The Purposes of Tort Law

A Attribution of damage, liability as the counterpart to individual freedom to act

A first fundamental purpose is the attribution of damage. Not all damage can be shifted to a tortfeasor. Tort law determines the precise conditions under which a person shall be liable for damage suffered by another. It draws this line according to criteria such as fault or engaging in a particular dangerous activity, for example.^[15] While social insurance and first party insurance compensate any damage suffered by the victim, provided it falls into the scope of these systems, tort law provides criteria that, once met, justify shifting the loss from the victim to the person claimed to be liable. In holding the individual responsible for his or her acts, responsibility in tort hereby is the counterpart to the individual’s freedom to act.^[16]

B Compensation of damage

The vast majority of courts and scholars, as well as art 10:101 PETL, recognise the compensation of damage as a purpose of tort law.^[17]

Compensation is indeed another, second important function of tort law for damage which is not covered by social and sometimes also not by first party insurance. One example is the compensation of immaterial harm, which the social security systems in most jurisdictions do not compensate,^[18] whereas in others they sometimes do.^[19] Another example is the life-long loss of earning capacity of young victims. If a person permanently loses their earning capacity early in their career and has acquired only a small amount of pension entitlements, the life-long damage often exceeds the scope of social security coverage.^[20] Finally, social insurance does not cover damage to property (whereas first party insurance may). It is in these cases that tort liability indeed still^[21] plays an important role for the compensation of victims.^[22]

C Pronouncing a moral value judgement of the wrongdoer’s behaviour; re-establishing an equilibrium between tortfeasor and victim (fault-based liability)

A third purpose focuses on fault-based liability. Liability based on fault implies a moral value judgement of the wrongdoer’s behaviour. If the tortfeasor has not respected the required standard of care, he or she is somewhat ‘guilty’ of having caused the damage, rather than having behaved as expected and having avoided the damage. In the famous English case Donoghue v Stephenson, in which the House of Lords in its judicial capacity established ‘negligence’ as an independent, selfcontained tort in English Common Law, Lord Atkin famously held that: ‘The liability for negligence ... is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay’.^[23]

The idea of blaming the tortfeasor for his or her faulty behaviour and of sanctioning socially undesirable behaviour is deeply rooted in society.^[24] If one commits a fault and injures another, ‘correction of the wrong may help to restore the moral balance between them’.^[25] This aspect is to a remarkable degree independent of who eventually pays compensation, the tortfeasor or his or her liability insurer. Civil liability re-establishes a moral equilibrium between both parties that has been disturbed by the infliction of damage.

D Making the person that benefits from an activity pay for the costs that this activity imposes on others; internalising negative external effects and social costs

A fourth purpose focuses mainly on strict liability and the liability of professional parties, businesses and companies.

Tort liability has the potential of making the person that benefits from an activity pay for the costs that this activity imposes on others and on society as a whole. In economic terms: civil liability internalises negative external effects and social costs. It ensures that social costs generated by an activity become part of the costs of the person who is engaging in the activity, rather than falling upon third parties, or upon society as a whole. These costs hereby become part of the calculation that the person interested in the activity shall consider before deciding whether it is worth engaging in that activity.

If, for example, a product causes damage to users or bystanders, holding the producer liable increases his costs. He then has two options: the first is to improve the safety of the product and avoid such damage in the future, which is beneficial to society. The other option is to pass the increased costs on to his buyers, which leads to a higher price of his products when compared to similar products of competitors who manufacture products free of defects. A higher price leads, in turn, to a competitive disadvantage of products which are prone to cause damage when competing with safer products.^[26] Tort liability, together with the ‘invisible hand of the market’, may, ultimately, drive dangerous products out of the market, in favour of safer products. This is, again, a beneficial effect of tort liability.

Liability in tort (and in particular if independent of fault) thus has the potential to promote product safety or higher environmental standards, for example. It thereby generates beneficial effects to society as a whole. This effect would be entirely lost if the costs of damage and accidents fell upon the victim, and the victim took out first party insurance against such loss.

E Transferring the costs of damage to the party who can best avoid it (cheapest cost avoider)

Closely linked to the internalisation of negative external effects is a fifth purpose of tort law, which is transferring the costs of damage to the party who can best avoid it, or in economic terms, to shift the loss to the cheapest cost avoider. In the above example of a dangerous or defective product: it is the manufacturer of the product who is in the best position to make a product safer and avoid the costs of accidents, rather than the buyer for whom protective measures against the damage may be (very) costly.

F Allocating the damage to those who can best pass it on to the community of beneficiaries of that activity; spreading the loss

Along a similar economic line of reasoning, tort law has the potential, and sixth purpose, of allocating the damage arising from an activity to those who can best pass it on to the community of beneficiaries of that activity. It hereby socializes damage rather than putting the burden of the damage on one party’s shoulders only.^[27]

For example, in many jurisdictions, damage caused by a broken water main is shifted to the business operating the pipeline system, rather than burdening a single victim with the entire loss. The operator can then pass the costs on to the community of users who all benefit from the system. Hereby, each beneficiary carries the burden for a small fraction of the damage, whereas for a single person carrying the burden for the entire loss may be extremely onerous.

