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Prof Ewoud Hondius Molengraaff Instituut Janskerkhof 12 NL 3512 BL Utrecht NETHERLANDS E.H.Hondius@Uu.Nl Prof Ewoud Hondius Molengraaff Instituut Janskerkhof 12 NL 3512 BL Utrecht NETHERLANDS [email protected] Dear national reporters, 2 July 2014 1. Please find attached the outline of our second draft general report on disgorgement damages. As compared to the draft which I sent you on June 19, the present manuscript has been revised only marginally. We are grateful to among others Talia Einhorn and Stephen Watterson for their suggestions. 2. We are glad to report that in the end we will receive an English version of the French report, so all national reports will be in English. Kind regards, Ewoud Hondius André Janssen PREFACE 1. Disgorgement damages is not exactly a household word in private law. This book basically is about the question whether it should become one. We do find different attitudes in the various legal systems presented in this volume. Many common law and mixed jurisdictions are familiar with the notion, although not all do embrace it wholeheartedly. Civil law jurisdictions, however, are much less inclined to accept the notion, which they often find to be at odds with their abhorrence of contamination of their private law system with criminal law elements. 2. We have given considerable thought to an arrangement of the national reports in the volume to be published. Something which we abhor is the classical arrangement by country in alphabetical order. Should we then rather introduce classification by taking the answer to our main question as criterion?1 Part I would then consist of national reports from jurisdictions that accept compensation in general, Part II of those that do so occasionally, etc.? After some reflexion we decided to reject that approach as well. For reasons to be set out in the Preface we will revert to the traditional classification in legal families. Provisionally, that would mean common law, French law, German law, Nordic law, mixed and composite systems, Central & East European law, East Asian law, and Latin American law. The latter three have newly been invented by us. We have already entered into a discussion with our Canadian reporters how to classify Canada. Unlike at previous occasions there are not two Canadian reports, one from the French speaking province of Québec and the other from the remaining English-speaking provinces. That would have made it easy: the first report would be among the French reports and the second in the common law group. The single Canadian report made us consider the mixed jurisdictions as a parent group, but then Canada definitely is not mixed. So we will keep the issue for the discussion in Vienna. Perhaps a solution would be to broaden the notion of mixed jurisdictions for our purposes to something like ‘mixed and composite systems’. This may bring us into conflict with the keepers of the mixed systems from Louisiana, but who is afraid of a nice academic fight. 1 One of us did so previously in Ewoud Hondius & Hans Christoph Grigoleit (eds), Unexpected circumstances in European contract law, Cambridge: University Press, 2011, where the distinction between ‘open’ and ‘closed’ legal systems is used to distinguish the various jurisdictions. 3. Another innovation in this volume has been to use a geographical criterion for the jurisdictions from Central and East Europe, East Asia and Latin America. Although these jurisdictions do have common characteristics, these often are of a linguistic (Latin America, East Asia) or a historical nature (Central and Eastern Europe). Not always is language or history sufficient as a binding notion. The geographical breakdown therefore seems to us a useful alternative, although not wholly without inconvenience either. One again this is a discussion point for the forthcoming Vienna conference. More specifically, the question may be raised whether the newly invented groups of Central and East European law, East Asian law and Latin American law are sufficiently consistent to form a group. In the case of Romania, our colleagues from that country have convinced us that this jurisdiction belongs to the French family. But then, what about the two other Central and East European jurisdictions dealt with in this volume? 4. Studying the national reports may provide the reader not only with an insight in the specific problem of disgorgement damages, but also of remedies in general and even of sources. The latter is perhaps in need of some further explanation. It is obvious that the national reports emanating from civil law jurisdictions focus on statutory provisions, whereas common law jurisdictions first look for cases. But some further discrepancies may be observed. For instance, the Portuguese national report seems just as interested in doctrinal publications as in statutes or cases. Thus, Júlio Gomes writes, ‘Manuel Carneiro da Frada highlights this difficulty’, and ‘The inadequacy of Pereira Coelho’s position’ are some citations to illustrate this phenomenon. 