Punitive Damages in France: A New Deal?

CASE COMMENTARY
Punitive Damages in France: A New Deal?
A commentary on Cour de cassation (France), 1st civil chamber,
1 December 2010, case no 1090
(2012) 3 JETL 115
I. Distress at sea
In July 1999, a US purchaser placed an order for a catamaran with the French
company Fountaine Pajot, based in La Rochelle, for a purchase price of
$ 826,000. Prior to delivery the vessel was docked in the harbour of La Rochelle, which was hit by a fierce storm in December 1999. The storm inflicted
significant damage to the catamaran which was subsequently repaired. Fountain Pajot made delivery in Miami Harbour (USA) in February 2000 without
informing the purchaser of these events. A few months and some nautical
miles later, numerous defects were detected that endangered the crew of the
ship. The past events were discovered and the current defects were traced back
to defective repairs at the time. As designated by the contract, an action was
commenced in the State of California.
In 2003 the Superior Court of California awarded $ 3,253,734 to the plaintiffs:1
$ 1,391,650 for ship repairs, $ 402,084 for legal costs, and $ 1,460,000 in punitive damages. The plaintiffs sought enforcement (exequatur) of the US judgment in France. Generally, foreign decisions may be enforced in France if
French courts are satisfied that three conditions are met, including that enforcement of the judgment would not be contrary to international public
policy. Significantly, the Cour de cassation2 held that, in principle, foreign
judgments awarding punitive damages are not in themselves contrary to public
policy insofar as the awarded amount is not disproportionate to the harm
sustained and the contractual breach. In this case, however, they were seen
as disproportionate.
1 Superior Court of California, County of Alameda, Peter X & Julie Y v Fountaine Pajot,
26 February 2003, no 837722-1.
2 Cour de cassation, Chambre civile (Cass Civ) 1, 10 December 2010, no 09-13303, Bulletin
des arrêts des chambres civiles (Bull) 2010, no 248; V Wester-Ouisse, La Cour de cassation
ouvre la porte aux dommages punitifs!, Responsabilité civile et assurances (RCA) 2011,
Etude no 5; Recueil Dalloz (D) 2011, 24, note I Gallmeister; D 2011, 423, note FX Licari;
La Semaine Juridique: Juris-classeur périodique ed Générale (JCP G) 2011, 140, note
J Juvénal; H Gaudemet Talon, Revue critique de droit international privé (RCDIP) 2011,
93; P Stoffel-Munck, JCP G 2011, 435, no 11.
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II. Clarifying the role of exequatur
It is best to start with a brief discussion of the prerequisites of the French rules
on exequatur. In order to obtain such a judgment, in terms of which a French
court permits a foreign judgment to be executed in France, several specific
conditions must be met. According to the arrêt Avianca,3
The French judge has to ensure that three conditions are fulfilled, namely the indirect competence
of the foreign court, based on the connection of the case to the court, the conformity with the
international public policy principles of content and procedure, and the absence of fraud of law.
Accordingly, the first step for any French judge is to verify that the nature of
the dispute does indeed fall within the competence of the foreign court, which
is to say that his or her court, or any other French court, does not already hold
exclusive competence over the matter. Such exclusiveness was, however, historically provided for by art 15 (Code Civil, CC) which stipulated that French
courts always had exclusive jurisdiction over French citizens. As a result, the
enforcement of foreign judgments was hampered because the courts would
deny exequatur on the basis of the lack of competence of the foreign courts
rendering the decisions.4 This view was recently changed in 2006 in the arrêt
Prieur.5 The court overruled the centuries old interpretation and held that
3 ‘Le juge français doit s’assurer que trois conditions sont remplies, à savoir la compétence
indirecte du juge étranger, fondée sur le rattachement du litige au juge saisi, la conformité
à l’ordre public international de fond et de procédure et l’absence de fraude à la loi’
(authors’ translation): Cornelissen v Société Avianca Inc et al, Cass Civ 1, 20 February
2007, Bull 68; RCDIP 2007, 420, with note B Ancel/H Muir Watt; cf Fairhurst v Simitch,
Cass Civ 1, 6 February 1985, RCDIP 1985, 369. It should be noted that two earlier
landmark cases changed the French understanding of exequatur with regard to its roots.
Originally, according to the French Civil Code (Code civil, CC), foreign judgments
could only be declared executory when successfully reviewed by the courts as to their
merits. Such procedure essentially required the parties to re-litigate their cases in front of
French courts. This stifled the desire of foreign claimants to make use of such an action.
