1

THE NATURE, HISTORY, AND SOURCES

OF COMMERCIAL LAW

A. The Nature of Commercial Law 1.01
Three definitions 1.01
Commercial law 1.02
Transnational commercial law 1.03
Lex mercatoria 1.04
What drives commercial law? 1.05
A medieval example 1.06
A later example 1.07
A modern example 1.08
Commercial law and civil law 1.11
The transition from planned economies
to market economies 1.15
B. The History of Commercial Law 1.16
The early and medieval codes 1.16
Characteristics of the medieval law
merchant 1.21
The nationalization of commercial law 1.25
The return to internationalism and
the growth of transnational
commercial law 1.26
The perceived benefits of harmonization 1.27
The growth of regionalism 1.34
C. The Sources of National
Commercial Law 1.35
Contract 1.36
Usage 1.37
Suppletive rules of common law 1.38
Domestic legislation 1.39
D. The Nature and Sources
of Transnational Commercial Law 1.40
Is there an autonomous transnational
commercial law? 1.41
The lex mercatoria and the conflict of laws 1.42
External validation by a court or tribunal 1.48
Determination in accordance with law 1.50
The sources of transnational commercial law 1.55
Lex mercatoria 1.56
International and regional instruments 1.57
Conscious or unconscious judicial or
legislative parallelism 1.58
Contractually incorporated rules
and trade terms promulgated
by international organizations 1.59
Standard-term contracts 1.60
Restatements of scholars 1.61
General principles of international law 1.62
E. Lex Mercatoria 1.63
The sources of the lex mercatoria 1.63
The normative force of usage 1.64
International conventions as evidence
of usage 1.68
General principles of law 1.69

A.  The Nature of Commercial Law

Three definitions
We shall begin by defining three terms: commercial law, transnational commercial law, and 1.01
lex mercatoria. These are not terms of art, and different writers use them in different senses.
But for our purposes, they denote the following:
Commercial law
The totality of the law’s response to mercantile disputes, encompassing ‘all those principles, 1.02
rules and statutory provisions, of whatever kind and from whatever source, which bear on

3
 Part I: General Principles

the private law rights and obligations of parties to commercial transactions’.1 In this concep-
tion, commercial law is concerned with transactions between professionals, whether they are
merchants, financiers, or intermediaries. This definition thus excludes: (1) institutional law,
such as the law of corporations and partnerships and the law governing the establishment
and capital adequacy of financial enterprises; (2) consumer law (since one party is not a pro-
fessional); and (3) public law, even if affecting the enforceability of agreements, for example,
competition (antitrust) law.
Transnational commercial law
1.03 We use this phrase to denote that set of private law principles and rules, from whatever
source, which governs international commercial transactions and is common to legal sys-
tems generally or to a significant number of legal systems. Again, the focus is on private law
and on transactions, particularly cross-border transactions. Our subject is thus to be distin-
guished from international economic law, which is a branch of public international law and
is concerned primarily with dealings between states and resolution of inter-state disputes by
organs of the World Trade Organization.

Norbert Horn, ‘Uniformity and Diversity in the Law of International Commercial Contracts’
in Norbert Horn and Clive M Schmitthoff (eds), The Transnational Law of International
Commercial Transactions (Kluwer, Boston, 1982) 4 and 12

