Elements of Good Faith in Legal Systems
(Chapter 4 in Good Faith in International Law, by J.F. O’Connor
The principle of good faith probably receives more unqualified acceptance than any other in international law. Grotius concluded his great work on the system of the law of nations with’ Admonitions on behalf of Good Faith and Peace’, and left his readers in no doubt of his conviction that good faith sustained the society of states.1 More than three hundred years later, Mr Yepes of Colombia reminded the members of the International Law Commission, who were considering the law of treaties, that Article 2, paragraph 2 of the Charter of the UN made good faith the supreme rule of international life, and he urged the members of the Commission to draw all the possible conclusions from that principle.2 Declarations by Statesmen, judicial pronouncements and the teachings of the most highly qualified publicists all accept or refer to this principle. Dr Mann assures us that it ‘unquestionably pervades public international law’.3
Professor Schwarzenberger included good faith in his rigorously selected catalogue of seven Fundamental Principles of International Law.4 He concluded that the inductively verified rules from which this fundamental principle is derived are confined to:
1 A duty to interpret and execute consensual (and, within their limits, duly communicated unilateral) engagements in good faith.
2 The interpretation as relative rights of such rules of international customary law as form part of jus aequum.
3 The interpretation of other rules as absolute rights or jus strictum or in accordance with the ethical minimum standards laid down specifically in such rules. The arbitrary or unreasonable exercise of such absolute rights is not illegal, but an unfriendly act.
He also recognized that absolute rights tend to be transformed into relative rights on the international judicial level ‘in the course of a balancing process in which considerations of good faith and reasonableness playa prominent part’.5 But he rejects the notion that there is a general rule of international customary law prohibiting the abuse of rights. Such evidence as exists for the prohibition of bad faith and unreasonableness appears to justify merely more limited rules.6
The principle of good faith is included by Professor Bin Cheng in his study of-general principles of law applied by International Courts. and Tribunals, and he devotes three chapters to good faith in treaty relations; good faith in the exercise of rights (the theory of the abuse of rights); and ‘other applications of the principle’.7 Like Professor Schwarzenberger, he does not attempt to provide a definition of this principle, but in the three chapters he provides many illustrations of the application ‘of this essential principle of law in the international legal order’ by means of international judicial decisions.8
Unlike Professor Schwarzenberger, he considers that there is a general rule or theory of abuse of rights which is recognized both by the Permanent Court of International Justice and the International Court of Justice, and that it is merely an application of the principle of good faith to the exercise of rights.9
Professor Cheng does not distinguish between good faith as a general principle of law-and good faith as a general principle of international law. because he concludes that in relation to this, as well as all the other general principles examined in his work, it is of no avail to examine the possible distinction. It is precisely of the nature of these general principles that they belong to no particular system of law, but are common to them all.10 Consequently, his ‘other applications of the principle’ (Chapter 5) are largely examined under rubrics familiar in legal systems generally such as allegans contraria non est audiendus, nullus commodum capere de sua injuria propria and fraus omnia corrumpit.11
Apart from the section in Professor Cheng’s book on the General Principles, there is no other study of good faith in international law which attempts to set forth the nature, scope and function of the principle generally. There is, however, a considerable volume of literature referring to good faith in relation to treaties,12 which is hardly surprising if, as the highest international tribunal has asserted, the very rule of pacta sunt servanda in the law of treaties is based on good faith.13 The dominant role of treaties in modern international law, and the consequent relative diminution in importance of other law-creating processes, has led to such an emphasis on good faith in treaties that the principle often appears to be virtually confined to the rule pacta sunt servanda and other doctrines directly associated with the obligation of treaties such as rebus sic stantibus. Professor Cheng’s illustrations of the application of good faith in other than treaty relations is a valuable indication of the wider scope of the principle in international law.
Characteristic Rules and Elements of the Principle of Good Faith
Foremost amongst these is the rule pacta sunt servanda, the importance of which in relation to treaties has already been mentioned. This norm has constituted ‘since times immemorial the axiom, postulate and categorical imperative of the science of international law’.14 Kunz explains its meaning as ‘the institution, by general international law, of a special procedure – the treaty procedure – for the creation of international norms’ 15 and, while undoubtedly a positive norm of international law ,he admits that the meaning of the norm is controversial.16
Chailley observed that the rule originated in the Roman Civil law and from it was transferred to international law and applied to treaty engagements between States.17 Perhaps (as Mr Maresca, the Italian delegate at the United Nations Conference on the Law of Treaties in Vienna said) if Latin were still the language of diplomacy, the mere statement of such a basic rule as pacta sunt servanda would have sufficed as the text of what became Article 26 of the Convention on the Law of Treaties, 1969.18 However, as is clear from the record of the disagreements about the precise meaning and scope of pacta sunt servanda which emerged at that Conference.’19 the International Law Commission was justified in expressing the principle contained in the maxim more fully, and its Draft Article included a specific reference to good faith.20 The Commission’s Commentary on the article pointed out that there is much authority in the jurisprudence of international tribunals for the proposition that in the present context the principle of good faith is a legal principle which forms an integral part of the rule pacta sunt servanda,21
The origins of the link between pacta sunt servanda and good faith were referred to above.22 and despite any modern doubts about the precise meaning of the Latin maxim, it is beyond question that it has been associated with the Roman concept of bonafides and its equivalents in other societies for millenia.23 That association of good faith with the keeping and manner of performance of treaties is one of the oldest and most clearly established of the major elements of the principle in international law.
