Pl. ÚS 18/01

Civil law, which includes Act No. 82/1998 Coll., defines damage
as  property detriment which can be objectively expressed in  a
general equivalent, i.e. money. True damage is considered to be
property  detriment  expressible in money,  which  consists  of
reduction, lowering or other devaluation of the injured party’s
already existing property, as well as in the outlay of expenses
for  the removal of this devaluation. It is apparent from  this
very  definition that damage can also be the expenses  actually
incurred  by  parties to proceedings for the  proceedings,  and
that  the  state  is  also  liable  for  damage  thus  arising,
provided,  of course, that other conditions for this  liability
relationship  to arise have been fulfilled, i.e. the  existence
of a causal relationship between the creation of the damage and
the statutorily presumed damaging event, i.e. with the issuance
of   an   unlawful  decision  or  with  an  incorrect  official
procedure. The legislature itself, as indicated by § 31 para. 1
of  Act No. 82/1998 Coll., expressly includes proceedings costs
in the damage which is compensable under this Act; nonetheless,
as  is evident from comparing the following two paragraphs,  it
does  not maintain the same approach to all entities which come
into  consideration. It sets different conditions  under  which
incurred  proceedings costs can be compensated  under  the  Act
when,  in  relation  to  those damaged  by  incorrect  official
procedure  it  sets as the only condition a causal relationship
between the incurring of proceedings costs and the procedure in
question  (para. 2), while in relation to those entities  which
were  damaged by an unlawful decision (apart from the condition
that  the  proceedings costs have not yet  been  awarded  under
procedural   regulations,  which  is  acceptable),   conditions
further  compensation of incurred expenses on the existence  of
damage  which arose through the decision. In the words  of  the
explanatory report, “proceedings costs can be paid as  part  of
compensation  of damages caused by the decision, but  they  may
not  be  the only damage”. In this way the contested  provision
then  de  facto divides those entities to which it applies  who
incurred property detriment in connection with the issuance  of
an unlawful decision into two categories. One consists of those
who   incurred   damage  consisting  “only”  of  the   incurred
proceedings costs, and the other of those who at the same  time
incurred other damage, and only this second-named group,  under
para.  3,  is entitled to compensation of proceedings costs  as
part  of  damage  compensation (assuming that  compensation  of
theses  expenses was not awarded under procedural regulations).
In  the Constitutional Court’s opinion, the legislature is thus
making differences which can not be justified on legal grounds,
as  in  both cases there is a reduction in the injured  party’s
property,  and there is therefore damage in the above-mentioned
sense, the right to compensation of which is guaranteed by Art.
36 para. 3 of the Charter.
    
     Under  Art. 4 para. 2 of the Charter, limitations  can  be
placed   upon  fundamental  rights  and  freedoms   under   the
conditions prescribed by this constitutional document  only  by
law,  and  in  employing the provisions concerning  limitations
upon  the  fundamental rights and freedoms  their  essence  and
significance must be preserved, and such limitations may not be
misused for purposes other than those for which they were  laid
down  (Art.  4  para. 4 of the Charter). Thus, if everybody  is
entitled  to  compensation  for damage  caused  to  him  by  an
unlawful  decision  by  a court, other  state  body  or  public
administrative body or by incorrect official procedure, and the
conditions and details of exercise of this right are set by law
(Art.  36  para. 3, para. 4 of the Charter), then such  a  law,
issued  on  the  basis  of constitutional  authority,  may  not
completely annul (negate) the right to compensation  of  damage
arising as a consequence of such conduct and thereby deny, even
if   only  in  certain  cases,  a  constitutionally  guaranteed
fundamental  right. Thus, in the cases of persons who  incurred
damage  consisting “only” of proceedings costs,  the  procedure
projected by the legislature in the contested provision led  to
the  complete exclusion of this category of entities  from  the
right  to  compensation  of  damages  caused  by  the  unlawful
decision  of a court, other state body or public administrative
body.   Such  a  procedure  is  in  sharp  conflict  with   the
constitutional order of the Czech Republic and does not respect
the  principle  of minimizing interference in  the  fundamental
rights  in  the form of possible limitation and maximizing  the
preservation   of   the  substance  of  a  fundamental   right.
Therefore,  the  Constitutional Court  annulled  the  contested
provision  due  to conflict with Art.36 para. 3, in  connection
with  Art. 1 para. 1, Art. 3 para. 1 and Art. 4 para. 4 of  the
Charter.