B.╇ THREE CONCEPTS OF TRANSNATIONAL LAW

Despite the usual connection between a private contract and its applicable national contract law, the
transnational (i.e. cross-border) character of a commercial transaction entails specific legal problems
and consequences. The most suitable way to describe them is to adopt the modern term ‘transna-
tional law’. This term in fact points to a variety of interrelated and complex problems which are of
daily concern for the international business lawyer. In order to avoid confusion, however, we must
strictly distinguish three separate usages of the term ‘transnational law’:
(1) as a general description of the legal regime of an international commercial transaction;
(2) as a label for the factual uniformity or similarity in contract laws applicable to or contractual
patterns used in international commercial transactions; and, finally,
(3) as a term to denote international sources of commercial law, i.e. internationally uniform law in
the proper sense.
Each of these different concepts of transnational law is relevant to understanding the legal regime
of international commerce and requires some further explanation. In addition, we should bear in
mind that the term ‘law’ is sometimes used not only to denote the objective norms created by the
legislative power of a state or states but also to describe the contracts concluded by the parties which
are legally binding between them; in this respect, individual contracts as well as typical and widely
used contractual patterns may be termed ‘contract law’ (lex contractus).
1.╇All Law Pertaining to Transnational Transactions
‘Transnational law’ in the broadest sense has been defined by Jessup as ‘all law which regulates
actions or events that transcend national frontiers’. This is just a label for all legal norms governing
international business contracts and might serve as a mere description of the complex legal circum-
stances surrounding international transactions. It is common that a variety of norms outside the
lex contractus, from at least two and often more national legal systems, have an impact on the con-
tract. These may be laws on exchange controls, taxation, safety rules, etc. This is in addition to the
strict rules of national contract, business or company law which must be respected.

1 ╇ Roy Goode, Commercial Law in the Next Millennium (Sweet & Maxwell, London, 1998) 8.

4
 Chapter 1: The Nature, History, and Sources of Commercial Law

The drafters of international commercial contracts have to take into account the various legal envi-
ronments and complex legal situations, which might be relevant not only when drafting clauses on
choice of law and forum, but also when deciding on the time and manner of delivery and payment
(including the role of banks and the use of specific sureties), and clauses on specific dispute set-
tlement procedures. These contractual provisions dealing with the transnational situation might
equally be labelled ‘transnational law’ in so far as they constitute legally binding lex contractus.
2.╇De facto Uniform Law and Contractual Patterns
But we can go one step further and single out those legal rules, principles and contractual pat-
terns which are internationally used or recognised in a uniform or similar way although they may
stem partly from different national laws. Here, ‘transnational law’ describes an actual uniformity
or similarity of rules and patterns. In fact, international commerce is, to a growing extent, guided
and co-ordinated by such uniform rules and patterns. This phenomenon of uniform rules serving
uniform needs of international business and economic co-operation is today commonly labelled
lex mercatoria.
3.╇International Sources of Law; Uniform Law
Finally, the term transnational law can also be used as a label for internationally uniform law in the
proper sense, based on international sources of law, i.e., either on conventions (‘international legis-
lation’) or on customary law. In addition, we should note commercial custom which, though not a
legal source in a technical sense, has some important functions similar to those of a true legal source.
Examples of international conventions can be found in the law of international transportation of
goods by sea, air and land.â•›.â•›.â•›.â•›Such conventions, once signed by the signatory states and embodied
in their national legal systems, will be an important international source of uniform commercial
law. This source has the great advantage of clarity and is a suitable vehicle for imposing mandatory
rules of law on the persons to whom it is addressed. For example, the Hague-Visby Rules on Bills
of Lading cannot be contracted out. On the other hand, the drafting, negotiating and ratification
procedures necessary to bring such conventions to life (often followed by procedures to transform
them into municipal law as prescribed by the national constitution) are time-consuming and dif-
ficult. International legislation, therefore, can be confined only to select and particularly important
legal issues.
International customary law, on the other hand, is only of limited assistance in solving legal prob-
lems of international commerce. There are few legal principles, such as pacta sunt servanda, which
are generally recognised and can be termed international customary law. It is true that the general
principles of customary law provide common ground for lawyers from civil law and common law
countries. But these principles are difficult to apply in specific cases, and courts in various countries
have been extremely reluctant to resort to rules of international customary law when deciding issues
involving private contracts.
Lex mercatoria
Some writers equate this with transnational commercial law. Thus, the Danish scholar 1.04
Professor Ole Lando, in a much-cited article,2 lists the following elements of the law mer-
chant (which he describes as non-exhaustive): public international law, uniform laws, gen-
eral principles of law, rules of international organizations, customs and usages, standard
form contracts, and reporting of arbitral awards. But we prefer to confine the lex mercatoria,
or law of merchants, to what Roman lawyers described as ius non scriptum, and thus to define
it as that part of transnational commercial law which consists of the unwritten customs and
usages of merchants, so far as these satisfy certain externally set criteria for validation. That is
certainly how it was seen by the anonymous author of the thirteenth century Lex Mercatoria,

2 ╇ Ole Lando, ‘The Lex Mercatoria in International Commercial Arbitration’ (1985) 34 ICLQ 747.

