VYTAUTAS MAGNUS UNIVERSITY. Deividas Užkurys WHETHER PUNITIVE DAMAGES EXIST IN PUBLIC INTERNATIONAL LAW? Master's Thesis

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1 VYTAUTAS MAGNUS UNIVERSITY FACULTY OF LAW Deividas Užkurys WHETHER PUNITIVE DAMAGES EXIST IN PUBLIC INTERNATIONAL LAW? Master's Thesis Joint Law degree study program, state code 601M90004 Supervisor Assoc. Prof. Aristotelis Constantinides (Acad. degree, name) (Signature) (Date) Defended Doc. dr. Tomas Berkmanas (Dean of the Faculty) (Signature) (Date) Kaunas, 2017

2 TABLE OF CONTENTS LIST OF ABBREVIATIONS...2 ABSTRACT...3 SANTRAUKA...4 INTRODUCTION...7 I. FORMS OF REPARATION IN PUBLIC INTERNATIONAL LAW...9 II. THE NOTION AND PURPOSE OF PUNITIVE DAMAGES...12 III. INTERNATIONAL LEGAL FRAMEWORK FOR PUNITIVE DAMAGES...14 IV. EVIDENCE FOR PUNITIVE DAMAGES...16 V. EVIDENCE AGAINST PUNITIVE DAMAGES...19 VI. RATIONALE AND NEW DEVELOPMENTS IN THE FIELD...22 CONCLUSIONS AND RECOMMENDATIONS...24 BIBLIOGRAPHY

3 LIST OF ABBREVIATIONS ARSIWA PCIJ ICJ ILC IACHR ECHR ACHR UN IACHR ICAO Articles on Responsibility of States for Internationally Wrongful Acts Permanent Court of International Justice International Court of Justice International Law Commission Inter-American Commission on Human Rights European Convention on Human Rights American Convention on Human Rights United Nations Inter-American Court of Human Rights International Civil Aviation Organization 2

4 ABSTRACT The aim of this thesis is to examine whether punitive damages exist in public international law. Legal problem and relevance of this thesis is confirmed by the ongoing debates among legal professionals regarding the place and application of such damages at international arena. The object of the work is forms of reparation in public international law. Purpose of the work is to review the current legal framework for punitive damages and examine whether they exist and could be applied in public international law. There have been the following tasks completed: A) current status of punitive damages in international law was reviewed; B) evidence supporting and rejecting doctrine of punitive damages in international law was gathered and assessed; C) analysis of new incentives calling for a revision of punitive damages was carried out. Analytical Research Method was used to analyze the legal environment of the matter and Socio- Legal method was used in order to check the real consequences or positive and negative aspects of the doctrine of punitive damages being implemented. Analysis has confirmed, that punitive damages do not exist in public international law, since the order of our international community is still based on a very well-founded principle of sovereign equality. These are the main conclusions: first, international legal community have dealt with punitive damages and gone through the evolution of three stages when it suddenly stopped at the point rejecting any form of reparation, that may have punitive characteristics; second, evidence supporting punitive damages is strongly outweighed by evidence rejecting them; and third, it is an essential finding, that international order and sovereign equality of the state will prevail over introduction of punitive damages in the nearest future. 3

5 SANTRAUKA Magistrinio darbo tikslas yra išanalizuoti ir atsakyti į teisini klausimą ar baudiniai nuostoliai egzistuoja tarptautinėje viešojoje teisėje. Darbo problematika ir aktualumas pagrindžiamas tuo, jog tarptautinėje arenoje baudinių nuostolių tema dažnai diskutuojama ir teisės ekspertų nuomonės šiuo klausimu išsiskiria. Jungtinių Tautų Tarptautinės teisės komisija (toliau Komisija) yra patvirtinusi Valstybių atsakomybės už tarptautinės teisės pažeidimus straipsnius (Straipsniai), kurių 34 str. nurodo visas tarptautinėje teisėje galimas reparacijos formas. Šiame sąraše galime rasti tokias reparacijos formas kaip restitucija, kompensacija ar satisfakcija. Atrodytų akivaizdu, jog baudinių nuostolių nebuvimas automatiškai reiškia ir jų nepripažinimą tarptautiniu mastu, tačiau situacija yra kiek sudėtingesnė. Pirmiausia painią situaciją lemia tas faktas, jog Komisijos požiūris dėl baudinių nuostolių egzistavimo nuolatos keičiasi. Anksčiau baudiniai nuostoliai buvo suprantami kaip viena iš satisfakcijos formų, tačiau dabar Komisijos Straipsnių komentare yra išdėstyta aiški pozicija, jog satisfakcija turi būti proporcinga, o baudiniai nuostoliai nepripažįstami. Nors Komisijos pozicija aiški, tačiau daugelis teisės specialistų turi priešingą nuomonę. Vis dažniau ir dažniau galime pamatyti teisės mokslininkų darbus, kuriuose iškeliama versija, jog baudiniai nuostoliai jau seniai yra priteisiami netiesiogiai, t. y. prisidengiat kompensacijos ar satisfakcijos pavidalu. Šis darbas analizuoja ar tokia situacija galima ir apskritai ar tokie baudiniai nuostoliai gali būti reikalaujami ginčuose dėl tarptautinės teisės pažeidimų. Šio darbo objektas yra reparacijos formos tarptautinėje viešojoje teisėje. Tad darbo objektas apima tiek ir tarptautinę žmogaus teisių praktiką, tiek ir valstybės, kaip juridinio asmens, teisių ir interesų pažeidimus. Nors tyrimo laukas yra apibrėžtas tarptautinėje viešojoje teisėje, tam tikros koncepcijos ir teisės doktrinos yra pristatomos ir iš nacionalinės ar privatinės teisės. Tai yra pateisinama, kadangi baudiniai nuostoliai yra plačiai paplitę bendrosios teisės tradicijų valstybėse. Baudinių nuostolių kaip teisės instituto vystymasis daugiausiai buvo įtakotas tokių valstybių kaip Jungtinės Amerikos Valstijos arba Jungtinė Karalystė. Dėl šių priežasčių yra analizuojamos ir baudinių nuostolių taikymo tradicijos, jų reikšmė, socialiniai padariniai. Tam, jog būtų išanalizuota ir atsakyta į darbe keliamą klausimą, ar baudiniai nuostoliai egzistuoja tarptautinėje viešojoje teisėje, buvo atlikti šie uždaviniai: 1) išanalizuota dabartinė teisinė aplinka baudiniams nuostoliams tarptautinėje arenoje; 2) surinkta ir susipažinta su įvairia teisine medžiaga, pagrindžiančia bei tuo pačiu paneigiančia baudinių nuostolių egzistavimą tarptautinėje teisėje; 3) išanalizuoti nauji įvykiai ir paskatos, kurios galėtų nulemti baudinių nuostolių, kaip reparacijos formos, tolesnį vystymąsi tarptautinėje teisinėje sistemoje. Išsikeltiems uždaviniams įvykdyti buvo pasitelkti keli tyrimo metodai. Analitinis tyrimo metodas buvo pasitelktas analizuojant teisės aktus, teisinę literatūrą ir bylas. Šiuo metodu buvo 4

