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What can UK learn from USA?
The USA is an obvious example of a country that is widely held to demonstrate a ‘Compensation Culture’ in extreme. The gloomiest predications imply cost of compensation (tort costs) could increase twice as fast as economy, possibly rising to 2.4% of GDP by 2005, from around 1.8% in 2000. This potential increase is fuelled by increasing asbestos-related claims, increasing medical costs and additional claims following destruction that took place on September 11th 2001.
There are a number of class actions against big food and drink companies, seeking compensation for adverse effect food and drink have had on claimants’ health. For example, diets containing too much saturated fats and sugar. McDonalds and other manufacturers/outlets of convenience foods have been in public eye as number of US children, teenagers and adults suffering health and obesity-related problems continue to grow.
Table 1. Monetary costs of compensation in a selection of countries (tort costs)
United States124.0 Switzerland10.8 Australia 7.3 Germany 7.2 Belgium 5.9 UK 5.8 France 5.5 Canada 5.0 Italy 4.3 Spain 3.4
Figure 1 demonstrates considerable difference in tort costs between USA and other countries throughout world. Many legal scholars are concerned with apparent Americanisation of European law and arrival of large corporate law firms, with more aggressive approaches to litigation and dense, defensively-worded American-style contracts.
To many, America has taken their litigation and compensation rights too far and it’s American shareholders and taxpayers who are paying real price. Europe and USA have very different legal systems and practices, which if preserved, will prevent a further shift towards American style of compensation.
The distinguishing feature of American legal system is use of juries to decide cases. In UK civil actions are tried by a judge rather than a jury, with a much less hard-line approach towards pursuing large amounts in damages.
In addition to this, in USA ‘punitive damages’ are imposed to serve as a punishment for defendant and a deterrent to others who may be negligent in similar circumstances. Punitive damages are a modern phenomenon of U.S. judicial system and enable individuals to claim compensation amounts far in excess of realistic economic compensation for loss or injury. The problem is that potential size of a punitive damages award is variable, and process of arriving at it is arbitrary. There are no maximums and no minimums – jury alone determines amount. Problems arise because juries view case subjectively without regard of broader implications of their decisions.
Punitive damages do not feature in UK legal system. Instead, only need to establish a fault is required. This suggests that compensation culture in UK is less likely to accelerate to excessive levels as USA.
The way forward
A general awareness of corporate responsibility over last decade has increased employees/a citizen’s access to justice and raised health and safety standards within many organisations. The need to exercise these rights with responsibility is more pertinent than ever. It is important to take stock and be aware of consequences of resorting to litigation to resolve problems when mediation and negotiation would be a more effective, economical and productive route to resolution. We have witnessed how ‘compensation culture’ in USA has resulted in a change in behaviour for many Americans and whilst many countries will follow where America has led, it is important for countries such as ours to do everything possible to prevent replication of American model.
The differing legal systems and practices highlighted in this article are thought to be main checks and balances preventing UK adopting American judicial style of compensation. It is therefore likely that UK’s biggest challenge in coming years will be in trying to prevent adoption of American policies and influences on European legal systems. If lessons learnt from experiences in America inform Parliament and legal decision makers in UK, one can only hope that a balance between advantages and disadvantages of rising number of people claiming personal injury compensation will have been achieved.
Paul Johnson YouClaim firstname.lastname@example.org
www.youclaim.co.uk is a UK based litigation company providing a no-cost, no-risk compensation claim service for people who have been injured or become ill due to someone else’s negligence.