- Introduction
The Council of State (CoS) recently dealt with the legal issue of the civil liability of a municipality in the context of lawsuit proceedings stemming from the cancellation of a RES investment due to unlawful acts and omissions of said public authority.
- Facts
The envisaged investment: The plaintiffs aimed to the integration of their investment in photovoltaic (PV) stations on an island of Cyclades into the EU operational program “Competitiveness”. The program provided a subsidy of 45% of the estimated costs for the installation of the PV stations and 50% of the interconnection costs. The remaining costs would be covered through financing and private funds. The integration of the investment presupposed the issuance of all necessary licenses by a certain date. The investment was integrated into the program and the subsidy was approved by means of a ministerial decision subject to the obtainment of the required licenses.
The unlawful acts and omissions of the authority: The plaintiffs referred to the pertinent administrative authorities and submitted the necessary supporting documents for the licensing of their projects. However, the town planning authority of the municipality in charge failed to issue a construction permit in a timely manner due to misinterpretation of the requirements of the law and delays in responses, hence the deadline set by the ministerial decision lapsed and the investment was downgraded.
- Actions/remedies claimed
Therefore, the plaintiffs filed for a lawsuit against the municipality before the Administrative Court of First Instance of Syros claiming:
- indemnification for positive damage (θετική ζημία) for project studies and other expenditures and moral damage (ηθική βλάβη) suffered due to the unlawful acts and omissions of the town planning authority. Both claims were (finally) partially upheld by the Piraeus Administrative Court of Appeals; and
- indemnification for loss of profit (διαφυγόν κέρδος) for lost annual revenues from power production for 20 years. Such a claim was dismissed by the First Instance Court and the Court of Appeals, therefore the plaintiffs filed for a cassation recourse (αναίρεση) before the CoS.
- Applicable legal regime/Considerations
The civil liability of State bodies, municipalities and public legal entities is governed by articles 105 and 106 of the Introductory Law to the Civil Code providing that indemnification can be claimed in case of unlawful acts or omissions of State bodies, municipalities, or public legal entities during the exercise of their duties, except where the unlawful act or omission was in breach of an existing provision of law intended to serve the public interest.
As per article 298 of the Civil Code, indemnification includes positive damage and loss of profit, namely the profit that is anticipated with probability (με πιθανότητα) in the light of the ordinary course of events or the specialcircumstances, especially the preparatory steps taken.
As per case law, loss of profit is deemed as damage to be incurred in the future, linked to the hypothetical development of events, and does not display the certainty of positive damage. For the restoration of the lost profit, however, mere probability does not suffice, but a strong probability (βάσιμη πιθανολόγηση) is required.
Hence, a specific and detailed indication, where appropriate, of the specific facts, circumstances and measures rendering the (future) loss (strongly) probable must be included in the lawsuit filed.
- The ruling of the Piraeus Court of Appeals
Based on the aforementioned considerations, the Piraeus Administrative Court of Appeals in its judgement no. 228/2018 dismissed the claim for loss of profit of the plaintiffs, ruling that such loss cannot be substantiated only based on the unlawful acts and omissions of the town planning authority of the municipality. And the reasoning is that there was no certainty (βεβαιότητα) as to the following:
- the investment, as its implementation, inter alia, depends on financing (despite the fact that a loan had been pre-approved by a bank);
- the duration of the power purchase agreement (PPA), as it may be terminated if the power production license expires or is revoked under certain circumstances;
- the total power to be generated, as it cannot be estimated a priori;
- the value per kWh for the entire duration of the PPA due to various reductions usually effected by law;
- the energy performance of the PV panels for the entire duration of the PPA, as it depends on various parameters (weather conditions).
- Judgement 460/2023 of the CoS (A’ Division)
The CoS, in its judgement no. 460/2023, ruled that the reference made in the appeal decision to absence of certainty does not mean that the court required full evidence of the lost profit, but that there was no strong probability (βάσιμη πιθανότητα) that the plaintiffs would suffer such loss. As a result, the CoS ratified the appeal decision and effectively dismissed the claim of the plaintiffs.
- Remarks
In principle, the considerations of the Court of Appeals and the CoS do not deviate from the consistent case law on the legal issue of restoration of loss of profit by public authorities.
However, based on the facts of the discussed case, there are grounds for questioning the use of the notion of “strong probability” by the courts. And that is because, albeit in principle full evidence of loss of profit is not required under consistent case law, the reasoning of the courts in the discussed case essentially implied that for the lost profit to be indemnified, certainty of damage was required (and not strong probability), which contradicts the default hypothetical nature of loss of profit.
This precedent set by the CoS raises questions as to the extent plaintiffs are expected to demonstrate the probability of their loss or profit, and, in essence, the extent they enjoy protection against acts and omissions of public authorities.
