Pensions-Sicherungs-Verein (Social policy - Protection of employees in the event of the insolvency of their employer - Opinion) [2019] EUECJ C-168/18

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(Request for a preliminary ruling from the Bundesarbeitsgericht (Federal Labour Court, Germany))

(Reference for a preliminary ruling - Protection of employees in the event of the insolvency of their employer - Directive 2008/94/EC - Article 8 - Supplementary pension schemes - Protection of entitlement to old-age benefits - Scope of application - Offset of a previous pension reduction by the former employer - Minimum level of protection guaranteed - Direct effect against a supplementary occupational pension institution)

1. Does Article 8 of Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 on the protection of employees in the event of the insolvency of their employer (OJ 2008 L 283, p. 36) require an insolvency insurance institution responsible for occupational pensions to take over payments which an employer, now in insolvency, had the obligation to make to a former employee in order to comply with a legal obligation? While this is the essential question which arises in this reference from the Bundesarbeitsgericht (Federal Labour Court, Germany), this reference also requires the Court once again to pronounce on the scope and interpretation of this provision.

2. This obligation arises from the national law where employers are required to offset any reduction in the pension benefits paid by a pension fund when those benefits were paid based on contributions provided by the employer.

3. 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 employer (OJ 1980 L 283, p. 23) provided in Article 8:

‘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.’

4. Directive 80/987 was replaced by Directive 2008/94, which entered into force on 17 November 2008.

‘(3) It is necessary to provide for the protection of employees in the event of the insolvency of their employer and to ensure a minimum degree of protection, 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. To this end, the Member States should establish a body which guarantees payment of the outstanding claims of the employees concerned.

(6) In order to ensure legal certainty for employees in the event of insolvency of undertakings pursuing their activities in a number of Member States, and to strengthen employees’ rights in line with the established case-law of the Court of Justice of the European Communities, provisions should be laid down which expressly state which institution is responsible for meeting pay claims in these cases and establish as the aim of cooperation between the competent administrative authorities of the Member States the early settlement of employees’ outstanding claims. …

(7) Member States may set limitations on the responsibility of the guarantee institutions. Those limitations must be compatible with the social objective of the Directive and may take into account the different levels of claims.

(9) … In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.’

‘This Directive shall apply to employees’ claims arising from contracts of employment or employment relationships and existing against employers who are in a state of insolvency within the meaning of Article 2(1).’

‘This Directive is without prejudice to national law as regards the definition of the terms “employee”, “employer”, “pay”, “right conferring immediate entitlement” and “right conferring prospective entitlement”.

However, the Member States may not exclude the following from the scope of this Directive:

(b) employees with a fixed-term contract within the meaning of Directive 1999/70/EC;

‘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 occupational or inter- occupational pension schemes outside the national statutory social security schemes.’

‘This Directive shall not affect the option of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees.’

10. Paragraph 1 of the Gesetz zur Verbesserung der betrieblichen Altersversorgung (Betriebsrentengesetz) (Law on the improvement of occupational pensions, ‘the Law on Pensions’), headed ‘Guarantee given by the employer of an occupational old-age pension’, provides (as last amended by the Law of 17 August 2017), as follows:

‘If an employee is given by his employer a guarantee of an old-age pension … on grounds of his employment relationship (occupational old-age pension), the provisions of this Law shall apply. A scheme for occupational old-age pensions may be implemented directly by an employer or through the conduit of one of the pension providers mentioned in Paragraph 1b(2) to (4). An employer shall remain responsible for ensuring the provision of the benefits he has guaranteed even where he does not implement the scheme directly.’

11. Paragraph 1b of the Law on Pensions lists amongst others the possibilities that the employer has for providing occupational old-age pensions. It essentially provides that the employer can take out assurance on the life of the employee (subparagraph 2), or implement the occupational old-age pension scheme of a Pensionskasse (pension fund) - as in the present case - or a Pensionsfonds (retirement fund) (subparagraph 3), or a so-called Unterstützungskasse (provident fund) (subparagraph 4).

12. Paragraph 7(1) of the Law on Pensions, headed ‘Scope of the insurance cover’, stipulates:

‘Pensioners whose entitlements arising from a direct pension guarantee from the employer are not fulfilled because insolvency proceedings have been opened regarding the assets or estate of the employer … have a claim against the insolvency insurance institution in the amount of the benefit that the employer would have to provide on the basis of the pension guarantee had the insolvency proceedings not been opened …’

13. Paragraph 10(1) of the Law on Pensions, headed ‘Contribution obligation and calculation of contributions’ provides:

‘The funds for implementing the insolvency insurance shall be provided, on the basis of a public-law obligation, by way of contributions from all employers that have directly guaranteed occupational old-age pension benefits or implement an occupational old-age pension scheme via a provident fund, Direktversicherung (life assurance concluded by the employer in favour of the employee) … or a retirement fund.’

14. Paragraph 14 of the Law on Pensions, headed ‘Insolvency insurance institution’ specifies that the insolvency insurance institution is the Pensions-Sicherungs-Verein Versicherungsverein auf Gegenseitigkeit.

15. According to the Agreement of 22 September 2000 between the Federal Republic of Germany and the Grand Duchy of Luxembourg in relation to cooperation in the area of insolvency insurance for occupational old-age pensions, this institution is also the insolvency insurance institution for pension guarantees made by companies based in Luxembourg.

