The Compensation for Losses and non - Material damages Caused by State Administration Institutions

[1] Article 92 of  the Constitution of Republic of Latvia prescribes that everyone, where his or her rights are violated without basis, has a right to appropriate compensation. More precisely, the right of private persons to receive compensation for losses and non-pecuniary damage caused to them by an unlawful administrative act or unlawful factual conduct by a public administration body is regulated by Law on Compensation for Losses Caused by State Administration Institutions.

[2] In order to claim compensation for loss and non-pecuniary damage, it is necessary to establish an act or omission of the institution (error by the institution), the existance of a victim, a casual link and the resulting loss and/or non-pecuniary damage.

[3] An act of the institutions refers to either an an administrative act or an unlawful actual action. An omission by an authority occurs when the authority was under a legal duty to act but failed to do so. The victim is a private person who is the addressee of an unlawful administrative act or a third party within the meaning of Article 28 of the Law on Administrative Procedure. The victim is the private person directly targeted or affected by the unlawful action.

[4] Causal link is established when an objective link is established between the act or omission of the institution and the victim's loss or non-pecuniary damage. The institution’s act or omission must have been the main factor which proximately caused the loss and non-pecuniary damage. The likelihood of such consequences can be assesed hypothetically by considering the probable course of events. Only damage that  is directly and causally linked to the act (conduct) of the institution may be compensated.  No causal link exists if loss would have occurred if the institution had acted lawfully, or where the loss would have occurred independently of the institution's action (act or omission).

[5] Damages are intended to restore the victim in the financial position would have been in had the institution which caused the damage not commited the fault, while ensuring the compensation does not place them in a better financial position than if the infringement had never occurred. The Court will not itself seek evidence on the behalf of the applicant, especially when the victim is best placed to provide details of the damage suffered. It is important to emphasise that, where it is clear that a a private party has suffered damage, the court cannot refrain from awarding compensation simply because it is difficult or impossible to establish the amount of the damage. An individual cannot be held responsible for the conduct of the authorities, therefore, administrative practice cannot justify denying compensation for damage resulting from an unlawful decision of the authorities.

The types of damages that are covered are:

1. a loss, measurable in pecuniary terms, suffered by the victim as a result of an unlawful administrative act or an unlawful actual act of an institution;

2. lost profits, provided the injured party can demonstrate that, under normal circumstances, such profits would have been realized;

3. a financially measurable loss related to the revocation of an administrative act, the elimination of an actual act of the institution or its consequences, or the reduction or elimination of a loss. Loss shall also include legal costs.

   
   

[5.1] Lost profits can only be assessed where the wrongful conduct of the wrongdoer has deprived the victim of the possibility of obtaining an expected increase in the value of the property, i.e. a future pecuniary gain that would have been obtained if the wrong had not occurred. Article 1787 of the Civil Code provides that, in calculating the loss of profit, it is not to be based on mere probabilities, but that there must be no doubt, or at least it must be proved to the satisfaction of the legal authorities, that such loss has resulted, directly or indirectly, from the act or omission by which the loss was sustained. This means that the calculation of lost profits will always be based on a hypothetical simulated situation in the past, in which the amount is determined not with precision but with a high probability (the profit that could plausibly have been made). The determination of lost profits may be based on economic calculations. In determining the amount of lost profits, the institution or court shall take into account the general risks and the circumstances of the particular case which affect the likelihood of lost profits. If it is possible to determine the exact amount of the loss, the institution or the court shall assess the loss as a whole or its individual components. In assessing the loss, the institution or court shall reasonably take into account common experience and the circumstances of the particular case The victim must be able to substantiate the amount of the loss of profit with evidence to a high degree of probability, while the court shall examine the reliability and relevance of that evidence to the facts of the case.  The burden of proof should not be so stringet that providing damages for loss of profit becomes impossible.  It cannot be concluded that whenever the victim earns an income after the infringment, it is reasonable to assume that the infringement has therefore not in fact caused loss in the form of loss of profit.

