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The mere fact that the 'societas mercatorum' has an interest in achieving commercial profits through cross border trade, does not suffice to justify the law-making power of the international community of merchants. The assumption of a transnational legal system requires more than a simple pragmatic policy of reasonable self-interest 508 . It would be wrong to assume that there are transactions which have the transaction itself as their sole end, rather than, for example, the accomplishment of a useful step in a chain from producer to consumer. 509

Also, transnational law has to be distinguished from a mere social structure 106 organized through conventional rules 510 . In order to be recognized as the basis for a true legal system, the collective expectations of the members of that community with respect to compliance with certain rules of behavior have to be intensified in a way that these rules and principles are regarded as binding and mandatory upon each member 511 . This requires a basic consensus of common values and convictions and the readiness of every member of that community to comply with the relevant rules and principles even at the risk of losing or doing damage to individual interests 512 . From an individual perspective, the 'validity' of a legal system means nothing more than 'being motivated through the existence of legal principles and rules' 513 . With this mandatory element, the law carries an 'unfriendly moment' 514 in the regulation of social life.

This is also true in international trade where the businessmen's consciousness of the validity of trade usages, customs, contract practices and similar rules is guaranteed through 'black lists', withdrawal of membership rights, forfeiture of bonds and similar dangers to the commercial reputation 515 . Above all, it is the inherent danger of losing commercial good will and standing within the community of merchants - and with it the 'membership' of this closely knit community - which provides the necessary incentive to adhere to the self-made law of international business 516 . The necessary coordination of the wills of the individual market participants is brought about in the context of 'conflict avoidance' during the drafting of the contracts themselves 517 . In participating in the contractual consensus ('consensus ad idem'), each party expresses the confidence that its counterpart will comply with the terms and conditions of the contract 518 . Thus, the contract becomes the most important means to implement the will of the parties in practice because, in the absence of any need to ensure consumer protection, international trade and commerce constitutes an ideal climate for the free development of contractual structures 519 . The notion of 'private governance' is thus extended at the level of society, in our context within the society of merchants who take part in the global exchange of goods, services and money. The contract becomes the means of 'auto-regulation' within the de-territorialized and, by virtue of modern IT-technology, de-materialized global marketplace.

The realization of this eminent force of the contractual consensus goes back to Grotius and Pufendorf, who realized that the keeping of one's word is in harmony with the social nature of men and the principle of good faith 520 . Through these authors, this realization then penetrated into classical contract law doctrine 521 . The ancient lex mercatoria of the middle-ages was thus built on the faith in a given word, thereby allowing the actionability of pacta nuda 'in curia mercatorum'522 . At the fairs, seaports and market towns of the Middle Ages, "purchase and sale of merchandise was continually made" and "the law merchant or law of the market was always followed there continuously" 523 .

Today, this ancient contract practice forms the basis of the 'promise principle' as the underlying idea of modern contract law 524 . The trust of one side in the promise of the other ('my word is my bond') provides the essential basis for modern international trade transactions 525 : 'The morality of business turns the promise into a categorical imperative'526 . The legal obligation that requires performance from every party to a contract is nothing other than the moral duty to respect one's word 527 . This notion of the contractual consensus, like the classical contract doctrine 528 , is characterized by a lack of concern with distributive questions. However, the new lex mercatoria only applies outside the consumer context. Also, international merchants bear an increased responsibility for the conduct of their business affairs, resulting in a transnational principle which presumes their professional competence 529 . It is thus in the field of transnational business activities, where the force of the contractual consensus can flourish and develop its law-making quality, unhampered by consumer protection laws and notions of distributive justice that go beyond the general principle of "good faith and fair dealing in international trade".

A typical example of this process, albeit in a closely knit commercial community, is the diamond trade in Antwerp, Belgium and other places of the world 530 . Each day, diamonds worth thousands or even millions of US dollars are traded there. The contracts between the diamond traders, frequently concluded through professional intermediaries, are based solely on the consensus of the parties, the mutual 108 trust in the other party's performance, a handshake and a special trading formula. Breach of these informal, unwritten contracts, however, will result in worldwide suspension from trading which will be publicly announced. This provides a strong incentive for the parties to meet their contractual obligations. Similar examples of informal, trust-based contract practices can be found in the commodity trade. When written contracts are required in international, arm's length transactions, the mutual trust of the parties is made possible and enhanced by the multitude of standard form contracts and uniform contractual models that are circulated in the worldwide business community.

This understanding of the transnational legal process requires the redefining of the traditional theory of legal sources. In modern business relationships, it is the contract which assumes the genuine function of a source of law:

"It is the contract which now constitutes a legal change. Traditional legal concepts do not include the contract among the sources of law. But if we continue to conceive of the contract as a mere application of the law, and not as a source of law, we will preclude the possibility of understanding how the law of our times is changing. The contract is taking the place of the law, even in the organization of society. Some decades ago Millibad wrote that, more than ever, people considered the state as source of all provisions and even as a source of their happiness. Today we must say that this notion is disappearing. Society now looks after itself and tends towards self-organization... The inadequacy of the law to make changes derives from two characteristics of contemporary economy. The first is the meta-national nature of the economy which is antithetical to the national character of the legal systems. The second is that the economy is in continuous change which demands flexible instruments of adaptation from the law to change, in antithesis to the rigidity of the laws" 531 .

This process implies that the contractual consensus which assumes a law-making force of its own, is shaped, influenced and validated by external criteria other than the parties' self-interest in making a profitable deal. This process of external validation may be effected by the parties' adhesion to certain general or sector-specific market standards, by the reconciliation of the contract with unwritten cultural and/or ethical standards existing in the parties' home jurisdictions, in third countries (e.g. the place of performance) or on the regional and global level, or by the transformation of written standards contained in soft law instruments such as Codes of Conduct of the relevant industry in which the parties' subjective contractual consent receives additional force if they base their contract not (only) on terms wish they negotiate on an ad hoc basis, but on standard forms prepared by industry organizations or formulating agencies operating at the regional or global level, such as the 'United Nations Economic Commission for Europe (ECE)-General Conditions for the Supply of Plant and Machinery For Export (LW 188)' or the International Federation of Consulting Engineers (FIDIC) Conditions for the model contracts for distributorship, agency and international sales issued by the ICC. 109

If the confidence of one side in the compliance with the contractual terms by the other is disappointed, the arbitrators, whose jurisdiction is based on the consensus of the parties, assume the function of a control instance. The parties' confidence is no longer focused on the counter-party's will to comply with the contractual terms but on the competence of the arbitral tribunal as a privately constituted and 'genuine' 535 court for international trade. The transfer of the case from the plane of the individual bargain to the arbitral tribunal also leads to a change of perspective. The neutrality of the arbitrators requires them to take an objective view of the case, applying objective commercial standards such as 'fair dealing', 'reasonableness' and 'trade usages', thereby enriching the abstract contractual consensus ('pacta sunt servanda') with commercial life 536 . The private character of the arbitral process may therefore not be used as an argument to deny the control competence of international arbitrators 537 . Rather, the contractual character of their competence guarantees the homogenous character of the transnational legal process in that not only the participation in it but also the compliance control is based on the same legal notion, i.e. the contractual agreement as such. It is not surprising, therefore, that both general contract law and arbitration, are characterized by the same principle: 'in favorem validitatis' 538 .