16. In December 2000 the claimant in the main proceedings, Mr Bauer, was granted several occupational old-age pension benefits by his former employer, namely:

- a pension, paid through the intermediary of a supplementary occupational pension institution (PKDW), on the basis of contributions provided by his former employer;

17. In mid-2003, the PKDW experienced financial difficulties and was authorised by the national authorities to reduce the amount of the pensions paid. A reduction of 1.25% up to 1.4% was therefore gradually applied each year. In total, between 2003 and 2013, the amount of the supplementary pension Mr Bauer received was reduced by 13.8%, representing a loss of EUR 82.74 per month. According to the German Government, compared to the total occupational pension, the percentage of reduction of the benefits is only 7.4%. (3)

18. As under German law there is an obligation to make good any shortfall, Mr Bauer’s former employer was obliged to offset this reduction in pension benefits.

19. On 30 January 2012, an insolvency procedure was opened with regard to the assets of Mr Bauer’s former employer.

20. By notification of 12 September 2012, the defendant (PSV) informed the applicant that it would assume the responsibility for the payment of the monthly pension supplement, as well as the annual Christmas bonus. However, PSV refused to take over the amount paid by Mr Bauer’s former employer to offset the pension benefit reduction.

21. Mr Bauer contests this refusal on the ground that PSV has the obligation to make good any shortfall arising from the insolvency of his former employer. PSV replied that, under national law, it has no obligation to guarantee any payment made by an employer in compensation paid in respect of a previous pension benefit reduction.

22. Under those circumstances, the Bundesarbeitsgericht (Federal Labour Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘(1) Is Article 8 of Directive [2008/94] applicable if occupational old-age pension benefits are provided via an inter-occupational pension institution subject to State supervision of financial services, and, for financial reasons, that institution legitimately reduces its benefits with the consent of the supervisory authority, and, although the employer must assume liability for the reductions vis-à-vis the former employees under national law, its insolvency means that it is unable to discharge its obligation to offset those benefit reductions?

Under what circumstances can a former employee’s losses suffered in respect of occupational old-age pension benefits as a result of the insolvency of the employer be regarded as manifestly disproportionate and therefore oblige the Member States to ensure a minimum degree of protection against such losses, even though the former employee receives at least half of the benefits arising from his acquired pension rights?

Does Article 8 of Directive 2008/94 have direct effect and, if a Member State has failed to transpose the directive into national law or has failed to transpose it correctly, does that provision confer rights on the individual that he can assert against the Member State before a national court?

Is an institution organised under private law that the Member State has designated - in a manner that is binding on employers - as an insolvency insurance institution for occupational pensions that is subject to State supervision of financial services and levies the contributions required for insolvency insurance from employers under public law, and, like an authority, can establish the conditions for enforcement by way of an administrative act, a public body of the Member State?’

23. By its first question, the referring court is asking whether Article 8 of Directive 2008/94 is to be interpreted as applicable to the loss of an allowance such as the one in the main procedure due to the insolvency of a previous employer. In this particular case, the allowance was being paid by the employer to offset, as required by national law, a previous reduction of an occupational old-age pension provided on its behalf via an inter-occupational pension institution subject to State supervision, which for financial reasons had, with the consent of the supervisory authority, to reduce the amount paid.

24. As the question raised directly concerns the application of Article 8 of Directive 2008/94, it is accordingly appropriate to commence this analysis by examining what the conditions for the application of this provision are.

25. According to this article, ‘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 … under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes’. Therefore, four conditions need to be met in order for Article 8 to apply, namely:

- the applicant must be an employee or a person having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency;

- such insolvency must affect rights conferring immediate or prospective entitlement to old-age benefits;

- the old-age benefits in question must have been granted under an occupational or an inter-occupational pension scheme outside the national statutory social security schemes.

27. The second condition (4) implies that the employer is in insolvency. Accordingly, Article 8 does not apply, in principle, to the situation of where it is only the occupational pension body which faces financial difficulties. (5) This is consistent with Article 1 of Directive 2008/94, which requires, for the directive to apply, that the claim is held by an employee against its employer or former employer. Indeed, it should be recalled that Directive 2008/94 is not intended to guarantee, in all circumstances, the rights of employees or former employees conferring on them immediate or prospective entitlement to old-age benefits, but, according to its recital 3, to protect them simply in the event of the insolvency of their employer. In the event of difficulties of the occupational pension body, it is only, as the Court has ruled, when the employer committed to guarantee the payment of the benefits set up in a pension plan and is itself in insolvency that Article 8 may apply. (6)

28. Concerning the third condition, which refers to the term ‘rights conferring immediate entitlement’ and ‘rights conferring prospective entitlement’, it must be noted that, according to the first sentence of Article 2(2) of Directive 2008/94, this is expressed to be without prejudice to national law as regards the definition of these terms. However, the phrase ‘without prejudice’ may create a certain ambiguity, since it can be understood as meaning either that both concepts of ‘rights conferring immediate entitlement’ and ‘rights conferring prospective entitlement’ should be interpreted by reference to national law or that Directive 2008/94 does not seek to modify the definition of these notions given by the national legislation in some other areas of law.

29. The second sentence of Article 2(2) makes clear, however, how the first sentence has to be understood. Indeed, while the first sentence mentions among the concepts for which the directive 2008/48 is without prejudice the term ‘employee’, the second sentence of Article 2(2) stipulates that Member States may not exclude certain types of employees from the scope of that directive. Since the second sentence is aimed at limiting the autonomy of the Member States in defining one of the terms referred to in the first sentence, the first sentence must be understood as empowering Member States to define the terms in question. Accordingly, the concepts of ‘right conferring immediate entitlement’ and ‘right conferring prospective entitlement’ and, by extension, therefore, the application of the third condition rely on national law.

