Professor Volker Behr wrote a paper in 2003 in which he said that the USA and Germany are moving closer together on the issue of punitive damages. The USA has always recognized both a compensatory and a punitive element in damages, but they are now more frequently capped and not all of the punitive element goes to the victim (one does wonder why a victim should profit from the fact that the tortfeasor is particularly malicious or profit-making). Germany recognized both pillars in the 19th century (Prussia was pro-punitive damages and Bavaria against – who would have guessed?!), but since the Civil Code was drafted it has loudly proclaimed that a punitive element is unconstitutional (see sections 249-255 of the Civil Code, which refer only to compensation).
This has long been a problem for Americans who want their judgments enforced in Germany – German authorities would not enforce punitive damages orders.
The German attitude towards punitive damages is somewhat schizophrenic. On the one hand, since the enactment of the German Civil Code, the general German attitude toward punitive damages is that damages have to be purely compensatory.99 The German law of damages is a monistic system. What presumably does not fit into this scheme will be labeled as exceptions. On the other hand, and likewise since the beginning of the German Civil Code, there is a long and steady line of court decisions that do not fit into this scheme.101 German courts frequently awarded damages that could not seriously be held to be purely compensatory because they tended to include punitive elements. These decisions may be labeled as exceptions, as the German legislature labeled them when drafting the Code.102 And eventually they were exceptions in former times.
The European Court of Justice has also held that punitive damages may be awarded in cases of sex discrimination (§ 611a of the Civil Code), and the calculation of damages in intellectual property cases also has a non-compensatory element.
(Summarized by John Y. Gotanda in Charting Developments Concerning Punitive Damages: Is the Tide Changing? – thanks to German American Law Journal weblog)