I. Introduction
In 2021, in Josiya v British American Tobacco Group (BAT),Footnote 1 over 7,000 Malawian tobacco tenant farmers and their family members brought proceedings in the UK High Court against BAT and the Imperial Brands Group (IBG), two of the world’s largest multinational tobacco groups. The claimants, including children as young as three, work on tobacco farms from which the defendants allegedly source tobacco leaves for use in the manufacturing of cigarettes and other commercial products. The defendants then retail these products at substantial profit. Sourcing comprises a contractual chain that leads from the claimants as tenant farmers/growers of the tobacco leaves through several intermediary suppliers to the defendants. The claimants’ direct counterparties in this chain are the contract farmers—owners or leaseholders of the tobacco farms. The contract farmers recruit the claimants, provide them with credit for the purchase of agricultural inputs and loans to supplement their meagre food rations (repaid through deductions from pay), work them, and take possession of the tobacco leaves at amounts significantly below their market price or the legal minimum. The claimants allege unlawful, exploitative, and dangerous practices involving derisory or no pay with resulting debt bondage, child labour, forced labour and extremely hazardous working conditions. Affected are vulnerable and impoverished adults and children who labour with minimal protection against industrial accidents, injuries and diseases.Footnote 2
As this description illustrates, the defendants are at a contractual and relational distance from the claimants. They appear to be altogether absent from the stage of production and supply in which the claimants are directly involved. The claimants argue that this structure is deliberately designed to mislead, and that at all material times, the defendants were fully aware of, facilitated, assisted, and were unjustly enriched by the practices and conditions under which the tobacco leaves were being produced. They seek damages for the tort of negligence arising out of breach of duty of care and the tort of conversion arising out of the defendants having wrongfully deprived the claimants of the use and possession of the tobacco leaves to which the claimants retained legal title. In reliance on the same set of ‘unlawful, exploitative and dangerous conditions’,Footnote 3 the claimants also contend that the defendants were unjustly enriched at their expense and are liable to make restitution of that unjust enrichment. The remedies sought in this regard are restitution of the value of the tobacco leaves and/or their products in the hands of the defendants and/or the value of the agricultural services provided by the claimants; further and/or alternatively, the claimants seek the remedy of a constructive or resulting trust to be held by the defendants for the claimants over all the products and monies traceable to the tobacco leaves.
Less than a year earlier, the UK High Court struck out a plea of unjust enrichment in another case, Begum v Maran,Footnote 4 on the basis that it was ‘not remotely arguable that the defendant had been enriched at the deceased’s expense’.Footnote 5 The judge rejected the argument that the saving of expense occasioned by not having to pay the ‘full price’ of safely dismantling a ship satisfied the requirements of the law of unjust enrichment.Footnote 6 By March 2021, however, Josiya survived a strike-out application to become the first UK case in which a business and human rights (BHR) claim in unjust enrichment is progressing to trial. Lawyers’ endeavour to transplant this area of the law to BHR and its potential to ease legal challenges and expand the range of available remedies may now be tested.
Using Josiya as a case study, this article provides a reflection on the function and potential of unjust enrichment as an emerging tool in BHR litigation. Given the recent unjust enrichment BHR cases heard by the UK courts, the article’s focus is on UK law, though references are also made to other jurisdictions,Footnote 7 as well as scholarly commentaries on unjust enrichment and its place within the law of restitution. The article opens with a theoretical overview, followed by a discussion of the interface between unjust enrichment and BHR, the framing of this cause of action and its function as a supplementary head of claim in BHR litigation.
II. Unjust enrichment: Theoretical framework
The law of restitution is defined as a body of law that is concerned with the award of gain-based remedies. Unjust enrichment serves as a substantive principle used to determine the availability of remediesFootnote 8 directed at reversing benefits unjustly obtained by one party at the expense of another. Thus, in certain prescribed circumstances, ‘giving back’ (rather than compensation) is deemed the appropriate remedy for the purpose of doing justice. Justice, generally accepted as the justificatory basis for restitution, is understood primarily in its Aristotelian corrective form.Footnote 9
Whereas Aristotelian distributive justice is concerned with the allocation of benefits and burdens in a community and is based on criteria of merit, corrective justice operates in the private sphere and is concerned with the preservation of equilibrium. Equilibrium refers to a pre-transactional presumption of equality in ownership, irrespective of material inequality or whether ownership was merited.Footnote 10 The parties are equal by virtue of their shared ownership in the disputed goods. Thus, in unjust enrichment in its narrow formulation of reversal or ‘giving back’, doing justice alludes to the restoration of disrupted equilibrium between interacting partiesFootnote 11 through the rectification of their pre-transactional equality. Aristotle illustrates this process of rectification by drawing two equal lines rendered unequal because a segment was subtracted from the claimant’s line and added to the defendant’s line. Equality is restored upon reversal—the additional segment is removed from the defendant’s line and returned to the claimant’s line. Aristotle’s illustration is put to practice by courts when applying the unjust enrichment element of ‘at the claimant’s expense’ discussed further below.
Corrective justice informs not only the law of unjust enrichment, but private law generally. However, unlike in tort and contract, which are founded on harm and breach, respectively, in claims for unjust enrichment there is no requirement that the defendant committed an independent wrong. Rather, wrongdoing lies in retaining a benefit obtained through a normatively defective transfer.