30. As regards the fourth condition, I also believe that the definition of the terms ‘benefits provided under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes’ is also contingent on national law. (7) This flows simply from the reference made to the notion of ‘national statutory social security schemes’ which cannot be assessed otherwise than by reference to national law. (8)

31. These four conditions must be met, in addition to those set out in Article 1 relating to the application in general of Directive 2008/94, in respect of which the Court is not questioned. The fact, therefore, that the employee made a claim arising from a contract of employment, as required by Article 1 of Directive 2008/94, is not in itself sufficient to justify the application of Article 8.

32. In the present case, the referring Court asks whether or not Article 8 is applicable to the loss, due to a former employer’s insolvency, of an allowance such as the one at issue in the main procedure. As it happens the allowance was paid by the former employer to offset, as required by national law, a reduction of an occupational old-age pension provided at first by this employer via an inter-occupational pension institution subject to State supervision of financial services, the amount of which had, for financial reasons, been reduced, with the consent of the supervisory authority.

33. Given the third and fourth conditions mentioned above, in order to determine whether Article 8 applies , it is first necessary to determine the status of the rights held by the claimant when the insolvency of his former employer occurred.

34. In the present case, the particularity of the situation is that the rights held had already been the subject of a previous reduction. Therefore, the legal status of these rights at the time of the insolvency of the former employer depends on the consequences produced by this operation, which in turn depend on whether or not this operation was already covered by Article 8 of Directive 2008/94 (or, before that, by Article 8 of Directive 80/987). Indeed, if Article 8 was not applicable at that time, the consequence produced by that reduction were contingent upon national law, so that it could not be ruled out that a part of these rights were lost or that the amounts paid to compensate for this reduction were not done under ‘a supplementary occupational or inter- occupational pension schemes’.

35. Here, the difficulty is that the referring court did not specify the reason why the occupational pension institution had encountered financial difficulties since 2003. It appears, however, from the information received from the referring court, which has been confirmed by the parties at the hearing, that under Paragraph 1 of the Law on Pensions, employers are responsible for the execution of the occupational pension benefits they have granted in the context of an employment relationship, even if such payments are made through an intermediate occupational pension body. Accordingly, the employer must guarantee the payment in question even in the event that the pension fund does not pay the granted benefits or if it only partially pays them.

36. In any event, all parties agreed at the hearing that the reduction had changed neither the nature nor the quantum of Mr Bauer’s rights. Indeed, it seems that, in view of the information provided by the referring Court, that, under German law, when an employer sets up a pension scheme, he or she nevertheless remains responsible for ensuring the subsequent provision of the benefits.

37. Since, therefore, it is the insolvency of the applicant’s former employer in 2012 which had the effect of affecting the rights conferring immediate or prospective entitlement to old-age benefits and it is not disputed that these rights were granted under an occupational or an inter-occupational pension scheme outside the national statutory social security schemes, I propose to answer the first question that Article 8 is to be interpreted as covering the loss of a payment, such as the one at issue in the main proceeding, made by a former employer to offset, as required by national law, a reduction of an occupational old-age pension. While the precise circumstances of the present case are admittedly unusual, the fact remains that the failure of the former employer to make the supplementary payment in respect of pension reductions otherwise imposed on the employee nonetheless falls squarely within the ambit of Article 8.

38. By its second question, the national court asks under what circumstances, referred to in paragraph 35 of the judgment of 24 November 2016, Webb-Sämann (C-454/15, EU:C:2016:891), the losses suffered by an employeeas a result of the insolvency of his former employer could be considered to be manifestly disproportionate, in the light of the obligation to protect the interests of employees referred to in Article 8 of Directive 2008/94, even if those losses do not amount to more than half the old-age benefits arising out of the accrued pension rights for which he has paid contributions under a supplementary occupational pension scheme.

39. This question calls for a full re-appraisal of the case-law of the Court to date so far as Article 8 of the Directive 2008/94 is concerned.

40. As the Court has pointed out, the level of protection required by Directive 2008/94 is to be determined having regard to the words used in the provision concerned and, if need be, in the light of the objectives pursed by this directive. (9)

41. According to the wording of Article 8 of Directive 2008/94, Member States must 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 under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.

42. In her opinion in Robins and Others (C-278/05, EU:C:2006:476, points 70 and 82), Advocate General Kokott considered that Article 8 requires the full protection of workers’ interests, albeit that such protection did not necessarily mean that pension schemes must be comprehensively financed at all times. She nevertheless maintained that Article 8 required, in respect of cases in which under-financing in the event of the employer’s insolvency leads to adverse consequences for the interests of employees, that Member States take the appropriate measures to ensure that the pension entitlements of employees will be satisfied.

43. In paragraph 36 and 45 of its judgment of 25 January 2007, Robins and Others (‘Robins’, C-278/05, EU:C:2007:56), the Court however held that the wording of Article 8 leaves Member States considerable latitude in determining both the means employed for the purposes of that protection and the level of protection provided. The Court concluded that this latter obligation did not include an obligation to guarantee these pension payments in full.

44. This statement is somewhat surprising. While it may be readily admitted that Article 8 leaves considerable latitude to Member States regarding the means employed for the purpose of ensuring that protection, this provision is nonetheless quite clear regarding the level of protection to be provided. In any event, the usual consequence of the fact that a Member State has been vested with a broad discretion by a particular directive is that it can escape liability by demonstrating that it has taken all appropriate measures that might reasonably be expected in order to fulfil that particular obligation. (10) Yet I must confess that I am unaware of any other instances where the existence of a margin of appreciation for deciding on the means to be used to achieve a certain objective has led to the recognition that this objective must only be achieved partly or where a Member State has been regarded as having discharged its obligation to achieve such objective by reference to some rather vague half- way house simply by reason of the breadth of the discretion so vested by the relevant legislative measure.

