0.01  Referring existing or future disputes to international arbitration primarily rests on the will of the parties. In that sense, international arbitration has a clear contractual and consensual nature.¹ This implies that international arbitration is regarded as an exceptional mechanism for the settlement of disputes.² While this was the prevalent perception of international arbitration, it has drastically changed.³ It is now generally recognized that international arbitration is the preferred method for resolving disputes in international trade,⁴ and the normal means for resolving commercial and investment disputes.⁵

0.02  As the size and complexity of international commercial and investment transactions continue to grow, so will transnational business disputes. Thus, the dire need for appropriate and efficient dispute resolution schemes remains a global reality.

(p. 2) 0.03  Any major concern that is left unremedied may grow to become an arbitral nightmare that can adversely impact the arbitral process and induce distrust and disbelief in the system.

0.04  In recent years, international arbitration has been plagued by different forms of procedural abuse. Abusive practices developed by parties may not only cause paramount prejudice to their opposing parties, but can also undermine the fair resolution of disputes and frustrate the administration of arbitral justice.

0.05  Thus, we have witnessed cases where parties restructure their investments in an abusive manner by altering one of its features, not for commercial purposes but to gain access to ICSID arbitration.⁶ Similarly, the rise of abusive parallel arbitral proceedings and the undesirable risk of inconsistent decisions may pose an impediment to standards of fairness, requirements of due process, and the broader notion of administration of justice.⁷

0.06  There are pre-existing classic tools and legal rules at the disposal of arbitrators that can be utilized to prevent abuse and administer arbitral justice. However, these tools have a defined and narrow scope, are inherently rigid in their application, and fail to remedy different forms of abuse.

0.07  A general principle of abuse of rights is vital in international arbitration. The virtue of a single theory with a wide scope and an overarching premise is that it is a principle which involves equity considerations, enjoys the flexibility of general principles of law, and can be used to address different abusive behaviours.

0.08  The importance of endorsing a general principle of abuse of rights in order to ensure the good administration of justice is not only appealing because of its comprehensiveness and its ability to remedy forms of abuse that other rules fail to remedy. As shall be discussed, its potency stems equally from the fact that it is a general principle that can also remedy any form of abuse that is not currently regulated by a specific rule.

0.09  The book discusses the principle of abuse of rights in international arbitration. Specifically, it explores the possibility of developing and applying the principle of abuse of rights as a general principle of law in international commercial and investment arbitration to tackle different forms of substantive and procedural abuse.

0.10  The principal issues/questions addressed in this book are:

• •  The meaning of abuse of rights;

• (p. 3) •  The recognition, or lack thereof, of a principle of abuse of rights in different legal systems;

• •  The essential elements of abuse of rights and the conditions sine qua non for its application;

• •  Limitations/concerns of the principle of abuse of rights;

• •  The legal basis of abuse of rights in international commercial and investment arbitration and whether it is applied as a general principle of substantive and procedural law;

• •  Whether it is considered an overriding principle of substantive and procedural law in international arbitration;

• •  Justification for the principle’s application in international arbitration and its importance in ensuring the administration of arbitral justice;

• •  An examination of how it ensures the administration of arbitral justice.

0.11  The study of abuse of rights has not been subject to much legal analysis in English legal literature. This is frustrating, given that a principle so pivotal in the civil legal systems, and equally an intrinsic part of international law, has not stimulated the interest of jurists in that part of the world.

0.12  Moreover, the study of the principle of abuse of rights and its application in international arbitration is far from being a recognized topic of discussion in the law and practice of international arbitration. While recent trends in arbitral practice may reveal a frequent, albeit scattered, use of the principle as shall be discussed in this book, its application has been left to the judicial whim of arbitral tribunals, especially in the absence of any sufficiently detailed analysis where the principle’s core elements have been addressed or its application in international arbitration scrupulously discussed.

0.13  In this section one endeavours to provide an abridged overview of the existing theoretical background on the principle of abuse of rights in general, and a succinct overview on its application in international arbitration in particular.

0.14  Whilst the relevant literature is analysed in each section of the book, this prefatory section is important in order to grasp the current discussion of the issues addressed, to highlight the originality of the study, and to pinpoint its theoretical and practical significance.

0.15  Individuals possess substantive and procedural rights in every legal system. The law protects and enforces any normal exercise of a right.⁸ However, the question arises whether an exercise of a right in an abusive manner may trigger the right holder’s liability. This posits the question: when does an exercise of a right become an abuse of a right?