    
The  Plenum of the Constitutional Court decided on the petition
from the District Court for Prague 10 to annul § 31 para. 3  of
Act  No.  82/1998 Coll., on Liability for Damage Caused  During
the Exercise of State Power by a Decision or Incorrect Official
Procedure and Amending Czech National Council Act No.  358/1992
Coll., on Notaries and Their Activities (the Notarial Code)  as
amended  by  Act No. 120/2001 Coll., with the participation  of
the Chamber of Deputies and the Senate of the Parliament of the
Czech Republic as parties to the proceedings,
    
                          as follows:
                               
Provision  of  §   31  para. 3 of Act  No.  82/1998  Coll.,  on
Liability for Damage Caused During the Exercise of State  Power
by  a  Decision  or Incorrect Official Procedure  and  Amending
Czech National Council Act No. 358/1992 Coll., on Notaries  and
Their  Activities  (the Notarial Code) as amended  by  Act  No.
120/2001  Coll.,  is annulled as of the day  this  judgment  is
published in the Collection of Laws.
    
    
                          Reasoning:

On  28  June 2001 the Constitutional Court received a  petition
from the District Court for Prague 10 in which that court seeks
the  annulment  of  § 31 para. 3 of Act No. 82/1998  Coll.,  on
Liability for Damage Caused During the Exercise of State  Power
by  a  Decision  or Incorrect Official Procedure  and  Amending
Czech National Council Act No. 358/1992 Coll., on Notaries  and
Their  Activities  (the Notarial Code) as amended  by  Act  No.
120/2001 Coll., basically with the claim that this provision is
in  evident  conflict with the principle enshrined in  Art.  36
para. 3 of the Charter of Fundamental Rights and Freedoms  (the
“Charter”), under which everyone is entitled to compensation of
damage caused to him by an unlawful decision of a court,  other
state  body  or public administrative body or by  an  incorrect
official procedure. The District Court for Prague 10 thus  used
the  opportunity given it by § 64 para. 4 of Act  No.  182/1993
Coll.,  on  the  Constitutional  Court,  as  amended  by  later
regulations, on the basis of which a court is entitled to  file
a  petition  to  annul  a law or its individual  provisions  in
connection  with  its decision making activity  under  Art.  95
para.  2  of  the  Constitution  of  the  Czech  Republic  (the
“Constitution”).