Again, the consensus-based dispute settlement system has important repercussions on the development of transnational law. The drafting practice of international trade, geared towards the ideal of conflict avoidance, reacts to the case law of international arbitral tribunals 539 and thereby consolidates and stabilizes the general structure of the new lex mercatoria which, in turn, is shaped and influenced by international drafting practice. This phenomenon of 'consensual regulation of international commerce'540 is well known from the field of investment contracts:

'It belongs to the regrettable weaknesses of public international law that its norms - frequently still in the status nascendi- are difficult to put in a concrete form. Every arbitral award, every other solution of such a conflict - and every drafting technique adopted to solve such problems - contribute to the finding 110 of the law. One should not be impatient. The 'actors'... generally know about the consequences of their conduct. Irrational conduct from one or the other side will always have catastrophic consequences for the party... there is a major chance for the consolidation of public international law of expropriation because the parties usually behave in a rational manner'

541 . It is at this juncture that the circle of consensual law-making is closed. Dispute settlement through arbitration or other dispute resolution techniques forms the vital link between spontaneous and reactive drafting techniques and the formation and evolution of the new lex mercatoria. Transnational law may therefore be traced back to the consensus of the participants of international trade 542 . This consensus has a legal force of its own without the need of a prior acknowledgment by domestic legislatures.

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161

The 1994 edition of the UNIDROIT Principles consisted of 120 articles which were divided into seven chapters. The 2004 edition of the Principles has not changed this basic structure but has lead to the addition of three new chapters and new subsections in Chapters 2 and 5. The 2004 edition consists of 185 articles. The first chapter ('general provisions') of the UNIDROIT Principles contains basic legal notions and principles that deal with such fundamental notions as freedom of contract, freedom of form and proof, pacta sunt servanda, good faith and fair dealing and the primacy of usages and practices in international trade. The other chapters contain provisions relating to the conclusion of contracts, the effect of contracts, the construction of contractual stipulations, the content of contracts, performance and the legal consequences of non-performance. The structure of the Principles follows the American Restatement of the Law of Contracts 146  in that a basic rule or a general legal principle formulated as black-letter-law is followed by a short commentary-like explanation and explanatory examples. However, in contrast to the Restatement (2nd.) of the Law of Contracts, there are no 'notes' specifying the comparative references (statutory provisions of domestic laws, court judgments, arbitral awards, conventions, doctrinal writings, etc.) on which the wording of the relevant rule or principle is based. The drafters intentionally left out such references to national legal systems in order to emphasize the international character of the UNIDROIT Principles, 162 which are detached from any domestic legal system 147 . Also, the omission of comparative references was intended to avoid highlighting the fact that in the preparation of the Principles, some legal systems played a more significant role than others 148 . The first version of the American Restatement also did not contain any references to the practice of the common law in the various American states 149 . However, in order to enhance its acceptance, such notes were included in the second edition of the Restatement. It was for this very reason that the 'Principles of European Contract Law ' drafted by the Lando Commission contain comprehensive comparative references 150 . A collection of comprehensive comparative references may attach increased legitimacy and authority to a list of general principles and rules of international commercial law and may serve as a starting point for their differentiation and diversification 151 . This issue will be looked at in more detail when the 'creeping codification' through the drafting of lists of general principles and rules of the new lex mercatoria is discussed 152 .

A particular characteristic of many of the provisions contained in the Principles is the attempt to uphold the contract as much as possible 153 . The assertion of the Principle 'in favorem validitatis' reflects a general concern of economic practice perceived in the general international law of contracts ('favor contractus')154 and also in the area of international commercial arbitration 155 . Whether formulated as a comprehensive regulatory framework of the parties or drafted by reference to general conditions of trade, the contract detaches the legal relationship between the parties from the 'otherwise' applicable domestic law. Due to its self-sufficient character the contract becomes the 'substitute law' for the parties 156 . Influenced by Anglo-American drafting techniques, the comprehensive contractual arrangements 'autonomize' the parties' legal relationship from the direct application of substantive law 157 . In both long term business relationships and arms' length bargains, the parties therefore have a vital interest in upholding their contract. The validity of the contract becomes all the more important since aspects of 163 consumer protection do not play any role in this context 158 . From the perspective of legal theory the principle of 'favor contractus' correlates with the general significance of the contractual consensus of the parties as the driving force behind the creation and evolution of transnational commercial law 159 .

A survey of those provisions which reflect the principle 'favor contractus' may give an indication of the significance which it has played in the drafting of the Principles. These provisions include acceptance of a contractual offer by performing an act without notice to the offeror (Art. 2.6) 160 , the modification of contractual terms by writings in confirmation (Art. 2.12), contracts with terms deliberately left open (Art. 2.14), the battle of forms (Art. 2.22), the validity of a mere contractual agreement without consideration (Art. 3.2), the validity of a contractual relationship in spite of initial impossibility (Art. 3.3), the rule of interpretation 'favor negotii' (Art. 4.5), the rule to supply an omitted contractual term (Art. 4.8) and finally the right of the non-performing party to cure (Art. 7.1.4). Also, the principles on re-negotiation in case of hardship (Artt. 6.2.1 et seq.161 ) and of excuse of non-performance in case of force majeure (Art. 7.1.7) 162 are inspired by the principle of 'favor contractus' 163 . The last two principles are characterized by their inherent vagueness and lack of clarity. They are workable in practice, only when they are embedded in a comprehensive legal system which is based on such fundamental legal notions as 'pacta sunt servanda' 164 .

The differentiation between 'general principles' ('principes générales'; 'allgemeine Rechtsgrundsätze') and 'rules' ('règles', 'Regeln') 165 or between 'general principles', 'rules' and 'standards' 166 is an integral part of legal theory. According to the doctrine of legal sources, all these terms may be grouped under the heading of 'norm' 167 .This does not mean, however, that the UNIDROIT Principles obtain 164 the quality of a norm. Like the American Restatement168 they are merely drafted like norms so that the principles relevant to the drafting of norms of domestic law may always be applied here by analogy.