6 operuojami visi trys viršuje nurodyti uždaviniai. Socialinis-teisinis metodas taip pat buvo naudojamas, ypatingai vykdant trečiąjį uždavinį. Šiuo metodu buvo vertinamas ir analizuojamas subjektų elgesys ir požiūris bandant pritaikyti baudinius nuostolius praktiškai, t. y. buvo svarbu išsiaiškinti tikrąsias šios doktrinos pasekmes. Darbe buvo iškelta hipotezė, jog baudiniai nuostoliai, kaip reparacijos forma neegzistuoja tarptautinėje viešojoje teisėje, kadangi tarptautinė teisinė sistema paremta suverenios lygybės principu, kuris yra fundamentalus visos tarptautinės santvarkos pamatas. Iškeltoje hipotezėje buvo daroma prielaida, jog suverenios lygybės principas yra nesuderinamas su baudinių nuostolių doktrina tarptautinėje teisėje. Dar daugiau, tokia reparacijos forma, jei ji ir būtų įgyvendinta tarptautinėje arenoje, tiesiogiai kėsintųsi į valstybių suverenitetą. Atlikus tyrimą ir įvykdžius aukščiau nurodytus uždavinius, į iškeltą teisinį klausimą, ar baudiniai nuostoliai egzistuoja tarptautinėje viešojoje teisėje, buvo atsakyta neigiamai. Hipotezė pasitvirtino, jog baudiniai nuostoliai neegzistuoja tarptautinėje viešojoje teisėje, kadangi tarptautinė teisinė sistema paremta suverenios lygybės principu, kuris yra fundamentalus visos tarptautinės santvarkos pamatas prieštaraujantis bet kokiai baudiniai reparacijos formai. Tokios išvados darytinos, gavus apačioje nurodytus rezultatus. Pirma, tarptautinė teisinė bendruomenė su baudinių nuostolių doktrina susidurdavo neretai, todėl galima būtų išskirti tris etapus, kurie atskleidžia doktrinos nuoseklų vystymąsi laike: 1) baudiniai nuostoliai buvo laikomi kaip viena iš satisfakcijos formų; 2) baudiniai nuostoliai buvo siejami su tokiais nuostoliais, kurie patiriami tik po sunkių tarptautinės teisės pažeidimų; 3) paskutiniame vystymosi etape laikomasi pozicijos, jog reparacijos formos tarptautinėje teisėje negali turėti jokių baudžiamųjų savybių. Šie trys evoliucijos etapai parodo, jog tarptautinė teisinė bendruomenė šiuo metu bent jau tiesiogiai nepripažįsta baudinių nuostolių doktrinos. Dėl šios priežasties joks tarptautinis teismas nepriteisia baudinių nuostolių nukentėjusiajai šaliai nesvarbu ar ji fizinis asmuo ar kaip pati valstybė. Šiandieninė teisinė aplinka teismams nesuteikia tokių kompetencijos galių. Antra, yra pripažįstama, jog tarptautiniai teismai priteisia įvairaus tipo nuostolius, kurie kartais gali atrodyti labai panašūs į baudinius, tačiau dažniausiai sprendimai tokiose bylose yra priimami dėl žmogaus teisių pažeidimų, o ne dėl pačios valstybės, kaip juridinio asmens, teisių. Be to, dabartinė tarptautinė teisinė sistema bei jurisprudencija neleidžia daryti išvados ir dėl tokios reparacijos formos žmogaus teisių srityje. Nors teismų praktikoje pastebima vis daugiau bylų, kur priteisiama kompensacija viršija materialius nuostolius, tai nesudaro prielaidų baudinių nuostolių doktrinos įsitvirtinimui. Priešingai, baudinių nuostolių doktrina žmogaus teisių srityje yra nesuderinama su tokiais principais kaip teisinga satisfakcija ar teisinga kompensacija. Šie principai atitinkamai naudojami Europos Žmogaus Teisių Teisme ir Amerikos šalių žmogaus teisių 5

