European Union: Punitive Damages—German Constitution Might Limit U.S. Antitrust Damages Claims Against German Companies

 On 25 July 2003 the German Federal Constitutional Court ("Court") issued a preliminary injunction ("Injunction") against the service of a U.S. lawsuit claiming $17 billion in damages against Bertelsmann AG ("Bertelsmann"). This article explains the relevance of that injunction in the context of the Rome II proposal of the European Commission of 22 July 2003.

Factual Background

In 2001, a class action brought against Napster, Inc. ("Napster") by the songwriting and music-publishing team of Jerry Leiber and Mike Stoller and another music publisher succeeded in shutting down Napster’s distribution of soft-ware that enabled the unauthorized on-line distribution of copyright-protected recordings. In February 2003, the same lead plaintiffs and another publisher filed another copyright-infringement lawsuit, this time against the German corporation Bertelsmann AG, in the federal District Court in Manhattan. Seeking to represent over 27,000 publishers allegedly damaged by Napster, the plaintiffs charge Bertelsmann with contributory and vicarious copyright infringement, alleging that Bertelsmann’s financial assistance kept Napster in business nearly an additional year. The complaint claims $17 billion in damages, reflecting the maximum statutory penalty of $150,000 for each of the more than 100,000 allegedly infringed copyrighted works. More recently, Universal Music Group and EMI Group have also sued Bertelsmann in the same district court on the same theory. On July 17, Bertelsmann filed motions in the U.S. federal court in New York to have the suits dismissed.

Procedural Background

The service of the lawsuit on the defendant is required by U.S. law, but also for the acknowledgment of the foreign judgment under German civil law. The U.S. plaintiffs applied for service of the lawsuit on Bertelsmann in accordance with the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters ("Convention"). The president of the Higher District Court Düsseldorf—the competent authority for such application—rendered a service order. Bertelsmann then filed a constitutional complaint before the Court, arguing that the lawsuit violated its constitution-ally guaranteed property and profession rights. Bertelsmann also applied for a preliminary injunction against the service order.


The Court granted the injunction, prohibiting the president of the Higher District Court Düsseldorf to execute its service order and to transmit the certificate of service for a period of six months, or until the date the Court has decided the main proceeding on the constitutional complaint. The U.S. complaint thus cannot be delivered to Bertelsmann during that time. The injunction is only preliminary; it does not necessarily predetermine the main proceeding’s outcome.


Finding Bertelsmann’s application not self-evidently groundless (offensichtlich unbegründet), the Court then considered the balance of harms resulting if (1) the injunction was not issued, but later the service order was deter-mined in the main proceeding to violate constitutional law or (2) the injunction was issued, but later the service order was determined in the main proceeding to be constitution-al. The Court concluded that the balance of interests was in favour of Bertelsmann.

In order to evaluate whether or not the complaint was self-evidently groundless, the Court noted that the Convention aims at facilitating reciprocal judicial assistance. This means that the legal system of the country in which service is sought is generally not the legal standard for evaluating a service. Thus, the Court referred to its previous rulings that, in general, punitive damages under U.S. law do not violate German constitutional law.

However, Article 13(1) of the Convention provides that a State may reject an application for service if the State considers the service capable of putting its sovereign rights or security at risk. The Court noted that those earlier decisions had left open the question whether the service of a lawsuit violates constitutional law if the aim of the lawsuit violates the fundamental structure of the constitutional state. Turning to the present complaint, the Court confirmed that the German constitution mandates respect for foreign legal systems even if such systems are not congruent with the German system. The Court expressed the view that the obligation to respect may not apply, however, where a foreign lawsuit—at least in relation to the amount in dispute—has no substantive basis. The Court stated that if lawsuits in foreign courts are obviously misused to bend a market player to one’s will by way of media pressure and the risk of a court order, service of the complaint could violate the German constitution. The Court stressed that these questions will ultimately be decided in the main proceeding.

