arbitrators saying that the Principles provided a means of avoiding other terminology. This is what one eminent European arbitrator wrote to us: 'In these arbitration cases, as well as others, I did invoke in my briefs, memorials and arguments rules of transnational law or lex mercatoria. But on practically all of theses occasions, although all these cases were won, the arbitrators, if I remember correctly, preferred in general to avoid any specific [Page122:] reference to transnational law or lex mercatoria. I may add that, according to my experience, most of the distinguished arbitrators I have been dealing with preferred to evoke general principles of law or legal principles common to the parties opposed in the case, rather than one of these new concepts. On a number of occasions, the arbitrators have indeed resorted to somewhat new legal concepts but they left them nameless. They have sometimes, upon the suggestion of one of the other members of the tribunal, avoided mentioning this formula expressis verbis. They were apparently afraid to open the door to an appeal for nullity of the award by the losing party.' In my opinion, this reflects one of the most important purposes of the Principles - they allow discussions to be conducted with the parties on the basis of something that they can carry in their hand and can see, rather than something that they have in their heads.
Fabio Bortolotti
I would like to make a few comments about usages. The first time I read the award in the Kuwaiti case mentioned by Yves Derains, I was rather surprised. After deciding that the law of Kuwait was the applicable law, the arbitrators announced that 'in accordance with a well-established practice in international commercial arbitration', they would also take account of the 'principles generally applicable in international commerce' and that they would apply Kuwaiti law only to the extent that it was consistent with such general principles. On the specific question of the definition of the notion of gross negligence, or faute grave, the tribunal said that if the notion of gross negligence in Kuwaiti law had been narrower than the notion generally accepted in international commerce, the arbitrators would have applied the latter.
My initial reaction was that, at least in contracts between private parties (the solution would be different for contracts falling within the scope of the ICSID Convention), general principles of law or lex mercatoria cannot prevail over a national law which has been found to be the applicable law.
At the same time, however, I understand that it is somewhat unfair to apply national rules which contradict principles generally accepted in international trade. In many cases the strict application of domestic rules not intended for international trade may force the arbitrators to apply solutions felt to be inappropriate and often 'surprising' for the parties in light of their normal expectations. For this reason, I am in favour of any means of overcoming the rigidity of national laws.
However, I do not think that this can be achieved simply by saying that lex mercatoria applies together with domestic law, over which it prevails, as said in the above-mentioned award. The arbitrators may decide that lex mercatoria applies instead of a national law, but if they decide that a national law is applicable, this law in principle prevails.
I believe there is an alternative way of applying general principles together with a national law. It consists in extending the notion of usages so that it covers also general principles and-why not?-the UNIDROIT Principles, at least to the extent they actually reflect the expectations of international trade. Some awards have already pointed in this direction, e.g. the 1989 award in ICC case 5713,6 where it is said that the Vienna Sales Convention is a usage that should prevail over the applicable national law.
I am perfectly aware that this implies broadening the notion of trade usages to an extent which is hardly compatible with the traditionally accepted notion. At the [Page123:] same time, however, we should not be afraid of developing a wider definition of usages in international trade (independently of national laws) if this can be a way of avoiding the application of national rules that appear to be inconsistent with the needs and expectations of parties engaged in international trade.
I would like to stress that if we construe general principles of law as usages, we can apply them together with a national law (and, thus, also in cases where the parties have chosen a national law as the applicable law), and they will prevail over non-mandatory rules of the applicable national law.
As regards the case mentioned by Mr Ferrante, where the parties chose the UNIDROIT Principles and a national law, I think it is rather dangerous to choose both at the same time, and it would be far better to choose the UNIDROIT Principles within the framework of lex mercatoria or simply as the applicable law, without reference to any domestic law. The UNIDROIT Principles are organized as a self-sufficient and virtually 'complete' system of rules on contracts, as are national laws. If therefore you put together two systems of rules of this type, contradictions are bound to occur, giving rise to endless debates between lawyers when it comes to disputes. If, on the other hand, the UNIDROIT Principles are placed alongside the general principles of lex mercatoria, there is much less likelihood of contradiction, since the general principles of lex mercatoria (good faith, pacta sunt servanda, etc.) will normally be part of the UNIDROIT Principles too, while the more detailed rules of the UNIDROIT Principles are not contained in lex mercatoria and will therefore supplement it without contradicting it.
Filip De Ly
I do not wish to speak about whether national or non-national law is to be applied, but would like to make an observation about the purposes to which the UNIDROIT Principles may be applied mentioned by Allan Farnsworth. Supposing the arbitrators agree that national law is to be applied, is it possible to apply the UNIDROIT Principles? Is there not an important distinction to be made between gaps in the applicable national law and uncertainties, as far as possible use of the UNIDROIT Principles is concerned? Two examples may help to make this clearer. Open-price sales contracts are problematic in French law, if my understanding is correct. However, open contract terms have become less of a problem since a decision of the French Court of Cassation in the mid-1990s. It is therefore a matter of uncertainty in French law whether the Court of Cassation would uphold its existing case law with respect to open-price sales contracts. On the other hand, it is quite clear that such contracts are valid under the UNIDROIT Principles (arts. 2.14 and 5.7). If French law is the applicable law in an arbitration, how then does one deal with the tension between existing French case law and the UNIDROIT Principles as far as the persuasive authority of the latter is concerned? The second example is an illustration not of uncertainty but of a gap. It concerns article 2.17 of the UNIDROIT Principles regarding merger clauses. For the last two or three years, the Working Group on International Contracts (Groupe de Travail Contrats Internationaux) has been discussing the interpretation to be given to these entire-agreement clauses,7 which are very common in international commercial contracts. Civilists are at a loss to know how to interpret such clauses, which are not dealt with by their laws. Here, the UNIDROIT Principles are very valuable. By reading the comment to article 2.17, one understands exactly how, in the common law, merger clauses are to be applied, function and what their objectives are. This is of great assistance when the national law applicable in an arbitration belongs to the civil law family. The question therefore is whether there is a difference [Page124:] between gaps and uncertainties as far as arbitrators' decisions on the applicability of the UNIDROIT Principles are concerned.
Yves Derains
I have two very short comments to make by way of response to the discussion. Firstly, regarding the question of whether or not lex fori exists in arbitration, I think the problem here is one of terminology. We should not confuse lex arbitri, the law applicable to the arbitration, with lex fori, meaning the system of rules of conflict that the arbitrators should apply. This is a problem very similar to that of the chicken and the egg. It is true that in no law is there any obligation for arbitrators to apply specific rules of conflict. This is because in the past it was clearly stated and accepted that arbitrators have no lex fori. I was quoting Henri Battifol and Pierre Lalive. This was before most of the arbitration laws in the world were introduced. In 1957 Battifol maintained that arbitrators were not bound to apply the rules of conflict of any one country rather than another. In 1971, my first year at ICC, one of the first awards I read was by Pierre Lalive. He wrote that an international arbitrator has no lex fori from which rules of conflict of laws may be taken. So, when we refer to lex fori, we mean laws of conflict. Years later, when the modern laws of arbitration were introduced, they took this approach into consideration, which explains why there are no specific rules of conflict applicable to arbitrators.
My second point concerns the Kuwaiti case commented upon by Fabio Bortolotti. What is important in this case is that the arbitrators expressed a preference for the application of international principles if Kuwaiti law provided different solutions. It is important to bear in mind that Kuwaiti law had not been chosen by the parties: it was the arbitrators who decided to apply it, as they were free to do so, which is completely different. What they were saying was that if they did not like the content of Kuwaiti law, they would not apply it. This illustrates the difficulty of drawing general conclusions from a specific award, because when arbitrators decide to apply a law, they always consider the content of that law. In applying the law that is most appropriate, arbitrators consider appropriateness from the point of view of both private international law and substantive law.
As far as the role of the UNIDROIT Principles is concerned, I believe the focus in future will be more and more on the substance of the solution rather than on the problem of their applicability.
Allan Farnsworth
Leaving aside the interesting question of negative choice for internationalization, I come back to what Robert von Mehren said about the drafter. I think from the point of view of common lawyers, at least American lawyers, and from my own point of view, I would agree with him that if you can find the appropriate law of some developed legal system that has confronted similar problems several times before, it is better to choose it. It need not necessarily be New York law; it could be French law, for example. However, there is an obvious and unfortunate tension between American common lawyers and European or civil lawyers, hence the different approach taken by Yves Derains and Fabio Bortolotti.