7 teisme, kuomet nukentėjusysis reikalauja piniginės kompensacijos dėl žmogaus teisių pažeidimų. Galiausiai turime pripažinti, jog argumentų ir įrodymų paneigiančių baudinių nuostolių doktrinos egzistavimą tarptautinėje teisėje yra žymiai daugiau, nei tų, kurie juos pagrįstų. Tarptautinė teisinė bendruomenė iš esmės atmeta baudinių nuostolių doktriną dėl valstybių suverenios lygybės principo, kuris yra tokios santvarkos pamatas. Daroma pagrįsta išvada, jog valstybės nebus suinteresuotos priimti vieningą konsensusą dėl baudinių nuostolių doktrinos taikymo, kadangi tai siejama su dalies suvereniteto atidavimu. Trečia, nors tarptautiniai įvykiai ir skaudžios katastrofos gali sudaryti paskatas ateityje ir vėl apsvarstyti baudinių nuostolių doktrinos įgyvendinimą, tačiau vargu ar tokiai santvarkai tai atneš daugiau naudos. Nors baudiniai nuostoliai gali įtakoti valstybių elgesį ir dalinai atgrasyti kitus subjektus nuo tarptautinės teisės pažeidimų, tai iškeltų kitą problemą. Baudinių nuostolių doktrinos įgyvendinimas nors ir socialiai naudinga priemonė, galiausiai kėsintųsi į valstybių suverenitetą. Tai atverstų pandoros skrynią nepagrįstiems pareiškėjų reikalavimams bausti valstybes. Kaip ir buvo minėta, atlikus tyrimą peršasi išvada, jog dabartinė teisinė santvarka ir valstybių suverenios lygybės principas visgi yra dominuojantys elementai tarptautinėje arenoje, kurie bent jau artimiausiu metu priešinsis bet kokiam bandymui įgyvendinti baudinių nuostolių doktriną. 6

8 INTRODUCTION Legal problem and relevance of the work. Generally punitive damages are found in common law legal systems, while civil law countries seem reluctant to the application of such remedy. If both legal systems have different approach and understanding of punitive damages, what status does such remedy have at international level? Punitive damages are commonly analyzed in private international law, while their applicability in public international law is largely unknown or at least undeveloped. Punitive damages were examined only in a few cases by human rights courts, when awarded to individuals rather than states for human rights violations. However, the most challenging question we may encounter is: whether punitive damages are found in inter-state relations? In other words, is there any legal framework for such damages in public international law? One may argue that according to Art 34 of ARSIWA, punitive damages are not found among forms of reparation and therefore cannot be awarded against states. On the other hand, the ILC used to consider such damages as a form of satisfaction, which is listed as a remedy in the forms of reparation. Additionally, more and more scholars and legal professionals suggest that punitive damages are being awarded implicitly. To weigh up both approaches there is a need to carry out a more in-depth analysis in this matter. Moreover, the relevance of this topic is also confirmed by the fact that the most prestigious and the largest Philip C. Jessup International Law Moot Court Competition during the 58th year season presented legal issues, which are also to some extent related to punitive damages. Novelty of the work. This topic has not been analyzed extensively and comprehensively at international level recently. However, the most notable work in this field has been done so far by such Professors as Stephan Wittich and John Y. Gotanda, while Proffesor Helmut Koziol focused more on this matter from a European perspective. Also, the recent events concerning Congo s initiative in 2015 to start proceedings before the ICJ over questions on reparations against Uganda as well as shooting down the Malaysian Airlines Flight 17 in Ukraine in 2014 by rebels could be seen as an incentive to call for a revision of current legal framework in relation to punitive damages. No indepth analysis and recent international events confirm the novelty and relevance of this topic. Purpose of the work to review the current legal framework for punitive damages and examine whether they exist and could be applied in public international law. To reach the purpose of the work, these are the tasks to be carried out: 1. To review the current status of punitive damages in international law; 2. To weigh up evidence for and against punitive form of reparation in international law; 3. To assess whether new incentives could provide more room towards acceptance of punitive damages in the international community. 7

9 Methodology. The work will be done using several methods. Analytical Research Method is chosen to review the legal rules, case law, works done by other scholars and interpret them from different perspectives. Additionally, the Socio-Legal method will be used to go beyond the traditional legal analysis approach for the purpose to assess the broader picture and consequences of a matter at hand. Hypothesis of the work. Punitive form of reparation does not exist in public international law, since the order of our international community is still based on a very well-founded principle of sovereign equality, which perhaps strikes the foundation of punitive damages. Structure of the work. Various forms of reparation currently available in public international law will be reviewed in Section I. The history, notion and purpose behind punitive damages will be examined in Section II. We will discuss the work done by the ILC in relation to the international legal framework for punitive damages in Section III. In Sections IV and V we will examine evidence, which might show existence of punitive damages in international law. The new developments and new incentives in the field will be assessed in Section VI. The last Section will conclude. 8

