CASE AGAINST PENSIONS DISCRIMINATION
James Nelson FFA and Brian Havard
for the British Australian Pensioner Association
Revised February 2002
THE FUNDAMENTAL CHALLENGE
2. British Age Pensions: The historical background
3. Countering ECmHR adverse precedents
3.1 Application 9776/82, JW & EW v UK
3.2 Application 11271/84, F R Corner v UK
3.3 Application 38882/97, Brian E Havard v UK
4. Countering justifications claimed by Britain
5. Discrimination and its bizarre side-effects
6. Margin of appreciation
1. British Age Pensions
1.1 British Age Pension components
1.2 Discrimination adversely affecting SERPS, compared with Occupational Pensions
2. The Beveridge Report
3. Supporting ECHR Precedents
3.1 Gaygusuz, Case Summary
3.2 Szrabjer, Case Summary
3.2.1 Correcting ECmHR Misapprehensions in Szrabjer
3.3 Sutherland, Case Summary
4. Main Precedents cited in ECHR judgements
4.1 9776/82, JW & EW v UK
4.2 4130/69, X v Netherlands
4.3 5849/72, Müller v Austria
4.4 7459/76, X v Italy
5. German Constitutional Court Case
THE FUNDAMENTAL CHALLENGE
The UK government's discriminatory pensions policy violates Article 14 together with Article 1 of Protocol 1, of the European Convention on Human Rights, now incorporated into UK law as the Human Rights Act.
The United Kingdom state retirement pension scheme is funded by mandatory contributions which are uniform for all people in employment.
The Secretary of State for Social Services, (Sir) Norman Fowler, in a Green Paper Reform of Social Security, June 1985, re-affirmed a fundamental principle of the Beveridge report on which the British pension system is founded, quoting: 'all insured people, rich or poor, would pay the same contributions for the same security.'
The United Kingdom pays the same annual uprating, as applies to UK resident pensioners, to some 350,000 of its expatriate pensioners in the European Economic Area, the USA, the Philippines, Israel, Turkey, former Yugoslavia and certain Commonwealth countries and UK dependencies.
The United Kingdom denies pensions uprating to the remaining 450,000 of its expatriate pensioners, including those in Australia, by enforcing Social Security Benefit (Persons Abroad Regulations) SI 1975/563, and Social Security Benefit (Up-Rating Regulations) SI 1990/645
The House of Commons Social Security Committee enquiry into Uprating of State Retirement Pensions Payable to People Resident Abroad concluded:
'38. Surely no one would have deliberately designed a policy of paying pensions to people living abroad intending to end up in the position we are at today . . . It is impossible to discern any pattern behind the selection of countries with whom bilateral agreements have been made providing for uprating'. (Third Report, Session 1996-97)
On Monday 13 November 2000, the Pensions Minister, the Rt. Hon. Jeff Rooker, in the course of his reply to a question in the House of Commons about the government's policy in relation to 'frozen' pensions, admitted: 'I have already said that I am not prepared to defend the logic of the present situation. It is illogical. There is no consistent pattern.'
The United Kingdom is treating differently, without objective or reasonable justification, persons in relevantly similar situations in breach of Article 14.
The European Commission of Human Rights determined that payment of contributions to the UK State Earnings Related Pension Scheme creates a possession. (Szrabjer and Clarke v UK 27004/95 & 27011/95)
Furthermore, the European Court of Human Rights determined the pecuniary nature of the link between entitlement to benefit and payment of contributions. (Gaygusuz v Austria 39/1995/545/631)
UK pensions policy denies a pecuniary right in breach of Art 1 of Prot 1.
Therefore, UK Pensions discrimination breaches Art 14 together with Art 1 of Prot 1
For solicitors and barristers in the matter of 'frozen' pensions
The aim of these notes is to show that:
Freezing of pensions is an interference with property rights, contrary to Article 1 of the First Protocol to the European Convention on Human Rights.
Such interference is applied in a discriminatory manner, in contravention of Article 14 of the European Convention on Human Rights.
The contraventions can not be justified on objective or reasonable grounds.
The contraventions go beyond the reasonable limits of any 'margin of appreciation'.
United Kingdom domestic laws, which provide for the selective freezing of expatriate pensions, should therefore be struck down.
2. British Age Pensions: The historical background
(For details of British Age Pension components, see Appendix 1.1)
Age and widows' pensions were established in Britain early in the twentieth century. In 1925 a contributory scheme was introduced, but at first pensions were only payable to residents in Britain. In 1929 the rules were changed to allow payment anywhere in 'His Majesty's Dominions', more or less what is now called 'the Commonwealth'.
From then until 1946, the pension was at a fixed rate of 10/- per week, no adjustment being made for rises in the cost of living. In 1946, the pension was increased to 26/- per week, but only for residents in Britain. The justification for this, according to a DSS letter, appears to have been that the increase was being made in anticipation of the introduction of the National Insurance Scheme (see Appendix 2: The Beveridge Report) with a higher level of pension, to which overseas residents were not expected to contribute.
In 1955 payment of age and widows' pensions was extended so that they were payable wherever in the world the pensioner happened to reside but the enabling legislation proscribed pension increases for non-resident pensioners, unless specifically authorised by the Secretary of State. The justification was that it was a time of economic stress.
Since that time, Secretaries of State have exercised their discretion to a point where roughly half of the expatriate pensioners have their pensions indexed each year in step with those of resident pensioners, the other half having their pensions 'frozen'.
