The situation regarding the spread of coronavirus (COVID-19) entails not only health risks and the associated increased health protection for all of us, but also the adoption of measures that have the effect of reducing business activities, which in some cases have significant economic implications for the functioning of businesses.
In order to protect public health, the government has declared an emergency state pursuant to the Act No. 240/2000 Coll., on crisis management (the Crisis Act), as amended (hereinafter the “Crisis Act”), which gives the government, among other things, powers to restrict certain human rights, such as the freedom of movement and residence, the right of assembly and the right to conduct business.
It is precisely by restricting business activity, because of the introduction of increasingly stringent state measures to prevent the spread of coronavirus, that entrepreneurs can incur considerable damage and loss of profit. Will entrepreneurs affected by these crisis measures be entitled to compensation for any damage they have incurred or for lost profits and how can this compensation be claimed from the state, if any?
In general
In this context, the Crisis Act clearly stipulates that the state is obliged to compensate the damage (actual damage and lost profit) caused to legal and natural persons in causal connection with the crisis measures implemented under this Act. Such liability may be exempted only if it is established that the injured party has caused the damage himself.
The special responsibility of the state under the Crisis Act is based on simultaneous fulfilment of several conditions:
- The entrepreneur is entitled to claim damage incurred if it arose only on the basis of an emergency measure.
- A causal link must be established between the occurrence of the damage and the implementation of the crisis measure.
- After fulfilment of these conditions, the damage can be claimed from the state.
- If the competent crisis management authority does not recognize the claim for damages, it is possible subsequently to file a claim through the courts against the state.
Therefore, in order for legal and natural persons to claim damages from the State, there must be a causal link between the crisis measures taken and the damage suffered. In this case, it is up to the entrepreneur who claims the damages from the state to prove the causal link between the crisis measure and the damage suffered. The entrepreneur therefore bears the burden of proof in relation to the causal link, so it is appropriate in this context to keep any possible documents that could serve as evidence in the event of claiming damages from the state, i.e. invoices, orders, receipts, email communications, cancelled orders, etc.
The state, not the crisis management authority, is responsible for the damage caused to natural and legal persons in causal connection with the crisis measure. However, the claim for compensation of such damage is first claimed by a legal or natural person in writing, in the form of an application, to the competent crisis management authority within 6 months of the time when it became aware of the damage, but no later than 5 years after the occurrence of this damage, otherwise the right will expire.
Compensation shall not be granted to legal and natural persons who caused the occurrence of the damaging event. In this case, the competent crisis authority may be the government or the ministry or the competent authority of the region that issued the given crisis measure that led to the damage.
Case law
The case law of the Supreme Court has also dealt in detail with claim for damages, its application and fulfilment of the prerequisites required for the occurrence and exercise of such claim. In this context, the decision of the Supreme Court of 22 October 2009 under the file no. 25 Cdo 3798/2007 states that:
“the institute of liability for damage incurred in a causal connection with a crisis measure (which is also a measure taken in connection with a flood or for the purpose of solving or preventing its consequences) is a special standard containing a special factual liability, which is governed by this law, not the Act No. 82/1998 Coll. or general legislation. In doing so, it establishes liability irrespective of fault (the so-called objective liability) and, unlike the Act No. 82/1998 Coll., it does not require the damage to be caused by an unlawful decision or maladministration. This special liability is based on the simultaneous fulfilment of the prerequisites, namely: 1. the implementation of the crisis measure, 2. the occurrence of damage and 3. the causal link between the crisis measure and the occurrence of damage. The state can be released from its liability if it proves (the burden of proof lies on the state) that the injured party caused the damage himself.”.
Conclusion
A large number of applications by entrepreneurs who have been affected by the crisis measures taken by the state which have caused them damage can be foreseen while guarantees for the success of recovery cannot be provided.
In particular, it is expected that the causal link between the crisis measure and the occurrence of the damage and its evidence will be thoroughly examined in the relevant proceedings. The causal link will thus have to be established without any doubt.
In the event of a failure to apply for compensation to the competent authority, it will be possible to subsequently file a claim through the courts against the state in civil proceedings. It is most likely that this will be a long and demanding process, the success and outcome of which cannot be guaranteed in advance, especially given the possible overload of the courts in these cases.
However, it is still advisable, at least to try to claim the damage in the form of an application, especially in light of compliance with the duty of care and diligence, where we consider essential an effort to prevent any damage and to properly document it and prepare for the necessity of proving it.
If you have any questions in this context, we are happy to assist you – do not hesitate to contact us.
Mgr. Bc. Štěpánka Vajdová, junior lawyer – vajdova@plegal.cz
Mgr. Jakub Málek, partner – malek@plegal.cz
Eliška Vetýšková, legal assistant – vetyskova@plegal.cz
21. 03. 2020