45. Returning now to the judgment in Robins, the Court proceeded to state that ‘a provision of domestic law that may, in certain cases, lead to a guarantee of benefits limited to 20% or 49% of the benefits to which an employee was entitled, that is to say of less than half of that entitlement, cannot be considered to fall within the definition of the word “protect” used in Article 8 of the directive’. The situation at issue in those proceedings was one of these specific cases, as, firstly, ‘about 65 000 members of pension schemes suffered the loss of more than 20% of the expected benefits’ and, secondly, ‘some 35 000 of them, that is to say, nearly 54% of the total, suffered losses exceeding 50% of those benefits’.

46. It would seem, therefore, that the Court considered that, irrespective of its percentage, a reduction in the benefits to which a particular employee is entitled was not in itself sufficient to engage the liability of the Member State concerned: the person concerned needs to go further and demonstrate that, in general, the Member State does not ensure a sufficient protection to employees. This approach, which is consistent with the idea of an obligation of means, was also reflected in the considerations set out by the Court regarding the direct effect of this provision for which the Court held that the establishment of Member State liability supposes the demonstration of ‘a manifest and grave disregard’ by that State for the limits set on its discretion.

47. It must, however, be acknowledged that the effect of Robins is that in order to succeed with an Article 8 claim employees are not only required to demonstrate a ‘manifest and grave disregard’ by the State concerned in order to obtain financial compensation in the event of such breach of the State’s obligations, but also that in any case Member States are not expected to guarantee in full the rights of employees. For reasons I will presently set out, I cannot help thinking that the 50 % threshold somewhat impaired the scope of the protection afforded to employees by Article 8. For my part, I consider that in Robins Advocate General Kokott was correct regarding her interpretation of the scope of Article 8.

48. I take this view for the following reasons. First, the language of Article 8 (‘… shall ensure …’) clearly imposes an obligation on the Member States. Second, it is clear that this obligation extends to ‘protect[ing] the interests of employees … in respect of rights conferring on them immediate or prospective entitlement to old-age benefits …’. Third, Article 8 does not itself provide for any ceiling or any percentage so far as the extent of the State’s obligation is concerned.

49. I accordingly find it difficult to see how the obligation provided for in Article 8 could in principle concern anything less than the full satisfaction of the employee’s pension entitlements. As Advocate General Kokott observed in her Opinion in Robins, it is ‘precisely not in the interests of an employee to receive payment of only a fraction of his contractually agreed pension entitlements’.

50. If - as is surely the case - that is precisely the interest of the employee which the Member State is obliged to protect under Article 8, then there is no special magic in the 50% found by the Court in Robins as the minimum figure which an employee should receive in respect of old-age benefits arising from an employer’s insolvency. If - as it plainly does - Article 8 imposes an obligation on the part of the Member States to ensure that these employee interests are protected, I should have thought that this obligation extends to the entirety of the old-age benefits in question and not just to part of them. It should be recalled that in many instances a diminution of some 50% of old-age pension benefits is likely to cause an enormous real financial hardship for persons in receipt of such pensions.

51. If the Union legislature had wished to dilute the extent of the obligation of Member States to protect pensioners from the impact of employer insolvency in respect of their pension entitlements in this potentially far-reaching manner, then I consider that very clear language to this effect would have been used. This is especially so given the manifest social importance of this particular obligation.

52. Accordingly, if the Union legislature had considered that the extent of this obligation was simply to the degree enunciated by the Court in the quartet of cases commencing with Robins, Article 8 would presumably have been drafted differently to specify that the obligation on the part of the Member States extended simply to ensuring that 50% (or any other percentage) of these benefits was protected.

53. Here it may be noted that Article 4(2) and (3) of the directive expressly provides that Member States may limit the number of months in respect of which claims for unpaid salary may be made as against the insolvency fund. Indeed, Article 4(3) permits Member States to place ceilings ‘on the payments made by the guarantee institution’, albeit that such ceilings cannot fall below a level ‘which is socially compatible with the social objective of the directive’.

54. The absence of similar restrictions or limitations in Article 8 regarding the extent of the obligations of Member States regarding the protection of the rights of employees to old-age benefits by reason of employer insolvency is surely telling. As Advocate General Kokott observed in her Opinion in Robins, the very fact that express restrictions on the scope of the obligation imposed on the Member States to protect employees in the case of insolvency are to be found elsewhere in the directive simply serves to re-inforce this argument regarding the nature and extent of the obligation enshrined in Article 8.

55. For all of these reasons, therefore, I consider that Article 8 imposes an obligation on Member States to protect all of the old-age benefits affected by an employer’s insolvency and not just part or a designated percentage of these benefits. In that respect I agree entirely with the reasoning of Advocate General Kokott in her Opinion in Robins. It follows in turn that I am of the view that the reasoning of the Court in Robins on the Article 8 issue cannot be supported and should not now be followed by this Court.

56. None of this implies, however, that Member States have no latitude in determining the means that need to be employed for the purpose of that protection. Indeed, as it follows from the wording of Article 8, the obligation imposed on Member States is not themselves to guarantee the payment of pensions, but rather to ‘ensure that the necessary measures are taken’ to this end. In this regard, I agree with the conclusion reached by the Court in Robins to the effect that an individual cannot simply claim that he suffered a reduction in his pension and then require that the Member State concerned offsets this reduction. It is instead necessary for the claimant to go further and to demonstrate that this Member State did not adopt the measures that could reasonably have been considered sufficient to protect these interests.