In the New York case of Bierman v City of New York of 1969, a US judge used the argument of ‘cost-spreading’, alongside the arguments of ‘injury-prevention’ and ‘fairness’, in a most remarkable judgment. He declared the City of New York liable for property damage which a lady living on her own had suffered to her apartment from a broken water main. The judge did so for the purpose of doing ‘substantial justice’^[28] being well aware that strict liability is, as a matter of law, available in the USA only under very limited circumstances.^[29]

English and German law, for example, have introduced strict liability for damage caused by broken water mains in special legislation over the last decades,^[30] thereby acting in full compliance with the above-mentioned rationales and purposes of tort liability.

G Preventing (or deterring) harmful behaviour; providing incentives to avoid harm

A seventh purpose of tort liability, which overlaps with many other functions, is to prevent (or deter) harmful behaviour. By threatening potential tortfeasors with liability, tort law creates incentives to avoid causing harm. It thus ‘creates incentives towards safety’.^[31]

Some see accident prevention as a primary function of tort law and ‘the chief purpose of the liability system today’,^[32] others, including art 10:101 PETL, regard it as a secondary function.^[33]

Where tort liability is fault-based, it gives actors an incentive to avoid fault and the negative moral value judgement that comes with it. Actors have an incentive to comply with the required standard of care, avoid the damage and potential civil liability.

Where liability is strict, actors have an incentive to include in their calculation all costs which their activity generates for society, and for which they would be held liable in tort. If these costs exceed the benefits resulting for them from the activity, they have an incentive to either refrain from the activity, or engage in the activity at a lower level and only to the extent where the benefits still exceed the costs.

H Recognising that the victim’s protected interests have been infringed

The eighth purpose concerns cases of non-material, immaterial or emotional harm. By awarding damages to victims, tort law recognises that a person’s protected interests have been infringed and that the victim suffered such harm.

All jurisdictions are faced with claims brought by persons having lost, or having to deal with the severe, lasting injury of a loved one. The issue is dealt with in terms of tort moral pour la perte d’un proche (ou sa grave blessure), Angehörigen- oder Trauer­schmerzens­geld, damages for bereavement or (recently in Germany) Hinterbliebenen­geld.^[34]

In English and German discussion, it was said that no amount whatsoever can compensate the loss of a loved one.^[35] The attempt to fix an appropriate award would be doomed to failure from the outset; trying to compensate would be pointless.

This argument misses the point. The reason is that the purpose of tort law in these cases is not compensation, and rarely prevention of harm, given that any decent person wishes to prevent killing or severely injuring another anyway. The first and foremost purpose of tort law in these cases is to recognise the severe suffering of the secondary victim through the award of damages for pure mental harm.^[36]

Civil liability insurers confirm that paying out these amounts without dispute, and recognising the secondary victim’s suffering, helps to create an atmosphere of decency and cooperation between the liability insurer and secondary victims, instead of burdening the relationship with dispute and conflict.^[37] For insurers, this is particularly important in cases where the primary victim was not killed, but severely injured and where long-term treatment needs to be organised, with secondary victims cooperating in the process. Last but not least, the recognition of his or her suffering is also beneficial to the health of the secondary victim him- or herself.

I Providing an entrance gate in private law for the protection of constitutional values

Tort law fulfils a ninth purpose by providing an entrance gate for the protection of constitutional values into private law. To give an example: in reaction to the horrors of World War II, the German Grund­gesetz (Basic Law), which has the role of the Constitution, protects human dignity and personality rights in its arts 1 and 2. Shortly after the entry into force of the Grund­gesetz, the German Federal Supreme Court of Justice recognised the right to one’s personality as sonstiges Recht, protected by tort law against injury by any other private party.^[38] For this purpose, the courts developed the theory of the horizontal effect, or third party effect, of constitutional rights. It is thus within the framework of tort law that personality rights and the protection of privacy are carefully balanced against other constitutional rights, such as the freedom of the press in private law. Tort law hereby ‘defines and sets the boundaries between individual freedom and liability based on the current state of societal development’.^[39] When defining the scope of tort law, a balance is sought ‘between the legal recognition and protection of certain goods and interests on the one hand, and the freedom of action on the other; in this respect, tort law plays a central and crucial role for the development of society.’^[40]

Following these developments in other jurisdictions, the legislator in Estonia, for example, included the right to one’s personality explicitly in its Code of Obligations of 2002 in the catalogue of legal interests protected in tort (art 1045 sec 1 no 4).^[41]

Personality rights and privacy are protected not only by national constitutions and many European tort law systems, but also by art 8 of the European Convention on Human Rights. The PETL do not yet mention personality rights and privacy in the catalogue of protected rights in art 2:102.^[42] This could, and maybe should, be remedied in the future.^[43]

J Providing a forum for the recognition of newly protected (private or public) rights and interests

Last but not least, and overlapping with the previous function, tort law frequently provides the forum for courts for the recognition of newly protected rights and interests. The case law on the protection of personality rights and privacy in the USA, France, and Germany is a prominent example.

