Unlawful government decision gives right to compensation for damages

The basic premise is that according to settled Dutch case law, the annulment by the administrative court of a government decision indicates the unlawfulness of this decision. The victim can then claim compensation from the government. What are the criteria for obtaining compensation from the government?

Principle for compensation after an unlawful decision

The decision that is unlawful must be final (have formal legal force). There may be cases in which an administrative body has to take a new decision after annulment, withdrawal or revocation of a decision. In addition, there is a second category of cases in which the administrative body is not required to do that. If the new decision is lawful and contains a decision that has the same legal effect as the previous decision, then there will be no right to compensation. But if the new decision says something different, for example: the refused licence is now granted, then the illegality is established. The damage as a result of the (first) wrong decision must then be determined. Where no new decision is required, the following applies. The causal relationship between the decision and the damage must be assessed on the basis of the criterion of how the administrative authority would have decided or acted if it had not taken the unlawful decision. However, when assessing such a matter that does not concern the validity of the decision, the civil court is not bound by the substantive considerations underlying the decision of the administrative court on that decision (HR 20 March 2015, ECLI:NL:HR:2015:661).

The damage can be claimed through the administrative court or through the civil court. This court deals with most actions for damages against the government.

Causal connection between government error and damage suffered

In the judgment of 3 June 2016, ECLI:NL:HR:2016:1112, NJ 2016/291 on the liability of an administrative body in the matter of a favourable decision annulled by the administrative court, the court discusses the relationship between (unlawful) government decision and damage resulting therefrom. The existence of the causal connection between an unlawful decision and damage must be assessed on the basis of the standard of how the administrative authority would have decided (or acted) if it had not taken the unlawful decision and that there is no ground to establish the csqn (condicio sine qua non) connection otherwise if it concerns an unlawful decision by an administrative authority. So if it is plausible that a lawful decision would have been taken that would have resulted in the same damage in nature and scope, then the party concerned has not suffered any damage as a result of the decision.

Comparison of scenarios to determine damage caused by an unlawful decision

The court will assess the hypothetical situation, namely what would have happened if, for example, a permit had been granted correctly, and compare it to what actually happened. In order to assess the causal connection in the sense of a conditio sine qua non between the violation of the standard (the unlawful decision) and the alleged damage, a comparison must be made between the actual situation after the violation of the standard and the hypothetical situation as it would have been if the violation of the standard had not occurred. As far as the factual situation is concerned, it is about establishing what actually happened. As far as the hypothetical situation is concerned, it is about establishing what would in fact have happened without the violation of the standard. In this case about refusal of a permit for a marketplace stand, the claim for compensation was rejected because of the lack of a causal connection between wrongful act and damage. It has not become sufficiently plausible that a permit would have been issued in the fictitious situation.

Wrong decision can also be loss of opportunity with damage as a result

Sometimes the tenet of “lost opportunity” or “missing a chance” is applied. This tenet of lost opportunity is apt to provide a solution to situations such as this one where there is uncertainty as to whether an inherent shortcoming or wrongful act has caused damage, and where that uncertainty is based on the fact that it cannot be determined whether and to what extent in the hypothetical situation without the shortcoming or wrongful act, the chance of success (in the sense of: a real, i.e. a not very small chance) would have actually been realised (compare HR 21 December 2012, ECLI:NL:HR:2012:BX7491). For example, in this case, it was determined that the chance that the victim would have had the pigsty ready and operational before 29 October 2007 is 75%. He was therefore entitled to claim compensation for his damage in proportion to the probability that he could have built the pigsty without wrongful action on the part of the Municipality, and that is 75% of the damage suffered. Another example: if it is considered that there is only a small – i.e. very slim – chance that, disregarding the unlawful refusal, a valid building permit would have been granted and the building plans would eventually have been realised, then this very small chance is too small – according to the “tenet of lost opportunity” – for a successful claim for damages. Together with the party concerned, a lawyer can analyse what the chance of a successful claim for damages is.

Government liability in case of exceeding time limit for decision

Deciding too late is a separate case of possible government liability. The mere circumstance that an administrative authority takes a decision while exceeding the statutory time limit for the decision is insufficient for the opinion pursuant to Book 6, Section 162 of the Dutch Civil Code that liability exists for damage that may arise from that time limit being exceeded. Additional circumstances are required for this, which mean that the administrative authority, by taking a decision only after the statutory decision time limit has expired, is acting contrary to the due care to be observed in society towards an interested party. No compensation was awarded in this case. Important factors in this regard may include inter alia the extent to which the time limit for the decision is exceeded, the cause or causes of the time limit being exceeded, and the interests of the stakeholders involved that are known to the administrative body (HR 22 October 2010, ECLI:NL:HR:2010: BM7040). The statutory decision time limit is not simply intended to also protect against possible damage to an interested party that may arise if the decision is not made within that time limit. (HR 22-10-2010, ECLI:NL:HR:2010:BM7040 and HR 11-1-2013, ECLI:NL:HR:2013:BX7579).

Blenheim has a lot of experience in damages cases and is happy to advise you on (the chances of) a claim for compensation.