57. As I hope presently to demonstrate, one consequence of the incorrect interpretation of Article 8 which I respectfully consider the Court adopted in Robins is that the Court has subsequently struggled to justify this solution in view of the actual wording of Article 8 itself.

58. This is perhaps well illustrated by the judgment delivered in Hogan and Others. (11) Here the Court in effect abandoned the condition related to the existence of special circumstances. It held instead that the correct transposition of Article 8 of Directive 2008/94 requires an employee to receive, in the event of his employer’s insolvency, at least half the old-age benefits arising out of the accrued pension rights for which he has paid contributions under a supplementary occupational pension scheme. (12)

59. In its subsequent judgment of 24 November 2016, Webb-Sämann (C-454/15, EU:C:2016:891, paragraph 35), the Court added that the obligation for Member States to protect employees against any loss of half or more of their old-age benefits did not preclude that ‘in other circumstances, the losses suffered could also, even if their percentage differs, be regarded as manifestly disproportionate in the light of the obligation to protect the interests of employees, referred to in Article 8 of … Directive [2008/94]’.

60. In its latest judgment delivered so far on this topic, namely the judgment of 6 September 2018, Hampshire (C-17/17, EU:C:2018:674), the Court reiterated that certain losses suffered, even if less than half of the expected benefits, could also be regarded as manifestly disproportionate in the light of the obligation to protect the interests of employees, referred to in that provision. (13)

61. As it happens in respect of the 50% figure, the Court did not provide any justification or guidance as to what diminution in benefits might otherwise constitute a manifestly disproportionate interference with the rights of the employees in question.

62. It may, however, be noted that in Webb-Sämann (14)and Hampshire (15)the Court held that this obligation for Members States to guarantee at least half the old-age benefits arising out of the accrued pension rights, for which an employee has paid contributions under a supplementary occupational pension scheme, is an individual minimum guarantee for each and every employee. It seems, therefore, that in these two judgments the Court considered that the application of the 50% rule does not fully exhaust the effects of this provision. In other words, Member States would thus have an obligation to ensure that each employee was guaranteed at least 50% of the benefits to which he was entitled under a supplementary occupational pension scheme in the event of the insolvency of his employer, (16) but this obligation would not exempt them from taking the necessary measures (financial, prudential or other) to protect the interests of employees in full. Where the reduction is below 50%, employees concerned may, therefore, obtain compensation if they demonstrate that the State has failed to fulfil its obligation of means by failing to ensure that the necessary measures (financial, prudential or other) have been taken to protect the interests of employees. Thus, to reiterate the wording used in Robins e.a., even if the reduction suffered does not reach such a threshold, an employee may nonetheless ask to be compensated in full by the Member State concerned in case of ‘a manifest and grave disregard’ by that State for the limits set on its discretion to adopt appropriate measures.

63. These recent decisions can, thus, be understood as a tacit endeavour by the Court to move away from Robins and instead to move in the direction of what I consider to be the underlying objective of Article 8 of directive 2008/94, namely to protect all occupational pension entitlements of retirees from the risk of loss brought about by the insolvency of the employer.

64. In this context, the existence of disproportionate loss may be regarded in itself as evidence, supporting a rebuttable presumption, that the Member State has not fulfilled its obligation of means to ensure such protection.

65. In any event, I believe that the Court should take greater account of the proportionality of the loss suffered.

66. In any proper analysis of proportionality, the context is, of course, of critical importance. Here it must be recalled that provision for pensions in retirement has been part of the fabric of the social contract in European States since the days of Bismarck. Investment in private pensions is for some employees a key part of that social contract, since it is by that mechanism that those who are employed during their active years can save for retirement in the belief that they will thus prudently make provision for themselves and their family once their working years are at an end. Making provision for a private pension is therefore for many employees working in the private sector as critical a financial decision as, for example, buying a house or making future provision for the rearing and education of children.

67. This is why even the partial loss of a pension entitlement by reason of an employer’s insolvency is such a grave and serious matter for the employee concerned. Not only must the employee in question feel that best laid plans in respect of prudent saving for retirement have been set at naught by reason of external factors in respect of which he or she has no control, but the employee’s ability to react to that loss will often be seriously compromised by reason of old age. Put simply, therefore, the capacity of, say, the average 70-year-old to make up for that financial loss will be greatly impaired, as to all intents and purposes the prospect of re-entering the workforce is simply not an option for most retirees.

68. Safeguarding the interests of these retirees who have invested in private pensions from loss brought about by reason of the insolvency of a former employer must therefore be a key policy objective of the Member States. It is in its own way as vital as providing a system of education or housing or protecting the security of banking deposits.

69. In this context, when asked at the oral hearing about whether, for example, a 25% reduction in pension entitlements by reason of employer insolvency would represent a disproportionate loss for the retiree concerned, the representatives of both PSV and the German Government freely acknowledged that this would be painful for the retiree concerned. But I cannot help thinking that such a loss is somewhat more than that: it would represent an unanticipated loss of income which they had every reason to believe would be made available for them when their working lives were at an end. The modern social state exists precisely to protect its citizens against potentially serious losses of this kind.