10 I. FORMS OF REPARATION IN INTERNATIONAL PUBLIC LAW Generally any tort, delict or a breach of certain rule entails the responsibility of that a particular person or a state. In 1646 Hugo Grotius suggested, that every fault creates the obligation to make good the loss. 1 It is the basis for any type of law including but not limited to domestic law, private or public international law. The responsibility and remedy as two closely related players always play hand in hand. It is understandable that ubi jus, ibi remedium could be regarded as a general principle of law recognized internationally. 2 The remedy in domestic law as well as reparation in international public law serves as a tool to fix that has been broken. Indeed, this is not always as possible as it seems, however it provides at least a certain mechanism that the law could function. Public international law is not an exception when it comes to the legal framework of responsibility and reparation. Art 1 of ARSIWA states, that every internationally wrongful act of a State entails the international responsibility of that State. 3 According to Art 31, the responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act. 4 This again suggests and affirms Hugo Grotius assumption said in late 17 th century, that the one who is responsible owes a remedy to the injured. 5 In international law above-mentioned ARSIWA are significantly important when a dispute arises. While the legal framework of responsibility could be analyzed as a single subject matter, this master paper will focus only on forms of reparation and on punitive damages in particular. As per Art 34 of ARSIWA there are three forms of reparation in international law: restitution, compensation and satisfaction. 6 Guarantees of non-repetition is understood as a separate form of reparation, which has its different function and purpose. 7 Restitution is the first form of reparation. Art 35 of ARSIWA provides, that a state responsible for an internationally wrongful act is under an obligation to make restitution, that is, to re-establish the situation which existed before the wrongful act was committed. 8 PCIJ in the Factory at Chorzów held that responsible State was under obligation as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed. 9 In the case of Venus of 1 Luke T. Lee, The Right to Compensation: Refugees and Countries of Asylum, The American Journal of International Law, (80(3), , 1986), p Murphy, Sean D., Does International Law Obligate States to Open their National Courts to Persons for the Invocation of Treaty Norms that Protect or Benefit Persons?, GWU Law School Public Law Research Paper, (No. 438, 2009), p International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts, 12 December 2001, (A/RES/56/83), Art 1. 4 Art Supra note 1. 6 Supra note 3, Art Art Art Factory at Chorzow (Germ. v. Pol.), 1927 P.C.I.J. (ser. A) No. 9 (July 26), p

11 Cyrene, the court assessed the restitution in relation to cultural property. 10 It was noted, that when restitution is impossible or inadequate to grant only then a state could seek other forms of reparation. 11 While supremacy of restitution over compensation is undisputed, compensation is often more appropriate to provide full reparation to the injured. 12 Art 36 (1) of ARSIWA deals with a compensation as a second form of reparation. It sets out, that a state responsible for an internationally wrongful act is under an obligation to compensate for the damage caused thereby, insofar as such damage is not made good by restitution. 13 In a case concerning Gabčíkovo-Nagymaros Project ICJ stated, that it is a well-established rule of international law that an injured State is entitled to obtain compensation from the State which has committed an internationally wrongful act for the damage caused by it. 14 In general, compensation as a form of reparation is flexible and adaptive, this is why it is widely acceptable in international community. 15 Also, compensation is of compensatory and reparative character. It does not have the punishing purpose. 16 In addition, the function of compensation is to remedy past wrongs rather than being future-oriented. 17 This feature is always assessed, when the subject matter is punitive damages. Most importantly Art 36 (2) states, that compensation has to be financially assessable. 18 ILC chosen this phrase to exclude any possible monetary compensation for so-called moral damages, which are sometimes referred as punitive damages. 19 The third form of reparation is satisfaction. Art 37 of ARSIWA provides, that satisfaction might be sought where the injury cannot be made good by restitution or compensation. 20 Paragraph 2 of this article lists some examples of the forms of satisfaction, such as an acknowledgement of the breach, an expression of regret, a formal apology or another appropriate modality. 21 It should be noted, that the list provided in paragraph 2 consists of examples only and is not exhaustive. 22 It could be various forms of satisfaction depending on circumstances of the case. For instance, in cases where injury done to a state is of non-material character the acknowledgment of the wrongfulness of such act could be also considered as appropriate form of satisfaction. Such reparation form is especially 10 Case Venus of Cyrene. Consiglio di Stato. No. 3154/ Alessandro Chechi, Anne Laure Bandle, Marc-André Renold, Case Venus of Cyrene Italy and Libya, Platform ArThemis (Art-Law Centre, University of Geneva); < italy-and-libya> [accessed 12 January 2017]. 12 Stephan Wittich, Compensation, Max Planck Encyclopedia of Public International Law, (2008), para Supra note 3, Art 36 (1). 14 Gabčíkovo-Nagymaros Project (Hungary/Slovakia), Judgment, 1. C. J. Reports 1997, p. 7, p. 81, para Supra note 12, para para para Supra note 3, Art 36 (2). 19 International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries November 2001, Supplement No. 10 (A/56/10), chp.iv.e.1, p. 99, para Supra note 3, Art Art 37 (2). 22 Supra note 19, p