This doctrine of révision au fond ultimately persisted until 1964, when the Cour de
cassation eventually replaced the revision approach with the doctrine of contrôle in arrêt
Munzer (Munzer v Dame Jacoby-Munzer, Cass Civ 1, 7 January 1964, RCDIP 1964, 344,
Journal du droit international ‘Clunet’ (JDI) 1964, 302). According to the contrôle doctrine, the courts were required to examine the judgment, rather than the claim upon
which the judgment was issued, to determine its conformity with specific conditions,
some of which were eventually excluded, ie régularité de la procédure (compliance with
French procedural rules) in the arrêt Bachir (Bachir v Bachir, Cass Civ 1, 4 October 1967,
RCDIP 1968, 98) and application of the substantive law designated by the French choice
of law rule in the arrêt Avianca (supra).
4 See eg Tribunal de grande instance (TGI) Paris, 22 April 1976, RCDIP 1977, 324, note
G Droz; Cass Civ 1, 5 May 1976, [1976] Bull I 126; G Cuniberti, The Liberalization of the
French Law of Foreign Judgments (2007) 56 International and Comparative Law Quarterly (ICLQ) 931.
5 Prieur v de Montenach, Cass Civ 1, 23 May 2006, RCDIP 2006, 871, Journal de droit
International (JDI) 2006, 1365.
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art 15 CC could no longer be understood to confer exclusive jurisdiction.
Instead (only) a significant link to the jurisdiction to which the matter was
referred was required (compétence indirecte du juge étranger).6
In the present case, Fountaine Pajot relied on earlier judgments and sought
non-execution on the basis of art 15 CC. The court of lower instance (Cour
d’appel de Poitiers) accepted this argument and denied exequatur as the French
defendants had not waived their ‘privilege of jurisdiction’.7 The Cour de cassation revoked this judgment.8 In the Court’s view, the litigation was sufficiently
linked to the State of California as the purchasers lived and worked in California, and are US citizens, the agent of Fountaine Pajot (Cruising Cat Cie)
resides in California and the place of delivery was in California, all of which
established a sufficient link to the US courts. The case thereby, for the first
time, affirmed the new direction of the French jurisprudence, indicating that a
French court is now more likely than ever to enforce a foreign judgment.9
As any fraude à la loi on the part of the plaintiffs10 was absent, the transnational litigants had to meet the final safeguard, namely, that the decision should
not contravene French conceptions of international public policy (conformité
à l’ordre public international), that is, if a foreign judgment conflicts with
French law, exequatur will be denied. This concept exists in two peculiarities.
First, the judgment will not be executed if a French judgment on the case
already exists and it has thus become res judicata (chose jugée) in France.11
No such judgment existed in the case submitted. Secondly and most importantly, it will be determined whether or not the result of the foreign judgment
is consistent with French substantive law. Clearly under French law punitive
damages, that is, damages which are intended to not only compensate for harm
but also punish the wrongdoer and deter such conduct by others, do not exist
and thus exequatur was denied by the court of lower instance:12 in line with
most continental European jurisdictions the court refused to award punitive
6 Simitch, Cass Civ 1, 6 February 1985, RCDIP 1985, 369; the various factors to be taken
into account in determining such a link are described by B Audit, La fin attendue d’une
anomalie jurisprudentielle: retour à la lettre de l’article 15 du code civil, D 2006 chron,
1846.
7 Cour d’appel (CA) Poitiers, 28 June 2005, not published.
8 Cass Civ 1, 22 May 2007, no 05-20473, D 2007, 1596, note F-X Licary.
9 However, certain areas of law are maintained as exclusive to French judges, such as,
most notably, matters relating to corrective civil status documents, patents, proceedings
for infringement of a French trademark, real estate properties located in France and
jurisdiction clauses. See Audit, D 2006 chron, 1846.
10 Such as a malicious alteration of specific facts relating to the case in order to render rules
favourable to the claim applicable, eg by altering the party’s nationality, domicile or
residence or any circumvention of the due observance of defence rights. See Audit, D
2006 chron, 1846.
11 Cass Civ 1, 23 March 1936, RCDIP 1937, 198.
12 CA Poitiers, 29 February 2009, no 07/02404, JDI 2010, 1230, note F-X Licari.
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damages because it considered that the compensation paid to the injured party
should not exceed the loss or harm suffered. As a matter of fact, the Cour de
cassation had previously consistently held that damages awarded to the injured
party must compensate the harm suffered without any profit or loss for the
injured party (restitutio in integrum)13 thereby excluding the award of punitive
damages as a matter of principle. Nevertheless, in the case at hand, the Cour de
cassation held that, in principle, foreign judgments awarding punitive damages
are not in themselves contrary to public policy insofar as the awarded amount
is not disproportionate to the harm sustained and the contractual breach.