In the absence of an independent wrong, what then is the norm which renders a transfer defective? Corrective justice, argues Canadian scholar Jennifer Nadler, shapes the structure of the parties’ interaction and the remedies available to them. It does not impart the law’s normative basis. This, she says, requires a theory of right.Footnote 12 The statement that it is unjust to retain an unjustly obtained benefit is circular. It does not answer the question of what the claimant’s prior right was that justified the defendant’s liability. ‘… the plaintiff’s right must surely be prior to that of the defendant’s liability, for … the conditions of liability must derive from a conception of what the plaintiff is owed’.Footnote 13 Nadler concludes that the claimant is owed a right of self-determination. The right of self-determination goes beyond the abstracted Kantian agent’s capacity to choose goals, free of any coercive duty to act for the benefit of others. It also includes her entitlement to actualise these choices and realise these goals. To be free is also to be able to view one’s life ‘as the unfolding of one’s self-determined ends’.Footnote 14
Thus, the court’s concern for individual freedom requires that, in addition to respect for the party’s capacity to choose, it also supports the realisation of this capacity. The court as a public institution bears the duty to ensure that the claimant was not coerced into acting for the defendant’s benefit, even in circumstances where the defendant did nothing wrong. The remedial response is not compensatory because compelling the defendant to compensate the claimant would amount to intervention in the parties’ shared space of equalised ownership and rights. Rather, the court’s role is to fulfil the claimant’s defeated expectations and vindicate its rights by declining the validity of an otherwise legal transaction and ordering restitution.Footnote 15 Accordingly, judgments in unjust enrichment treat as fundamental the aim and consequences of the claimants’ action, as well as the claimants’ legitimate expectations and reasonable mistakes. Nadler points to several judgments which exemplify the Canadian judiciary’s attention to these fundamentals.Footnote 16
Claims in unjust enrichment, however, are relatively new to BHR litigation. At least in the UK, no judgments are available to undertake a similar examination. In the United States, the unjust enrichment claims involving historic German Holocaust BHR claims (discussed below) were settled. In Josiya, a judgment is yet to come (unless it is settled). Nevertheless, applying Nadler’s analysis to the facts of the case, it is apparent that the claimants intended and reasonably expected that their services and/or the products of their labour be exchanged for a benefit accrued to them. Vitiation of this intent and the duress which compelled them to act for the benefit of the defendants had concrete adverse consequences such as poverty, debt bondage and sickness. The claimants’ right(s) having been infringed and their legitimate expectations vitiated, it falls to the court as a public institution to vindicate them.
In the UK, the barrister Andrew Lodder theorises the place which rights occupy in unjust enrichment claims by bifurcating enrichment into factual and legal.Footnote 17 Factual enrichment is understood in terms of economic value. Legal enrichment is understood in terms of rights and obligations. In the case of legal enrichment, the benefit received may be conceived factually as the value of a right acquired or obligation extinguished. Alternatively, it may be framed as an alteration of the legal relations between claimant and defendant to the claimant’s detriment. This bifurcation expands the scope of unjust enrichment by adding a new category of ‘specific restitution’ to the traditional personal and proprietary restitutionary remedies. Specific restitution need not be economic or pecuniary in nature. It encompasses remedies such as rescission and rectification, since it functions to restore the legal relations between the parties by reversing the acquired right or reinstating the released obligation.Footnote 18 It ‘can also be justified by reference to corrective justice, since the effect of the remedy is to correct an injustice between the claimant and the defendant’.Footnote 19 The defendant’s enjoyment of the right acquired is curtailed. Alternatively, the liability previously extinguished by the release from an obligation is revived. Revival entails ‘a corresponding benefit to the claimant, who now has a right which can be vindicated against the defendant’.Footnote 20
Vindication of claimants’ expunged human rights and the revival of defendants’ corresponding obligations lie at the heart of BHR litigation. Nadler’s framing of the normative content of unjust enrichment in terms of pre-existing rights and Lodder’s analysis of the element of ‘enrichment’ by reference to the restoration of the parties’ respective rights and obligations underscore the contribution which unjust enrichment can make to the strengthening and development of BHR litigation. It coheres with scholars’ and practitioners’ call for centring rights in BHR disputes and laws.Footnote 21 A pathway opens for claimants to enter the arena less as victims and more as rightsholders pursuing that to which they are entitled. In this, they are assisted by the fact that restitution injects legal realism into BHR litigation,Footnote 22 offering recourse to economic actualities, necessitous intervention and public law and policy. In Abdur Rahman v J C Penney, a tort case brought in the wake of the Rana Plaza disaster, the US court noted that the doctrine barring the liability of a general contractor operating through independent contractors seemed contrary to public policy.Footnote 23 Yet, with legal principles overriding policy, the court’s hands were tied.
BHR litigation invariably arises out of the commission of a wrong. Consequently, claims in unjust enrichment are habitually pleaded in addition to or in the alternative to a claim in tort. It is a matter of debate whether wrong-based claims may be framed as unjust enrichment. Some scholars view unjust enrichment and restitution as a single body of law within which so-called ‘autonomous unjust enrichment’ is analytically distinguished from so-called ‘unjust enrichment by wrong’.Footnote 24 Others maintain that unjust enrichment is but one of a host of causative events capable of triggering a restitutionary response. Therefore, it forms only part of the law of restitution. Holders of this view—now recognised generally in the UK—draw a bright line between unjust enrichment and wrong-based restitution, giving rise to alternative terms, such as ‘restitutionary damages’ and ‘restitution by disgorgement’,Footnote 25 themselves the subject of debates. British scholar Graham Virgo applies wrong-based restitution’s fundamental principle that defendants should not benefit from their wrongdoing to conclude that such defendants were unjustly enriched.Footnote 26 Nevertheless, ‘a distinct cause of action relating to the wrongdoing needs to be established …’Footnote 27 Some torts trigger a restitutionary remedial response. The task is to identify them and the additional remedies which may be available. Notably, the remedy of disgorgement goes beyond rectification of the status quo through reversal to include the return of profits. It thereby functions also to deter and distribute.Footnote 28
The American lawyer David Fagan attributes these functions of distribution and deterrence to unjust enrichment generally. Writing in the context of indigenous people’s claims against multinational enterprises (MNEs), he argues that unjust enrichment as a legal tool for the preservation of equilibrium is not limited to corrective justice for an individual claimant. Rather, it also extends to the promotion of a morality-based distributive role in society at large. The moral force behind this role, he posits, is to be found in Aristotle’s argument that the purpose of justice is to maintain ‘an equilibrium of goods among members of the society’.Footnote 29 On this view, justice as the pursuit of balance between opposing forces may be societal as well as individual. In the context of BHR litigation where the defendants are invariably corporate bodies, mostly powerful MNEs, unjust enrichment’s capacity to deter through redistribution is important. It points to its potential to be transformative. Access to profits or proceeds of sale enhances the power of BHR litigation to augment civil consciousness and compel MNEs to rethink their treatment of those they encounter during their profit-seeking cross-border excursions. It is one thing to pay compensation. It is quite another to part with profits. Whilst the scholarship that evolved around tort claims in BHR litigation has addressed the legal formulation of claimsFootnote 30 and the challenges that claimants are likely to face,Footnote 31 less attention has been paid to the litigation’s impact on corporate behaviour.Footnote 32 Nonetheless, we can surmise that the threat of paying profits or proceeds of sale would focus the corporate mind.
