BACKGROUND

The general concept of a compensation fund, in most jurisdictions, is that it is a redress structure that provides compensation to victims of accidents and other misfortune where tort law, insurance law or social security law provide no or insufficient compensation.Beyond that common reference point, there are vast differences in the shape and categorisation of compensation funds around the world.For example, in some European civil law jurisdictions, compensation funds can be divided into two main categories: the so-called guarantee funds on the one hand and damage funds on the other hand.Their approach is different. Guarantee funds, such as motor guarantee funds, function as a safety net that complements tort and insurance law. In short, they intervene in case the tortfeasor cannot be retrieved or is un(der)insured. On the contrary, so-called damage funds, e.g. Belgium's Asbestos Compensation Fund, compensate the victim when no liability can be established, for example due to a lack of fault. By way of contrast in the common law world, the UK has taken an erratic approach to compensation funds that does not fit a set pattern, yet New Zealand operates a comprehensive universal compensation fund that eclipses refinements such as ‘damage’ and ‘guarantee’.

THE ORIGINS AND GROWTH OF COMPENSATION FUNDS

As shall be seen, compensation funds are created because of perceived gaps of coverage or shortfalls in the compensation offered by the three other, traditional, sources of compensation, i.e. tort law, private insurance and social security.Due to budgetary constraints, the social security system cannot cover all the damages of a victim of an accident. Tort law and private insurance are said to be too slow, too costly and unfair, because the victim generally bears the burden of proving negligence of the tortfeasor. Moreover, where accident insurance is available it generally only offers a lump sum. As a result, victims of harmful events oft en remain fully or partially uncompensated. However, victims as a group in society no longer find it acceptable to carry their own loss. Instead, they may claim to be entitled to damages, regardless of whether they find a person accountable for the damage.