70. This, therefore, is the context in which the proportionality of any loss falls to be assessed. Other factors are undoubtedly also relevant, not least the question of whether the amount of the pension now available to the retiree and his or her dependants is sufficient for his or her needs having regard to the living standards for retired persons prevailing in the Member State concerned. (17)

71. Admittedly, relatively small reductions in occupational pension entitlements can generally be regarded as either de minimis or, at least, at a level which does not impair the essence of the pension entitlement and the corresponding expectation that it has created on the part of the retiree concerned.

72. But where the loss to the private pension by reason of an employer’s insolvency cannot be regarded as de minimis, the spectre of disproportionality will at some point thereafter come into view, even if there is also no magic figure which would automatically render such loss disproportionate. Contrary to whatever the Court might previously have hinted, I consider that in many instances a loss of below 50% of pension entitlement by reason of employer insolvency will be disproportionate. The pension entitlements of most retirees are relatively modest and even a small reduction in that pension will generally bear too heavily on them.

73. Although this is ultimately a matter for the referring court to ascertain, the representative of Mr Bauer claimed at the hearing that his occupational pension loss might ultimately be in the region of between 30 to 33% (depending on his age). If that is indeed the case then, bearing in mind the relatively modest level of income which evencorresponds to 100% of his full occupational pension entitlement, it is hard to conclude that the loss in question is not disproportionate in view of the general context which I have just described.

74. Summing up, I consider that these are factors bearing on the proportionality issue which, perhaps, have not been sufficiently emphasised in the case-law to date.

75. To that extent, therefore, I believe that the Court should move on from decisions such as Robins and answer the second question to the effect that the circumstances to which the Court referred in paragraph 35 of the judgment of 24 November 2016, Webb-Sämann (C-454/15, EU:C:2016:891), are those in which the claimant proves that the Member State has not fulfilled its obligation to ensure that the necessary measures were taken to protect the interests of employees or of persons having already left the employer’s undertaking and where the reduction in pension rights is at a level which is either not de minimis or which otherwise impairs the essence of the occupational pension entitlements which, but for the employer’s insolvency, the retiree had every reason to anticipate receiving.

76. By its third question, the referring court asks whether or not when a Member State has failed to transpose Directive 2008/94 correctly into national law, Article 8 can be invoked against this Member State before a national court.

77. In this respect, as I explained earlier, the Court was at first cautious, holding that, as neither Article 8 of the directive nor any other provision therein contains anything that makes it possible to establish with any precision the minimum level required in order to protect entitlement to benefits, the liability of the Member State concerned is contingent on a finding of manifest and grave disregard by that State for the limits set on its discretion. (18)

78. In Hampshire, (19) the Court abandoned some of its earlier caution and held, with regard to the obligation for the Member States to guarantee at least half of the old-age benefit to which the employees would normally be entitled, that Article 8 can be invoked against the Member State before a national court as soon as an employee suffers a loss exceeding 50% of its benefits.

79. In reaching this conclusion, the Court recalled that, according to case-law, a provision of a directive may be relied upon by individuals against a Member State if this provision is unconditional and sufficiently precise and that there are three points to be considered in that assessment: the identity of the persons entitled to the protection provided for in Article 8, the content of that protection and the identity of the person liable to provide this protection. (20)

80. I fully share the Court’s analysis in this respect, even if the reasoning held by the Court about the identity of the person liable to provide the protection afforded by Article 8 also deserves to be placed in context.

81. With regard to the identity of the persons entitled to the protection provided for in Article 8 of Directive 2008/94, it is clear from the wording of that provision that the directive is intended to protect employees affected by the insolvency of their employer. (21)

82. Concerning the identity of the person liable to provide the protection afforded by Article 8 of Directive 2008/94, Article 8 designates, clearly and unconditionally, for this purpose the Member States.

83. It is true that Article 8 leaves to Member States some latitude. That latitude essentially relates to the means to be adopted to ensure that Article 8 is discharged. (22) Therefore, it does not deal with the identity of the persons liable to provide the protection afforded by Article 8, which are Member States.

84. Last, regarding the content of the protection provided for by Article 8 of Directive 2008/94, despite the fact that Member States enjoy considerable latitude in determining the form and method used to transpose Article 8, (23) this article can be directly invoked before national courts. Indeed, even when Member States enjoy a certain margin of discretion to implement a provision of EU law, that provision can nevertheless be invoked against a Member State if it has exceeded this margin, in particular because its national legislation does not ensure the minimum protection required by this provision. (24)

85. It follows that, with regard to the minimum protection required by Article 8, since the Court held that this minimum protection consists in the obligation to protect employees against any reduction of more than 50% of their acquired rights, if a Member State does not provide such protection, it must necessarily be inferred from this that the Member State has exceeded its margin of manoeuvre. Consequently, such a breach can be directly invoked against that Member State.

86. Regarding the obligation referred to in paragraph 35 of the judgment in Webb-Sämann, (25) for Member States to ensure that the necessary measures are taken to prevent any disproportionate loss, admittedly, the Court did not indicate the situation to which it was referring. It must nevertheless be recalled that an obligation can be considered not only clear and precise when it is expressly provided for in a text, but also when it can be deduced from that text by means of commonly accepted methods of interpretation, which, in my view, is the case here as it can be inferred from the wording of Article 8 that it protects the rights held by employees in full.

87. However, since the Member State concerned has only an obligation of means, applicants need to demonstrate that the measures taken by that Member State were insufficient to ensure such protection, provided that the existence of disproportionate loss is to be considered as evidence supporting a presumption of such insufficiency.

