How to recover material damages caused by the quarantine restrictions

Quarantine-related restrictions imposed by the state authorities of various countries, including Ukraine, caused material damages to many companies. Some of the regulations imposing restrictions can be challenged in court. One of the reasons to challenge them can be the constitutional validity of adopting those regulations.

The matter of constitutional validity of the quarantine-related restrictions has sparked lively debates in many jurisdictions. The discussions go on in the context of:

1) non-compliance with the decision-making procedure

2) violation of the scope of the adopted restrictions

For example, in New Zealand, citizens filed a petition claiming that self-isolation decisions were economically disproportionate to the number of COVID-19 cases in the country. At the same time on 6 May 2020, the Constitutional Court in Romania ruled that the state of emergency decree which increased the amount of the penalty for breaching the quarantine rules, had been unconstitutional because of its non-compliance with the procedure for adopting the restriction.

In Ukraine, on 29 May 2020, the Supreme Court filed to the Constitutional Court of Ukraine a question of whether the adopted restrictions were legal. The Supreme Court noted that government acts restricted constitutional rights which before had been possible only in the state of emergency. This applies, for example, to the right to conduct business activity.

The Supreme Court acknowledges that restrictions related to air flights and closed borders present a direct conflict with the constitutional guarantees. The restriction to travel violates the right of individuals to leave the territory of Ukraine freely, which may be limited only by law and not by acts of the government. In this case, both the decision-making procedure and the scope of the restriction are subject to appeal.

What is next?

The Constitutional Court of Ukraine may decide that some of the adopted decisions comply with the provisions of the Constitution, and others do not. This will mean that certain restrictions can be challenged in court and the state might be obliged to compensate for the damage done.

In Ukraine, everyone has the right to compensation at the expense of the state or local governments for material and moral damage caused by the illegal decisions, actions or omissions of public authorities, local government bodies, their officials in the exercise of their powers. This is provided by Art. 56 of the Constitution of Ukraine, and in case of recognition of the accepted decisions unconstitutional – by Art. 152.

Persons whose rights have been violated as a result of unconstitutional decisions may claim damages in court. In accordance with Part 5 of Article 21 of the administrative proceedings of Ukraine, an administrative court considers the cases if they are claimed in one proceeding with the requirement to resolve a public law dispute. In all other cases disputes go to civil or economic courts.

The grounds for compensation are specified, for example, in Art. 1175. of the Civil Code of Ukraine: "damage caused to a natural or legal person as a result of the adoption of a state or local normative legal act, which was declared illegal and repealed, is reimbursed by the state or local government regardless of the fault of officials of these bodies". The provisions on compensation can also be found in the Commercial Code (Part 7 of Article 23, Part 1 of Article 224).

If you are a foreign investor, you can protect your rights and receive compensation under Art. 397 of the Commercial Code of Ukraine, Art. 10 of the Law "On the regime of foreign investment", as well as under the bilateral treaties between the government of Ukraine and other state governments on the promotion and mutual protection of investments.

Constitutional validity of the quarantine restrictions can directly affect the possibility to claim for compensation from the state. That is why we recommend to keep track of the court practice in this area both in the world and in Ukraine.

If you have questions regarding force majeure and its impact on agreements, please contact us

Contacts:
Olena Perepelynska, Partner
+38 044 391 38 53, Olena.Perepelynska@integrites.com
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