Whereas with respect to a rule, there are definite guidelines directing what conditions must be met before the rule can be applied and there is a determined central area of application surrounded by a fringe of vagueness, i.e. a more or less wide, less distinct peripheral scope of possible applications 169 , general principles are much less precise even at their core, the guidelines for their application are unclear and formulated in a general and vague manner 170 . General principles do not necessarily have pre-set conditions for application. Instead, they merely constitute 'rules of optimal application' which means that they may be complied with in varying degrees. The required degree of compliance depends not only on the actual but also on the legal options open to the target group. Application of general principles therefore requires a substantial process of weighing up contradictory principles and rules 171 . General principles are therefore always subject to a continual discussion about their effectiveness and scope 172 .

General principles of law thus express a general truth which serves as a basic guideline for the application of the law, whereas rules are the practical formulation of the principle and, for reasons of expediency, may vary and depart, to greater or lesser extent, from the principle from which they spring. This teleological aspect reduces the level of foreseeability with respect to cases in which general principles are applied as well as their practical workability. However, general principles of law also have the important task of explaining the function of individual legal institutions in the context of a legal system. They assist the legal institutions in that they appear not only as a (simple) group of standards and rules but as a group with meaning and therefore as a 'system' 173 . Reference to general principles of law therefore allows for a certain degree of self-control of the decision-maker in that the solution found for an individual legal problem has to be integrated into the network of coherent general principles enunciated so far174 , at 409. It is for this reason that in the judgments of domestic courts, general principles of law today take the place of standard references to vague blanket clauses of substantive law, thereby investing the courts with a kind of 'quasi-law-making power', enabling 165 them to find more modern, more contemporary solutions for the legal problems of today 175 .

The UNIDROIT Principles make use of this dialectic between a rule and a general principle of law. They keep to very definite rules with a clearly defined scope of application. In addition to the provisions relating to the conclusion of contracts (Artt. 2.1 et seq.), the following articles should be mentioned in this context: Articles relating to the mode of payment (Artt. 6.1.7 et seq.), to the currency of payment (Art. 6.1.9.9), to the costs of performance (Art. 6.1.11), to the right to withhold performance (Art. 7.1.3), to a party's right to require payment (Art. 7.2.1), to a party's right to claim damages for non-performance (Art. 7.4.1), to the calculation of damages (Art. 7.4.6) and to the rules governing the calculation of interest claims (Art. 7.4.9), the latter provision being of utmost economic relevance, given the enormous amounts that are frequently in dispute in international commercial cases 176 . However, the UNIDROIT Principles are not restricted to the reproduction of the technicalities of conclusion of contracts by offer and acceptance177 and the performance of contracts and possible secondary claims. Instead, a number of general principles in the form of general clauses take precedence in the first chapter over the specific provisions in chapters 2 to 7 and are then worked through by the UNIDROIT Principles as a central theme, making assessments and comparisons between rules and general principles possible. This is in accordance with the general experience that in the field of law of contracts, the application of the law always oscillates between the strict principle 'pacta sunt servanda' and general fairness considerations and is therefore largely dependent on the consideration of a number of flexible principles 178 .

In addition, general principles perform an important gap-filling function 179 . Art. 1.6 (2) of the Principles takes up this idea and states that issues within the scope of the Principles but not expressly settled by them 'are as far as possible to be settled in accordance with their underlying general principles'. These general principles are either expressly contained in the individual articles of the Principles ('good faith', 'reasonableness' etc.) or must be derived from specific provisions by way of autonomous interpretation, detached from any domestic laws 180 . This concept of an autonomous uniform interpretation without reverting to any domestic law, constitutes an important leading principle in international uniform law. It formed the basis of Art. 17 of the Uniform Sales Law and Art. 7 Sec. 2 of 166 the Vienna Sales Convention 181 both of which were drafted on the basis of corresponding provisions of domestic legal systems 182 . UNIDROIT's official commentary to the Principles accordingly makes it clear that in order to promote uniformity in the application of the principles, gaps should be filled 'whenever possible, within the system of the principles itself before resorting to domestic laws' 183 . Through this statement, the Working Group directly recognized the 'openness' of the 'system' 184 and the important function of the general principles contained therein.

Legal principles have to be weighed against legal rules when such provisions in the UNIDROIT Principles are applied which, though having the characteristics of rules, allow wide scope for teleological considerations by using broad legal language which requires extensive interpretation and elaboration. The following are examples of such provisions: Duty to pay damages in case of breaking off of negotiations in bad faith (Art. 2.15 (2)), supplying an omitted contract term (Art. 4.8), possible sources of implied contractual obligations (Art. 5.2), the duty to cooperate with the other party in the performance of that party's obligation (Art. 5.3), which, if it can reasonably be expected under the circumstances, may even amount to a duty of active cooperation notwithstanding contractual provisions to the contrary 185 and the duty to re-negotiate in the event of hardship (Art. 6.2.3) 186 .

The general principles which serve as important reference points for the assessment process described above are: The principle of party autonomy as the Magna Charta of international contract law (Art. 1.1), the principle of 'pacta sunt servanda' (Art. 1.3), the notion of 'good faith and fair dealing in international trade' which the parties have to observe during the negotiations of the contract and for the whole duration of the contract and which may not be excluded or limited by them according to Art. 1.7 of the UNIDROIT Principles 187 .

The notion of good faith in particular belongs to the common core of the legal systems of the civil law countries 188 and is also acknowledged by the American Uniform Commercial Code and the Restatement (2nd.) of Contracts 189 and other 167 common law jurisdictions such as Australia 190 . The German Federal Supreme Court has stated 'that the notion of good faith is a supra-national legal principle that is inherent in all legal systems' 191 .

English courts, however, have always rejected the idea of a general principle of good faith ever since Lord Mansfield described the notion of good faith as 'the governing principle...applicable to all contracts and dealings' in 1766 192 . In their view, such a general principle of law would run counter to the parties' respective positions during contract negotiations and over the duration of the contract and would also be impracticable 193 . Thus, the English House of Lords has ruled that an express agreement that parties must negotiate in good faith is unenforceable194 . From the perspective of a functional comparative analysis 195 , however, the assumption of a general principle of good faith and its inclusion in the UNIDROIT Principles is justified 196 and has also found its way into Art. 7 of the Vienna Sales Convention. The reason for this is that English courts have applied the principle of good faith as an 'implied term of the contract' in individual cases 197 , thereby indirectly acknowledging the existence of a principle of 'good faith in the performance of the contract' 198 *. Also, the principle of good faith lies at the roots of such important legal institutions of the common law systems as 'promissory estoppel' or 'estoppel in pais' 199 . Finally, it seems that under the influence 168 of European law, especially with respect to the EU- Directive on Unfair Terms in Consumer Contracts, implemented in the Unfair Terms in Consumer Contracts Regulations 1994, and continental legal traditions, the long-standing hostility against the principle of good faith will soon be overcome by English lawyers and courts 200 .

Thus, it may be said that the principle of good faith is a perfect example for the basic drafting approach of the UNIDROIT Working Group, which has always been rather pragmatic than purely dogmatic 201 .