Pension freezing falls in an uneven manner on expatriate pensioners, for it depends not just on their country of residence but on the date when their pension was first paid there. As will be shown later, this has unexpected and unacceptable consequences.
3. Countering ECmHR adverse precedents
3.1 Application 9776/82, JW & EW v UK
(See Appendix 4.1 for transcript of decision)
The applicants were contemplating emigration to Australia, and alleged violation of Article 1 of the First Protocol. The application was declared inadmissible.
The Facts (para 3):
From the information submitted by the applicants it appears that their entitlement to a pension under UK Social Security legislation is modified as from their emigration to Australia by the terms of a Social Security Agreement between UK and Australia.
The Agreement merely provided that contribution years in Britain would count as residence years in Australia and vice versa. It did nothing to modify pension entitlement, leaving each party free to enact its own domestic legislation. Britain opted for selective denial of uprating; by contrast Australia uprates expatriate pensions.
It appears that under the terms of the agreement persons migrating between the two countries are enabled to claim certain social security benefits in the country to which they migrate. The position as regards the applicants' retirement pension is as follows:
i the retirement pensions . . . relevant legislation; (no comment)
ii by virtue of the Agreement they become entitled to Australian age pension minus the amount of their basic United Kingdom pensions. However the Australian pension is subject to a means test until the recipient is 70 years old and because the applicants have a pension from employment they will not satisfy this test and will therefore receive no Australian pension - only the frozen United Kingdom one
iii as from the age of seventy the applicants will be entitled to receive Australian age pension minus the amount of the basic United Kingdom pensions
There were significant errors of fact in the application as presented. The applicant, who was at the time aged 65, submitted that, under Australian legislation, he would be able to get a pension free of means test when he turned 70.
However, it was not so. JW & EW were evidently unaware that, at the time of their application, the first steps had already been taken in abolishing the non-tested pension, and by the time he reached age 70 in 1987, this special pension had completely disappeared. Thereafter all pensions were means tested, except for the quantum of pension already awarded to people who were already aged 70 or more.
Based upon information supplied by the applicant, the Commission observed:
after a ten year period of residence in Australia they will, it appears, become entitled to Australian age pensions in their own right, not merely under the agreement, and without deduction of the United Kingdom pensions, which they will receive in addition.
Again, this was not so. Having both the frozen UK state pension and a private pension, JW would have been disqualified from the Australian pension under the means test, both while the social security agreement was in force and also after ten years residence. Even if an Australian pension had been granted, 50% (now 40%) of their UK pension would have been deducted from their Australian pension.
These major errors of fact, based upon incorrect information from the applicants, resulted in a flawed judgement, setting an insurmountable precedent for subsequent applicants.
The transcript of the decision continues:
The Law 3 (para 1)
The Commission . . . recalls that it has previously held that although this provision does not as such guarantee a right to a pension, the right to benefit from a social security system to which a person has contributed may in some circumstances be a property right protected by it. However the Commission also held that Article 1 does not guarantee a right to a pension of any particular amount, but that the right safeguarded by Article 1 consists, at most, in 'being entitled as a beneficiary of the social insurance scheme to any payments made by the fund' (Application. 5849/72 Müller v Austria. See Appendix 4.3)
The word any in this context surely cannot mean that an equal contributor must be grateful for anything he gets, accepting that different benefit levels may be arbitrarily set between one and another. Frozen pensioners do not seek a particular amount of pension, only to secure parity with other age pensioners, and particularly expatriate pensioners in 'non-frozen' countries, who are 'persons in relevantly similar situations'.
In the Müller case, the applicant was seeking to have his pension calculated in such a way as would have resulted in a higher pension than that enjoyed by other Austrians. In paragraph 32 of that same case the Commission observed:
It is true that, in some cases, a substantial reduction of the amount of the pension could be regarded as affecting the very substance of the right to retain the benefit of the old age insurance system. However, in the present case, this problem does not arise because the difference of which the applicant complains amounts to 97.70 schillings, that is to say approximately 3% of his pension.
Because of the manner in which expatriate pensions are frozen, the shortfall between pensions paid in non-uprated countries and the current basic pension amounts to 6.9% for pensions frozen since the year 2000 up to 50.62% for pensions frozen in 1984, and higher still for earlier years. On any reckoning, this must be regarded as affecting the very substance of the right to retain the benefit of the old age insurance system.
It has further held that before the right to benefit protected by Art 1 can be established, it is necessary that the interested party should have satisfied domestic legal requirements governing the right (Application 7459/76 X v Italy. See Appendix 4.4)
But the case referred to went further:
In order that such a right may be established, however, it is necessary that the interested party should have satisfied domestic legal requirements governing the right, in principle, to an annuity. Such requirements generally include a minimum number of years of contribution.
The final sentence in that paragraph indicates that the criterion in this case was whether the complainant had made 'a minimum number of years of contribution'. Because of his dismissal from the service, he failed to attain the required seniority. The quantum of benefit was not in question, nor was there a question of residence. The UK pension system is predicated upon a minimum number of contribution years.
The Law 3 (para 2)
In the present case when the applicants migrate to Australia their entitlement to benefit from the UK pension scheme will come to be regulated by different rules of domestic law under which they will cease to qualify for payment of future pension increases contemplated by the relevant legislation. To that extent they will not satisfy domestic legal requirements to benefit from the UK pension scheme. Even if the right to benefit from a scheme will normally also apply to the regular increases this is not necessarily the case where a person leaves the country where the specific scheme operates.