12 important when it comes to non-material or moral damages done to the state. In Saiga case tribunal held that declaration of the fact that Guinea violated the rights of Saint Vincent and the Grenadines in respect of ships flying the latter s flag in itself constituted adequate reparation, but it did not award additional compensation for these non-material damages. 23 In the Chorfu Channel case ICJ also found declaration in itself appropriate satisfaction, when the British Navy violated the sovereignty of Albania. 24 The Rainbow Warrior case is an exceptional example in this regard. In the said case Secretary-General awarded New Zeeland with both apology and compensation for material and nonmaterial damages. 25 Special Rapporteur Gaetano Arangio-Ruiz regarded that award as being an afflictive form of satisfaction or in other words punitive damages. 26 This character of the award will be discussed in sections below. Apology as a subform of satisfaction is generally used in diplomatic practice. 27 However, in some cases it was found inappropriate. In LaGrand case ICJ held that an apology was not sufficient, where foreign nationals have not been advised without delay of their rights <...> and have been subjected to prolonged detention or sentenced to severe penalties. 28 It is worth to mention, that LaGrand case brought to surface another interesting point regarding forms of reparations. From Germany s perspective an apology was not sufficient. For that reason, Germany requested ICJ to award assurances and guarantees of non-repetition, so that the US would not violate its duties under Vienna Convention on Consular Relations 29 again in the future. This was the first case when ICJ awarded such remedy. 30 Assurances and guarantees of non-repetition is not a traditional form of reparation. 31 This is why we cannot see it listed in Art 34 of ARSIWA. Restitution, compensation and satisfaction are all restorative or backward-looking. 32 Assurances and guarantees of non-repetition serves a different function. This remedy is future oriented or forwardlooking. 33 Quickly after the ICJ s judgment in LaGrand case, ILC included this separate form of reparation in its Art 30 of ARSIWA. In a discussion regarding forms of reparation in international law, Judge Margarette May Macaulay from IACHR also stressed out the importance of just satisfaction, which could provide additional acknowledgement of the state s wrong, especially when states commit gross violations of 23 The M/V SAIGA (No 2), Saint Vincent and the Grenadines v Guinea, Merits, Judgment, ITLOS Case No 2, ICGJ 336 (ITLOS 1999), 1st July 1999, International Tribunal for the Law of the Sea [ITLOS], para Corfu Channel case, Judgment of April 9th, 1949 : I. C. J. Reports 1949, P. 4, p Rainbow Warrior I, Reports Of International Arbitral Awards, 6 July 1986, Volume XIX pp , p. 271, para Arangio-Ruiz, Gaetano, Second report on State responsibility, International Law Commission, 1989, para Supra note 19, p LaGrand (Germany v. United States of America), Judgment, I. C. J. Reports 2001, p. 466, para United Nations, Vienna Convention on Consular Relations, 24 April Supra note 28, para 128 (6). 31 Christian J. Tams, Recognizing Guarantees and Assurances of Non-Repetition: LaGrand and the Law of State Responsibility, 27 Yale J. Int'l L. (2002), p

13 human rights and traditional damages are not alone sufficient. 34 Andrés Jana from Bofill Mir & Alvarez Jana Abogados in the same discussion stated, that investment tribunals unlike human rights courts rarely award just satisfaction. 35 He also added, that sometimes it is not enough to award only compensation or restitution and that just satisfaction could also be appropriate form of reparation in arbitration matters. 36 While restitution as the first form of reparation is not related to punitive damages directly, as per above-mentioned cases both compensation and satisfaction may include correlation with such punitive character. However, ILC clearly states in its commentary to ARSIWA that satisfaction does not include punitive damages. 37 The Art 37 (3) imposes certain limits on satisfaction. Satisfaction must be proportionate and may not take a form humiliating to the responsible State. 38 These are precise limitations imposed on satisfaction and therefore it is hardly be seen as suggesting any basis for punitive character. Compensation as a form of reparation is also commonly understood as being reparative and backward-looking only. However, international jurisprudence and scholars in some instances find evidence supporting characteristic of punitive damages under the guise of compensation or satisfaction. A substantive analysis will be provided in sections below. II. THE NOTION AND PURPOSE OF PUNITIVE DAMAGES Punitive damages, sometimes referred as exemplary damages, are sums being awarded for aggravated misconduct of the defendant that are beyond any compensatory or nominal damages. 39 Origin of punitive damages could be traced back to the Code of Hammurabi and the Bible. 40 The main purpose and the essence of these damages are to deter and/or punish the wrongdoer. While in civil law countries punitive damages are not recognized, their usage in common law countries is widely accepted. 41 Civil law system limits the recovery of damages to amount that was before the injury, i.e. it does not allow to recover more than you have been injured. Also, civil law system especially in private matters is based on equality of the parties and punitive damages as such could be only found in administrative and criminal law, where a state forces a private actor to behave in a certain way, otherwise it might be punished. It is an interesting point, that equality of the 34 Laura Livingston, A Critical Assessment of Reparation in International Law ( ); < [accessed 18 January 2017] Supra note 19, p Supra note 3, Art 37 (3). 39 Gotanda, John Y., Punitive damages: a comparative analysis, 42 Columbia Journal of Transnational Law (2003), p Koziol, Helmut, Punitive Damages-A European Perspective La. L. Rev. 68 (2007): 741, p

14 parties is not only important to private matters in civil law. Equality of the states play significant role in international law as well. Also, the civil system follows the principle nulla poena sine lege, which means, that the punishment should be laid down in law. 42 It reflects modern approach by separating civil and criminal law. It is based on the idea, that the civil law cannot remedy your rights and to punish the responsible one at the same time. It is noted, that even foreign arbitral or judgment awards of punitive damages are not enforced in civil law countries. Generally courts refuse to enforce such awards, since they are not compatible with the fundamental public policy. 43 In common law system, there is a different understanding when it comes to punitive damages. In contract, such states as: England, Australia, New Zealand, the US and Canada have a long history of punitive damages. 44 Rookes v Barnard case was one of the leading cases, where the issue of punitive damages was examined. 45 The case included UK labour and tort law, however the most important findings relevant to our topic were made by Lord Devlin. In 1964 he declared, that there are three categories of cases where punitive damages might be awarded: 1) oppressive actions by the servants of government; 2) where the defendant aims to make a profit for himself; 3) where a statute expressly authorises such award. 46 However, jurisprudence towards punitive or exemplary damages was not uniform even in UK. The Lord Widgery had once said, that they should be awarded in rare cases only, since [it is not the function of the civil courts to punish. 47 It is hard to find out the reasons why punitive damages are recognized in common law system, while in civil law countries are not. Some scholars argues, that this could be because of the different concept and understanding of law. In 1972 UK scholars proposed, that punitive awards must have a place not only in criminal, but also in tort law. 48 They suggested, that civil and criminal law can go hand in hand. 49 According to the view by common law countries, punitive damages aim not necessarily to punish wrongdoer, but may also serve other functions, i.e. to discourage the injured from engaging in self-help remedies, compensate victims for unrecoverable losses and litigation expenses. 50 The notable Rookes v Barnard case was about domestic dispute and did not include any international aspect. 51 However, if we look at these three situations suggested by Lord Devlin, we can see that punitive damages might be awarded only in instances where the violation of some type 42 p Supra note 39, p p Rookes v. Barnard [1964] AC 1129, Supra note 45, para Hodgin, R. W., and E. Veitch, Punitive Damages Reassessed International and Comparative Law Quarterly (1972): , p p p Supra note 39, p Supra note