The expansion of unjust enrichment from the commercial sphere to BHR is embryonic. Nevertheless, it has the capacity to shift the focus from the corporation as producer of loss to the corporation as a violator of rights and, consequently, an unconscionable taker. Conduct such as the expropriation of First Nations’ land, workers’ exploitation, use of child labour, slavery and environmental and climatic harm is castigated not for the loss it generated, but for its normative and dispossessive substance. Hence, the law of unjust enrichment makes restorative remedies available.
Controversy often facilitates the shifting of legal boundaries. Therefore, claimants and practitioners may also be assisted by the amorphous and open-ended character of unjust enrichment and its lack of jurisprudential uniformity. For example, as recognised by Sir Donald Nicholls V-C, the grounds of restitution are not closed.Footnote 33 They may be extended to better respond to BHR’s factual matrix. In Lord Goff’s words:
An action of restitution appears to me to provide an almost classic case in which the jurisdiction should be available to enable the courts to do full justice. The seed is there, but the growth has hitherto been confined within a small area. That growth should now be permitted to spread naturally elsewhere within this newly recognised branch of the law. No genetic engineering is required, only that the warm sun of judicial creativity should exercise its benign influence rather than remain hidden behind the dark clouds of legal history.Footnote 34
III. Overview of unjust enrichment in BHR litigation
The introduction of unjust enrichment claims into BHR litigation reinforces BHR litigation’s reputation as a dynamic area of law. To date, developments in the UK and other MNE home states have concentrated on tort claims initiated against parent companies within groups of companies whose corporate members are linked by shareholdings. In particular, innovations were driven by claimants and the courts having to grapple with corporate law that constructs corporations as persons and turns a blind eye to the reality of their commercial and organisational integration when grouped together. In the seminal case of Adam v Cape,Footnote 35 the UK Court of Appeal applied the fundamental principle of separate corporate personality to a multi-jurisdictional group of companies, long established but previously applied only to a single company. At issue was the enforcement in England of a US judgment against Cape Industries, a parent company registered in England but with a network of subsidiaries and associated companies in the United States. Workers who became ill after inhaling asbestos dust secured a judgment in the United States through a class action. Inter alia, the court found that it was not entitled to lift the corporate veil simply on the grounds that the corporate structure had been used to ensure that legal liability for the group’s future activities would fall on another member of the group. This is but one example of the separate entity doctrine prevailing over the demands of justice. Similarly, in the Rana Plaza litigation in the United States, the court felt compelled to prioritise black letter law over public policy.Footnote 36
It seems tort claims are now beginning to percolate into global value chains. A global value chain is essentially a network of contractual relations between a lead purchasing company and its various tiers of suppliers, ostensibly independent third parties. As in the case of corporate groups linked by shareholdings, here too, the law distances itself from the organisational and power dynamics which animate these networks, creating a fiction of market-based, self-standing bilateral agreements, freely entered into at arm’s length.Footnote 37 Attempts at formulating responses to this gap between legal and commercial realities permeate both policy-making and judicial decisions.
At the regulatory level, in recent years, policymakers have turned their attention to the exacting of a due diligence obligation on MNEs. The aim is to create a pathway to the imposition of duties concerning the management of human rights and mitigation of harms in their value chains. Imposition is realised through the adoption of human rights due diligence (HRDD) laws.Footnote 38 Some of these laws provide rightsholders with a mechanism for bringing a claim where the injury suffered was occasioned by the MNE’s failure to comply with the law.Footnote 39 However, at the judicial level, civil litigation in the form of freestanding tort claims has remained an important route to legal redress in MNEs’ home states.Footnote 40 This is particularly so in the aftermath of a number of US federal court decisions which tapered off the role of international law in US BHR litigation.Footnote 41 The effect of these decisions was to incrementally yet dramatically narrow both the personal and subject-matter jurisdictional reach of the Alien Tort Statute, which is based in part on claims arising under international law.Footnote 42
Successes in UK tort-based proceedings concentrate in so-called foreign direct liability cases involving parent-subsidiary relationships. In these cases, the court is asked to circumvent the veil of legal personality which fragments the group’s liability, treating liability as exclusive to the corporate unit(s) proximate to the harm. This exclusivity is disrupted when the parent is drawn into the proceedings through the imposition of a duty of care. Notable among the successes are the key decisions of the UK Supreme Court in Vedanta v Lungowe and Okpabi v Shell. Footnote 43 In both these cases, the court explored the parameters of assumption of responsibility and related application of a duty of care. Following Chandler v Cape,Footnote 44 the court held that these obligations could extend to the parent company, even though the harm was caused by its subsidiary, which is a legally separate entity. In both cases, the UK Supreme Court’s decision followed on from an examination of the parent’s involvement in the management of the activity of the overseas subsidiary which was the proximate cause of the claimants’ injury.
It was not long before the issue of affixing corporate tortious liability in circumstances where a third party occasioned the injury arose in a supply chain case. In Begum, the companies were linked only by contract. The defendant, an English-domiciled shipbroker, acted as an agent for the shipowner in relation to the disposal of an oil tanker for scrappage. The defendant sold the vessel via an intermediary to a Bangladeshi shipbreaking yard reputed for its track record of death and injuries, where working conditions are known to be hazardous and where Mr Begum fell to his death. Begum’s widow initiated proceedings in the UK courts in tort and unjust enrichment. The claim in unjust enrichment was struck out. As to the tort claim, the claimant, inter alia, raised an exception to the general rule that the law does not impose liability on a person for a third party’s injurious intervention. The defendant, she contended, owed her a duty of care and was liable for the intermediary’s and/or the shipyard’s conduct on the basis that it created the source of danger.
