top of page



Uma Sekhar's election to the Governing Council of the International Institute for the Unification of Private Law in Rome marks a groundbreaking achievement, for India, bringing renewed attention to UNIDROIT Principles of International Commercial Contracts (UPICC), a soft law instrument, which over a span of approximately 30 years, spanning from 1985 to 2016, has diligently developed the UNIDROIT Principles. The latest iteration, released in 2016, represents the pinnacle of this continuous development, comprehensively addressing nearly the entirety of general contract law, aimed to facilitate International Contractual Transactions. The contemporary scope of the UNIDROIT Principles is extremely wide in its scope and also goes beyond the issues covered in the already widely used set of Principles for International Transactions given in the Convention on the International Sale of Goods (CISG). Despite this, there exists a prevailing perception that the potential  of the UNIDROIT Principles in transnational contract has not been actualized to its maximum extent. One recognized factor contributing to this phenomenon may be a lack of awareness among parties regarding the extensive scope and potential of the UNIDROIT Principles compared to its counterparts like CISG. However, the limited applicability of the UNIDROIT Principles goes beyond mere lack of awareness. Another facet of this discussion involves parties deliberately avoiding the use of the UNIDROIT Principles due to certain constraints on their applicability, primarily when they intend to resolve their dispute through the traditional court system. In contrast, the UNIDROIT Principles are more adept at facilitating arbitration on the international stage. This acknowledgment is even implied in the 'Model Clauses' for UNIDROIT, which advises parties intending to adopt the UNIDROIT Principles as governing rules for their contract to pair such a choice-of-law clause with an arbitration agreement. This article aims to explore the factors that restrict the application of UNIDROIT Principles when parties opt for dispute resolution through courts. In contrast, it will also highlight the reasons why UNIDROIT is well-suited for facilitating arbitration. Through this exploration, we aim to unravel the dichotomy between UNIDROIT's success in international arbitration and its journey towards wider recognition in domestic legal landscapes.



This section of the piece will explore potential limitations that could lead contracting parties to hesitate in adopting the UNIDROIT Principles when seeking to resolve disputes through traditional dispute resolution forums, such as domestic courts in the countries of either party or the courts of a third country, that the party has chosen in its contract.


§  Ambiguity In Whether Or Not The Unidroit Principles Will Be Enforced In Court

UNIDROIT necessitates that rules of domestic importance, related to public policy, decency, morality, or matters of national significance, take precedence over the interests of multinational contracting parties. Moreover, Article 1.4mandates that if parties have merely incorporated the UNIDROIT Principles into the contract, the determination of the proper law of the contract would still be made based on the Private International Law rules of the forum/court where the dispute is being resolved. Hence, due to the unpredictability and uncertainty in the resolution of disputes, parties might refrain from selecting UNIDROIT as the governing law. This uncertainty stems from the fact that the court may or may not apply UNIDROIT, even when expressly chosen by the parties.


§  Reluctance Of Parties From Common Law Nations To Rely On Unidroit

For contracting parties originating from common law jurisdictions or when the appropriate forum for both parties aligns with a common law legal system, the inclination to reference the UNIDROIT Principles may be diminished due to some noteworthy disparities between UNIDROIT and common law systems such as Article 1.7 of UNIDROIT which envisions the prevalence of "good faith” in contractual obligations which is a civil law and not a common law concept. Courts in civil law countries such as the Australian Court in Aircraft Systems International v. Air Services Australia acknowledge the inclusion of "good faith" within contractual obligations. Conversely, common law systems like the U.K in landmark judgments such as Campbell Discount v. Bridge, differentiated from this principle. A similar inclination of UNIDROIT to civil law also emerges in Article 2.1.22 of UNIDROIT that addresses the intricacies of the "battle of forms" in drafting terms—a concept entirely foreign to common law systems, as well in Articles 7.2.2 and 7.3.4 where UNIDROIT emphasizes specific performance and assurance of contractual obligations as primary remedies in the case of a breach. This is a departure from common law systems, where damages and termination typically constitute the primary remedies. The disparities between UNIDROIT and common law legal systems render UNIDROIT less favourable for contracting parties within the common law framework, since these differences may potentially clash with the domestic laws of the forum where the dispute is being resolved.


