Rethinking the Commercial Law Treaty

In international commercial transactions, it is notalways clear which state's law will apply to govern aparticular contract. Historically, states have sought toaddress this problem by means of two types of treaties.The first aims to solve the problem by bringing about thesubstantive unification of commercial law across multiplejurisdictions;once the law is everywhere the same, then itno longer matters which state's law applies to govern thecontract. The second aims to solve the problem in part byempowering the transacting parties to choose the law thatwill govern their contract; once these parties know thattheir choice of law will be respected by national courts,then the uncertainty as to the governing law goes away.The conventional wisdom has long been that substantiveunification represents the better approach to solving theproblem of legal uncertainty. This Article argues that, infact, a choice-of-law approach may be superior.

It does so,first, by identifying weaknesses in two rationalesfrequently advanced in favor of substantive commerciallaw treaties-that they are uniquely able to reducetransaction costs and that they offer law uniquely suited tothe needs of international commercial transactions. Itthen explains how a choice-of-law treaty could lead to thedevelopment of better commercial law that moreaccurately captures the preferences of parties engaged ininternational commerce by facilitating the development ofan international market for commercial law.