I found it fascinating to read this new book on transnational commercial law which covers largely the same ground as my Transnational and Comparative Commercial and Financial Law, just now in its third edition. In covering also the basics of transnational insolvency and of international commercial arbitration, the authors showed the greater stamina. In taking the transnational perspective, both books derive their inspiration substantially from international finance, no longer, therefore, from the more traditional mercantile part of commercial law (mine even less so). It is an important shift in perception that will continue greatly to affect the coverage of books of this nature. It is also clearly shown in the work of Philip Wood. In doing so, we now look less at the old law merchant than at a new lex mercatoria operating in a much broader field of activity, especially important in finance.

As legal transnationalization goes, the idea and need for a substantive supranational law approach remains engrained in all international business dealings. It was a pre-19th century reality but was obscured in the 19th and 20th centuries when domestic law was thought also to be able to cover international transactions even if this law was never made for them. In a globalizing world, transnationalization of the substantive law has acquired renewed validity and even urgency now that the flows of persons, goods, services, money and technology are increasingly freed and have acquired a worldwide momentum, whilst private international law seems to get ever-more detailed and therefore unstable and unpredictable in itself. In these flows, the legal dynamics and needs are likely to be very different from domestic ones and commercial law is here the first called upon to respond. So at last the nationalistic cloud is lifting but it is an anguished process and it is amazing to see how conditioned we remain by 19th-century statist thinking, even in international commerce and finance. For many it is axiomatic. Also, common law, at least that of the English variety, struggles and finds it often difficult to accept non-statist sources of law; in the US, Sec 1–103 UCC remained more pragmatic and is here more realistic.

Against this background and need, there are a number of areas where one might try to push the boat out a little further. First, there is the concept of international professional dealings itself rather than older notions of commerce to set this area of the law more fundamentally apart. Then there is the connected delocalization issue of this law, its transnational nature itself and its meaning. This can indeed be grouped around the modern notion of the law merchant or the modern lex mercatoria, where I take a different perspective from the one presented in this book.

There is here, further, the fundamental question of the remaining impact of domestic regulation to be considered and its effect in international transactions now that notions of tariffs and other quantitative restrictions on trade have moved into the background and are overtaken by very different governmental concerns and interests which cannot simply be ignored in international transactions or circumvented by notions of transnational private law.

Subsequently, there is the just-mentioned force of international finance and its meaning to consider, which leads into the bankruptcy resistance of modern financial products and into the resulting reclaiming rights or priorities and preferences derived, on the one hand, from using a newer concept of property and, on the other, from using similarly updated notions of set-off and netting. Personal property and the rights of income, use and enjoyment therein become here important risk-management tools and then function best at the transnational level, which ultimately requires a transnational concept of personal property and of the operation of party autonomy in this area. That also goes for set-off and netting. Clearly, there are here fundamental systematic or similar structural issues to be considered.

No less important is that this modern law is likely to be dynamic rather than static. This introduces the post-modern notion of law as a dynamic forward-moving force in both contract and personal property law rather than as a pre-set system of rules. In commerce and finance it poses the worn question of certainty and the much more important question of finality in payments and title transfer of commoditized assets including security entitlements, a well-known subject in the old law merchant when dealing with negotiable instruments and documents of title.

These are, I believe, some of the main areas of struggle in terms of ideas with which books of this kind must now deal in one form or another and where they can best be compared.

To begin with the notion of professional dealings, the authors do not present a rounded new concept but such a concept suggests itself in accepting a new transnational, delocalized law covering these dealings. The UNCITRAL Model Law on International Commercial Arbitration is clearer and it is a key point. The main distinction is then between this law and consumer law. Never mind the EU efforts in this area, consumer law remains here a typical repository of domestic laws and especially of domestic protection notions, which in any event should never be transferred from it into professional law, certainly as it operates at the transnational level—an all-too–common mistake, however, of which especially the UNIDROIT and European Contract Principles suffer, as does much of the effort to arrive at a European contract law. Relationship thinking and thinking in context—much more typical for the more pragmatic common law than for the model or system-oriented civil law—is here fundamentally lacking and undermines, in my view fatally, any attempt at unification from above, most certainly also the present effort in the EU which means to govern all in one single system of contract law.