Another major element is the association of good faith with the notion of abuse of right. Whether the arbitrary or unreasonable exercise of an absolute legal right is unlawful – or, as Professor Schwarzenberger believes, merely an unfriendly act,24 may be debatable, but there can be little serious disagreement with the proposition that the notion of abuse of right is an important element in the principle of good faith in international law.
The theory of abuse of rights, abus de droit, recognised in principle both by the Permanent Court of Intemational Justice and the International Court of Justice, is merely an application [of the principle of good faith] to the exercise of rights.25
The Roman Law bona fides is the basis of the doctrine of abuse of right in the civil law,26 and although the doctrine is not formally applied in common law systems as a general principle, international lawyers from the common law tradition have not denied the applicability of the doctrine in appropriate cases in international law.27 For present purposes, the expression ‘abuse of rights’ may be taken to include cases where a legal right – whether arising from a treaty or by virtue of customary rules – is exercised arbitrarily, maliciously or unreasonably, or fictitiously to evade a legal obligation. Thus stated, it is hardly surprising that abuse of rights should be seen as merely an application of good faith to the exercise of rights.
In addition to pacta sunt servanda and abuse of rights, good faith in international law is also associated with various kinds of action or conduct which, in municipal legal systems, are often subjected to specific rules. These rules reflect standards of ethical or equitable behaviour in a society, which are considered to be so important that they are supported by the legal institutions of the society. The range and development of legal rules of this type inevitably vary between different municipal legal systems, and differences in their formulation and classification, for example, procedural or substantive, add further to the difficulty of identifying them precisely. The extent to which they may then have been incorporated in or translated to international law could hardly fail to give rise to differences of opinion, and firm conclusions about this could be made only after a detailed and systematic study of the corpus of rules of the system. As regards the principle of good faith in international law , it is perhaps sufficient at this point to identify some major examples of unethical or inequitable behaviour which have been subjected to scrutiny and dealt with in a manner which closely parallels (even as to terminology) municipal law systems. Here, however, it is suggested that the parallels arise because of the common origin of the deciding principle – good faith – rather than as a result of importing into international law, private law institutions ‘lock, stock and barrel’ ready made and fully equipped with a set of rules.28
It is because certain actions or conduct in international relations, are regarded as unjust, dishonest, unfair or unreasonable that they are condemned in certain circumstances by international law. As in municipal law, such actions or conduct are considered to be ‘contrary to good faith’, and the concept of good faith in international law includes a strong element of rejection of injustice, dishonesty, unfairness or unreasonableness. There may be dispute about. the precise. nature, scope and function of the rules which reflect that rejection, but there is little dispute about the fact of rejection. In the Case concerning the Temple of Preah Vihear (Cambodia v. Thailand), Merits29 the International Court of Justice rejected conduct by Thailand which amounted to the withdrawal of a clear and unequivocal representation it had made to Cambodia (and on which Cambodia had relied). This application of a view based on common sense and common justice, and which is expressed in the maxim allegans contraria non est audiendus,30 is often referred to in both international and municipal law as ‘estoppel’, ‘preclusion’, ‘forclusion’, ‘acquiesience’ or ‘recognition’, but the basis of it is the perception that it is contrary to good faith to allow a party to blow hot and cold – to affirm at one time and deny at another31
Earlier, the Permanent Court of International Justice, in two cases,32 rejected the essentially unjust, dishonest and unfair act of seeking to take advantage of one’s own wrong, expressed in the maxim nullus commodum capere de sua injuria propria. ‘Fraud is the antithesis of good faith, and indeed of law .. .’33
It is hardly necessary to state that in international law as in legal systems generally, fraudulent or deceitful conduct is associated with lack of good faith. In the praetorian system in Roman Law, it became common for the praetor to include in the formula a direction to the judge to decide according to ‘good faith’ or in a manner which would prevent ‘fraud’.34 Dolus in Roman Law provided a defence in an appropriate case even before the development of the good faith actions,35 and fraud had, and continues to have, a special and separate role in both civil law and common law systems. The International Law Commission agreed that fraud is a concept which is found in most legal systems, but that the paucity of precedents in international law meant that there was little guidance to be found either in State practice or the jurisprudence of international tribunals as to the scope to be given to the concept. The Commission concluded that it would suffice to formulate the general concept of fraud in relation to treaties, leaving its precise scope to be worked out in practice and in judicial decisions.36 In modern international law, fraud and corruption or coercion of the representative of a State to procure a State’s consent to an agreement,37 are not major factors, but in Roman Law, and in the classical writers of international law, such manifestations of injustice, dishonesty and unfairness were stigmatized as contrary to good faith and might vitiate a transaction.