If French or New York law is chosen, the question then is: to what extent can the Principles be applied? Some interesting remarks have been made. Looking at the Kuwaiti case, Fabio Bortolotti suggested that one might even be able to override the chosen law. Filip De Ly wondered whether there is a difference between gaps [Page125:] and uncertainties. This is an interesting point. I would read the reference in the Preamble to the impossibility of establishing the relevant rule of the applicable law as including both gaps and uncertainties.
If one takes a very strict view, refusing to allow the Principles to override the domestic law that has been chosen, one comes to the question of usages, discussed by Mauro Ferrante and Fabio Bortolotti. The technique here is to treat international rules as usages so as to sneak them into the case without having to override domestic law. There is another side to that question too, as illustrated by the ad hoc arbitration in Rome I mentioned, where the domestic (Italian) law mentioned the need to take account of trade usages and the arbitral tribunal decided that the Principles were an indication of such usages.
2
Anton Schnyder
I would like to follow up the interesting points made by Professor Dessemontet on implied application and opting out. What does it mean if the parties do not explicitly or implicitly opt out? Taking the various rules of conflict that state which laws will apply in arbitration, I think it will be difficult to force the parties to opt out. If they make a positive statement on applicability, then the Principles might be applied. If they are silent, this might however be the result of the bargaining process: it may be that they cannot agree on applicability. If we overstress opting in and opting out, we might end up with a result that does not exactly fit the parties' wishes. It may be for this reason that they did not want to write anything down. Another reason for not overstressing this matter is that we now have more sources of possible applicable law. If the UNIDROIT Principles are excluded through an opting-out clause, what bearing does this have, for example, on the Principles of European Contract Law? And if new principles are introduced in the years ahead, does an agreement to opt out made this year apply to them as well?
Karl-Heinz Böckstiegel
I feel that some of the remarks made by Professor Dessemontet suggest that the UNIDROIT Principles could be treated as almost identical to lex mercatoria. I would question this: in my view, it is almost a disservice to the UNIDROIT Principles to put them on a par with lex mercatoria or to say that they are an example of lex mercatoria. As has rightly been pointed out, an initial difference is that you can hold one in your hand, whereas you have to look the other up in writings and even then you still do not know exactly what you have. I also feel that we should not enter into wishful thinking, but should try to be as realistic as possible. Whenever the UNIDROIT Principles are used, they should be used in the right way, to avoid their use being questioned later.
Hilmar Raeschke-Kessler
Continuing Professor Böckstiegel's line of thought, I would like to ask Professor Dessemontet whether the Principles could be considered to be an expression of lex mercatoria to the extent that they are in conformity with the Principles of European Contract Law and other general principles of law, as collected in Klaus Peter Berger's book, The Creeping Codification of the lex mercatoria.8[Page126:]
Bernd von Hoffman
I have a question for Professor Bonell regarding his statements concerning the amendment of the Vienna Sales Convention through the UNIDROIT Principles. Is this peculiar to arbitration? Those national courts that are required to apply the Vienna Sales Convention should amend it in the same way. Such amendment derives from the spirit of the Vienna Sales Convention itself and is not specific to the task of an arbitrator.
My second question concerns an arbitration case in which the parties have stated that a specific national law should apply, excluding the Vienna Sales Convention, which is not unusual. What is strange is that the contract in dispute was not a sales contract, but a construction contract, so it lies outside the scope of the Vienna Sales Convention. My question to Professor Dessemontet is: would he feel free to apply the UNIDROIT Principles, given the statement of the parties?
I would like to come back to the relationship between lex mercatoria and the Principles. I had a very interesting discussion with Jürgen Basedow on this matter. In his view - and I think he is right - the Principles establish a presumption that the rules contained therein are part of lex mercatoria. However, this will need verifying and someone can always challenge the assumption, in which case the burden of proof will lie with the person making the challenge. Rather than speaking of equality between the Principles and lex mercatoria, I prefer the idea of presumption. We could perhaps use the term that I think was used by Pierre Karrer in a Swiss commentary on private international law.9 He said that the Principles are to a certain extent, at least as far as lex mercatoria is concerned, a kind of pre-statement. They reflect what the contents of lex mercatoria could be. The problem is that the user should always check, by looking at comparative law, and convince him or herself whether or not this is true.
I would like to make a remark about the competitors of the UNIDROIT Principles. I do not refer to the Principles of European Contract Law, but to the relationship between transnational principles, lex mercatoria and the UNIDROIT Principles on the one hand and national law on the other hand. There is a complicating factor here, namely European Union law. I would refer to three recent directives that are directly relevant to international commercial transactions. One is the directive dealing with the collection of payments, which provides for basically 7% on top of the discount rate of the European Central Bank. This directive will enter into force in August 2002. It will have an impact on article 7.4.9 of the UNIDROIT Principles. The second is the directive on electronic signatures. The third is the e-commerce directive, which is likely to change some rules on offer and acceptance. Again, this introduces a complicating factor that may have an impact on the rules on offer and acceptance in the UNIDROIT Principles. May I ask for the panel's comments on these developments?
From the perspective of a common lawyer, there is a distinction between lex mercatoria and general principles. A common lawyer would not traditionally view lex mercatoria as a law in itself because it does not have a sovereign to command [Page127:] it. It does not have any national sovereignty locus. On the other hand, the general principles falling within the analysis of common law courts very often apply in the evolution of the law through the decisions of the judges. Many US Supreme Court decisions are characterized by a comparative analysis in order to determine the way in which, in the view of the court, the law should evolve. So it is very common for American courts to apply general principles found in the UNIDROIT Principles or elsewhere and the decisions of courts and writings of academics, etc.
To add a further view from a common lawyer, I think lex mercatoria has another aspect for common lawyers not mentioned by Mr von Mehren: its foreignness - the use of the Latin name, the fact that it has been talked about in foreign literature for decades and is on the whole unfamiliar to Americans. I think we view it as close to some generalized civil law and remote from the common law system. In that sense it seems perhaps exotically inaccessible to us.
I am not convinced that trying to decide whether the lex mercatoria is represented by the UNIDROIT Principles will solve anything. The main problem is not to know whether one thing is the other, but to determine what the parties want when they refer to lex mercatoria. We usually know what they do not want - the application of national laws. The question then is whether the UNIDROIT Principles can fill the gap when the parties wish for something other than the application of national laws. Referring to lex mercatoria in such situations is just one of many possible formulations. The question arose in ICC case 7110, where the parties had used the expression natural justice. The arbitrators' response was to apply the UNIDROIT Principles. This seems to me to be the real issue, not whether the Principles represent lex mercatoria or not. Nobody will ever know this and I do not think we ever need to know.
Sergio Le Pera
Why is it that our colleagues from the common law systems do not understand what lex mercatoria is, or care about it? I would suggest that they do not need to understand or care because they never lost their lex mercatoria, which a few centuries ago Lord Mansfield incorporated into the common law. In civil law countries we did not have that advantage; we had, instead, civil and commercial codes. The Swiss code des obligations was, of course, the exception. If I had to suggest what the lex mercatoria incorporated into the common law was, I would say that it was little more than our old, good and solid principles on contracts of Roman law. That explains why our common law colleagues are not longing for lex mercatoria; they already have it although they do not always remember how they got it or where it was before.
Fabian von Schlabrendorff
I have a question for the entire panel. Let us assume you have a case involving a bond issued under the law of the State of New York. The issuer has become insolvent and the creditors have assembled in Switzerland in Zurich to make decisions on how to proceed with the adaptation of the bond. Do you believe that the UNIDROIT Principles could apply as a supplementary law to the applicable law of the State of New York? As a second hypothesis, let us assume in the same case [Page128:] that the documentation relating to the bond made no reference to the law of the State of New York. Would you apply the Principles in this case?
Antonio Crivellaro
As regards the relationship between the UNIDROIT Principles and lex mercatoria, I think that the best answer comes from the Principles themselves. They state that they may be applied when the parties have agreed that their contracts be governed by general principles of law, lex mercatoria or the like. From this, I understand two things: first, that there must be at least a presumption of a certain connection, more or less close, between lex mercatoria and the Principles; second, that the intention of the authors is that these Principles should be mainly applicable when the parties, so to speak, denationalize or delocalize their contracts in terms of applicable law. This situation, in which the parties have not selected a specific national law, will be the most difficult of all those in which the Principles may be applied. There are of course other situations, in which the Principles fulfil other functions (serving to complement, supplement, or interpret, etc.). But the typical situation for which the Principles are offered to the international trading community is when there is no choice of national law, or when the arbitrators have the authority to apply 'rules of law' other than a specific national law or to apply them in the light of 'international usages'.
