| EMPLOYMENT — Employer’s insolvency — Company pension schemes — Community law obligation of member states to protect scheme members’ rights — Whether requiring full guarantee of underfunded schemes — Member states’ liability if breach of obligation — Council Directive 80/987/EEC, art 8
Robins and others v Secretary of State for Work and Pensions (Case C-278/05)
ECJ: President of Chamber Timmermans, Judges Klučka, Silva de Lapuerta, Makarczyk and Bay Larsen: 25 January 2007
Art 8 of Directive 80/987 on the protection of employees in the event of their employer’s insolvency did not require member states fully to indemnify members of underfunded company pension schemes, on the employer’s insolvency, but a system for protecting the rights of members such as that established by the relevant UK legislation was incompatible with art 8, entailing possible state liability if the member state had manifestly and gravely exceeded its discretion in the matter.
The Second Chamber of the Court of Justice of the European Communities so held on a reference for a preliminary ruling by the Chancery Division of the High Court.
Art 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 … entitlement to old-age benefits … under supplementary company or inter-company pension schemes …”
The claimants, members of two 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 scheme for implementing article 8 of Directive 80/987 did not afford the protection required by that article. The High Court referred questions on the issues raised to the European Court for a preliminary ruling.
THE COURT said that, on its wording, art 8 left the member states some latitude as to the means to be adopted for protecting the employees’ rights referred to, and could not be construed as calling for a full guarantee of those rights by the state, such as to oblige the member states to provide the necessary funding. However, although it was nowhere stated in Directive 80/987 what a minimum level of protection was, a scheme such as that instituted by the UK legislation, which resulted in two of the claimants being guaranteed less than half of their pension entitlement, could not be regarded as conferring “protection” in the meaning of art 8, and was therefore incompatible with that article. The 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 broadly was dependent on the degree of clarity and precision of the Community rule. In that connection, it was not clear what a minimum level of protection was, and the Commission had stated in a report that the UK legislation “appears to meet the art 8 requirements.”
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