0.16  In broad terms, abuse of rights denotes the malicious or unreasonable exercise of an otherwise lawful right, or an exercise of a right for a purpose other than that for which it was granted.⁹ According to Hersch Lauterpacht, an abuse of right occurs when a right is exercised in an unreasonable or arbitrary manner in a way that inflicts upon another harm that cannot be legitimately justified.¹⁰

0.17  Many legal systems have sought to design rules to prohibit the abusive exercise of rights.¹¹ Such sanctions are not necessarily imposed for the mere wrongdoing of the individual, but rather to preserve another more important right.¹² Thus, it seems that the gist of abuse of rights comprises the constructive analysis and evaluation of various competing legal rights, where the legislator and/or court, upon prudent consideration, decides to sacrifice one right to preserve another.¹³

0.18  Although abuse of rights is not generally acknowledged in the common law, it is widely recognized in civil law jurisdictions.¹⁴ As shall be discussed below, while some States adopt a strict approach to the principle and limit its application to certain areas of law, others tend to encompass a broader scope, and further extend its application to different legal areas.¹⁵

(p. 5) 0.19  Scholars have different views regarding abuse of rights. Those who deny the validity of the principle argue that it is a vague concept that lacks defined content capable of application.¹⁶ Moreover, as its application traditionally rests on the determination of the motive of the right holder (the subjective element), many have opposed the principle and argued that one’s motive is immaterial.¹⁷ Some also oppose its adoption owing to the fact that it grants extensive discretionary power to decision makers. In this regard, Gutteridge opined that a principle, which leaves it to the discretion of the decision maker to determine the purpose of a right, is subject to ‘grave objection’.¹⁸

0.20  Those who support the need for the prohibition of abuse of rights argue that it: grants courts/arbiters the flexibility needed to deal with the uncertainties and undeterminable variable parameters of which any right bears, aids decision makers in reaching a fair and equitable outcome,¹⁹ and is employed to defeat any attempt to utilize a rule of law for an improper purpose.²⁰ Herch Lauterpacht noted that the prohibition of abuse of rights ‘must exist in the background in any system of administration of justice in which courts are not purely mechanical agencies’.²¹ To its proponents, it is a potent legal tool which precludes ‘summum ius’ (supreme justice) becoming ‘summa iniuria’ (supreme injustice),²² given that it ameliorates the rigidity of legal rules and advocates reasonableness.²³

0.21  A prudent review of scholarly writings and decisions/awards dealing with abuse of rights reveal that it functions either as a curative mechanism or, more prominently, as a corrective mechanism, and aims to ensure the administration of justice.²⁴

0.22  Firstly, whilst all legal systems have articulated legal rules to ensure fairness and the good administration of justice, no legal system exists that has exhaustive legal rules to govern an infinite number of cases and all diversified issues that may arise. In this regard, while rights may be effectively defined in scope and qualified in their reach, it is tenuous to presume that legislators are omniscient, that is, can predict all exceptions and qualifications covered by a given right.²⁵ In these particular cases, abuse of rights may act as a curative mechanism, as it may be employed to grant courts/arbiters the (p. 6) flexibility needed to deal with the uncertainties and undeterminable variable parameters of which any right bears. As stipulated by Joseph Voyame, Bertil Cottier, and Bolivar Rocha:

[T]he great majority of commentators agree on the usefulness of the remedial function of the rules forbidding abuse of rights. Indeed, the legislator is no more infallible today than he was in the past. While the rules he promulgates are becoming increasingly precise and detailed, he cannot foresee every eventuality. Only the proscription of abuse of rights makes it possible to establish the connection between the justice ostensibly guaranteed by positive law and genuine justice.²⁶

0.23  Accordingly, it serves to fill the lacuna that may exist in all legal systems.²⁷ Thus, as shall be discussed below, abuse of rights has been utilized in certain cases to create new contractual obligations to avoid an unjust or inequitable outcome.²⁸

0.24  Secondly, abuse of rights functions as a corrective mechanism, as it softens and ameliorates the rigidity of strict legal rules.²⁹

0.25  The principle has arguably presented elements that were peculiar to the positivistic legal school: courts are bestowed with a parochial right to apply an existing legal provision on a given set of facts.³⁰ With the introduction of abuse of rights, courts are conferred with a rather broad role, that is, to ameliorate the harshness of positive law or contractual provisions.³¹

0.26  The corrective function of abuse of rights is further fortified by the words of the Swiss Federal Supreme Court where it provided that:

The fundamental theory of this article is the recognition that positive legislation is unable to affect in detail all the controversies which may arise in the society of men, and it is equally impossible for it to regulate these controversies in advance. However much the legislator may try to build up a legal structure that shows no gaps in the laws, there will always be special cases in which a rigid application of the statutory principles would lead to injustice, and this the judge is not permitted to tolerate. This happens in particular if individual rights are exercised contrary to good faith. Section 2 of article (p. 7) 2, which denies legal protection to the manifest abuse of a right, forms the necessary amendment to the duty which is set down in section 1 of article 2, namely, to act always in good faith. The purpose of this provision is to either limit or to annul the formal validity of positive laws whenever the judge deems this to be in the interests of substantive justice.³² (Emphasis added)

0.27  On a different note, characterizing and labelling abuse of rights as a term of art is not an easy task. Scholars have engaged in a futile logomachy in this regard.