In response, the defendant argued that it had no control over, nor did it assume responsibility for, the conduct of the shipyard or its workers. The Court of Appeal agreed with the High Court that the claim was arguable and was not bound to fail; therefore, it should not be summarily struck out. Adopting a policy-based approach, it reasoned that precisely because Begum involved ‘an unusual argument in a rapidly-developing area of law, it would … be wrong in principle to strike it out at this stage’.Footnote 45 A door opened for the court to review the strict application of common law principles governing negligence and entertain the introduction of exceptions in cases involving human rights claims. On the other hand, the discomfort with which the UK courts responded to the possibility of a ‘looser’ attitude to the causation testFootnote 46 points to a proclivity for caution. The Begum decision came with reservations concerning the claim’s compatibility with established principles of duty of care. The court remarked on the considerable hurdles faced by the claimant, noting that her plea represented an unusual extension to existing negligence jurisprudence and could be regarded as being at the edge of the issue of liability.
Notwithstanding these initial steps towards greater MNE accountability for human rights abuses arising from their global operations, BHR claimants continue to face considerable practical and legal challenges. The developments briefly recounted above were all at the preliminary stage of the proceedings. MNEs’ strategy of seeking settlement following a claimant’s win on a preliminary issue obstructs opportunities for judicial innovation. Claimants rarely succeed in supply chain cases.Footnote 47 All of which underscores the significance of unjust enrichment as an additional route to redress. Importantly, unjust enrichment also offers claimants access to a restitutionary remedial response, said to form the essence of the law of restitution and to underpin its existence as an independent, identifiable body of law.Footnote 48
To date, with some exceptions such as punitive and aggravated damages, there has been little attempt to frame BHR claims in terms other than compensatory damages.Footnote 49 By contrast, the aim of restitutionary relief is not to compensate but to restore to the claimant the value of the thing transferred, the thing itself or its substitute.Footnote 50 At issue is not the loss suffered. Rather, relief is measured by reference to a benefit handed over in circumstances which, though legally effective, do not legitimate its receipt by the defendant. The significance of access to restitutionary relief is accentuated by the likelihood that the quantifiable loss suffered by already impoverished and marginalised BHR claimants may be deemed limited. It may amount to no more than the modest wages or equivalent sums the Josiya tenant farmers, for example, received for the tobacco leaves they grew and/or the market value of the agricultural services they provided. By contrast, the benefit claimants produce and then transfer to others may be of substantial value. In Josiya, the claimants greatly enriched the defendants who had sold the products made using the tobacco leaves at significant profits.
Much like the duty of care in foreign direct liability claims, unjust enrichment provides a route for bypassing the gap between a legally generated fiction and commercial reality. In particular, it may assist in multi-tier global value chains where hurdles to a successful outcome are especially acute.Footnote 51 In multi-tier chains, the supply sequence is partitioned among one or more ostensibly independent contractors and/or ostensibly independent subsidiaries from whom the commodities are sourced. At the chain’s bottom tier is the contractor or subsidiary that employs the workforce (the direct producers). At its top tier is the MNE’s retail unit (the lead company). The products may be supplied by the direct producers’ employer directly to the lead company or, as is usually the case, they may first pass through a chain of one or more intermediate supply channels. This layered structure obfuscates the exchange said to have taken place between the lead company and the direct producers, giving rise to what is termed in the Josiya case a ‘nexus issue’. In the Josiya strike-out application,Footnote 52 the defendants/applicants argued that the claimants, having sold the tobacco leaves they had farmed via an intermediary, had no direct relationship with the defendants or any of their subsidiaries. The claimants, by their own admission, were unable to identify beyond a statistical probability which of the defendants or their subsidiaries acquired tobacco crops grown by each individual claimant. In dismissing the application, the court declined to assess the veracity of the claimants’ statistical evidence, deeming such an exercise to be in the nature of a mini trial inappropriately undertaken at a preliminary stage of the proceedings. Whether the claimants will succeed at trial therefore remains uncertain.
Further, multi-layering severs the contractual link between the direct producers, as claimants, and the lead companies, as defendants, thereby legally detaching them from each other. The presence of intermediary entities problematises the attribution of liability to the defendants. A claim in unjust enrichment can help overcome these obstacles by virtue of being a non-contractual cause of action. Also, and as further elaborated below, a claim in unjust enrichment is potentially less vulnerable to third parties’—i.e., intermediate entities’—impact on liability. In Rahman, the claimants were the personal representatives of two of some 1,134 people killed when Rana Plaza, an eight-storey Bangladeshi commercial building used to produce garments, collapsed in April 2013. The defendants were the lead companies which sourced from suppliers housed there. The Delaware Superior Court was unable to attribute liability to the defendants for the harm occasioned by the building’s collapse. This was because, subject to three exceptions which did not apply in that case, ‘generally, an owner or general contractor does not have a duty to protect an independent contractor’s employees from the hazards of completing the project’.Footnote 53
IV. Framing of a cause of action
A. Reversal or wrong-based?
Both wrong-based and autonomous restitution claims may trigger a reversal-based remedy whereby a normatively defective transfer of value is corrected by reversing the benefit received by the defendant and restoring it to the claimant. However, they differ analytically. This is a significant factor in deciding how best to frame the claim because analytical differences translate into differences in what is to be proved. Where the factual matrix is the same, the claimant will have the benefit of alternative analysis. That is, they may elect whether to claim in tort and/or unjust enrichment.Footnote 54
Claims for autonomous unjust enrichment comprise three elements. Claimants need to establish that the defendants were enriched, that such enrichment was at their expense and that this was unjust. As to the first element, the Lodderian categories of factual and legal enrichment were discussed above. Enrichment may also include services and negative benefits such as saved expense.Footnote 55 In Josiya, the claimants plead both. They allege that the defendants were enriched through saving of expenditure (by not paying adequately or at all for their labour), as well as through receipt of valuable tobacco leaves and/or services.
