Kara Sears
Lex mercatoria, or 'merchant law' in English, is a body of commercial law used by merchants throughout Europe during the medieval period. It was a system of custom and best practice, enforced through merchant courts along trade routes. It emphasised contractual freedom and inalienability of property, while deciding cases ex aequo et bono. Common law equity, on the other hand, refers to a set of remedies and procedures involved with civil law, developed in the English Court of Chancery. In the US, the traditions of lex mercatoria were incorporated into common law by figures such as Sir John Holt and Lord Mansfield, who is considered the 'father of English commercial law'.
Lex Mercatoria and Common Law Equity Characteristics
| Characteristics | Values |
|---|---|
| Lex Mercatoria | Medieval body of commercial law used by merchants throughout Europe |
| Developed as a system of custom and best practice | |
| Enforced through merchant courts along trade routes | |
| Emphasised contractual freedom and inalienability of property | |
| Used in international disputes between commercial entities | |
| Common Law Equity | Refers to a set of remedies and procedures involved with civil law |
| Distinguished from "legal" remedies, which typically involve monetary damages | |
| Equitable remedies include injunctions, specific performance, or vacatur | |
| Administered in the English Court of Chancery | |
| Developed to address limitations of common law, which only recognised legal owner of property |
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What You'll Learn
Equity in US Law
Lex mercatoria, or "merchant law", is a body of substantive commercial law that was used by merchants throughout Europe during the medieval period. It evolved similarly to English common law as a system of custom and best practice, enforced through a system of merchant courts along trade routes. It was not tied to the local customs of any particular country but was instead based on the recognised customs of merchants and traders with business relations across Europe.
Equity, in the context of US law, refers to the power of federal courts to impose equitable remedies. For federal statutory claims, the underlying federal statute governs the availability of equitable relief. For constitutional claims, federal courts may apply traditional equitable principles as a matter of constitutional common law. For state-law claims, federal courts must apply state statutes and precedents to determine the availability of equitable relief.
Historically, federal courts in the US treated equity as a type of general law. They applied a uniform, freestanding body of principles derived from the English Court of Chancery to all equitable issues, regardless of whether a case arose under federal or state law. In 1945, in Guaranty Trust Co. v. York, the United States Supreme Court held that federal courts could continue to rely on traditional principles of equity to determine the availability of equitable relief, even in cases arising under state law.
However, it is important to note that equity should not be understood as a single, independent body of principles that federal courts must apply in all cases. Instead, a federal court's power to impose an equitable remedy stems from the legal authority that establishes the underlying right. The manner in which state-created rights are protected is a matter of substantive state policy, and federal courts must respect state statutes and precedents when determining the availability of equitable relief for state-law claims.
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Common Law and Equity in England
Lex mercatoria, or "merchant law" in English, refers to the body of commercial law used by merchants throughout Europe during the medieval period. It developed out of the need for a separate body of law to govern the legal relationships between merchants and traders who had business relations across Europe, including England. This law was not based on the customs of a particular place or territory but on the recognised customs of the merchants themselves.
Lex mercatoria evolved similarly to English common law, with merchant courts enforcing it along major trade routes. It was a voluntary system that provided a level framework for transactions, emphasising contractual freedom and the inalienability of property.
Common law, on the other hand, refers to the legal system that originated in England and is based on custom and judicial precedent. It is a system of law that is created and applied by judges in courts, and it forms the basis of legal systems in several countries, including England and Wales.
Equity, in the context of English law, refers to the body of principles and rules that aim to provide fair and just outcomes in specific cases. It operates alongside the common law, filling in any gaps or providing remedies where the common law may be inadequate or too rigid.
In England, the common law and equity were unified and administered by the Court of Chancery, with the common law courts recognising and enforcing equitable principles. This dual system of common law and equity has influenced the development of legal systems in other countries, including the United States.
Overall, lex mercatoria, common law, and equity each play a role in shaping the legal landscape, with lex mercatoria focusing on international commercial law, common law forming the basis of domestic legal systems, and equity ensuring fair and just outcomes in specific cases.
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Lex Mercatoria in Medieval Europe
Lex Mercatoria, or the Law Merchant, refers to the customary rules and procedures developed by merchant communities to support trade in medieval Europe. This system, which emerged in the early Middle Ages, became widely recognised as commerce expanded in the eleventh and twelfth centuries. Lex Mercatoria was a body of substantive commercial law, logical, just, and modern in character, and it emphasised contractual freedom and the inalienability of property. It was enforced through a system of merchant courts along the main trade routes, and it provided a levelled framework for conducting transactions, reducing the need for a trusted second party.
The development of Lex Mercatoria was driven by the necessity of commerce and trade. Merchants travelled from fair to fair and from place to place, and they required a consistent set of rules to govern their commercial transactions. This law was not based on the customs of a particular place or territory but was instead rooted in the recognised customs of merchants and traders with business relations across Europe, including England. Lex Mercatoria was considered a part of international law, taking precedence over national legislation.
The English courts applied merchant customs selectively, requiring them to be "certain" in nature, "consistent with law", and "in existence since time immemorial". Despite this selective application, English legal figures such as Chief Justice Edward Coke and William Blackstone considered Lex Mercatoria as "a part of the common law". The tradition was particularly prominent under Lord Mansfield, who is regarded as the father of English commercial law.