The domestic legislation is discriminatory because of its less favourable treatment of 430,000 expatriate pensioners, including those in Australia, compared with the remaining 330,000 expatriate pensioners who enjoy identical treatment to those in the UK. The UK Pensions Minister admitted to Parliament in November 2000 that there is no logic in the choice of countries. The Australian government found the failure of Britain to uprate its pensions so unreasonable that it terminated the bilateral social security agreement.
The Commission notes that in many countries specific restrictions as to the payment of social security benefits exist or have existed. (see Application No 6572/74, x v Federal Republic of Germany, 8 Decisions and Reports, p 70)
When the non-payment of pensions to certain categories of overseas residents was challenged in the German Constitutional Court 1 BvR 111/74 & 283/78 20 March 1979, it was ruled: 'the unequal treatment of insured people who through equal contributions have achieved an equal legal foundation and an equal legal entitlement cannot be reconciled with the Basic Law'.
This case was summarised, in the 1993 UK Department of Social Security Research Report No 23, entitled Crossing National Frontiers by Helen Bolderson and Francesca Gains of Brunel University, as follows: 'The court ruled that contributory pension rights should be seen as the 'property' of the contributor and therefore the state must justify occasions when pension rights are withdrawn if a person leaves the country. The case law became incorporated into subsequent revisions of the RVO (relevant German law), and altered the policy towards payment of benefit abroad.' (See Appendix 5)
The Commission notes that it is a common feature of international life that social security agreements are entered into between different countries for the purpose of regulating the rights of persons moving from one country to another under the social security systems of each country. Such agreements commonly provide for the substitution, to a greater or lesser degree, of benefits under one system for those due under another.
No dispute could arise if the benefits were broadly equivalent in nature and purpose. State health care, provided in UK by the National Health Service largely free of cost, is available in Australia under different arrangements. Medicare, broadly equivalent to the NHS, is funded by a charge on taxable income and offers subsidised health care. Unemployment, sickness and disablement benefit differ only in the detail. By contrast the pension systems are radically different. Britain's mandatory non-means-tested contributory system, where benefit is a function of contributions, operates like a superannuation fund. Australian means-tested pensions, funded by taxes, have more in common with the UK Minimum Income Guarantee.
Furthermore the Commission notes that the applicants will only lose the benefit of future increases in their pensions, whose purpose broadly speaking is to compensate for rises in the cost of living in the United Kingdom.
This use of the word only is quite inappropriate in the circumstances. In 1982 the rate of pension for a single pensioner was £32.85. In 2001 it is £72.50. If JW is still living, his pension will now fall short of the pension enjoyed by an equivalent expatriate pensioner living in an uprated country by £39.65. His pension will be only 45% of what it would have been in the absence of freezing, a loss of over £17,000.
Given that they will not be living in the United Kingdom, it appears reasonable that this element in their pension rights in particular should be replaced by the possibility of benefiting under the system of the country they are moving to.
In a world where inflation is universal, indexation is necessary in order to preserve the real value of pensions. No benefit whatsoever accrues in their country of residence (Australia) to 60,000 UK pensioners, excluded from local pensions by a means test which has no part in the British scheme. Australia found Britain's denial of uprating to its pensioners so unreasonable that it terminated the bilateral agreement.
3.2 Application 11271/84, F R Corner v UK
The applicant was contemplating emigration to South Africa to be with his daughter and his only grandchild. The dismissal of his application, alleging violation of Article 1 of the First Protocol and discrimination contrary to Art 14, cited the earlier case 9776/82 as the principal precedent. Much of the transcript advances the same arguments with the same case references as 9776/82 but it invokes one different precedent, 4130/69 X v Netherlands (See Appendix 4.2) in which it was argued that, because the Netherlands scheme was founded on 'social solidarity' rather than on funding principles, contributors did not acquire proprietorship rights in the fund.
In support of this the respondent government submitted that there was no relationship between the amount of an individual's contribution under the Old-Age Pension Act and the pension amount from the age of 65. The Act was characterised by its underlying principle of solidarity, a feature of the Netherlands system notably absent from the British scheme, whose pension benefits are strictly in proportion to contributions.
The Netherlands scheme was said to be 'based on a revolving fund and not . . . on capital coverage'. (loc. cit.) This concept is constantly advanced by the UK government, arguing that the British pension system is an unfunded 'pay-as-you-go' scheme under which the current year's benefits are paid out of the current year's contributions.
Although the British NIS bears some of the characteristics of a 'social solidarity' scheme, it has two distinguishing features. One is the scaling of the basic benefit according to contributory years, either paid or accredited. The other arises from comments made in the Beveridge proposals. (See Appendix 2 for extracts from and commentary on the Beveridge Report, in particular paragraph 24)
In reaching its decision on 4130/69 the Commission observed:
. . . the making of compulsory contribution to a pension fund may, in certain circumstances, create a property right in a portion of such fund. And that such right might be affected by the manner in which the fund is distributed.
This thought appears also in X v Sweden (1986* 8 EHRR 252)
. . . the payment of contributions to a pension fund may in certain circumstances create a property right in a portion of such fund and a modification of the pension rights under such a system could therefore in principle raise an issue under [Article 1 of Protocol 1]
The British National Insurance Scheme is clearly not just a 'social solidarity' scheme. Contributions establish a firm basis of calculation of a person's basic pension or 'share' in the fund, as they do equally for the additional pensions introduced from 1961.