Balancing the interests, the Court found that if the preliminary injunction were granted but in the main proceeding the Court decided service was constitutional, the result would be a delay in the service of the lawsuit. This would not cause irretrievable detriment to the U.S. plaintiffs and would not prejudice the political relationship between Germany and the U.S. However, if the Court denied the preliminary injunction but in the main proceeding decided that service would be unconstitutional, a potential constitutional issue could arise. This is because the U.S. lawsuit would proceed and could lead to Bertelsmann being required to pay as much as the requested $17 billion in damages. This result would be contrary to the German constitution. In addition, even though the judgment would not be enforceable in Germany, Bertelsmann’s assets in the U.S. would not be safeguarded, and the mere fact of service as such could harm Bertelsmann’s business reputation.

Conclusion of the Court’s Injunction

The Court’s Injunction addresses important questions that are also highly relevant for pending and potential antitrust cases, particularly those in the U.S. where initial claims for damages can be very large. The test of obvious groundlessness, and the Court’s reference to the misuse of foreign law-suits to pressure defendants, are both reminiscent of U.S. antitrust law’s own bar on anticompetitive sham litigation. The novel and interesting element is that the Court’s attention to the amount at issue in the lawsuit indicates that it could find the US lawsuit unconstitutional on the basis of what it considered to be an excessive potential penalty. If the court decides in Bertelsmann's favour in the main proceeding, it will have a significant impact on U.S. antitrust litigation against German companies. Outside of the legal issues, the Injunction sends a political message to the U.S. courts to restrict the award of excessive damage claims to the detriment of German companies. Whether this message would be taken on board by claimants and their lawyers is questionable.

Rome II

The message of the Court’s injunction has also to be seen in the context of a proposal to limit the applicability of punitive (antitrust) damages in the EU, namely the proposal for a Regulation on the law applicable to non-contractual obligations (Rome II) of 22 July 2003.

The Rome II proposal is based on the Community’s attempt to harmonize the private international law in civil and commercial matters. Its historical roots go back to 1968 when the European Economic Community concluded a Convention on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (Brussels Convention). The Convention of Rome 1980 (entry into force on 1 April 1991) on the law applicable to contractual obligations harmonizes the rules of conflict of laws applicable to contracts and complements the Brussels Convention 1968. The latter, which has been replaced by the Brussels I Regulation on 1 March 2002 provides that in certain circumstances the courts of several Member States may have jurisdiction over a case.

The proposed Rome II Regulation will be a further extension of the unification of private international law relating to contractual and non-contractual obligations in civil or commercial matters in the Community. In relation to excessive damages claims, Article 22 and Article 24 of the Rome II proposal is particularly relevant.

Pursuant to Article 22, the mechanism of the public policy exception (ordre public) allows the court to disapply the rules of the foreign law designated by the conflict rule and to replace it by the lex fori (that is, the law applicable at the law in a given case would be contrary to the public policy of the forum.

Article 24 provides that the application of a provision of the law designated by this Regulation which has the effect of causing non-compensatory damages, such as exemplary or punitive damages, to be awarded shall be contrary to Community public policy. Compensatory damages are understood to serve to compensate for damage sustained by the victim or liable to be sustained by him at a future date, whilst non-compensatory damages serve a punitive or deterrent function.

In general, countries in continental Europe do not know the category of damages for punitive reasons. In Germany this rule is set out in Section 40 III No 2 EGBGB, according to which damages that obviously aim at purposes other than a reasonable compensation of the injured person are permitted. However, prevention and deterrence are accepted purposes of damages for the infringement of personal rights in Germany, as well as in France and Italy.

Article 24 of the Rome II proposal could therefore be seen as a response to the concerns many contributors in the consultation process expressed; namely, that the idea of applying the law of a third country providing for damages not calculated to compensate for damage sustained. Whilst indeed some suggested that it would be preferable to adopt a specific rule rather than to apply the public policy exception of the forum (as is the case in Germany), the effect of Article 24 would be that the application of a provision of the law designated by this Regulation which has the effect of causing non-compensatory damages, such as exemplary or punitive damages, to be awarded will be contrary to Community public policy.

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions