Good Faith in Exception Clauses: An Abus de Bonne Foi?

Abstract The decisive question in international investment law is the following: what is the proper balance between investor rights and regulatory freedom? Exceptions are an important lever in defining that balance. However, their efficacy has been limited by investment tribunals in recent years: while Eco Oro affirmed a duty to pay compensation for justified measures, the tribunal in Seda subjected a self-judging exception clause to a good faith control, the implication being that its invocation could constitute an abus de droit and hence be ineffectual. This amounts to an extra ‒ unwritten ‒ check on the discretionary powers of states. The Seda ruling is of systemic importance because of the way it separated a provision’s self-judging nature from its justiciability. This article uses Seda as a reference point to explore the operation of good faith within exception clauses and attempts to elaborate a systematic approach. Three constellations can be distinguished: an explicit exclusion, an explicit incorporation, and an implied good faith requirement.