1. Legal Grounds Governing State Liability for Compensation
The right to claim compensation for damage caused by unlawful administrative decisions or administrative acts is governed by the following applicable legal instruments:
- 2017 Law on State Compensation Liability (Law No. 10/2017/QH14): The principal specialized legislation governing the scope, principles, and procedures for resolving compensation claims by state agencies in respect of individuals and organizations suffering damage in the course of administrative management activities (Articles 7 to 21).
- 2015 Law on Administrative Procedures: Provides for a plaintiff’s right to request the Court to annul an unlawful administrative decision and concurrently resolve a claim for compensation for damage in the same administrative case (Article 7).
- 2011 Law on Complaints: Provides for the right to claim compensation for damage when pursuing administrative complaint procedures (Articles 7 and 12).
- 2015 Civil Code: Establishes the general legal framework for liability to compensate for damage caused by persons performing official duties (Article 598).
- Decree No. 68/2018/ND-CP: Provides detailed regulations on certain articles and measures for implementing the Law on State Compensation Liability.
2. Are Individuals and Organizations Entitled to Claim Compensation?
The answer is YES. This is a statutory right protected by the Constitution and applicable laws.
Pursuant to Clause 1, Article 7 of the 2017 Law on State Compensation Liability, the State is liable to compensate for damage arising from administrative management activities where a competent authority or person performing official duties commits any of the following unlawful acts:
- Unlawfully imposing administrative penalties (such as fines, confiscation of material evidence, or suspension of business operations);
- Unlawfully applying preventive measures and measures to ensure the handling of administrative violations (such as temporary seizure of material evidence or vehicles);
- Unlawfully applying coercive measures to enforce decisions imposing administrative penalties;
- Unlawfully granting, revoking, refusing to grant, or refusing to revoke licenses, certificates, or practicing certificates;
- Unlawfully failing to process administrative procedures or exceeding the statutory time limit for processing such procedures, thereby causing damage.
3. Mandatory Conditions for a Compensation Claim to Be Accepted
To claim compensation from a state agency, individuals and organizations cannot simply make a verbal request or immediately submit a claim for payment. They must satisfy all three prerequisite conditions:
1. A document serving as the legal basis for the compensation claim
2. Actual and direct damage has occurred
3. The statutory limitation period for claiming compensation has not expired (3 years)
3.1. A “Document Serving as the Basis for a Compensation Claim” Must Be Available (A Decisive Condition)
Pursuant to Articles 8 and 9 of the 2017 Law on State Compensation Liability, an injured person is only entitled to submit a compensation claim after obtaining one of the following legally effective documents establishing that the conduct of the relevant official or state authority was unlawful:
- A decision resolving an administrative complaint issued by a competent person, concluding that the administrative decision or license revocation was unlawful;
- A judgment or decision of a People’s Court annulling an unlawful administrative decision or license revocation decision;
- A decision to annul or revoke the relevant decision issued by the authority that originally issued it after detecting the violation;
- A conclusion on the contents of a denunciation issued by a competent person, determining that the performance of official duties involved a violation of the law.
Important note: If no document has been issued establishing that the administrative decision was unlawful, the state agency will refuse to accept the compensation claim for processing.
3.2. Causal Relationship and Actual Damage
- The damage must be a direct consequence of the unlawful administrative decision. For example, the unlawful revocation of a construction permit may result in the contractor being penalized for delays, construction steel becoming rusty, and additional costs being incurred for site security.
- The claimant is responsible for providing invoices and supporting documents evidencing each specific item of loss.
3.3. Statutory Limitation Period for Claiming Compensation
Pursuant to Article 6 of the 2017 Law on State Compensation Liability:
- The limitation period for claiming compensation is three years, commencing from the date on which the person entitled to claim compensation receives the document serving as the basis for the claim (such as a decision annulling the unlawful decision or a Court judgment).
- The period during which a force majeure event or objective obstacle occurs is excluded from the calculation of this limitation period.
4. Scope of Damage Eligible for State Compensation
Pursuant to Section 2, Chapter III of the 2017 Law on State Compensation Liability, individuals and organizations are entitled to full compensation for the following categories of damage:
4.1. Damage Caused by Infringement of Property Rights (Article 23)
- Property damaged or deteriorated as a result of an unlawful decision to suspend operations or revoke a license: Compensation covers the full cost of repair and restoration, calculated based on market prices at the time the compensation claim is resolved.
- Perishable goods or agricultural products that are completely spoiled: Compensation equivalent to 100% of the market value of the destroyed goods.
- Administrative fines unlawfully paid: The full amount paid is refundable, together with interest calculated at the applicable bank interest rate for overdue payments.
4.2. Actual Lost or Reduced Income (Article 24)
- For individuals: Lost salary or wages during the period in which the individual was unlawfully deprived of a practicing certificate or unlawfully suspended from work. Compensation is determined based on the individual’s actual income during the three consecutive months immediately preceding the loss.
- For organizations and enterprises: Net profits lost during the period in which a factory or business establishment was forced to close due to the revocation of its operating license. The amount is calculated based on average profits over the three preceding consecutive years or on the basis of lawful accounting records and tax reports.
4.3. Other Reasonable Expenses Incurred (Article 28)
- Costs of renting warehouses or storage facilities to preserve property and goods during a period of unlawful sealing or enforcement measures;
- Costs of engaging a professional valuation organization to assess damage to machinery and equipment;
- Travel and transportation expenses, as well as document printing costs, incurred in connection with filing administrative complaints, attending meetings during complaint resolution proceedings, and initiating court proceedings.
4.4. Mental and Emotional Distress (Article 27)
- This category applies to individuals who are unlawfully subjected to administrative handling measures requiring placement in compulsory drug rehabilitation establishments or compulsory education establishments. The compensation amount is equivalent to a prescribed proportion of the statutory base salary for each day of detention or compulsory placement.
CONTACT LEGAL CONSULTANT:
TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.
1. Lawyer Vu Thi Phuong Thanh, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Ha Noi Bar Association
Email: tmle@tlalaw.vn
Nguyen Thuy Duong