One of the most remarkable developments in international commercial law over the last fifty years has been the gradual acceptance of the existence of a new ‘merchant law, ‘ or lex mercatoria, spontaneously generated by the international community in the shadow of national legal orders. While the notion that there might be law beyond the state aroused the interest of legal scholars around the world, few wondered whether international commercial actors had a genuine interest in the development of an autonomous transnational law. This Article offers empirical evidence suggesting that commercial parties almost never freely opt into lex mercatoria, but instead select a particular national law to govern their contracts. This conclusion begs the question of whether anybody else might benefit from lex mercatoria.
In a groundbreaking article published in 2005, Christopher Drahozal argued that the idea had lost practical significance and offered a signaling theory of lex mercatoria: the interest in the idea can be explained by the desire of would-be arbitrators to market themselves. While essentially agreeing with Drahozal, this Article offers two other theories explaining the development of lex mercatoria. First, I argue that deciding disputes on the basis of lex mercatoria can bring important benefits to international arbitrators. If that is the case, though, their interests may conflict with those of the parties who hired them. That raises a serious agency problem that threatens the legitimacy of the international arbitration system as a whole. Second, I demonstrate how lex mercatoria can benefit organizations that are involved in the business of producing model contracts, and maintain that the active promotion of non-state law-side-stepping mandatory rules of national law-is intended to reduce the costs of producing international model contracts by such organizations.