In following the decision in 9776/82, the Commission overlooked the substantial difference in the facts of the case. Whereas the applicant in case 9776/82 (mistakenly) anticipated both enjoying a non-means-tested Australian pension from age 70, and after ten years residence an Australian pension in his own right, without deduction of the UK pension, the applicant in this case had no prospect of obtaining any pension whatsoever in the country to which he proposed to emigrate.
3.3 Application 38882/97, Brian E Havard v UK
The applicant alleged breach of Art 1 of the First Protocol and Art 14 but corrected some misapprehensions in 9776/82 and also adduced the recent case of Gaygusuz v Austria (See Appendix 3.1) which had determined that contributions give entitlement to benefit.
'It appears that your complaints under Article 1 of Protocol 1 and Article 14 are substantially the same as complaints which have already been dealt with by the Commission. I enclose copy of the Commission's decision in application 9776/82.' (Letter 27 Aug 1998 to Applicant from J S Phillips for Secretary to ECmHR)
'I would note that in the case of Gaygusuz, the applicant was in exactly the same position as Austrians who had paid into the State system, but he was not entitled to a particular benefit. The position in your case is different, as you receive a pension (even if it is not index-linked) and you are not in the same position as someone who has not left the country' (Letter 29 Jan 1999 to Applicant from J S Phillips, Legal Sec for the Registrar, ECtHR)
The application was dismissed in the final days before the Commission was absorbed by the Court at a time when it was reportedly overwhelmed with applications. The decision misinterpreted the relevance of Gaygusuz and was made without considering a correction to the Commission's misunderstanding in 9776/82 of the provisions of the Social Security Agreement between Australia and Britain. But the over-riding fallacy lies in implying that all emigrants are treated equally though differently from those remaining in the UK. The discrimination exists in treating differently two emigrants, one say in Melbourne, the other in Miami, whose circumstances are otherwise identical.
The applicant persisted in his appeal against the dismissal, and was informed:
'As far as you are complaining about matters which are substantially the same as those raised in the above application, which was declared inadmissible by the European Commission on 22 October 1998, I should point out that, by virtue of Article 35 §2(b) of the Convention, the Court could not deal with any further application by you which was substantially the same as the above application and which contained no relevant new information.' (Letter 21 June 2000 to Applicant from J.S Phillips, Legal Sec for the Registrar, ECtHR)
The Legal Secretary chose to ignore the fact that the original application contained new relevant information, namely correction of the Court's misapprehension in 9776/82 about the provisions of the Anglo-Australian Social Security Agreement, and the now established case law from Gaygusuz that contributions give entitlement to benefit.
He cited Article 35 §2(b) on the Court not dealing with any application 'substantially the same as a matter that has already been examined by the Court' (though the Application under reference had only been adjudicated by a rump Commission of three judges), but he omitted any reference to the option in Article 37 §2 'The Court may decide to restore an application to its list of cases if it considers that the circumstances justify such a course.'
4. Countering justifications claimed by Britain
4.1 Reciprocal agreements are necessary
Britain claims that pensions can be indexed only for pensioners resident in the UK or in the EU or in one of the countries with which Britain has a reciprocal agreement that provides for indexing. This is manifestly untrue, for the following reasons:
i Reciprocal agreements are irrelevant. The Government has conceded that: 'Full indexation of British pensions world-wide could be achieved by a simple change in our domestic legislation.' Parliamentary Under Secretary for Social Security Mrs Gillian Shephard. 16 October 1990
'reciprocal agreements are not necessary to pay pensions to all beneficiaries living abroad at the same rates as those paid in the United Kingdom'. Minister of State Nicholas Scott, 1988
'An agreement is not strictly necessary to allow payment of pension increases, as that could be achieved through changing UK domestic legislation.' Minister of State Stephen Timms in answer to a question from Dr. Lynne Jones, 10th Mar 1999
'It would clearly be impractical to negotiate bilateral agreements with each of the other countries in the world where people draw British state retirement pensions, and in any case unnecessary, a simple change in British law could enable upratings to be paid in any or all overseas countries, provided the political will was there to do so.' Social Security Committee Third Report , January 1997
ii The (recently terminated) social security agreement between Britain and Australia specified only that 'the rate of a benefit which is payable by virtue of paragraph (3) shall . . . be assessed in accordance with the provisions of the legislation of the relevant Party'. It neither prescribed nor proscribed indexation, leaving each party free to amend its domestic legislation. Australia did so, and Australian pensioners living in Britain enjoy the same annual indexation as those living in Australia.
iii Britain has an agreement with Guernsey. But this does not cover Sark even though it is in the bailiwick of Guernsey. Sark is covered 'under UK domestic legislation'.
4.2 Scheme was designed for people living in Britain
'The Social Security system is designed primarily for people living in Britain. However desirable and worthwhile, . . . the substantial additional cost involved would have to be found from the money available for Social Security.' (A frequent excuse offered in correspondence.)
This excuse is demonstrably false. The issue is not with the Social Security system as a whole, only with pensions. These two quite distinct divisions are separately funded: Pensions are 'Social Insurance' funded by contributions to the National Insurance Fund from employees and their employers; the larger division, 'Social Welfare', is funded by taxation. It was never intended that Social Welfare benefits be paid from the Social Insurance fund.
In any event, half the expatriate pensioners are already uprated, therefore this excuse cannot justify discriminating between expatriate pensioners living in Darwin and those living in Dallas, or between two pensioners living in Australia.
4.3 Shortage of money - the need to order priorities
The United Kingdom Government declares that its priority is to direct the limited resources available to those pensioners in the United Kingdom who are in most need. On 7th February 2000, Minister of State Jeff Rooker put it more crudely: 'Frankly, we have other and better ways of spending £300 million.'
