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(EDITORIAL from Korea Times on July 22)

All News 07:11 July 22, 2016

Time for punitive damages
: Parties should adopt the system by year's end

The main opposition Minjoo Party of Korea (MPK) is stepping up legislative efforts to introduce punitive damages ― large financial penalties imposed on companies that commit anti-social and malicious crimes intentionally or negligently.

The Presidential Committee on Judicial Reform began to discuss adopting the punitive damages system in 2004. But there has been no progress so far as businesses opposed it citing concern about weakened corporate activities.

Two high-profile incidents served as the catalyst to revive debates on punitive damages.

The so-called Oxy scandal triggered deaths of more than 200 people, including children and pregnant women. Oxy Reckitt Benckiser was responsible for the deaths for manufacturing and selling toxic humidifier disinfectants. The British consumer goods maker was aware of the peril of the deadly chemicals from the outset but sold them without due safety checks.

Oxy had been busy fabricating the results of experiment and covering up its illegal acts. It was only last month that the company acknowledged responsibility and apologized; but it has been unfaithful in meeting compensation demands from the victims and their families.

In Korea, Volkswagen sold more than 120,000 vehicles with emissions cheating software. But the German automaker has not yet carried out the Ministry of Environment's order to recall them, much less concrete compensation plans. By contrast, Volkswagen is to face fines of up to $18 billion in the United States.

All this negligence of consumers here is a testament that punitive damages must be introduced without fail this time. In fact, Korean courts have made it a rule not to make much of damage done to consumers because the legal system is largely geared toward protecting businesses. So the payment for mental anguish has been neglected, and judges have shunned making conspicuous rulings when it comes to damages.

Of course, there are concerns about lawyers encouraging consumers to file lawsuits against companies at the expense of corporate time and money, should the system be introduced.

But it's certain that gains from the introduction of punitive damages will far outweigh losses.

First of all, there is no question that the system will make it possible to prevent similar incidents victimizing a lot of consumers, because companies will be fearful of enormous damages. Also, social costs will diminish as companies are motivated to do their utmost to prevent calamities.

Currently, there is controversy concerning the limit of punitive damages. The MPK is seeking to make the ceiling at 10 percent of a company's net worth, but critics say imposing excessive damages could threaten the survival of businesses. So it may be reasonable to set the limit at three times the amount of the damage consumers sustain, as exemplified in a subcontracting law.

A recent survey of 41 lawmakers affiliated with the National Assembly's legislation and national policy committees found that 73 percent supported the introduction of punitive damages, with only two legislators against it. This must be the green light for introducing the innovative system.

Long gone are the days when anti-social and immoral businesses are faring well without a hitch. The ruling and opposition parties must work together to introduce the punitive damages system by the end of the year.

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