The ‘at the claimant’s expense’ element requires that the benefit is correlative to the loss.Footnote 56 As illustrated by Aristotle, the defendant’s gain is assessed by reference to a subtraction from the claimant.Footnote 57 At issue is first, whether the benefit flowed directly from the claimant and second, whether it needs to correspond exactly to that of which the claimant was deprived. Satisfaction of the directness requirement is particularly challenging in multi-tiered supply chains. This is because, as in Josiya, the claimants’ services and/or the product of their labour passed through several supply tiers involving third parties before ending up in the defendants’ hands. Some scholars consider the directness requirement an obtuse constraint of doubtful normative foundations, best replaced by the simpler test of ‘but for’ causation.Footnote 58
Applying the ‘but for’ test to Josiya, the argument will be that the defendants would not have been enriched but for the claimants having enriched the intermediary suppliers in the first place. This argument, however, was rejected by the UK Supreme Court in Investment Trust Companies (ITC) v Revenue and Customs Commissioner. Footnote 59 Virgo notes that whilst UK courts’ general practice is to apply the directness requirement strictly, they are beginning to entertain the possibility that indirect enrichment may also be at the defendant’s expense in certain recognised exceptions. In a development which proponents of legal realism would welcome, the courts may address breaks in the passage of the benefit by reference to economic actualities.Footnote 60
The Josiya claimants rely on the circumstances surrounding the defendants’ enrichment as falling within the ‘genuine exceptions’ to the directness requirement referred to by the Supreme Court in ITC. Footnote 61 The exceptions pleaded include (i) the claimants’ vulnerability (both objectively and as against defendants that are powerful and dominant MNEs); (ii) the extent and egregiousness of their exploitation; (iii) the size of the defendants’ profits; (iv) illegality; and (v) the aim of avoiding legal and regulatory responsibility through the manner in which the supply chain was structured.Footnote 62 The claimants also invite the court to consider the reality of cohesion behind the appearance of fragmentation.Footnote 63 They acknowledge that the benefit of their services and/or the tobacco leaves was transferred to BAT and IBG via third parties. However, they contend that these were all related transactions in which BAT and IBG knowingly participated, and which amounted to a carefully coordinated, longstanding single scheme. The scheme was intentionally and artificially designed to be clandestine, having the semblance of separate and independent dealings.Footnote 64
In UK jurisprudence, the third element (the transfer was unjust) comprises specific, judicially recognised categories of vitiating conduct known as ‘unjust factors’.Footnote 65 These factors characterise the circumstances which ground restitution for unjust enrichment. Mostly, they are claimant-orientated in that they apply where the intention to transfer ‘can be considered to be absent, vitiated, or qualified’.Footnote 66 By contrast, Canadian courts are more willing to award restitutionary remedies by reference to a general notion of unjustified enrichment. This approach is critiqued for the unrestrained discretion it is said to confer on the judiciary and the uncertainty created in consequence.Footnote 67 The standard applied by US courts is different again. At issue is whether keeping the benefit offends notions of fairness and equity.Footnote 68 In Josiya, the unjust factors said to have vitiated the claimants’ intention to transfer are unconscionable exploitation, duress, undue influence, failure of consideration (also known as failure of basis) and illegality.Footnote 69 For example, by reason of failure of consideration, thetransactions’ contractual scaffolding is void/unenforceable/non-existent/capable of rescission.Footnote 70
The requirement of ‘at the claimant’s expense’ and associated issues constitute the main difficulty in attempts to theorise wrong-based restitution as unjust enrichment. As argued by Virgo, whilst enriching oneself through wrongdoing is patently unjust, a benefit transferred via a third party may be said to be not at the claimant’s expense. Therefore, orthodoxy dictates that it does not invite intervention by restorative justice. As Grantham and Rickett put it, ‘where a defendant’s gain was received from a third party as a consequence of a wrong done to the claimant by the defendant, the claimant’s ability to reach that gain is determined as a response to the wrong, and while it might be called “restitution”, it cannot mean restitution by restoration’.Footnote 71 Analysing the benefit as having been obtained pursuant to a breach of duty owed to the claimant by the defendant is one proposed method of overcoming this hurdle. Virgo, however, suggests that a less forced approach is to acknowledge that the cause of action is founded not on unjust enrichment (to be framed as a separate cause of action), but on a wrong recognised as capable of triggering a restitutionary remedy.Footnote 72
This approach reduces the burden of proof. Whilst the requirement of enrichment remains unchanged,Footnote 73 the second and third elements fall away. The benefit’s indirect flow becomes immaterial since the restitutionary relief is founded not on the reversal of the unjust enrichment but ‘on the wrongdoing itself’.Footnote 74 As to the third element, it suffices that the wrong is proven and that it is of the type recognised as capable of triggering restitutionary relief.Footnote 75
Finally, in the case of autonomous unjust enrichment, defendants may avail themselves of a number of prescribed defences. These function to defeat or reduce liability. In the United States, a relevant defence for present purposes is that the claimants themselves benefited from the transfer to the defendant. The question arises whether, in the context of global value chains, defendants may argue that claimants benefited economically from their own exploitation (an exploitative job is better than no job)Footnote 76 and, more generally, from the claimed development and rising standards of living said to be engendered by MNEs’ outsourcing production to the country.Footnote 77 To date, such a defence has not been raised in the BHR unjust enrichment cases, but a similar point has been made in other BHR litigation contexts.Footnote 78
B. Remedial responses
The Josiya claim is bifurcated into two independent causes of action pleaded as concurrent or in the alternative. One comprises the torts of negligence and conversion. The other is unjust enrichment. Whereas, to date, no restitutionary remedy has been awarded for negligence, conversion is recognised as capable of triggering such a remedy.Footnote 79 Nonetheless, the personal remedy pursued in Josiya for both torts is compensatory, including exemplary and punitive damages. The profits the defendants made by the conversion of the tobacco leaves are pleaded as an alternative or an additional measure of the damages to be awarded.Footnote 80 The relief sought for unjust enrichment is reversal-based reinstatement of the status quo ante through the return to the claimants of the value of the transferred tobacco leaves, and/or their products and/or the agricultural services they provided.Footnote 81
Benefit reversal is the only remedy available in autonomous unjust enrichment claims. Liability is strict as opposed to wrong-based remedies which, though more numerous, are fault-based. This difference is one factor that claimants may want to consider when deciding how best to frame the cause of action. The unjust factor of illegality is another wrong recognised as triggering restitutionary remedies, including disgorgement.Footnote 82 This illustrates the flexibility which alternative analysis affords to claimants.
