Unjust enrichment in investor–State arbitration: a principled limit on compensation for future income from fossil fuels

If States take seriously the Paris Agreement's mitigation goal by phasing out the use of fossil fuels in energy production, investor–State arbitration could allow claimants to recoup lost value. In awards of compensation, tribunals typically apply forward-looking, income-based valuation methods to quantify future cash flows. But such methods may lead to upward redistribution of wealth and expansion of fossil fuel production. This article recalls the prohibition against unjust enrichment as a general principle of law that complements the obligation to make full reparation by ensuring that any compensation does not undermine some legally recognized allocation of benefits and burdens. The Paris Agreement's distributive scheme may thus impose a principled limit on compensation for future income from stranded fossil fuel assets when a tribunal determines the appropriate method of valuation, thereby ensuring that investor–State arbitration does not enrich claimants to the detriment of State capacity in climate mitigation and adaptation.