Damages for unlawful nationalisation may be sought through the courts

The Polish Supreme Court has upheld the possibility of seeking damages through the courts for nationalised property, holding that the statute of limitations on such claims begins to run from issuance of a supervisory decision and not from the occurrence of the event causing the loss.

Resolution of the Polish Supreme Court (Civil Chamber en banc) dated 31 March 2011 (Case No. III CZP 112/10)

On 31 March 2011 a panel of the full membership of the Civil Chamber of the Supreme Court issued a resolution ruling on an application from the First President of the Supreme Court dated 8 January 2010, presented by a seven-judge panel of the court:

1. Claims for redress of loss caused by a final administrative decision issued prior to 1 September 2004 whose invalidity or issuance in violation of Administrative Procedure Code Art. 156 §1 has been confirmed after that date are governed by Administrative Procedure Code Art. 160 §§ 1, 2, 3 and 6.

2. If a defective final administrative decision was issued prior to the effective date of the Polish Constitution, damages due under Administrative Procedure Code Art. 160 §1 do not include benefits lost as a result of issuance of the decision even if the loss of benefit occurred after entry into force of the Constitution.

This extremely important resolution generally upholds and sanctions the rights of persons injured as a result of unlawful act of state authorities. It is of particular significance for former owners of real estate who were irreversibly deprived of the right of ownership as a result of various types of nationalisation and expropriation decisions issued after the Second World War. It is critical particularly because the Polish government has once more halted work on a reprivatisation act, in effect forcing former owners to pursue their rights through the courts.

Under Art. 61 §6 of the Supreme Court Act, adoption of the resolution by the full membership of the Civil Chamber of the Supreme Court means that upon issuance the resolution has the force of a binding rule of law. Departure from a rule of law adopted by the full chamber would require reconsideration via a resolution by the full Civil Chamber, combined chambers, or the full membership of the Supreme Court. It should thus be expected that the lower courts will follow this resolution when ruling in other cases.

The resolution specifically confirms the right to pursue judicial recourse to seek damages for unlawful nationalisation, and clarifies that such claims expire three years after issuance of a supervisory decision (confirming the invalidity of the administrative ruling or finding that it was issued in violation of law). Numerous controversies have arisen on this issue because from 1 September 2004 such matters have been governed by the Civil Code, which provides for a limitations period of 10 years from the date of the event causing the loss (i.e. issuance of a defective administrative decision in the 1940s, 1950s or 1960s). This meant that all such claims expired before the plaintiffs could effectively pursue their rights before administrative bodies or the state courts. The resolution now confirms that claims for damages could not expire before they arose, as the ability to pursue the claim only arises upon issuance of a supervisory decision.

The resolution may nonetheless be criticised insofar as it limits the right to pursue a claim for damages in the full amount, by barring the ability to seek lost benefit. It should be stressed, however, that this restriction applies only to cases in which a defective final administrative decision was issued prior to the effective date of the Polish Constitution of 1997. This means that redress of injury caused by the acts of state authorities after entry in force of the current Constitution may be pursued in the full amount.

This resolution was long-awaited by specialists in the field of reprivatisation. Many cases in the courts were stayed pending the ruling, while some plaintiffs, concerned about assertion of the statute of limitations as a defence, decided to hold off filing their claims.

A more thorough analysis of the resolution will be possible after the Supreme Court publishes the justification for the ruling.

Krzysztof Wiktor, Reprivatisation practice, Wardyński & Partners