Punitive damages are an important aspect of the U.S. law of torts, yet they still remain subject to much controversy. Over the years, a number of theories have been developed to justify the policy of awarding punitive (also called “exemplary” or “vindictive”) damages. Chief among them is the economic approach which views punitive damages as an efficient instrument of deterrence. However, punitive damages have also received a plethora of critical remarks pointing out especially their excessive amounts and absence of any guidelines for their awards.
In what follows, I will present the standard theory of punitive damages and provide some basic arguments in favour of them. I will further point out that, even though American tort law is quite friendly towards punitive damages, it does nevertheless impose certain limits on the amounts of punitive damages awards. I will also briefly discuss the English law of exemplary damages. Then, I will turn to Europe and describe the general attitude of selected European legal systems to punitive damages. Finally, I will show that the approach of the Czech law of torts with respect to punitive damages is not as restrictive as that of other European countries and that it does, in fact, and to a certain extent, recognise the punitive function of damages.
1. What are punitive damages?
1.1 United States
Generally speaking, tort law redresses the defendant’s violation of the plaintiff’s rights with an award of monetary damages. In a typical scenario, the plaintiff who suffered harm compensable in tort law may request the court to order the defendant to pay damages that will compensate the harm done. These so-called compensatory damages should correspond to the amount of damage incurred by the plaintiff. The idea is that compensatory damages should put the plaintiff in a position he would have been in had the tort not been committed.
In addition to compensatory damages, the jury in a jury trial may provide the plaintiff with an award of punitive damages. Punitive damages form a special category of damages in two main respects. First, they stand apart from damages that merely compensate tort victims for physical harm, pain and suffering. Second, punitive damages are not available to all tort plaintiffs. Indeed, something more than a mere commission of a tort is required. There must be circumstances of aggravation, such as malice, insult, evil motive, or wanton or wilful violence on the part of the defendant. Moreover, even if the plaintiff proves that the defendant’s conduct fulfils all the requirements that are necessary for subjecting him to punitive damages, the jury does not have to award them. This is because punitive damages are purely discretionary. Finally, there can be statutory limits on the awards of punitive damages.
1.2 United Kingdom
Under English law, a plaintiff may be awarded so-called exemplary damages which are intended to punish the defendant for his “outrageous conduct.” Exemplary damages can be awarded in three situations, namely (i) in the case of oppressive, arbitrary, or unconstitutional actions by servants of governments, (ii) where the defendant’s conduct has been calculated to make a profit for himself which exceeds the compensation payable, and (iii) where statute authorises the award of exemplary damages.
Exemplary damages should be distinguished from aggravated damages. As opposed to exemplary damages, which are punitive, aggravated damages are compensatory and are intended as a remedy for mental distress caused to the plaintiff. However, the line between exemplary damages and aggravated damages is not very clear and, as noted by Cees van Dam, these damages “occupy a murky middle ground between normal compensatory damages and exemplary damages.”
1.3 Differences between the U.S. and English practices of awarding punitive damages
As we have seen, although there are limitations to awarding punitive damages, the common law of torts, both in the United States and the United Kingdom, is generally quite receptive to the idea of punitive damages. Even here, however, differences arise as to the approaches to punitive damages between American and English tort law. First, English law, as opposed to the U.S. law of torts, does not strictly speak of punitive damages but, instead, talks about exemplary damages. This may suggest that English law is not open to the idea of private punishment imposed on a defendant. Second, and more importantly, whereas punitive damages under American tort law are discretionary, under English law, the instances in which exemplary damages can be awarded are strictly limited to the above-mentioned categories of tortious conduct.
2. Justification of punitive damages
The idea of awarding punitive damages has become subject to never-ending discussions of scholars who have tried to figure out their proper place in the law of torts and who have devised theories justifying them. According to some scholars, punitive damages may be viewed as a partial remedy for the defect in American civil procedure that does not allow for reimbursement of all of the plaintiff’s litigation expenses. On a deeper level, they resemble pecuniary punishments in the form of fines, which are ordered by courts and administrative authorities for breaches of criminal law and administrative law respectively. Indeed, some view punitive damages as “civil fines against persons guilty of flagrant misconduct that violates the rights of others.”
