French Supreme Court Rules on Punitive Damages
On December 1st, the French Supreme Court for private and criminal matters ruled on whether a foreign judgment awarding punitive damages could be enforced in France.
The Court held that, in principle, foreign judgments awarding punitive damages are not contrary to public policy and will thus be recognised. However, the Court also ruled that such awards would exceptionnally violate public policy in cases where they would not be proportionate to the harm sustained and the contractual breach.
In this case, the foreign judgment was unsurprisingly American (Superior Court of California, it seems). The plaintiffs had been awarded USD 1.39 million in compensatory damages and USD 1.46 million in punitive damages. This was found to be “clearly” disproportionate. This was because, the Court held, the amount of punitive damages was clearly higher than the amount of compensatory damages (the “very large” difference was USD 70,000).
The U.S. Supreme Court has also ruled that disproportionate awards in punitive damages violate the U.S. Due Process Clause and are thus unconstitutional. But the Court laid down the famous single digit ratio test for that purpose: no more than nine times the amount in compensatory damages.
The judgment of the court can be found here. It dismisses an appeal against a judgment from the Poitiers Court of appeal, which was previously mentioned on this site.
Thanks to Elbalti Béligh for the tip-off
It is quite interesting to note that the French Cour de Cassation refused the exequatur of the judgment altogether (compensatory as well as punitive damages). It could have aligned itself with the position of other countries where the enforcement of the compensatory part is still possible. For example, the Japanese Supreme court of 1997 regarding also the enforcement of Californian punitive damages (an English translation of the said decision can be found here : http://www.tomeika.jur.kyushu-u.ac.jp/procedure/procedure-cases-judgments%20JAIL-PDF/2-030_SUPREME_COURT_JULY_11.1997.pdf)
By comparing the Japanese and the French decisions, it is interesting to highlight that whereas the Japanese Supreme Court considered that punitive damages are “incompatible with the fundamental principles of the Japanese system of compensatory damages because the Japanese system just purports to restore the actual loss caused to a victim” – a position similar to the position of the originating Court of Appeal – but still allowed the enforcement not only compensatory damages but also cost and interest ordered by the Californian court, the French Cour de Cassation recognized that punitive damages are not in principle contrary to public policy but still refused the enforcement of the judgment including the non-punitive damages. This is probably due to the fact that the issue of partial enforcement (exequatur partiel), permitted also in French law, was not raised and French courts have to rule only on what the parties claim.
The French Cour de Cassation would probably put this issue right in the future. Indeed, after the liberalization of the requirements of the exequatur (3 requirements relating to the competence, absence of fraud and public policy according to the Cornelissen case) French litigants cannot anymore invoke the application of article 15 to block the exequatur of foreign judgments. Henceforth, their only effective way to do so is public policy. This is probably why this case is the first ruling of the French cour de cassation on the issue of punitive damages. Note that the French defendant in this case did successfully invoke the application of article 15, but the French cour de cassation, in its decision of 22 May 2007, reversed the decision of the court of appealed. (http://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000017830501&fastReqId=749404508&fastPos=91) It is only when the case was sent back to the Poitiers Court of Appeal the issue of the compatibility of punitive damages with the French substantial public policy (ordre public de fond) was raised (for the first time). With this respect, the Poitiers Court of Appeal had a position similar to the one taken by the abovementioned Japanese Supreme Court i.e. the punitive nature of punitive damages is incompatible with the French public policy which only allows for compensatory damages. Here again, the French highest court disagreed. Punitive damages are in principle not contrary to public policy; it is only when the awarded damages are “manifestly disproportionate” (le montant des dommages intérêts était manifestement disproportionné) punitive damages violate public policy. Can the Cour de Cassation control the appreciation of the juges de fonds of whether the award of punitive damages is manifestly disproportionate to the sustained damages? It can be understood from the judgment that this appreciation is left to the discretion of lower courts knowing that the cour de cassation usually intervene only with legal issues leaving factual ones to the aprréciation souveraine des juges de fonds.
Anyway, one can agree with the position of the French court: punitive damages are contrary to public policy only when they are manifestly disproportionate to the loss or harm suffered. This position reflects the recent trends allowing, in principle, the enforcement of punitive damages when they are not excessive (solution adopted for example article 11 of the 2005 Hague convention on choice of court agreements and by other countries such as Switzerland). However, the final conclusion of the Cour de Cassation is regrettable. Its all-or-nothing approach obviously deprived the plaintiffs from due compensation (compensatory part) of their prejudice which was caused by the defendant’s fraudulent attitude.