Punitive Damages-A European Perspective

Helmut Koziol: Prof. I.R. Dr. H.C. Helmut Koziol is a retired law professor of the University of Vienna. He is the Director of the Research Unit for European Tort Law under the Austrian Academy of Sciences, Managing Director of the European Centre of Tort and Insurance Law and a member of the European Group on Tort Law. Other fields of interest include Banking Law and Insolvency Law.

This article is the extended version of the John H. Tucker Jr. Lecture, held at the Paul M. Hebert Law Center of the Louisiana State University on March 22, 2007. I would like to thank Ms. Vanessa Wilcox, LL.M. (Cantab) for her valuable and varied assistance in drafting this article.

I. Introduction

As an introduction, I think it is useful to point out that the legal systems of the United States show a number of peculiarities that cause continental Europeans to shake their heads, and which may be of some influence on the discussion of the topic touched of this article. As the first anomaly, I have to mention the institution of juries,1 which have to decide complicated legal questions and yet are not legal experts. By analogy, continental Europeans tend to pose the question whether Americans, in the case of a heart attack, prefer to be operated on by a lawyer instead of a surgeon. Second, Europeans are astonished that the winning party has to bear his own costs and that the American legal system allows, on one hand, claimants with spurious petitions to blackmail entrepreneurs with the threat of a suit, and on the other hand, accept that victims receive incomplete compensation because they have to pay enormous sums to their lawyers and the court. Furthermore, the extremes of class actions send shivers down the spine of European lawyers. Last, though certainly not least, punitive damages stir up memories of very ancient times when legal systems did not make a strict difference between penalty and compensation. With that, we finally have arrived at the centre of the topic.

I wish to begin by mentioning two cases, one from the United States and the other from Germany. Every American lawyer is familiar with BMW of North America, Inc v. Gore, where Dr. Gore discovered that the new BMW he purchased had been repainted after being scratched during transportation.2 He brought an action for fraud and recovered $4,000 compensation for the difference in value between the repainted and the brand new car, as well as four million dollars in punitive damages.3 The jury calculated the punitive damages by taking regard of the total harm, thus multiplying the approximate number of repainted vehicles sold by BMW-about 1,000-by the depreciation of each car.4

In contrast, a German case. In 1992 the German Supreme C...

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