At some point, entities engaged in international trade would have to make a contract, which would govern terms and specify details of the transaction. The contract would normally outline, in addition to other things, quantities, price, and delivery details. Additionally, a well written contract would have to specify a law that would govern contract interpretation and enforcement. Parties to the international agreement may not agree on the governing law that other party wants. A European counterpart, for example, may not be comfortable with the preference of its U.S. partner to resort to U.C.C. Art. 2. The U.S. entity, on the other hand, may not be comfortable with European laws. One possible neutral solution lies in the adoption of UNIDROIT Principles 2010 as the governing framework of the contract agreement.
The principles take favorable position with respect to arbitration. Arbitration can be a useful instrument in international trade due to The New York Convention, which is the recognition and enforcement instrument for arbitration awards that are made outside of the United States. The United States is a signatory to The New York Convention. The reasons favoring arbitration can be found in the UNIDROIT Principles preamble:
These Principles set forth general rules for international commercial contracts.
They shall be applied when the parties have agreed that their contract be governed by them.
They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like
They may be applied when the parties have not chosen any law to govern their contract
They may be used to interpret or supplement international uniform law instruments.
They may be used to interpret or supplement domestic law.
They may serve as a model for national and international legislators.
Note that there is only one “shall” and the rest of them are “may,” which gives a substantial leeway to an arbitrator to interpret and apply these principles.
Careful reader may note that UNIDROIT Principles 2010 do not provide much room for parties to get out from contract performance. See Art. 6.2.2 (Definition of Hardship). Less room to void the contract may not be favorably viewed by the U.S. parties to the contract. But, Art. 2.1.17 codifies common law parole evidence rule principles, to which U.S. parties are accustomed. Unlike some U.S. jurisdictions (e.g. New York), UNIDROIT Principles provide for pre-contractual liability. Art. 1.7. In sum, UNIDROIT Principles 2010 may provide a viable alternative, however, some of its provisions may not be favorably viewed by the U.S. parties.
Interpretation and application of UNIDROIT Principles is available at UNILEX portal, which provides case law compilations from jurisdictions all over the world.
