Damage without compensation - compensation without damage - Do mass harm events require modifications of liability law?

• Applicant: Professorin Dr. Astrid Stadler
• Subject Area: Private Law
• Term: from 2019 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 429842187

Mass harm events have been under debate for several years with a focus on new procedural instruments. Collective redress tools have been implemented in several MS in recent years and the EU Comm. has published a proposal for new collective actions in 2018. What has been neglected so far is the substantive matter question of whether the complexity of mass claims allows for or even requires modifications of substantive rules on liability. Although inevitable, such modifications need clearly defined limits, because two potential risks may collide with the principle of compensation: over- and undercompensation of mass harm victims. The project will develop solutions of how to cope with small individual loss caused to a large number of victims. Collective damages actions based on an opt-out mechanism or actions for skimming-off illegally gained profit from the tortfeasor are possible options. Although actions for damages often result in funds established by the defendant, large parts of remain unclaimed as the victims often do not bother to claim small amounts. The EU Comm. suggests to adopt cy près solutions which are common practice in the US and the UK and which prevent disproportionate efforts to pay small amounts of money to the victims and the restoration of left-overs of funds to the defendant by giving the money to charity or public institutions. This highly controversial approach is subject to consitutional concern even in the US. It raises the question of whether small individual loss may be neglected for the sake of a deterrent effect. Representative actions for the disgorgement of illegal profits can be a more straightforward solution from a dogmatic perspective and easier to handle in proceedings. The second part of the project tackles the issue of prove and calculation of individual damages in collective actions in general. Courts or parties when negotiating a settlement often resort to lump sum awards, but it is unclear to what extent such consolidations are justified. Approaches to be analysed inlcude: specifications for estimating the loss, abstract-statistical methods, and statutory damages as used in the US which fix a certain amount for each violation irrespective of the actual damage. In cartel law, European rules favour presumptions and prima facie evidence. In the VW Diesel scandal, legal scholars discuss giving up the principle of adjustment of profit in order to maintain a deterrent effect of liability rules and to promote early settlements. All these approaches are questionable and may lead to an overcompensation of mass tort victims or to damage awards where victims actually did not sustain loss. Cy près solutions or disgorgement proceedings as well as modifications of substantive rule on (tort) liability are motivated by the idea of favouring deterrence over compensation. The project analyses both developments critically on the basis of comparative research and from a dogmatic perspective and will propose specific rules.

• DFG Programme: Research Grants