[5.2] The costs of legal assistance shall be reimbursed in accordance with the types and amounts established in the normative enactments on the payment of state-provided legal assistance in administrative cases. In exceptional cases, an institution or a court may determine the amount of reimbursable expenses exceeding the amount determined in the normative enactments on the payment of state-provided legal aid in administrative cases, if such expenses were objectively necessary. It can be concluded that in exceptional cases, expenses for legal aid exceeding the fees for legal aid provided by the State in administrative cases may be reimbursed. The extent and complexity of the legal aid should certainly be taken into account. The objective need is demonstrated by the lack of knowledge and practice to defend one's rights and legal interests.

[5.3] In addition, other circumstances relevant to the particular case may be taken into account in determining the amount of damages if they can be objectively proven. One example is damages for depreciation (inflation), which can be objectively proven on the basis of the Central Statistical Office and the inflation calculator (https://tools.csb.gov.lv/cpi_calculator/lv/2021M03-2025M03/0/100).

[5.4] It should also be noted that the institution may, at its discretion, compensate the victim for the loss suffered by restoring the victim's property to the factual state in which it was before the loss occurred, rather than paying damages.

[6] The types of non-pecuniary damage that are compensated are:

1. violation of life, health, freedom, dignity and respect, personal or family secret of a natural person, other non-material rights or interests thereof protected by law as a result of which adverse non-material consequences have been caused;

2. violation of transaction reputation, commercial secret of a legal person, its copyright or other non-material rights or interests protected by law as a result of which adverse non-material consequences have been caused.

If an unlawful administrative act or unlawful factual conduct has caused a substantial impairment of the rights of an individual, the existence of non-pecuniary damage is presumed to be proven.

The rights, freedoms and obligations of persons established in the Constitution of Republic of Latvia shall also aply to legal persons governed by the private law, to the extent that these rights, freedomsm and obligations are inherently applicable to them. loss would have occurred if the institution had acted lawfully, or where the loss would have occurred independently of the institution's action (act or omission).

[7] In determining the amount of damages and non-pecuniary damage, the victim's contributory liability for their occurrence must be assessed. The victim is not entitled to compensation in whole or in part if he or she has not made every effort, using his or her knowledge, ability and practical capacity, to prevent or reduce the damage. The victim shall not be entitled to compensation if, by his or her wilful conduct, he or she has contributed to the damage suffered or to an increase in its amount.  In this connection, it should be emphasised that contributory liability does not govern the question of establishing causation. Where vicarious liability is established, the extent of that liability should also be determined to determine whether denying the victim full

or partial compensation for the loss or damage suffered is justified.

[8] The amount of the loss and non-pecuniary damage shall be proved by the means of proof established by the Law on Administrative Procedure, i.e. explanations, witness testimonies, written evidence, material evidence, expert examination and expert's opinion. The private party shall be obliged to indicate how his or her moral rights and interests protected by law have been violated and to justify the amount of compensation. Where a private party has suffered a substantial impairment of a right by an unlawful administrative act or an unlawful factual act, the existence of non-pecuniary damage shall be deemed to have been proved.

[9] In order to receive compensation for damages and non-pecuniary loss, the individual must submit an application for compensation to the authority responsible for the loss. The claim for compensation for non-pecuniary damage may be an independent claim but may also be a subordinate claim alongside a main claim. The individual must submit  an application for compensation for the loss and/or non-material damage within one year of the date on which he became aware or should have become aware of the loss and/or non-material damage, but no later than five years from the date on which the unlawful administrative act of the institution entered into force or the unlawful actual act was committed.  The time-limit for lodging an application shall run from the time when the unlawful administrative act or unlawful de facto conduct of the institution was established.

Gvido LOŠAKS

Associate attorney at law

tel. +371 29181817

e-mail: gvidolosaks@gmail.com

Riga, June 01, 2025