However, the punitive damages in this case, compared to the amount of compensatory damages ($ 1.46 million compared to $ 1.39 million) was manifestly
disproportionate in the court’s view and hence exequatur was denied.14
III. Punitive damages and the principle of proportionality
An explanation for this rather surprising obiter dictum may be inferred from
recent discussions in French legal scholarship. As is well known, three tort law
drafts have been published in the past six years in France,15 all proposing the
13 See eg Cass Civ 2, 12 May 2010, Bull civ II no 94; Cass Civ 2, 23 January 2003, Bull Civ
II no 20; Cass Civ 1, 25 March 2009, no 07-20774; Cour de Cassation, Chambre criminelle (Cass crim) 19 May 2009, no 08-82.666, D 2009, 1767.
14 The question still to be determined is under which circumstances the amount awarded
would satisfy the French courts as proportionate. In this case, an amount more than the
compensatory damages was enough to offend the French court.
15 Art 1371, Avant-projet de réforme du droit des obligations, 22 September 2005, Rapport
Catala au Garde des Sceaux: ‘L’auteur d’une faute manifestement délibérée, et notamment d’une faute lucrative, peut être condamné, outre les dommages-intérêts compensatoires, à des dommages-intérêts punitifs dont le juge a la faculté de faire bénéficier
pour une part le Trésor public. La décision du juge d’octroyer de tels dommages-intérêts
doit être spécialement motivée et leur montant distingué de celui des autres dommagesintérêts accordés à la victime. Les dommages-intérêts punitifs ne sont pas assurables’;
art 1386-25, Proposition de loi no 657 portant réforme de la responsabilité civile, Sénat,
9 July 2010: ‘Dans les cas où la loi en dispose expressément, lorsque le dommage résulte
d’une faute délictuelle ou d’une inexécution contractuelle commise volontairement et a
permis à son auteur un enrichissement que la seule réparation du dommage n’est pas à
même de supprimer, le juge peut condamner, par décision motivée, l’auteur du dommage, outre à des dommages et intérêts en application de l’article 1386-22, à des dommages et intérêts punitifs dont le montant ne peut dépasser le double du montant des
dommages et intérêts compensatoires’; F Terré (ed), Pour une réforme du droit de la
responsabilité civile (2011) art 54, 199: ‘Lorsque l’auteur du dommage aura commis
intentionnellement une faute lucrative, le juge aura la faculté d’accorder, par une décision spécialement motivée, le montant du profit retiré par le défendeur plutôt que la
réparation du préjudice subi par le demandeur. La part excédant la somme qu’aurait
reçue le demandeur au titre des dommages-intérêts compensatoires ne peut être couverte par une assurance de responsabilité’; S Carval, Vers l’introduction en droit français
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inclusion of punitive damages in the Code civil. In this regard the present
judgment may be an indicator of current discussions on the introduction of
punitive damages in France. It must be duly observed that the Court added,
however, that an award of punitive damages would not violate public policy if
the amount awarded was proportionate to the violation and the contractual
breach. This very core of the decision – the application of the principle of
proportionality regarding damages awards – finds its legal basis in art 8 of
the Declaration of Human and Civic Rights (DHCR) of 26 August 178916
which was originally conceived to be applicable to criminal law only but is
now extended to civil law.
Such a shift from civil to criminal law and, accordingly, from the principle of
full compensation (restitutio ad integrum) to deterrence and punishment
seems to have gained acceptance not only in France but also in other supranational legislation and jurisprudence. As for France, the Cour de cassation
had already ruled in 2009, in a case involving stock exchange legislation, that a
late payment fee, although a civil and not a criminal penalty, must conform
with the principle of proportionality, the latter being a principle of international public policy.17 Thereby, the extension of punitive aims to civil remedies
was accepted. As for supra-national actors, the European Court of Human
Rights (ECtHR) adopted a comparable solution in Pressos Compania Naviera
when it took the view that ‘there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by
any measure depriving a person of his possessions’.18 Finally, the Rome II
Regulation also states that only ‘punitive damages of an excessive nature’
may be regarded as being contrary to public policy.19 Thus, this judgment
seems to be in line with what has become mainstream legal thinking in Europe:
the acceptance of punitive damages as a civil law remedy as long as they are
proportionate.
