Epidemiological Restrictions versus Entrepreneurs in Courts

The prolonged time of the state of epidemic, including the restrictions regarding business activity constitute an incentive, and sometimes the only solution for entrepreneurs who more and more often decide to pursue their claims in court. The legal bases of the introduced restrictions undoubtedly facilitate that.

Entrepreneurs initiate court proceedings, both in administrative and common courts of law. In terms of administrative court proceedings, entrepreneurs’ cases pertain mainly to financial penalties for violating the restrictions imposed by sanitary epidemiological service Sanepid, and the number of such cases is growing on a daily basis.  Such penalties are particularly burdensome for entrepreneurs, because in principle a decision regarding a financial penalty up to PLN 30 000 is immediately enforceable as at the day of serving, and such decisions are served forthwith – in accordance with Article 48a section 4 of the act on preventing and combating infections and infectious diseases in people (hereinafter: “the Combating Act”).

Administrative Courts begin to repeal the above decisions, however the court decisions are not yet final and binding. At this point one should indicate the judgement of the Voivodeship Administrative Court in Opole of 27 October 2020 (case file ref. no.: II SA/Op 219/20) and the judgement of the Voivodeship Administrative Court in Szczecin of 11 December 2020 (case file ref. no.: II SA/Sz 765/20). Both cases concerned financial penalties for conducting business activity what was prohibited during the state of epidemic – a catering facility and a hairdressing salon.

In the above decisions courts indicated that since the state of exception had not been introduced, then in each case one needs to consider Article 31 section 3 of the Constitution of the Republic of Poland, hence that it is acceptable to introduce limitations into a statute with observing the rule of proportionality and without violating the essence of a given constitutional right or freedom, with observing all the relations occurring between a statute and a regulation, described in Article 92 section 1 of the Constitution of the Republic of Poland. Next, the courts found that firstly, the statutory power to issue a regulation in the scope regulated in Article 46b points 2-12 of the Combating Act does not in fact contain the guidelines pertaining to the regulation issued on that basis. As a consequence, it does not fulfil the conditions required by Article 92 section 1 of the Constitution of the Republic of Poland. And secondly, that no provision related to statutory powers contained in Article 46 section 4 and Article 46b of the Combating Act does not contain the power to specify in a regulation the prohibitions of conducting business activity. The Council of Ministers was only authorized to introduce, by way of regulations, the limitations in the scope of using the freedom to conduct business activities. Hence, in this scope the controlled regulation was issued without statutory power, nor it enforces the provisions of the statute as it introduces the contents that are not defined in the statute to the legal system by introducing the unknown prohibition to conduct business activity due to the state of epidemic. It also fails to meet the constitutional conditions required for the relation occurring between the statute and the regulation. The Courts have also pointed to the violation of provisions of administrative proceedings, including primarily the violation of Article 10 of the Code of Administrative Procedure that mentions the rule of active participation of the parties in the proceedings. On these grounds the decisions of Sanepid were repealed.

The above situation should be assessed in the absolutely negative terms. The legislators legislation sloppiness results in this case in a high likelihood of repealing the imposed penalties. Such a state of affairs may encourage entrepreneurs to avoid observing the restrictions (if ultimately the penalty is repealed) the aim of which is after all the protection of the whole society against the epidemic. The judgements such as the one of the Voivodeship Administrative Court in Opole or Szczecin are presently appearing more and more frequently. Taking into consideration the number of cases filed with administrative courts, pertaining not only to the restrictions in conducting business activities, but also the order to wear masks or the prohibition to move, one could expect that in the foreseeable future tens, if not hundreds, of decisions will start appearing with similar determinations.

When it comes to civil procedures before common courts of law, the scale of cases submitted before courts by entrepreneurs individually is not yet known, however it is very likely that such cases also appear in courts. Despite the fact that in this case entrepreneurs may also seek compensations from the State Treasury precisely for observing the prohibitions imposed on them, and not avoiding the penalties already imposed, the charges they may submit to the State Treasury will be analogous as in the case of proceedings before administrative courts – i.e. no introduction of the state of exception, introducing restrictions based on regulations not statutes, and overstepping a statutory power (introducing the prohibition to conduct business activities by way of regulation instead of limiting them). Of course entrepreneurs must show the conditions of the liability for damages with that.

On the other hand, two class-action lawsuits of entrepreneurs were filed in the Regional Court in Warsaw in January 2021. Other class-action lawsuits are being considered by the representatives of the fitness industry and tourist organisations. It needs to be indicated that claiming damages within a class-action lawsuit will surely be more lengthy, but in the case of unfavourable settlement for entrepreneurs, the amount of court fees in class-action proceedings to be paid by them will be significantly lower.

Entrepreneurs’ claims in civil courts will be based on Article 417 § 1 of the Civil Code in accordance with which the responsibility for damage inflicted by an action that is at variance with the law or by omission when exercising public authority is borne by the State Treasury or a local self-government unit or some other legal entity exercising that authority by virtue of the law, and on Article 417¹ § 1 of the Civil Code pursuant to which if damage was inflicted by adopting a normative act, its remedy may be requested after stating, within the proceedings before a competent court, that the act was at variance with the Constitution, a ratified international agreement or a statute.

In this context it should be mentioned that in accordance with Article 178 section 1 of the Constitution of the Republic of Poland, the judges exercising their powers are independent and are only subject to the Constitution and statutes. If that is so, the common courts of law may independently examine the constitutionality of a regulation based on which the restrictions had been introduced deeming that issuing the regulation was at variance with the constitution and caused damage, what would open a path for entrepreneurs to obtaining damages within single proceedings. In order to prevent the situation that would enable entrepreneurs to obtain damages commonly and relatively quickly, the Prime Minister made a request on 28 August 2020 to the Constitutional Tribunal for examining the compliance of 417¹ § 1 of the Civil Code in the scope in which it does not introduce the requirement stating by Constitutional Tribunal the discrepancy i.a. with the Constitution (there is not hearing date or any information in the case to date). Hence, an applicant aims at having the constitutionality of the regulation approved by the Constitutional Tribunal first.

Regardless of the intentions of the Prime Minister, when filing such a request there is a high likelihood that the courts will suspend proceedings until this issue is settled. While as it is shown by practice of recent years, a couple of years may pass from the moment of filing a request with the Tribunal  till settling it. The above circumstance will make it difficult for entrepreneurs to pursue their claims before courts, who presently not infrequently balance on the border of survival.

In conclusion it should be stated that from the perspective of an entrepreneur on whom a financial penalty had been imposed based on the final decision, it is worth in such a case to refer a complaint to an administrative court It appears from practice (at least up to now) that within a couple of months an entrepreneur may obtain a decision that is not final repealing the decision, with a high likelihood that cassation appeals filed by authorities will be dismissed by the Supreme Administrative Court of Poland. While in the case of entrepreneurs who wish to obtain damages, unless they intend to risk losing and covering high court expenses, it would be good to consider joining a class-action lawsuit or wait with bringing an action – at least until the first judgements are made by the common courts of law.