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Good Faith in the Lex Mercatoria

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Good Faith in the Lex Mercatoria UNIVERSITY OF PORTSMOUTH SCHOOL OF LAW GOOD FAITH IN THE LEX MERCATORIA: AN ANALYSIS OF ARBITRAL PRACTICE AND MAJOR WESTERN LEGAL SYSTEMS The thesis is submitted in partial fulfilment of the requirements for the award of the degree of Doctor of Philosophy of the University of Portsmouth LORENA CARVAJAL ARENAS Portsmouth, December 2011 ABSTRACT This thesis is a comprehensive guide to the current interpretation of the principle of good faith in the lex mercatoria. It sets out the full background to this interpretation, exploring the development of good faith in major legal cultures in the Western world and in arbitral practice. Modern lex mercatoria is one of the most conspicuous manifestations of globalization in the field of law. Previous examples of global law are the Roman ius gentium and the medieval law merchant. The principle of good faith has been fundamental in all these manifestations. The thrust of this thesis represents an investigation of the reasons for the essential role of good faith in universal contexts, and in particular, its meaning in the lex mercatoria. It is argued here that national laws have been influential on the meaning of good faith in the current lex mercatoria. Hence, four major legal systems in the civil and the common law areas are studied: German, French, US and English. Nonetheless, other national systems are also mentioned throughout the thesis. This analysis will reveal the fundamental dynamism of the concept of good faith. This thesis challenges the traditional view of good faith as a moral and subjective concept, impractical and difficult to assess. It will show that an objective notion of good faith is vigorous in international commerce nowadays. This thesis explains that good faith in the lex mercatoria is interpreted as cooperation of the parties to a commercial contract. This notion fits the experience of global trade today. This theory will be verified through an analysis of: comparative legal history, sociological, philosophical and political theories, international instruments embracing the lex mercatoria and also through cases from national courts and international arbitration. This comprehensive study will serve as a context for future investigations on ancillary duties that emanate from good faith and on the principle of good faith in specific stages of the contractual iter, such as re-negotiation of the agreement. It will contribute to the harmonization and unification of law in different regions of the world and also to global projects containing the language of good faith. Likewise, it will be useful for traders and practitioners, especially arbitrators dealing with good faith in international disputes between merchants. ii TABLE OF CONTENTS ABSTRACT ........................................................................................................................................II DECLARATION ................................................................................................................................ VI ACKNOWLEDGEMENTS ................................................................................................................ VII DEDICATED ................................................................................................................................... VIII NOTE ............................................................................................................................................... IX ABBREVIATIONS AND ACRONYMS................................................................................................ X CHAPTER ONE – INTRODUCTION ................................................................................................. 15 1.1 BACKGROUND OF THE STUDY ............................................................................................... 15 1.1.1 LEX MERCATORIA .......................................................................................................... 17 1.1.1.1 CONTEXT ............................................................................................................... 17 1.1.1.2 THE ADVENT AND THE REVIVAL .......................................................................... 20 1.1.1.3 THE DEBATE ON THE EXISTENCE OF THE LEX MERCATORIA .......................... 26 1.1.1.4 SOURCES AND CONTENT ..................................................................................... 32 1.1.1.5 APPLICABILITY ....................................................................................................... 46 1.1.1.6 PROCEDURAL LEX MERCATORIA ........................................................................ 55 1.1.1.7 CONCLUSION ......................................................................................................... 58 1.2 OBJECTIVES ............................................................................................................................. 59 1.3 IMPORTANCE AND JUSTIFICATION ........................................................................................ 61 1.4 RESEARCH QUESTIONS .......................................................................................................... 62 1.5 STRUCTURE OF THE THESIS................................................................................................... 64 1.6 CONTRIBUTION TO KNOWLEDGE ........................................................................................... 65 1.7 LITERATURE REVIEW ............................................................................................................ 66 1.7.1 PREMISES ...................................................................................................................... 66 1.7.2 GOOD FAITH IN TRANSNATIONAL COMMERCE TODAY .............................................. 66 1.7.3 A BOOK ON GOOD FAITH AND THE LEX MERCATORIA .............................................. 71 1.7.4 A REVISED NOTION OF LIBERTY OF CONTRACT ........................................................ 72 CHAPTER TWO – THE HISTORY OF GOOD FAITH AND ITS DEVELOPMENTS IN NATIONAL LAWS ............................................................................................................................................... 74 2.1 INTRODUCTION......................................................................................................................... 74 2.1.1 PREMISES .......................................................................................................................... 74 2.1.2 OBJECTIVES ...................................................................................................................... 75 2.1.3 RELEVANCE ....................................................................................................................... 76 2.1.4 METHOD AND STRUCTURE .............................................................................................. 77 2.2 GOOD FAITH IN HISTORY ...................................................................................................... 78 2.2.1 BONA FIDES IN ROMAN LAW ........................................................................................ 78 2.2.1.1 SUMMARY .............................................................................................................. 81 iii 2.2.2 BONA FIDES IN THE POST CLASSICAL ROMAN LAW, HIGH MIDDLE AGES AND FIRST PART OF THE MODERN PERIOD .................................................................................... 82 2.2.2.1 SUMMARY .............................................................................................................. 86 2.2.3 GOOD FAITH IN THE CODES ......................................................................................... 87 2.2.3.1 SUMMARY .............................................................................................................. 90 2.3 GOOD FAITH IN CIVIL AND COMMON LAW: AN OVERVIEW .................................................. 91 2.4 GOOD FAITH IN CIVIL LAW .................................................................................................... 99 2.4.1 GOOD FAITH IN FRANCE ............................................................................................... 99 2.4.2 GOOD FAITH IN GERMANY .......................................................................................... 106 2.4.3 CONCLUSION: COMPARATIVE PERSPECTIVE ........................................................... 110 2.5 GOOD FAITH IN COMMON LAW .......................................................................................... 111 2.5.1 GOOD FAITH IN THE UNITED STATES ........................................................................ 111 2.5.2 GOOD FAITH IN ENGLISH LAW.................................................................................... 119 2.5.3 CONCLUSION: US AND ENGLISH EVOLUTION ........................................................... 146 2.6 CONCLUSION .......................................................................................................................... 147 CHAPTER THREE – GOOD FAITH IN THE LEX MERCATORIA: THE CRYSTALLIZATION OF A NEW CONCEPT ............................................................................................................................. 149 3.1 INTRODUCTION....................................................................................................................... 149 3.1.1 PRELIMINARY OBSERVATIONS .................................................................................. 149 3.1.2 OBJECTIVES AND MEANS
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