The International Market for Contracts: The Most Attractive Contract Laws

Gilles Cuniberti | January 1, 2014

This Article aims to contribute to a better understanding of the international contracting process by unveiling the factors that influence international commercial actors when they choose the law that governs their transactions. Based on an empirical study of more than 4,400 international contracts by approximately 12,000 parties who participated in arbitrations under the aegis of the International Chamber of Commerce, this Article offers a method of measuring the international attractiveness of contract laws. It shows that parties’ preferences are homogenous and that the laws of five jurisdictions dominate the international market for contracts. Among them, two are chosen three times more often than their closest competitors: English and Swiss laws. This Article then inquires which features made English and Swiss laws more attractive than other jurisdictions’ laws and seeks to verify whether the postulate is true that international commercial parties are rational actors. It concludes that while some parties might have the resources to study the content of available laws before deciding which one to choose, others have no intention of investing such resources and are happy to rely on cheaper means to assess the content of foreign laws, including proxies. Furthermore, some parties suffer from cognitive limitations, the most important of which is parties’ fear of the unknown and their correlative need to select a law resembling their own. Finally, unsophisticated parties might not fully appreciate the extent of their freedom to choose the law governing their transaction and might wrongly believe that it is constrained by largely irrelevant factors such as the venue of the arbitration.