In any event, the influence of the Principles in this respect has already been felt. In an unpublished award of 1996, an arbitral tribunal made reference to the Principles in order to demonstrate to the parties that the enforceability of the parties' agreement to negotiate in good faith under the applicable New York law was in line with international contract practice 202 .

Within the UNIDROIT Principles the notion of good faith is qualified in that it is mentioned in Art. 1.7 (1) simultaneously with the idea of 'fair dealing in international trade' 203 . This was done in order to make it clear from the outset that the conduct of the parties is not to be measured according to the subjective standards of their bilateral (or multilateral 204 ) contractual relationship, nor according to the standards of their respective domestic legal systems but according to a far-reaching, objective standard to be found among businessmen in international trade, amounting to a 'fairness in the market place' 205 . This objective understanding of the notion of good faith in international business is not only in line with the approach taken in Sec. 2 - 103 (1) (b) UCC 206 but is also reflected in English legal practice where the principle of good faith is always seen in the 169 context of the standards of honesty, fairness and reasonableness that prevail in the relevant legal community 207 . In any event, the standard reflected in Art. 1.7 of the UNIDROIT Principles has to be understood in a transnational sense. It is detached from the particularities of domestic legal systems and has to be seen in the socio-economic environment in which multinational enterprises usually operate 208 . This confirms the general observation that it is impossible to compile a common stock of concrete rules, principles and applications that are related to the principle of good faith. Instead, this broad and vague notion always has to be interpreted and applied in a context-oriented manner 209 .

In spite of its general and vague character, Art. 1.7 of the UNIDROIT Principles may rightly be characterized as the Magna Charta of international commercial law. The principle of good faith and fair dealing performs a central function in the interpretation of the Principles and in transnational commercial law in general 210 . By stating in general terms that each party must act in accordance with this standard, the article makes it clear that even in the absence of special provisions in the Principles the parties' behavior throughout the life of the contract, including the negotiation process, must meet certain requirements which are generally accepted within the international business community 211 .

The Magna Charta of international trade law does not stand alone within the system of the UNIDROIT Principles. It is supplemented by the parties' commitment to trade usages to which they have agreed or 212 which are widely known to and regularly observed in international trade by parties in the particular trade concerned and to practices which they have established between themselves (Art. 1.8) 213 . 170 The general terminology used in this article was adopted from Art. 9 of the Vienna Sales Convention 214 and Art. 9 Sec. 2 of the Uniform Sales Law 215 . The basic difference between the approach chosen in the Principles and in the Uniform Sales Law is that the standard of reasonableness which leads to the exclusion of the application of trade usages has been changed. The heavily criticized 216 subjective test of the Sales Law ('...usages which reasonable persons in the same situation as the parties' usually consider to be applicable to their contract...') is replaced by an objective test of reasonableness ('...except where the application of such a usage would be unreasonable').

This principle of 'reasonableness' plays a dominant and recurrent role in almost all of the provisions of the UNIDROIT Principles even though, contrary to the 'Principles for European Contract Law' of the Lando-Commission 217 , the UNIDROIT Principles do not contain a blanket clause which defines the notion of reasonableness. Under the Uniform Sales Law 218 and the Vienna Sales Convention, the 'reasonableness-test' ('reasonable person'; 'reasonable time'; the juxtaposition of 'reasonable' and 'unreasonable') has been used as a general criterion for the evaluation of the parties' conduct in those cases where there is no specific provision to be applied to their legal relationship 219 . The new Dutch Civil Code also contains specific provisions on the standard of reasonableness which it links to the principle of good faith ('redelijkheid en billigheid', Artt. 6:1, 6:248, 6:285 NWB) 220 . The notion of 'reasonableness' thus provides the classical standard which attaches an objective quality to the principle of good faith 221 . The standard thereby performs an important prohibitive function which, under German law, is effected by the prohibition of the improper exercise of legal rights under the blanket clause of good faith contained in Sec. 242 of the German Civil Code 222 .

Inclusion of this standard in the general section of the UNIDROIT Principles reflects the particular character of international commercial law. It is composed not only of clearly defined legal duties but also and to a large extent of general standards and duties of conduct ('obligations de comportement') 223 . They allow for the adaptation of the law to the changing circumstances of international trade 171 and commerce. Under the standard of 'reasonableness', it is irrelevant whether or not a party has acted upon what it honestly believed to be reasonable rather, it is decisive that one has put forth his best efforts, exercised due diligence in performing his contractual obligations, upheld the common contractual goals, avoided abuse of rights required under the contract and facilitated the other party's performance 224 . The flexibility and 'souplesse' of the standard of reasonableness also reflects its major virtue: It allows arbitrators and judges to focus on the search for a fair and 'equitable' solution of international commercial disputes 225 . At the same time, the standard provides a further 226 indication for the 'openness' of any legal system in general and of the lex mercatoria in particular, proving the quality of transnational commercial law as a 'law in action'. The standard of reasonableness has its origin in a sociological understanding of the contract 227 which is also the basis for the idea of an institutional development of the law through the international community of merchants 228 . This view is confirmed by the fact that reasonable behavior usually means nothing more than keeping to one's word in all circumstances or at least to one's word in the manner (commonly) intended by the parties 229 . The idea of reasonable conduct is therefore inextricably linked to the principle of 'pacta sunt servanda' and to the notion of a general transnational liability for breach of confidence as a basic pillar of the lex mercatoria 230 .

In the context of the UNIDROIT Principles, the reasonableness test is of particular relevance for all those provisions which require a flexible interpretation and application in individual cases. They include those relating to the application of usages and practices (Art. 1.8 (2)), to the time of acceptance in case no time has been fixed by the offeror (Art. 2.7), to the interpretation of the contract in cases where no common intention of the parties can be determined (Art. 4.1 (2)), to the determination of the quality of performance which is neither fixed by, nor determinable from, the contract (Art. 5.6), to the determination of the contract price where the contract does not fix or make provisions for determining the price (Art. 5.7 231 ), to the determination of the time of performance absent an agreement by the parties (Art. 6.1.1 (c)) and in the context of those articles dealing with 'hardship' (Art. 6.2.2) and 'force majeure' (Art. 7.17). In the context of these provisions, the standard of reasonableness frequently takes the place of party agreements thereby reflecting the drafters attitude of the existence of a general standard 172 of conduct in international trade. However, the abstract and general provisions contained in the UNIDROIT Principles do not themselves provide this standard. Therefore, the construction of international contracts and the determination of the conduct of the parties depends upon a close interaction between the criterion of good faith (Art. 1.7) and the objective test of fair dealing in international trade and reasonableness on one hand and the usages and practices of international trade (Art. 1.8) on the other. A contract as well as a unilateral statement or conduct of a party shall be interpreted under the UNIDROIT Principles according to the intention of the party or parties and, where no such intention can be established, according to the meaning that a reasonable person of the same kind as the parties or party would give to it under the circumstances (Artt. 4.1 and 4.2). Art. 4.3 of the Principles states that in applying the standard, regard shall be had to all the circumstances, including preliminary negotiations between the parties, practices which the parties have established between themselves, the conduct of the parties subsequent to the conclusion of the contract, the nature and purpose of the contract and, most important, 'the meaning commonly given to terms and expressions in the trade concerned'. With this latter provision the UNIDROIT Principles refer to Art. 9 Sec. 3 of the Uniform Sales Law 232 . The UNIDROIT Principles refer the judge or arbitrator who has to interpret the contractual stipulations to the meaning of typical trade clauses as reflected in the INCOTERMS issued by the ICC 233 . The Principles are therefore even more detailed than the Vienna Sales Convention which contains a reasonableness test in Art. 8 Sec. 2 but has not adopted a provision such as Art. 9 Sec. 3 of the Uniform Sales Law which refers the judge or arbitrator to the meaning of contractual stipulations commonly given to terms and expressions in the trade concerned 234 .