I do not think we need to rack our brains over whether or not to apply the UNIDROIT Principles if the parties have chosen lex mercatoria in their contract, because this simply does not happen in practice. I have not seen any contract where the expression lex mercatoria is included. I think there are two or three cases worldwide where this might be an issue, but the problem is basically an academic one.
Julian Lew
I was brought up in an era when the existence of the international lex mercatoria was widely denied. The debate in England was led by two very distinguished German ex-patriates, Professor Clive Schmidthoff, who was in favour, and Professor Francis Mann, who was against.
My mind was further broadened having undertaken my postgraduate studies in Belgium where there was a more open-minded approach to the question.
I think the attitude in England has moved away from the general view that a choice of a national law must be clear and that lex mercatoria was too ethereal a concept. Lord Mustill wrote a very powerful paper some years ago, in a Liber Amicorum for Lord Wilberforce, showing how difficult it was to identify the content of lex mercatoria. That attitude has been ameliorated to an extent in two respects.
First, the 1996 Arbitration Act made it absolutely clear that arbitrators can apply a standard other than a national law when the parties have expressly selected such a standard. In this, I think we were influenced by our friends on the Continent. But also it is a reality; it is what parties want; so English law and attitude had to change. Personally, I do not share the general antipathy towards lex mercatoria prevalent in England. This attitude is along the lines described by Mr von Mehren.
There is uncertainty as to its existence. What is the lex mercatoria? Different authors offer different interpretations. It is slightly easier to ascertain the content [Page129:] of the general principles of law to the extent that an analysis can be done for the specific problem or the specific case, and in this way one can obtain some concrete rules.
I think that the UNIDROIT Principles are particularly helpful because an analysis has been conducted, leading to a body of rules that in time will probably become more widely accepted than it already is and may even be recognized as the basis of, or an expression of, a significant part of lex mercatoria.
Joachim Bonell
The question has been raised as to whether the use of the UNIDROIT Principles as a means of interpreting and supplementing international uniform law instruments was restricted to arbitration or whether one could envisage such a use also by domestic courts? My answer to this question is definitely yes. Domestic courts too may face problems of interpretation when applying international uniform law instruments and they should be able to resort to the UNIDROIT Principles on essentially the same basis as arbitrators.
Yet there is a further clarification to be made. As has also emerged from the discussion, arbitrators sometimes justify resorting to the UNIDROIT Principles to settle an issue not covered by CISG by invoking article 17(2) of the ICC Rules of Arbitration, according to which '[i]n all cases, the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages'. I do not think that this is quite appropriate. I have difficulty in equating the UNIDROIT Principles as a whole with 'trade usages'. If the UNIDROIT Principles were to be applied even with respect to issues outside the scope of CISG and as such directly governed by the otherwise applicable domestic law, then such an approach should rather be justified on the basis of article 17(1) of the ICC Rules (so-called 'voie directe').
This brings us to the question of whether the UNIDROIT Principles may be considered an expression of lex mercatoria, general principles of law, principles of natural justice, or the like. My answer is: why not? Or to be more precise, I think it would be fair enough to accept at least that this may be presumed, subject to demonstrating, with respect to specific provisions contained in the UNIDROIT Principles, that they do not (yet) have sufficient international support. By the way, this is exactly the approach which is increasingly being taken in international arbitration practice.
François Dessemontet
Questions of two very different kinds have been raised during this discussion. On the one hand there were questions about specifics, concerning particular cases. An example is the question about the exclusion of the Vienna Sales Convention and whether this is an implied exclusion of the UNIDROIT Principles. We cannot give a general answer to such questions about the implications of facts. Factual implications presuppose a knowledge of the details of the individual case. It is only when we turn to implications at law that we could posit a general answer, on the basis of the case law of a given country.
A clear illustration of this is the case of the bond issue. Is it possible that someone in a New York bank could forget to include an applicable law clause? If this is conceivable and corresponds to experience, it merely shows that no meaning [Page130:] should be read into the absence of such a provision. But, as has been pointed out by arbitrators in their awards, many contracts are negotiated over a period of several months, and in this case the absence of such a clause would have some meaning. I believe the first guideline we should follow when looking at the facts is to see what sort of contract is involved, whether it is a contract that has been negotiated or a standard contract.
We can then go on to more risky and more detailed guidelines. For example, what is the meaning of the exclusion of the Vienna Convention? Professor von Hoffman's remark points to the answer. If the parties do not wish to apply the Vienna Convention as the matter lies outside its scope, there is no further meaning to be elicited. The convention cannot be applied, but the UNIDROIT Principles can. On the other hand, we can also reason another way: if the Vienna Sales Convention has been excluded for a matter that comes within its scope, then we could assume that the parties meant something else, i.e. the exclusion of all texts of an international nature unless they are binding as state or inter-state commercial law or international conventions.
The question arises, I believe, because the parties put it to the arbitral tribunal. There have indeed been cases where one party has said that it objects to the application of the UNIDROIT Principles. I do not say the question will arise in most cases, but, without overemphasizing it, we need to have tools to be able to deal with it when it does arise.
If a party does not want to apply the UNIDROIT Principles and it can provide evidence of having excluded the Vienna Convention, this can be interpreted as implying that the party did not want to be ruled by any supranational order or by lex mercatoria. The party's wish should be respected. A comparison can be drawn with states. When a sovereign state enters into a convention, it does not want to derogate from its sovereignty any more than is indicated by the wording of the convention. That is why the Vienna Convention on the Interpretation of International Treaties prescribes a narrower technique of interpretation than that to which we are accustomed in commercial contracts. However, whether the contracting party be a sovereign state or a merchant enjoying the freedom to contract, there is a basic common requirement to respect the party's will. This is such an obvious statement that I need hardly elaborate on it.
When considering the nature of lex mercatoria, was it not the case that when it was initially conceived in the 1950s and 1960s it was intended to free economic agents from the oppressive rule of domestic provisions? This freedom has probably been achieved through other instruments too, like GATT, etc. There is no longer any need to see lex mercatoria as the sole key to freedom for international merchants. As a result, we can adopt a more relaxed attitude towards conflicts between lex mercatoria and domestic rules.
In all likelihood, no one, other than the 20% mentioned in Mr Berger's inquiry, will contest the existence of lex mercatoria. There is always a need to look for expressions of legal thinking, but the expression of legal thought is not the law itself, it is merely an expression. The UNIDROIT Principles are but a contemporary expression of something that may be evolving. This evolution has to be taken into account. In ten years' time, people will refer to the UNIDROIT Principles as something quite commonplace.
As a final remark, I would add that one cannot simply cite the Preamble of the UNIDROIT Principles in order to impose them against the will of the party. This would be illogical. However, if, on the basis of the contract or factual implications, [Page131:] there is no specific reason to exclude the application of the UNIDROIT Principles, then one can apply the Preamble too.
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Antonio Parra
The remarks of Professor Böckstiegel and Professor Crawford prompt me to point out that the overwhelming majority of cases that now come before the International Centre for Settlement of Investment Disputes are being brought to us on the basis of the dispute settlement provisions in bilateral and multilateral investment treaties concluded by the state party to the dispute. Most of these bilateral and multilateral treaties provide for application to the dispute of rules of international law. Some, but not all, of these cases brought under bilateral and multilateral investment treaties involve state contracts. In two of the newest cases, the claimant investors have invoked the UNIDROIT Principles as embodying rules of international law. I can only think that what they have in mind is that the Principles embody 'general principles of law' within the meaning of article 38 of the Statute of the International Court of Justice. To the extent that this approach prospers, it would also have implications for ICSID cases not taking place under bilateral and multilateral investment treaties, given that in most of these other cases, international law is also applicable, either as a result of an express choice by the parties or under the default provision on applicable law in article 42 of the ICSID Convention, which calls for host state law to be supplemented by international law.
Horacio Grigera Naón
The comments of Yves Derains and Professor Crawford on award 7110 prompt me to make a comment on my side. And this is in the light of reflections that we heard from Professor Lalive when we had a seminar here on investment protection and arbitration some months ago. Professor Lalive warned against drawing conclusions as to the legal implications of arbitral decisions without considering the legal and factual circumstances of the case and the pleadings of the parties. In case 7110, the parties requested the arbitral tribunal to make a preliminary partial award on the proper law of the contracts, and not on the law applicable to the statute of limitations. So the arbitral tribunal was compelled to decide, as a preliminary matter, on the law applicable to all the contracts giving rise to the dispute in their entirety.