     The  petitioner, by resolution file no. 9 C 6/2001  of  25
June 2001, interrupted, under § 109 para. 1 let. c) of Act  No.
99/1963  Coll., the Civil Procedure Code, as amended  by  later
regulations, proceedings opened on a complaint from E.  H.,  V.
H.  and  J.  Š. versus the Czech Republic, represented  by  the
Ministry of Justice of the CR, in the matter of compensation of
damages,  claimed  on the basis of Act No. 82/1998  Coll.,  and
submitted the matter to the Constitutional Court. In that case,
the   above   mentioned  plaintiffs  based  their   claim   for
compensation  of damage on the fact that, on  the  basis  of  a
filed accusation, criminal prosecution was opened and conducted
against  them  for  the crime of evasion of taxes  and  similar
payments under § 148 para. 1, para. 4 of the Criminal Code  [in
the  case  of the last named, § 148 para. 1, para.  3  let.  c)
ditto],  committed as accomplices (§ 9 para. 2 ditto). However,
criminal  prosecution  of all the defendants  was  subsequently
stopped, as it was not proved that they committed the  act  for
which an accusation was filed against them [§ 172 para. 1  let.
c) of the Criminal Code]. As proceedings in the cases concerned
a  crime  for which the law provides a prison sentence  with  a
maximum  exceeding  five years, they were required  to  already
have  defense  counsel  in  the  preparatory  proceedings,  for
required  defense,  based  on § 36  para.  3  of  the  Criminal
Procedure  Code. In the complaint for compensation  of  damage,
the  plaintiffs then expressed the opinion that  disclosure  of
the accusation is considered, in the event criminal prosecution
is  stopped, to be incorrect official procedure, and if  damage
arises  as a result, which happened in this case, the state  is
liable  for it, and compensation of damage which was caused  by
the  indicated incorrect official procedure is also  considered
to  include  the amount expended for costs related to  defense,
which the plaintiffs enumerated in detail and documented.  They
also  stated and documented that, in accordance with § 6  para.
1,  para. 2 let. a) of Act No. 82/1998 Coll. they turned to the
defendant  –  the  Ministry  of  Justice  of  the  CR,   damage
compensation department. The defendant informed them, by letter
of  5 April 2000, file no. Odšk. 136-8/2000, that the right  to
compensation of damage under § 7 of Act No. 82/1998  Coll.  had
arisen,   but  it  that  their  application  for   payment   of
compensation could nevertheless not be granted. In this regard,
it  stated  that under § 31 para. 3 of this Act, the  right  to
compensation  of  proceedings costs as part of compensation  of
damages  arises only if other damage also arose by the decision
(as the disclosure of accusation was characterized for purposes
of  Act  No.  82/1998 Coll.). In support of this  position,  it
pointed to the explanatory report for the proposal of the  Act.
In  view  of this fact, the plaintiffs, who persisted in  their
decision  to claim damages only for the amount of the  standard
prescribed  rates  for  the expenses of  legal  representation,
presented  their  complaint to the court and argued  that  this
opinion  was  not  correct, as this  conclusion  could  not  be
unambiguously concluded from the cited provision. They  pointed
to  the fact that the finding of a right is a matter solely for
the  court, and that they considered relying on the explanatory
report to be unsuitable. They also argued that the Act can  not
be  interpreted  so as to be in conflict with the  Charter,  in
their  matter  specifically  with  Art.  36  para.  3  of  this
constitutional  document.  They  believe  that  evaluation   of
entitlement  to  compensation of  damages  arising  during  the
exercise  of  state  power by a decision or incorrect  official
procedure  must  always  be  subject  to  this  article,  which
generally prescribes state liability for causing damage, on the
basis   of  constitutional  Act  No.  23/1991  Coll.,  i.e.   a
regulation  of  higher  legal force. In connection  with  these
deductions,  in  relation to the arguments presented  by  them,
they  also relied on Constitutional Court judgment file no.  I.
ÚS  245/95  of 22 September 2000. Finally, they also emphasized
that  this  restrictive  interpretation,  followed  through  ad
absurdum,  could basically lead to the rejection of  any  claim
exercised independently, even despite the fact that damage  was
clearly  caused by the exercise of state power and was  proved.
Apart from that, they are convinced that such an interpretation
is  in  conflict  with general principles of justice  and  good
morals, as it was not their fault that an accusation of  crimes
requiring mandatory defense counsel was filed against them  and
they had to pay the defense counsel from their own means.

     As  was  already stated, the District Court for Prague  10
interrupted  the proceedings and submitted the  matter  to  the
Constitutional  Court for evaluation. In the  grounds  for  its
petition  it  stated  that it was capable of  interpreting  the
provision  in  question  in favor of  the  plaintiffs,  but  it
systematically could not, nor did it wish to, ignore  the  text
of  the explanatory report to Act No. 82/1998 Coll., which,  in
connection  with  the  formulation of the contested  provision,
paragraph  3  of  §  31, poses a problem of  interpretation  as
regards  para.  1  of  §  31 of the  Act.  If  costs  of  legal
representation  are clearly defined as damage in  paragraph  1,
then subjecting this claim to the existence of other damage  is
not justifiable in terms of Art. 36 para. 3 of the Charter. The
sudden restrictive concept of an indisputable obligation of the
state power to compensate damage is not in accordance with  the
cited  norm  of the Charter, and it is not even interpreted  by
the cited explanatory report. That report contains nothing more
than  a terse statement in this regard. The Act itself contains
internally inconsistent provisions in para. 1 and para. 3 of  §
31,  whose inconsistency the explanatory report tries to remove
by  using the phrase “other damage”, which, however, § 31  does
not  contain at all. The petitioner thus concludes that  it  is
appropriate  to  fundamentally resolve the  conflict  with  the
constitutional principle under Art. 36 para. 3 of the  Charter,
and  therefore it proposes annulling para. 3 of  §  31  of  the
cited Act.
    
