Punitive damages: Still far from getting access to the Italian legal system?

Thanks to Sofia D’Arena for collaborating on this article.

In October 2019, the Supreme Court of Cassation ruled once again on the nature—compensatory or punitive—of non-pecuniary damages.

With judgment No. 27590/2019, the Third Section of the Court of Cassation, following the position adopted by the Joint Sections in July 2017, denied the punitive nature of non-pecuniary damages. That decision endorsed the general principle of full compensation of damages, to which punitive damages are sometimes an exception.

1. Factual background

The at-issue decision deals with the liquidation of damages suffered by the wife and the minor daughter (hereinafter, the “Injured Party”) of a man who died because of a work injury.

The court of first instance did not apply the guidance criteria to assess the damages set forth by the Court of Milan and thus ordered the damaging party to pay a sum exceeding the amount recommended therein. In doing so, the court expressly awarded punitive damages.

In the second instance proceeding, the Court of Appeals overturned the initial decision, finding that there is no room for punitive damages in the Italian legal system. As a result, the Court of Appeals ordered the Injured Party to return part of the compensation received.

Hence, the Injured Party appealed to the Supreme Court of Cassation, challenging the decision of the Court of Appeals that had, inter alia, halved the due compensation.

2. The Court of Cassation’s decision

In deciding the case, the Court of Cassation could not disregard the precedent set forth by its Joint Sections in July 2017.[1]

Indeed, in 2017 the Joint Sections remarked that punitive damages are not per se incompatible with the general principles of the Italian legal system, since the system provides several provisions that recognize a punitive component to damage compensation. [2]

In reaching this conclusion, however, the Joint Sections of the Court of Cassation clarified that this does not mean that Italian judges are allowed to increase damage compensation arbitrarily when quantifying extra-contractual or contractual damages. On the contrary, punitive damages are only applicable if the law expressly provides for them, in compliance with the Italian Constitution and the European Convention on Human Rights.[3]

Therefore, in our legal system punitive damages are still the exception to the general rule of compensatory damages.

On the basis of this authoritative precedent, the Court of Cassation confirmed the Court of Appeals decision and denied the awarding of punitive damages to the Injured Party.

In doing so, the Court of Cassation reaffirmed the compensatory nature of damages under Italian law, meaning that the function of damages is to restore the injured party’s assets to the condition they were in before the tort occurred. To this end, damage compensation shall be determined on an equitable basis, i.e., by reasonably appraising the circumstances of the specific case, and thus leaning toward what is commonly known as personalization of damages. Only under this approach can damages be fair, consistent, adequate, and proportionate, in line with the principle of full compensation, and therefore not merely symbolic or irrelevant, but also not disproportionate to the damage actually suffered.

The court also pointed out that personalization of damages does not run contrary to the general principle under which the damaging party is obligated to pay compensation only for the damage caused by the unlawful conduct that is causally attributable to them, but instead correlates closely with it. This helps meet the need to avoid damage duplication and unjust enrichment.

3. Concluding remarks

The 2017 decision of the Joint Sections was seen by many as a revolutionary opening to punitive damages in Italy. A closer reading of that precedent shows instead that there has been no change in the paradigm: compensatory damages are still the general rule that undergirds the Italian legal system.

In full compliance with that precedent, two years later the Court of Cassation confirmed this principle and accordingly denied the punitive nature of non-pecuniary damages, reaffirming that damages are by nature compensatory.

[1] Court of Cassation, Joint Sections, decision of July 5, 2017 No. 16601.

[2] See also, Court of Cassation, Joint Sections, decision No. 9100/2015.

[3] Ibid.

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