28 March 2012

A global contract law? What is in store for Australia?

Some utopian visions of the world foresee that, in a globalising economy, we will be ruled by a ‘global law’ – a law that is not connected to any particular nation state. But the concept of a universal law, applying across nation states, regardless of the nationality of market participants is in fact very old. It is found in the medieval concept of the lex mercatoria – the law merchant – which applied to all merchants in the vibrant medieval international economy. Now, in response to the internationalisation of markets, we are seeing a resurgence of that vision, especially by nations such as Australia which stand outside any of the major trading blocs and seek to be relevant.

The Australian Government has recently released a discussion paper, Improving Australia’s Law and Justice Framework: A discussion paper to explore the scope for reforming Australian contract law: Discussion Paper. Such reforms are said to be necessary in light of the lack of uniformity of contract law across Australian jurisdictions, the lack of clarity as to the applicable law in particular contract disputes and international developments in contract law. The discussion paper is a broad-ranging one and covers many issues including the possible codification and ‘harmonisation’ of contract law.

Of particular interest and importance are the aspects of the paper relating to Australia’s contract law in the context of international commerce. The paper notes that a key potential obstacle to greater economic integration with Australia’s main trading partners are the differences between their systems of contract law and Australia’s and acknowledges the potential benefits in Australia being an early adopter of the developing “international law of commerce”. The paper makes reference to a number of important international approaches to contract law including the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention) and the UNIDROIT Principles of International Commercial Contracts. Each of these have been attempts at codifying parts of the law merchant. They are important sources of restatement of the fundamental rules that apply to any international transaction.

The challenge for Australia is how it best integrates its economy into the international world economy, especially in this ‘Asian Century’. The discussion paper on the reform of Australian contract law should be seen in the context of two other projects already underway or about to proceed. The first is the Prime Minister’s forthcoming White Paper on Australia in the Asian Century: Australia in the Asia Century. The second is the possible project to be approved in April by the Standing Council on Law and Justice (previously known as the Standing Committee of Attorneys-General) on the private international law aspects of commerce: Standing Council on Law and Justice.

All three projects sharpen our focus on the international dimensions of our economy and legal system.

This is an exciting time for those concerned about the international dimensions of commerce – these projects bring many opportunities for reform but also great risks. As the projects proceed we will bring you insights into the issues and thinking that stand behind them.

This post is written by Freehills Partner Don Robertson.

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