Over time, the precepts of Lex Mercatoria were incorporated into new international mercantile law, which prioritises market efficiency and privacy. Dispute resolution methods have evolved, with international commercial arbitration now available for commercial entities. While Lex Mercatoria is not as prominent today, it continues to be referenced in international disputes, and its principles are occasionally applied by arbitrators.
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![An Enquiry into the Law Merchant of the United States, Or, Lex Mercatoria Americana, on Several Heads of Commercial Importance / [George Caines] 1802 [Leather Bound]](https://m.media-amazon.com/images/I/61FbOFgXaEL._AC_UY218_.jpg)
Lex Mercatoria and International Law
Lex mercatoria, derived from Latin, means "merchant law". It is a body of substantive commercial law that was used by merchants throughout Europe during the medieval period. It is similar to English common law as it evolved as a system of custom and best practice, enforced through merchant courts along trade routes. Lex mercatoria was considered superior to national legislation and was a separate body of law, administered in special courts.
The concept of lex mercatoria is particularly relevant in the context of international law. It is regarded as an a-national body of legal rules and principles, developed by the international business community, to govern transactions between private parties and states in transborder trade, commerce, and finance. This development is a response to the complexities of modern international commerce and the limitations of domestic law in addressing these challenges.
The notion of lex mercatoria, also referred to as the "new lex mercatoria" or "new law merchant", is prominent in scholarly writings within private international law. It serves as a concept to describe and understand the special legal rules that govern transborder commerce, independent of traditional sources of law and the categories of national and international law.
The evolution of lex mercatoria is associated with the revival of commercial activities in Europe following the fall of the Roman Empire. The work of scholars like Berthold Goldman and Clive Schmitthoff has been instrumental in shaping the modern understanding of lex mercatoria. While Goldman viewed it as a completely autonomous legal system, independent of national and international law, Schmitthoff considered its autonomy to be derived from and limited by domestic law.
In conclusion, lex mercatoria, or merchant law, is a significant aspect of international law, shaping the legal framework for international commerce and trade. Its development and application reflect the evolving nature of transnational commercial law and the need for a standardized framework in a globalized world.
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Lex Mercatoria in the US
Lex Mercatoria, derived from the Latin term for "merchant law", was a body of commercial law used by merchants throughout Europe during the medieval period. It was a system of custom and best practice, enforced through merchant courts along the main trade routes. It was not subject to the common law, instead, it was the recognised custom of merchants and traders with business relations across Europe, including England.
In the US, the traditions of Lex Mercatoria prevailed in the general principles and doctrines of commercial jurisprudence. Sir John Holt (Chief Justice from 1689 to 1710) and Lord Mansfield (Chief Justice from 1756 to 1788) were proponents of incorporating Lex Mercatoria into the common law. Lord Mansfield is considered the father of English commercial law and is credited with harmonising commercial custom and common law, creating a system that was acceptable to both merchants and lawyers.
Lex Mercatoria was also kept alive through equity and admiralty courts in maritime affairs. The Uniform Commercial Code (UCC) is an example of modern codification that promotes custom, common law, equity, and the law merchant. The UCC is not codified in the European sense, but its influence is seen in the US legal system.
The development of international trade after World War II exposed flaws in the traditional regulation of international contracts, and the supremacy of national law in international economic relations was questioned. Traders began adopting alternative solutions, creating their regulatory framework independent of national law, known as the new Lex Mercatoria. This new Lex Mercatoria is a set of general principles and customary rules in international trade, with an emphasis on market efficiency and privacy. It provides functional dispute resolution methods, such as international commercial arbitration, attracting the interest of empirical sociology of law.
Overall, Lex Mercatoria in the US has evolved from its medieval origins to modern applications, influencing commercial law and providing a framework for international trade.
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Frequently asked questions
Lex Mercatoria, or 'merchant law' in English, is a body of international commerce rules that have been developed by the customs in the field of commerce and affirmed by national courts. It was used by merchants throughout Europe during the medieval period.
Common law is a system of law that was developed in the English Court of Chancery and is now administered concurrently with equity. It is a type of law that is developed and administered by the authority of the King of England, and whose jurisdiction over disputes between the King's subjects is based on the King's writ.
Equity refers to a particular set of remedies and associated procedures involved with civil law. These equitable doctrines are distinguished from "legal" ones, which typically involve monetary damages. Equity provides remedies in situations in which precedent or statutory law might not apply or be equitable.
In the past, England had two separate court systems: courts of "law" and courts of "equity". The courts of "law" could only award monetary damages and recognize the legal owner of the property, while the courts of "equity" could issue injunctive relief and recognize trusts of property. Today, modern equity has been assisted by legislation and is no longer limited to only protecting property rights.
Lex Mercatoria is considered a part of international law, and its standards are superior to national legislation. In the US, proponents of incorporating Lex Mercatoria into Common Law included Sir John Holt and Lord Mansfield, who is regarded as the "founder of the commercial law" of Great Britain. Equity is a separate set of doctrines and procedures that can be applied in situations where common law may not be sufficient or adequate.
