Public authorities’ liability for damages
The topic of liability for damages on the part of public authorities is not widely known. Many people are not aware of the extensive rights at their disposal connected with actions by bodies of public authority. Consequently, injured parties often fail to pursue redress of losses suffered in connection with public administration.
Damages liability of public authorities is not a new feature of Polish law. Its genesis may be found in the Constitution of 1921, which provided for joint and several liability of the State Treasury and the body responsible for the injury. Relevant regulations were also included in the Act on Liability of the State for Injuries Caused by State Officials of 15 October 1956, which was then almost entirely carried over into Art. 417–421 of the Civil Code of 23 April 1964. These provisions of the Civil Code, apart from the repealed Art. 418–4202, remain in force in this area down to the present day.
The institution of the liability of the State Treasury is no longer merely an expression of good will on the part of the Polish Parliament. The rights of every Polish citizen are also shaped by international law and European Union law, including the wealth of case law from the EU courts. The right to damages for exercise of public authority is also enshrined in Art. 77(1) of the Polish Constitution of 1997.
Damages liability of entities of public authority is governed by the Civil Code and specific regulations.
Liability in damages of entities of public authority for unlawful acts or omissions
A public authority is liable for injury caused by an unlawful act or omission in exercise of its authority (Civil Code Art. 417 §1), and for injury arising out of issuance of a normative act (Art. 4171 §1) or a final ruling or final decision (Art. 4171 §2), or in connection with failure to issue a ruling or decision (Art. 4171 §3) or normative act (Art. 4171 §4) if an obligation to issue them is provided by law.
Entities of public authority which bear liability are the State Treasury, territorial governmental units, and other legal persons exercising public authority pursuant to law. Liability of the State Treasury is tied to the activity of specific organisational units whose bodies represent the State Treasury in damages cases (stationes fisci). These entities include for example ministers, province governors, bodies of “aggregated” government administration such as province environmental inspectors and province construction inspectors, and bodies of “non-aggregated” government administration such as the heads of tax offices and customs offices. Liability of entities of public authority may also arise for example in connection with the functioning of such units as the Agricultural Property Agency or the Agency for Restructuring and Modernisation of Agriculture.
The State Treasury also bears liability for unlawful acts or omissions in performance of the duties of bailiffs, but this liability is joint and several with the bailiff, who is primarily liable to make up any loss he has caused (Art. 23 of the Act on Court Bailiffs and Execution of 29 August 1997).
However, the State Treasury is not liable for injury caused by a notary in performance of notarial duties. Upon entry into force of the Notarial Law of 14 February 1991, liability in damages was shifted onto the notary, who is required to maintain civil liability insurance (Notarial Law Art. 19a and 49).
Generally, liability of entities of public authority may arise in just about any area of economic life, in relation to the activity of businesses, individuals and public administration. This is particularly relevant to commercial entities, because due to the range and extent of their business operations, erroneous actions by public authorities can generate huge losses for them or a number of other negative consequences. The effect can be a reduction in their business, the inability to fill orders from customers, loss of market share, loss of reputation, the need to cut their workforce, and in extreme cases even bankruptcy.
Particularly glaring instances of losses by companies can result from the functioning of tax authorities and customs authorities. This can be tied in particular to erroneous imposition of financial obligations on businesses, or seizure of the taxpayer’s goods or facilities during proceedings. These authorities are also equipped with legal instruments enabling them to quickly execute their decisions (for example before their actions can be reviewed by the administrative court, where they are subsequently held to be in error). Such actions can greatly hinder ongoing business operations, preventing the taxpayer from complying with its contractual obligations and negatively impacting its liquidity, thus generating losses.
Often it is not until many years later that the actions of public authorities are determined to be wrongful, and assets regained after a long period may be damaged or worthless.
The negative consequences of a wrongful action by a public authority may be suffered by entities operating in the power industry, mining, fuels, aviation or transportation, or various types of manufacturers who rely on licences and permits for their operations. Any erroneous denial or removal of a licence or permit can cause a loss for an entity that has made investments but has lost the possibility of operating in a given area.
Liability of entities of public authority may also be caused by refusal to issue an administrative decision or issuance of a decision not in compliance with the law. Such instances may occur for example in cases connected with the operations of real estate developers and construction companies. Refusal to issue a decision on construction conditions or a building permit, or issuance of defective decisions that are later challenged, can prevent development projects from being carried out or completed, and consequently lead to a loss of invested funds or anticipated profits. These issues are discussed in our article “Liability of public authorities in the real estate development process.”
The violations mentioned above are just a few of the possible scenarios that can give rise to liability of bodies of public authority under the Civil Code.
Specific regulations in relation to the Civil Code
The grounds for liability of the State Treasury cited above are not exhaustive, as indicated in Civil Code Art. 421, which provides that Art. 417, 4171 and 4172 of the code do not apply if liability for injury caused in exercise of public authority is governed by specific regulations.
Such specific regulations include the provisions of the Criminal Procedure Code governing liability for wrongful conviction or wrongful temporary arrest or detention (Criminal Procedure Code Art. 552–558). But it should be remembered that the issue of criminal liability may also be a consequence of suspicion of commission of an economic offence and can directly impact business operations. Wrongful actions by state authorities in such cases will have negative consequences not only for the individual involved in the criminal proceeding, but also for the enterprise the individual represents. The higher the position held by the individual, the greater is the damage to the reputation and the financial consequences for the firm.
Another basis for liability of the State Treasury for improper actions is the Excessive Length of Proceedings Act of 17 June 2004, regulating issues of liability for overlengthy proceedings. We discuss the liability of public entities under this act in the article “Excessive length of proceedings and its consequences.”
The State Treasury may also bear liability for damages based on bilateral investment treaties under which the Polish state has ensured foreign investors that their investments in the country will be protected. Claims by foreign investors under these treaties are pursued before international arbitral tribunals.
Liability of bodies of public authority for lawful actions
The instances discussed above of liability on the part of public authorities are tied to their actions in violation of regulations of law, and thus unlawful actions. But unlawfulness is not always a necessary condition for the liability of public authorities. In certain instances the state may be liable for lawful actions taken in the public interest.
These primarily involve expropriation issues, in connection with preparation of road development projects (Art. 12 ff. of the Act on Specific Rules for Preparation and Realisation of Public Road Projects of 10 April 2003) or zoning of property for public use (Art. 128 ff. of the Real Estate Administration Act of 21 August 1997). This same category includes for example losses arising from adoption of a zoning plan preventing or seriously limiting the use of all or part of a property (Art. 36 of the Zoning and Development Act of 27 March 2003).
Compared to other European solutions, the construction of damages liability of public authorities under Polish law provides broad possibilities to citizens. The various legal grounds, backed by established case law, gives injured parties strong instruments in the battle against acts and omissions of the authorities, and they are worth using.
Leszek Zatyka, Aleksandra Florek, Reprivatisation Practice, Wardyński & Partners