5
 Part I: General Principles

the earliest known English treatise on the law merchant and the practice of the mercantile
courts in England.3 It is also traditional to include general principles of law as an aspect of the
lex mercatoria, but there is a strong argument in favour of excluding such principles in that
they are not specific to international transactions or even to commercial dealings, and thus
can scarcely be regarded as a manifestation of the creative power of trade usage.4

What drives commercial law?

1.05 In order to understand commercial law in general and transnational commercial law in
particular, it is important to realize that commercial law is not devised in the abstract but is
a response to the practices and legitimate needs of merchants. It is mercantile practice that
fashions commercial law;5 and mercantile practice evolves as a response to impediments to
trade, whether legal or practical, that has to be surmounted and to the driving force of com-
petition as each enterprise strives to attract increased business by developing new products
in goods and services. Three examples will help to make the point.
A medieval example
1.06 The transportation of money to pay for goods was a hazardous enterprise. The vessel on
which the money was carried might sink or be seized by pirates and other untoward events
might prevent the seller from receiving payment. Moreover, physically counting large sums
of money was time-consuming and therefore expensive. Building on similar instruments
from centuries before, Italian professional money-changers, who were familiar with exchange
rates and could thus provide a currency clearing house, devised arrangements by which, say,
an Italian buyer from a French exporter, instead of shipping gold as payment of the purchase
price, would arrange for his Italian bank (with which he had funds or a line of credit) to draw
a bill of exchange (payment instruction) on one of its French correspondents in favour of the
seller, to whom the draft would be delivered and who would present it for payment to the
French bank and collect payment in France or, if credit was to be given, obtain acceptance of
the bill, that is, an undertaking to pay at a fixed future time. The two banks, between whom
there might be many mutual dealings, would typically settle their accounts at one of the great
international fairs or at a commercial centre.6 In this way payment was localized and the risks
attendant on physical transportation avoided. At a later stage the bill of exchange became
negotiable by delivery with any necessary indorsement, so that the person whom the drawee
is to pay is not necessarily the named payee but whoever is the current holder of the bill and
presents it for payment.
A later example
1.07 Once merchants ceased to travel on a ship with their goods exporters and importers of goods
by sea were anxious to have a mechanism by which the goods could be sold or pledged in
transit. This led to the creation in the seventeenth century of the quasi-negotiable bill of lad-
ing, a document of title issued by the carrier who undertook that on arrival of the goods at

3  See: Mary Elizabeth Basile, Jane Fair Bestor, Daniel R Coquillette, and Charles Donahue Jr, Lex Mercatoria

and Legal Pluralism: A Late Thirteenth-Century Treatise and Its Aftermath (The Ames Foundation, Cambridge
(MA), 1998).
4  See below, paras 1.69–1.70.
5  It is also, of course, true that businessmen shape their contractual arrangements around the law in order to

produce or avoid a particular legal result.

6  For a detailed account of the medieval bill of exchange see Benjamin Geva, The Payment Order of Antiquity

and the Middle Ages: A Legal History (Hart Publishing, Oxford, 2011), ch 8.