16
17
18
19
des dommages-intérêts punitifs?, Revue des contrats 2006, 822; J-S Borghetti, Punitive
Damages in France, in: H Koziol/V Wilcox (eds), Punitive Damages: Common Law and
Civil Law Perspectives (2009) 55; P Pierre, L’introduction des dommages et intérêts
punitifs en droit des contrats – Rapport français, Revue des contrats 2010, 1117;
A Vignon-Barrault, Les dommages et intérêts punitifs en Europe, Groupe de recherche
européen sur la responsabilité civile et l’assurance (GRERCA) – Droits nationaux et
projets européens en matière de responsabilité civile (IRJS editions, forthcoming 2012).
‘The Law must prescribe only the punishments that are strictly and evidently necessary.’
See also Conseil Constitutionnel, 3 September 1986, no 86-215 DC.
Cass Civ 1, 28 January 2009, no 07-11729, JCP G 2009, act 80, note E Cornut; D Martel,
Précisions sur les conditions de l’exequatur, JCP G 2009, II 10086.
ECtHR Pressos Compania Naviera SA and Others v Belgium, 20. 11. 1995, no 17849/91,
§ 38; ECtHR Hamer c Belgique, 27. 11. 2007, no 21861/03, D 2008, 884, note J-P Marguénaud.
Regulation (EC) No 864/2007 of 11 July 2007 on the law applicable to non-contractual
obligations (Rome II), Official Journal (OJ) L 199, 31. 7. 2007, 40–49, recital 32.
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However, it is submitted that pursuit of purely deterrent aims in civil law
should be constrained by principles drawn from the criminal law sphere, with
which they have traditionally been more closely associated. For example, the
French legislator has mandated administrative authorities (sometimes even
private individuals) to conduct fact-finding and enforce sanctions in formerly
criminal proceedings.20 It is uncontested by French courts and the ECtHR that
those alternative systems belong to the criminal sphere21 despite the involvement in them of private actors. Accordingly, key principles of criminal proceedings must be adhered to, including the principle of proportionality. It
seems clear then that such overarching principles are not confined to the
borders of the legal sphere in which they have traditionally arisen. Correspondingly, it is submitted here that where a judge, even when adjudicating
a claim rooted in the civil law, grants a remedy such as punitive damages which
effects punishment rather than simple compensation, he or she should be
bound to apply that remedy in an appropriately proportional manner.
In any case, the drafts mentioned earlier also provide sound evidence that
punitive damages belong to the criminal sphere only. Catala22 and Béteille
state that punitive damages are allowed for ‘intentional faults’, which (at least
in French law) is the fundamental element of penal fault, except when the law
provides for an exception and penalises involuntary fault.23 Moreover, a claimant is, according to the drafts, not entitled to punitive damages; they are
awarded at the discretion of the judge and such an award may be handed over
to the Treasury or a compensation fund. Finally, all seem to agree that punitive
damages, like criminal sanctions, are not insurable.
IV. A solution peculiar to continental Europe
The audaciousness of the judgment at hand becomes even more obvious when
compared to the approaches of other European civil law jurisdictions. For
example, the German Bundesgerichtshof (Federal Court of Justice, BGH) held
that:24
20 The banks have dealt with the drawing of cheques without sufficient funds since 1992.
More recently, some professional organisations dealing with illegal uploading were
granted investigative powers and sanctions: loi no 2007-1544, art L 331-2 Code de la
propriété intellectuelle (French Intellectual Property Code). See also the delegations of
functions to quasi non-governmental organisations: Autorité de la concurrence, Autorité des marchés financiers, Conseil supérieur de l’audiovisuel.
21 ECtHR Jamil v France, 8. 6. 1995, no 15917/89, JCP G 1996, II, 22677, note G Bourdeaux; Cass crim, 29 February 1996, Bull no 100: ‘mesure à caractère pénal’.
22 Carval, Revue des contrats 2006, 822.
23 Code pénal (C pén) art 121-3.
24 ‘Ein US-amerikanisches Urteil auf Strafschadensersatz (punitive damages) von nicht
unerheblicher Höhe, der neben der Zuerkennung von Ersatz für materielle und imma-
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A US judgment awarding a considerable amount of punitive damages in addition to awards for
pecuniary and non-pecuniary loss will regularly not be granted exequatur.