Further examples from commercial reality may serve to illustrate the functioning of this principle.

Schlechtriem provides the example of internet communication not envisaged by the drafters of the Principles. In this case, the question may arise as to the time within which the recipient of an internet sales confirmation has to object. Does it run only from the time the internet message is reproduced in tangible form or from the moment of receipt in the addressee's computer? In this case, good faith and fair dealing require that the 'undue-delay-requirement' of Art. 2.12 has to be interpreted so as to give the recipient a reasonable opportunity to take notice of the recorded message regardless of whether and when it is printed 235 .

It is also said that from the perspective of international business practice, Art. 3.10 of the Principles, dealing with a party's right to avoid the contract or individual terms of it in case of excessive advantages for one party, would allow a seller who offered products at a low price because it had temporary cash-flow problems to 173 ask the court at a later date to increase the contractually agreed price on the grounds that when the contract was made, this party was under 'economic distress' and had an 'urgent need' for cash (Art. 3.10 (1) (a))236 . This view would indeed go against free market principles and the fundamental rule of pacta sunt servanda in that it overrules the natural distribution of bargaining powers within each contractual equilibrium 237 . However, Art. 3.10 is not intended to provide the parties with a means to escape their contractual commitments. Even a considerable disparity in the value of the price of performance and counter-performance is not sufficient to permit avoidance of the contract 238 . The application of this provision requires much more than this. Under the circumstances of the case and in the light of reasonable business practice, the disequilibrium 'has to be so great as to shock the conscience of a reasonable (business) person' 239 . This, of course, does not apply to mere cash-flow problems of one of the parties to the contract.

The same is true for the hardship-provision of Art. 6.2.2. It is alleged that this provision allows the adaptation of the contract in case of currency fluctuations or because of an unexpectedly high failure rate under warranty 240 . Again, this would contravene usual business practice and again, the answer to these objections must be that the hardship-provision has to be read and construed in a context-oriented manner. Thus, Art. 6.2.1 expressly states that 'where the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations subject to the following provisions on hardship'. In other words, in cases of doubt, the principle of pacta sunt servanda prevails and performance must be rendered as long as it is possible and regardless of the economic burden it may pose on the performing party 241 . This principle is a constituent element of international commercial contract practice242 and is also reflected in the 'ICC Guide on Force Majeure and Hardship' 243 . Currency fluctuations are a common element of commercial reality. They are usually regarded as typical business risks which cannot be shifted to the other party in case the contract does not contain a special provision and the pricing structure does not imply a certain 'currency risk-premium' 244 .

Finally, it has been argued that the provisions on public permissions (Artt. 6.1.14 et seq.) are impracticable and not in line with international business practice. Art. 6.1.17 (1), which states that the refusal of a permission affecting the validity of a contract renders the contract void, is alleged to be unacceptable since it would 174 enable a state-controlled entity to evade its contractual duties simply by arranging for the refusal of the public permission. Also, it is claimed that in such cases there should be some claim for non-performance for the aggrieved party 245 . This objection is unjustified for two reasons. First, the public entity's conduct in this case would violate the general principle of good faith (venire contra factum proprium) which has to be observed in the interpretation of the Principles according to Art. 1.7. Also, Art. 6.1.7 (2) calls for the application of the rules on non-performance in cases of refused public permissions that render the contract void, thus opening the way for a claim for damages under Art. 7.4.1.

These examples reveal that the black-letter-law of the Principles cannot be applied in a mechanical way without having regard to the general framework and thrust of the Principles as clarified in the official commentary 246 . Instead, the provisions always have to be construed in the light of their underlying guiding notions, of which 'pacta sunt servanda' and 'reasonableness' are the most important. The generality of the principles and rules contained in the UNIDROIT Principles and the complex assessment process and the weighing of interests that is necessary for their proper application are by no means proof of a lack of practicability. Rather, they are indications for the quality of international commercial law as a 'law in action' which is in a state of constant evolution through international practice. In the context of international commerce and trade this important function is performed by international arbitrators striving to reach equitable and reasonable solutions for commercial disputes 247 . It is through their decision-making that the UNIDROIT Principles 'are filled with life' 248 . This reflects the general experience that general principles of law and standards of conduct do not have legal effects in abstracto, but have to be integrated into a law-finding and norm-creation process 249 . In the context of transnational commercial law this is the functional comparative methodology and the institutional creation of the law250 .

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220

The list reprinted in the Annex to this study is based on the methodological approach and comparative preparations described in this study. The functional comparative methodology 196 on one side and the case law of international arbitral tribunals and the scientific discussions surrounding it 197 on the other form the two pillars on which the legitimacy of this list is based. It contains legal principles, standards and rules as constitutive elements of a transnational commercial legal system.

The experience with the project of the American Cornell Law School, which focused solely on the technical issue of the formation of international contracts 198 , and the judgment of the Vienna Supreme Court, which set aside an arbitral award that was based solely on the principle of good faith 199 , has shown that transnational commercial law which is focused solely on general principles of law or on technically detailed legal rules is not viable. The structure of the list takes account of this experience. It starts with the general principles of 'good faith' and 'pacta sunt servanda'. These principles do not constitute vague formulas that are intended to invite decisions in equity that are totally detached from any legal considerations and that only take into account the particularities of the individual case 200 . True 221 it is that vagueness and flexibility do not necessarily constitute attractive elements of transnational commercial law 201 . However, it has been emphasized above that it is impossible to regard transnational commercial law as a set of clearly defined, detailed legal rules. Rather, every attempt to codify the lex mercatoria involves a sound mixture of detailed legal rules and general principles as well as standards of conduct ('obligations de comportement') 202 . In spite of their necessary vagueness and generality these general principles provide a vital function within the system of transnational commercial law:

'Le droit international économique connaîtra rarement la précision méticuleuse du droit des traités. Il est 'impressionniste' et non 'pointilliste'. Cette malléabilité n'empêche pas les normes du droit international économique d'exister, d'être strictement appliquées, de faire preuve d'effectivité et enfin d'être sanctionnées - sans doute grâce à des techniques inusitées et inconnues du droit international classique'

203 . These general principles of law play an important, dual role in the drafting of lists of the lex mercatoria.

