Corona related measures might induce compensation rights for companies

Companies suffering from revenue losses or were even forced to close down during the corona crisis should claim compensation from authorities until mid June.

In reaction to Corona related state decrees and directives a vast number of companies needed to close their doors completely for several weeks. Others were still allowed to operate but suffered severe losses. Many company owners are wondering if they can claim compensation for these losses.

 

Official stance of state authorities

The official stance of the respective authorities is that only companies that reported an actual infection case in their staff and subsequently were ordered to close through an individual order can receive compensation. This position finds its reason in Art. 56 para 1 and 4 of the infection protection act (Infektionsschutzgesetz) that limits potential compensation claims to these companies.

 

Most companies suffering losses however do not fall under the scope of said compensation regime. State authorities in respect to the latter argue that the exhaustive nature of Art. 56 para 1 and 4 of the infection protection act prohibit a fallback to general compensation claim statutes.

 

Legal reasons in favor of a wide compensation regime

However, this is not the only valid reasoning. Legal scholars as well as courts so far have only scarcely debated compensation questions in relation to pandemics due to the rare occasion of such. Many fundamental questions and details are unresolved to this day. Yet there is a number of legal arguments speaking in favor of a wider compensation regime.

First, there are necessities derived from the constitution that might lead to a compulsory extension of the scope of Art. 56 para 1, 4 of the infection protection act to other companies. Under Art. 14 of the German constitution individual property is protected from state measures. It has long been established by German courts that a running company is seen as a kind of property under that article. A consequence of the protection level Art. 14 of the constitution provides is that state measures affecting companies beyond a reasonable level necessarily lead to compensation claims of such companies against that state. As demonstrated above, only a few companies can demand compensation under Art. 56 of the infection protection act. Given the general equality principle derived from Art. 3 of the constitution it can however be established as unconstitutional to exclude all the other companies from the compensation regime. In a ruling from 1981 the German constitutional court (1 BvL 11/78) suggested that the compensation rules might not be free from conflict potential in respect to the constitutional equality principle.

Second, understanding the compensation regime of the infection protection act as exhaustive is highly debatable. As a consequence, a fallback to compensation rules of general police laws could be a viable way for companies to demand compensation. Neither when drafting nor when expanding the successor to the infection protection act lawmakers did intend an exhaustive compensation regime (BT-Drs. 3/1888, p. 27; BT-Drs. 8/2468, p. 27). The reform leading to the current act did not change that either. Not altering the compensation rule, lawmakers simply copied it into the draft of the new act. Nowhere in the materials documenting the law-making process it is made clear that - in alteration to the former system - compensation rules were to be made exhaustive (BT-Drs. 14/2530, esp. p. 87 f.).

General compensation principles support a fallback to general compensation rules as well. The Corona based state measures were introduced to combat hazards the virus is causing. It is a general legal principle of the German legal system that hazard provoked state measures against persons who did not cause these particular hazards lead to compensation rights. Persons on the other hand, who did cause hazards the respective state measures are directed at generally are not entitled to compensation under these principles. Deducing potential compensation rights solely and exhaustively from Art. 56 para 1, 4 infection protection act would in fact reverse that logic.

 

What is the extent of the potential compensation?

The extent of potential compensations is highly dependent on the particular case.

Art. 56 para 4 phrase 2 infection protection act compensates for uncovered running operation costs during the shutdown of the respective firm. Under general compensation principles companies can claim compensation for unreasonable losses which usually equals the decrease of the company value due to the closure.

 

How, when and were to ask for compensation?

Art. 56 para. 11 infection protection act sees sets a time limit of three months to apply for compensation starting at the date of the closure. Despite that fact that Art. 56 para. 11 infection protection act is only directly applicable to compensation claims deducted from the same article, as a precaution any company claiming compensation should declare their claims within that three month period. If in case of a later law suit a court would order the state to pay compensation and base such judgement on Art. 56 infection protection act, the timely declaration within three months might very well come into play.

Should the authorities reject declared claims companies can file a  law suit with the competent court.

As an example we outline the respective time limit for companies residing in the state of Saxony. In case a company were to close down on 19thMarch due to the decree in effect from that day on, companies have to declare their claims until 18thJune 2020 at the State Directorate of Saxony (Landesdirektion Sachsen). The Directory holds declaration forms on their website for that purpose.

Do you have any questions about compensation claims or has your claim for compensation been rejected? We will be happy to advise you! Please contact us at central@schaffrathlaw.de, by phone at +49 351 44753 0 or visit our website https://www.schaffrathlaw.de.

 

By your side

Schaffrath & Metzmacher Team

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