A number of theories have been devised in favour of the policy of awarding punitive damages. Chief among them is the view of the proponents of the economic analysis of law. Basically, the economic analysis of tort law is based upon the idea that tort law should promote efficient allocation of resources within society through minimising the costs of accidents. From this standpoint, Judge Richard Posner, a leading figure of this movement, argues that punitive damages are economically rational as they relieve pressure on the criminal justice system both directly and indirectly by providing a substitute for violent self-help. In this regard, punitive damages provide an incentive to victims of minor criminal conduct to shoulder the cost of legal actions against the perpetrators, substituting a tort remedy for criminal punishment.
As noted above, punitive damages are not available to all tort plaintiffs as plaintiffs need to prove that the defendant acted wilfully, wantonly, or with specific intent to injure the victim. This rationale for awarding them only in cases of such gross misconduct “that constitutes an extreme departure from lawful conduct” may also be bolstered by economic arguments. Generally, when people act, they always engage in some sort of cost-benefit analysis weighing all the pros and cons of whether to take the contemplated course of action. Now, imagine two kinds of torts: a purely accidental tort in the form of a car accident, on the one hand, and an intentional punch in the nose. As David Friedman points out, although a car accident is an accidental tort, it results from a series of purposeful actions and decisions, including decisions whether to drive after consuming an alcoholic beverage, how often to check the brakes in the car, etc. However, since the cost of paying damages form only a small part of all the costs included in the driver’s decision-making, an award of punitive damages in the cases of negligent driving will hardly produce any significant effect on how much and how recklessly people drive. Here, the practice of not awarding punitive damages in the cases of accidental torts is corroborated by economic theory.
In sharp contrast to the accidental torts, David Friedman argues that the tortfeasor’s intentional punching the face of the victim is very likely to result in a tort action being initiated and in an award of damages to be paid to the victim. In this respect, the paying of damages forms a significant part of all the expenses that the tortfeasor takes into account when deciding whether to throw a punch or not. Therefore, an award of an additional amount of (punitive) damages seems to have a great effect on whether he will actually punch the victim or not. Since one of the goals of tort law is to prevent harm, it is rational, at least from the standpoint of the economic analysis of law, to allow the courts to award punitive damages in the cases of intentional torts. Again, it appears that the economic standpoint explains well the established practice of awarding punitive damages, which are limited to the cases of intentional torts and torts involving circumstances of serious aggravation.
3. Constitutional limits on punitive damages
Critics of punitive damages claim that they have gone out of control mainly due to the following reasons: (i) the awards of punitive damages given with increasing frequency, (ii) the amounts of punitive damages awarded have become too high, and (iii) punitive damages have been awarded in a random fashion. However, advocates of punitive damages argue that these critical remarks are myths. For example, Anthony Sebok explains that major surveys reviewing punitive damages show that in the recent past plaintiffs received punitive damages only in approximately 4% of all trials. Moreover, with respect to the allegedly high amounts of punitive damages, Sebok points out that none of the probes into the history of punitive damages shows that they have been acting in a way that one would describe as out of control.
It is nevertheless true that the amount of punitive damages awarded to plaintiffs were in some cases extremely high. A classic example is BMW of North America, Inc. v. Gore. In this case, plaintiff, Mr. Gore, purchased a new BMW car, but later discovered that it had been repainted. The defendant, BMW of North America, disclosed at trial that it followed a nationwide policy of not disclosing pre-delivery damage to new cars when the cost of repair did not exceed 3% of the car’s suggested retail price. The plaintiff filed a lawsuit and an Alabama jury awarded him $4,000 in compensatory damages and $4 million in punitive damages, which was later reduced to $2 million by the Alabama Supreme Court.