     Upon  affirmatively  answering the  question  whether  the
submitted  petition  meets formal requirements,  in  particular
whether  it  was  filed by an entitled party  under  conditions
provided  in  § 64 para. 4  of Act No. 182/1993 Coll.,  on  the
Constitutional Court, as amended by later regulations,  whether
conditions  of admissibility under § 66 para. 1  were  met  and
whether  there are no grounds to reject it under § 43,  or  for
stopping  proceedings  under § 67, the petition  was  sent,  in
accordance  with  §  69  of the same Act,  to  the  Chamber  of
Deputies and the Senate of the Parliament of the Czech Republic
for their comments.



                              II.
                               
Under  §  68  para.  2  of  Act  No.  182/1993  Coll.,  on  the
Constitutional  Court,  as amended by  later  regulations,  the
Constitutional   Court  first  reviewed   whether   the   legal
regulation  in question had been passed and issued  within  the
bounds  of constitutionally prescribed jurisdiction  and  in  a
constitutionally  prescribed manner. The  Constitutional  court
stated that the law was passed and issued within the bounds  of
constitutionally    prescribed   jurisdiction    and    in    a
constitutionally prescribed manner.
                               

                             III.
                               
In  the  substantive review of the petition, the Constitutional
Court took as its starting point, among other things, the  fact
that  it  is not limited by the reasoning of the petition,  but
only  by its statement of claim, and therefore it also reviewed
the  contested provision in terms of its consistency with other
constitutional  norms. After reviewing  the  petition  and  the
positions  of parties to the proceedings, it then  reached  the
conclusion that there were grounds for the petition.  In  doing
so, it took into account the following considerations.

    The Act containing the contested provision went into effect
on  15  May  1998  and replaced the previous legal  regulation,
implemented by Act No. 58/1969 Coll., when the legal regulation
contained  in  that  Act  ceased to  fit  the  changing  social
situation. It had been established on the principle of a single
exclusive bearer of liability for damage, which was the  state,
but  in  connection with the application of  the  principle  of
local government in our legal order the state ceased to be  the
sole   holder  of  public  power.  Therefore,  the  new   legal
regulation had to take this fact into account, just like  other
changes  in  the  existing legal order, i.e. in particular  the
changes  in  the  structure  of  state  bodies,  to  which  the
definitions  of bodies, office holders or other entities  which
could  cause  damage for which the state is liable  had  to  be
adapted.  Generally, it is now the state and  local  government
entities  which are liable for damage on the Act  on  Liability
for  Damage. The legal regulation contained in this Act applies
to damage which was caused under conditions provided in the Act
by  the  public  law activities of the state; local  government
entities  are liable for damage caused within the  exercise  of
those  independent jurisdiction powers which are  entrusted  to
local  government entities by law. Under the Act  on  Liability
for  Damage,  liability  for damage is construed  as  objective
liability; no grounds for liberation from it are prescribed  in
the  Act. The Civil Code is in a subsidiary relationship to the
Act  (§  26).  In  contrast to the previous  legal  regulation,
contained  in  Act  No.  58/1969 Coll., the  new  Act  contains
detailed  regulation of conditions concerning the  compensation
of  proceedings costs incurred in proceedings in which unlawful
decisions  or  incorrect  official  procedure  occurred.   This
regulation is implemented by § 31 of Act No. 82/1998 Coll.,  in
the  joint  and  transitional provisions in  the  part  labeled
manner and scope of compensation of damage, whose text reads as
follows:

                             § 31
                               
  (1)   Compensation   of  damages  includes  compensation   of
     proceedings  costs  which the injured  party  incurred  in
     proceedings  in which an unlawful decision or decision  on
     custody, punishment or protective measures was issued or in
     proceedings in which an annulling or absolving decision was
     issued, a decision in which criminal proceedings were stopped,
     or a decision in which a matter was assigned to another body.
(2) Compensation of damages includes compensation of
proceedings costs which the injured party incurred in
proceedings in which incorrect official procedure occurred, if
these costs are related to the incorrect official procedure.
(3) The entitlement to compensation of proceedings costs as
part of compensation of damages arises only if the decision
caused damage and if compensation of costs has not already been
awarded under procedural regulations.
(4) Legal representation costs are part of proceedings costs.
They include the actual expenditures incurred by an attorney
and compensation for representation. The amount of this
compensation is determined according to provisions of a
separate regulation on non-contractual compensation.
(5) The injured party is not entitled to compensation of legal
representation costs which arose in connection with the
handling of the exercised entitlement before the appropriate
body.