At least in the communitarian view—strongly supported by law and economics and various strands of modern political philosophy—distinguishing professional dealings with their own momentum and requirements leads into the operation of a new non-statist legal order operating besides national ones and of equal standing. Decentralization in the formation of private law results, often believed to be a key ingredient of law if it is to back up modernity and is to remain responsive to newer needs as they unfold, in this case from the professional community it tries to serve.Footnote ¹ It is an objective fully recognized in this new book but less clearly pursued. It requires an idea of what is going on, in particular, here, an idea of international market forces, which admittedly lawyers and legal academics mostly do not have and which in this and many other areas remains the challenge of all social sciences. It may be the reason why in the law we are always tempted to repeat the mantras of the past in the hope that at least it achieves some certainty, no matter new situations. But such law is likely to be of ever lower quality and may become a serious legal risk factor around which lawyers must then structure. Could it be that many continental European countries have seen their financial markets slip away because of this lack of legal responsiveness in the pursuit of an idea of certainty that legally debilitates everything that is new?

Subsequently, the key subject is what this new lex mercatoria is and how it operates. I see here a hierarchy of norms or sources, descending from fundamental legal principle to mandatory practices or customs, mandatory treaty law, mandatory general principles (of advanced commercial nations or as appearing in arbitral awards and legal writings), party autonomy, directory practices or customs, directory treaty law, directory general principles, and ultimately (if still no solution is found) to domestic law found on the basis of the established conflict rules. Domestic law then operates as the residual rule but still at the transnational level in order to make sense at that level and is adjusted accordingly in its interpretation.

Fundamental principles in this sense are the principle of pacta sunt servanda, the basic notion of ownership, the need to undo damage wrongly caused, the need the give back what does not belong and a number of others (but not many) that, like the ownership notion and basic procedural protections, may be closely connected with human rights notions. We see here the core of contract, property, tort, unjust enrichment and procedural laws implemented by the lower-ranking sources of law in the hierarchy just given. This was much the approach of Grotius, retained in public international law to this very day (see Article 38 (1) of the Statute of the ICJ). Why private law in international transactions should now operate in a fundamentally different manner has never been satisfactorily explained. What functions here as fundamental principle, custom, or general principle might still give rise to some argument or even overlap, but the essence is that the lex mercatoria operating in this manner presents a law-finding process inspired by facts rather than a preset unitary system of rules.

This approach is much less new and also less radical than it may seem but solves a number of important problems often associated with the operation of the modern lex mercatoria: first, given the residual role of domestic law it presents a complete system. It also does not deny the residual importance of conflict rules (and thus domestic laws) and gives them their proper place. It also suggests that the question whether the lex mercatoria can be chosen as a system of law may be improperly framed. In international professional dealings, it is always there. Domestic law on the other hand can still be chosen, but by doing so it only moves from the rank of residual rule to that of party autonomy. The consequence is that in the given hierarchy directory practices, directory treaty law and directory general principle can then only supplement and not precede it. Again, the domestic law so chosen will operate in the transnational legal order and as such be transnationalized and adjusted accordingly.

Some of this may be found or recognized in the 1980 Vienna Convention on the International Sales of Goods, in its Article 7, like the importance of general principles (at least those on which the Convention is based) and domestic law being applied as the residual rule found on the basis of established conflict rules. But the Convention is seriously confused on the issue of the relevant sources of law with an unhappy distinction between interpretation of the Convention itself and of contracts concluded thereunder (custom and practices acknowledged to operate only in the latter category and good faith in the former), followed by a distinction between interpretation and supplementation in respect of the Convention itself, hardly helpful either. It is unwisely repeated in many UNIDROIT and UNCITRAL Conventions, even in those substantially dealing with proprietary issues, like the UNIDROIT Leasing and Factoring Conventions and the UNCITRAL Convention on the Assignment of Receivables in International Trade, where at least the reference to good faith is wholly inappropriate. The European Contract Principles do not do much better either. Here the UNIDROIT Contract Principles may have an edge.

The one thing that can be said is, however, that all these compilations in whatever form can hardly determine the issue of the relevant sources of law and their own rank amongst them. Article 4 of the Vienna Convention appears to acknowledge as much. In any event, it is my experience as an arbitrator that international arbitrators substantially apply the new lex mercatoria in the manner as here indicated, even though they do not normally explain themselves.Footnote ² It results in a simple system of rule application and in a complete transnational system of applicable law.

