Carol Marilyn Robins and Others v Secretary of State for Work and Pensions.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Writing for the Court: Bay Larsen
• ECLI: ECLI:EU:C:2006:476
• Date: 13 July 2006
• Docket Number: C-278/05
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 13 July 2006 ¹(1)

Case C-278/05

Carol Marilyn Robins,

John Burnett and

Others

v

Secretary of State for Work and Pensions

(Reference for a preliminary ruling from the High Court of Justice (England and Wales), Chancery Division (United Kingdom))

(Protection of employees in the event of their employer’s insolvency – Protection of acquired and prospective rights of employees to old-age benefits – Scope of the obligation – Article 8 of Directive 80/987/EEC – Liability of Member States for breaches of Community law – Sufficiently serious nature of the breach)

I – Introduction

1. In this case the High Court of Justice of England and Wales, Chancery Division, requests the Court to provide an interpretation of Article 8 of Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employers. (2) Article 8 of Directive 80/987 relates to the protection of the interests of employees in regard to their rights under company pension schemes in the event of the insolvency of their employer.

2. The claimants in the main proceedings are former employees of a company which is in insolvent liquidation. The company maintained two occupational pension schemes. By reason of the company’s insolvency, these schemes were also closed down. While the schemes were being wound up, it transpired that their assets would be inadequate to meet all the claims of its members. The claimants are for that reason facing a significant reduction in their contractually-agreed occupational pension. In their action brought against the competent United Kingdom Government department they invoke Article 8 of Directive 80/987 in their claim for financial compensation in respect of those reductions in their pensions.

3. It is against this background that the High Court has submitted questions to the Court of Justice concerning the content of the rule in Article 8 of Directive 80/987. That court also seeks clarification as to the conditions governing State liability in respect of defective implementation of a directive.

II – Legal framework

A – Community law

1. Directive 80/987

4. The first recital in the preamble to Directive 80/987 is worded as follows:

‘… it is necessary to provide for the protection of employees in the event of the insolvency of their employer, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community’.

5. Section II of the Directive, under the title ‘Provisions concerning guarantee institutions’, contains rules governing the securing of pay claims brought by employees.

6. Article 4(1) provides that Member States are to have the option of limiting the obligation of the guarantee institution to make payments relating to pay under Article 3. Under Article 4(3), ‘in order to avoid the payment of sums going beyond the social objective of this Directive, Member States may set a ceiling to the liability for employees’ outstanding claims.’

7. Section III of the Directive, entitled ‘Provisions concerning social security’, sets out provisions relating to the safeguarding of claims:

8. Article 6 provides that Member States may stipulate that ‘Articles 3, 4 and 5 shall not apply to contributions due under national statutory social security schemes or under supplementary company or inter-company pension schemes outside the national statutory social security schemes.’

9. Member States are required under Article 7 to take the measures ‘necessary to ensure that non-payment of compulsory contributions due from the employer, before the onset of his insolvency, to their insurance institutions under national statutory social security schemes does not adversely affect employees’ benefit entitlement in respect of these insurance institutions …’

10. Article 8 of Directive 80/987 provides:

‘Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes.’

2. Directive 2002/74/EC amending Directive 80/987 (3) (‘amending Directive 2002/74’)

11. Amending Directive 2002/74 did not introduce any amendment to Article 8.

12. Recital (2) in the preamble to amending Directive 2002/74 provides:

‘Directive 80/987/EEC aims to provide a minimum degree of protection for employees in the event of the insolvency of their employer. To this end, it obliges the Member States to establish a body which guarantees payment of the outstanding claims of the employees concerned.’

3. Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision (4)

13. Recital (18) in the preamble to Directive 2003/41 provides that, in ‘the event of the bankruptcy of a sponsoring undertaking, a member faces the risk of losing both his/her job and his/her acquired pension rights. This makes it necessary to ensure that there is a clear separation between that undertaking and the institution and that minimum prudential standards are laid down to protect members.’

14. Article 8 of Directive 2003/41, which prescribes a legal separation between sponsoring undertakings and institutions for occupational retirement provision, is the only article to contain a rule in regard to the insolvency of sponsoring undertakings.

15. Article 16(2) of Directive 2003/41 permits temporary under-financing of the institution of the sponsoring undertaking and sets out further rules to cover such a case.

B – Law of the Member State

16. The rules in the United Kingdom designed to ensure protection of employees’ pensions in the event of their employer’s insolvency provide essentially that the funds of the sponsoring undertaking are not available to creditors and that contributions which are not paid to the institution responsible for occupational old-age benefits by reason of the insolvency of the employer are to be met to some extent by the National Insurance Fund.

17. However, even the application of the protective measures designed to safeguard employees in the United Kingdom has not prevented the pension entitlement of the first claimant amounting to merely 20% of her full entitlement following the insolvency of the employer, and that of the second claimant amounting to merely 49%.

III – Facts and main proceedings

18. The claimants in the main proceedings are former employees of ASW Limited (‘ASW’), the assets of which were the subject of insolvency proceedings instituted on 24 April 2003 and which was itself made subject to compulsory winding-up.

19. ASW had two pension schemes, the ‘ASW Pension Plan’ and the ‘ASW Sheerness Steel Group Pension Fund’ (‘the pension schemes’). Both pension schemes were designed as occupational supplementary pension schemes and had the following characteristics:

The level of benefit entitlement was calculated by reference to an accrual rate, the final salary and each member’s length of service. Benefits of this kind are known as ‘final salary benefits’. Under the provisions governing them, the pension schemes were financed, on the one hand, through payments by employees, who were required to pay a percentage of their salary or wages as their contribution. On the other hand, the employer was required to contribute at a rate necessary to ensure that the benefits would be maintained and provided. This type of pension scheme is known as a ‘balance of costs’ pension scheme. The pension schemes were operated as trust funds independent of the employer.

20. Following the opening of insolvency proceedings against ASW, the pension schemes of ASW were terminated in July 2002 and are in the process of being wound up. Actuarial valuations carried out on behalf of the schemes indicated that, as at 31 July 2002, the ASW Pension Plan was in deficit in the amount of GBP 99.7 million and that the ASW Sheerness Steel Group Pension Fund was in deficit in the amount of GBP 41.2 million. There is no prospect of any further monies being paid by ASW or by any other undertaking into the pension schemes.

21. The assets held by the pension schemes are thus insufficient to meet all existing and prospective claims of those employees who were members of these pension schemes.

22. For the event of such a shortfall, the statutorily determined provisions of the pension schemes set out a specific order of priority under which members’ claims are to be satisfied: the trustees are required to use the assets of the schemes in the first instance to secure the benefits of those members whose pensions had become payable at the date on which the schemes went into winding-up and subsequently, to the extent to which any assets are left in the schemes, to secure the benefits of those members whose pensions had not yet become payable at the date on which the schemes went into winding-up.

23. As applied to the facts of the main proceedings, these rules resulted in a reduction in the prospective pension entitlements of ASW employees who were not yet in receipt of a pension. According to the calculations carried out by the actuaries of the two schemes, the payment expectation of the first claimant now amounts to barely 20% of her original entitlement under the occupational pension scheme, while that of the second claimant comes to merely 49% of his original entitlement.

24. It is common ground that these payment expectations arise after consideration of the mechanisms provided for under United Kingdom law for the purpose of...