  The  petitioner’s  petition contests para.  3  of  the  above
cited  norm  basically  because,  while  para.  l  states  that
compensation of damage which arose through the issuance  of  an
unlawful  decision includes compensation of proceedings  costs,
the  contested  paragraph, on the other  hand,  conditions  the
creation of the entitlement to compensation of damage caused by
paying proceedings costs on another – additional damage. It  is
convinced  that  this concept is narrowing, as the  entitlement
concerning proceedings costs is tied to the existence of  other
damage,  and  can not be satisfied by itself, independently  of
the  existence  or  non-existence  of  other  damage,  and   it
considers this concept to be in conflict with Art. 36  para.  3
of the Charter.
    
     Article  36 para. 3 of the Charter provides that everybody
is  entitled  to  compensation for  damage  caused  him  by  an
unlawful  decision  of  a court, other  state  body  or  public
administrative authority or by an incorrect official procedure.
The  Act on Liability for Damage is precisely the statute whose
issuance is presumed by para. 4 Art. 36 of the Charter, and  it
should   therefore   implement   the   fundamental   right   to
compensation   of  damage  caused  by  unlawful  or   incorrect
interference by the public power.

     Civil  law, which includes Act No. 82/1998 Coll.,  defines
damage as property detriment which can be objectively expressed
in  a general equivalent, i.e. money. True damage is considered
to  be  property detriment expressible in money, which consists
of  reduction,  lowering or other devaluation  of  the  injured
party’s already existing property, as well as in the outlay  of
expenses  for the removal of this devaluation. It  is  apparent
from  this very definition that damage can also be the expenses
actually   incurred   by  parties  to   proceedings   for   the
proceedings, and that the state is also liable for damage  thus
arising,  provided, of course, that other conditions  for  this
liability relationship to arise have been fulfilled,  i.e.  the
existence of a causal relationship between the creation of  the
damage  and the statutorily presumed damaging event, i.e.  with
the  issuance  of  an unlawful decision or  with  an  incorrect
official procedure. The legislature itself, as indicated  by  §
31  para.  1  of  Act  No.  82/1998 Coll.,  expressly  includes
proceedings costs in the damage which is compensable under this
Act;  nonetheless, as is evident from comparing  the  following
two  paragraphs, it does not maintain the same approach to  all
entities  which  come  into consideration.  It  sets  different
conditions  under  which  incurred  proceedings  costs  can  be
compensated under the Act when, in relation to those damaged by
incorrect  official procedure it sets as the only  condition  a
causal relationship between the incurring of proceedings  costs
and  the procedure in question (para. 2), while in relation  to
those  entities  which  were damaged by  an  unlawful  decision
(apart  from the condition that the proceedings costs have  not
yet  been  awarded  under  procedural  regulations,  which   is
acceptable),  conditions  further  compensation   of   incurred
expenses  on  the existence of damage which arose  through  the
decision.  In the words of the explanatory report, “proceedings
costs can be paid as part of compensation of damages caused  by
the decision, but they may not be the only damage”. In this way
the contested provision then de facto divides those entities to
which  it applies who incurred property detriment in connection
with  the issuance of an unlawful decision into two categories.
One consists of those who incurred damage consisting “only”  of
the  incurred proceedings costs, and the other of those who  at
the same time incurred other damage, and only this second-named
group,   under   para.  3,  is  entitled  to  compensation   of
proceedings costs as part of damage compensation (assuming that
compensation   of  theses  expenses  was  not   awarded   under
procedural regulations). In the Constitutional Court’s opinion,
the  legislature is thus making differences which  can  not  be
justified  on  legal  grounds, as in  both  cases  there  is  a
reduction  in  the  injured  party’s  property,  and  there  is
therefore  damage in the above-mentioned sense,  the  right  to
compensation of which is guaranteed by Art. 36 para. 3  of  the
Charter.