15 of law reaches enough severity. 52 Same principle used to apply in international law. When draft articles on state responsibility were provisionally adopted in 2000, the gravity of the breach was also mentioned. 53 III. INTERNATIONAL LEGAL FRAMEWORK FOR PUNITIVE DAMAGES The legal framework for punitive damages vary from private to public law as well as from one region to another. As it was stated above, in most of the cases outside the US, the reaction to punitive damages has been negative. 54 The courts in those cases generally put forward the argument of host country s public policy. 55 Same approach is followed within EU institutions. For instance, in the proposals for a regulation on the law applicable to non-contractual obligations was provided, that Regulation which has the effect of causing non-compensatory damages, such as exemplary or punitive damages, to be awarded will be contrary to Community public policy. 56 At some point we could find some origins of punitive damages even in the EU legislature. In 2006 European Commission proposed in early discussions to allow punitive damages for infringement of EU antitrust law. 57 On 26 November 2014 adopted Directive 2014/104/EU aimed to facilitate for victims of violation of competition law to exercise the right to claim full compensation for that harm. 58 However, after the final proceedings Art 3 (3) of Directive 2014/104/EU clearly stated, that [full compensation under this Directive shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages. 59 This final provision was mostly affected by civil law states, which constitute majority in the EU. Public international law in this regard differs. I will limit myself only to cases concerning human rights law and inter-state relations. When we talk about legal framework for punitive damages in public international law, we cannot escape the work done by ILC. ILC s view on punitive damages over years was inconsistent. ILC in its draft articles of 1996 recognized punitive damages as a form 52 para Draft Articles on State Responsibility, Second Reading, U.N. GAOR, 52nd Sess., U.N. Doc. A/CN.4/L.600, (Aug. 21, 2000), Art Supra note 39, p p Art 24 of Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations ("ROME II") /* COM/2003/0427 final - COD 2003/0168 */. 57 Gotanda, John Y., Charting developments concerning punitive damages: Is the tide changing, Colum. J. Transnat'l L. 45 (2006): 507, p Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance OJ L 349, , p

16 of satisfaction. 60 Art 45 (2) (c) provided, that satisfaction may take the form of damages reflecting the gravity of the infringement in cases of gross infringement of the rights of the injured State. 61 Then, in 2000 provisionally adopted draft articles, namely Art 42 (1) provided, that a serious breach within the meaning of article 41 may involve, for the responsible State, damages reflecting the gravity of the breach. 62 After the adoption of ARSIWA in 2001, it seems, that there is no more room for any considerations on punitive damages. ILC in its commentary of ARSIWA clearly stated, that the award of punitive damages is not recognized in international law even in relation to serious breaches of obligations arising under peremptory norms. 63 Given these three developments over punitive damages from 1996 to 2001, Professor Christian J. Tams indicated such evolution in three steps: 1) recognition of punitive damages (he used a word of non-compensatory instead of punitive damages ) as a form of satisfaction; 2) punitive damages as a specific consequence of serious breaches of international obligations; 3) rejection of punitive damages as a form of reparation. 64 It seems, that ILC has been considered the question of punitive damages for a considerable time and finally chosen to exclude them from the ARSIWA. In addition, scholars argues that theoretically even if punitive damages may be rendered in international cases, in practice they have been excluded, because of the limited powers granted to the courts by the treaties. 65 In other words, current multilateral treaties do not allow awards of punitive damages. 66 We could agree and disagree with this statement at the same time as per reasons below. Art 41 of ECHR provides, that the court if necessary can render just satisfaction to the injured one. 67 Similarly, Art 63 (1) of ACHR allows the court if appropriate to pay fair compensation to the injured party. 68 In both conventions we will not find any reference to punitive damages. Human rights courts if necessary or appropriate grant compensation to the injured one without considering punitive damages. 69 Moreover, in the Practice Directives issued by European Court of Human Rights on January 1, 2016, namely in Paragraph 9 it was clearly stated, that the court does not accept claims for 60 The draft Articles on State responsibility, with new successive numbering, are reproduced in the Report of the ILC on the work of its forty-eighth session 6 May-26 July 1996, Chapter III, GAOR - Fifty-first Session Suppl.No.10 (A/51/10) Supra note Supra note 19, p. 111, para Tams, C. J., Do Serious Breaches Give Rise to Any Specific Obligations of the Responsible State?, European Journal of International Law 13, No. 5 (2002): , p Fontana, Barbra, Damage Awards for Human Rights Violations in the European and Inter-American Courts of Human Rights, Santa Clara L. Rev. 31 (1990): 1127, p Council of Europe, European Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols Nos. 11 and 14, 4 November 1950, Art Organization of American States (OAS), American Convention on Human Rights, "Pact of San Jose", Costa Rica, 22 November 1969, Art Supra note 65, p

