Robins and others v Secretary of State for Work and Pensions: Case C-278/05

ECJ: President of Chamber CWA Timmermans, Judges J Klucka, R Silva de Lapuerta, J Makarczyk and L Bay Larsen, Advocate General J Kokott: 25 January 2007

The claimants, members of two company pension schemes that had been established by their employer but were being wound up following the employer’s insolvency, would not receive their full benefits under the schemes, owing to an insufficiency of assets, and brought an action claiming that the United Kingdom government should compensate them, as the national legislation setting up a structure for implementing article 8 of Council Directive 80/987/EEC, on the protection of employees in the event of the insolvency of their employer, did not afford the protection required by that article. It was unchallenged that, inter alia, the first and second claimants would be receiving only 20% and 49%, respectively, of their contractual entitlements, after taking into account government support, and that in 2004 about 65,000 members of pension schemes in the United Kingdom lost more than 20% of their expected benefits, and of those, some 35,000 lost more than 50%.

The High Court referred to the Court of Justice of the European Communities for a preliminary ruling the questions whether article 8 of Directive 80/987 required member states fully to make up the deficit of underfunded pension schemes in the event of insolvency of the employer, and if not, whether, none the less, legislation such as that in the United Kingdom properly implemented article 8, and if it did not, what test was to be applied in determining whether the state was liable in damages.

The Court of Justice held:
(1) Article 8 of Directive 80/987 did not oblige member states themselves to fund the protection of employees’ pension rights and could not be construed as calling for a full guarantee of those rights, by providing the necessary funding for schemes that had insufficient assets following the employer’s insolvency. But, although it was not possible to establish with any precision what a minimum level of protection was, it was to be concluded on the unchallenged figures that a system such as that established by the United Kingdom legislation could not be regarded as conferring “protection” within the meaning of article 8 and was therefore incompatible with that article.

(2) A member state was liable for damage caused to individuals by such a breach of Community law if it could be shown that it had manifestly and gravely disregarded the limits on its discretion, which depended on the degree of clarity and precision of the Community rule and the extent of the discretion left by it to the national authorities. The national court considering those issues in the present case should take into account that Directive 80/987 did not make clear what a minimum level of protection was and that the Commission of the European Communities had stated in a report that the United Kingdom rules “appear to meet the requirements of article 8”.

Appearances: David Anderson QC and Paul Newman (Thompsons) for the claimants; David Pannick QC, Derrick Wyatt QC, Richard Hitchcock and Kassie Smith (Solicitor, Department of Work and Pensions) for the Secretary of State.