The case was eventually decided by the U.S. Supreme Court which considered the constitutionality of punitive damages awards. In its reasoning, the court invoked the so-called Due Process Clause of the Fourteenth Amendment to the U.S. Constitution, which has been used to prohibit imposing a “grossly excessive” punishment on a tortfeasor. Also, the court provided three guideposts for assessing whether a punitive damages award is within the constitutional limits. These are: (i) the degree of reprehensibility of the defendant’s conduct, (ii) the disparity between the harm or potential harm suffered by the plaintiff on one hand and his punitive damages award on the other hand, and (iii) the difference between this remedy and the civil penalties authorised or imposed in comparable cases. Based on these guidelines, the U.S. Supreme court held that the punitive damages award in the amount of $2 million was unconstitutional. Eventually, the jury, upon considering the damages award anew, awarded the plaintiff $50,000 in punitive damages.
Although the above decision of the Supreme Court has been criticised for having intruded in what had been traditionally the realm of individual states’ staturory and common law, the Supreme Court laid down some rules in light of which the courts must assess the juries’ verdicts on punitive damages. This idea of some procedural and substantive limits on the awards of punitive damages has been reiterated by the Supreme Court in a more recent decision in State Farm Mut. Auto Ins. Co. v. Campbell. The case involved a punitive damages award of $145 million where full compensatory damages were only $1 million. The court further stated that “courts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered.” The court refused to impose a bright-line ratio which a punitive damages award cannot exceed. Nevertheless, it went on to proclaim that, in practice, “few punitive damages awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” Arguably, this may be troublesome as the more the awards of punitive damages and their amounts become predictable, the less deterrence they will render. On the other hand, it seems just that punitive damages should be subject to some kind of a reasonableness test. And that is what seems to be the opinion of the Supreme Court.
4. European perspective
The European approach towards punitive damages is rather restrictive. This is largely because many European legal systems build upon a view that the purpose of damages is to compensate the victim for the loss she suffered and not to punish the tortfeasor. This attitude is particularly apparent from the European Principles of Tort Law, especially its Article 10:101 which reads as follows: “Damages are a money payment to compensate the victim, that is to say, to restore him, so far as money can, to the position he would have been in if the wrong complained of had not been committed. Damages also serve the aim of preventing harm.”
The rather restrictive approach of European courts and legislatures towards punitive damages may be further documented by reference to national legal orders. Take for instance German law. Helmut Koziol mentions the following decision of the German Federal Court of Justice (BGH) of 4 June 1992 where the court refused to enforce the judgment of the Supreme Court of California awarding the plaintiff punitive damages of $750,260 for having been sexually abused. In the opinion of the court, punitive damages awards are contrary to the Germany public policy as it is primarily the responsibility of criminal courts to impose punishments. Moreover, the BGH stated that non-compensatory damage awards are inconsistent with the constitutional principle of proportionality and illegitimately concatenate private and criminal law. Thus, the prevailing view in Germany is that there is no place for punitive damages in civil law.
A similar view of the punitive damages awards is employed by scholars and courts in other European countries. Thus, for example, Alessandro P. Scarso points to a recent decision by the Corte di Cassazione holding that punitive damages are incompatible with the fundamental principles of the Italian legal order. In a similar fashion, Bjarte Askeland writes that punitive damages as a special head of damages to be awarded to a tort plaintiff have no tradition under Scandinavian law. Last but not least, Spanish courts also uphold the orthodox view that civil law damages are intended to compensate the plaintiff for the harm incurred and not to punish the defendant.
