There is no doubt that the measures taken by the Spanish Government to manage the health crisis caused by COVID-19 have involved serious economic losses to many companies.
Just think of all those companies that have been prevented from opening to the public during the state of alarm. Such is the case of retailers (except for those who sell basic necessities), restaurants, all type of tourist accommodation (such as hotels, camping, etc.), facilities for sports and leisure activities, etc. Besides, the losses suffered during the state of alarm will increase with the successive stages of the “unlocking process” or, as they have called it, the de-escalation plan set up by the Government and the conditions that will be imposed to business activities in each of those stages (e.g., capacity limitations, distance between clients, etc.).
Businesses that have suffered all these economic losses, should they just bear them stoically, or can they consider claiming compensation from the Spanish Government?
Undoubtedly, the compensation claim is legally possible. Spanish current regulations so provide, and the requirements for the compensation to be granted are as follows: (i) the existence of a legislative act or action (or the lack thereof) by an Administration; (ii) the existence of a person whose property or rights have been damaged in an effective, individual, economically quantifiable and unlawful way (that is to say, the aggrieved or injured party does not have the duty to bear the costs thereof); (iii) the existence of a cause and effect relationship between (i) and (ii); and, (iv) that there is no force majeure.
Companies, either individually or in association (by sectors or territory, for instance), must assess whether they meet or not the above requirements based on their circumstances. In order to do so, please find below some key factors that may help you make your claim for compensation viable.
Key 1.- The cause of the damage is the management of the crisis by the Government, and not COVID-19 itself.
Defined by the courts as an event external to the Administration that is unforeseeable or inevitable, force majeure nullifies the cause and effect relationship and, therefore, the right to obtain compensation disappears.
It seems difficult to deny that the appearance of COVID-19 fits, in principle, into the definition of force majeure: the virus is an element foreign to Spanish health services, and its appearance and spread in our country, considering what has happened worldwide, was inevitable.
Does this mean that any claim for compensation is doomed to failure? In our opinion, the answer is no. Although part of the damages caused by the COVID-19 management measures may be unavoidable, it can be affirmed that the Spanish Government aggravated those damages with their actions or their lack of action by not adopting measures that they might have adopted to mitigate said damages.
We are talking here about Government decisions that should have been avoided by applying reasonable diligence (e.g., authorizing certain public shows or collective activities that favoured the spread of the virus, when its presence in the Spanish territory was already known), and other measures that the Government did not adopt but that, depending on the circumstances, they should have adopted to avoid or mitigate damage (e.g., earlier borders closure; provision of more tests or protective equipment; capacity limitations instead of suspension of activities).
Certainly, this line of reasoning poses the problem of specifying and proving which particular damages could have been avoided if the Spanish Government had acted diligently, and which ones would have occurred anyway. However, in cases where there is uncertainty as to whether the administrative action could have avoided or reduced the damage suffered, the courts frequently grant the compensation, but moderating its amount based on the probability that the damage would have been produced anyway even if the Government had acted diligently (“loss of opportunity” doctrine).
Key 2.- Unlawfulness of economic damage.
First, in order to be able to affirm that the economic losses caused by the Spanish Government’s measures constitute an “unlawful” damage, which must not be borne by the aggrieved party, it must be proved that the specific measure or measures that have caused such losses impose an obligation or burden, not to the community in general, but to a small and minority group of subjects within a larger group or sector.
Secondly, it will be also necessary to reason and prove that the content of the measure is arbitrary, lacking justification and/or unreasonable.
Key 3.- Deadline to claim.
In general, the term to claim for compensation prescribes within a year from the fact that motivated it or from the moment the detrimental effects show up.
In this case, since the compensation is claimed for the damages resulting from the COVID management measures adopted by the Spanish Government, we consider that the most prudent course of action is to set the deadline to submit the claim on March 14, 2021.
Key 4.- The importance of a rigorous prior feasibility analysis.
Any claim for compensation to the Administration is a full obstacle course for the claimant (the requirements that must be met and proved) and, it is also a long journey (it is likely that it will be necessary to go to court). Compensation for damage caused by government COVID-19 management measures will be no exception.
However, difficult does not mean impossible. A prior, rigorous and objective analysis of the case will be key to success (and not only legal, but also technical, as can be deduced from what we have exposed). If from this analysis we conclude that obtaining compensation is feasible, our advice is definitely to claim, and this both, in the individual interest of the claimant, and also in the public interest (undoubtedly, the granting of compensation will make the Spanish Government more diligent in the future when it comes to preventing and more careful when taking certain measures). In any case, the most important thing is not to give up along the way!