The Relevance of the Foreign Investor’s Good Faith

This chapter investigates the importance and function of the investor’s good faith in investment arbitration. Good faith, a bona fide general principle of law, operates at several stages of the proceedings and gives rise to different more specific doctrines. Ascertainment of the investor’s good faith and the investment’s legality informs the tribunal’s determinations regarding its own jurisdiction, the claim’s admissibility, the State’s liability and the quantum of compensation. The chapter illustrates the role of good faith and its proximate declensions (estoppel, clean hands), accounting for the tribunals’ preference for nuanced solutions. The chapter also addresses the principle’s new frontier, relating to the investor’s compliance with standards of international law (which transcends the simple requirement of domestic legality). Ultimately, good faith is portrayed also as an interpretive benchmark rather than an autonomous rule of conduct: the case law shows that ‘bad-faith defences’ raised by the host State may steer the tribunal’s use of the applicable law and weaken – if not altogether bar – the investor’s claim