This article is written by Stuti Modi, from Jindal Global Law School, Sonipat.

Introduction

Good faith is one of the most powerful General Principles of law, overarching an entire legal order. It ensures international legal order in a phase where Customary or Treaty law is not yet shaped. Article 38 (1) (c) of the ICJ Statute directs that the Court “shall apply the general principles of law recognized by civilized nations.” The nature of good faith as an overarching legal principle makes it difficult to define in absolute terms.[1] Hence, the aim of this paper shall not be an attempt to define it but rather to describe and exemplify its place in international law.

Good faith in various subject areas of Public International Law

Good Faith in Sources of Law

• Treaties

As held by the ICJ in the Nuclear Test Case “One of the basic principles governing the creation and performance of legal obligations is good faith. Trust and confidence are inherent in international cooperation, in particular in an age when this cooperation in many fields is becoming increasingly essential. Just as the very rule of pacta sunt servanda in the law of treaties is based on good faith, so also is the binding character of an international obligation. Thus, interested States may take cognisance of unilateral declarations and place confidence in them, and are entitled to require that the obligation thus created be respected.”[2] Hence, based on good faith, the ICJ has found that that a State can be bound by a unilateral act alone like a public statement made by a State, with an intention to be bound, can create legal obligations, which could otherwise only be created through a treaty, by imposing the legal maxim of pacta sunt servanda.

Moreover, Article 18 of the VCLT of 1969 reads as follows: A State is obliged to refrain from acts which would defeat the object and purpose of a treaty when: (a) it has signed the treaty or has exchanged instruments constituting the treaty subject to ratification, acceptance or approval, until it shall have made its intention clear not to become a party to the treaty; or (b) it has expressed its consent to be bound by the treaty, pending the entry into force of the treaty and provided that such entry into force is not unduly delayed. It facilitates creation of a bond of trust among the concerned states, such that no one of these states, in a disloyal manner attempt to defeat the object and purpose of the treaty while it is not yet in force and thus not yet legally executory. It imposes a duty upon the state to formally notify that it renounces ratification to the treaty incase the State does not want to participate any more to the treaty it has signed but not yet ratified. Furthermore, good faith is adhered to by ensuring protection of legitimate expectation of a minimally loyal behavior along with protection of the object and purpose of a transaction against frustration by unilateral acts of some state is ensured.

In addition, Principle of estoppel forbids a state which has applied a treaty for a prolonged time-span and thereby created legitimate expectations that it considers the treaty applicable and also reaped advantages from the application of the treaty; to plead at its discretion that the treaty had not been validly ratified. As can be seen, good faith as protection of legitimate expectations operates here as a sort of substitute principle of effectiveness by recognizing ‘ratification by conduct’.[3]

Furthermore, Article 45 of VCLT concerning Good Faith and the Loss of the Right to Claim the Invalidity of a Treaty, deals with applying estoppel or acquiescence, in order to protect legitimate expectations and treaty stability. Real intention is not necessary when state behaves in a certain way, they are considered by the virtue of good faith to be bound and acceptance is thus objectively imputed, if at all. Legally, this can manifestly be called acceptance. This is supported by a legal maxim that a state should not benefit from its own contradictory behavior.[4] Acquiescence to maintaining a treaty has been applied under customary international law a long time before its codification in Article 45 of VCLT.

The two main aspects while Interpreting Treaty are: (i) The primacy of the spirit of the treaty over an excessive attachment to the black-letter wording; and (ii) the search for a reasonable interpretation, in the sense of what an honest and reasonable party could and should have understood with regard to the text as it has been adopted.[5] These aspects are in line with principles of good faith and prevents exploitation of parties to a treaty.

There are certain legal norms flowing from good faith which impose obligations on the treaty parties in the Execution Phase. These duties extend beyond the mere interpretative aspects mentioned above. There are different types of duties including the General Duty of Cooperation,[6] The Duty not to Defeat the Object and Purpose of the Treaty after its Entry into Force[7] and the Obligations of Rectitude.[8]

• Customary International Law

In the continuous process of demand and response, normative patters emerge through the creation of legitimate expectations as to future conduct, and thus through legal instruments such as reliance, acquiescence or estoppel. Ultimately, all these institutions are rooted in the doctrine of good faith as the depositary of the Reasonable Expectation Doctrine. However, the reasonable expectations theory, cannot purport to provide a sufficient explanation for the formation of all customary rules. This is manifest for the axiomatic customary rules at the apex of the system (pacta sunt servanda); but it is also true for a series of other rules, like customary rules hardening into existence in the course of a formal codification process. The formation of customary law is too multi-faceted and complex a process to be caught up in one-size-fits-all.