6
 Chapter 1: The Nature, History, and Sources of Commercial Law

the end of the sea transit, the carrier would deliver them to whoever was the current holder
of the bill of lading and presented it at the port of arrival. The bill of lading thus gave control
of the goods to the holder of the document, who could transfer that control by delivery of
the bill of lading with any necessary endorsement. This neat technique enabled the buyer of
the goods to resell them in transit or to borrow against them by delivering the bill of lading
to the buyer or lender in exchange for the price or loan, which itself might be paid by a bill
of exchange.
A modern example
A creditor holding a portfolio of mortgage receivables would like to have this taken off its 1.08
balance sheet in order, for example, to reduce its capital adequacy requirements, which are
geared to its risk-weighted assets, and to use the receivables to raise money from the securities
market. Both these objectives can be achieved by a technique known as securitization. This
may take different forms, but a common one is for the creditor (known as the originator) to
sell the receivables to a special-purpose vehicle (SPV) which will then issue notes to investors,
the proceeds of the issue being used to pay the originator the purchase price. The receivables
are then charged by the SPV to trustees for the investors to secure the issuer’s obligations
under the notes.
Of course, all these techniques rely on the willingness of courts, in case of a dispute, to 1.09
uphold the validity of the transaction and to give it the effect intended by the parties.
Experience has shown that, in most developed countries, the courts are sensitive to the
need to avoid damaging commercial instruments that are fulfilling a useful and legitimate
purpose, if only because of the potentially adverse effects this could have on the stability
of the industry and on the attractiveness of the jurisdiction to foreigners wishing to deal
with its traders. The more widespread the market practice, and the more damaging the
effects of invalidating it, the more likely it is to be upheld by the courts. Even so, there are
occasional upsets which either force the modification or abandonment of the practice or
lead to corrective legislation. Such was the case in England in the 1990s, when the House
of Lords held that swaps transactions entered into by local authorities were ultra vires and
wholly invalid,7 a decision that caused widespread consternation among financial institu-
tions, particularly foreign banks, and for a while, did some damage to London’s reputation
as a world financial centre.8
The role of the practice of merchants in shaping commercial law was not always accepted. In 1.10
nineteenth-century Germany, for example, under the influence of the Pandectists, commer-
cial law was conceived as based on rigorous logic derived from the principles of Roman law—
Professor Heinrich Thöl being one of the leading exponents of this dogmatic approach. But
the great German jurist Levin Goldschmidt, who possessed a vast and profound knowledge
of commercial law and its history, demonstrated the importance of looking at what com-
mercial men were actually doing, at their conceptions of what was fair, rather than treating

7   Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1 (HL).

8   As was subsequently acknowledged by Lord Goff (who had not been a member of the panel hearing that
case) in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL) 680. For a not unsym-
pathetic approach to the decision, see: Ewan McKendrick, ‘Local Authorities and Swaps: Undermining the
Market?’ in Ross Cranston (ed), Making Commercial Law: Essays in Honour of Roy Goode (Clarendon Press,
Oxford, 1997) ch 8. The hardship imposed on third parties entering into an ultra vires transaction with a local
authority in good faith was subsequently alleviated by the Local Government Act 1997 ss 5–7.

7
 Part I: General Principles

commercial law as a set of abstruse principles grounded in legal science. His works9 pro-
foundly influenced Karl Llewellyn, the architect of the American Uniform Commercial
Code. The point is well put by a leading American commercial law scholar.

Boris Kozolchyk, Comparative Commercial Contracts: Law, Culture and Economic Development
(West Academic Publishing, St Paul, 2014) 3
The law of commercial contracts is about merchants, how they compete and cooperate with each
other, strangers or third parties. That is why commercial values, attitudes, courses of dealing, prac-
tices and usages of trade require greater attention than legal pedagogy and jurisprudence presently
offer them. An important contribution of the peopled nature of commercial contract law is the
understanding that those legal institutions that most accurately reflect commercial man’s best prac-
tices are the most supportive of society’s economic development.10

