29 April 2020 – On 23 April 2020, the Municipal Court in Prague (in Czech: Městský soud v Praze) issued a crucial ruling, annulling, with effect from 27 April 2020, four measures implemented by the Czech Ministry of Health. The measures, issued in response to the current coronavirus pandemic, restricted (i) retail and service sector commercial activities in establishments including catering and accommodation services (ii) the freedom of movement, and were implemented on 23.3., 26.3., and 15.4, 17.4., respectively.

During the court case, the Ministry of Health argued that the measures were implemented in accordance with article § 69, Act no. 258/2000, Coll., on the protection of public health. However, the court ultimately found that the measures exceeded the purview of the ministry, and that any measures restricting fundamental civic rights and freedoms can only be issued by the Government of the Czech Republic itself under § 6 Act no. 240/2000, Coll., of the Crisis Act (In Czech: Krizový zákon), and on the basis of Paragraph 6 of Constitutional Act no. 110/1998, Coll., on the safety of the Czech Republic. The Ministry of Health has a two-week period in which to file an appeal in the form of a cassation complaint before the Supreme Administrative Court of the Czech Republic (Nejvyšší správní soud České republiky, or NSS). The Ministry of Health has stated that it does indeed plan to utilise this course of action. Although it is impossible to predict how the NSS might rule on such an appeal, an argument can be made that the Municipal Court's ruling is both persuasive and precisely argued.

In a wider sense, the Municipal Court ruling could have a fundamental impact on the ability of affected businesses to secure compensation for damage incurred in relation to the restrictions implemented by the Ministry of Health. During the period of compliance with the ministry's measures, affected parties can now seek compensation from the Czech state under Act no. 82/1998 Coll. (the Act on the State's Responsibility for Damage, or Zákon o odpovědnosti státu za škodu), on responsibility for damage incurred in the performance of public power via a decision or improper administrative approach. The annulled measures could indeed be interpreted as an improper administrative approach under this law. This would then open the door for seeking compensation from the Ministry of Health for any incurred damage. Should the Ministry of Health concede liability for such damage, it is obliged to provide compensation within six months from the date of any such claims. Failing this, the damaged party has the right to seek recompense through the courts.

Damages can also be sought under § 36 of the Crisis Act (in Czech: Krizový zákon) for measures implemented by the Government of the Czech Republic from 12 March 2020 to 24 March 2020. According to the Crisis Act, compensation claims for any incurred damage must be filed within six months.

Such a possibility primarily concerns those individuals directly impacted by the annulled restrictive measures (retail stores, the service sector, etc.). Given that the restrictions on free movement impacted all those within the territory of the Czech Republic, it is our view that this also covers those indirectly affected by the measures (albeit, in such cases, presenting supporting arguments will be a more complex process).

At the same time, it is also necessary to emphasise that in assessing this case, the Prague Municipal Court did not address the question of the proportionality or “appropriateness” of the implemented measures. Rather, the Ministry of Health measures were annulled “only” for the reasons of a failure to adhere to a lawful procedural approach. This line of argument thus remains open for further judicial interpretation, chiefly within the context of the hitherto-filed (or future) constitutional complaints against government crisis measures, or within the context of individual civil actions for damages.

Given that the Municipal Court annulled the measures implemented up to and including 27 April 2020, it provided the Czech government with ample time to adopt similar measures in a lawful manner – which the Government of the Czech Republic then did. On 23 April 2020 the measures were again adopted under the Crisis Act and are now fully subject to compensation rights under § 36 of the Crisis Act.

In all cases, successful claims will require proof of the relevant levels of damage. The scope of awarded damages is assessed based on standard Czech Civil Code provisions, with – in this case – the damaged party required to prove that the respective damage was incurred as a result of crisis measures implemented in response to the current coronavirus pandemic, and not as a result of the pandemic itself. However, settled Czech case law offers inadequate guidance on the question of how the courts will assess these questions, and each area of business will undoubtedly have its own specificities in this respect. In all cases, we advise carrying out an inventory and cataloguing of all documents which might attest to incurred damage, with the aim of providing the most complete evidentiary basis for any potential future claims.

Originally published by Kinstellar, April 2020

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