Author

Mr Stavros Michalopoulos

Associate in International Arbitration and Litigation - DLA Piper Middle East

Editors
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Enrichment without cause

I. Definition

1.

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

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

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

II. Analysis of certain elements of enrichment without cause

4.

The elements of unjust enrichment discussed in the Sea-Land case are as follows:

  1. One party has to be enriched at the expense of the other as a consequence of the same act or event;
  2. There must be no justification for the enrichment; and
  3. There must be no other available remedy to the injured party.7
5.

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

6.

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

7.

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 

8.

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.

III. Conclusion

9.

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

Bibliography

Binder, C., Schreuer, C., Unjust Enrichment, Max Planck Encyclopedia of International Law, 2017.

Binder, C., Unjust Enrichment as a Principle of Law in Investment Arbitration, in General Principles of Law in Investment Arbitration, 2018.

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.

McNair, A., The General Principle of Law Recognized by Civilized Nations, British Yearbook of International Law, Vol. 33, 1957.

O'Connell, D. P., Unjust Enrichment, American Journal of Comparative Law, Vol. 5, 1956.

Veeder, V. V., The Lena Goldfields Arbitration: The Historical Roots of Three Ideas, International and Comparative Law Quarterly, Vol. 47, 1998.

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.

Williams, R., Unjust Enrichment and Public Law: A Comparative Study of England, France and the EU, Bloomsbury Collections, 2010. 

Mitchell, C., Mitchell, P., and Watterson, S., (eds), Goff & Jones : The Law of Unjust Enrichment, Sweet & Maxwell, 2011.

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