88. Moreover, it should be noted that the protection conferred by Article 8 relates to the rights conferring immediate or prospective entitlement, a notion the definition of which relies on national law, and not to the financial effects attached to those rights. Indeed, two kinds of supplementary pension schemes exist: ‘defined benefits schemes’ and ‘defined contribution schemes’. (26) Therefore, if, under national law, the rights acquired by a person are only rights to shares of profits and not, as it seems to be under German law, rights to defined benefits, the obligation borne by the Member State is to ensure that the employee does indeed enjoy rights to such shares in full, without prejudice to the amount that will ultimately be paid to the employee.

89. In summary, I propose to answer the third question in the affirmative, i.e., that Article 8 of Directive 2008/94 has direct effect so that, if a Member State has failed to transpose this directive into national law or has failed to transpose it correctly, that provision confers rights on the individual which can be asserted against the Member State before a national court.

90. By its fourth question, the referring court asks when, in matters relating to occupational retirement provision, the Member State has designated - in a manner that is binding on employers - an institution organised under private law as an insolvency insurance institution for occupational pensions, and when this institution is subject to State supervision of financial services and, in addition, levies from employers, in accordance with public law, contributions required for insolvency insurance from employers against the risk of insolvency and, like an authority, can establish the conditions for enforcement by way of an administrative act, whether such institution should be considered as a public body of that Member State so that a provision of a directive may be directly invoked against it.

91. In this regard, it must be recalled that the Court has already held that any provision of a directive that is unconditional and sufficiently precise may be relied upon by individuals, not only against a Member State and all the organs of its administration, such as decentralised authorities, but also against institutions, organisations and bodies which are subject to the authority or control of the State or which possess special powers beyond those which result from the normal rules applicable to relations between individuals. (27)

92. Such institutions, organisations and bodies can be distinguished from individuals and must be treated as comparable to the Member State, either because they are legal persons governed by public law that are part of the State in the broad sense or because they have been required, by a public body, to perform a task in the public interest and have been given, for that purpose, such special powers. (28)

93. Given that, in its question, the referring court refers to a case where a Member State has designated - in a manner that is binding on employers - as an insolvency insurance institution for occupational pensions a certain institution and has granted to the latter the right to levy the contributions required for the insolvency insurance from employers under public law, such institution must be treated as comparable to this State even if it is organised under private law.

94. However, for an obligation arising from a directive to be directly enforceable against that institution, the tasks that they have been required to perform in the public interest must include, explicitly or implicitly, the implementation of that obligation. Indeed, the simple fact that an institution is given special powers by a Member State does not mean that this institution can be held liable for any obligation imposed on that Member State by EU law.

95. In its question, the national court refers to a situation in which a Member State has designated an institution as being in charge of guaranteeing the occupational pensions. However, the case file in conjunction with the information provided in the oral hearing seems to show that the tasks transferred by the German Government to the Pensions-Sicherungs-Verein VVaG concern only the situations where the occupational old-age pension is realised by the employer via a direct promise or a Direktversicherung (direct insurance) or by means of an Unterstützungskasse (an insurance institution that is legally independent of the employer) or a Pensionsfonds (retirement fund). (29) Thus, the case where the occupational old-age pension is realised by the employer via a ‘Pensionskasse’ (pension fund), here the PKDW, does not fall within the scope of any of these assignments.

96. In any case, it is for the national court to assess in view of the specific nature of the obligation invoked - i.e. the breach of the obligation to avoid any disproportionate loss mentioned in paragraph 35 of Webb-Sämann, (30) whether or not this obligation has been delegated by that Member State to that entity. (31)

97. Consequently, I propose that the answer to the fourth question be that when, in matters relating to occupational retirement provision, the Member State has designated - in a manner that is binding on employers - an institution organised under private law as an insolvency insurance institution for occupational pensions, and when this institution is subject to State supervision of financial services and, in addition, levies from employers, in accordance with public law, contributions required for insolvency insurance against the risk of insolvency and, like an authority, can establish the conditions for enforcement by way of an administrative act, such institution is to be considered a public body of that Member State. However, the failure to comply with the obligation provided for in Article 8 of Directive 2008/94 may be invoked against that institution only if the implementation of that obligation falls within the scope of the assignments delegated to it by that State, which is for the national court to determine.

98. In the light of the foregoing considerations, I propose that the Court answer the questions asked by the Bundesarbeitsgericht (Federal Labour Court, Germany) as follows:

1) Article 8 of Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 on the protection of employees in the event of the insolvency of their employer is to be interpreted as covering the loss of a payment, such as the one at issue in the main proceedings, made by a former employer to offset, as required by national law, a reduction of an occupational old-age pension.

2) The circumstances to which the Court referred in paragraph 35 of the judgment of 24 November 2016, Webb-Sämann (C-454/15, EU:C:2016:891), are those in which the claimant proves that the Member State has not fulfilled its obligation to ensure that the necessary measures were taken to protect the interests of employees or of persons having already left the employer’s undertaking and where the reduction in pension rights is at a level which is either not de minimis or which otherwise impairs the essence of the occupational pension entitlements which, but for the employer’s insolvency, the retiree had every reason to anticipate receiving.

3) Article 8 of Directive 2008/94 has direct effect so that, if a Member State has failed to transpose this directive into national law or has failed to transpose it correctly, that provision confers rights on the individual that he can assert against the Member State before a national court.

4) When, in matters relating to occupational retirement provision, the Member State has designated - in a manner that is binding on employers - an institution organised under private law as an insolvency insurance institution for occupational pensions, and when this institution is subject to State supervision of financial services and, in addition, levies from employers, in accordance with public law, contributions required for insolvency insurance against the risk of insolvency and, like an authority, can establish the conditions for enforcement by way of an administrative act, such institution is to be considered a public body of that Member State. However, the failure to comply with the obligation provided for in Article 8 of Directive 2008/94 may be invoked against that institution only if the implementation of that obligation falls within the scope of the assignments delegated to it by that State, which is for the national court to determine.