In the Gaygusuz case (See Appendix 3.1) when the Austrian government tried to justify its discriminatory policies on the grounds that the money should be used for its own citizens, the Court was not prepared to accept this proposition.
The needs of poor UK resident pensioners are already addressed by for instance the Minimum Income Guarantee and Rates relief, but many significant concessions apply to all pensioners irrespective of income, such as Winter Fuel Allowance, concessionary travel and free eye tests, while a TV licence is granted free to all aged 75 and over. All of these are met out of the supposedly 'limited resources' of general revenue.
The National Insurance Fund has a large and growing surplus (£12 billion in March 2000). This surplus has already been diverted once to reduce contributions by £3 per week. This may be a legitimate application of such surpluses, but not at the expense of a section of pension recipients denied uprating on cost grounds, though their contributions helped create the surplus..
4.4 Pensioners knew their pensions would be frozen
'Before people leave the country, they fully know the rules on how pensions are uprated around the world. There is no secret about the countries with which we have international treaties.' Mr Rooker, 7th February 2000
This is both untrue and irrelevant. In reality it is very difficult for a citizen to discover that pensions will be selectively frozen. Even people who request a pension forecast and disclose that they are contemplating emigration are not told. One pensioner had made such an enquiry before he emigrated. It was only when he was living in Canada and advised the DSS of a change of address that he was given a leaflet which, for the first time in his experience, disclosed the existence of the frozen pension laws. When he asked why they had not told him when he made his enquiry about pension forecast, they replied: 'We do not issue these leaflets with pension forecasts unless the customer is actually resident abroad.'
4.5 Your contributions do not entitle you to benefit
This excuse is expressed in a letter from the Minister's office:
Ever since it was established, the NI scheme has worked on a 'pay-as-you-go' basis. This year's contributions go to this year's pensioners. An individual's contributions provide a foundation for calculating personal future benefit entitlement, but do not actually pay for those benefits.
This is the 'Dutch' excuse offered by the Netherlands in case 4130/69 (See Appendix 4.2) In the British context it is inapplicable.
To describe a scheme as 'pay-as-you-go' merely means it is 'unfunded', that is, the contributions were not invested to provide for future benefits; the government spent contributors' money instead of saving it for them. Private pension schemes are always funded, but it is not unusual for civil service and parliamentary pensions to be paid from an unfunded scheme.
The failure to fund a scheme does not detract from the members' rights to benefit - unless, of course, all the funds have been embezzled as happened in the Maxwell fund.
The department's letter does at least acknowledge the link between contributions and benefit entitlement.
Beveridge consciously discarded the fully funded approach for practical reasons. Nevertheless the scheme's philosophy was based on a funded approach. Indeed the original calculation of the contribution rates was based on actuarial methods used in funded schemes.
4.6 Any uprating of pensions for pensioners in Australia would only result in more money going into the Australian Treasury
Mr. Rooker: 'I must tell the right hon. Gentleman that there is no basic state pension in Australia; it is all means-tested. [Interruption.] It is not all means-tested in this country. If the Government did change their policy in respect of Australia, we would be paying to the Australian Treasury. The only people who would gain in Australia are those who are so well off that they do not get the age pension in Australia.' Hansard 13 Nov 2000, Column 627-8
This is a callous and cynical attitude. It is also untrue. In Australia, apart from a means test, there is a 10 year residency requirement for the age pension. The recently terminated agreement had only benefited those with less than ten years residence by permitting contribution years in Britain to count as years of residency in Australia. It was true that for qualifying migrants any increase to the British pension resulted in a reduction of the Australian pension, thus benefiting the Australian Treasury (meaning Australian taxpayers).
But the pension is means tested. All income is considered in the means test, including the British pension. The Australian pension is reduced by 40% of any income over a given threshold, so any increase in the British pension would result in a reduction of 40c in the dollar for the Australian taxpayer, but the balance would go to the pensioner.
4.7 The UK government pays millions of pounds every year to UK pensioners living in Australia. Those people are contributing to the Australian economy and very many will have done so for many years as workers in Australia before they retired.
The people most severely affected are those who have moved to Australia on or after retirement in order to join children who emigrated in earlier years. After a lifetime of contributing to the UK economy and the NIF, they have a pension of 100% of the base rate, plus, in many cases, SERPS pension. Such pensioners never contributed to the Australian economy as workers.
Their children, who came to Australia as migrants in the prime of life, will have UK pensions, if any, proportional to the number of years they contributed to the UK economy. Their grand children were either born here or came as young family members and have no entitlement to a UK pension, which is reasonable, since they never contributed to the UK economy nor to the NIF.
These children and grandchildren are now Australian taxpayers who have to shoulder part of the burden caused by the UK government's failure to honour its responsibilities. Until the agreement was terminated, British citizens who spent a large part of their working life in Australia, then returned to Britain prior to retiring age, got a fully indexed pension, mostly at 100% of the standard rate. And all this without contributing to the NIF nor to the British economy during the years spent in Australia.
4.8 British pensioners living in Australia have their pensions supplemented by the Australian Social Security system
Not true. Australian pensions are means tested on income and separately means tested on assets, the actual pension being whichever test gives the smaller amount. Moreover, 60,000 British expatriates, one third of all the UK pensioners in Australia, draw no local pension, excluded under the means test by their generally modest assets accumulated in a lifetime of saving, something now strongly encouraged by UK governments.