The origin of many of the rules and principles contained in the list may be traced back to the basic notion of good faith. Thus, the right to set-off mutual claims is based on the idea that it would be against good faith if a creditor requires performance of an obligation from his debtor if the former would have to return immediately what he has required from the latter ('dolo agit, qui petit, quod statim redditurus est')204 . The particularly important aspect of good faith is the prohibition of contradictory conduct ('venire contra factum proprium nemini licet'). Even though the latter principle is 'still far away from a sufficient normative solidification' 205 , it lies at the roots of many of the more detailed rules and principles contained in the list. The principle thereby serves as a perfect example for the inductive development of special rules within the system of transnational commercial law. Thus, the principles of 'volenti non fit iniuria' as well as the general prohibition of a state or state-controlled entity to deny its contractual obligations with the reference to its internal law is based on the idea of 'venire contra factum proprium'. The latter principle does not only form part of public international law and is reflected in Art. 46 of the Vienna Convention on the Law of Treaties. 222 As one of the first principles of the lex mercatoria it has been codified in domestic law in Art. 177 Sec. 2 of the Swiss Statute on Private International Law 206 . Also, the idea of liability for breaking off negotiations in bad faith can be traced back to the prohibition of 'venire contra factum proprium' and its Anglo-American counterpart, the idea of 'promissory estoppel' 207 . The general principle as well as the detailed rules derived from it, all hint at a subordinate idea pertaining to the codification of transnational law. They provide strong indications for the development of a general principle of transnational liability for disappointing the confidence of the other party in the performance of ones' own obligations 208 . From the perspective of German law, this development finds further support in the strong interaction between the idea of confidence and faith of one party in the performance of the other party's obligation and the general prohibition of 'venire contra factum proprium' 209 . The development towards a transnational principle of liability related to this aspect of confidence is reinforced by the special role which confidence and faith plays in the doctrine of international contract law 210 .

Apart from the genetic function just described, the principles of 'good faith' and 'pacta sunt servanda' 211 also play a decisive role as reference points for valuation processes within the flexible system of an autonomous world trade law that is reflected in the list. Within the complex process of developing an autonomous system of transnational commercial law, general principles of law perform an important 'classifying function' 212 with respect to the legal character and application of rules and standards contained in that system. This phenomenon is exemplified by the duty to renegotiate. The origin as well as the contents and character of this duty is influenced by the principle of good faith and is also linked to other general principles such as the notion of 'clausula rebus'. A new rule that is being discovered as an element of the lex mercatoria therefore always has to be harmonized with the general principles that form the basic pillars of transnational commercial 223 law 213 . It becomes clear at this juncture that the constant interplay between legal rules and principles described above in the context of the UNIDROIT Principles 214 is also decisive for the evolution of the lex mercatoria in general 215 and for the structure of the lists in particular. In the context of transnational commercial law, general principles of law perform a function that is similar to that of domestic legal systems - they provide the basis for the development of new legal rules 216 .

Frequently, the list will reproduce legal principles in their original Latin terminology. This 'Latin approach' is evidence that the dogmatic basis of these principles can be traced back to classical Roman law. The reference to the Roman origins of many of the rules and principles contained in the list provides another important aspect of the comparative research on which the list is based217 . This historic approach to the lex mercatoria finds support in the drafting process of the new Dutch Civil Code. Even though this code is based on substantial comparative research218 , the drafters have emphasized the Roman origins of many of the rules and principles contained therein219 . Also, reference to the Roman origins of the rules and principles that are part of the lex mercatoria provide an ideal complement to the various sources of contemporary law such as the case law of international arbitral tribunals, international contract forms, general conditions of trade and the scientific discussion of the lex mercatoria-doctrine. The historic references thereby add to the legitimacy of the lex mercatoria as an autonomous transnational legal system 220 .

Apart from standards, general principles of law and rules, the list also contains generally recognized legal institutions such as the notion of prescription. To be workable in practice, these institutions need to be filled with concrete legal contents 221 . Thus, the idea of prescription can only be applied in international legal disputes if it relates to clearly defined periods of time. However, even without such concrete workable legal contents, the inclusion of such a legal institution in the list performs an important function within the system of the lex mercatoria in that it avoids from the outset any discussion on the existence of such an institution on the transnational plane. Also, the inclusion of the institution on the list may ultimately lead to a consensus on the details of its content.

224

For reasons of clarity and workability, the comparative material relevant to the rules and principles contained in the list have not been included in footnotes but in special 'notes' that are reprinted directly behind the black-letter text. The experience with the American Restatement of the Law of Contracts 222 reveals the tremendous significance which these notes have. It was for this reason that the Lando-Commission decided to include such notes in its Principles on European Contract Law and not to follow the example of the UNIDROIT Working Group 223 . The notes guarantee the transparency which is necessary for a world-wide acceptance of the list and the rules and principles contained therein224 . Also, the comparative references contained in the notes may serve as starting points for the further evolution of the list in general and for the development of individual rules from mere 'candidates'225  to genuine components of the lex mercatoria. Finally, the references contained in the notes prevent the danger of a 'battle of lists' 226 .

In order to be workable and to give a reliable picture of the status quo of transnational commercial law, the list requires constant updating and development. This process starts with a concrete legal problem that appears in an international arbitration or before a domestic court. The corresponding legal principle or rule would then be developed on the basis of the functional comparative methodology, i.e. using a topical, problem-oriented comparative approach 227 . This process has to take account of the dual nature of the list, embracing both general principles of law as an abstract set of principles and the legal and commercial convictions of the international community of merchants. It also has to take into account the plurality of legal sources which account for the development of the lex mercatoria and which include public international law, uniform laws, the general principles of law, the rules developed by international 'formulating agencies', uncodified customs and usages, standard-form contracts and published arbitral awards 228 . These sources constitute the 'raw material which has to be distilled into formally enacted or declared rules in order to become binding' 229 , i.e. in order to become part of the lex mercatoria as an autonomous legal system.

As far as the discovery of general principles of law and legal rules is concerned, the UNIDROIT Principles and the Lando-Principles of European Contract Law 225 reprinted in the Annex of this study may serve as a starting point for the comparative analysis. The restatements are not a source of the lex mercatoria in the proper sense 230 but they provide an initial indication for the existence of certain legal principles and rules on the transnational plane 231 . Other lists of principles 232 such as that set up by the Cairo Regional Centre for International Commercial Arbitration (CRCICA) 233 may also be included in the research. However, this requires a careful approach. Some of them, such as the one of the CRCICA, do not contain any comparative references 234 . Others merely repeat the contents of other lists, such as the one set up by Mustill, himself an opponent of the lex mercatoria-doctrine, without verifying the comparative legitimacy of the individual rule, principle or standard.

