Punitive Damages in International Commercial Arbitration: Much Ado about Nothing?

Abstract

This article constitutes an attempt to assess the practical significance of punitive damages in the context of international commercial arbitration. It shows that, although punitive damages are regularly awarded in domestic arbitrations in the US, such awards are quasi-inexistent in the international arena. As this article explains, this limited practical relevance of punitive damages is due to two factors. It results, first of all, from the limited availability of punitive relief, i.e. the fact that punitive damages are only recognized under a small minority of domestic (substantive and arbitration) laws, especially as far as contract claims are concerned. Second, the limited practical significance of punitive damages also stems from the difficulties to enforce such awards abroad and the resulting reluctance of arbitral tribunals to grant punitive relief even where it may be available and appropriate under the applicable law. While this article is primarily concerned with providing an explanation of the current status quo, it also discusses legal developments that may lead to punitive damages playing a more significant role in the future.