The award of punitive damages clearly conflicts with the principles of public
policy as punishment and deterrence are criminal purposes reserved for state
actors; they are not civil matters.25 Damages should compensate the claimant
only to the extent of the harm actually sustained and must not result in profit.26
The Italian courts also rejected exequatur when confronted with US punitive
damages awards.27 Interestingly, the contractual hypothesis was invoked: the
claimant argued that parties to a contract may agree on a penalty clause in terms
of which a fixed indemnity is to be paid in the event of damage; such penalty
clauses have a punitive effect and thus the punitive aim of damages is not
contrary to the Italian public order. The Corte di cassazione disagreed, stating:28
The idea of penalty and punishment is foreign to the compensation of damage, and the behaviour
of the person causing the damage is immaterial. The purpose of tort law is to restore the patrimonial sphere of the victim, by the payment of a sum of money the aim of which is to erase the
consequences of the damage. This goes for all the damage, including the non-material or moral
loss, whose compensation we cannot say has a punitive purpose, not only because we do not take
into account the property of the victim or the solvency of the person liable, but also because it is
necessary to adduce evidence of an offence caused by the wrongdoing, by the assertion of concrete
circumstances.
Clearly, the main reason why German and Italian judges refuse to award
punitive damages stems from the respective objectives of civil and criminal
law: tort law aims to compensate while criminal law aims to deter and punish;
the latter is not within the realm of the claimant but the State. In the words of
Lord Devlin in the English House of Lords, ‘it may well be thought that this
25
26
27
28
terielle Schäden pauschal zugesprochen wird, kann insoweit in Deutschland regelmäßig
nicht für vollstreckbar erklärt werden.’ BGH 4 June 1992, IX ZR 149/91: (authors’
translation).
See ibid § V.3.
N Jansen/L Rademacher, Punitive Damages in Germany, in: Koziol/Wilcox (fn 15) 74.
Cassazione civile III, 19 January 2007, no 1183/2007. See also, AP Scarso, Punitive
Damages in Italy, in: Koziol/Wilcox (fn 15) 103.
‘Nel vigente ordinamento l’idea della punizione e della sanzione è estranea al risarcimento del danno, così come è indifferente la condotta del danneggiante. Alla responsabilità civile è assegnato il compito precipuo di restaurare la sfera patrimoniale del
soggetto che ha subito la lesione, mediante il pagamento di una somma di denaro che
tenda ad eliminare le conseguenze del danno arrecato. E ciò vale per qualsiasi danno,
compreso il danno non patrimoniale o morale, per il cui risarcimento, proprio perché
non possono ad esso riconoscersi finalità punitive, non solo sono irrilevanti lo stato di
bisogno del danneggiato e la capacità patrimoniale dell’obbligato, ma occorre altresì la
prova dell’esistenza della sofferenza determinata dall’illecito, mediante l’allegazione di
concrete circostanze di fatto da cui presumerlo, restando escluso che tale prova possa
considerarsi in re ipsa.’ Cassazione civile III, 19 January 2007, no 1183/2007: (authors’
translation).
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confuses the civil and criminal functions of the law; and indeed, so far as I
know, the idea of exemplary damages is peculiar to English law.’29
Nevertheless, a comparative view reveals that the Spanish courts also grant
exequatur for judgments rendering punitive damages30 and, according to some
authors, even award damages that are punitive in nature in some specific
cases.31 Like the French Cour de cassation, the Spanish Tribunal Supremo
circumvents the purely deterrent purpose of punitive damages with the argument that such damages reflect normative, prescriptive purposes of tort law.
Such an argument seems to be problematic for several reasons. First, the main
purpose of damages in tort law is compensation; any moral or prescriptive aim
is at best a side-effect of such compensation. Turning to substantive French
tort law, any emphasis on moral aims would over-emphasise the requirement
of fault which would catapult French tort law back a century. Second, it is
unclear what is in the sphere of private conflict, yet requires deterrence, and
which harms injure society as a whole and should hence be dealt with in the
criminal system. Lastly, any pursuit of moral aims by tort law may open the
floodgates to the ‘outsourcing’ of criminal proceedings to civil courts. Apart
from the fact that litigation costs will then be borne by the claimants, the
protection offered by principles of criminal procedure could be eroded, thereby depriving defendants of, for example, firmer guarantees in the conduct of
their defence and the protection of citizens. One may conclude that the question of punitive damages still provokes much concern and debate regarding
their implementation in continental European law.
Véronique Wester-Ouisse* and Thomas Thiede**
29 Rookes v Barnard [1964] Law Reports, Appeal Cases 1129, 1221 per Lord Delvin.
30 Sentencia del Tribunal Supremo (Spanish Supreme Court, STS) 13. 11. 2001; Miller Import Corp v Alabastres Alfredo, SL (Exequátur no 2039/1999).
31 P del Olmo, Punitive Damages in Spain, in: Koziol/Wilcox (fn 15) 137 no 7 ff.
* Maître de conférences à l’Université de Brest, IODE Rennes UMR CNRS 6262, France.
** Researcher at the Institute for European Tort Law, Fellow of the European Centre of
Tort and Insurance Law and Lecturer at the University of Vienna, Austria.