M-EPLI Roundtable: Punitive Damages
What is the perspective of several countries on punitive damages in and outside of Europe? What issues arise from the recognition and enforcement of foreign (mostly US) punitive damages judgments? How do different countries view the public policy exception?
These questions and more were among the topics that were addressed during the M-EPLI Roundtable on punitive damages that took place on October 14th. The Roundtable was organized by Lotte Meurkens and Cedric Vanleenhove. Multiple experts shared their insights on the recognition and enforcement of punitive damages in several countries.
The Roundtable started with a warm welcome by Marta Pertegás Sender, professor in private international law and transnational law at Maastricht University and the University of Antwerp. Pertegás Sender illustrated the starting point of the Roundtable: a conference held in Milan by the Department of Italian and Supranational Public Law of the University of Milan in 2018. The organizers of the Roundtable took part in this conference and decided to broaden the question of private international law by looking into countries outside of Europe, since extensive research has not been done yet on the recognition and enforcement of punitive damages judgments in non-European countries. As Pertegás Sender explained, the organizers hope to contribute to the ongoing debate on the future of punitive damages (in Europe) by gaining insights from experts on the matter.
It was then time to start with the first speaker of the Roundtable: Cedric Vanleenhove. Van Leenhove is a professor in private international law at the University of Liège and Ghent University. As Vanleenhove explained, it is important to set a general frame of punitive damages before the experts can share their insights on the situation in each country. Therefore, the quid-question was answered first. For this Roundtable, the American definition of punitive damages is used, since the US is a very important country in terms of trading. In addition, the majority of punitive damages awards stem from this jurisdiction. The American definition of punitive damages can be found in § 908 of the Second Restatement of Torts: “Punitive damages may be awarded for conduct that is outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others.” As Vanleenhove explained, there is a traditional hostility to punitive damages in civil law countries, or as some call it: “the Trojan Horse of Americanization of continental law, indigestible to the civil law stomach”. Due to growing globalization, the importance of enforcement of punitive damages increased. The problem with this, however, is that no treaty between the US and other countries facilitates enforcement of punitive damages judgments abroad. This results in a patchwork of national rules of private international law that apply. Despite this patchwork of national rules, there is one central mechanism: the international public policy exception. Vanleenhove continued by addressing the various attitudes towards punitive damages. As he explained, there are different levels of openness towards punitive damages in European countries. Germany, for example, is very conservative whereas France and Spain are more liberal and maintain a ‘cautious welcome’ approach towards punitive damages. Vanleenhove concludes his presentation by stating that there should not be an ‘all or nothing’ approach towards punitive damages: the judge should be able to cut down the punitive damages award to the appropriate amount.
The second speaker was Béligh Elbalti. He is associate professor in Japanese law, private international law, and common law at Osaka University. Elbalti spoke about three different jurisdictions: Japan, South Korea, and the Philippines. In Japan, Elbalti explained, two issues are rising regarding the recognition and enforcement of punitive damages. First of all, whether punitive damages should be considered as penal, and second, whether recognition of punitive damages is incompatible with Japanese public policy. The prevailing view in Japan is that punitive damages are in principle contrary to Japanese public policy. In South Korea, punitive damages that are related to actual loss and serve to compensate damages, for example, would not be considered as against public policy. In general, however, the recognition and enforcement of punitive damages judgments in refused. Contrary to South Korea and Japan, the debate on punitive damages in the Philippines is interesting because of what has not been said. Elbalti illustrated this by using some case examples, such as the Mercantile Insurance Co. v. Sara Yi G.R. case. The issue of public policy was not raised at all in this case. This suggests that there was no problem in enforcing a foreign judgment including punitive damages. Elbalti concluded by stating there is a clear difference in the treatment of punitive damages in the three jurisdictions. Whereas in Japan and South Korea the recognition and enforcement of punitive damages judgments is refused (probably due to the civil law influence on recognition systems), in the Philippines punitive damages can be recognized and enforced (probably because of the common law influence on the recognition system).
Next up was Wenliang Zhang, associate professor in private international law at the Renmin University of China. Zhang, who was assisted by two of his students, spoke about the recognition of punitive damages in China. Accompanied by several charts, Zhang demonstrated that the landscape for punitive damages in China is changing. Especially in the last five years, the use of punitive damages is on the rise in China and the civil sanction is increasingly accepted. Although punitive damages of an excessive nature are still problematic in light of the international public policy exception, reciprocity to punitive damages in China is growing. Zhang expects that the trend to expand the use of punitive damages and welcome foreign punitive damages judgments is likely to continue.
The third speaker of the Roundtable was María Guadalupe Martínez Alles, assistant professor of private law at IE University. Martínez Alles shared her insights on the recognition of punitive damages in Argentina and Mexico. She illustrated that the attitude towards punitive damages is more receptive than in other civil law countries. Martínez Alles expects changes in the following years since the landscape for punitive damages is drastically changing in Latin America. The Mexican Supreme Court has already formally introduced punitive damages in a wrongful death case in 2014. Despite an intense ongoing academic debate taking place in Argentina, punitive damages were also introduced there in the Consumer Protection Statute in 2008. This shows that both countries are actually already familiar with punitive damages, which will simplify recognition and enforcement of foreign punitive damages awards. In both countries, there is little to no case law available. Martínez Alles therefore describes the situation as ‘fluid’ and expects the public policy to mutate over the upcoming years. According to Martínez Alles, it can be stated that the door is open for punitive damages in both countries.
Vsevolod Chernyy then continued the Roundtable by illustrating the situation on the recognition of punitive damages in Russia. Chernyy is a Ph.D. candidate at Lomonosov Moscow State University and obtained a master’s degree in law from NYU. His main focus of interest is private international law and corporate law. Chernyy stated that there have been no classic punitive damages cases in Russia in the American understanding of this term. He continued by explaining that public policy in Russia is based on the principles of equality of parties in civil legal relations, good faith in their behavior, and the proportionality of civil liability. It can be concluded from case law that the court shall recognize foreign judgments unless the evidence presented by the debtor shows that liquidated damages or penalties (recovered because of a civil contract) are of a punitive nature. However, the only fact that the amount of liquidated damages or penalties exceed the amount of actual losses cannot per se result in the violation of Russian public policy. This results in a case-by-case consideration with a broad interpretation for the court.
The last presentation of the Roundtable was delivered by Lotte Meurkens, assistant professor of private law at Maastricht University. She discussed the road ahead of punitive damages in Europe. Meurkens spoke about the status quo of rejection towards punitive damages in Europe. One can speak of a crossroads since there is resistance as well as interest in punitive damages present in Europe. This has to do with a number of difficulties such as the danger of lack of proper knowledge on punitive damages, that results in an incorrect perception of American reality (e.g. punitive damages will lead to an ‘unwanted claim culture’) as well as ungrounded contra arguments. Even though caution is needed, Meurkens argues that the focus should be on the positive effects of punitive damages by answering the ‘why’ question (“Why should punitive damages be incorporated in European legal systems?”) rather than solely focusing on the objections.
After some concluding remarks and room for questions, the Roundtable was concluded. The Roundtable provided a general overview of different countries’ attitudes towards punitive damages as well as insights on the recognition and enforcement of foreign punitive damages judgments in other countries. Although time has yet to come for punitive damages outside the US, it can be concluded from the experts’ insights that the landscape for punitive damages is (slowly) changing. That said, it can be stated that the door to punitive damages in countries other than the US is left ajar rather than closed.
Written by Marielène Wertenbroek (M-EPLI student-intern)