The original narrow obligation to keep one’s word, expressed in the maxim pacta sunt servanda, was enlarged through philosophical and religious influences38 to embrace higher standards of ethical behaviour. The elaboration of the concept of bona fides in Roman Law as involving a legal obligation to do what a decent, honourable, fair and conscientious man would do in particular circumstances39 contributed very largely to the association of good faith, in a wider ethical sense, with pacta sunt servanda. In relation to keeping promises and agreements, good faith acquired the meaning of not only the obligation to observe literally the undertakings given, but also the advertence to the real intentions of the parties or to the ‘spirit’ of the agreement.40 It also required that the promise or agreement itself should have been the result of real consent and not vitiated by for example, force or fear.41
An important element in the concept (which is also traceable directly to Roman Law) is that good faith adds a dimension to strict law which enables a court to take into account circumstances and considerations of fairness which might otherwise be excluded.42 Reasonable belief or honest mistake of fact might, therefore, be taken into account as defences, or might operate to reduce liability for wrongful acts.43
The canonist conception of good conscience added an individual dimension to the community aspect of bona/ides in Roman Law. As Sohm noted, the Roman jurists applied the demands of good faith in human dealings to individual cases.44 The standard of good faith applied was the community standard. The canonists, on the other hand, emphasized personal conscience, and for them, good faith and personal good conscience were the foundations of pacta sunt servanda and thus, even nude pacts were binding.45
The association of good faith with individual conscience, which was particularly marked in the development of Equity in English Law,46 is still very marked in cases where the actual intention or state of mind of a party is relevant. Actual knowledge of particular circumstances, for example, that the seller of goods had a defective title, clearly involves questions of conscience. Good (or bad) faith in such cases is judged in accordance with the individual’s conscience, but as a practical matter, it may be difficult to convince a tribunal of personal good faith and good conscience if the conduct in question has significantly deviated from what might reasonably have been expected, having regard to common usage or the community standard of good faith in that situation.
The special association of good faith and conscience in the development of English Equity jurisprudence, already referred to, is not paralleled in civil law systems, but there is a general association of good faith with ‘equity’ in all legal systems.47 In that context, ‘equity’ has the meaning which it had for Ulpian when he laid down the doctrine of equity or good faith in contractual obligations.48 This was seen as opening up a wide discretion for the judge to apply the exceptio doli to actiones stricti juris, and it was also seen as the basis of such moral or natural justice-based legal doctrines as clausula rebus sic stantibus, unjust enrichment and abuse of rights.49
The association of good faith with moral obligation gives rise to one of the recurring themes in the concept of good faith in legal theory. That is the perception that the obligations of good faith pertain in some way to a ‘higher’ order than the normal obligations of positive law. Suarez, for example, while conceding that the validity of an agreement might depend on compliance with (positive) rules of law, asserts that when any agreement is validly concluded, an obligation of a higher order results. For him, this higher order obligation belongs to natural law.50
In relation to the basic obligation to keep an agreement, the reference to good faith and a ‘higher order’, such as natural law, does not create a problem in as much as the rule pacta sunt servanda is in any case undoubtedly a norm of positive law.51 But in relation to other good faith obligations, the association of good faith with a higher order than positive law may give rise to the view that such obligations, although perhaps morally binding, are not legally binding.52 Although there can be no real doubt about the facts that good faith is associated with morality or ethics, and that there is a moral principle of good faith, this work is concerned with international law and the legal principle of good faith. Thus, we are here concerned only with obligations which are legally binding, and the relationship between ‘moral’ and ‘legal’ good faith, if any, is a matter which might be considered later when confronting the question of the definition of the principle of good faith in international law.