Commercial law and civil law

1.11 Whether commercial law should be formally distinguished from the general civil law is
a question that has exercised both legislators and scholars over the years, and approaches
vary widely from jurisdiction to jurisdiction. Many legal systems have a commercial code,
many others do not. In some, the applicability of the code is used as the determinant of the
commercial nature of the transaction, in others, the function of the code is simply to pro-
vide rules governing some of the more important types of commercial transaction without
thereby implying that other transactions are necessarily non-commercial. In those legal sys-
tems that treat commercial law separately from civil law, the character of the transaction may
be determined subjectively by the status of the parties as carrying on a business (commerçants,
Kaufleute) or objectively by reference to the type of transaction or activity (actes de commerce,
Handelsgeschäfte) or by a combination of the two. Whatever the legal system involved, it is
clear that commercial law and commercial transactions cannot be isolated as self-contained
compartments of contract or of commercial law.

Boris Kozolchyk, ‘The Commercialization of Civil Law and the Civilization of Commercial
Law’ 40 La L Rev 3, 3–5 (1979–80)
This topic requires that one first clarify what is meant by civil law and by commercial law. One might
be tempted to assert positivistically that civil law is the law found in civil codes and commercial law
is the law found in commercial codes. Yet, legal history proves that it has been very difficult, if not
impossible, to draft a code that applies exclusively to civil or commercial transactions. Even where
the draftsmen of separate civil and commercial codes adopted what they thought to be neat lines of
differentiation or scope criteria, it was clear, almost before the ink had dried, that they had failed in
their attempts at separation.
The first to try separation was Napoleonic France with its so-called objective criterion, a criterion
followed by the majority of other civil law countries. The scope of the French Commercial Code
of 1807 was determined by inquiring whether the parties had entered into ‘an act of commerce’,
such as, a purchase and sale of goods or merchandise for their resale, enterprises of manufacture,
commission agency, transportation, public spectacles, exchange, banking and brokerage, construc-
tion, or maritime commerce, or whether the parties had signed or endorsed a promissory note or
a bill of exchange. By contrast, the subjective criterion defined the scope of a commercial code on
the basis of the merchant’s professional affiliation. A subjective commercial code applied only to

9
  In particular Universalgeschichte des Handelsrecht and Handbuch des Handelrechts.
10
  In the same work Professor Kozolchyk discusses in some detail (at 440 and following) the contrasting
approaches of Thöl and Goldschmidt.

8
 Chapter 1: The Nature, History, and Sources of Commercial Law

those who qualified as habitual and professional merchants. This approach, which was implicit in
the eighteenth century Prussian Allgemeine Landrecht, was expressly adopted by some of Germany’s
nineteenth century commercial codes and prevails in the German Commercial Code of 1900. The
professionals chosen under the subjective criterion included predominantly bankers and traders.
Primary producers were not included because they treasured their monopolistic status, inconsist-
ent as it was with the competition principles of the commercial codes. Agricultural business was
similarly uninterested in the competitive capitalism of the commercial code. Also exempted from
the commercial characterization were those who thought better of themselves, such as members
of the liberal professions, including physicians (however enterprising), actors, attorneys, authors,
composers and teachers.
By defining the commercial code as objective, the French codifiers attempted to avoid the stigma of
conferring a privileged status to a class of citizens, anathema as privileges were to the revolutionary
principle of equality before the law. Thus, in principle, the French Commercial Code applied to acts
of commerce by merchants, as well as to those acts of commerce entered into by non-merchants,
such as law professors, opera singers, or priests.
On the other hand, the French Civil Code dealt with matters such as a person’s legal status, regu-
lating that status from birth until death. Included in the regulation of a person’s status were such
aspects as: his domestic and family relations; his obligations, both contractual and extra-contrac-
tual; his non-profit associations; and his acquisition, use, and disposition, both inter vivos and mortis
causa, of personal and real property. In addition, it provided principles of general application to
transactions both within and beyond its confines, such as:
Laws relating to public order and morals cannot be derogated from by private agreement. Contracts
lawfully entered into have the force of law for those who have made them. They can only be can-
celled by mutual consent or by causes allowed by law. They must be carried out in good faith.
Possession is the equivalent of title with respect to personal property. Any human act which causes
damage to another obligates the person through whose fault damage occurred to make reparation
for the damage. The generality of these and other principles contributed to the civil code’s status as
the unofficial constitution of France’s private law.
The problem with the objective–subjective dichotomy is that the life of the law in general, and of
commercial life in particular, is not, as Justice Holmes continually reminds us, quite that syllogis-
tic. One who disagrees with Holmes should try to define an act of commerce, such as ‘brokerage’,
without referring to the activity of the broker. To make sense you would have to define brokerage
by describing brokers and vice versa; if you wish to define a broker, you must describe what he, as a
broker, does. Moreover, consider the case of the so-called ‘mixed act’, the act which is commercial
for one of the parties, say the seller, and civil i.e., not profit making . . . for the consuming buyer.
Additionally, consider the act which starts out as a civil act on the part of the buyer, but becomes
profit-making once the buyer realizes that he can profit by reselling that which he bought with the
initial purpose of only consuming.
The difficulty of drawing a neat line between that which is civil and that which is commercial in
everyday legal affairs does not mean that there are no significant differences between the rules, con-
cepts, and principles of interpretation that characterize each of these major branches of private law.
The differences emerge once one examines how civil and commercial law treat a simple, everyday
transaction such as a sale or conveyance of valuable property.
Commercial codes in Europe tend to be rather fragmented in character and to embody only 1.12
a small part of what is considered to constitute commercial law. The American Uniform
Commercial Code, by contrast, adopts an integrated approach to the more important types
of transaction—for example, sale, leasing, negotiable instruments, secured transactions—
but does not seek either to insulate these from the general law or to characterize transactions
outside the code as non-commercial. Systems such as English law that have no commercial
code and no formal separation of commercial law from the general law nevertheless have a