0.28  Some, influenced by the views of Marcel Planiol, have rejected the use of the words ‘abuse’ and ‘right’, holding that it is a ‘contradiction in terms’ as a right ceases to be given such status when tainted with abuse and consequently, it is futile to speak of it as the abuse of a right:³³

This new doctrine is based entirely on language insufficiently studied; its formula ‘abusive use of rights’ is a logomachy, for if I use my right, my act is licit; and when it is illicit it is because I exceed my right and act without right.³⁴

0.29  This emanates from the perception that one who abuses his rights is no longer within the formal limits of the right, but has necessarily exceeded the limits of that right. Others prefer to use terms such as ‘distortion of rights’, ‘competitive rights’, or ‘conflict of rights’.³⁵

0.30  Regardless of such terminological juxtaposition, it is submitted that, for reasons of convenience and given the scope of the book, the best term to be used is ‘abuse of rights’.

0.31  As a term of art, one may argue that there is no contradiction in terms given the distinction between one’s subjective right (droits subjectifs) and the objective law (droit objectif); the abuse ‘is in accord with such a right, but is against the law in its entirety’.³⁶

0.32  Finally, choosing to employ such terminology equally emanates from reasons of convenience, as it is the term used in the existing literature and it easily depicts the principle’s legal concept and purpose. From a purely logical stance, the main purpose of words is to indicate a specific meaning to those in receipt. If such purpose is effectively (p. 8) satisfied, any debate regarding the use of the words seems of a purely linguistic nature and is futile from a strict legal point of view.

0.33  Despite its historical imbroglio, ‘abuse of right’, as a term of art, largely satisfies its main purpose by alluding its characteristic elements, as a legal construct, to readers.

0.34  An examination of the principle of abuse of rights in different legal systems reveals that the principle’s conditions of application comprise the existence of a right, and that such right ceases legal protection given that it has been abused.³⁷

0.35  In relation to what conduct constitutes an abuse, courts and tribunals rely on different criteria. It is generally recognized³⁸ that abuse is established if any of the following criteria is fulfilled.

0.36  Firstly, abuse is established if a right is exercised with an intent to cause harm. Most scholars and legal systems that recognize abuse of rights endorse this criterion.³⁹ Scholtens held that abuse is established whereby the right holder exercises his/her right with an intention to cause harm to another, and this may be presumed where the exercise brings no advantage to the right holder, or where the benefit derived is minimal and the detriment caused thereby is great.⁴⁰ Other scholars opposed endorsing the subjective element of malice because of the difficulty in proving it.⁴¹

0.37  Secondly, abuse is established if a right is exercised for a purpose other than that for which it was granted. The supporters of this criterion of abuse note that it presupposes that rights do not exist in a vacuum; they are conferred upon the right holder for a specific social purpose. If the holder of the right derogates from its purpose, it may be tantamount to an abuse of right.⁴²

0.38  Thirdly, abuse may be established if one exercises his/her right unreasonably. It is often held that unreasonableness is determined where the right holder exercises the right (p. 9) with minimal serious or legitimate interest,⁴³ or where there is disparity between the interests which are served by its effectuation and the interests which are, or could be, damaged as a result thereof.⁴⁴

0.39  Finally, some also note that abuse may be established if a right is exercised in violation of good faith.⁴⁵

0.40  On a different note, the application of abuse of rights has clearly developed throughout the years. While its scope of application was limited to the area of property law, it subsequently extended to other areas and is now said to have a general application.⁴⁶

0.41  As noted by John Crabb, abuse of rights has been applied in cases pertaining to contract law, law of procedures, including the legal process, the process of appeal, and the execution of judicial decisions, and to family law.⁴⁷ Other scholars equally note that abuse of rights applies in every department of the law.⁴⁸

0.42  Whilst the application of abuse of rights in international arbitration has not been addressed in detail, the growing phenomenon of abuse and procedural misconduct in the context of arbitration is acknowledged by many.