Also, both parties had clearly voiced their concerns, should general principles of law apply and irrespective of their conflicting positions as to such possibility, about the potential vagueness of those principles. This was an additional element that the arbitral tribunal had to deal with. The parties were asking from the arbitral tribunal details or guidelines about those principles in advance, that is to say, before pleading on the substance of the applicable law.
Finally, in the hearing previous to the issuance of the partial award, the arbitral tribunal asked the parties (one of the parties had already mentioned the UNIDROIT Principles in its pleadings) about their views on specific guidelines helping to identify the substance of such general principles. The lawyer for claimant clearly indicated that the UNIDROIT Principles could constitute such basis. The lawyer for respondent did not object to that possibility. So, these were also elements that the arbitral tribunal took into account when deciding on the applicable law. [Page132:]
Hans van Houtte
One of the problems why the UNIDROIT Principles are less often applied to business-to-state or state-to-business arbitration is lack of familiarity on the part of the counsel of the parties. I have the following anecdote. The United Nations has a duty to settle disputes by arbitration and not by courts. For years, they had arbitration in New York, with New York lawyers, New York law, New York arbitrators-an all New York affair. Then, a few years ago, the UN thought the arbitration proceedings ought to be a little more international. I happened to be the first arbitrator appointed by the United Nations for a dispute over supplies of goods in a peace-keeping mission somewhere in Africa, in a country not fully developed, legally speaking. The matter involved a Southern European company which, as supplier, had assigned the contract to a Middle Eastern company. As news of the United Nations' change of attitude had not reached the claimant (the supplier), it still argued the case in New York, with a New York lawyer, under the U.S. Uniform Commercial Code. The arbitral tribunal inquired why the UCC was invoked, considering the international composition of the tribunal and the fact that the countries involved were at least 3,000 miles away from the United States. The tribunal suggested the Vienna Sales Convention and the UNIDROIT Principles as solutions. Eventually, counsel found in their library a copy of the 'red book', which had never before been consulted. They were unfamiliar with the UNIDROIT Principles but would think it over. They finally agreed on the Vienna Sales Convention and the UNIDROIT Principles. They found the interest provisions above all very useful. The case was settled shortly thereafter as the Vienna Sales Convention and the UNIDROIT Principles contained all the relevant legal parameters.
On the question of state contracts, I recall some now dated decisions, according to which, in international trade, a state cannot raise restrictions upon the validity of arbitration agreements derived from its internal law when the arbitration agreement would be valid under international law. I have in mind an Ethiopian case involving an administrative contract mentioned in the treatise on international commercial arbitration by Fouchard, Gaillard and Goldman.10 Under Ethiopian law, administrative contracts cannot be subject to arbitration. However, the arbitrator decided that this rule could not be applied to an international dispute, as in international commerce it would be contrary to good faith for the state to 'se prévaloir de la nullité de sa propre parole', i.e. to renege its own word. Other awards followed in which a similar line was taken on such matters as the need for permission and approvals, sometimes used by state parties to invalidate international contracts. If such decisions are considered in relation to the UNIDROIT Principles, I think they can be seen as anticipating the good faith principles now set down in the Principles. In applying such case law, arbitrators now have additional confirmation in the Principles. Where does that leave us however with article 1.4, affirming that in no case may mandatory rules be disregarded? Would this principle need some further revision in order to be in conformity with the traditional principle I believe should be upheld in international trade disputes?
In replying to the preceding remarks I would like to add in relation to Hans van Houtte's comment, that in the United Nation case I cited we also had very large [Page133:] New York law firms on both sides. However, they were somewhat closer to international practice and it was relatively easy to bring the UNIDROIT Principles into the discussion as I described.
I can only confirm, of course, that the traditional principle that no state may rely on its internal law to disclaim obligations under international law probably can be helped by the UNIDROIT Principles. And if I had the time to go through several principles, I could give more examples of this. It begins with the arbitration clause. I remember I was involved in a case where the Belgian government was the respondent party. It concerned a very high-level contract about the reform of the Belgian steel industry. The Belgian counsel pointed out to us that under Belgian law and even the constitution, the ratification of the Belgian parliament was required. This was not the case however: the contract had been signed by the Belgian Prime Minister and the Finance Minister. We had to rely on general principles of law to argue that this did not make the arbitration clause void. We were also helped by the 1961 European Convention on International Commercial Arbitration. To be fair, I must add that the Belgian government then published the award immediately even though it lost in the matter. This showed that it must have felt quite comfortable with the award. I would agree that the UNIDROIT Principles, which did not exist at the time of our decision in the Belgian case, can help in such contexts.
James Crawford
The question of whether you can rely on international law is, of course, a question of what is the proper law of the tribunal. I am not talking about lex arbitri; I am talking about the law of the tribunal in terms of its substance. In the Texaco case, the question is whether, for example, a government department is part of the state or not, so that you can execute the award against state assets irrespective of their relationship with that department. This is a very important question in practice. It is probably as well to aggregate the state. International law does that. But international law would have to be the lex fori, which arbitrator Dupuis said it was. In the English law cases we dealt with, it was not. You therefore had the problem that each of the entities involved had a legal personality and the state could, as it were, move the deckchairs around on the Titanic while the ship was going down. It may be that the Principles can be brought in, whether by reason of the relationship between national and international law or for other reasons. But there is a serious difficulty. The Principles do not exclude that, especially article 1.4, which states that mandatory rules are to be applied in accordance with the relevant rules of private international law. The point is, the UNIDROIT Principles hover between being, as it were, a set of rules which substitute for a legal system and a set of rules which are incorporated in a contract. For some purposes, they are the one; for some purposes, they are the other. For the purpose of mandatory rules, they are clearly the second.
4
Werner Melis
For the purposes of this seminar, I examined the arbitration agreements and choice-of-law clauses in the 100 most recent cases-all international-that have come before the Arbitral Centre of the Austrian Federal Economic Chamber (WKO). Given that the UNIDROIT Principles were formally published in 1994 and several years have passed since then, I thought this would be a good test of the [Page134:] extent to which they have been accepted and used by parties. Some interesting results emerge.
In 16 of the 100 cases examined, the parties had not agreed on an applicable law. According to article 16(1) of the WKO Arbitration Rules, the arbitral tribunal was therefore required to apply the law designated by the choice-of-law rules it considered to be authoritative, that is to say the national law considered to be applicable in the circumstances. Most of these cases involved contracts for the sale of goods containing standard terms
In 80 cases, the parties chose a national substantive law.11 Given that CISG has been mentioned several times this year, it came as a great surprise to me to find that in ten cases the parties opted out of application of this convention.
In none of the 100 most recent cases did the parties agree that the contract be governed by the UNIDROIT Principles. Nor, to my knowledge, has this been the case in any of the disputes brought before our Centre since the publication of the Principles.
The Preamble states that the Principles may be applied if the parties have agreed that their contract be governed by '"general principles of law", the "lex mercatoria" or the like'. There are a few cases in my sample that might fall into this category. For example, in two cases, the arbitration clause stated that 'the arbitration panel which will primarily make efforts to reach an amicable solution of the dispute will consider in its efforts to solve the dispute not only on the basis of the legislation of the country X but also on the basis of the norms and practice of international and transnational commercial law-lex mercatoria on orders'.12 The wording of this clause may be interpreted by the arbitral tribunal as an invitation to use the UNIDROIT Principles as an additional source of law, as contemplated in the Preamble to the Principles. In another case, the parties agreed that the arbitral tribunal 'decides final and binding (verbindlich) according to its own knowledge and on the basis of the legal Arbitration Rules'. By giving the arbitral tribunal the right to decide 'according to its own knowledge', albeit in a clause that could easily be described as pathological, the parties expressly entitle it to apply a set of rules such as the UNIDROIT Principles as the basis for its decision, if the tribunal considers such rules to be an international reference standard. In yet another case, the parties stated as follows: 'The Federal Economic Chamber, Vienna has jurisdiction to decide disputes on the existence and on the performance of this contract. It will decide final and binding ex æquo et bono.' Language like this would similarly allow the arbitrators to apply a set of rules such as the UNIDROIT Principles if, again, they regard them as an international reference standard in international arbitration. Finally, in an international sales contract which was not subject to any particular national law, I found a provision stating as follows: 'All cases under circumstances of Force Majeure shall be settled according to the valid international rules.' Here again, the arbitrators could conclude that the most appropriate provision to be applied in this instance is article 7.1.7 of the UNIDROIT Principles.
