Important decision
The Supreme Court, in its judgment of December 2025, clearly rejected the claim of a businesswoman who demanded more than one million crowns as compensation for lost profits caused by the covid measures. According to the court, the state is not liable for this type of damage. The decision provides a clear answer to the question whether entrepreneurs have the right to claim compensation from the state for lost sales caused by the widespread closure of establishments.
When the government closed down establishments across the board during the covid-19 pandemic, many businesses lost significant revenues. One of these cases has now reached the Supreme Court. The operator of a retail outlet claimed more than ₹1.1 million in compensation for lost profits for the time she had to keep her shop closed under the government’s measures. She based her claims on a comparison of sales before and during the pandemic. However, the lower courts did not uphold her claim and the Supreme Court upheld their conclusion.
According to the Supreme Court, the state is liable under the Crisis Act only for a certain type of damage, namely, so-called material damage. This means, for example, damage to or destruction of an item, or a situation where the state takes an item away from a business for use. Lost profits are not among these damages. Where undertakings have been closed down by a blanket measure affecting the whole sector, this is not an individual interference with the rights of a particular undertaking, but a general measure of a normative nature. And the State is not normally liable for its consequences.
The Supreme Court also emphasised that even subsequent legislation, including the Pandemic Act, does not provide for compensation for lost profits for entrepreneurs whose activities have been restricted for epidemiological reasons. The applicant’s appeal was thus dismissed, thus virtually confirming that entrepreneurs cannot claim compensation for lost profits across the board.
First of all, it is not possible to claim compensation for lost profits in the courts for the period when the establishments were closed on the basis of blanket covid measures. Businesses wishing to claim retrospective compensation for lost revenue are unlikely to succeed. Only those whose business has been restricted by an individual decision aimed directly at them – for example, where a particular establishment has been closed for health reasons following an individual decision by the authority – may stand a chance.
The judgment thus brings important certainty to businesses. The courts will not award compensation for lost profits caused by blanket measures, and any litigation would only place an unnecessary burden not only on businesses but also on the court system.
If you are struggling with whether you are entitled to compensation for state intervention in a particular case, or if you are unsure whether your situation falls within the scope of “material damage”, we will be happy to help you make an assessment.
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