In order to ensure this legitimacy, the research must also include classical legal systems from civil and common law countries and 'hybrid' laws such as the civil code of the Canadian province of Quebec and the special laws of foreign trade contracts of the countries of the former Eastern Bloc and of the People's Republic of China 235 . Also, the comparative analysis will include Part I of the new Civil Code of the Russian Federation promulgated on January 1, 1995 236 . The value of this law for comparative research is based on the fact that it is drafted upon the major codifications of civil law of continental Europe 237 . The drafting process of the new Russian law was dominated not so much by Anglo-American legal notions and ideas but by the legal systems of Germany, the Netherlands and Italy. As a consequence of this comparative drafting approach, the new Russian law takes account of recent developments and statutes in the field of private law in Europe 238 . Apart from its contents, the new Russian law is of particular significance for comparative research because it performs an important integrative function in the former Soviet Union. The law constitutes the beginning of a far-reaching 226 and unified codification movement in the field of private law. Uzbekistan and Kazakhstan have adopted the Russian draft 239 and the Republic of Kirgistan has promulgated a new civil code that is based on a previous draft of the Russian law 240 .

The results derived from this comparative research may then be verified on the basis of international conventions such as the Vienna Sales Convention241 and its predecessor, The Hague Sales Law an d with reference to conventions of public international law, such as the Vienna Convention on the Law of Treaties of 1969. The Vienna Sales Convention plays a pivotal role in this verification process for two reasons. First, the Convention is itself a first step towards the codification of the lex mercatoria in the field of international sales contracts 242 . Secondly, many of the principles and rules contained therein have been derived from the practice of international arbitral tribunals which in turn are the driving forces behind the development of an autonomous and transnational commercial legal system 243

The second aspect in the development of the lists relates to the question of whether general principles or rules are in fact supported by the conviction of the general community of merchants 244 . Here, the verification process has to include not only the case law of international arbitral tribunals but also those legal instruments which have been drafted by reputable international institutions, such as the International Chamber of Commerce, and which constitute an amalgamation of commercial competence and experience. These 'code-like' 245 instruments include the 'Uniform Customs and Practices for Documentary Credits' issued by the ICC and in effect in a revised version since January 1, 1994 (ERA 500) 246 , 'Uniform Rules for Demand Guarantees' 247 , and the INCOTERMS 248 . Reference can also be made to the various projects of UNCITRAL such as the Convention on Independent Guarantees 249 or the work on a Standard Communication Agreement Pertaining to Electronic Date Interchange (EDI and EDI-Lite) as reflected in the 227 UNCITRAL Model Law on Electronic Commerce 250 . The various cross border payment-schemes such as SWIFT, CHIPS 251 or CHAPS may provide important indications as to the existence of a commercial usage in the field of interbank payment 252 . Standard Contract Conditions such as the "General Conditions For The Supply of Plant and Machinery For Export", drafted by the United Nations Economic Commission for Europe in March 1953 253 and the "ORGALIME General Conditions for the Supply of Mechanical, Electrical and Related Electronic Products" 254 must also be included in the comparative research. Finally, the verification process has to focus on international standard form contracts and general conditions of trade such as the FIDIC-Conditions contained in the FIDIC-Red Book255 . This Book has greatly influenced the shaping of international construction law as the new World Bank guidelines for procurement, which are incorporated into the World Bank's loan agreements with its borrowers, prescribe the use of 'Standard Bidding Documents', the principal document of which is almost entirely based on the FIDIC-Red Book. This, of course, has given new authority to the influence of FIDIC on the shaping of international construction contract practice and also on the evolution of transnational commercial law in this area 256 .

The restatements of international contract law presented by UNIDROIT and the Lando-Commission pave the way to the codification of transnational commercial law: Informality and pragmatism rather than formalized and overdogmatized228 instruments. For the first time, a private group of academics and practitioners was able to show that the idea of a transnational commercial law is not an abstract academic subject developed in the ivory tower 257 , but a practical working tool for the international practitioner. Focusing on the question of how to codify the lex mercatoria instead of being trapped in endless doctrinal discussions on the existence of this legal system has led the discussion on transnational law out of the status of stagnation in which it had been trapped in the past. The perspective has changed dramatically and the question is no longer 'lex mercatoria: yes or no'? but 'lex mercatoria: when and how'? 258 .

The projects have also done away with the well-know concern raised by international practitioners that the lex mercatoria is too abstract and cannot be used in practice. However, the drafting of the restatements is not the final word in the discussion on possible ways to codify transnational commercial law. In view of its particular legal nature, the lex mercatoria depends upon a new codification technique which provides sufficient openness and flexibility in order to take account of the rapid development of international trade and commerce. In spite of the positive experiences of the American Law Institute, the restatements of UNIDROIT and of the Lando-Commission have nevertheless introduced a dangerous static element into the lex mercatoria-doctrine. At first sight, this consequence seems to be inevitable since every codification necessarily implies the fixing of the law in statutory form. The restatements take account of this problem in so far as they contain provisions which allow the development of new solutions in accordance with their underlying general principles. Yet, these 'opening clauses' are only of limited use. They may help in individual cases but they also reveal the essential weakness of the restatement technique in that they contain an implied acknowledgment of the fact that transnational commercial (contract) law may not be put in statutory form. This need for openness and flexibility in a transnational commercial legal system is of another quality than in domestic legal systems and the idea of a self-contained character of the major codifications this century have long since been abandoned 259 . The lex mercatoria as 'law in the making' requires a degree of codificatory flexibility and subtleness that goes far beyond that which the restatements may provide.

The idea of a 'creeping codification' of transnational law through the drafting of lists of rules and principles avoids this essential weakness of the restatement technique. Contrary to the restatements, the updating and development of the list does not require a formalized procedure. For this reason, the list may be easily adapted to the progressive development of transnational commercial law. As a consequence of this more informal approach to the codification of transnational commercial law, the scope of the list is not limited to international contract law in the proper sense. Rather, the special emphasis on the case law of229 international arbitral tribunals allows to focus on those problems which play a dominant and recurring role in contemporary transnational commercial disputes, immaterial of whether they belong to the classical fields of private or public (international) law. The extensive comparative references contained in the list provide additional authority to its contents and avoid a 'battle of lists' from the outset.

