Hogan and others v Minister for Social and Family Affairs (Court of Justice of the European Union, formally ECJ) – 25 April 2013


In this recent decision, the CJEU found that Ireland has failed to properly transpose the requirements of the EU Insolvency Directive (the “Directive”) into its national law.

Background

Article 8 of the Insolvency Directive requires Member States to ensure that the necessary measures are taken to protect the pension benefits of current and former employees under the employer’s occupational scheme, in the event of the employer’s insolvency.

Facts

Mr Hogan brought the case along with other former employees (the “claimants”) of Waterford Crystal Limited (“Waterford”).

Waterford was declared insolvent at the beginning of 2009 and its occupational pension schemes were wound up on 31 March that year.  The pension schemes’ deficit was approximately EUR 110 million.

The claimants’ actuary estimated that the claimants would receive between 18 and 28% of their benefits.  Ireland’s actuary was a little more optimistic, putting the percentage between 16 and 41%.

The claimants therefore argued that Ireland had failed to correctly transpose Article 8 of the Directive into national law.

The Irish High Court stayed proceedings to refer several questions on the interpretation of the Directive to the CJEU.

CJEU decision

Among other matters, the CJEU ruled that Ireland had failed to properly transpose the Directive.  Furthermore, its failure to put adequate measures in place, following Robins, to ensure members of occupational schemes would receive in excess of 49% of the value of their accrued pension benefits constituted a serious breach of its obligations and, as such, could entitle the claimants to damages.

Comment

Hogan is a follow-up to the decision of the CJEU in Robins in 2007.  The Robins case followed the collapse of Allied Steel and Wire where more than 800 staff who lost their jobs and most of their pension when the firm folded in 2002.  They argued that the UK had not properly transposed Article 8.

The CJEU found that correct transposition of Article 8 requires an employee to receive, in the event of the insolvency of his employer, at least half of the pension benefits they have accrued to date.  By the time judgment was delivered, the UK had put the PPF and Financial Assistance Scheme (FAS) in place.

Under the current system, in the UK the PPF pays members over the scheme’s normal pension age, those who retired on ill-health and those in receipt of survivor’s benefits receive 100% of their benefits.  However, other early retirees and deferred members are only entitled to 90% of their accrued benefits excluding pre-1997 increases and, subject to a “compensation cap” (currently £34,867.04, but which equates to £31,380.34 once the 90% has been applied).  Therefore some members may find that, once this cap is applied, they receive less than 50% of the benefits they had accrued by the date of their employer’s insolvency.  This means that the UK may also be at risk of claims that it has failed to put sufficient measures in place, to safeguard at least 49% of a member’s benefits.