5. Volumes such as the current one ours usually encompass one general report. We now envisage including both the questionnaire and a concluding part. This is because some national reports enter into a discussion with the questionnaire and it therefore seems methodologically better to include that questionnaire. 6. This volume includes both a table of cases and an index. 7. We are grateful to our national reporters who were willing to submit their reports in time. We also thank the organisers of the conference, both at the Paris headquarters of the International Academy of Comparative Law and in Vienna. We also thank the publishers of Springer. TABLE OF CONTENTS A. Questionnaire B. Common law Australia England & Wales Ireland C. French legal systems Belgium France Italy Portugal Romania Spain D. German legal systems Austria Germany Greece Turkey E. Nordic legal systems Norway F. Mixed and legal systems Canada Israel Scotland South Africa G. Central & Eastern Europe Croatia Slovenia H. East Asia China Japan I. Latin America Brazil Chile J. CONCLUSIONS Table of cases Index XVIIIth Congress of the International Academy of Comparative Law (Vienna, 2014) Topics to be discussed during the XVIIIth Congress of the International Academy of Comparative Law (Vienna, 2014) ORIGINAL QUESTIONNAIRE by Ewoud Hondius, University of Utrecht2 and André Janssen, University of Münster3 II A 2 Disgorgement of Profits4 “This Court never allows a man to make profit by a wrong, (%).”5 This famous sentence by Lord Hat erly in Jegon v (ivian is already more than 140 years old but still seems to be completely in line with today’s rhetoric.6 It is a timeless statement. Maybe even more than in Lord Hatherly’s time there is a worldwide ideal that unlawful conduct (or more specific tort) should not pay and that for this reason 7 the wrongdoer’s illegal profits must be disgorged. 2 Professor of European Private Law, membre titulaire de l)AIDC, previous general reporter on precontractual liability (Montréal 1990: Ewoud Hondius (ed), Precontractual Liability, Deventer: Kluwer, 1990), extinctive prescription (Athens 1998: Ewoud Hondius (ed), Extinctive Prescription/On the Limitation of Actions, The Hague: Kluwer Law International, 1995) and precedent and the law (Ewoud Hondius (ed), Precedent and the law, Brussels: Bruylant, 2008). 3 Mr. André Janssen, PhD is a Senior Research Fellow at the Centre for European Private Law (CEP) in Münster (Germany). Currently, his research at the University of Turin (Italy) is supported by a Marie Curie Intra European Fellowship within the 7th European Community Framework Programme. 4 In preparing this questionnaire we have profited from the various suggestions by the national reporters from Australia (Katy Barnett), Belgium (Marc Kruithof) and Israel (Talia Einhorn). 5 „T is Court never allows a man to make profit by a wrong, but by Lord Cairns’ Act t e Court as t e power of assessing damages, and t erefore it is fairly argued ere t at t is is a case in w ic damages oug t to be reckoned (%).” Lord Hat erly in Jegon v (ivian (1870-1871), Law Reports Chancery Appeal Cases VI, 742 (761). 6 See e.g. Restatement (Third) of Restitution and Unjust Enrichment (American Law Institution, 2011) §3, ‘Wrongful Gain’: ‘A person is not permitted to profit by his own wrong.’ 7 See e.g. Rookes v. Barnard [1964] AC 1129 (1227), per Lord Devlin: „Exemplary damages can properly be awarded w enever it is necessary to teac a wrongdoer t at tort does not pay.” This decision has in fact limited exemplary damages in English law to just three odd cases. The limits of this decision were very well demonstrated in the later case of ,roome v. Cassels, per Lord Denning, MR, in the Court of Appeal. Lord Denning suggested that the Rookes precedent, especially the limits it had set on exemplary damages, was given per incuriam. This decision, however, was later overurned by the HL. See also Ulrich Schmolke, Die Gewinnabschöpfung im U.S.-amerikanischen Immaterialgüterrecht, .RUR Int. 2007, p. 3 (3): “tort must not pay”. Unfortunately, the legal reality looks very different from the rhetoric. Infringements of e.g. competition law, unfair commercial practices law, capital market law, intellectual property rights or personal rights by mass media or the breach of fiduciary duties are generally highly profitable for the wrongdoer. Thousands of millions of euros or dollars of unlawful profits remain with the wrongdoers every year.8 Thus, in practice tort or in general unlawful conduct often pays.9 From a private law perspective the reasons why unlawful conduct at the end pays are at least threefold: The first and most obvious one is when the chance to detect the wrongdoer is very low. In these situations he is „speculating” that he will not be held liable for his unlawful behaviour. The second reason can be the rational apathy of the injured parties in cases of so-called ‘trifling damages’ or ‘nominal damages’.
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