Seized Money in Criminal Proceedings: Why Acquittal Does Not Automatically Mean Compensation for Damages

Your company was prosecuted, then acquitted, and you would logically expect the state to compensate you for all damages incurred during the prosecution. However, the legal reality is more complex than it appears at first glance. The case of TMIS Ledeč s.r.o. clearly illustrates this – the company sought compensation of nearly 14 million Czech crowns for lost profits from funds seized during criminal proceedings, yet it was unsuccessful at the Supreme Court.

TMIS Ledeč s.r.o. was criminally prosecuted between 2018 and 2023 in two related cases concerning the construction of photovoltaic power plants. In both instances, the company was ultimately acquitted, because the courts concluded that the act described in the indictment was not a criminal offense. However, during the criminal proceedings, police authorities seized the company's financial assets under Section 79a of the Criminal Procedure Code. The company was unable to use these funds for several years – it could not invest them, grow their value, or otherwise dispose of them.

After the criminal proceedings concluded, the company approached the state demanding compensation for lost profits. It argued that if the funds had not been seized, it could have grown their value in a savings account or a time deposit. It quantified the total damages at 10,782,097.54 CZK (funds seized related to the Pacov project) and 3,087,314 CZK (funds seized related to the Ledeč project). Concurrently, it requested a declaration that the unlawful decisions of the police authorities had infringed upon its right to a fair trial.

Key Legal Issue: What exactly constitutes an unlawful decision?

The District Court for Prague 2 dismissed the lawsuit, and the Municipal Court in Prague upheld this decision. The company therefore filed an appeal with the Supreme Court. However, the Supreme Court rejected the appeal as inadmissible and affirmed the legal opinion of the lower courts.

At the heart of the dispute was the assessment of whether the decision to seize financial assets constituted an unlawful decision within the meaning of Act No. 82/1998 Coll., on liability for damage caused in the exercise of public authority. According to established Supreme Court jurisprudence, only a decision that was by the competent authority annulled or amended specifically due to its unlawfulness. If the decision to seize was annulled because the reasons for its issuance ceased to exist (which is common in criminal proceedings after the prosecution concludes), it does not automatically mean that it was unlawful from the outset.

The Supreme Court emphasized a fundamental principle: The fact that criminal proceedings did not conclude with a conviction does not mean that all actions taken by law enforcement authorities were incorrect or that all decisions issued during the proceedings were unlawful. If we were to adopt the opposite interpretation, it would mean that in every case where criminal proceedings do not end in a conviction, all imposed disciplinary fines, witness summonses, and similar actions would automatically be deemed unlawful. This would effectively paralyze the functioning of the criminal justice system.

Practical Implications for Businesses

The appellant attempted to argue in her appeal that her criminal prosecution was clearly unfounded from the outset. However, the Supreme Court stated that this assertion was not supported by the courts' factual findings. The appellant thus effectively based her legal assessment on factual circumstances other than those established by the courts, which is not an admissible ground for appeal.

For businesses, this decision yields several key conclusions. Acquittal alone does not automatically establish a right to compensation for damages caused by the seizure of assets during criminal proceedings. To successfully assert a claim, it is necessary to prove that the specific decision was unlawful at the time it was issued — not merely that it later proved unnecessary. A decision to seize assets under Section 79a of the Criminal Procedure Code is a preventive measure which can be entirely legitimate at the time of its issuance, even if it subsequently turns out that the criminal prosecution does not result in a conviction.

This case illustrates a broader principle of Czech liability law: the state is not liable for every harm arising in connection with the exercise of public authority, but only for harm caused by unlawful decisions or improper official conduct. The line between legitimate exercise of powers and unlawful conduct is assessed at the moment the decision was issued, not retrospectively based on the final outcome of the proceedings.

For companies facing criminal prosecution, this means the necessity to carefully document and legally analyze every step taken by law enforcement authorities already during the prosecution. Any objections to unlawfulness should be raised immediately, not only after the proceedings have concluded. A later general assertion that the prosecution was unfounded from the outset, without specific evidence, will generally not stand.

Source: Supreme Court, 30 Cdo 621/2026