Apr 01, 2011
Partner Emmanuel Gaillard (Paris-International Arbitration) authored an article entitled "General Principles of Law in International Commercial Arbitration—Challenging the Myths," published in the Vol. 5, No. 2 (2011) issue of World Arbitration & Mediation Review (WAMR).
The debate over the question of whether arbitrators can resort to general principles of law rather than the legal system of a given State in order to resolve issues related to the merits of a dispute has been obfuscated by questions of vocabulary. The very meaning of the word ‘general’ is ambiguous: are the principles ‘general’ because they operate at a level of generality such that they are limited to broad precepts such as good faith or pacta sunt servanda, or are they ‘general’ because they are accepted in a large number of legal systems around the world? The confusion is all the more persistent that certain principles are general in both meanings, while others are ‘general’ only in the latter sense. Good faith is a broad precept and is recognized in virtually all legal systems. A party’s duty to mitigate its losses is a very specific rule pertaining to the assessment of damages; it is nonetheless ‘general’ in that it is accepted in the vast majority of legal systems. Only the second meaning comes into play when one considers the arbitrators’ discretion to resort to general principles of law.
Another source of confusion stems from the fact that the early proponents of the application of ‘general principles’ in arbitration chose to treat this question in the context of the existence of a ‘lex mercatoria.’ It would be misleading, however, to equate ‘general principles’ with ‘lex mercatoria.’ The doctrine of ‘lex mercatoria’ itself is intrinsically ambiguous in that it sought to identify rules which are perceived as ideally suited for international commercial transactions—something that national laws were assumed to be incapable of achieving but that the community of merchants could generate spontaneously—while, at the same time, borrowing from solutions found in national laws which it would then apply under its own umbrella. These two aspects need to be carefully distinguished. Indeed, one does not have to adhere to the theme of the so-called inadequacy of national laws, which aimed at identifying rules specific to international trade and capable of meeting the ‘needs of the community of merchants,’ to accept that an arbitrator, faced with a choice of law issue, may choose to apply either a given national law or rules selected because they are accepted in a large number of national legal systems. Accepting that general principles common to a majority of national legal systems can be chosen by arbitrators as the applicable law assumes nothing more than the aptitude of States, as opposed to a hypothetical ‘community of merchants,’ to craft solutions that meet the needs of international trade. Unlike ‘lex mercatoria,’ the terms ‘general principles of law’ and ‘transnational rules,’ which may be referred to interchangeably, both acknowledge that the rules falling within these categories are rooted in national legal systems and identified through a comparative law analysis.
General principles are sometimes viewed as rules generated spontaneously by a community of merchants, whereas, in reality, they are rooted in national legal systems. This may explain the confusion surrounding the source of transnational rules or general principles, and the strong resistance met in certain quarters to these concepts in international commercial arbitration—still inextricably associated with the lex mercatoria doctrine—and the fact that such resistance remains, today, extremely vivid. The challenges to transnational rules or to the general principles of law in international commercial arbitration are threefold and bring to light three different myths: first, arbitrators who have embraced a transnational approach will apply general principles in virtually all situations; second, general principles are inherently vague and unpredictable; finally, the arbitrators’ recourse to general principles in fact reveals a hidden agenda, that of signaling a comparative law expertise to monopolize the market of arbitration services. Each of these three myths will be addressed in turn.