The question of whether disgorgement constitutes a remedial response to unjust enrichment invites further attention. At issue is delineating the limits of unjust enrichment, specifically whether justice is confined to giving back the same benefit as the one transferred or whether it may extend to giving up wealth subsequently accumulated by the defendant on the back of the original transfer of value.Footnote 83 In the context of supply chains, this question touches on the ability of workers claiming unjust enrichment to access the retailer’s profits or sale proceeds. Hedley points to the systemic implications of this question when he posits that ‘It is basic to our political system that a victim of losses can expect state action to provide a remedy, but profits are something you must make for yourself’.Footnote 84 Consequently, he argues, profits should not be removed lightly in response to wrongdoing. Their removal should be limited to a small number of cases, such as breaches of fiduciary duties and intellectual property rights.Footnote 85
Disgorgement mandates the return of ill-gotten gains. The gains to be disgorged are those obtained by the defendant from a third party post-receipt from the defendant of the original, wrong-based benefit. This is in circumstances where the two are causally connected. Applied to Josiya, BAT and IBG would be ordered to disgorge to the claimants the gains they made upon the sale of the tobacco leaves sourced from the claimants. This challenges unjust enrichment’s reversal orthodoxy, specifically the correspondence requirement. It could be argued that the claimants’ loss does not correlate to this portion of BAT’s and IBG’s gain, nor will this portion be restored to the party from whom it originated.Footnote 86 The claimants never had these proceeds. These proceeds are a product of the defendants’ own enterprise. In all probability, had the claimants retained the tobacco leaves, any gains they would have procured would not have come close to the order of magnitude of the defendants’ gains.
Little wonder that the theorisation of disgorgement by reference to unjust enrichment is subject to scholarly debate. For Birks, applying the trust principle, gain upon investment is recoverable in an unjust enrichment cause of action since it was made with resources provided by the claimant. This is so whether or not there was wrongdoing.Footnote 87 Grantham and Rickett, on the other hand, conclude that disgorgement and restoration articulate two different types of restitution. One cannot lead to the other.Footnote 88 Dagan argues that beyond fiduciary guardianship of property, English law ‘merely seems to preach freedom under the law. It will have nothing to do with arguments that a profit should be removed simply because the means of its acquisition seem rather dubious’.Footnote 89 Writing from a US law perspective, Palmer distinguishes between what he terms ‘restitutionary’ and ‘non-restitutionary’ disgorgement. The former focuses on the claimant’s loss, whereas the latter focuses on the defendant’s unjust enrichment. ‘In particular, a person acting in conscious disregard of the rights of another should be required to disgorge all profits, because disgorgement both benefits injured parties and deters perpetrators …’Footnote 90 In the UK, Virgo distinguishes between the corrective justice remedy of literal restitution and the distributive justice remedy of disgorgement. Literal restitution refers to the act of giving back. Disgorgement refers to the act of giving up. Nonetheless, both qualify as restitution since they both fulfil the function of gains-stripping, thereby injecting the law of restitution with the logic of both corrective and distributive justice.Footnote 91
In Josiya, the ‘profits made by the Defendants by the conversion of the tobacco leaves’ are pleaded as a measure of damages for the tort of conversion.Footnote 92 In the context of the unjust enrichment claim, the plea is for restitution of the value of the tobacco leaves, and/or their products and/or of the agricultural services provided by the Claimants. At this point, the tort of conversion and the unjust enrichment causes of action overlap since the claimants’ assertion of continuing proprietary interest in the tobacco leaves forms part of both.Footnote 93 The Josiya claimants base their retention of the legal title and ownership of the products of their labour on their legal title to the agricultural inputs, such as the tools, seeds, fertilisers and pesticides which they acquired on credit.Footnote 94 This proprietary interest is continuing because the contracts which purported to transfer their title to the defendants are void, unenforceable, non-existent or rescindable on the ground of the unjust factor of failure of consideration.Footnote 95 Alternatively, as part of the claim in unjust enrichment, were the court to find that the claimants had relinquished their legal title to the tobacco leaves, they would instead have acquired a traceable equitable proprietary interest in them.Footnote 96
V. Unjust enrichment: A useful addition to BHR litigation?
Historical corporate human rights violations that have been framed as unjust enrichment claims provide a starting point for assessing unjust enrichment’s contribution as an additional tool in BHR claimants’ toolkit. There are relatively few examples of such cases. The first is found in the United States from the late 1990s onwards. In these cases, American and foreign claimants sought compensation from American and foreign corporations for wrongs committed in the course of the Holocaust in Europe, such as stolen assets,Footnote 97 medical experimentationFootnote 98 and slave labour.Footnote 99 These claims later served as a model for other proceedings in unjust enrichment against corporations for human rights violations, including other World War II (WW II) cases, colonial and post-colonial claims, slavery reparations and claims for corporate aiding and abetting in the commission of human rights violations.Footnote 100 In the absence of relevant precedents, Fagan has theorised how unjust enrichment might contribute to the furthering of First Nations’ BHR claims against MNEs.
Noah Vardi, writing about the German Holocaust cases from a US law perspective, points to a number of challenges which claimants face when seeking restitution in response to a claim in unjust enrichment. Such challenges include concurrence and cumulation issues encountered when unjust enrichment, contract and tort are all invoked, the intersection between restitution and property law and the framing of claims in cases where different national laws are relied on. For instance, whereas French and Italian unjust enrichment jurisprudence requires proof of loss or injury, in the Anglo-American system a claimant needs only establish loss of a benefit or a greater moral right to it.Footnote 101 Particularly in class actions—common in BHR litigation—restitutionary remedies are difficult to quantify because the detriment to each claimant may not be the same and may not be easily or uniformly classified.Footnote 102
On the other hand, says Fagan, inclusion of an unjust enrichment claim made it possible to overcome some substantial and procedural difficulties associated with claims in contract or tort, such as indirect liability and justiciability.Footnote 103 Unjust enrichment is particularly useful in claims based on ‘aiding and abetting’, common in BHR litigation and further addressed below. Thus, the law of restitution ‘allows a wider range of instances to be fit within the framework of the claims’.Footnote 104 However, for Vardi, restitution’s greatest appeal lies in its inherent strong moral dimension, particularly pertinent in egregious cases, such as those arising out of the Holocaust and slavery. This strong moral dimension renders it germane to proceedings brought in pursuit of justice.
Another example of a situation where unjust enrichment can be of assistance in BHR litigation is in First Nation claims.Footnote 105 First Nations’ potential claims share certain common features with those brought by Holocaust victims. Colonialism and WWII respectively situate both groups in the historical wrongs category, albeit that the dispossession of First Nations is ongoing and continues to form part of contemporary BHR litigation.Footnote 106 In both instances, the absence or vitiation of intention to exchange is unlikely to be at issue, though this is probably more so in the German Holocaust litigation. Both contain strong political, ideological and policy elements, as well as state-corporations collaboration.
