French law continues to integrate and adopt some concepts of common law legal systems. Following the French-style class action reform in 2014 and the French-style deferred prosecution agreement (“convention judiciaire d’intérêt public”) in 2016, a draft legislation contemplates to soon incorporate punitive damages into French law. The reform should be submitted to the Council of Ministers in the Spring of 2019.
These punitive damages would apply under restricted conditions: in the event that a party has deliberately committed a fault in order to obtain profits or savings. The purpose of punitive damages would thus be to penalize the so-called lucrative fault, namely the fault from which that party could derive greater profits than the penalty it would have incurred; in other words, when the penalty does not sufficiently discourage the attempt to obtain the economic benefit resulting from the fault.
Examples of notorious lucrative faults include, in particular, the increased magazine sales volumes in case of invasion of privacy, generating a turnover substantially higher than the damages incurred, or guerilla-style video-clip shootings on public roads and the resulting buzz, compared to the savings on the legal registration and publication formalities.
The purpose of these punitive damages will thus be to deter abusive or self-serving behavior aimed at obtaining profits or savings greater than the compensation for the loss that might result therefrom.
Punitive damages could be claimed either by the affected party or by the public prosecutor.
The amount of punitive damages would be limited to ten times the amount of the profit made or, if the initiator is a corporate entity, to 5% of the turnover excluding tax and would not be paid to the affected party but to a compensation fund correlated to the nature of the damage or to the Public Treasury.
Finally, this civil fine would not be insurable.
Currently, the French equivalent of punitive damages is “amende civile”, or civil fine. This civil fine, provided for in Article 32-1 of the French Civil Procedure Code, applies in case of abusive or dilatory proceedings. It is not much of a deterrent since its maximum amount is €10,000 and it is seldom applied. In addition, when judges impose such fines, they set them at limited amounts.
Recently, since the trade secrets act of 30 July 2018, the amount of the civil fine has been increased as the judge can now order a civil fine representing 20% of the claim for damages or, failing such a claim, €60,000 to penalize the initiator of an abusive procedure (intended, for instance, to silence an investigating journalist) or dilatory procedure introduced pursuant to the new legislative provisions protecting trade secrets.
Finally, punitive damages, as found in other legal systems, starting with common law, are currently recognized in French law only in the context of the enforcement of a foreign judgment that ordered punitive damages. However, this recognition is controlled as a French judge has the option to limit the authorization to recover punitive damages ordered abroad, in case of disproportion, on the jurisprudential grounds that “[…] if the award of punitive damages is not, as a matter of principle, contrary to public policy [Editor’s note: international, French], the situation is different where the allocated amount is disproportionate compared to the loss suffered and the breaches of the debtor’s contractual obligations”.[1][2]
This reform to be introduced shortly, intended to incorporate punitive damages into French law, will thus constitute a mini-revolution since it will broaden the principle of full compensation limited solely to the loss suffered, which prevails under French law, and will have to avoid the civil fine from being considered as a dual penalty, which would punish twice for the same facts, thus contravening the non bis in idem rule.
To be continued.
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Paris
Alexandre Bailly
Xavier Haranger
[1] Punitive damages are currently prohibited under French law, as they are contrary to the principle of full compensation of the damage limited solely to the loss suffered, in order for the affected party to be restored to the position it would have been in if the damage had not occurred but also to prevent enrichment of the affected party and any penalty against the wrongdoer in excess of the actual loss.
[2] Cass. civ. 1st, 1st Dec. 2010, no. 09-13.303; Gallmeister (I.), “Ordre public international : dommages-intérêts punitifs”, D. actu., 9 Dec. 2010.