Mr Rooker's remark that 'The only people who would gain in Australia are those who are so well off that they do not get the age pension in Australia' amounts to imposing a means test on British pensions that was never a part of the British National Insurance Scheme.
4.9 Agreements were made when public spending constraints were not as great
'Increases are paid in European Union countries in accordance with European Community regulations. Most of the Agreements with other countries outside the European Union, which allow increases to be paid, were entered into long ago when constraints on public spending were not as great as they are today.' DSS letter to pensioner in Australia, 29 April 2000
This is totally refuted by Lord Peter Shore who was a Labour Cabinet Minister in the mid 1970s: 'I remember dealing with this matter in Cabinet some years ago. There was never any question but that, morally, our fellow citizens, who worked for us here in Britain and who then migrated overseas, were entitled to a pension by virtue of their paid-in contributions. We did not update the pension because of the chronic shortage of foreign exchange, but morally the case was clear. When we were controlling capital movement, when tourists could spend only £50 a year abroad, and when all kinds of restrictions faced us, we could not do it, but morally these people have a right to a pension.' House of Lords Hansard. Debate: Expatriate Pensioners: Australia, 3 April 2000
5. Discrimination and its bizarre side-effects
It has now been generally conceded that the British basic retirement pension gives rise to a right of ownership, and can therefore properly be acknowledged as a property right protected by Art. 1 of Protocol No. 1, which the freezing of pensions must breach.
This should in itself be sufficient to strike down the legislation, but it is possible to show that the legislation which freezes pensions gives rise to discrimination in several forms, all contrary to Art. 14. The arguments establishing this will be confined to the basic component of the pension, though the same line of argument can readily be applied to the other components.
5.1 Discrimination by manipulating the definition of the term 'Basic Pension'
On reaching pensionable age, an individual has his entitlement calculated from his contribution record as a fixed percentage of the 'basic pension'. While the percentage remains a constant, the amount to which it is applied, the 'basic pension', is adjusted annually by the increase in the price index, the change becoming effective at the commencement of each new fiscal year. Thus 'basic pension' is a variable amount but once determined for the coming fiscal year, the Beveridge principles require it be applied to all pensioners without qualification.
The DSS publishes a table in which the number of contribution years determines the pro rata entitlement to the 'basic pension' as defined above. All UK resident pensioners and half the expatriate pensioners draw pensions strictly according to this DSS table.
But the remaining expatriates, being 4% of all UK age pensioners, have their pensions calculated not on the 'basic pension' for the current year, but on an out-dated 'basic pension' which applied when first they qualified or emigrated as pensioners. In other words, expatriate pensioners in a frozen country receive the correct percentage of basic pension, based on their contribution history. But instead of a percentage of the current basic pension, they receive the correct percentage of the basic pension that was in force at the time they first received a pension.
The use of a discriminatory definition of 'basic pension' substantially reduces the amount of pension, and affects the very substance of the right to retain the benefit of the old age insurance system, and is thus a breach of Art 1 of Protocol No 1.
5.2 Discrimination between countries
Those receiving frozen pensions do not argue the right to a particular amount of benefit, but merely the right to be treated in the same manner as expatriate pensioners in non-frozen countries. In Müller v Austria, the Commission gave in para 34 an example of commonality between people distributed over various geographical locations: 'a similar scheme applies to all frontier workers, so that there is no difference between frontier workers employed in Liechtenstein and other frontier workers.' (Dec. No. 5849/72).
5.3 Discrimination within a country
The policy adopted by Britain not only discriminates on the basis of country of residence; it results also in discrimination between expatriate pensioners living in the same country. Two pensioners of the same age and the same sex and with identical contribution records can have very different amounts of pension.
Discrimination by age
Consider two expatriate pensioners, with identical contribution records, both of whom first received their pension at age 65 while residing in Australia. One now aged 75 attained pensionable age in 1991. The other has just now reached age 65. Assuming that each is entitled to 47% of the basic pension, the 65 year old receives £34.07, while the 75 year old receives £24.44, a difference of 28%.
Discrimination by date of emigration
Two people of the same age and sex, and with identical contribution histories can have different pensions because one emigrated at retirement and the other a few years later.
Discrimination by choice of domicile
The pension of a person having one home in the West Indies and another in the USA will be decided according to which of his homes he declares as his domicile.
Discrimination by migration pattern
Of two pensioners with identical contribution records living in a frozen country, one decides to move back to the United Kingdom, whereupon her pension is restored to the full value payable to a resident. Later, for family reasons, she decides once more to take up residence in Australia. Her pension will be frozen at the higher rate applicable at the date of her second emigration.
All these examples of discrimination within a frozen country arise because of the distortions created by freezing pensions at the 'basic pension' which applied on first entitlement or emigration as a pensioner.
6. Margin of Appreciation
A distinguished lawyer has advised: The criteria for a discrimination claim under the ECHR may be summarised:
i An individual or a group must be placed in a situation comparable or analogous to that of other groups who are better treated.
ii A difference in treatment constitutes discrimination if there is no legitimate aim and no reasonable relationship of proportionality between the means employed and the aim sought. (Belgian Linguistic Case (No 2) (1968)1 EHRR 252)
iii The national authorities are allowed a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment in law.
iv The scope of the margin of appreciation depends on the circumstances, the subject-matter and its background, as well as the existence or non-existence of European consensus.
The advice continued: If there is a standard practice which is applied across Contracting States, then the court is more likely to find that there has been a breach of Article 14 in the case of a state which does not comply with that standard practice. However, in the instant case, the UK Government has entered into various different agreements, with many states, with different conditions for each one. Thus there is no standard practice with which to compare the agreement which operates for those pensioners who have emigrated to Australia for example.