Good Faith in Jurisdiction of States

Jurisdiction or competence is a legally recognized power or duty to do something which has been reiterated in Island of Palmas case (1928), where the rights conferred by sovereignty are matched by the duty to protect the rights of other states in the territory where that state enjoys its sovereignty.[9] There are several issues with regard to the creation and loss of jurisdiction, which are based on, or at least trigger, considerations of good faith. Some of them flow from the notion of reliance on good faith (legitimate expectations), as is the case of ‘acquisitive prescription’. While others flow from the necessary link between the exercise of a competence and the aims for which it was granted, as in the notion on abuse of rights. In other words, good faith displays two main functions in the context of competences, that is, the protection of legitimate expectations and the protection of aims and purposes.

Good Faith in Law of International Organizations

• Article 2, § 2 of the UN Charter

According to the letter of article 2, § 2, the Members undertake to ‘fulfil in good faith the obligations assumed by them in accordance with the present Charter’, and this with a certain aim being ‘in order to ensure to all of them the rights and benefits resulting from membership’. It becomes more understandable if one considers that the obligation of good faith reflects customary international law. Moreover, other subjects than states are also bound by this principle. Thus, good faith is a principle from which duties flow for all the organs of the UN.[10] The principle of good faith allows the organs of the organisation the shaping of flexible duties and expectations with regard to member states in an attempt to find solutions to major or minor issues of contention, and sometimes even to major constitutional crises.[11]

• International Administrative Law

The protection of staff members of international organisations has produced an important branch of international law, called administrative international law. As was stated by the Court of Justice of the European Communities in the Lachmüller case of 1960, the principle of good faith dominates the contractual relationships between the organization and the staff member.[12] We therefore find all typical aspects of public law good faith in this area of international jurisprudence namely the protection of legitimate expectations, the consequences flowing from acquiescence and estoppel, the prohibition of abuse and arbitrary action and the prohibition of misuse of authority.

• International Commercial and WTO law

Commercial law is heavily dependent on notions of legal certainty and confidence between the contracting parties. No one engages into investments and commerce without some guarantees on the foreseeability of action and on concomitant protection of his economic interests. Thus, well before the WTO was created, international commercial law and arbitration practice relied on the principle of good faith.[13] The principle of good faith has founded in this subject area the various rules such as the doctrine of legitimate expectations; doctrine of abuse of rights; estoppel; pre-contractual duties; in analogy to article 18 VCLT, 1969; the duty to negotiate in good faith gave rise to similar concretizations as in general international law. Good Faith also directs the interpretation and execution of contracts; as well as the withdrawal from contracts; there is a good faith duty to attempt to mitigate the amount of damage suffered through an unlawful act by taking reasonable measures. Moreover, a party is not allowed to profit from its own wrong. There exists duty to cooperate to the administration of evidence in arbitral procedure and the parties shall not undertake acts that aggravate the dispute or prospectively hamper the execution of the final judgment.

Good Faith in the Law of International Responsibility

It has been claimed that the whole law of international responsibility is but a manifestation of the principle of good faith taken as an expression of pacta sunt servanda and obligatio est servanda.[14] This is an extremely broad statement and if followed, it could be said that the whole legal order based on agreements and practice is ultimately but an expression of the principle of good faith. However, there are certain principles on which the responsibility relies-

1. Ultra Vires Responsibility- The criterion of reliance on good faith is dependent upon the criterion of action in ‘capacity’. But the solution finally chosen is not based entirely upon that principle. Other aspects than simple apparent authority is taken into consideration for deciding whether an agent or organ acted in ostensible authority.
2. Exceptions to the Exhaustion of Local Remedies Rule- The exceptions to the rule of Exhaustion of Local Remedies is based on the conception of good faith. The three exceptions include Inexistence or Lack of Effectiveness of the Local Remedies, Official Assurances on the Availability of Local Remedies and other situations of Estoppel.
3. Clean Hands Doctrine- The doctrine of clean hands has considerably declined in the modern case law. The ICJ has for itself refused to apply this doctrine outside the context of diplomatic protection, for example when the US claimed that a case brought by Nicaragua and leading to two judgments of 1984 and 1986 should have been declared inadmissible on account of the ‘dirty hands’ or ‘unclean hands’ of Nicaragua.[15]

Good Faith in the Law on the Peaceful Settlement of International Disputes

The law for the peaceful settlement of international disputes rests on two pillars being the principle of cooperation and the principle of consent. The principle of cooperation is concerned since the attempt at settlement gives rise to some extent to a common process, like a judicial procedure, which can be a success only if there is a minimum of loyalty and coordinated effort. The principle of consent is relevant since all the means for settling international disputes rest ultimately on the acceptance of the states involved. In both contexts, the principle of good faith plays a major role: in the context of cooperation for the protection of the common finalities in the process; in the context of consent as a limitation on the true will of a subject in favor of considering the objective meaning of a certain conduct and what other subjects could and should have expected on the basis of such conduct. Thus, as has been said, the principle of good faith dominates the subject area of the pacific settlement of international disputes. This is facilitated by ‘negotiations in good faith’, Provisional Measures by ways of pendente lite, prohibition of abuse of procedure, Prospective Overruling, Execution of Arbitral and Judicial Awards.   