9
 Part I: General Principles

conception of commercial law as a distinct branch of law, though its scope and content are
nowhere defined and are very much a matter of individual perception. As Professor Ernst von
Caemmerer so elegantly put it:
The consequence of this [historical] development is that there is no special, separate com-
mercial law in the Anglo-American systems. If the commercial or mercantile law has its own
special literature even in the Anglo-American countries, that is only a result of selection and
organization of materials, which lies in the discretion of the particular author.11
1.13 To this, one may add that in common law jurisdictions commercial law is conceived as essen-
tially transactional in character, and thus distinct from company (or corporation) law, while
civil law jurisdictions tend to treat company law as part of commercial law.
1.14 As a generalization, one can say that commercial contracts are governed by the general law,
except so far as this is qualified by rules particular to commercial transactions. Such rules are
designed to accommodate the need of the business community for informality, flexibility,
and respect for commercial practice. So rules requiring writing for ordinary contracts, in
particular contracts entered into by consumers, may dispense with this requirement in the
case of commercial contracts. Those who deal in goods as merchants are generally expected
to assume certain basic obligations—for example, that the goods are of proper quality and fit
for their purpose—which are not required of a person selling as a consumer. Most jurisdic-
tions recognize in different degrees the binding force of trade usage, whether as an implied
term of a contract or as an independent legal norm. Traders frequently engage in repeat deal-
ings among themselves, so that terms may be implied from a course of dealing that would not
arise in one-shot consumer transactions. Persons engaged in commerce are generally held to
a standard of commercially reasonable behaviour that is not necessarily expected of others.
Consumers are in most countries protected by special legislation, which in large part does
not apply to those entering into contracts in the way of business.