However, despite the general attitude of European countries with respect to punitive damages, there are a few exceptions where the national legal systems recognise certain punitive functions of tort liability rules. One of these exceptions is most notably French law. Although punitive damages do not officially exist as such under French law and, strictly speaking, they are alien to the French Civil Code, the scholarly literature nevertheless recognises a sort of “private law penalty,” especially in the cases involving immaterial harm. Moreover, contrary to other European supreme courts, the Cour de Cassation held in the decision of 1 December 2010 that punitive damages in general are not contrary to public policy, but their amount must not be disproportionate to the actual damage caused to the victim. In addition, there are further instances where elements of punishment are incorporated into the statutory provisions of French law. For example, in the area of intellectual property law, following an illegal reproduction of a work protected by intellectual property law, a civil court can order the confiscation of all or part of the revenue obtained through counterfeiting, which is handed over to the aggrieved party.
5. The Czech law perspective
As regards the Czech position in respect of punitive damages, the situation is rather unclear. The Czech law of torts is based on the idea that damages should compensate the victim of a tort, i.e. the victim should be awarded damages in the amount corresponding to the actual harm incurred by her and thus should be put in a position she would have been in, had the tort not been committed. Moreover, from the standpoint of Czech constitutional law, Article 90 of the Czech Constitution mentions punishment only with respect to crimes, which potentially restricts the possibility of awarding punitive damages as a form of redress for private law wrongs.
Despite the above limits, the Czech Civil Code contains certain provisions which are, say, more friendly to the possibility of awarding some kind of extra compensation. By way of example, the following provisions of the Czech Civil Code may be said to incorporate certain elements of punishment. First, Section 2957 requires the court awarding the so-called adequate (monetary) satisfaction to consider certain circumstances deserving special consideration, such as the intentional causing of harm, the causing of harm by way of trickery or by abuse of the victim’s dependence on the tortfeasor, as well as other significant circumstances of a case. Second, Section 2969 (2) provides for a duty to compensate the damage caused to a thing for which the victim had a special liking, if the damage has been caused by the tortfeasor acting wantonly or maliciously. The punitive element under Section 2969 (2) lies in that the tortfeasor is obligated to compensate a higher value of the damaged thing. Third, Section 2971 provides for the right of anybody to seek compensation of non-pecuniary harm regarded as personal misfortune, especially when the harm was caused out of gross negligence or other reprehensible motives.
It is apparent that the Czech Civil Code does not explicitly provide for awarding punitive damages. Nevertheless, the above provisions show that plaintiffs in tort suits can seek such compensation as to vindicate their dignity, which was violated by the tortfeasor. As a result, the above provisions of the Czech Civil Code may serve the function of punishing the tortfeasor for his outrageous conduct and deterring similar actions in the future.
The idea of punitive damages has also been subject to the Czech courts’ decision-making. Thus, the Czech Supreme court recently held, contrary to most of the decisions of European supreme and constitutional courts, that punitive or exemplary damages are not necessarily contrary to public policy as long as their amount is proportionate to the actual harm to be compensated.
With respect to the foregoing, the following decision of the Czech Constitutional Court may be instructive for the Czech civil courts when deciding whether or not punitive or aggravated damages should be awarded. In the decision of 6 March 2012, reference number Pl. ÚS I. ÚS 1586/09, the Constitutional Court explicitly rejected the possibility of awarding extremely high punitive damages as known in the U.S. law of torts. However, it argued, relying upon Section 13 (3) of the former Czech Civil Code, that Czech legal order allows for awarding aggravated damages, particularly when harm to personality rights is involved. In this respect, aggravated damages may well serve the function of deterring future unlawful conduct violating such rights. Moreover, courts should have due regard to the individual circumstances of a case deserving special consideration. In conclusion, the amount of aggravated damages may not be excessive, but should be rather proportionate to the amount of damages compensating the victim for the actual harm.
Punitive damages form a distinct feature of American tort law. As noted above, however, they are not available to all plaintiffs and, also, there are certain constitutional and statutory limits on the amounts of punitive damages awards. In a similar fashion, the English law of torts recognises the so-called exemplary damages, too. However, the difference between American punitive damages and English exemplary damages lies in that the punitive damages are mostly discretionary, whereas the English exemplary damages can be awarded only in a limited number of cases.
