Punitive damages in international arbitration awards : problems of enforcement

Abstract

This paper is an attempt to point out to the importance of punitive damages in international commercial arbitration. Punitive damages are considered a punishment for a malicious and reckless deed. Such damages are usually awarded in domestic arbitrations in common law jurisdictions; nevertheless, they are practically non-existent on the international legal scene. Therefore, punitive damages have limited practical relevance because of two factors - the limited availability of punitive relief and difficulties to enforce such awards abroad. Generally speaking, although punitive damages have not had significant historical importance, international commercial arbitration awards involving punitive damages have attracted much of the international legal attention mostly due to the progressive acceptance of such awards in the US, the homeland of punitive damages. As it will be more thoroughly explained in the following paragraphs, punitive damages have been awarded to serve as both a punishment for an offense and a deterrent for potential tortious acts. In the famous Mastrobuono v. Shearson Lehman Hutton case, the Supreme Court in its decision from 1995 confirmed arbitrators’ ability to grant punitive relief. This decision raised two important questions: the enforcement of US awards containing punitive damages abroad and the importance of punitive damages in international commercial arbitration. What is more, this decision did not comply with the practice that had been followed before 1995. Namely, in the Garrity v. Lyle Stuart case, it was held that punitive arbitration awards violated public policy. Such sanctions have been specially reserved for the State since the power to punish is a state monopoly. However, there have been some exceptions such as the ICC case no. 7453, whereby arbiters did not want to qualify precisely the nature of damages. The clash of these two famous cases depicts the change in awarding and perceiving the importance of punitive damages. Moreover, the clash perfectly mirrors the different approaches entailed in the New York Convention and the Federal Arbitration Act toward awarding punitive damages in international commercial disputes. Although there are a few crucial points left to be discussed in the paper, such as arbitrability and public policy when awarding punitive damages in international commercial arbitration awards, a new development in awarding such damages can be taken for granted and best seen through some groundbreaking cases such as AXO Sport, SpA v. NOSA Inc, Schlenzka v. Fountaine Pajot, and Miller Import Corp. v. Alabastres Alfredo. Overall, it seems that punitive damages awards in arbitration are an essentially American phenomenon. This paper shows two major practical issues and the reasons for the limited practical relevance of punitive damages in international commercial arbitration. It is noticeable that punitive damages awards are virtually non-existent in international commercial arbitration; however, this paper proves that a more widespread recourse to this remedy may be possible in the foreseeable future.

Tema ovog master rada je prikaz odnosa kaznene nadoknade štete naspram međunarodne trgovačke arbitraže, kao i posebne važnosti tog odnosa. Kaznena naknada štete je naknada štete za zlonamerno i bezobzirno prouzrokovanje štete. Naknada štete te vrste poznata je i najčešće se dodeljuje u domaćoj arbitraži država anglosaksonskog pravnog sistema, premda je polovično priznaje i međunarodna pravna praksa. S obzirom na njen ograničen domet u jurisdikcijama koje ne poznaju ovaj institut, kaznena naknada štete nailazi na praktične probleme, kako pri njenom donošenju tako i pri izvršenju. Iako kaznena naknada štete nije imala veliki uticaj u međunarodnoj trgovačkoj arbitraži, s vremenom je njen uticaj rastao istovremeno s porastom dodele ove vrste štete u državi gde se ovaj institut prvobitno razvio, tj. u Sjedinjenim Američkim Državama (SAD). Nadalje će biti podrobnije objašnjeni kazneni i odvraćajući karakter nadoknade štete. U poznatom slučaju Mastrobuono v. Shearson Lehman Hutton, Vrhovni sud SAD-a je po prvi put u svojoj odluci iz 1995. godine potvrdio mogućnost dodeljivanja kaznene nadoknade štete. Međutim, spomenuta odluka otvorila je druga dva pitanja: da li je moguće izvršiti primenu jedne takve presude izvan SAD-a i koji je njen značaj u međunarodnoj trgovačkoj arbitraži. Situaciju je dodatno zakomplikovala nepostojeća praksa njenog dodeljivanja do 1995. godine. Naime, u slučaju Garrity v. Lyle Stuart odlučeno je da je kaznena naknada štete suprotna pravilima javnog pravnog poretka. Štaviše, dodeljivanje takve nadoknade štete s kaznenim karakterom oduvek se smatralo monopolom pojedine države, s obzirom da je država ta koja ima pravo da vrši prisilu i kaznu. Uprkos tome, tokom istorije bilo je izuzetaka i u arbitražnim odlukama kao što je na primer ICC slučaj broj 7453, kada je arbitražni sud izričito odbio da okarakteriše štetu. Na taj način arbitražni sud izbegao je da kvalifikuje kazneni karakter nadoknade štete u presudi. Suproтstavljen primer odlučivanja u navedenim presudama očigledan je dokaz kako se uticaj i poimanje kaznene nadoknade štete vremenom promenilo. Neujednačen stav po pitanju dodele kaznene nadoknade štete izražen je i u Njujorškoj konvenciji i Saveznom arbitražnom zakonu SAD-a. Iako postoji par prepreka u dodeli kaznene nadoknade štete, kao što su arbitrabilnost i javni pravni poredak, može se uočiti da se međunarodna trgovačka arbitraža kreće u smeru njenog prihvatanja. Primer toga su i najnovije presude AXO Sport, SpA v NOSA Inc, Schlenzka v. Fountaine Pajot i Miller Import Corp. V. Alabastres Alfredo. Uopšte uzev, kaznena naknada štete suštinski je američki fenomen. Ovaj master rad baviće se dvama navedenim problemima na koje kaznena naknada štete nailazi u praksi, odnosno u međunarodnoj trgovačkoj arbitraži. Iako je primetno njeno sveopšte odsustvo u primeni međunarodnih trgovačkih arbitraža, deluje i da bi se praksa u bliskoj budućnosti mogla kretati u suprotnom smeru.