     The  Constitutional  Court interprets  the  constitutional
principle of equality enshrined in Art. 1 of the Charter, under
which  people are free, have equal dignity, and enjoy  equality
of  rights, and complementarily expressed in article 3  of  the
Charter, as well as the principle forbidding discrimination  in
the  recognized  fundamental rights in its case  law  from  two
perspectives  (e.g. judgments file no. Pl. ÚS 16/93,  file  no.
Pl.  ÚS 36/93, file no. Pl. ÚS 5/95, file no. Pl. ÚS 9/95, file
no.  Pl.  ÚS 33/96, Pl. 9/99 and others). The first comes  from
the   requirement   of   ruling  out   arbitrariness   in   the
legislature’s procedures in distinguishing groups  of  subjects
and   their   rights,   the  second  by  the   requirement   of
constitutionally  admissible grounds for  distinguishing,  i.e.
the  inadmissibility of affecting one of the fundamental rights
and  freedoms by distinguishing subjects and rights on the part
of  the  legislature. In this regard, the Constitutional  Court
did  not find any reason which would justify the inequality  in
the  approach to individual groups of injured parties  as  they
are  described above. The legislature also did not  justify  in
any   way  the  procedure  establishing  this  inequality.  The
Constitutional  Court therefore concluded  that  the  contested
provision  has  as  a  consequence  an  unjustified  inequality
between subjects who were caused damage during the exercise  of
public  power.  The postulate of equality does not  lead  to  a
requirement  that everyone be equal to everyone  else,  but  it
does  lead  to a requirement that the law not give an advantage
or  disadvantage one group over another groundlessly.  In  this
case  it is indisputable that the requirement of providing  the
same  rights  under  the  same  conditions  without  groundless
differences  is  not  respected by the text  of  the  contested
provision,   as   the  legislature,  without   constitutionally
admissible grounds, disadvantaged those subjects who  sustained
damage only in the form of incurred proceedings costs.

     In  connection with the foregoing, we cannot overlook  the
fact that under Art. 4 para. 2 of the Charter, limitations  can
be  placed  upon  fundamental rights  and  freedoms  under  the
conditions prescribed by this constitutional document  only  by
law,  and  in  employing the provisions concerning  limitations
upon  the  fundamental rights and freedoms  their  essence  and
significance must be preserved, and such limitations may not be
misused for purposes other than those for which they were  laid
down  (Art.  4  para. 4 of the Charter). Thus, if everybody  is
entitled  to  compensation  for damage  caused  to  him  by  an
unlawful  decision  by  a court, other  state  body  or  public
administrative body or by incorrect official procedure, and the
conditions and details of exercise of this right are set by law
(Art.  36  para. 3, para. 4 of the Charter), then such  a  law,
issued  on  the  basis  of constitutional  authority,  may  not
completely annul (negate) the right to compensation  of  damage
arising as a consequence of such conduct and thereby deny, even
if   only  in  certain  cases,  a  constitutionally  guaranteed
fundamental  right. Thus, in the cases of persons who  incurred
damage  consisting “only” of proceedings costs,  the  procedure
projected by the legislature in the contested provision led  to
the  complete exclusion of this category of entities  from  the
right  to  compensation  of  damages  caused  by  the  unlawful
decision  of a court, other state body or public administrative
body.   Such  a  procedure  is  in  sharp  conflict  with   the
constitutional order of the Czech Republic and does not respect
the  principle  of minimizing interference in  the  fundamental
rights  in  the form of possible limitation and maximizing  the
preservation   of   the  substance  of  a  fundamental   right.
Therefore,  the  Constitutional Court  annulled  the  contested
provision  due  to conflict with Art.36 para. 3, in  connection
with  Art. 1 para. 1, Art. 3 para. 1 and Art. 4 para. 4 of  the
Charter.
    
    For the sake of completeness we must add that the contested
provision was annulled in full, despite the fact that,  insofar
as  it  further excludes from the opportunity to seek  incurred
proceedings  costs  as part of compensation  for  damage  those
subjects  to  whom  compensation of  costs  was  awarded  under
procedural regulations, then this is a condition which  is  not
unconstitutional but is completely superfluous, because in such
cases  the  fundamental prerequisite of liability  for  damage,
i.e. the existence of damage itself, is completely lacking.


Instruction: Decisions of the Constitutional Court can  not  be
appealed.
    
Brno, 30 April 2002


                                           JUDr. Zdeněk Kessler
                 Chairman of the Constitutional Court of the CR