As to differences, First Nations’ claims can draw on a broad range of legal disciplines that go beyond tort, contract and unjust enrichment to include also treaty law and breaches of statutory and equitable duties.Footnote 107 The centrality of land and its resources in these disputes also sets them apart and presents specific challenges. The private nature of the law of obligations and its individualistic framing of value do not capture and may not have an answer to the multi-dimensional collective devastation which land dispossession often produces in indigenous settings. Cultural and social divergence, as well as historical practices and narratives, problematise the establishment of wrongdoing and the required correspondence between deprivation and gain. Claimants’ assertion of proprietary rights may stumble over disparities in attitudes and beliefs around ownership and relationship with land, as well as the requirement of title registration as proof of ownership.
Thus, it appears that also in First Nations settings, it is justice which primarily shores up a plea of unjust enrichment. It operates ‘as a moral check against the retention of benefit’.Footnote 108 Palmer makes the point that, ‘[t]here are times when about all one can say in support of restitution is that it is just for the plaintiff rather than the defendant to have the benefit’.Footnote 109
As observed earlier, Fagan attributes to unjust enrichment the potential to deter, as well as promote equality through distributive justice.Footnote 110 Yet, in the context of First Nations cases, unjust enrichment’s political and moral dimensions may also function as a double-edged sword. Claimants may have to submit to Western notions of morality and justice that are incompatible with their own. There is also the phenomenon of MNEs’ capture of the state and its political authority. Whereas in the German Holocaust claims, political intervention played an important role in bringing about settlements, the same may not apply to First Nations’ claims against an MNE which eyes their land and resources with the support of an obedient state. This is even more so where, as in Glamis Gold v US, the threat of an investor-state claim (which may also include a plea of unjust enrichment) looms over a state’s attempt to decline or withdraw collaboration with the MNE.Footnote 111 The case concerned the grant of a mining concession to Glamis Gold, a Canadian gold company. The project met with opposition, in particular from the Quechan Indian Nation, due to its location in an area sacred to the Native American tribe. Glamis instituted proceedings against the United States, claiming that the series of regulatory measures imposed by federal and Californian state agencies in response to the opposition were arbitrary, discriminatory and expropriatory in violation of the North American Free Trade Agreement.
Unjust enrichment’s moral dimension, which both Vardi and Fagan posit as central to BHR litigation, speaks to the role of public policy in cases brought in pursuit of justice. Against the backdrop of developments in human rights laws and changing judicial attitudes, a finding of unjust enrichment may now be justified on grounds of public policy requiring respect for and compliance with human rights. Legislative and judicial developments which support this prospect were noted earlier. Examples include the promulgation of HRDD laws which impose on MNEs responsibility for mitigating human rights impacts throughout their supply chainsFootnote 112 and the UK court’s willingness to entertain exceptions to general rules in cases where human rights are engaged. A by-product of HRDD laws is the introduction of human rights considerations into corporate boardrooms. International law provides a further example of the growing role of public policy in BHR litigation. Claimants may be assisted by the ‘Protect, Respect and Remedy’ framework as implemented in the UN Guiding Principles on Business and Human Rights.Footnote 113 Insofar as unjust enrichment is one area of private law that is more amenable to policy intervention, these legal and normative developments have the potential to turn human rights violations into policy-oriented grounds of restitution. The Josiya claimants, in support of their unjust enrichment claim, invoke, inter alia, the recognition and protection of human rights afforded in the Malawian constitution, including in relation to child and slave labour, exploitation and the right to an effective legal remedy.Footnote 114
Notwithstanding the advances noted above, BHR litigation continues to present multifaceted challenges to claimants.Footnote 115 The law of unjust enrichment may have an answer to some but not to all. At the practical level, it is unlikely to alleviate the power and capacity deficit which separates claimants from corporate defendants. This includes factors such as the protracted nature of BHR litigation, which MNEs are better equipped to withstand and tactically prolong, and the disparity in available resources.Footnote 116
The Josiya claimants, for example, invoke the existence of hundreds of subsidiaries established by the defendants in many jurisdictions. On the whole, the court’s hands have remained tied when the demands of justice clash with entity theory. The Josiya claimants further allege that the defendants deliberately limit the information they make public concerning the role, interactions and activities of most of these subsidiaries.Footnote 117 This touches on the challenge of discharging the evidentiary burden. Much of this burden is shouldered by claimants. By contrast, much of the evidence is in the defendants’ hands.
Claims in unjust enrichment in contemporary BHR litigation are mostly found in cases arising from multi-tier supply chains, where such claims may circumvent some of the many challenges they pose. Insofar as these chains represent vital and growing arteries of the globalised economy, unjust enrichment’s contribution to securing MNE accountability for the human rights violations which afflict them all too often is manifestly of significant importance.
As discussed above, multi-layering severs the contractual link between the direct producers as claimants and lead companies as defendants, thereby problematising the attribution of liability to the defendants. A claim in unjust enrichment has the potential to assist by virtue of being a non-contractual cause of action. On the contrary, where an enforceable contract subsists, a claim founded on unjust enrichment may be barred.
Unjust enrichment may also help resolve the issue of third parties’ impact on defendants’ liability, a particularly challenging hurdle in multi-tier supply chains. Establishing third party liability in circumstances where the law does not recognise MNEs’ corporate and supply chain unity is one important instance where this law may come to the aid of BHR claimants. Third parties may be internal, e.g., subsidiaries and/or independent contractors, or external, e.g., the police, security providers, or armed criminals. While in some jurisdictions ‘accessory’ or ‘secondary’ liability is classified under ‘joint’ liability, in others it is recognised as a separate legal doctrine (aiding and abetting in the US or common design in the UK). One UK case, Kadie Kalma v African Minerals,Footnote 118 resulted in defeat for the claimants partly on this ground. The UK authorities on accessory liability in tort—one of the allegations in the case—provide that a defendant may be liable in tort for a wrong committed by another only where the defendant and the wrongdoer pursue the same objective. The wrong is the means to achieve a ‘common design’.Footnote 119 Intent to commit the wrong in question was not found on the facts of the case. It was classified as an omissions case to which, subject to a few limited exceptions, the duty of care does not attach.