In England, for example, the courts extended the tort ‘breach of confidence’ in the case of Campbell v MGN of 2004 to protect against the wrongful disclosure of private information.^[44] The development in the UK occurred in the law of torts and was spurred by the Human Rights Act and the European Convention on Human Rights.

The new Chinese Civil Code, in force since 2021, dedicates its entire fourth out of its seven books to the protection of personality rights.^[45]

Another, now classic example is the case law of the German Imperial Court of Justice and the German Federal Supreme Court on the intentional, unjustified interference with an established and operative business (Eingriff in den eingerichteten und ausgeübten Gewerbe­betrieb), which may qualify as an infringement of an absolute right, protected under § 823 Sec 1 of the Civil Code (BGB).^[46] The court has hereby opened the gates for the recovery of economic loss suffered by the victim, for example in cases of illicit calls for boycott against companies.

In an increasing number of jurisdictions, tort law is being used to protect the environment. To implement this protection in practice, the development goes hand in hand with an extension of legal standing for tort claims brought by environmental associations.^[47] The development has been particularly remarkable, first, in France and Belgium, and recently in the Netherlands in, for example, the Urgenda and Shell cases.^[48]

K Shifting illicitly acquired gains from the tortfeasor to the victim (or a third party)

So far, ten purposes of tort law have been identified. In some jurisdictions, but not in others, tort law is also being used for an eleventh purpose, which is the shifting of illicitly acquired gains from the tortfeasor to the victim (or to a third party). In case of infringements of personality rights and privacy by the tabloid press, the German Federal Supreme Court has awarded victims up to several hundred thousand Euros in damages. The Court argues that it is necessary to shift the illegally acquired benefits from the tortfeasor to the victim in order to protect the victim adequately. Otherwise, the tortfeasor could pay the victim and simply continue infringing their constitutionally protected rights.^[49]

Upon request of the victim, the Dutch Civil Code allows courts to estimate damages in line with the profit a tortfeasor has gained through their illicit behaviour (art 6:104 BW).

Courts in other European jurisdictions have refused to take illegally obtained benefits into consideration when fixing damages awards in tort law. This is notably the case for the courts in France.^[50] The Swiss Civil Code uses the provisions on Geschäftsführung ohne Auftrag, gestion d’affaires (agency without authority) for the shifting of illegally obtained benefits in cases of infringement of personality rights, rather than using tort law for this purpose.^[51]

L Punishing the tortfeasor?

The last potential purpose of tort law is also the most controversial one: punishing the tortfeasor for serious, inexcusable negligence or for deliberately taking the risk to cause harm to others.^[52]

For a long time, punitive damages were considered incompatible with public policy on the European continent (and in many codified systems elsewhere). Recently, there has been some liberalisation in this respect.

In Croatia, for example, an Act of 2021 on the Protection of Authors’ Rights and Related Rights allows, in the case of a wilful or grossly negligent infringement of an author’s rights, the award of an amount twice the agreed or usual remuneration of the author, independent of any damage suffered.^[53] Similar acts exist in many other countries. The courts in Hungary held in 2020 that, in case of an infringement of the protection of personal data, damages for immaterial harm (solatium doloris) in tort may have a punitive function.^[54] The Polish Supreme Court held in 2020 that damages for the infringement of personality rights by media may serve a punitive function.^[55]

The 2017 proposal for tort law reform in the French Civil Code^[56] suggests introducing punitive damages in case of deliberate misconduct for the purpose of gaining a benefit.^[57] The new Chinese Civil Code, in force since 2021, identifies two situations in which punitive damages may be awarded following intentional torts.^[58]

In Europe, the issue often arises in procedures for recognition of US American damages awards. The Italian Corte di Cassazione had refused the recognition of foreign punitive damage awards in 2007 and 2012, arguing that damages in tort only serve a compensatory function as opposed to a punitive function.^[59] In a much-noted decision of 2017, the Italian Corte di Cassazione overturned this reasoning.^[60] A motorcycle racer had suffered serious personal injuries in a race in the USA due to a defect in his crash helmet. The helmet was produced by an Italian company and sold by a company in the USA. The American seller paid the victim a large amount of damages, arguably including punitive damages, and a court in Florida ordered the Italian producer to reimburse the US seller. The seller sought recognition of the judgment in Italy.

In its judgment, the Grand Chamber of the Italian Court of Cassation emphasised that recent Italian laws and court decisions applying them (such as a 2015 decision on the liability of company directors) allowed damages in tort law to have a punitive function. The Court held that punitive damages are now admissible in Italian law, provided that a legal provision (domestic or foreign) allows them, that there is a cap or ceiling guaranteeing predictability and that the award respects the principle of proportionality in light of the tortfeasor’s conduct and the damage suffered.

French and Spanish courts have also held that the recognition of foreign punitive damages awards does not violate public policy, provided the amount is not disproportionate in relation to the damage suffered.^[61]

The majority of European jurisdictions are, however, opposed to admitting punitive damages if they pursue a truly punitive function.^[62] The PETL are consequently also hostile to them.^[63]