Compensation after annulment of an administrative decision

The annulment of an act or omission of an administrative authority does not automatically create a right to compensation

In a decision issued by the Supreme Constitutional Court on December 14, 2023 in Appeal 66/2017, it clarified the relevant jurisprudence regarding the possibility of establishing an actionable right to compensation after a decision annulling an act, omission or decision of an administrative authority. It is considered an important decision.

The issuance of an annulment decision does not automatically create a right to compensation, unless the conditions set by Article 146.6 of the Constitution are met and especially when the question of compensation is raised, the damage must have been caused by the annulled decision or arisen as a direct consequence of it.

After announcing a public tender for the execution of two similar technical works, the administrative authority awarded the tender for one project to a contractor who made bids for both projects, and the tender for the other project to another contractor. The contractor lodged an administrative recourse against the decision to award the tender for the second project to the other contractor and succeeded in annulling the relevant decision of the authority.

Subsequently, the contractor asked the authority to inform him if it had taken actions to comply with the annulment decision, in accordance with the provisions of article 146.5 of the Constitution, in order to know if the work was carried out and there was no room to review the annulled decision.

The contractor persisted by filing recourse when the authority failed to comply with the annulment decision and the court held that a scope of review was provided and its failure to review the annulled act was declared null and void. The authority appealed the decision claiming that it was wrongly judged that there was room for review once the work was carried out and that the concept of restitution is now limited to monetary compensation, based on Article 146.6 of the Constitution.

The Supreme Constitutional Court in examining the appeal, in the unanimous decision issued by President Antonis Liatsos, ruled that according to the constitutional imperative, Article 146.5, the administration must actively comply with the annulment decision and review the issue based on the legal and factual status, which was in force at the time the decision annulled by the court was made. Active compliance, it said, has the meaning of correcting any wrongdoing that was annulled, in a way that leads to the disappearance of the effects of the annulled act and restores the order of things that was in force before its issuance.

The court further emphasised, as an extract from the jurisprudence, that a right to compensation arises if, despite the restoration of legality, damage has occurred which has not been satisfied by the competent administrative authority. Damage caused or arising as a direct consequence of the annulled decision. The support of the basis of action and the claim for damages does not arise ipso facto from the annulment decision. The annulment of an administrative act constitutes the first condition, the claim for compensation or other remedy, which must first be addressed to the administration, is the second condition and the third condition is the rejection of the claim or the failure of the competent department to consider it.

In the particular case, the court ruled that the objective impossibility of executing an annulment decision led to the limitation of monetary compensation, provided that damage occurs and if the other conditions for compensation are met. In order to establish the case of the contractor within the framework of Article 146.6, he will have to prove that he would have secured the tender if the annulment had not intervened. The establishment, that is, of a right to compensation, requires confirmation that he would be awarded the tender.

As the court pointed out, an element that would emerge through the review, where it would be clear whether, despite the execution of the project in the meantime, he would be the successful bidder. Only then will the issue of compensation be established, which would trigger the applicant’s obligation to first apply to the administration for compensation and, in the event of rejection of his request, to take legal action by filling a civil action. The judicial conclusion of the Supreme Constitutional Court is that the court of first instance correctly decided the issue in its proper dimension and consequently dismissed the appeal.

George Coucounis is a lawyer specialising in the Immovable Property Law, based in Larnaca. E-mail: [email protected], tel: 24818288