0.43  Parties principally refer their disputes to international arbitration owing to the presumed advantages and benefits that the arbitration system aspires to offer, including procedural efficiency and obtaining a fair resolution of the dispute.⁴⁹ However, the arbitral system is currently subject to challenges and criticism,⁵⁰ owing to the perception that it is failing to accommodate the needs of its users.⁵¹ In recent surveys and empirical (p. 10) studies, users have complained primarily because of costs, delays, and procedural misconduct during the arbitration process.⁵²

0.44  Scholars have noted that different forms of abuse in arbitration may be detrimental to the arbitral system,⁵³ if an effective remedy is not established. To that effect, one scholar emphasized that the arbitral system will self-destruct unless there is recourse against procedural abuse.⁵⁴ Professor Emmanuel Gaillard also acknowledged the rising phenomenon of abuse in international arbitration. He emphasized that parties have developed an exceptional array of procedural abuse, and noted that specific tools need to be developed to prevent procedural misconduct.⁵⁵

0.45  The problem of abuse in arbitration is significant owing to the fact that it is frequently resorted to⁵⁶ and can be employed during any phase in international arbitration.⁵⁷

0.46  This was also confirmed by another scholar who acknowledged that abuse is becoming widespread, is negatively impacting the arbitration system, and may pertain to any right conferred upon the parties by the applicable arbitration rules or laws.⁵⁸

0.47  There is general consensus in legal discourse that the frequent abuse of the arbitral system is detrimental to arbitration and that finding a principle to remedy such abuse would be serving the parties’ interests, the integrity of the arbitral system, and the overall administration of justice.⁵⁹

(p. 11) 0.48  Whilst scholars have carefully accentuated the problem, they have not enunciated the procedural principle that can operate effectively to tackle the different forms of abuse.

0.49  Despite this, there have been clear attempts by commentators and arbitral tribunals to introduce, or revive, the principle of abuse of rights to tackle specific forms of abuse in arbitration, particularly in investment arbitration.⁶⁰

0.50  For example, it is generally acknowledged that the principle is vital to deal with abusive subsequent proceedings in arbitration. Eminent scholars confirm the need to apply abuse of rights to bar subsequent proceedings that fall outside the scope of res judicata.⁶¹ Thus, Audley Sheppard stipulated that:

[W]here the conditions for res judicata are not met, I would suggest that a tribunal nevertheless should consider whether it should not allow the second claim from proceeding, on grounds of abuse of process or abuse of rights.⁶²

0.51  Similarly, in the context of parallel arbitral proceedings, Gaillard recently noted that a principle of abuse of rights is the most promising tool to tackle the problem of abusive parallel proceedings in arbitration, and advocated for this in a number of ICSID arbitration proceedings.⁶³

0.52  Based on the above, it seems clear that abuse of rights has recently gained a pivotal role in the context of international arbitration and its application is slowly gaining momentum. Commentators have raised the application of the principle and arbitrators have been willing to apply it to preclude certain forms of abuse in international arbitration.

0.53  The above analysis reveals that there is an apparent lacuna in this context, where no substantial legal work has been undertaken to: carefully establish the core elements of (p. 12) abuse of rights; determine if it elevates to a general or transnational principle of law; and shed light on its multifaceted functions when applied in international arbitration.

0.54  Moreover, its application as a general principle of law in international arbitration is to be examined. A careful analysis of the possibility of approaching abuse of rights as a general principle of law has serious legal manifestations. Particularly, it enables arbitrators to utilize it to address all procedural tactics, and different forms of abuse, designed to undermine the arbitral process. It also dispenses with the current compartmentalized approach to abusive conduct, where different abusive behaviours fit into different rules or doctrines that are generally rigid and fail to effectively tackle the panoply of abusive practices.

0.55  Additionally, this book addresses a novel aspect of abuse of rights in the context of arbitration. Whilst some may have advocated the applicability of the principle in arbitration, it appears that the legal basis, or the justification for its application in arbitration, have not been discussed before. The book argues that the principle is vital not merely because it is considered, as shall be discussed, a general principle of law, but more importantly, as it functions to ensure the administration of arbitral justice. Thus, the principle’s interrelation with, and its effect on, the administration of arbitral justice shall be carefully addressed.

0.56  Moreover, the status of the principle in international arbitration is of particular importance. While abuse of rights may be applied as part of the applicable law, or as a general substantive and procedural principle of law, it is of theoretical and practical significance to examine if it constitutes a principle of transnational public policy that remains applicable irrespective of the lex arbitri and lex causae.