Good Faith in the International Law of Investments

• Protection of Legitimate Expectations (PLE)

Its formal basis is the principle of good faith and the Fair and Equitable Treatment (FET) clause, or an analogy to common principles of municipal administrative laws. The principle of PLE has been applied mainly in three contexts being Contractual Arrangements, Informal or Formal Representations and General Regulatory Framework under Municipal Law.

• Prohibition of Abuse of Procedure

The principle of abuse of procedure applies to the cases where the investor restructures his assets by the creation of new corporations, by acquiring a new corporate nationality which allows the application of a Bilateral Investment Treaty (BIT)[16] with the sole aim of getting access to arbitration. If a purportedly new claim is substantially the same as a previous one and is resubmitted under some circumventing legal constructions (transfer of the claim to another entity), it will be dismissed under abuse of procedure.

Good Faith in the Law of Armed Conflicts

Good Faith along with playing a significant role in the law of peace, also contributes significantly to the law of armed conflict. The main provision on perfidy is today article 37 of Additional Protocol I of 1977 to the four Geneva Conventions of 1949. By the said provision, it is prohibited to kill, injure or capture an adversary by resort to perfidy. Moreover, acts inviting the confidence of an adversary to lead him to believe that he is entitled to, or is obliged to accord, protection under the rules of international law applicable in armed conflict, with intent to betray that confidence, shall constitute perfidy. Good faith has to play an essential role in this context too.

The Interrelation of Good Faith with Sovereignty

The principle of internal sovereignty has been understood as the supreme authority of a State within its territory;[17] while the external sovereignty is the dimension that pertains to the international rights and duties of a State in relation to other States. In 1927, the PCIJ developed the Lotus principle,[18] which stated that good faith elements to a State’s conduct has a limiting effect on its external sovereignty. Accordingly, a state might have its supreme authority or sovereignty limited when aspects of good faith come into play, and these aspects necessitate behavior that contravenes what a state might otherwise want to do.

Conclusion

From the above discussion, it can be safely inferred that the main function of good faith includes protection of the legitimate expectations of the subjects of law and search for stability, legal certainty and foreseeability and protection of the object and purpose of legal processes against excessive unilateral action jeopardizing the common processes and interest. The principle further prohibits abusive and arbitrary action, notably the use of legal entitlements for aims and purposes alien to their grant and harmful to others or to the collectivity at large. As international law becomes more fragmented and dispersed in ‘self-contained’ regimes, the role of good faith will extend and create more permutations of this limitation, as, fundamentally, good faith acts to give legal value to the expectations that States have in the actions of other States. Good faith might therefore not be readily definable in abstract terms, it is however indispensable.

References

[1] William Tetley, ‘Good Faith in Contract: Particularly in the Contracts of Arbitration and Chartering’ (2004) 35 J Mar L & Com 561, 563.

[2] Nuclear Tests Case I.C.J. Reports (1974), p. 253 para 46.

[3] Military and Paramilitary Activities in and Against Nicaragua (Jurisdiction and Admissibility) (1984) ICJ Reports 413 – 15.

[4] Vienna Convention on the Law of Treaties, A Commentary (Berlin, 2012) 765.

[5] North Atlantic Coast Fisheries (1910) XI RIAA 187, 188. 

[6] Rainbow Warrior Case (1990) 20 RIAA 215.

[7] Military and Paramilitary Activities in and Against Nicaragua (Merits) (1986) ICJ Reports 135ff. 

[8] Fisheries Jurisdiction (UK v Iceland, Jurisdiction) (1973) ICJ Reports 15– 16,  § 28 – 29.

[9] Island of Palmas (1928) II RIAA 839.

[10] A Verdross and B Simma, Universelles V ö lkerrecht, 3rd edn (Berlin, 1984) 47.

[11] Kolb Rober, Good Faith in the Law on the Peaceful Settlement of International Disputes, (1^st edn, 2017).

[12] CF Amerasinghe, The Law of the International Civil Service, vol II (Oxford, 1988) 682.

[13] Palbalk Ticaret v Norsolor (1979) 29 Revue de l ’arbitrage 530.

[14] Lukashuk,  ‘Introduction’, in M Bedjaoui (ed),  Droit international— Bilan et perspectives, vol I (Paris, 1991) 320.   

[15] Military and Paramilitary Activities in and Against Nicaragua (Merits) (1986) ICJ Reports 392ff. 

[16] Phoenix v Czech Republic (2009) ICSID/ARB/06/6.

[17] Customs Regime between Germany and Austria (Advisory Opinion) [1931] PCIJ Rep Series A/B 57.

[18] The Case of the SS Lotus (France v Turkey) (Judgment) [1927] PCIJ Ser A No 10 4.

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