There have been two cases in which an arbitrator has actually applied the UNIDROIT Principles. These led to awards SCH-4318 and SCH-4336 rendered respectively on 15 June and 15 May 1994. Extracts from both awards were published and commented upon in the journal Recht der internationalen Wirtschaft, year 1995, vol. 7 at page 590 and following.13 The cases involved the same German and Austrian parties and concerned contracts relating to the sale of metal sheets, in which the parties had chosen Austrian law as the applicable law.[Page135:] Although these cases raise several interesting issues, the one that concerns us here is the application of the UNIDROIT Principles, so I shall confine myself to describing how the arbitrator brought the Principles into play when deciding on damages with interest. His reasoning was as follows. Austria has ratified CISG. Article 78 CISG states that a party is entitled to interest, but specifies no rate. There are two possibilities: one is to say that the matter of the rate of the interest is outside the scope of CISG, in which case national rules of conflict will apply to determine the national law; the second possibility would be to consider this as a gap which could be filled pursuant to article 7(2) CISG.14 The arbitrator concluded that this would be the more appropriate solution and further reasoned that, according to article 74 CISG, in cases of breach of contract, which was the case, the claimant was entitled to full compensation for the loss. The arbitrator then applied article 7.4.9 of the Principles, maintaining that the rate of interest should be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place of payment.
Jan Ramberg
I think it would be worthwhile for me to disclose something of the discussions that took place prior to the adoption the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, effective as of 1 April 1999. I strongly suggested to the drafting committee that we should take the same rule as in article 17 of the ICC Rules of Arbitration. However, I met considerable opposition from some lawyers, who said: 'But when we plead the case, we have to know what law applies.' It is not controversial to assert that arbitrators may bypass the choice-of-law principle that applies according to the forum. Everyone agreed to that. But then to say they could pick whatever rule of law they found appropriate, which of course would include the UNIDROIT Principles, aroused opposition. It was admittedly not very strong, because the majority view was that we should take the same rule as article 17 of the ICC Rules. My attitude was: ask the arbitrators. I have been in arbitrations where this was done. The problem though is that you do not know at the outset to what extent it would be appropriate to apply the UNIDROIT Principles, since the issues are not well enough known at that stage.
There is also the problem that the UNIDROIT Principles are not comprehensive enough. Even they contain gaps. You therefore need a back-up in such cases, which may be the otherwise applicable national law. I do not anticipate any major difficulties in practice: if an issue is not entirely clear at the outset, the litigants will undoubtedly ask the arbitrators what they intend to do, so they can plead accordingly.
I am greatly impressed by M.J. Bonell's suggestion that reference to the UNIDROIT Principles should at least have the same weight as a reference to scholarly opinion written down in authoritative textbooks. After all, the Principles represent the consolidated views of eminent professors. They should therefore become a source of law on this basis at least.
When it comes to precise rules, I am impressed by the frequency of references to the provision regarding default interest. This is a rule that in certain circumstances may conflict with the provisions relating to interest in the otherwise applicable law. Whether or not there is a conflict will depend on whether we choose to use the European Union directive on collection. The rule in the UNIDROIT Principles is related to currency. At least in the European Union you can take the common currency and add whatever is the applicable rate. This makes things much simpler.[Page136:]
Statistics may be misleading, because in many cases arbitrators do not refer to the UNIDROIT Principles and yet apply them. Application of the Principles is therefore perhaps much more frequent than is generally apparent. But if there is a specific issue, such as interest, to be solved, you cannot avoid stating in your award what you are doing.
I have a general observation. I think it is very interesting to see how business people, parties and companies have a terrible fear of lex mercatoria, general principles and suchlike. They have been told that there is no substance to them, that they are dangerous and so on, so they prefer national law. However, national law is very often not the best solution for international contracts. But this does not change their minds. Maybe they were right in the past, because when lex mercatoria or something similar was chosen, you did not know what rules to apply. Sometimes it is better not to have any rules than to have bad rules. However, now that we have the UNIDROIT Principles, we can refer to something that may be much better than an unknown national law on contracts. I think we should try to convince people that this is a valid alternative, not some abstract whim of a group of academics, but something entirely concrete and highly relevant. I have said elsewhere that there are two or three of the UNIDROIT Principles that are rather excessive and should be changed, but this is not difficult to do and, in any case, the Principles can be incorporated in a contract without these two or three rules in question.
Given that, on the one hand, we have this powerful tool and, on the other, more and more arbitral awards are being published revealing what arbitrators think, we should strongly canvass the business world and try to convince it that we are creating a new supranational law which will be to everybody's benefit and that we can achieve it together.
I should like to take up the point made by Professor Lalive that the arbitral tribunal should not invoke the UNIDROIT Principles without offering the parties the opportunity to express their views. This is a procedural issue. The first question to ask is whether arbitrators should indeed give parties the opportunity to express their views on the matter. In the end, in many cases, one of the parties wins and the other loses and invoking the UNIDRIOT Principles ex officio may help a party. Does this not go against the principle of party autonomy? If it is thought that arbitrators should be at liberty to do so, the question then is when should they do it? Should it be during the proceedings or during the oral arguments? Is it not dangerous if the tribunal has not yet made up its mind? In this case, might it not be wiser to do it during the drafting stage of the arbitral award, saying that these are the views of the arbitral tribunal and we invite the parties to express their views on the matter.
Hearing these discussions, I feel we should focus more, not today but in the future, on the concept of negative choice. Putting it into perspective, the approach in the not-too-distant past was that the parties may agree on the applicable law. This is party autonomy. In some systems, it was considered that their agreement could be subject to a number of conditions. There was some [Page137:] checking to ensure that the parties' choice was reasonable. Now we arrive at a situation that is completely different, indeed opposite: when the parties have not agreed on the law applicable to the contract, it may be that they have agreed on something else. When I hear Professor Melis say that in only 16 out of 100 cases was there no agreement by the parties on the applicable law, should we not really consider that when the parties do not agree on the applicable law, this is probably because they were unable to agree? For the international arbitrator this means that there is no law that should be applied. What remains is a big question mark. There is some scope for transnational principles, including the UNIDROIT Principles, because they are well publicized and their contents are apparently to the satisfaction of many people. The idea I wish to put across is that negative choice probably needs to be considered more deeply than we have done so up till now.
Pierre Lalive
Taking the comments in reverse order, I begin with the question of negative choice. Without saying that I am fully in favour of negative choice, I recognize that it exists. Apart from that, I could not agree more with Yves Derains. There are a number of cases in which there is no negative choice because the parties never thought of the problem. And, once again, there are still many badly drafted contractual clauses.
With regard to Professor De Ly's comments, I am not quite sure whether I understand his procedural problems. I thought - wrongly it would seem - that I was making a very harmless passing remark to the effect that, before drafting an award and giving a decision based on the Principles, it would be fair to offer the parties the possibility of expressing their views on the use of the Principles if they had not invoked them. This is a general remark and is not peculiar to the UNIDROIT Principles. If I understand Professor De Ly correctly, there is a limit to the initiative arbitrators can take, as it could benefit one party more than another. We all know about this, but, again, it has nothing to do with the UNIDROIT Principles as such. In my opinion, it is fair enough to offer that possibility to the parties. Of course, one may answer that jura novit curia, the arbitrators may apply any law, even if not invoked or discussed by the parties. But it seems clear to me that, in arbitration at least, the parties should, as a general rule, be given the chance to argue the matter.
Finally I come to the most important point, raised by Professor Ramberg. He expressed the fears of certain business circles over reference to general principles. I fully understand their fears and we have to take them into consideration. As counsel, it is very unpleasant to be in the situation of not knowing à quelle sauce vous allez être mangé, if I may use that expression - or, in other words, of not knowing what the arbitrators are going to do. Professor Ramberg's comment leads me to add the following. I fully agree with what he said about the UNIDROIT Principles being a consolidation of scientific studies. But this again is not a new phenomenon in law. If you will allow me to quote a Swiss source, the famous article 1 of the Swiss Civil Code mentions doctrinal writings as an auxiliary source of law. Another example is article 38 of the Statute of the International Court of Justice, which refers to 'the teachings of the most highly qualified publicists of the various nations' as a means of deciding disputes. This again lends support to the UNIDROIT Principles, which are an expression of 'the teachings of the most highly qualified publicists', as at least an auxiliary source of law.[Page138:]
I would like to make two remarks. First, it seems to me that what is considered a good principle in a general or abstract situation may not coincide with what is a good principle in a particular arbitration. In a given case, a good principle for one party may be a bad principle for the other. This helps to understand why in-house counsel are very reluctant to accept what may be considered good at a general level. Their concern is what is good for the particular case they have to prosecute or defend. As a footnote, I would add that corporate counsel do not like to give maximum choice to arbitrators. In the United States they want to be assured that there are parameters within which awards are issued. I believe this to be one of the underlying reasons why many corporations are reluctant to accept as the governing law principles such as those of UNIDROIT relating to international commercial contracts.
