Compensation: Is there hope on the horizon for entrepreneurs?

Is your business shut down due to government anti-epidemic measures? The first promising answers to the question of damages are provided by the anti-epidemic law.

The so-called anti-epidemic law (available here) was announced in the Collection of Laws. Its primary objective is to establish anti-epidemic powers for a number of state and local authorities, without the need to declare a state of emergency. However, the law also addresses the much-anticipated issue of damages, which we will briefly summarise for you.

According to the law, the state is obliged to compensate so-called real damages. These are mainly costs incurred in vain, i.e. costs which the company could not objectively avoid, but which, due to the limitation of its operations, did not lead to the achievement of any income. In practice, according to the anti-epidemic law, companies could claim compensation for employees' wages paid, rent for their premises or energy payments. However, the actual damages do not include lost profits, i.e. profits that the company probably would have made had its operations not been restricted. We must point out that the amount of compensation is reduced by subsidies, non-repayable financial assistance or other support received by the company in connection with the pandemic (e.g. compensation packages). The costs of acquiring protective, cleaning or disinfecting agents are also not regarded as damages. But the question remains whether the cost of testing employees can be considered as damages.

The claim must be made to the Ministry of Finance within 12 months from the moment the company became aware of the damage, otherwise it expires. The application must contain an indication of the amount of the damage, a detailed description of how it occurred, and which specific measure caused the damage. Above all, the damage must be substantiated by reliable evidence. In addition, proof of the aid received must also be provided so that the Ministry can assess the amount of the claim.

If the applicant's legitimate and duly substantiated claim is not satisfied within six months of the application, the applicant may go to court. If successful, the state will be obliged to reimburse the costs of legal proceedings. If the state grants the request only in part, only the remaining part can be enforced in court. We expect that the state will defend itself by all means and that its most common defence will be that the damage was not sufficiently proven, that insufficient steps were taken to prevent or mitigate the damage, or that the claimant has not exhausted all available compensation.

We must emphasise that under the anti-epidemic law, only damages caused by these specific measures are compensated. According to this law, it is not possible to claim compensation for damages caused in previous waves of the pandemic or due to existing measures issued based on a state of emergency declared by the government (however, we will see how the Constitutional Court assesses the current state of emergency). For damages caused by the government's existing crisis measures, the Crisis Act and the general liability of the state for damages apply.

If you want to assess what damages you have incurred and whether you are entitled to compensation, please contact us.

Štěpán Kleček, Filip Lukačovič