Islands of Transnational Governance
Islands of Transnational Governance
The two papers in Ch. 5 examine how lawyers and law professors, operating in private arenas, successfully revived a pre-modern legal system, the Lex Mercatoria – the international body of trade law derived from merchant practice. Stone Sweet’s paper traces the development of a transnational legal system, comprised of a national contract law and a network of arbitration houses that compete to supply third-party dispute resolution to the international commercial world. The paper is divided into two parts. The first discusses, in a theoretical manner, obstacles to the emergence of a stable network of traders engaged in relatively long-range, impersonal exchange, focusing on three generic problems of human community: cooperation and commitment, transaction costs, and institutional choice and governance. The second part examines three quite different regimes that have governed transnational commercial activity: from the mediaeval law merchant, to the Westphalian state system and its institutional failings (including discussion of conflict of laws practices), and – the principal focus of the chapter – the new Lex Mercatoria and its institutionalization.
Keywords: arbitration, commitment, conflict of laws, cooperation, dispute resolution, governance, institutional choice, institutionalization, international commerce, international trade law, Lex Mercatoria, mediaeval law, merchant practice, national contract law, trade law, transaction costs, transnational commerce, transnational governance, transnational legal system, Westphalian state system
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