5
I strongly hope that Professor Fontaine's presentation, which I found extremely interesting, will receive all the attention it deserves, especially by those who, in recent times, have taken the view that a reference to the UNIDROIT Principles is tantamount to a reference to standard terms, with the result that the individual provisions of the UNIDROIT Principles are subject to the same scrutiny as to their substantial validity as provided for in various jurisdictions for standard terms unilaterally prepared in advance by one of the parties only. Professor Fontaine has very convincingly shown that there is no reason for this to be the case.
Mr Raeschke-Kessler-as usual very stimulating, if not even provocative-is absolutely right in his remarks about the many questions still not addressed in the UNIDROIT Principles. May I just mention that work is under way on new chapters to be included in the UNIDROIT Principles, such as those on agency, limitation periods, assignment of rights, transfer of obligations and assignment of contracts, set-off and third-party rights. The new enlarged version of the UNIDROIT Principles should be available within the next two years or so. Yet I admit that even then some important subjects will still be left out. I am thinking in particular of immorality and illegality, or, more precisely, the effects of a contract being declared contra bonos mores or illegal. Parties choosing the UNIDROIT Principles as the law governing their contract are therefore well advised also to indicate a particular domestic law as a catch-all.
As to Mr Raeschke-Kessler's energetic plea for harmonizing the UNIDROIT Principles with the Principles of European Contract Law, two observations: first, I think it is fair to say that the differences between the two instruments are ultimately not so numerous nor of great importance; secondly, and more importantly, while the UNIDROIT Principles lay down rules for international commercial contracts to be applied everywhere in the world, the Principles of European Contract Law are intended to be an overall set of rules for both commercial and consumer transactions to be applied within the European Union and perhaps eventually become a binding European contract code in the future. In these circumstances I feel that certain differences are more than justified.[Page139:]
Some of the differences between the UNIDROIT Principles and the Principles of European Contract Law are due to the fact that it was necessary to take account of political considerations when drafting the UNIDROIT Principles to reflect the world prior to 1990. It has now changed with the disappearance of centralized planned economies. Provisions that were originally included in the UNIDROIT Principles for political reasons and are no longer necessary or justified should be taken out in the course of a revision.
Unlike the UNIDROIT Principles, the Principles of European Contract Law presently have working groups on partnership and restitution. In my opinion, the second is a matter of utmost urgency. Common principles have already been developed in the worlds of both common law and continental law and have been written about extensively, for example in the International Encyclopedia of Comparative Law.15 It should therefore be easy to formulate rules befitting the modern world. As much as I like and admire the German Civil Code, which has stood the test of 100 years, the provisions of its articles 812 and following, and likewise of article 66 of the Swiss Code of Obligations, do not stand the test of modern times as far as complex international transactions like BOT projects are concerned. So, we lack a system of appropriate rules that could be used in an arbitration where the contract is void ab initio but has been completely performed. There are things that cannot be returned. An example would be a power plant, once it has been constructed and is operating. In such a case, the investors would have to be paid for the plant, even if the contracts are void because of bribery. There is an urgent need for rules on restitution and I suggest that UNIDROIT takes care of the problem.
I was particularly interested by Mr Raeschke-Kessler's remarks on bribery, which is at issue in an arbitration on which I am sitting. On examining the case, we discovered that the two laws involved, one Asian, the other Western, gave quite different interpretations of what bribery is and attached quite different consequences to it. We also discovered that bribery can hardly be described as one particular type of action, because there are many facets to it. At one end of the spectrum there is the bribe given to the decision maker, in which case the contract can be said to flow directly from the bribery. At the other end of the spectrum, and to a much lesser degree, there is the bribe given to a corporate officer to accept an applicant as a bidder for the contract; having got to this stage, its bid is often accepted. In my view, the result should lie in the remedy rather than in the question of the validity or invalidity of the contract itself.
I fully support Hilmar Raeschke-Kessler's plea for transnational rules on unjust enrichment. The University of Osnabrück has already spent two years studying unjust enrichment for the Principles of European Contract Law. It has been said that both the UNIDROIT Principles and the European Principles should co-exist like East and West ten years ago and that university courses should deal with conflicts of principles and conventions. I question the existence of two sets of principles side-by-side. Would it not be preferable and simpler to have one set of global principles? [Page140:]
Marcel Fontaine
Returning to Mr Kessler's remarks on restitution, the UNIDROIT Principles do have some rules relating to this, such as 3.17 on avoidance and 7.3.6. As regards the co-existence of the Principles of European Contract Law and the UNIDROIT Principles and the suggestion that they should be harmonized as soon as possible, I think one should recognize that these principles have the great virtue of being similar. There may be bothering differences, but there is a great similarity, due not so much to coordination but to communication between the two groups and the fact that they had several members in common.
I would like to add that the Principles were published only in 1994. They break new ground and, in so doing, cannot be expected to have a monopoly. The Principles of European Contract Law and the UNIDROIT Principles were the first accomplishments, but there have been other codification initiatives, including the project of Professor von Bar paving the way for a European Civil Code. In the meantime, however, there will probably be several codes likely to be competing with each other to a greater or lesser extent. Perhaps we can say that the most appropriate will progressively prevail. It may seem strange to have two texts both claiming to reflect international principles applicable to international contracts, but I guess we will have to live with this situation for a little while. It may become worse in the coming years, but eventually we will achieve a more harmonized set of rules.
Teresa Giovannini
On reflection, it is somewhat inevitable that we should have two sets of principles, given the competition that exists between legal norms worldwide. I therefore conclude that we should accept their co-existence. The problem is that there are no rules for parties, arbitrators and lawyers indicating when each set of principles should apply. As a way of overcoming this problem, I would suggest the following. Given that the UNIDROIT Principles are considered as global and aim to be so, it is in my view the Principles of European Contract Law that should be subject to rules restricting their application. Whenever regional organizations create sets of rules, I believe it is their duty to indicate exactly when those rules should apply. This is precisely the difficulty we face in European private international law, where it has never been done. We in the European Union should try to do so.
Teresa Giovannini's proposal goes against the principle of contract law, for European contract law would then be the specialized law and the UNIDROIT Principles the general law, meaning that the former pushes aside the latter. It would also mean that in a European context, the rules of European contract law would have to be applied.
If my understanding is correct, the suggestion is that the UNIDROIT Principles working group should go on dealing with public works and procurement contracts and the consequences of bribery. In my opinion, although the UNIDROIT Principles are wide-ranging, they should be directed to other sectors of contract law. The UNIDROIT Principles define themselves as applicable to international commercial contracts. A contract for a public infrastructure put out to tender is [Page141:] much more a domestic administrative contract than an international commercial contract. It is a 'public works contract' and in most European countries disputes arising from such contracts are not subject to arbitration. Why therefore should the application of the UNIDROIT Principles be considered in a sector where an arbitrator would have no or very limited jurisdiction? As far as bribery is concerned, it is very likely to lead to a criminal investigation, which would imply the suspension or stay of other proceedings, including arbitral proceedings. If bribery makes a public works contract invalid, only state courts may make such a judgment. Here too then, the UNIDROIT Principles are of little use. It is nonetheless true that the provisions currently contained in the UNIDROIT Principles are incomplete. I would suggest that they may be better completed if consideration is given, not to public works contracts, but to long-term contracts between private parties or private parties and states, or contracts implying the allocation of technical, human and financial resources for a relatively long term. I say this because I feel the current contents of the UNIDROIT Principles typically reflect contracts involving short-term commercial transactions, such as sales. I would therefore suggest that attention should not be given to public works and procurement contracts, which are already governed by mandatory public provisions, national and international, and in Europe are regulated by several directives of the European Union. As such, they lie beyond commercial arbitration.
Borham Atallah
I think the common law principle of in pari delicto should cease to be applied in international contracting. My view is that once we get rid of this principle, we can apply article 7.3.6 of the UNIDROIT Principles concerning restitution. In this way we might be able to resolve the question raised earlier. It is to be noted that the influence of the common law on the European rules is too strong. That is why the UNIDROIT Principles have my preference and will, in my opinion, have more success in the future. We should also remember the new OECD Convention Combatting Bribery of Foreign Public Officials in International Business Transactions, now applicable in many countries. Very recently France introduced legislation on the subject.