0.57  In light of the above, the significance of this book not only stems from the importance of the issues covered and their theoretical and practical significance and ramifications, or the relative scarcity of specialized resources. Equally important is the fact that it represents a comprehensive study on abuse of rights in international arbitration and amongst the few examples, if any, that address the principle’s core elements, question its legitimacy in international arbitration, and discusses its nature and/or function when applied to different legal areas in arbitration law.

0.58  The book is divided into four chapters. Chapter 1 provides a comparative overview of the principle of abuse of rights and its application in national legal systems and in international law. In order to provide that abuse of rights is a general principle of law, this chapter examines its recognition and application in different legal systems. Thus, epitomes of its application in a number of civil and common law systems and international law are discussed to establish the generality/universality of the principle.

0.59  Chapter 2 addresses the particulars of abuse of rights and distils the concept to its essential elements. This chapter seeks to articulate the principle’s conditions of application and to shed light on any concerns that may arise from its application.

(p. 13) 0.60  Chapter 3 discerns the nature of abuse of rights in international arbitration. It determines the legal basis of abuse of rights, questions the transnational nature of the principle, and examines whether it comprises a principle of transnational public policy.

0.61  Chapter 4 examines the importance of applying abuse of rights in international arbitration. It analyses how the principle’s application in arbitration ensures the administration of arbitral justice. In particular, this chapter discusses how the application of the principle may achieve fairness during arbitral proceedings, fetter the effective resolution of disputes, enable arbitrators to reach equitable outcomes, and preserve the integrity of the arbitration system.

0.62  Finally, the book includes a general conclusion that summarizes the legal questions discussed and the findings of each question examined.

0.63  Descriptive, comparative, and analytical approaches are employed in examining the issues raised in this book.

0.64  The descriptive approach is utilized to elucidate the gist of the principle of abuse of rights, its scope of application, and to examine the status quo of the field and of the issues raised.

0.65  A comparative approach is equally indispensable to the study of abuse of rights in international arbitration. The study examines the application of abuse of rights as a general principle of law in international arbitration. Generally, for a principle to be considered transnational or a general principle of law, one should: (1) examine its generality and universality; (2) distil the concept to its essential elements; and (3) ascertain whether the principle is suitable to be transposed into international arbitration.⁶⁴

0.66  Thus, in order to ascertain the universality of abuse of rights, an examination of the principle in different legal systems is crucial. In this regard, it is generally acknowledged that the principle’s recognition in all systems of law is not required.⁶⁵ Thus, the study shall ascertain the prevailing trend within legal systems and establish wide recognition of the principle in question, rather than unanimous recognition.⁶⁶

(p. 14) 0.67  As the recognition of abuse of rights, its function, and its legal basis are questioned, the comparative analysis and the functional approach being utilized shall focus on the principle’s mechanism of operation in a number of civil legal systems, including French law, German law, Swiss law, the law of Louisiana, and Egyptian law. This method will generally focus on: (1) outlining the statutory and/or judicial formation of the principle; (2) the policy adopted, that is, a restrictive policy or endorsement of a general principle of abuse of rights; (3) the application of the principle; and (4) the criteria adopted to determine if there is an abuse of right. The recognition and application of abuse of rights in international law shall also be examined. This comparative methodology will assess whether the mentioned legal systems apply abuse of rights in the same manner or, at least, if there exists sufficient elements of commonality in its application.

0.68  Whilst abuse of rights is not readily recognized in the common law legal systems, as shall be discussed, this derogation does not necessarily deprive it from its status as a transnational or general principle.⁶⁷ This study employs a functional approach to identify and discuss other existing rules and principles in order to establish elements of commonality, that is tertium comparationis.

0.69  In parts related to the application of abuse of rights in international arbitration, the book employs an international comparative perspective. Thus, national court decisions and arbitral case law of various jurisdictions are reviewed and analysed.

0.70  Furthermore, the analytical method is similarly employed throughout the book in order to examine the elements of abuse of rights; the limitation of its scope of application; its relation to the administration of justice; and its function, transnational nature, and application in the context of international arbitration.

0.71  In doing so, one shall analyse the operation of the principle of abuse of rights in international arbitration as acknowledged by prominent scholars; as reflected in international legal instruments such as uniform laws; and as applied by arbitral tribunals. This methodology is particularly used in the arena of international arbitration.⁶⁸

0.72  The analysis of the mentioned legal issues shall be attained by examining the law and practice of commercial and investment arbitration. However, emphasis may be given to investment arbitration materials in relation to some issues and to commercial arbitration materials in others. In doing so, one is mandated and restricted by the existence and availability of materials for the relevant issue. That said, it is submitted that any conclusion reached in relation to the nature and application of the principle should extend to, and apply in, international commercial and investment arbitration.