Under current law, monetary sanctions for illegal behavior include damages, fines, and penalties, which are intended to remedy the victim, punish the perpetrator, and correct the violation of the law, respectively. Fines, in particular, serve as a deterrent, but they have their limitations when it comes to illegal behavior that is unlikely to be detected. In such cases, punitive damages are proposed as a way to provide victim relief and deterrence.
Monetary sanctions are more effective in deterring illegal behavior when members of society are more likely to engage in illegal behavior in pursuit of economic gain. These monetary sanctions serve as a social warning against illegal behavior and a deterrent to its recurrence, thereby contributing to the realization of social justice.
Under current law, monetary sanctions for illegal behavior include civil damages, criminal fines, and administrative penalties, each of which aims to remedy the victim, punish the offender, and correct the violation of the law. For example, if companies are caught colluding to raise the price of a product, they may be sued for damages by the victim, fined by a court, or fined by an administrative agency. In this way, three different monetary sanctions can be imposed for one illegal act, but the courts have ruled that the sanctions are not duplicative because they have different purposes.
However, in reality, in Korea, it is rare for a company to be sued for damages or fined for its illegal behavior, so administrative sanctions such as fines often serve as a deterrent. This is because administrative agencies can impose sanctions relatively quickly and efficiently. In these circumstances, increasing the severity of administrative sanctions, such as fines, can be a deterrent to illegal behavior. However, for illegal behavior with a very low probability of detection, increasing fines alone is not enough to deter. Also, unlike damages, which belong to the victim, fines and penalties belong to the state, so increasing fines does not directly benefit the victim. For this reason, there is a need to find a way to increase the deterrence of illegal behavior that is highly unlikely to be detected, while still providing fuller compensation for damages, and one such option is punitive damages.
The idea is to allow victims of tortious behavior to recover damages in addition to compensatory damages to punish the perpetrator. Punitive damages are unusual in that a victim cannot recover more than the amount of damages in a general damages system, but they can in a punitive damages system. This gives victims more incentive to come forward and report wrongdoing and file lawsuits. This motivation can contribute to deterrence by increasing the likelihood that the wrongdoing will be detected.
However, the fact that the system is a civil remedy and the victim’s award includes restitution, which is similar in nature to a fine, has led to conflicting opinions regarding the occurrence of duplicative sanctions, and has led to arguments for and against the system itself. Opponents of the system see punitive restitution as a windfall for victims, and argue that when punitive restitution is imposed in conjunction with a criminal fine, it creates duplicative sanctions against the offender. Proponents, on the other hand, view punitive restitution as a just reward for the time and effort victims put into their cases. Therefore, they argue that punitive restitution should also be viewed as a civil sanction aimed at redressing the victim, and therefore the combination of punitive restitution and a fine is not duplicative.
Furthermore, proponents argue that punitive damages serve to reinforce corporate social responsibility. The idea is that punitive damages are effective in encouraging companies to fulfill their social responsibilities beyond simply being held legally accountable. This encourages companies to pursue more ethical business practices, which in the long run can have a positive impact on society’s trust and economic development.
