Abus de Droit Clause Samples
The "Abus de Droit" clause is designed to prevent parties from exercising their contractual rights in a manner that constitutes an abuse of those rights. In practice, this means that even if a party is technically entitled to take a certain action under the contract, they must not do so with the intent to harm the other party or in a way that is contrary to good faith and fair dealing. For example, a party cannot use a contractual right solely to cause inconvenience or loss to the other side. The core function of this clause is to ensure that contractual rights are exercised responsibly and ethically, thereby protecting parties from bad faith actions and promoting fairness in the execution of the contract.
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Abus de Droit. As recognised by the Appellate Body in US- Shrimp and acknowledged by the Panel in US – s211, the doctrine of ‘abuse of rights’ is a tangible application of the general principle of good faith88 that ‘prevents a Party to an agreement from exercising its rights in a way that is unreasonable in light of the spirit of the agreement’.89 Cheng associates the abuse of rights doctrine with the malicious exercise of rights where the purpose is to injury others; the evasion of treaty obligations by feigning the exercise of a right; exercising a national right in a way that conflicts with an international treaty obligation to another state; and discretionary rights exercised unreasonably, dishonestly and without due regard for the interests of others.90 87 ▇’▇▇▇▇▇▇ (n 33) 124; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇, ‘Good Faith and the Protection of Legitimate Expectations in the WTO’ in ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Quick (eds) New Directions in International Economic Law: Essays in Honour of ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ (Kluwer Law International 2000) 50. 88 US – Shrimp (n 12) [158]; US – s211 (n 8) [8.57]; ▇▇▇ ▇▇▇▇▇, General Principles of Law as Applied by International Courts and Tribunals (Grotius, 1987) 121. 89 ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ (n 86) 51. 90 Cheng (n 87) 121-136. The Appellate Body decision in US – Shrimp has been described as ‘a landmark’, being the first express recognition of the doctrine of abus de droit in WTO law.91 By connecting the doctrine of abus de droit to the substantive exceptions rule contained in Article XX of the GATT, the Appellate Body has utilised the doctrine to control the exercise of rights by a Member State. In this case, the state’s permissible action in exercising an exception was claimed to encroach upon the trading rights of other Members enshrined within the GATT. Consequently, all Member States must execute such rights ‘bona fide[s], that is to say reasonably.’92 As noted by the Appellate Body: - To permit one Member to abuse or misuse its right to invoke an exception would be effectively to allow that Member to degrade its own treaty obligations as well as to devalue the treaty rights of other Members. If the abuse or misuse is sufficiently grave or extensive, the Member, in effect, reduces its treaty obligation to a merely facultative one and dissolves its juridical character, and, in so doing, negates altogether the treaty rights of other Members.93 Here the doctrine of abus de droit takes on a substantive function that seeks to find a balanc...