In a recent judgment, the Supreme Court took a position on the long-standing issue of whether and to what extent a property owner can claim damages from a local government (LG) which has repealed an existing detailed plan.
Firstly, the Court found that a right of claim arises if a detailed plan is repealed and a landowner suffers damage due to reliance on the validity of the plan. The Court explained that LG may not arbitrarily cancel implementation of a detailed plan. This would violate the prohibition of arbitrary action by a public authority and result in disproportionate restriction of property rights and free enterprise. Upon repealing previously established detailed plans, LGs should carefully assess the proportionality of restrictions on landowners’ rights and interests with the objectives of repealing a detailed plan.
As for the amount of damages, the Supreme Court ruled that full compensation of all material damage caused by repealing a detailed plan is not mandatory. The amount of compensation should have a causal relation to a landowner’s acts in reliance on the validity of the administrative act. As a first measure, confidence damages should be awarded relating to the landowner's acts to exercise its rights in reliance on the plan. This includes the cost of preparing the detailed plan plus design costs relating to consultations with engineers and architects. However, a landowner may not claim damages for the period during which it was already aware of the risk of the administrative act being repealed.
The Supreme Court also set guidelines for the procedure for repealing administrative acts. The Court emphasized the importance of the duty to give explanations. It noted that an administrative authority undertaking repeal proceedings should notify affected persons of their right to compensation and gather information and evidence for establishing the amount of damages. If the amount of damages is to be established by a lengthy procedure, an administrative authority may issue a preliminary administrative act to resolve certain issues within the procedure. The Court also stressed that an administrative authority should pay compensatory interest from the time of repealing an administrative act until the time when damages are paid out.