Enrichment without cause (or unjust enrichment) is recognized in a number of domestic legal systems as well as international law.1 Although a number of definitions have been proposed, the most representative definition is found in the Sea-Land case, which outlined the elements of enrichment without cause as follows:
“There must have been an enrichment of one party to the detriment of the other, and both must arise as a consequence of the same act or event. There must be no justification for the enrichment, and no contractual or other remedy available to the injured party whereby he might seek compensation from the party enriched.”2
Several publicists make a distinction between unjust enrichment and enrichment without cause. For example, Bin Cheng has pointed out that in cases of unjust enrichment, the recipient of the enrichment is at fault at the time of receipt and thus is liable for the amount of enrichment, even if it is not at its disposal anymore. On the contrary, enrichment without cause concerns the receipt of enrichment with a lawful cause that has been eclipsed. In that case, the enriched party is not liable for the enrichment, if there is none remaining. However, for investment arbitration purposes, the terms enrichment and unjust enrichment remain largely interchangeable.3
Given its widespread use in municipal legal systems, enrichment without cause has been categorized as a general principle of law, as per Article 38(1)(c) of the Statute of the International Court of Justice (ICJ).4 However, a number of commentators and tribunals have based enrichment without cause on principles of justice and equity.5 By analogy, enrichment without cause may be used both as a sword (as a basis of a claim) and as a shield (prohibiting double recovery on the part of claimants).6
Sea-Land Service, Inc. v. The Government of the Islamic Republic of Iran, Ports and Shipping Organization, IUSCT Case No. 33, Award (Award No. 135-33-1), 22 June 1984, para. 61; Benjamin R. Isaiah v. Bank Mellat (as Successor to International Bank of Iran), IUSCT Case No. 219, Award (Award No. 35-219-2), 30 March 1983, para. 23.
McNair, A., The General Principle of Law Recognized by Civilized Nations, British Yearbook of International Law, Vol. 33, 1957, p. 1, p. 16; Restatement of the Law of Restitution, American Law Institute, 1937, section 1; Lena Goldfields Co. Ltd. v. The Government of USSR, Award, 2 September 1930, para. 25; Veeder, V., V., The Lena Goldfields Arbitration: The Historical Roots of Three Ideas, International and Comparative Law Quarterly, Vol. 47, 1998, pp. 747 et seq.; Saluka Investments BV (The Netherlands) v. Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 449.
Binder, C., Schreuer, C., Unjust Enrichment, Max Planck Encyclopedia of International Law, 2017, para. 12; Dickson Car Wheel Company (U.S.A.) v. United Mexican States, Award, 1 July 1931, p. 676; Shannon and Wilson, Inc. v. Atomic Energy Organization of Iran, IUSCT Case No. 217, Award (Award No. 207-217-2), 5 December 1985, para. 17.
II. Analysis of certain elements of enrichment without cause
The elements of unjust enrichment discussed in the Sea-Land case are as follows:
International jurisprudence has analyzed a several particular issues arising from the above elements. First of all, there must be a legal and factual identity between the enriched party and the party invoking unjust enrichment. Indeed, in the case law of international arbitral tribunals, a State has been considered enriched through benefits conferred on its organs or entities only to the extend those were not separate judicial entities under municipal law.8 This view has been confirmed both by investment tribunals9 and the Iran-US Claims Tribunal.10
With respect to the question of what constitutes enrichment, a large body of jurisprudence (mainly from the Iran-US Claims Tribunal) has concluded that, in order for a party to be unjustly enriched, it must have had actual use and benefit of the enrichment.11 Consequently, if there is no beneficial gain by the allegedly enriched party, no claim or defense of unjust enrichment can be put forth.12
Further, tribunals have consistently held that unjust enrichment can only be pleaded if there is no other remedy to the injured party.13 Accordingly, unjust enrichment and remedies for breach of contract usually have different starting points. In particular, while a breach of contract focuses more on the damage of the aggrieved party, enrichment without cause focuses on the benefit of the enriched party. As a result, the two are mutually exclusive and enrichment without cause is not used as a damage evaluation method in cases that do not involve expropriation, but a breach of different standards of protection.14 Practitioners should note the Lena Goldfields Award did draw a parallel between the two concepts, but this case should be considered an outlier rather than the norm.15
Finally, given that unjust enrichment has its foundations in equity – and for public policy reasons in general – both commentators and tribunals agree that “the principle of good faith precludes the invocation of unjust enrichment in a situation that has been brought about by the claimant’s wrongdoing”.16 This is an expression of the principle “nemo auditur propriam turpitudinem suam allegans’ (‘no one will be heard relying on his own turpitude’).17 A number of investment arbitration tribunals and commentators, albeit not in the context of unjust enrichment, have repeatedly rejected jurisdiction,18 or dismissed claims as inadmissible due to reasons of illegality.19 Consideration of the above examples suggests that enrichment without cause is unlikely to be invoked when the person claiming the enrichment of the other party caused it in bad faith.
Flexi-Van Leasing, Inc. v. The Government of the Islamic Republic of Iran, IUSCT Case No. 36, Award (Award No. 259-36-1), 13 October 1986, para. 52; Uiterwyk Corporation, Jan C. Uiterwyk, Maria Uiterwyk, Robert Uiterwyk, Hendrik Uiterwyk, Jan D. Uiterwyks v. The Government of the Islamic Republic of Iran, the Ministry of Roads and Transportation, Ports and Shipping Organization, Iran Express Lines, Sea-Man-Pak, IUSCT Case No. 381, Partial Award (Award No. 375-381-1), 6 July 1988, para. 150; Parker (U.S.A) v. United Mexican States, General Claims Commission, Award, 31 March, 1926, p. 40, para. 9.
World Duty Free Company Limited v. The Republic of Kenya, ICSID Case No. ARB/00/7, Award, 4 October 2006, para. 179; Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, ICSID Case No. ARB/03/25, Award, 16 August 2007, paras. 396, 397; Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/02/26, Award, 2 August 2006, paras. 240, 339, 254-257.
In summation, enrichment without cause is a general principle of law that can be used both as a defense and as a basis for a claim, albeit in a subsidiary manner. Even though it has been applied both by investment tribunals and the Iran-US Claims Tribunal, its specification to the facts of the case is sometimes hampered by questions of actual enrichment, good faith and identity of claimant and enriched entity. As a result, due to difficulties pertaining to its characteristics in concreto, the use of enrichment without cause has been relatively rare.20
Schreuer, C., Unjustified Enrichment in International Law, The American Journal of Comparative Law, Vol. 22, No. 2, 1974.
Cheng, B., Justice and Equity in International Law, Current Legal Problems, 1955.
O'Connell, D. P., Unjust Enrichment, American Journal of Comparative Law, Vol. 5, 1956.
Dannemann, G., Illegality as defence against unjust enrichment claims, in Johnston, D., Zimmermann, R., Unjustified Enrichment: Key Issues in Comparative Perspective, 2002.
Vohryzek, A., Unjust Enrichment Unjustly Ignored: Opportunities and Pitfalls in Bringing Unjust Enrichment Claims under ICSID, Loyola Los Angeles International and Comparative Law Review, Vol. 31, 2009, p. 501.
Freyer, D., H., Recovering Damages for Unjust Enrichment in International Arbitration, World Arbitration and Mediation Review, Vol. 1, 2007, p. 19.
Mitchell, C., Mitchell, P., and Watterson, S., (eds), Goff & Jones : The Law of Unjust Enrichment, Sweet & Maxwell, 2011.