But this is to argue that Britain has a standard practice of not having a standard practice! The Contracting States who determine standard practice must be Britain's co-signatories to the European Convention. Britain is the only EU country which differentiates between expatriate pensioners on the basis of country of residence and date of emigration. All other Contracting States uprate their pensions for expatriate pensioners uniformly and without the need for reciprocal agreements.
6.1 Evolving jurisprudence
The Commission has itself recognised an evolving jurisprudence and an increasing reluctance to extend the 'margin of appreciation' concept to anachronistic Parliamentary legislation, on whose annual revalidation by successive administrations Britain has relied in defending its policy of pensions discrimination. These attitudinal changes are evidenced in Sutherland v UK 25186/94:
59. The Commission, however, observes that its Report in X. v. the United Kingdom is now nearly 20 years old. While it is true that the views expressed in that Report have been subsequently repeated, it is also true that major changes have in the meantime occurred . . .
60. The Commission, accordingly, considers it opportune to reconsider its earlier case-law in the light of these modern developments
61. In contending that there remains a reasonable and objective justification . . . the Government place considerable reliance on the fact that the issue was recently and fully debated by a democratically elected Parliament . . . Nevertheless, this factor cannot of itself be decisive. Of more importance is the sufficiency of the reasons advanced . . .
UK legislation grants wide powers to the Minister to determine what benefit shall be paid to persons who are not resident in the United Kingdom. The argument that the Australian age pension was considered sufficient compensation for the loss of indexation is unsound. It is not, and never was, the basis on which Britain decided whom to freeze and whom to index. Britain's principal concern has always been cost, as witness the March 2001 letter from the Pensions Minister to an Australian expatriate:
'A major consideration in deciding whether to enter into an agreement is the extent to which the advantages to be gained outweigh the cost of negotiating and administering the agreement. In the past, cost has been a factor in deciding whether pension increases should be paid in a particular country and previous Governments have taken the view that it would be unfair to impose an additional burden on contributors and taxpayers in the UK to fund additional pension for those who have chosen to live abroad.'
This explanation was totally unacceptable to the Constitutional Court of a country contributing to setting the standards for the treatment of expatriate pensioners to which Britain should adhere. In an almost identical case in Germany, its court concluded:
the Government cannot withhold an insured person's entitlement resulting from the payment of contributions in order to achieve other objectives.
the question whether, when and for what reason a reciprocal social security agreement can be sought or concluded, lies completely outside the sphere of the insured person.
what makes the regulation unconstitutional is its blatant unreasonableness.
Under close questioning in the House of Commons, 13 November 2000, on how countries were selected for uprating, the Minister admitted: 'I have already said I am not prepared to defend the logic of the present situation. It is illogical. There is no consistent pattern. It does not matter whether it is in the Commonwealth or outside it. We have arrangements with some Commonwealth countries and not with others. Indeed, there are differences among Caribbean countries. This is an historical issue and the situation has existed for years. It would cost some £300 million to change the policy for all concerned. We must also consider that as the European Union expands - pensions upratings are naturally paid in the EU - the issue will not go away. I accept that.'
Frozen pensioners contend that it is the capricious and illogical application of domestic legal power which is discriminatory.
Pensioners in frozen countries are, as a group, indistinguishable from other expatriate pensioners. They suffer discrimination, not only by comparison with them, but even within what would otherwise be a homogenous group.
In the discriminatory pensions policy pursued by Britain, there is no legitimate aim and no reasonable relationship of proportionality between the means employed and the aim sought. In fact the confessions of illogicality by the Minister suggest that there never was a consistent aim, just accidents of history.
A right of possession by reason of contributions, under Art 1 of the First Protocol, has been conceded by the UK government under the State Earnings Related Pension Scheme and must be equally applicable to the basic pension. Evidence of discrimination under Art 14 is overwhelming. The consensus of practice by other Contracting States in uprating all expatriate pensions asserts that the margin of appreciation for Britain is so narrow as to be negligible.
Appendix 1. British Age Pensions
1.1 British Age Pension components
This is the original National Insurance age pension. It is based on contribution years, rather than amount of contribution,
Each year a basic pension is declared. In 2000 it was £67.50 and in 2001 it is £72.50. For most people this is the amount of pension that they get in return for a lifetime of contributions. In detail, the full pension is paid if the pensioner has accrued a contribution record for 90% of his/her working lifetime. Qualifying years cover years in which contributions were made, plus years in which contributions were accredited because they were on a low income or out of the work force for various reasons.
Provision is made for (class 3) voluntary contributions at a flat rate in order to improve one's basic pension prospects. This is particularly valuable to people who are working overseas. Provision is also made for additional credit years for people whose working lifetime started before the scheme commenced.
For people entitled to less than a full pension, the percentage varies from 25% of the standard rate to 97%. The percentage, whether 25% or 100%, or in between, is constant from year to year. The only thing that varies is the declared full rate basic pension.
Graduated Retirement Benefit
This form of additional pension was introduced in 1961 and superseded in 1975. It is firmly based on contribution amounts. Each year's contribution purchases a number of 'units'. When the contributor retires he/she has accumulated a number of units. No change is made thereafter in the number of units, but a conversion rate is declared each year. So, as with the basic pension, the formula remains constant from year to year, but the amount of pension changes because the conversion rate rises. An example from publication NP46 January 2001 makes this clearer:
A man retires in June 1995. Between 1961 and 1975 he paid graduated contributions of £318.33. His units will be 318.33/7.5 = 42. The value of a unit at April 1995 was 7.64p. Weekly rate = 42 x 7.64p = £3.21. The declared rate for 2000 is 8.77p, so the man in the above example would have a graduated retirement benefit of 42 x 8.77p = £3.68, an increase of nearly 15% over five years.