6
Fabrizio Marrella
As reference has been made to the research I conducted into ICC awards and the UNIDROIT Principles, which led to the article by Fabien Gélinas and myself published in the Fall 1999 issue of the ICC International Court of Arbitration Bulletin, I feel obliged to give an opinion on the probable reason why parties did not expressly choose the Principles in their contracts. In most of the cases I studied, the underlying contracts had been entered into many years before the UNIDROIT Principles existed. This would seem to explain therefore why the arbitration clauses in such contracts do not refer directly to the Principles. It is only after 1994 that such a reference is found.
Pierre Mayer
It is obviously the explanation. Although there may already have been a few contracts entered into after 1994 that have been the subject of arbitration, there will [Page142:] be more in the future, so we may have reason to expect references to the UNIDROIT Principles. However, I just wonder in practice how many contracts actually refer to the UNIDROIT Principles as the governing law. Personally, I have not seen any, but I have limited experience. It would be interesting to know if anyone has seen one, or if figures could be produced.
I think you will find amongst the cases I cited three or four, most of them not ICC, in which, when the dispute arose and the parties went to arbitration, they agreed in some way that the UNIDROIT Principles should apply. That is at least a good sign that by the time they get angry at each other, they have learned about the UNIDROIT Principles.
I think it is a totally different situation. Once the dispute has arisen, you know what its subject matter is and you know what rules are needed, so it is easy to choose, whereas at the time of signing the contract you do not know what will happen. Then there are gaps, big gaps, in the UNIDROIT Principles, so it is necessary to complete the choice by referring, for instance, to a national law or the Vienna Sales Convention. And this, of course, raises the problem of the combination of the two. That, I think, is an obstacle.
Giorgio Schiavoni
I am not entirely in agreement with what has been said. In my experience as in-house counsel for a company dealing with engineering and construction contracts all over the world, one of the practical advantages of the UNIDROIT Principles is that it offers a way of finding common ground when, in dealings with lawyers in remote countries with laws very different from yours, it is difficult to reconcile parties' views on the rule that should inspire a specific clause of the contract you are discussing. I have witnessed a situation in which the application of general principles was proposed and accepted, including the UNIDROIT Principles. Although not a pure application of general principles, this trend is increasing around the world and is a useful resource in discussions.
I am personally a great supporter of the UNIDROIT Principles. However, I wish to be realistic about what has already been done and what remains to be done. I perfectly understand the advantages of the UNIDROIT Principles and the possibility they offer of finding a way out of a blockage in contract negotiation. I simply wished to point out that their use could be a source of problems. Although not a perfect solution, it may however be the best one in certain situations. According to the statistics of ICC and other institutions, some 80% of international contracts contain a choice-of-law clause designating a national law. In the remaining 20% of cases, maybe the best solution would have been to refer to the UNIDROIT Principles. I have nothing against the UNIDROIT Principles, but designating them as lex contractus necessarily creates problems. Either you are faced with lacunae, because they are only general rules on contracts and not rules on specific kinds of contracts such as sales or construction contracts, or you have the problem of combining them with a given national law that has to be chosen too. It is very difficult to combine the two in some situations. I just want to have a complete picture, that is all. This is the reality and I believe it needs to be recognized.[Page143:]
* * *
I would like to begin by stressing that the UNIDROIT Principles are welcome in Cairo and in the Arab world in general, where the publication of their translation in Arabic was a cause for celebration in 2000. There are two reasons in particular why the future of the Principles in the Arab world can be regarded with optimism. One concerns the nature of the international arbitration centre in Cairo, called the Cairo Regional Centre for International Commercial Arbitration (CRCICA), and the other the nature of the Egyptian Civil Code and the new Egyptian arbitration law.
The CRCICA has a noteworthy history. In 1978, the Asian-African Legal Consultative Committee, which was the successor of the Asian Consultative Committee formed in the wake of the 1956 Bandung Conference, decided to create regional arbitration centres in Kuala Lumpur in Malaysia and in Cairo in Egypt. The Cairo Centre was established the following year for an initial trial period of three years. It adopted as its arbitration rules the 1976 UNCITRAL Arbitration Rules with some modifications. In 1983, it started operating on a permanent basis. Since 1987, the Centre has enjoyed the privileges and immunities of independent international organizations in Egypt, as a result of an agreement with the Egyptian government. This should encourage international arbitration, although up till now 90% of cases have been Egyptian disputes. Going through some 100 awards rendered under the auspices of the Centre in the last two or three years, I did not find any specific references to the UNIDROIT Principles. However, there were references to lex mercatoria and to supplementation or confirmation of solutions provided by the Egyptian Civil Code.
There is indeed much affinity between the Egyptian Civil Code promulgated fifty years ago, in 1948, and the UNIDROIT Principles. Preparation of the Egyptian Civil Code began with comparative studies in the 1940s, involving Edouard Lambert and the well-known Egyptian jurist Senhuri. I would suggest two or three points of ideology common to the Egyptian Civil Code and the Principles. There are similarities with respect to contract formation: party autonomy is of the essence in both cases. Good faith is very important in both compilations. Similarities are also to be found on the matter of damages, including mitigation of harm, foreseeability of the damage and full compensation. The Egyptian Civil Code contains a very important provision on hardship, the application of which has given rise to well-developed case law in the supreme court, which could be of help at international level in interpreting the Principles. I am thinking in particular of the supreme court's decision to determine firstly the normal loss borne by a party and then, in the event of disproportion, to divide the other losses.
To conclude, I am hopeful for and feel comfortable with the Principles. When recently asked what to do if a foreign party refused to accept Egyptian law as the applicable law, I unhesitatingly suggested the use of the Principles.
Finally, I would mention the Egyptian arbitration law of 1994. Party autonomy is upheld by this law, and if a national law is chosen, then the substantive rules of this law would apply without any problem of renvoi. If no applicable law has been chosen by the parties, the tribunal should choose the rules most closely connected to the case before it.[Page144:]
Ahmed El-Kosheri
During the past two years, postgraduate studies have been conducted in the law school of Ain Shams (Heliopolis) University on the UNIDROIT Principles of International Commercial Contracts. The outcome of the studies undertaken has revealed that, when the Principles are compared to classical Islamic legal provisions and rules, in only six areas is the implementation of the UNIDROIT Principles likely be problematic. They concern the following articles of the Principles. With regard to 2.20, under Islamic law the content of contracts should be fixed since aleatory contracts are prohibited. Concerning the implications of 3.10 and 3.20, it has been noted that Islamic law restricts the possibility of one party binding itself unilaterally. Similarly, with respect to 5.7 and 5.8, there may in practice be a certain conflict with the traditional Islamic rule according to which both parties should know in advance the exact extent of their mutual obligations. Finally, 7.4.9 concerning interest for failure to pay money raises an issue in relation to traditional and classical Islamic law as this would touch on the question of riba and usury practices. Otherwise, the unanimous opinion of the postgraduate students and my younger colleagues who have been involved in the research is that the Principles can be considered perfectly acceptable under Islamic law. I mean classical Islamic law because, like my colleague Borham Atallah, I believe that there is a difference between classical Islamic law as it was elaborated in the seventh and the eighth centuries and what we have now as positive law applicable in most Arab and Islamic countries. In fact, classical Islamic law, as it was initially conceived, is today applied only in one country, which is Saudi Arabia. Other countries have mainly adopted the Egyptian model, which, without exaggeration, could be considered an integral part of the civil law system. Within the context of economic activities and business transactions, the application and interpretation of the domestic legal systems as presently in force can hardly be claimed contrary to any mandatory rules of Islamic law. I therefore agree with my colleague that the application of the UNIDROIT Principles of International Commercial Contracts should not raise practical problems whenever they are applied and relied upon by arbitrators operating under the Cairo Regional Centre or in ad hoc or any other kind of arbitration.
I would like finally to sound one note of caution. I am of the opinion that it is of no benefit to the UNIDROIT Principles to be amalgamated with the concept of lex mercatoria, which has bad press in the Arab world because it is traditionally linked with the trend, dating from the early 1950s when the Abu Dhabi/Qatar arbitrations took place, excluding the applicability of the legal system of Islamic law and replacing it with rules claimed to pertain to another alien system of an anational character. Hence, irrespective of any doctrinal theoretical reasoning, it is in the interest of the UNIDROIT Principles to stand and be considered on their own, independently of usages, lex mercatoria or transnational law. In essence, they are the fine product of a comparative law survey which resulted in the codification of principles applicable in the field of contracts. The UNIDROIT Principles, properly formulated, are fully coherent, and could be applied without problem in the modern Arab world, with the possible exception of Saudi Arabia in respect of the few provisions I referred to before.