Jan H Dalhuisen, Dalhuisen on Transnational Comparative, Commercial, Financial and Trade

Law (5th edn, Hart Publishing, Oxford, 2013) 41
Tying commercial law to acts of commerce (as enumerated) is often presented as the objective
approach as distinguished from the subjective approach to commercial law, in France, droit réel ver-
sus droit personnel. This latter approach ties commercial law to the activities of merchants. France has
opted for the objective approach (enumeration of the acts of commerce) . . . In Germany it was the
reverse: all merchants are governed in principle by the commercial code, but only of course for the
activities that it covers . . . So, even in Germany, a definition of commercial acts (Handelsgeschäfte)
comes in, although some activity is considered commercial per se. On the other hand, some com-
mercial activity may also be engaged in by non-merchants, such as the writing of cheques or the
drawing of bills of exchange, which is now covered by a separate statute. Where non-merchants
engage in commercial activity that activity may still be covered by the commercial code, but the
activity is then considered commercial only in a more generic or wider sense. In fact, many provi-
sions of the HGB [Handelsgesetzbuch, or Commercial Code] do not cover specific commercial mat-
ters at all and apply equally to non-merchants. The distinctions are therefore not so clean and clear
in Germany either . . . The real problem in all this, in both France and Germany and in all countries
that still maintain similar abstract criteria for the application of commercial law, is that merchants
are not only engaging in commercial activity but also in non-commercial acts. The consequence is

11  Ernst von Caemmerer, ‘The Influence of the Law of International Trade on the Development and

Character of the Commercial Law in the Civil Law Countries’ in Clive M Schmitthoff (ed), The Sources of the
Law of International Trade (Stevens, London, 1964) 90.

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 Chapter 1: The Nature, History, and Sources of Commercial Law

that neither the concept of merchant nor the concept of commercial activity can be defined exclu-
sively in terms of the other. Hence the confusion.

The transition from planned economies to market economies

What has been described above is based on the concept of a market economy in which, within 1.15
the constraints prescribed by law, parties are free to conclude bargains, to acquire property,
to accumulate wealth, and to pursue the goals of a capitalist society. That was not, of course,
the case in the communist countries in Central and Eastern Europe, where property was
state-owned, private rights were subordinated to the collective interest and the state had a
monopoly over foreign trade, which it exercised through a foreign trade organization. But
with the collapse of communism in those countries, collective rights began to be replaced
by private rights, and planned economies by market economies. It is only relatively recently
that the former communist countries have been able to turn their efforts to restoring and
modernizing their commercial laws. This has been done partly by dusting off old commer-
cial codes and partly by introducing new codes or other legislation. The transition process
has for many years been facilitated by the legal transition programme of the European Bank
for Reconstruction and Development (EBRD), which has devoted particular attention to
legal regimes for secured transactions and insolvency. The EBRD’s model law on secured
transactions, published in 1994, was a pioneer in its field and was later supplemented by its
set of core principles for a secured transactions law and its set of guiding principles for the
development of a charges registry.12 The EBRD has done much to promote the cause of legal
certainty in transition economies and is a strong supporter of the Cape Town Convention on
International Interests in Mobile Equipment.13

B.  The History of Commercial Law

The early and medieval codes
Commercial law in one form or another is probably as old as trade itself. The Code of 1.16
Hammurabi, believed to date back to 1900 bc, contained a number of rules of commer-
cial law, and that code itself derived in no small measure from Sumerian laws made several
centuries earlier. Much of the earlier content of commercial law remains shrouded in mys-
tery. What we do know is that its history is a story of constant reinvention of the wheel.
The Italians are generally credited with the creation of the bill of exchange in the Middle
Ages, but instruments recognizable as bills of exchange are to be found in clay tablets from
Karkhemish in Assyria as far back as the seventh century bc.14 English law is credited with
the development of the floating charge in the nineteenth century, yet the hypotheca of Roman
law was not so very different. From biblical times trade was both local and international and
was conducted by land, along the great caravan routes linking West to East, including the
elaborate network of roads constituting the famous Silk Road, which ran from the shores of
the Mediterranean through Samarkand in Central Asia to Tunhwang and Changan (Xian)
in China, and by sea from Greece to India. In international trade, commercial law was
closely allied to maritime law, and it is in the field of maritime law that we see one of the

12  All of these are available on the EBRD’s website.

13  Discussed in Ch 14.
14  Wyndham A Bewes, Romance of the Law Merchant (Sweet & Maxwell, London, 1923) 50.

11