Generalizing the Law Merchant Story

Lex Mercatoria, or the “Law Merchant,” provides classical liberals and libertarians with an important example of effective law without coercive state authority. Within the legal and classical liberal literaturse, Lex Mercatoria usually refers to the privately produced, privately adjudicated and privately enforced body of customary law that governed virtually every aspect of commercial transactions in Europe and the Middle East by the end of the eleventh century. Many writers suggest that this system of law was largely displaced in Europe by the end of the seventeenth century, but beginning in the mid-1950s, Lex Mercatoria also began to be applied to certain aspects of modern international commercial law (De Ly 1992: 1). The argument presented below, however, is that the historical Law-Merchant story has considerable more relevance today than its implications for international commercial activity.. The fact is that a law merchant arises any time that a commercial system begins to evolve, so many of the events underlying the emergence of commerce after the “dark ages” of medieval Europe are being replayed as Eastern Europe emerges from the dark ages of communist rule. The same is true in parts of Asia as a commercial sector attempts to emerge in the face of ongoing totalitarian political control, and in various parts of Latin American where economies are attempting to escape the effects of long periods of political turmoil and totalitarian governments. Furthermore, the emergence of a law merchant is likely to be necessary for the successful evolution of a commercial society into a strong and healthy market economy.