The authors still see it quite differently. First, they do not wish to integrate uniform treaty law into their concept of the lex mercatoria, which they thus distinguish from transnational law, whilst the role and especially status of practices or custom also remains in doubt. In countries like England, the separation between customary and treaty law reflects the old distinction between common law and statutory law but is counter-intuitive in terms of the full scope of private transnational law. In respect of commercial custom, the absence of a higher rule of recognition is mentioned so that custom acquires here, at best, the status of contract term—often still the preferred approach in England. It is better to accept that every highest norm (whether Grundnorm or ultimate rule of recognition) or source of law is ultimately always pure fact (‘it is as it is’) and can logically not depend on other norms validating them whilst in any event these norms themselves would need further validation, etc. It is probably best and clearest to say that it is the new international commercial and financial legal order itself which supports these new sources of law.

Thus, even though the authors admit in principle the advent of transnational law as an autonomous system, in their approach what it really is and, especially, how it functions remains seriously problematic.

Another important issue in this connection is the role and place of domestic regulation, which should be well distinguished from mandatory private law of which there is a lot, for example substantially the whole area of property law, and which can be taken care of in the hierarchy of norms of the lex mercatoria, but regulatory law as public law does not have a place proper in it as we have left the area of private law. Properly analysed, it is competing law and a question of the determination (as a matter of international public order) of which legal order, a national or the international one, has the more proper right or jurisdiction to prescribe.

Article 7 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations touches on the subject but it is best explained in sections 402 and 403 of the American Restatement (Third) Foreign Relations. Ultimately it might even lead to the enforcement of a system of uniform minimum standards, for example in environmental matters, employment and health or even finance, as a matter of international law. We see the beginnings of this in modern Bilateral Investment Treaties (BITs). Sections 402/403 of the Third Restatement receive an honourable mentioning in one footnote but this whole area of intervening national regulatory interests in international transactions does not otherwise get much attention in this book, never mind a full chapter on international law, but only as it affects private law conventions. Yet this interaction between transnational law and local regulation would seem to be a crucial issue in which the modern student needs to be thoroughly introduced.

As mentioned, the book rightly takes a great interest in modern finance and deals with a number of financial products and services, especially payments (though hardly the important set-off and netting facilities), leasing, factoring or receivable financing, and mobile equipment financing but does not present a unifying theme in terms of risk management and proprietary protection, ultimately resulting in reclaiming rights, priorities or preferences in a bankruptcy. This is a most difficult area which makes the highest demands on comparative law, so far barely developed in this area. The present authors pay a great deal of lip service to it. I seem to be doing nothing else but have become less convinced that comparative law is that important except if used to find transnationally normative general principles. Mostly, the research is far too formal, sees law fundamentally as a set of national systems, is as such always concerned with statist attitudes and the past, and thus hardly captures the dynamics of modern commerce and finance. That kind of research may well hold us back and often has, at best, a function of showing how things should no longer be done.

There is, all the same, a need to conceptualize and simplify, in which connection we must ask ourselves whether especially the traditional proprietary concepts of the civil law in terms of a closed system of only a few proprietary rights and the way they are held, transferred and can be defended through notions of ownership, possession and holdership still makes sense and especially how intangible assets, notably receivables, fit into it.

Here the common law tradition in equity (and not primarily in commercial law) may hold the greater promise, especially when we think about income, user and enjoyment rights or beneficial ownership rights in formal, constructive or resulting trusts, in conditional or temporary ownership structures, and in floating charges, which can all be freely created and (in principle) transferred, for their third party or proprietary effect only cut off at the level of the bona fide purchaser or now perhaps all purchasers in the ordinary course of business, at least in the case of commoditized products, including receivables. Party autonomy and its flexibility can thus be accommodated even in the law of property but will be effective only amongst a limited group of (professional) insiders (in terms of the ranking of these interests between them), leaving the others, and especially the commercial flows, otherwise untouched. That is a most important insight and facility. Civil law remains far away from this world. In fact, it is in equity—a facility civil law never had—where we see the greatest differences between both systems. One may here also think of set-off, equitable assignment, transfers in bulk, including future or replacement assets and undisclosed agency.

