Is the State liable for loss of revenue resulting from measures taken against Covid-19?

The coronavirus is not only harmful to health but also to our finances, leading to considerable financial losses for many companies and employees. In individual cases, insurance companies may be liable for the loss of sales associated with the virus. We will inform you about this option separately. Irrespectively thereof, the question is how to deal with the financial losses caused by the official prohibition of professions and events? Is the State liable to pay for damages caused by its measures?

I. The general State liability law in Germany

State liability law fundamentally differentiates between unlawful and lawful conduct. It is obvious that the State may be liable for unlawfully caused damage. In the case of lawful acts, however, reference is made to the “special sacrifice” of citizens: the core idea is the sacrifice for the community, which can justifiy a compensation.
 
For prohibitions “caused by corona” the State first of all may become liable for compensation to the extent that it makes wrong decisions. If authorities base their decisions (shutdown of businesses, occupational bans, etc.) on a wrong factual basis or exercise their discretion incorrectly, this could result in an obligation to pay compensation (referred to as claims for public liability). It is important to recognize errors early enough and to defend against the measure, as otherwise the liability claims will be lost (precedence of primary legal protection over secondary legal protection: no “tolerating and liquidating”!).

II. Compensation elements in the Protection against Infection Act

Legitimate State decisions may also trigger obligations for compensation. At first glance, the Protection against Infection Act offers special compensation rules for such cases, which is why many (including governmental) information sources also refer to these compensation possibilities. On closer inspection, however, claims for compensation are likely to fail in many cases.
 
Section 65 Protection against Infection Act is the relevant statutory provision for compensation due to bans on operations and events. Accordingly, compensation must be paid for objects that are destroyed, damaged, or otherwise reduced in value. At present, this is unlikely to apply to many cases.
 
The compensation provided for in Section 65(1) sentence 1 option 4 Protection against Infection Act is interesting in the event that “another not insignificant pecuniary disadvantage is caused.” This may also include disadvantages arising, for example, as a result of bans on operations and events.
 
What is problematic is that the law requires a measure under Section 16 Protection against Infection Act for compensation. This is not the only statutory provision, however, that grants such powers to the authorities. In addition to Section 16 Protection against Infection Act, which authorizes preventive measures, Section 28 Protection against Infection Act also provides a basis for authorizing protective measures. Both statutory provisions that confer authority may justify the shutdown of businesses and the prohibition of events; it can be very difficult to distinguish between the two statutory provisions in individual cases: When does a measure still serve the purpose of prevention, when does it already serve for protection?
 
One can argue about the basis of authorization on which the current bans should be established correctly. It is possible that the question will soon arise as to whether – exceeding the wording of the law – measures under Section 28 Protection against Infection Act would not also have to trigger compensation obligations: Special sacrifices are required of the persons affected in one way or another, irrespective of whether their damage results from a preventive or protective measure. These questions will ultimately have to be decided by the courts on a binding basis, unless the State turns out to be accommodating, which it will certainly not do in every single case, if only for fiscal reasons.
 
The fact that even the authorities are keeping silent on this point is, for example, demonstrated by the general ruling on the prohibition of events in cultural, sports, and leisure facilities and of assemblies and the operation of catering establishments of the City of Stuttgart of March 13, 2020, which was based on “Sections 28(1) sentence 2, 16(1) Protection against Infection Act, 49 et seqq. Baden-Württemberg Police Act.” i.e., which is based on both statutory provisions. In contrast, the statutory ordinance of the government of Baden-Württemberg on measures to protect against infection in relation to the spread of the SARS-Cov-2 virus of March 16, 2020 (“Corona Ordinance”), which was announced somewhat later, only refers to Section 28 Protection against Infection Act – according to the aforementioned for good reason.

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