6.1 Lex mercatoria + Unidroit Principles

Clause 6.1

“Any questions relating to this Agreement which are not expressly or implicitly settled by the provisions contained in this Agreement shall be governed, in the following order:

  1. by the principles of law generally recognized in international trade as applicable to international [type of contract: e.g., distributorship, licence] contracts,
  2. by the relevant trade usages, and
  3. by the Unidroit Principles of International Commercial Contracts, with the exclusion of national laws.”

This clause, which is the most frequently used clause within the ICC model contracts, states that the contract shall be governed by the lex mercatoria and the Unidroit Principles and provides at the same time the following hierarchical order:

  1. Contract provisions,
  2. general principles of law applicable to the particular type of contract in question,
  3. trade usages,
  4. Unidroit Principles.

First of all, the clause expressly states that the contract is submitted to an alternative legal system, with the exclusion of national laws. This clarification may be important in order to avoid any possible overlapping with a domestic legal system.

Furthermore, the clause makes clear that the Unidroit Principles apply only to the extent that they do not contradict the contract provisions, general principles of law and trade usages. The purpose of this wording is to give arbitrators the possibility of disregarding rules contained in the Unidroit Principles which are contrary to the contractual provisions agreed by the parties and/or which may contradict the reasonable expectations of parties engaged in a given trade (such as, for instance, the rule on gross disparity: see above, § 2.2.2).

6.2 Lex mercatoria + Unidroit Principles (with exclusions)

Clause 6.2

This contract is governed by general principles of law generally recognized in international trade (lex mercatoria) together with the Unidroit Principles of International Commercial Contracts [2010] (except for Articles 2.20, 3.2.7 and 6.2.1.) with the exclusion of national laws.

This clause places the general principles and the Unidroit Principles at the same level, but at the same time expressly excludes the application of a number of provisions contained in the Principles which the parties consider not to be appropriate. [Page31:]

Of course, the choice of the Articles which are to be excluded is left to the discretion of the negotiators: one could for instance, maintain the Article on gross disparity and cancel only the words "or of its improvidence, ignorance, inexperience or lack of bargaining skill". Also with respect to the provisions on hardship, it would be sufficient to delete Article 6.2.3(4)(b) which gives the court the right to "adapt the contract with a view to restoring its equilibrium" and to leave only the possibility of contract termination. One could also incorporate by reference the ICC Hardship Clause 2003, which does not provide, in case of failure of the renegotiation, for the adaptation of the contract, but only for its termination.

6.3 Unidroit Principles (with exclusions) + Lex mercatoria

Clause 6.3

“Any questions relating to this Agreement which are not expressly or implicitly settled by the provisions contained in this Agreement shall be governed, in the following order:

  1. by the Unidroit Principles of International Commercial Contracts [2010] (except for Articles 2.20, 3.2.7 and 6.2.1.),
  2. by the principles of law generally recognized in international trade as applicable to international [type of contract: e.g., distributorship, licence] contracts,
  3. by the relevant trade usages, and with the exclusion of national laws.”

This clause expressly excludes a number of provisions of the Principles, as in clause 6.2 hereabove. However, while clause 6.2 puts the the lex mercatoria and the Unidroit principles at the same level, this clause puts the Unidroit Principles in the first place after the contract clauses and before the lex mercatoria and trade usages.

This clause has the advantage over clause 6.2 of clearly providing a hierarchy of the various sources of law.

6.4 Unidroit Principles (without exclusions) + lex mercatoria

Clause 6.4

This contract shall be governed by the Unidroit Principles of International Commercial Contracts (2010) and, with respect to issues not covered by such Principles, by generally accepted principles of international commercial law.

This clause, (clause 1.3(a) of the Unidroit Model Clauses), puts the Principles in the first place and invokes the general principles (lex mercatoria) only for filling the gaps. Since it does not mention the contractual provisions, the issue whether the contract clauses prevail over the Unidroit Principles40is not expressly answered.

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6.5 Unidroit Principles as the applicable law

Clause 6.5

This contract shall be governed by the Unidroit Principles of International Commercial Contracts (2010)

This clause (clause 1.1(a) of the Unidroit Model Clauses) consists in choosing the Unidroit Principles as the rules of law governing the contract without reference to any other legal sources.

The clause does not expressly answer the question whether the principles should apply as the applicable law (instead of the otherwise applicable domestic law), or if they should apply together with the applicable national law; and, in the second case, if they should be considered as rules of law or as contractual provisions.

6.6 Unidroit Principles + domestic law

Clause 6.6

This contract shall be governed by the Unidroit Principles of International Commercial Contracts (2010) and, with respect to issues not covered by such Principles, by the law of [State X]

This clause (clause 1.2(a) of the Unidroit Model Clauses) consists in choosing the Unidroit Principles as the governing law of the contract together with a national law chosen by the parties, which is to rule on all issues not dealt with in the Unidroit Principles.

This means that all issues regarding the specific contract in question will be governed by the domestic law indicated by the parties and that mandatory rules of such law will prevail over the contractual stipulations of the parties.

6.7 Unidroit Principles as a means for interpreting and supplementing the applicable law

Clause 6.7

This contract shall be governed by the law of [State X] interpreted and supplemented by the Unidroit Principles of International Commercial Contracts (2010).

The purpose of this clause is much more limited than the clauses examined above: it simply intends to ensure that interpretation and supplementation of the applicable domestic law will be in accordance with the internationally accepted principles and rules set forth in the Unidroit Principles.

Such a clause can be useful when there is no way to avoid the application of the law of one of the parties, by choosing a more neutral solution, and the other party would like to make sure that, when applying such law, internationally accepted principles will be given due consideration.

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In fact, since the Principles are incorporated by contractual agreement between the parties, it may be disputed whether they can prevail over contractual provisions which contradict the Principles