17 punitive damages and is only concerned with awards of compensation for the actual harmful consequences of a violation. 70 Judge Paulo Pinto de Albuquerque proposed that the Practice Directive is already outdated and European Court of Human Rights awards punitive damages implicitly. 71 He considers recent jurisprudence in such case as Cyprus v. Turkey 72 and Nagmetov v. Russia 73, which we will examine in-depth in the sections below. The legal framework for punitive damages is constantly changing. While ILC articles still reject the idea of punitive damages in public international law, we can find more and more examples where courts grant considerable monetary awards similar those to punitive damages. The recent cases such as Cyprus v. Turkey and Nagmetov v. Russia showed us, that although the court did not consider punitive damages as such, both respondents at the end were punished for gross violations of human rights. It seems now, that in theory punitive damages are not available in public international law, however, they are being awarded in practice. IV. EVIDENCE FOR PUNITIVE DAMAGES In this section we will examine evidence, which might prove, that punitive damages exist in international law at least implicitly. One of the notable supporters claiming that these types of damages already exist is Arangio-Ruiz, a Special Rapporteur on State Responsibility from 1987 to He indeed supported the idea, that punitive damages exist in international law. As an example, he picked the The Moke Case, where the US national claimed before the U.S.-Mexican Claims Commission for $ 1,300, which were taken from him by the Mexican military as forced loans. 75 He also requested $ 500 as a damage for a day s imprisonment. 76 The Commission stated, that these loans were illegal and for the purpose to condemn the practice of forcing loans by the military, awarded $ 500 to the injured. 77 What is the most important, that the Commission in that case stressed out, that [if larger sums in damages, in such cases, were needed to vindicate the right of individuals to be exempt from such abuses, we would undoubtedly feel required to give them." Rules of Court, Practice Directive, Just Satisfaction of 1 January 2016, para Pinto de Albuquerque, Paulo, and Anne van Aaken, Punitive Damages in Strasbourg, U. of St.Gallen Law & Economics Working Paper No (2016), p Cyprus v. Turkey (just satisfaction) (GC), no /94, 12 May Nagmetov v. Russia, no /08, 5 November Resume of Arangio-Ruiz, The Iran-United States Claims Tribunal, < Gaetano%20Arangio-RuizGaetano%20Arangio.pdf> [accessed 11 February 2017]. 75 Moses Moke v. Mexico (Docket No. 342), Claims Commission United States-Mexico (Opinion of Aug. 16, 1871), in J.B.Moore, History and Digest of the International Arbitrations, Vol. IV, 4311 (1898)

18 Such wording is usually recognized as evidence affirming punitive or exemplary damages. It seems, that Commission indeed punished Mexican military for the illegal conduct. If the award rendered by Commission is not punishment, we could at least consider such award equal to punishment. On the other hand, Arangio-Ruiz also stated, that award in the Moke case was provided to individual and not to the state. 79 The US, which was a state of nationality of Moke, was not considered injured. 80 At the end, it would be difficult to suggest that this case purely affirms existence of punitive damages in international law. Another cause celebre is the case regarding sinking of the I m Alone. 81 Tribunal awarded pecuniary satisfaction ($25,000) to a state. 82 None was mentioned about punitive damages, however tribunal did not provide broad explanation regarding the purpose of this compensation. Did tribunal intend to compensate Canada s government for material losses or instead to punish the responsible state, or had it taken into account both elements?! These questions have been left unanswered. The case could not be considered as purely justifying punitive damages in international arena for the several reasons: 1) there was no in-depth explanation provided by tribunal whether by awarding $25,000 it had in mind certain elements of punishment; 2) indeed, Canadian government incurred $33, total expenses due to litigation costs and by repatriating the crew, while it was awarded $25,000 only. 83 It is obvious, that award did not even covered Canada s material expenses, how then we could draw conclusion, that the US was punished!? The tribunal s decision could hardly be seen as a sum that could punish or deter the United States. It should be also noted, that tribunal in I m Alone case was affected by the common law traditions and therefore this precedent could not be taken by other courts or tribunals for granted. 84 The trouble with these types of awards is that they do not distinguish precisely, which part of compensation is intended to cover material loss and which one is aimed to serve as a satisfaction for the state s immaterial injury if at all this is possible. The same issue arose in the Rainbow Warrior I case, where the Secretary-General in 1986 ruled, that France should pay $7 million to New Zealand as compensation for all the damage it has suffered. 85 Arangio-Ruiz was arguing that the ruling was punitive in character, since compensation exceeded the value of the material loss. 86 He even argued, that this ruling is an afflictive form of satisfaction. 87 A lump sum compensation for all damages, 79 Wittich, Stephan, Awe of the Gods and Fear of the Priests: Punitive Damages and the Law of State Responsibility, Austrian Review of International and European Law 3 (1998): 101, p S. S. I m Alone (Canada, United States), Reports Of International Arbitral Awards, 30 June 1933 and 5 January 1935, Volume III pp p Supra note 79, p p Supra note 25, p. 213, para Supra note 79, p Supra note

