Legal person’s claim to satisfaction for damage to its reputation - still not certain

9. 1. 2023
Legal person’s claim to satisfaction for damage to its reputation - still not certain

On November 3, 2022 the Municipal Court in Prague ruled on appeal that a legal entity was entitled to an apology and monetary compensation for damage to its reputation.

In its decision, it contradicts the opinion of the Supreme Court according to which a legal entity is a purely proprietary entity. It is therefore impossible to cause it any distress and thus non-pecuniary damage by damaging its reputation. Moreover, the Supreme Court has held in its case-law that the right of legal persons to compensation for damage to their reputation does not arise from general laws, constitutional order or international treaties.

However, in its most recent decision, the court relies on expert opinions according to which a legal person is an organism similar to an individual, which can experience an interference with dignity in the same way as a natural person. A legal person includes not only property but also the persons who confer a will on it. In addition, damage to the reputation of a legal entity has the effect of disrupting business relations and thus reducing profits and the overall assets of the legal person. The Court therefore emphasised that the absence of a statutory provision in the Civil Code granting a claim for compensation for non-pecuniary damage to legal entity is a mere omission by the legislator. Reference is made to the explanatory memorandum, according to which the Civil Code seeks to extend the non-pecuniary rights of persons, both natural and legal. The old Civil Code of 1964 granted compensation to legal persons for injury to reputation.

The Court therefore (in its final decision) concluded that, in order to be consistent with previous case law, the reputation of a legal entity enjoys the same protection as a business name or the rights conferred by statutory provisions against unfair competition.

In order to stabilize the decision-making practice and legal certainty of legal entities, however, it will be necessary to eliminate the discrepancies in opinions of the higher courts - it is not excluded that the case will eventually be submitted to the Constitutional Court when an appeal is filed to the Supreme Court against the current decision of the Municipal Court in Prague.

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