In contrast to the common law approach, most of the European legal systems tend to be generally sceptical or even prohibitive of the idea of punitive damages. Many European courts have held that punitive damages whose purpose is not to compensate the victim of tortious conduct, but to punish the tortfeasor instead, are contrary to national public policy. However, despite this general attitude, there are several instances, where particular statutory rules allow for awards of damages which serve punitive and deterrence functions.
As regards Czech law, it should be emphasised that the Czech Supreme Court ruled, contrary to a view held by many European courts, that punitive damages do not necessarily violate public policy. Furthermore, the Czech Constitutional Court held that courts can award aggravated damages, especially where the individual circumstances of a particular case such as malicious intent of the tortfeasor and the gravity of the damage caused support doing so. In this respect, one cannot but notice a striking similarity between the argumentation of the Czech courts and the U.S. Supreme Court. The recent decisions of the Czech Supreme Court and the Czech Constitutional Court reveal an interesting pattern that goes in favour of damages that may serve punitive and preventive functions. And as we have seen above, several provisions of the Czech Civil Code seem to corroborate such pattern.
Martin Sztefek is a Ph.D. candidate at the Charles University Law School in Prague, Czech Republic where he is writing a dissertation on the economic analysis of tort law. He is currently pursuing an LL.M. degree at the University of Michigan Law School, Ann Arbor, USA. His primary interests include the study of private law and the realm of tort law in both national and comparative contexts as well as from different perspectives. He has published a number of articles in several Czech law journals on a variety of topical issues.
 LL.M. candidate 2017 at the University of Michigan Law School, Ann Arbor, Michigan, and a Ph.D. candidate at the Faculty of Law of Charles University, Prague, Czech Republic. I would like to thank Pavlína Hubková and Margaret Chalmers for reviewing earlier versions of this article and providing helpful comments. Any errors that remain are, of course, my responsibility.
 Geistfeld, M. (2008). Tort Law: the essentials. Aspen Publishers, p. 354.
 Golberg, J.C.P., Sebok, A.J., Zipursky, B.C. (2016) Tort Law: Responsibilities and Redress. 4th Edition. New York: Wolters Kluwer Law & Business, p. 519.
 See, for example, Keeton, W.P., Dobbs, D.B., Keeton, R.E., Owen, D.G. (1984). Prosser and Keeton on the Law of Torts. T. Paul, Minn. West Publishing Co., pp. 10–11.
 Goldberg, J.C.P., Zipursky, B.C. (2010). The Oxford Introductions to U.S. Law. Torts. Oxford: Oxford University Press, p. 353.
 Van Dam, C. (2013). European Tort Law. 2nd Edition. Oxford: Oxford University Press, p. 358.
 Owen, R. (2000). Essential Tort Law. 3rd Edition. Oxford and Sydney: Cavendish Publishing Limited, pp. 170–171.
 Van Dam, C. op. cit., note 6, p. 358.
 See Rookes v. Barnard  AC 1129. The House of Lords held, inter alia, that apart from cases where exemplary damages are expressly authorised by statute, such awards are limited to cases of oppressive, arbitrary, and unconstitutional action by civil servants and to cases of conduct calculated to make a profit exceeding the compensation payable to the plaintiff.
 Keeton, W.P., Dobbs, D.B., Keeton, R.E., Owen, D.G., op. cit. note 4, p. 12. The current (majority) practice is that the prevailing party gets reimbursed for litigation expenses such as court fees or witness fees, but not for the attorney’s fees.
 Owen, D.G. (1988 – 1989), The Moral Foundations of Punitive Damages. 40 Ala. L. Rev. 705, p. 705.
 Posner, R.A. (2011). The Economic Analysis of Law. 8th Edition. New York: Aspen Publishers, p. 263.