19 could be seen as perhaps intention to punish France, however the tribunal itself did not provide such interpretation. It is also important to note, that Rainbow Warrior I case was decided by the UN Secretary-General. The proceedings was similar to mediation, however parties expressed intention to be bound by the decision rendered by Secretary-General. 88 That suggests, that Secretary-General had limited authority to act and otherwise could not impose punishment on another state. Since France did not comply with the said ruling, the case was referred to arbitral tribunal. 89 This was the moment, when tribunal had a chance to assess the doctrine of punitive damages and to clarify the matters, however it limited itself only to stating, that monetary compensation could be made for serious moral and legal damage, even though there is no material damage. 90 It also added, that such orders are unusual but one explanation of that is that these requests are relatively rare. 91 Tribunal also provided, that it could not make such an award for monetary compensation, since New Zealand had not requested it and instead rendered declaration of unlawfulness as appropriate satisfaction. 92 Following the decision in Rainbow Warrior II, the President of the Tribunal, Jimnez de Arichaga, had made a clear statement, that the imposition of punitive damages would go beyond the competence of any judicial organ, including the ICJ. 93 It is the evidence, that even independent and authoritative body would not be capable to render punitive awards on states, because those states have a powerful tool called sovereignty, which we will examine in the section below. If we look into the recent jurisprudence by human rights courts, we might see even more tangible examples of punitive awards being awarded against states. In the Nagmetov v. Russia case the injured one was awarded by 50,000 Eur in respect of non-pecuniary damage for a violations of Art 2 94 of the ECHR. 95 In this case, police caused death of the applicant s son and there was no compensation provided at a national level for more than nine years. Judge Paulo Pinto de Albuquerque in his paper states, that it was an award of punitive damages, since the applicant did not even ask the court for just satisfaction for non-pecuniary damages, but the court still rendered a considerable lump sum. 96 On 30 March 2017 Grand Chamber upheld Chamber s judgment stating that applicant requested non-pecuniary damages in early proceedings and there is no exact rule when applicant must make such claim Supra note 79, p Rainbow Warrior II, Reports Of International Arbitral Awards, 30 April 1990, Volume XX pp p. 272, para p. 275, para Supra note 79, p The Right to Life. 95 Supra note Supra note 71, p Nagmetov v. Russia, no /08, 30 March

20 Again, for Grand Chamber would be very difficult to rule on punitive damages explicitly without having strong legal basis in international law. Instead, the court found excuse, that applicant had already requested just satisfaction in early stages of proceedings and so Grand Chamber could not grant the award intentionally against the state. This is understandable approach, since the court was unwilling to open pandora s box for a possible escalations of its competence to render such awards. Another example of implicit punitive damages being awarded was in Cyprus v. Turkey case, where respondent was basically punished for gross human rights violations. 98 Cyprus claimed just satisfaction for the lawful heirs of 1,456 missing persons and other Greek Cypriots, although no identities and exact numbers of injured people were known. Judge Paulo Pinto de Albuquerquein in his concurring opinion stated, that the court has acknowledged both availability to grant just satisfaction to inter-state applications and to award punitive damages to the claimant state. 99 While both human rights cases could be considered as probably the most visible intentions to punish respondents, the sovereign states, the court tried to evade mentioning doctrine of punitive damages in its judgments. However, in Nagmetov v. Russia and Cyprus v. Turkey cases, the injured one was not a state itself, but its nationals, as well as, awards have been rendered not for violations of state s rights, but for infringements of human rights. We must now look into evidence, which might show, that doctrine of punitive damages does not really exist in international law. V. EVIDENCE AGAINST PUNITIVE DAMAGES In the above section we have seen, that there are a considerable number of cases where monetary compensations have been awarded against states very similar to those punitive or exemplary. However, we would still lack some legal basis or certainty to suggest, that these damages have place in international law. In most of those cases there was no clear explanation provided by tribunals or courts as to how one state can bring a claim for its own injuries or its nationals and claim punitive damages, so that responsible state could feel punished from this award. One of the main reasons, why punitive damages is a hot topic is because they seemed to be useful to our society, but at the same time they could be a dangerous tool to ruin the current international order. Sovereign equality enshrined in the Art 2 (1) of UN Charter tends to be that powerful shield resisting against any kind of punishment against a state. 100 To justify this statement, we must now examine the case law and to look into subsidiary sources of law. 98 Supra note p United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, Art 2 (1). 19

21 In 1939 German-U.S. Mixed Claims Commission dealt with Sabotage Claims, where Germany carried out acts of sabotage against America during World War I. 101 Application of punitive damages or so-called exemplary damages against Germany was also examined by the Commission. The Commission stated, that applicant failed to show any awards of punitive damages by international tribunal against a sovereign nation. 102 By referring to the decision in the Moke case, the Commission stressed out, that the said case should not be considered as recognition of doctrine of punitive damages in international law, mainly because of two reasons. 103 Firstly, it could hardly be seen, that $500 rendered by tribunal is adequate compensation for moral injuries, that Moke had suffered. 104 Secondly, the Commission did not see any elements of punishment in that case, that could deter Mexican authorities from such mistreatment of the US nationals in the future. 105 Even though German-U.S. Mixed Claims Commission was asked for punitive damages, they were rejected not only on the basis of interpretation of Moke case, but on the findings, that Commission does not have the power to impose such penalties on the Germany. 106 Actually, the Commission took a better way out when assessed punitive damages. It stated, that the Treaty of Peace did not include provisions Penalties, and so it was without power to grant them. 107 The Commission obviously was facing with sort of vacuum in the law regarding punitive damages and for the purpose to escape from it, it instead relied on procedural grounds. Another cause celebre case rejecting punitive damages is the Lusitania case. 108 The Umpire Parker stated, that the commission had no competence to award punitive damages. 109 He also argued, that imposing penalties against a state is "repugnant to the fundamental principles of international law" and rejecting that these damages could have room in international law. 110 The interesting point, which was touched in this case is the idea, that punitive damages cannot be a judicial remedy, since no judicial body competent to render a judgment wholly punitive in nature. 111 Punitive damages as a remedy is also being asked in human rights courts. In the Velásquez- Rodríguez case the IACHR refused to accept these types of damages. 112 The court relied on Art 63 (1) of ACHR allowing the court if appropriate to pay fair compensation to the injured party. 113 It 101 Sabotage Claims, Mixed Claims Commission (United States and Germany) (1 November October 1939), Reports of International Arbitral Awards, Volume VII pp p p Opinion in the Lusitania Cases, Reports Of International Arbitral Awards, 1 November 1923, Volume VII p p Supra note 79, p Velasquez Rodriguez v. Honduras (Reparations and costs), Judgment of 21 July Supra note