230

Unification and creation of the law on the transnational plane are neither fashionable phenomena nor are they mere indications of the 'trends of the time' 1 . Instead, they reflect the commercial realities of modern international business practice. Thus, in the international construction industry, a suggestion has been made that a "neutral lex mercatoria" should be applied in public sector procurement in order to create a true "level playing field" for competition for public work and to test the prospects for a general informal harmonization of international construction law 2 . Recent arbitral case law also confirms that the transnational spirit of international arbitration provides fertile ground for the application of this concept in international commercial practice and that international arbitrators become increasingly aware of this phenomenon 3 . The development of a 'lex petrolia' for the international oil-industry 4 , a 'lex numerica' or 'lex informatica' for international data interchange 5 , or a 'lex constructionis' 6 for the international construction industry reveals that the transnationalization of commercial law has already transcended the traditional boundaries of general contract law.

Legal theory has to take account of this phenomenon in order to avoid any claims that it is out of touch with reality or antiquated. Therefore, modern conflict of laws-doctrine faces the formidable task of redefining the relationship between autonomous international commercial law on one side and domestic law on the 231 other 7 . Formulating this task also reflects the paradox of traditional conflict of laws-doctrine. It was private international law withdrawn from the competence of domestic legislatures by Savigny and handed over to legal science and the courts for further development 8 , whose economic efficiency and legal uncertainty triggered the autonomous and decentralized evolution of the law through the international community of merchants 9 .

In view of the multifacetedness of the lex mercatoria, private international law alone, however, may not fulfill the enormous task of reconciling domestic conflict of laws rules and transnational legal principles. The hybrid nature of the lex mercatoria, combining elements of commercial law and public international law requires an interdisciplinary approach. This has to include not only conflict of laws but also general private law, contract law and comparative law on one side and public law and public international law on the other 10 .

In spite of the comprehensive and all-embracing approach towards the lex mercatoria as an autonomous 'third' legal system between domestic laws and public international law which has been developed in this study, every attempt to deal with transnational commercial law, as the basic and most controversial question of international commercial law, remains no more than an 'approach towards a new understanding' 11 of transnational commercial law. This is not because 'no author can work on all breaks at the same time' 12 , an impression which the idea of an autonomous transnational commercial law is said to leave within the traditional doctrine of legal sources. It is true that the discussion on the existence of an autonomous transnational commercial law raises a multitude of methodical, theoretical and practical issues which touch upon basic notions of legal theory and transnational decision-making. This study has shown that the dogmatic arguments against the lex mercatoria "are fading away" 13 . The rebirth of the ancient law merchant has led to the development of a coherent system of transnational commercial law that can be reconciled with the traditional and 'positivistic' concepts of the doctrine of legal sources. Based on a dialectical understanding of the relationship between law and commerce, this system constitutes the foundation stone for the evolution of a transnational commercial law as an autonomous legal system. The rules and principles which make up this system have the principal qualities which Benson has defined as the "desirable characteristics" of the law merchant: 1) universal character, 2) flexibility and dynamic ability to grow, 3) informality and speed, 4) reliance on commercial custom and practice 14 .

At the same time, the discussion on the viability of a transnational commercial 232 legal system needs to be objectified. While any outright rejection of the theory fails to take into account commercial realities, any emphatic acclamation of the concept of commercial transnationalism lacks persuasiveness in that it fails to provide verifiable legal arguments. This resembles the initial scientific treatment of the phenomenon of reception of law in the early ius commune. At that time, there was a similar concern that the new legal situation would attract 'illusionists and visionaries' 15 . With respect to the lex mercatoria, this danger is increased by a sometimes lax and careless treatment of the concept of an autonomous world trade law. This is especially true with respect to the 'negative choice of law' of the parties 16 . Without a further inquiry into the motives and the will of the parties, the assumption of a 'negative choice' amounts to a fictitious agreement on the applicable law. This idea is often misused, even in international arbitral practice, to indicate the parties' will to have their contract transnationalized, thereby justifying the application of the lex mercatoria 17 . The lex mercatoria-doctrine, whose respect for the autonomy of the parties is one of its most prominent features, would be doomed to fail from the outset if its application would be based on such a violation of the will of the parties.

Legal theory must not only take account of economic realities. After filtering these realities through its methodical processes and concepts, it has to give the results back to legal practice in a workable form. Practitioners of international commerce, whether businessmen, traders or lawyers, always act against the background of an at least tentative understanding of the applicable law. It has been emphasized in the Introduction to this study that they need "definitive" and "provable" legal standards to negotiate their agreements or to resolve disputes, thereby reducing transaction costs 18 . Practice and legal science alike, however, are confronted with the codification dilemma in the field of transnational commercial law. The lex mercatoria is 'law in action' and depends upon a maximum degree of flexibility and openness. Thus, its rules and principles cannot be fixed in 'statutory' form in the proper sense. The UNIDROIT Principles as well as the Principles of European Contract Law drafted by the Lando-Commission reveal this dilemma. They provide a serious new indication for the consolidation of legal convictions pertaining to the existence of an transnational commercial legal system 19 . The great importance of these collections is that they exist. They can be taken to the court or the arbitral tribunal, can be referred to by page and article number, and people who are referred to their provisions can locate and review them without difficulty 20 . At the same time, however, they do not present the 233 flexible codification method that takes account of the peculiar character of the lex mercatoria which, being an open legal system, requires a similar, open codification technique.

The alternative presented in this study is the idea of 'creeping codification' of the lex mercatoria through the drafting of lists that contain principles, standards and rules of transnational commercial law. This innovative approach is intended to provide international legal practice with the necessary working tool to ensure the application of the lex mercatoria in every-day arbitration- and drafting-practice without necessarily introducing the static element that is usually connected with any attempt to codify the law. The collection of over sixty legal principles, standards, rules and institutions in a list of transnational commercial law demonstrates the richness and wealth of transnational commercial law. This is important not only for international arbitral tribunals but also for domestic courts. It avoids the danger that is advocated by the prevailing opinion of German legal doctrine 21 that an arbitral award which is based on the lex mercatoria may be set aside by domestic courts because it is a decision in equity without authorization by the parties.

Even after the initial drafting phase, the list of transnational commercial law requires constant attention and updating. This requires a process of continued discussion between those who participate in the creation of transnational law. International arbitrators, international practitioners and international businessmen are reminded of this duty. It resembles the idea of uniting all the participants in international trade in a 'law-finding community' 22 . It is for this reason that a special research center, the 'Center for Transnational Law' (CENTRAL) 23 , has been founded at the University of Münster, Germany. Together with its Board of Trustees, composed of renowned experts, both academics and practitioners, in the field of transnational commercial law, CENTRAL provides the institutional framework for the recurring task of updating and developing the list reprinted in the Annex. At the same time, it serves as the focal point for the exchange of ideas, concepts and information on the emerging lex mercatoria. It is only through an organic, comprehensive approach, combining comparative law, conflict of laws, international business law and public international law, that an autonomous world trade law as a third legal system between domestic law and public international law may develop. Even those practitioners who have been skeptical about the transnationalization of commercial law now acknowledge that the publication of the Principles, together with other modern