It is in this intersection between third parties’ ‘aiding and abetting’ and the tortious requirement of intentional injury that unjust enrichment becomes particularly useful.Footnote 120 So long as the lead company was enriched at the direct producers’ expense, it is immaterial that the ground of restitution operated between the direct producers and a third party. Accordingly, where the direct producer was compelled or unduly influenced by a supply chain intermediary to transfer a benefit to the defendantFootnote 121 and the lead company had actual or constructive notice of the duress,Footnote 122 restitution founded on unjust enrichment should be available. Sourcing arrangements in global value chains frequently provide for supervision by the lead company in codes of conduct appended to the contract. Provisions may include the lead company delivering training to suppliers, monitoring their performance through audits, and prescribing sanctions-backed demands for improvements. In Josiya, the defendants promulgated policies and procedures ‘which were purportedly designed to prevent the use of unlawful child labour, forced labour and dangerous and exploitative working practices in their Malawian supply chains’.Footnote 123 In the context of the unjust enrichment head of claim, supervision may assist in establishing notice to the lead company.
Supervisory control often masks the less visible and often contradictory structural control. Structural control refers to the control that lead companies often exercise over what the sociologist Intan Suwandi terms ‘dependent suppliers’ engaged in unequal global power relations.Footnote 124 In the interior of global value chains, MNEs ‘extract surplus value through various mechanisms of control, both in terms of controlling the production processes of their dependent suppliers and in terms of controlling the labour process of workers employed by these suppliers’.Footnote 125 In the words of an executive of Malaysian Star Inc., ‘Multinationals are always looking for the most competitive supplier, wherever they can find them. They can make comparisons. … So we need to keep pleasing our customers’. Multinational clients ‘would observe, control how you work’. They ‘control what you do. We can even say they have power over you’.Footnote 126 In what becomes a chain of compulsions, the lead company’s pressure on speed, volume and cost of production dictates the conditions and practices which first-tier suppliers must force on the shopfloor if they are to survive. Allegations of structural control have now made their way to the courtroom. In the supply chain case of Limbu v Dyson, ‘The defendants are alleged to exert a high degree of control over the manufacturing operations and working conditions at ATA/Jabco’s factories’.Footnote 127 In the context of the unjust enrichment claim, proof of structural control may support qualification or vitiation of the intention to transfer.
Causation is another aspect of BHR litigation where an unjust enrichment cause of action may assist claimants. Insofar as the unjust enrichment claim is grounded in a causation test, the ‘contributory cause’ test of operating cause may apply. This causation test is less stringent than the ‘but for’ one commonly used in tort. It ‘is justified by virtue of the defendant’s conduct, which makes it easier to conclude that any enrichment received by the defendant was received in circumstances of injustice’.Footnote 128 Particularly significant in the context of supply chains litigation is the evolving recognition of economic duress as a ground for restitution. Here again, the illegitimate pressure which compelled the claimants to transact or left them with no other choice need only be a significant cause.Footnote 129
Finally, legal and practical challenges are mutually reinforcing. Claimants would find it easier to fund litigation if their prospects of success are higher. In turn, MNEs’ perception of litigation as risky could potentially incentivise change in conduct.Footnote 130 A concern is that the novelty of the law of unjust enrichment in the BHR context renders judicial decisions susceptible to costly and protracted appeals. Alternatively, as is often the case in BHR litigation, MNEs may elect to settle, thereby preventing the development and maturation of this class of claims.
Nonetheless, development and maturation may be imported from non-BHR cases. An example is the recent case of Esben Finance v Wong Hou-Lianq Neil. Footnote 131 In what is described as a ‘momentous’ judgment, the Singaporean Court of Appeal held that neither statutory limitation nor laches applies to unjust enrichment and that, subject to certain limitations, absence of consent is to be accepted as an unjust factor. All of which ‘is likely to have far-reaching consequences’ for unjust enrichment’s future development as a crystallised, independent claim under the common law umbrella. Significantly, Lord Neuberger, former President of the UK Supreme Court who had been involved in some key unjust enrichment cases, sat in these proceedings as an international judge.Footnote 132
VI. Conclusion
Unjust enrichment’s venture into BHR litigation brings to the fore its close connection to questions of justice, conscience, morality and rights that are parasitic on the obligation not to wrong others. In the words of Jacob J in Vedatech v Crystal Decisions, ‘The principle of unjust enrichment is in large part founded on conscience. Can the receiver of a benefit in all conscience hang on to it without paying? If he cannot, then he is unjustly enriched’.Footnote 133 It thus serves to broaden our understanding of human rights as going beyond individual entitlements vis-à-vis the state to also encompass our mutual obligations and entitlements vis-à-vis each other. Further, the law of unjust enrichment offers an additional, justice-based route for vindication of property rights, the darling of liberal law’s guardianship and, historically, the launching pad of human rights. This time, however, guardianship is exercised on behalf of vulnerable, exploited groups. In Josiya, the claimants’ proprietary interest in the products of their labour is established by their legal title to tools, seeds, pesticides and the like. This indirect route bypasses more fundamentally systemic questions arising out of our understanding of labour as private property exchanged for a wage and vested in the product.Footnote 134 It is nonetheless significant against the backdrop of land grabs in which formerly subsistence farmers remain in situ, but together with their land, labour and tools are incorporated into the globalised circuit of production and accumulation.Footnote 135 In sum, unjust enrichment has the potential to dent private law that is not ‘aware that there is much more to making a market serve the needs of the people than simply punishing thieves’.Footnote 136
This article reflects on unjust enrichment’s function and potential as an emerging tool of contestation in BHR litigation. It explains the origins of and debates within this evolving area of law and examines how it is being used in contemporary BHR cases. It argues that unjust enrichment, in addition to potentially assisting claimants in surmounting some of the hurdles presented by BHR litigation, also serves to reframe their claims vis-à-vis corporate defendants. Claimants are characterised as rightsholders rather than victims. This is not an exhaustive study. Issues such as choice of law are not considered. The discussion is necessarily grounded in what may happen in such cases because, as with many other issues in BHR litigation, the UK courts have yet to give substantive judgment in this area of law. The authors await such judgments and the opportunity that they present for clarification and development of this important area of law.
Competing interests
Yonit Manor-Percival and Rachel Chambers declare none.
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