 See First National Bank of Pulaski Tenn. V. Thomas, 453 So.2nd 1313m 1320 (Ala.1984). However, it should be noted that some courts have been reluctant to award punitive damages even if the defendant engages in wanton misconduct. See, for example, Johnson v. Rogers, 763 P. 2d 771 (Utah 1988).
 Owen, D.G. op. cit., note 10, p. 730.
 Friedman, D.D. (1988-1989) An Economic Explanation of Punitive Damages. 40 Ala. L. Rev. 1125, p. 1136.
 Friedman, D.D. ibid., p. 1136.
 Friedman, D.D. ibid., p. 1136.
 See, for example, Jeffries, J.C. (1986) A Comment on the Constitutionality of Punitive Damages, 72 Va. L. Rev. 139.
 Sebok, A.J. (2006-2007) Punitive Damages. From Myth to Theory. 92 Iowa L. Rev. 957, pp. 962–974.
 Sebok, A.J. ibid., p. 970.
 BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
 Note, for example, the dissenting opinion of Justice Scalia who wrote that the Court’s holding in BMW was an “unjustified incursion into the province of state governments”.
 State Farm Mut. Auto Ins. Co. v. Campbell, 123 S.Ct. 1513 (2003).
 Koziol, H. (2008) Punitive Damages – A European Perspective. 68 Law. L. Rev., p. 751 et al.
 BGH 118, 312. Cited according to Koziol, H. ibid., p. 742.
 Jansen, N., Rademacher, L. Punitive Damages in Germany. In: Koziol, H., Wilcox, V. (eds.) (2009) Punitive damages: Common law and Civil Law Perspectives. Wien: Springer-Verlag, p. 75.
 For details, see Scarso, A.P. Punitive Damages in Italy. In: Koziol, H., Wilcox, V. (2009) op. cit., note 25, pp. 106–108.
 Askeland, B. Punitive Damages in Scandinavia. In: Koziol, H., Wilcox, V. (2009) op. cit., note 25, p. 115.
 del Olmo, P. Punitive Damages in Spain. In: Koziol, H., Wilcox, V. (2009) op. cit., note 25, p. 137.
 European Group on Tort Law. Principles of European Tort Law. Text and Commentary. Springer-Verlag, p. 153.
 Van Dam, C. op. cit., note 6, pp. 352–354.
 Cour de cassation, Schlenzka & Langhorne v. Fountaine Pajot S.A., matter 09-13303
 Borghetti, J.-S. Punitive Damages in France. In: Koziol, H., Wilcox, V. (2009) op. cit., note 25, p. 58.
 However, as rightly observed by Zdeněk Kühn, any liability system which takes account of malicious intent of the tortfeasor serves certain punitive functions. See Kühn, Z. Má mít náhrada škody sankční funkci? In: Havel, B., Pihera, V. (2010) Soukromé právo na cestě. Eseje k jubileu Karla Eliáše. Plzeň: Aleš Čeněk, p. 207.
 Act No. 89/2012 Sb., občanský zákoník (the “Czech Civil Code”).
 Under this provision, compensation may be sought, inter alia, by a person even though such person is not considered to be the primary victim of the tortfeasor’s conduct.
 Judgment of the Czech Supreme Court dated 22 August 2014, Ref. No. 30 Cdo 3157/2013
 Section 13 (3) of Act No. 40/1964 Sb., the civil code, as amended, reads as follows: “The amount of compensation under subsection 2 shall be determined by court having regard to the gravity of the loss and the circumstances of the breach of the right.” (in Czech: Výši náhrady podle odstavce 2 určí soud s přihlédnutím k závažnosti vzniklé újmy a k okolnostem, za nichž k porušení práva došlo.).
 Examples of the facts to be taken into account by courts when determining the amount of adequate (monetary) satisfaction are listed in Section 2957 of the Czech Civil Code.
 The same conclusion was reached in the judgment of the Czech Supreme Court of 22 August 2014, Ref. No. 30 Cdo 3157/2013.