By Steven L. Schwarcz. Full Text.
International business transactions increasingly are being conducted under “soft law”—a term referring to non-state rules that may be aspirational or reflect best practices but are not yet legally enforceable. In part, this shift reflects a decline in cross-border treaty-making, which needs widespread consensus and is subject to lengthy negotiations. Soft law’s lack of enforceability, however, is creating uncertainty and undermining predictability. To increase predictability, this Article argues for an innovative use of soft law: as a set of rules to choose as all or part of the governing “law” of business contracts. This use of soft law would be transformational, making the soft law enforceable against the contracting parties and providing a flexible and practical alternative to treaty-making. This Article analyzes whether parties should have the right to choose soft law as governing law and also compares the lesser alternative of incorporating soft law only by reference.