Higher order values like ‘equity’, ‘justice’, and ‘fairness’ are indelibly associated with good faith in German law as a result of the revalorization cases,53 even if the good faith applied in these cases consisted in essence in an appeal to community standards or common usage.54 Similarly, in Swiss law, the determination of whether a party has acted in good faith is decided on principles of justice and equity.55 In many contract cases this simply means determining whether a party by normal standards had acted unfairly or unconscionably by overreaching or sharp practice.
The development of codified good faith in German, Swiss (and to a lesser extent) French law has led to particular national perceptions of the concept which cannot, in the absence of detailed comparative studies, be accepted as generally accepted elements of good faith. For example, the limitation of good faith to a merely interpretative or ‘completion of the legal norm’ function in Swiss law appears to be peculiar to that system, and the assignment by Swiss law of the function of taking into account imperative superior moral standards to abuse of right56 would perhaps be assigned to good faith itself in most legal systems. But disregarding for present purposes differences in national techniques or doctrinal presentations of good faith, there appears to be a common core or general perception of good faith in both civil law and common law systems, that good faith is concerned with the introduction of superior moral standards such as ‘justice’, ‘equity’, ‘fairness’, ‘good conscience’ into legal norms. The development of Article 242 of the German Civil Code57 to introduce justice and fairness into contracts in a situation where the contract or the general law did not provide for the situation is not essentially different from French views of the role of Article 1134, para. 3, of the French Code,58 or Swiss views of the role of Article 2 of the Swiss Civil Code.59
In the common law, with its tradition of separate Courts of Equity derived from the jurisdiction of the Chancellor and the Court of Chancery, the perception of good faith as concerned with the introduction of moral standards into strict law is equally, or even more clearly marked. The jurisdiction of the Court of Chancery was based on conscience, and good faith in English law has long been associated with the idea of the Chancellor intervening in the normal legal process to ensure that a party acted ‘equitably’ or ‘fairly’ as required by good conscience.
The development of separate Courts of Equity and Common Law in England eventually produced separate bodies of equitable rules and common law rules. The equitable rules became as rigid and technical as the common law rules, and the ‘conscience’ upon which the rules of equity were based moved largely from the desire of the Chancellor ‘to correct men’s consciences for frauds, breaches of trust, wrongs and oppressions of whatever nature’ to a more generalized concept of ‘the conscience of the realm’.60 The origin of the rules of equity in a requirement of good faith to which the convenient label of conscience was attached, and the supremacy accorded to equitable rules in the fused system of law and equity has resulted in a corpus of ‘normal’ rules in English law which, it might be said, were inspired by the general concept of good faith. But in addition, there is a principle of good faith in English law which may supplement or supersede the normal rules.61
From the foregoing it is possible at this stage to suggest at least that the principle of good faith in international law is a fundamental principle; that it is a legal principle integrally associated with the rule pacta sunt servanda; that, as in municipal law, it is directly associated with fairness in the exercise of legal rights and the rejection of dishonest, unfair or unreasonable conduct. Further conclusions on the nature, scope and function of the principle must await the examination of good faith in international law.
23 See e.g. Phillipson, 1 The International Law and Custom of Ancient Greece and Rome (1911), pp. 387-388 (China), p. 391 (Greece and Rome). There is a strong emphasis on pacta sunt servanda and bona fides in the 4th century BC work of Kautilya–Arthasastra in relation to treaty-making between sovereign rulers in India and Further India, C.H. Alexandrowicz, ‘Kautilyan Principles in the Law of Nations’, B.Y.I.L. (1965-66) 301 at p.308
36 Y.B.I.L.C., 1966, II, p. 244; Article 49 of the Vienna Convention on the Law of Treaties 1969 states: ‘If a State has been induced to conclude a treaty by the fraudulent conduct of another negotiating State, the State may invoke the fraud as invalidating its consent to be bound by the treaty’.
51 The rule pacta sunt servanda existed in, and between ancient civilizations and was considered to be ‘obligatory and inviolable’, De Taube (1930), vol. 32, p. 317 et seq., and see Whitton, 313 International Conciliation, p. 398.
53 The collapse of the German currency in 1923 and the subsequent revalorization of obligations by German courts is discussed inter alia, by Cohn (1968), vol. 1., pp. 60 et. seq.; Nussbaum (1950), esp. p. 206 et. seq.; Dawson (1968).
58 Art. 1134, para. 3, reads: ‘Agreements lawfully formed take the place of law for those who have made them. They cannot be revoked except by mutual consent or on grounds allowed by law. They must be performed in good faith.’ (Trans. von-Mehren-Gordley (1977)).
59 Art. 2 reads: ‘Every person is bound to exercise his rights and fulfill his obligations according to the principles of good faith. The law does not sanction the evident abuse of a man’s rights.’ (Trans. Williams (1925)).