Compensation for non-material damages to legal entities - yes or no?
Are legal entities entitled to compensation for non-material damages?
The question raised is the subject of conflicting opinions both in legal theory and in judicial practice. It is expected to be resolved with the adoption of a joint interpretative decree in interpretative case No. 1/2023 by the General Assembly of judges from the Criminal, Civil, and Commercial Division of the Supreme Court of Cassation and the First and Second Division of the Supreme Administrative Court. The supreme judges should provide a mandatory interpretation of the question "Do legal entities have the substantive right to be awarded non-material damages in tort?"
In the case law so far, there are mostly cases in which the claims of legal entities for awarding compensation for non-material damages have been rejected (the more conservative and traditional approach), but there are also individual cases, mostly from the previous ten years, in which such claims have been awarded. In legal doctrine and case law, several main arguments have been developed in support of the two opposing theses.
Arguments "against" the right to compensation of legal entities for non-material damages:
- Legal entities cannot suffer physical pain and mental suffering (i.e. non-material damages), as this is inherent only to natural persons (people). Non-material damages affect the physical and/or mental sphere of the injured person, and this is inapplicable to legal entities and incompatible with their legal nature and manner of establishment.
- Damages suffered by a legal entity affect its property and therefore cannot be non-material, but should be defined as material damages.
Arguments "in favour of" the right to compensation of legal entities for non-material damages:
- The regulatory framework, specifically the provisions of art. 45 to art. 52 of the Obligations and Contracts Act („OCA“), does not restrict legal entities from seeking compensation for incurred non-material damages. The wording of art. 45, para. 1 of the OCA states that "everyone is obliged to repair the damage they have culpably caused to another".
- Legal entities bear civil liability for the damages caused by the natural persons to whom they have assigned some work (art. 49 of the OCA), as well as administrative liability in the form of monetary sanctions for administrative violations committed by legal entities (it is provided for in numerous statute laws, as an example – art. 116 of the Measures against money laundering act). By an argument from the contrary, since a legal person can be sanctioned for the actions of people and can be a "violator" of laws, even though it is not a person, it should be able to be compensated for non-material damages.
What is the practical consequence of the adoption of an interpretative decree?
A large part of the already adopted case law relates to damage to the reputation and prestige of non-profit legal entities and commercial companies as a result of negative and/or defamatory publications in the media, television, and social networks. The awaited interpretative ruling will resolve the issue and will make clear whether such claims in the future will be admissible and examined on the merits by all courts in Bulgaria.