Briefing Note on the Discount Rate applying to Quantum in Personal Injury Cases : Comparative Perspectives
This briefing note examines the discount rate applying to quantum in personal injury claims from a comparative law perspective focusing on Australia, Canada, France, Germany, Hong Kong, Ireland, Spain and South Africa. These jurisdictions represent common and civil law jurisdictions, a diverse geographical spread as well as a range of approaches and rates. The research highlights the great variety of approaches adopted in adjusting damages awards to take account of investment opportunities. The decision maker as regards the discount rate is the legislator in some cases, the judiciary in others and a hybrid solution involving both in others. In some jurisdictions, whilst the rate is set through primary or secondary legislation, the court is empowered to vary it in the interests of justice, though this rarely occurs in practice. There is also considerable variety in the methodology for setting the rate including which institutions are involved in the process and what considerations are taken into account. In practice, the discount rates applied vary considerably across the various jurisdictions from 6% in the Australian State of Victoria to -0.5% for parts of payments in Hong Kong and -0.75% in the case of the UK. Beyond the rate itself, there is also variance as to whether a single rate applies to all personal injury claims or whether different rates apply depending on the type of claim, or the type of loss; as well as whether a single rate applies for the full period or whether different approaches are adopted depending upon the period of time covered by the award. It would seem that these determinations are influenced by a range of factors including economic factors, the availability of various financial instruments as well as broader policy factors such as a desire to avoid exponential increase in the cost of insurance.