Is There a Duty to Support the Damages Suffered as a Result of Managing the Pandemic?

Legal Area: Commercial and Trade Law, Real Property Law
Industry: Retail Trade, Wholesale Trade

There is no doubt that the management, by public authorities, of the health crisis has caused innumerable damages to the shopping center sector (both owners and tenants). These damages began with the approval of RD 463/2020, declaring the state of alarm, which forced the closure of all establishments located in shopping centers, except those aimed at the commercialization of essential goods. This measure caused damages, both to the owners of the shops, as well as to the owners of the shopping centers, who experienced a significant reduction in rents while assuming the same costs to keep the centers open.

Subsequently, the damages were aggravated for the owners of the shopping centers, with the approval of Royal Decree-Law 15/2020, through which the collection of rental income was forced to be deferred.

And the damage continued to increase with the adoption of the ministerial orders that regulated the phases of the de-escalation. These regulations discriminated against businesses located in shopping centers, compared to those located on the streets, by postponing their opening to the public.

Now that the state of alarm has been overcome, the damage continues to occur in certain areas, as a result of the resolutions of the regional governments, due to the appearance of outbreaks. Thus, for example, the special reduction in capacity in commercial establishments decreed in Agreement 46/2020, which approves the Prevention and Control Measures Plan to deal with COVID, approved on August 20 in Castilla y Lion. Our Constitution establishes as one of the basic pillars of our legal system the responsibility of all public powers (art. 9.3) and, in addition, proclaims that individuals will have the right to be compensated for any injury they suffer, provided that it is a consequence of the operation of public services (art. 106.2 of the Magna Carta).

As established by the Constitution, the right to be compensated is born in the terms established by law, so we must go to it to verify that the legal assumptions are met to claim responsibility. Likewise, the Magna Carta provides for a cause that exonerates the State from responsibility: that the damage comes from a force majeure.

There is no doubt that an important part of the discussion on the legal origin of compensation for damage caused by the management of the pandemic will lie precisely in determining whether the damage suffered has been caused by force majeure.

According to consolidated jurisprudence of the Supreme Court, any unforeseeable or irresistible event must be considered “force majeure” (in other words, inevitable despite the fact that it could have been foreseen). Therefore, it is a cause outside the scope of action of the Administration.

Thus, in the event of damage caused by floods of water, storms, fires... the courts have been exonerating the Administration for the damage caused.

As can be seen from the examples, force majeure always constitutes an event unrelated to the actions of the public authorities. For this reason, although COVID-19 may constitute a cause of force majeure, since it was an unforeseeable and unavoidable event (at least when it appeared in China and in the first moments of its spread); It can be argued that the specific measures that the authorities have taken or have omitted are not part of force majeure. These measures, which are the cause of the damage, could have been different. They were not unpredictable and irresistible, but were adopted at the discretion of the public powers, from a range of different possibilities.

However, it would not be enough to prove that the damage was not caused by force majeure, the viability of a claim requires compliance with the other legally established requirements, since the Constitution refers to them.

These requirements, in cases of damage caused by the legislator State or by the Administration, are regulated in a very similar way in arts. 32 and 34 of Law 40/2015 on the Legal Regime of Administrations.

In both cases, the birth of responsibility requires:

  • The existence of an individualized and effective damage. It cannot be a mere expectation of damage.
  • That the damage is a consequence of the Law, a regulatory provision or an administrative act (existence of a causal relationship).
  • And that the damage is unlawful, that is to say that the individual does not have the duty to bear it.

In addition, in cases of responsibility of the legislating State, it is required that the law that causes the damage provides for its compensation. Although none of the legal regulations approved for the management of the pandemic provides for a right to be compensated, an isolated interpretation of them cannot be made, but rather the regulations must be interpreted systematically with the rest of the legal system and, very particularly , within the framework of Law 4/1981 regulating the state of alarm. Which, in its art. 3.2, recognizes the right to be compensated for those who have suffered damages as a result of the application of the acts and provisions adopted during the validity of a state of alarm, in the terms provided by the general laws. Therefore, it could be interpreted that the legislator,

caused by his statement must be compensated.

Returning to the common requirements for the origin of liability, the one that may entail the most difficulty in its accreditation is the unlawfulness of the damage. In accordance with the jurisprudence of the Supreme Court, in those cases in which we are faced with damages caused by legal or regulatory norms whose legality is not disputed, unlawfulness requires that the norm imposes singular sacrifices and that the measures it imposes are outside of the margins of reasonableness.

In relation to the singularity of the damage, it is worth considering whether it should be accredited in relation to all economic agents or only in relation to the commercial sector. In the first case, the singularity of the damage would be clear. In the second, only those damages resulting from an unequal treatment of commercial agents could be claimed and it should be proven that the economic agents that operate in the shopping centers constitute a small part of the commerce, a minority, for which a singular sacrifice has been imposed on them. . For this, the use of an expert report could be of great help, which should refer to billing data, m2 of commercial area, market share, etc.

On the other hand, in terms of the reasonableness of the measures imposed, we must delve into the analysis of the factual circumstances existing at all times and the measures adopted in response to them. Analyze whether the public authorities carried out actions that aggravated the situation and/or failed to take other measures that could have contributed to better management of the situation.

Determine if the measures adopted were proportionate and necessary, so that they could have been less restrictive of the exercise of commercial activity, reducing the magnitude of the damage.

In relation to this issue, we have recently witnessed judicial resolutions that have considered some measures adopted by the regional governments to be disproportionate. For this reason they have refused to grant their ratification to the adoption of measures that restrict the fundamental rights of citizens.

Although it is true that the judicial recognition of the right to compensation for the damage caused by COVID to shopping centers and their businesses is not going to be an easy task; there is no reason to give it up.

They have one year from the approval of each of the regulations, to reflect and decide if it is worth filing such an action and claiming compensation.

 

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Eva Pich Eva Pich

Partner in charge of the Administrative Law department. Aside from her specialist knowledge of Administrative Law, she is also an expert on the distribution of goods and foodstuffs. She acts as adviser to numerous commercial distributors in their ongoing expansion throughout the Spanish peninsula and also counsels a number of food suppliers. Mrs.Pich has also designed the legal basis of various major public infrastructure projects undertaken by the Catalan government.

Barcelona - Spain

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