When parties invoke the UNIDROIT Principles as the governing rules of their contract, the implications diverge significantly when coupled with an agreement to resolve disputes through arbitration. This section will explore the factors that render UNIDROIT more fitting for adoption when parties are resolving disputes through arbitration.


§  No Obligation to Prioritize Any Specific Law For The Enforceability Of The Arbitral Award

In arbitration, there is no obligation to adhere to a specific national law, particularly in the context of International Arbitration, where arbitrators possess the authority to base their decisions on rules not tethered to any particular domestic legal system. Over the years, this principle has received affirmation through various international arbitration laws. Notably, the Article 28(1) of the 1985 UNCITRAL Model Law on International Commercial Arbitration expressly confirmed that the parties' freedom of choice with respect to the rules pertaining to their contract extends beyond national laws, and encompasses rules of law that are supranational. Thus, the enforceability of an arbitral award remains unaffected even if the arbitrator has based the award on laws of a transnational nature, unlike in courts or domestic forums that would give primacy to the domestic laws of the state or the already established private international law rules of the forum.


§  Comparative Nature of the International Arbitral Process

International arbitrators, given their inherent nature, routinely adopt not only an interest-oriented but also a natural comparative approach to decision-making. This intrinsic comparative orientation is primarily a response to the considerable cultural and legal diversity inherent in international arbitration, surpassing what is typically encountered in domestic courts. For instance, international arbitrators often employ a "cumulative approach" when dealing with conflict of laws problems, justifying their choice of law decision by considering all relevant conflict of laws rules, including those of the arbitration seat and the respective home countries of the parties. This same comparative orientation is evident in cases where arbitrators opt for general principles of private international law over domestic conflict of laws rules. The purpose behind employing this comparative method is primarily aimed at rendering awards more comprehensible and acceptable to the parties involved in arbitration, who frequently come from entirely distinct cultural and legal backgrounds.

This inherent comparative approach of international arbitrators aligns with the objectives envisioned by the creators of the UNIDROIT Principles. As per the official commentary, these principles aim to establish a set of rules that are neutral and balanced, intended for global application regardless of the legal traditions, economic circumstances, or political conditions of the countries where they are to be implemented. This foundational essence of the UPICC is clearly tailored to complement the decision-making process of international arbitrators. Furthermore, due to the comparative nature of arbitration and the fact that international arbitrators are not bound to accord precedence to domestic laws, as mentioned earlier, the distinctions between UNIDROIT and common law systems become inconsequential.



Hence, presently the potential reluctance of parties to integrate UPICC into their contract, despite its broad applicability and comprehensive coverage of nearly all aspects of contract law may be because even after its incorporation to govern a particular contract, it remains subject to the scrutiny of national domestic laws when presented before a court. This limitation is particularly pronounced in common law nations, given the substantial differences that persist between common law and UNIDROIT. Consequently, UNIDROIT as a choice of law achieves its utmost efficacy only when accompanied by the simultaneous inclusion of an arbitration agreement.

Nevertheless, as the UPICC operates as a soft law instrument, its enforceability is not inherently binding. Therefore, the only plausible alteration lies in harmonizing the distinctions between civil law and common law within UNIDROIT in its forthcoming editions, expanding its adaptability in common law legal systems. Apart from this, recent developments signalling a departure from the traditional state-centered approach suggest a potentially promising future for UPICC. A notable advancement is the 1994 Inter-American Convention on the Law Applicable to International Contracts, adopted by Mexico and Venezuela wherein it explicitly mentions, in Article 9(2) and 10, legal sources of a non-national or supra-national nature for determining the lex contractus. Other similar examples, include the adoption of the Hague Principles on Choice of Law in International Commercial Contracts, and the Paraguayan Law in 2015 in some states, which guarantee enforceability of a supernational law to when expressly mentioned by multinational parties in their contract. Within the scope of such Conventions, the inclusion of soft law instruments such as the UNIDROIT Principles could potentially establish them as the governing law of the contract, irrespective of any domestic or state law. This suggests a potential wider application of the UPICC in the future as more countries ratify these Conventions to enhance the efficiency of International Contract Law, extending beyond arbitration to encompass various contexts.

Author: Vania Kapoor

University: O.P Jindal Global University; 3rd Year

Programme: BBA LLB (HONS.)


bottom of page