Alexander Komarov
In the last four years the Court of International Commercial Arbitration of the Chamber of Commerce and Industry of the Russian Federation has dealt with six cases in which the UNIDROIT Principles have been referred to or applied. In one [Page145:] of these cases, their application was in accordance with the parties' agreement. In two cases they were applied as international trade usages but, interestingly, on the basis of different arguments in each case. In the first case, the ground for application of the UNIDROIT Principles was the United Nations Convention on Contracts for the International Sale of Goods. Reference was made to art. 9(2) CISG. The tribunal considered the Principles to reflect the usages which the parties knew or ought to have known and which are widely known in international trade. In the second case, the Principles were applied as international trade usages as our rules and arbitration law require arbitral tribunals always to apply international trade usages. There was no specific reference; the application of the Principles as international trade usages was at the instigation of the arbitral tribunal.
The Principles have also been applied as rules of law supplementing domestic law. In my view, 'supplement' is not the right word however. In the cases concerned, the tribunal simply referred to the Principles to support application of a rule in domestic law, so as to show its appropriateness to international contracts.
Some years ago, the Russian legal system adopted a new civil code based on a private law approach. Many provisions of the old law have been retained. Arbitrators applying these provisions in an international context are sometimes concerned to ensure that they are seen as adequate and appropriate, as they were originally intended for domestic relationships. For instance, our law allows a court or tribunal to reduce the sum stipulated by parties in the event of breach of contract, if it is deemed to be excessive in light of the consequences of the breach. This was for many years regarded as reflecting state interest. However, it is a rule that is equally applicable in an international context, as is the rule requiring good faith to be taken into account in matters of compensation. Arbitrators therefore refer to the UNIDROIT Principles in order to satisfy the need to show that these rules of domestic origin are also applicable to international situations.
I believe there is an important role for the UNIDROIT Principles to play in ICSID arbitration cases. ICSID arbitration is available for the settlement of disputes between states and private foreign parties. In what I think is the first formulation of this type, article 42, paragraph 1, of the ICSID Convention gives the parties full autonomy to agree on the rules of law that their arbitral tribunal should apply in settling their dispute. Parties have occasionally made use of this power to subject their relationship simply to the law of the state party in the dispute. It has been suggested that in this type of case the UNIDROIT Principles be invoked to fill gaps in the law of the state concerned or to assist in its interpretation.
Although we have not yet encountered cases of parties explicitly adopting the UNIDROIT Principles, they could also, of course, expressly provide for the application of the Principles in conjunction with the law of the state party or some other law. Moreover, given the freedom that the parties to ICSID Convention proceedings enjoy in this area, they might even, as the comment on the Principles' Preamble suggests, make the Principles applicable, to the exclusion of any domestic rule of law.
Express choice-of-law clauses in investment contracts involved in ICSID cases have most commonly provided for the application of the law of the state party and the relevant rules of international law. Article 42-1 of the ICSID Convention similarly provides that, in the absence of agreement between the parties on applicable law,[Page146:] the tribunal shall apply the law of the state party in the dispute and such rules of international law as may be applicable.
As perhaps most clearly stated in the first annulment decision in the famous case Klöckner v. Cameroon, the reference to rules of international law in this provision is understood as providing for their application to fill gaps in the applicable national law or to correct inconsistencies between it and international law.
Rules of international law are applicable in the overwhelming majority of ICSID cases. Most of these cases nowadays are being brought to us under bilateral and multilateral investment protection treaties that call for the application by arbitrators to disputes submitted to them under these treaties of the international law rules of the treaties themselves and of general international law. In two recent cases brought to us under this type of treaty arrangement involving state contracts, the claimants have invoked certain of the UNIDROIT Principles, characterizing them in the process as embodying international law rules. In my contribution to the discussion following the presentations by Professor Böckstiegel and Professor Crawford, my imagination did not extend beyond the reference in article 38 of the ICJ Statutes to general principles of law, and I am grateful to Professor Lalive for extending my horizons to the reference in that same provision of the statute of the world court to the teachings of the most highly qualified publicists.
I think now I have to confess, and you probably suspect, that there is no ICSID award actually referring to the UNIDOIT Principles. As I have tried to explain, however, I think there is considerable scope for them to be invoked in ICSID cases, at least more frequently than at present. In this respect, I am very attracted by the remarks of Professor van Houtte with respect to the need perhaps in some quarters to give the Principles wider dissemination.
The Chamber of National and International Arbitration of Milan had a case referred to it that is reported in the 1999 edition of the Yearbook Commercial Arbitration.16 The claimant was a US company, the defendant an Italian company. The arbitration took place in Milan, Italy, and centred on the issues arising out of the termination of a contract. The UNIDROIT Principles were applied. The final award was rendered on 1 December 1996.
The facts, as narrated in the Yearbook Commercial Arbitration, were as follows. In 1983, the two companies entered into a joint venture, whereby the general manager of the US company became export director of the Italian company on the basis of a consultancy and brokerage contract made between the U.S. and Italian companies. Subsequently, in September 1993, the Italian company and the export director negotiated an exclusive agency contract, which was signed in 1994 for a three-year term, tacitly renewable save notice of non-renewal six months before the expiry date.
The agency contract contained a clause referring all disputes to the Chamber of National and International Arbitration of Milan. In 1995, the Italian company, alleging unsatisfactory sales results, terminated the contract with effect from January 1995. This led to a dispute, which was referred to a sole arbitrator empowered to decide ex æquo et bono. The arbitrator applied the UNIDROIT Principles and held that the unilateral termination of the contract was invalid, as it violated both the terms of the contract and the UNIDROIT Principles. The contract did not contain a clause specifying the applicable law. The fact that the UNIDROIT [Page147:] Principles were taken as the basis for the decision was the result of an agreement reached between the parties and the arbitrator at the time of the arbitration.
This is a beautifully written award. It is based on the following articles of the UNIDROIT Principles: 4.1 (contract interpretation), which the arbitrator applied to the unilateral act of termination, 1.3 (binding character of contract), 7.3.1 (right to terminate a contract), 7.4.3 (determination of damages), and 7.4.2 (amounts to be taken into account when compensating consequential losses). This is an example of an award based entirely on the UNIDROIT Principles, as it sets the contract in question and the related facts against the background of the Principles alone.
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1 See Y. Derains, 'The Role of the UNIDROIT Principles in International Commercial Arbitration (1): A European Perspective', hereinabove, pp. 9-19.
2 Not mentioned in art. 88 ULIS. Our emphasis.
3 Art. 77 CISG.
4 No. 6851 of 13 December 1982.
5 CISG entered into force in Italy on 1 January 1988.
6 (1990) XV Y.B. Comm. Arb. 70.
7 See 'Interpretation Clauses in International Contracts (Characterization, Definition, Entire Agreement, Headings, Language, NOM-Clauses, Non-Waiver Clauses and Severability)' [2000] IBLJ 719 at 744ff.
8 K.P. Berger, The Creeping Codification of the lex mercatoria (The Hague: Kluwer, 1999).
9 In H. Honsell, N.P. Vogt & A.K. Schnyder, eds., Kommentar zum Schweizerischen Privatrecht, Internationales Privatrecht, (Basel: Helbing & Lichtenhahn, 1996), art. 187, no. 71.
10 E. Gaillard & J. Savage, eds., Fouchard Gaillard Goldman On International Commercial Arbitration (The Hague: Kluwer, 1999) at 326, referring to the decision rendered in ICC case 1939 of 1971 (and 3327 of 1981).
11 National laws chosen in decreasing order of frequency of choice: Austrian (53), Swiss (6), German (5), Czech (4), Slovak (3), English (2), Ukranian (2), Swedish (1), Hungarian (1), Yugoslavian (1).
12 In this and the following quotations, the extracts from the contractual clauses are reproduced in their original wording. It is worth noting that contracts were very often drafted in a language that was foreign to the parties involved.
13 See also www.unilex.info
14 CISG art. 7(2): 'Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.'
15 P. Schlechtriem, chief ed.,vol. 10: Restitution - Unjust Enrichment and Negotiorum Gestio (Tübingen: Mohr Siebeck, 1984-2001).
16 (1999) XXIVa Y.B. Comm. Arb. 196.