Punitive Damages and Foreign Courts

Back to Jack in a bit. Adam Liptak’s NYT article notes that foreign courts don’t like to enforce American punitive damages awards, a position that Liptak’s interviewees attribute to foreign discomfort with the American jury system and American-style punitive damages. It’s true that foreigners think that the American jury system is crazy, but European courts routinely enforce American compensatory-damage judgments, which means mainly the judgments of juries. So European discomfort with juries can’t go as deep as Liptak’s article implies.

As for punitive damages, the attitude of the European courts is not surprising, once one recalls that American courts also do not enforce foreign judgments that are “penal”—namely criminal, for example, fines. European courts appear to have the same rule, and the evident puzzle for them is whether punitive damage judgments should be classified as regular civil judgments (their formal classification) or criminal judgments like fines (which they seem to be, in effect). Punitive damages straddle the line between civil judgments (which are supposed to compensate) and criminal judgments (which are supposed to punish). Hence European puzzlement about whether to enforce these awards.

Courts also don’t enforce foreign tax judgments, and this rule, along with the penal rule, seem to reflect a kind of inter-state deal. We’ll enforce your civil judgments if you enforce ours—because we’re basically in agreement that people should be compensated for their injuries, and we don’t want to let defendants escape liability by going abroad. However, we don’t agree as much about taxation, criminal penalties, and general regulatory matters, so let’s agree to leave enforcement of these rules to one’s own national courts, even if sometimes people can escape judgments by going abroad. If this is really the deal, then European reluctance to enforce American punitive awards is justified, even if these awards are good policy.

See also Jonathan Adler’s post here .