To err is human, as the old saying goes. Errors are an inherent element of almost all legal proceedings – and this is why appeal procedures exist. Sometimes, however, the damage is done, even if the errors are eventually corrected. This was the situation in a recent case heard by the Appellate Court in Warsaw. The claimant in the proceedings acquired a plot of land in Warsaw in 1998 planning to build a hotel. In 1999, it obtained a decision confirming that the plot of land could be used for that purpose. Subsequently, the claimant applied for a construction permit. Shortly afterwards, the city of Warsaw apparently changed the concept for the utilization of the area. After extraordinarily long administrative proceedings, the city declined to issue the construction permit. The decision was upheld further in the administrative proceedings. The claimant finally succeeded in the legal battle after several years when the Supreme Administrative Court found that the administrative authorities wrongly declined to issue the construction permit requested by the claimant. In the meantime, however, the city of Warsaw enacted a zoning plan that made it impossible to erect a hotel on the claimant’s plot of land. The claimant believed that if it had not been for the time taken by administrative proceedings, it would have been able to construct the hotel before the zoning plan was introduced. Hence, it decided to sue the city of Warsaw for damages. At issue was whether the administrative authority issuing the decision in the first instance proceedings can be held responsible for the damage caused. The Supreme Court jurisprudence has so far favored the opinion that only the authority upholding the decision in the second instance proceedings can be held responsible for the damage caused by the decision. The Supreme Court indicated that the administrative authority controlling the decision in the second instance proceedings can fully review the case and issue its own decision as to the merits of the case. Hence, it is the second instance authority that is responsible for any damage, if the decision is later found to violate the law. In the case at hand, the Appellate Court in Warsaw adopted a different approach. It stated that each administrative authority has to be held responsible for its illegal actions. It explained that under the currently favored position, the authority originally issuing the decision would be held harmless just because the authority controlling the decision also violated the law. The Appellate Court in Warsaw stated that instead both authorities should be responsible for the results of their actions. The position adopted by the Appellate Court in Warsaw broadens the scope of entities responsible for the damage resulting from administrative decisions that are non-compliant with the applicable law. In many cases, the damage is caused by the sole fact that the party involved has to spend several years challenging the decisions in administrative and court proceedings. Sometimes revoking the decision is not a sufficient remedy. Until now the authorities issuing decisions in the first instance were virtually not responsible for the effects of incorrect decisions. The entire economic burden of wrong decisions lay with the administrative bodies controlling the decisions in the second instance. When the adverse consequences of wrong decisions can affect the budget of the administrative authority which issues the decision, such authority may be more motivated to ensure that it acts within the boundaries of the law. Hence, the result of this case may not only make it easier for parties to claim damages from administrative authorities, but may incentivize the administrative bodies acting in the first instance to carefully analyze the legality and impact of their decisions. However, since the judgment of the Appellate Court in Warsaw may be challenged in the Supreme Court and is not formally binding with regard to other cases, it remains to be seen whether the position adopted by the Appellate Court is just a flash in the pan or marks a change regarding the principles of responsibility for issuing incorrect administrative decisions.
Łukasz Zbyszyński is an associate in Baker McKenzie’s Warsaw office. Łukasz specializes in advising clients in complex commercial disputes, both in litigation and arbitration. Before joining the Firm in July 2019, Łukasz was an associate at another premier international law firm.