In recent years European legal scholars and policy makers have been expressing an increased interest in improved methods of enforcement of private legal rules, preventing damages and compensating victims of the gravest wrongs. As result, the attention has focused on Anglo-American institution of punitive damages which allows awarding the plaintiff in a civil proceedings extra-compensatory damages and at the same time punish the tortfeasor for his outrageous conduct. The paper analyzes the functions of punitive damages, its advantages and disadvantages, applicability and limitations. It also discusses the key arguments raised by opponents of punitive damages in Europe and argues that not all of them are convincing. The traditional functions of tort liability, the public-private law division and effectiveness of private law remedies have been subject of detailed analysis. The result of the research enabled to answer some relevant questions, including the main one: is continental Europe missing out by not adding punitive damages to the already existing set of private law remedies?