Press Release
Unions take government to European Court
25 October 2005
Amicus, Britain's biggest private sector union along with Community have today submitted evidence to the European Court of Justice (ECJ) as part of an on going legal battle with the UK Government to win compensation for workers who have lost their pensions through company insolvency.
Under an insolvency directive issued in 1980, member states were required to take measures to protect the interests of employees pensions. The UK under the Thatcher Government was the only member state that failed to meet the obligation.
Amicus in conjunction with Community have taken to UK Government to the ECJ for justice in respect of the Allied Steel Wire workers who several years ago lost their jobs and pensions through insolvency.
Amicus General Secretary Derek Simpson, said: "It must be a fundamental right that people who save in a company pension scheme should be protected by law. We believe if the 1980 insolvency directive had been implemented by the Thatcher government at the time, then thousands of hardworking people would not be facing poverty in their old age. Our legal advice is sound and the union is confident of a victory on behalf of our members"
The written Observations with the European Court of Justice is the first opportunity the unions have had to explain the issues to the ECJ in detail. The case which they make in their Written Observations is as follows:
1. Article 8 of the Insolvency Directive (Directive 80/987/EC) requires the member states of the European Union to "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 [i.e. pensioners and deferred pensioners] in respect of rights conferring on them immediate or prospective entitlement to old-age benefits...." under company pension schemes. In the case of the Claimants in these proceedings, who may receive as little as 20% of their expected pension, the UK Government has manifestly failed to meet that obligation.
Article 8 requires the member states to ensure that such pension entitlements are fully funded at all times. The UK failed to do that until, belatedly, it created the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS) under the Pensions Act 2004. The PPF has come too late for these Claimants; the FAS provides woefully inadequate protection. Only 73 members of the ASW Cardiff Pension Plan are likely to qualify for any payment under the FAS at all.
2. The legislation relied on by the Government, prior to the Pensions Act 2004, did little or nothing to protect scheme members. The minimum funding requirement (MFR) says nothing about the solvency of a pension scheme if it is wound up, and the timescales allowed for bringing the pension scheme up to the inadequate MFR level mean that the scheme could legitimately remain below the MFR level for up to ten years.
The UK Government also relied on the legal requirement that, in most cases, pension scheme assets had to be held separately from the assets of the sponsoring employers. That said nothing about the amount of the contributions the employers had to pay into the scheme and, at the time when the Directive was meant to be implemented (October 1983) the only necessity to contribute was an Inland Revenue requirement to pay contributions at a level more than "token or insignificant." The tax law was designed to prevent pension schemes being over-funded. It was not designed to ensure that they were properly funded.
Finally, the Government relied on the existence of the Pensions Compensation Board - which only comes into play where the pension scheme has been raided dishonestly - and the relatively trivial amount the National Insurance Fund will pay in respect of unpaid pension contributions if an employer becomes insolvent leaving an under-funded pension scheme in its wake.
3. The Claimants say that the Government is legally obliged to compensate them for the losses they have suffered as a result. The ECJ can require member states to pay compensation where citizens have lost out as a result of theb Government's failure to implement a Directive. The best known example in this country is the Spanish Fishermen's case. The ECJ's case law dictates that compensation should be paid if the European legal provision is (i) sufficiently precise, (ii) is designed to grant rights to individuals and (iii) the loss suffered by the Claimants is causally linked to the failure to implement the Directive correctly. The Government's failure to implement the Insolvency Directive in the case of pension rights is so serious that compensation ought to be paid.
The government is required to submit any Written Observations it may wish to make by the 24 October. The European Commission is also entitled to make Written Observations if it thinks fit.
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