2 In addition, the applicant obtained, through his own contributions, an increase in the amount of his pension. This additional amount is not affected by the present request for a preliminary ruling. Moreover, the referring court did not specify the amount of the State pension from which the applicant was benefiting.

5 Article 9(1)(e) of Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision (OJ 2003 L 235, p. 10) provides that: ‘Each Member State shall, in respect of every institution located in its territory, ensure that […] where the sponsoring undertaking guarantees the payment of the retirement benefits, it is committed to regular financing.’ (italics added). A contrario, this means that Union law does not require that Member States ensure that the employer guarantees such payment.

6 See judgment of 25 April 2013, Hogan and Others, C-398/11, EU:C:2013:272, paragraphs 35 to 40. In cases in which the Court has already ruled, it flows either from the description of the facts made by the referring court that the employer committed to guarantee the payment or the Court proceeded from the premise that this was the case.

7 See, by analogy regarding the concept of compensation used in Article 3(1), judgment of 28 June 2018, Checa Honrado, C-57/17, EU:C:2018:512, paragraph 30.

8 When adopting Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977, L 61, p.26), which forms a part of the same legislative package as Directive 80/987, the Commission abandoned its attempt to legislate for the transfer of supplementary pension rights in a harmonised way. The stated reason for that was because: ‘the requirements, forms and nature of [pension] obligations differ so greatly and the ways in which they are organised are so varied, that it is not possible to lay down specific Community rules in [the] Directive’. See Opinion of Advocate General Bobek in Webb-Sämann, C-454/15, EU:C:2016:653, point 62.

9 Judgment of 25 January 2007, Robins and Others, C-278/05, EU:C:2007:56, paragraph 41.

10 See, to that extent, judgment of 27 March 2014, UPC Telekabel Wien, C-314/12, EU:C:2014:192, paragraphs 52 and 53.

12 However, in so ruling, the Court departed from the idea of an obligation of means.

16 As the Court lays down, Member States have an obligation of result only ‘in that regard’, namely to ensure a minimum degree of protection. See Judgment of 24 November 2016, Webb-SämannWebb-SämannWebb-Sämann, C-454/15, EU:C:2016:891, paragraph 35.

17 It is true that in Hogan and Others (paragraph 33) the Court held that Article 8 of Directive 2008/94 must be interpreted as meaning that State pension benefits may not be taken into account in assessing whether a Member State has complied with the obligation laid down in that article. However, I believe that, when the Court made this statement, it only had in mind the 50% threshold. First, when this judgment was rendered, the solution adopted in Webb-Sämann and Hampshire had not yet been found. Second, from a logical point of view, it cannot be inferred from the fact that Article 8 only covers the claims related to supplementary occupational or inter-occupational pension schemes outside the national social security schemes that the State pension benefits may not be taken into account in assessing whether a Member State has fulfilled the obligation laid down in that article. Indeed, the scope of a guarantee is different from the amount of its coverage. In the field of social security, it is common that the payment of compensation is decided in consideration of a particular situation (disability, severe disability, orphan), but that its amount varies according to external factors, such as all the income received. However, the interpretation made by the Court in Hogan and Othersis correct from the perspective of the 50% rule, since, by definition, to assess whether the reduction incurred exceeds this threshold, only the benefits paid under an occupational or inter-occupational pension scheme is to be taken into consideration. .

18 Judgment of 25 January 2007, Robins and Others, C278/05C278/05C278/05, EU:C:2007:56, paragraphs 80 and 82.

22 See to that extent, judgment of 18 October 2001, Gharehveran, C-441/99, EU:C:2001:551, paragraph 44.

23 See judgments of 25 January 2007, Robins, C-278/05, EU:C:2007:56, paragraphs 36 to 45, of 25 July 2018, Guigo, C-338/17, EU:C:2018:605, paragraphs 30 and 31.

24 See, to that extent, judgment of 25 April 2013, Hogan and Others, C-398/11, EU:C:2013:272 paragraph 46.

26 As their names imply, in a defined benefits pension plan, the person concerned receives a fixed pension - which may require the employer to replenish the plan in the event of poor performance of the investments made -, whereas the payment received in a defined contribution plan depends on the performance of the investments made with a fixed contribution paid by the employer.

27 See judgment of 10 October 2017, Farrell, C413/15C413/15C413/15, EU:C:2017:745, paragraph 3333

31 In judgments of 16 December 1993, Wagner Miret, C-334/92, EU:C:1993:945, paragraph 18, and of 18 October 2001, Gharehveran, C-441/99, EU:C:2001:551, paragraph 38, the Court ruled thus that Article 3 of Directive 80/987 (now Article 3 of Directive 2008/94) provides that the directive on the insolvency of employers does not oblige the Member States to set up a single guarantee institution for all categories of employee, and consequently to bring higher management staff within the ambit of the guarantee institution established for the other categories of employees.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Pensions-Sicherungs-Verein (Social policy - Protection of employees in the event of the insolvency of their employer - Opinion) [2019] EUECJ C-168/18_O (08 May 2019) URL: http://www.bailii.org/eu/cases/EUECJ/2019/C16818_O.html Cite as: [2019] EUECJ C-168/18_O, EU:C:2019:392, ECLI:EU:C:2019:392

Court of Justice of the European Communities (including Court of First Instance Decisions)