Sat, Apr. 03, 2004

Punitive Disgorgements in Germany

CK - Washington.   An interesting twist in the revisions to the German statute on unfair trade, Gesetz gegen den unlauteren Wettbewerb, that passed the federal diet, Bundestag, yesterday introduces an element that appears similar to concepts integral to the American concept of punitive damages.

Considering that Germany will not enforce foreign judgments with punitive awards on the basis of a violation of public policy, BGHZ 118, 312; see also Germany: Federal Court of Justice Decision Concerning the Recognition and Enforcement of U.S. Judgments Awarding Punitive Damages, 32 I.L.M. 1320, (1993), this change could open the door slightly to the argument that German public policy no longer bars the recognition and enforcement of such awards. The result may no longer be "a result manifestly irreconcilable with fundamental principles of German law" under section 723 (2) of the Code of Civil Procedure. The amendment authorizes the disgorgement of illicit profits made from a class of consumers that extends beyond individual plaintiffs, according to a blurb published by the Department of Justice.

A significant difference to punitive damages in the United States is the assignment of the recovery to the federal treasury, not the private plaintiff. The amendment will next be reviewed by the upper house, Bundesrat.

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