Who Pays the Bill for Anti-Covid Measures?

The Supreme Court of the Czech Republic opens the way for those who have been damaged by measures during the pandemic to claim compensation from the state. A retailer brought an action against the Czech Republic for compensation for profits lost as the Czech Government restricted and then completely prohibited retail sales. The applicant argued that, pursuant to the provisions of the Crisis Act, the State is liable for the damage caused by the crisis measures adopted, irrespective of whether their adoption was correct or not.

The court of the first instance dismissed the action and the appellate court upheld the decision dismissing the action.

The appellate court based its decision on two arguments. Firstly, the provisions of the Crisis Act do not establish the State’s liability for damage caused by the adoption of the crisis measures. The measures themselves have the legal nature of a generally binding legal act, are a source of general legal regulation affecting an indefinite and individually undetermined circle of persons to whom they impose legal obligations. The State is not generally liable for the creation of rules and for the damage caused to persons by fulfilling legal obligations established by a legal regulation. Secondly, the State is to be held liable under the Crisis Act only for damage caused by its activities in the implementation of specific crisis measures.

Based on the extraordinary appeal brought by the applicant, the Supreme Court first addressed the question whether the Crisis Act makes a distinction between crisis measures which operate throughout the territory of the Czech Republic and those which are directed against a specific person or a specifically defined group of persons. The Supreme Court found that it did not. A crisis measure is an organisational or technical measure intended to deal with a crisis situation and to eliminate its consequences, including measures which interfere with the rights and obligations of persons. It does not follow from the language that the range of persons whose rights and obligations are affected by the crisis measure must be specifically defined or limited.

Next, the Supreme Court dealt with the question whether such a distinction is the result of the will of the original historical legislator. However, according to the Supreme Court, neither the original wording of the government’s draft crisis law nor the explanatory memorandum show that the historical legislator intended to limit the state’s obligation to compensate for damage to individually targeted crisis measures.

The Supreme Court also rejected the Court of Appeal’s conclusion that the State is not liable for damage caused by crisis measures, which by their nature are the product of legislative activity. The Supreme Court is of the opinion that the State has assumed such liability.

Last but not least, the Supreme Court disagreed with the appellate court’s conclusion that the State is only liable for damage caused by its activities in the implementation of specific crisis measures, i.e., that the mere issuance of a crisis measure by the Government cannot be considered its implementation. In this regard, the Supreme Court has held that the obligation of the State to compensate for damage caused by crisis measures arises at the moment when the effects of the crisis measure are such as to lead to the occurrence of damage. A contrary conclusion would lead to the absurd conclusion that a retailer who did not comply with the crisis measure and against whom the crisis measure had to be ‘carried out’ by force, for example by the police, would, in accordance with the appellate court’s reasoning, be entitled to compensation whereas the claimant, who had acted in accordance with the law, would not. On the basis of the foregoing, the Supreme Court set aside the decision of the appellate court and remitted the case back to it for further proceedings on the basis that, once the legal question of the State’s liability for damages had been resolved, the appellate court had to deal with the actual damage caused to the applicant.

JUDr. Ondřej Rathouský