A choice needs to be made and I do not believe that any amount of comparative law or obfuscation will resolve the conundrum. In my view, there is no other way to overcome these differences but by civil law adopting these equitable structures, thus fundamentally opening up its system of proprietary rights subject to much better bona fide purchaser protection also in respect of receivables and their use in financings. Recent American research seems to suggest otherwise and likes standardization, wrongly so in my view, where we talk here of management of risk. It also shows an imperfect understanding of the equitable principles and their present operation in this area. Recent French law appears more receptive at least as far as the fiducia/trust concept and floating charges are concerned, but is piecemeal and does not conceptualize. In particular it leaves open the question whether these new rights must still be defended and claimed in the old civil law way of ownership/possession/holdership rather than in tort. In common law countries like England, the law of equity must, on the other hand, regain more of its dynamic force and also become more conceptual, or must otherwise be helped by legislation (or internationally by treaty law) of which, of course, in the US the UCC is the most significant example.

As far as treaty law goes, there are here many impediments and the efforts in UNIDROIT and UNCITRAL (with the possible exception of the more enlightened Mobile Equipment Convention) have not inspired great confidence and may not present the proper model. Even the Vienna Sales Convention, although the most successful in terms of ratifications, is rejected by the UK and by much of the commercial practice.

As for receivables, the promissory note should further provide the modern analogy, a direction we see in section 2-210 UCC. This takes us back to the old transnational law merchant which first separated the note/receivable from the relationship out of which it arose and gave it independence and also protected bona fide purchasers. We need that much more generally now, not only in payments but for all modern monetary claims and their transfer and protection. They are assets like any other and the law merchant, therefore the early transnational law, found here ways of protection which have lost nothing of their importance. One need not be a radical Hohfeldian adept to accept in this connection that in law we only talk about rights and obligations which, whatever their proprietary or other status, are always intangible and that the physical or other nature of the underlying assets in respect of which rights and obligations are asserted is in a modern system of law of ever less significance.

Finally, the law as a dynamic concept. To quote Cardozo: ‘law never is but is always just about to be’. All models present here problems because in private law they are typically not empirically tested for their sufficiency and reality content but are usually the result of historical development or extrapolation of system and precedent or similar techniques. Civil law is a particular victim but the formal tradition in the common law of the English variety is not far behind. It leads all too commonly to intellectual prejudice and insensitivity to newer fact situations, changing context, or new needs. It is likely to be innovation averse.

In contract law through good faith, civil law tries to escape both on the norm side by extending and transforming the systems and on the factual side in a more independent search for what is relevant in fact. That at least is the idea. Ontological hermeneutics may do some more in legally backing up modernity better. In personal property law we now have the impact of party autonomy if it may be applied in the manner discussed above, especially in the organization of new financial facilities and in limiting legal risk in connection with them. All the same, so far the true jump into the more functional approaches has not been made.

The conclusion then is that nothing is absolutely certain in the law, need not be, probably never was, and perhaps should not be, assuming that finality obtains and is supported especially in payment and title transfers. For the rest, certainty foremost derives from the self-restraint of the participants. It was in fact never otherwise. At least in trade and commerce it is for them an efficiency tool which does not restrain creativity or constant innovation and renewal on which a modern society depends.

Educating students in the concept of transnationalization, including the operation of multiple sources of law, in the application of law as a dynamic concept, and in new legal structures and reasoning altogether has become a great challenge and may now have to wait until the graduate programme. It cannot then ignore the more functional approaches to law formation and application either and may also have to provide interdisciplinary and qualitative tools. In this sense, this book remains more an undergraduate text. Especially in Europe, students may want no more; they desire a tool kit of rules which they can memorize and too often have been given no other perception of the law. It is law as a technique, an administrator's approach, geared mostly to dispute resolution—certainly the most imperfect part of the law, even though probably the most lucrative for lawyers, but by no means its most important. It puts the lawyers largely in the position of diviners. The idea is then that rules are there primarily for the umpire rather than to elevate the game, in other words that the law is a micro, not a macro event. This book does not disabuse students of that idea, but educators may here differ and I do not criticize it on that score. Where I have a somewhat greater problem is that English commercial law in its traditional guise, therefore as far as it has got, is here substantially presented as the future transnational law. That may go a little far. This being said, the authors are to be congratulated on completing this enormous task. The book is well written, brings together a lot of relevant information, and is for the more ambitious student an excellent introduction into the subject.