Additional Pension, usually referred to as SERPS
The formula for working out the amount of SERPS pension is much more complicated, so complicated that the DSS refrains from giving a simple example in its leaflet GL23. Nevertheless the effect is the same. The pension formula contains constants which are personal to that pensioner, and variables which are declared each year.
For all three types of pension the yearly percentage increases keep in step.
1.2 Discrimination adversely affecting SERPS, compared with Occupational Pensions
Government failure to warn of potential SERPS disadvantages
In 1975 the State Earnings Related Pension scheme SERPS was launched simultaneously with the option of contracting-out into an occupational scheme (subject to its offering a Guaranteed Minimum Pension GMP not less favourable than SERPS). The Government undertook to pay any uprating of GMPs, necessitated by inflation, so there appeared to be little to choose between the schemes. In its 'Employers' Guide', Leaflet NP23/July 80 revised Aug 85, the Government required employers to explain the SERPS scheme to workers, however, it failed to warn of its arbitrary powers to deny expatriate pensions uprating.
Government implied equivalence between SERPS and GMP schemes
'We cannot ignore SERPS. As Opposition members have rightly said, the build-ups of the occupational pensions in the 1960s and 1970s, and of SERPS, which is part and parcel of the same thing . . .' (Minister for Pensions Jeff Rooker, MP, speech to the Commons, 7 February 2000)
Contracted-out salary-related schemes
Before April 1997 Contracted-out salary-related schemes had to pay members a guaranteed minimum pension (GMP) when they retired. A GMP is roughly the same as the amount of SERPS you would have received had you not been in your employer's Contracted-out scheme. (DSS Leaflet PM7 from June 1998)
SERPS Link to Contracted-out schemes
Occupational and personal pensions built up from 6 April 1988 to 5 April 1997 will be at least partly protected by the scheme. The rate of increase will be 3 per cent, or equal to the rate of price increase if this is less. The rate of your State Retirement Pension will be increased by any amount prices go up above 3 per cent. The increases required to be made to your pension will be taken into account when calculating the Contracted-out deduction each time your Retirement Pension is increased in line with inflation.
From 6 April 1997 when the link between the State Earnings-Related Pension scheme and Contracted-out schemes (including personal pensions) is broken, schemes will be required to protect pensions earned after that date in line with inflation up to 5 per cent. (DSS Leaflet NP46 April 1999 'A Guide to Retirement Pensions')
HM Treasury Paper relating to the 1995 Pensions Act The Roles of the Public and Private Sectors in the UK Pension Scheme, by Budd and Campbell
59. The abolition of GMP breaks the links between SERPS and Contracted-out pensions. The state will no longer guarantee price indexation for Contracted-out pensions. (The Act has however required private sector schemes to index future pensions by inflation or 5% a year whichever is lower).
There was no exclusion of obligatory uprating for expatriates in Contracted-out schemes, thus expatriates whose employers had opted for SERPS were disadvantaged.
Selective disqualification of expatriate uprating of state pensions
Social Security Benefit (Persons Abroad Reg's) SI 1975/563
Application of disqualification in respect of uprating of benefit
5. (3) Where a person is not ordinarily resident in Great Britain immediately before the appointed date the provisions of these regulations (except this regulation) shall not, unless and until he becomes ordinarily resident in Great Britain, affect his disqualification while he is absent from Great Britain for receiving: (a) . . (b) . . (c) in any other case, any additional retirement pension of any category, if that person had become entitled to a retirement pension before the appointed date;
Social Security Benefit Up-rating Regulations SI 1990/645
Persons not ordinarily resident in Great Britain
3. Regulation 5 of the Social Security Benefits (Persons Abroad) Regulations 1975(a) (application of disqualification in respect of up-rating of benefit) shall apply to any additional benefit payable by virtue of the up-rating order
Obligation to Uprate Expatriate Pensions in Contracted-out Schemes
Government Denial of Obligation in letter 16 June 2000 from Barry Owen, DSS Occupational and Personal Pensions, to James Nelson in Victoria, Australia:
' . . ., there is no legislative requirement on a scheme to increase the GMP for pensioners living abroad, it is simply a matter for the scheme rules'.
Letter 29 June 2000 from Pensions Minister Jeff Rooker MP to Nigel Jones MP
' . . concerning annual increases in occupational pensions. At present, increases to pensions in payment are at the discretion of the trustees in accordance with the rules of the scheme. The only exception is that, within the UK, schemes contracted out of SERPS are required to index the Guaranteed Minimum Pension (GMP) element. However, as already explained to Mr Nelson by one of my officials in his letter of 16 June, there is no legislative requirement on a scheme to increase the GMP for pensioners living abroad. . . .'
These statements are contradicted by the wording of the Act
Child Support, Pensions and Social Security Act 2000
Chapter c 19, continued; PART II, PENSIONS, continued
Prohibition on different rules for overseas residents etc.
55. After section 66 of the Pensions Act 1995 there shall be inserted - 'Treatment of overseas residents etc. Prohibition on different rules for overseas residents etc.
66A.- (1) This section applies where an occupational pension scheme contains provisions contravening subsection (2) or (3).
(2) Except so far as regulations otherwise provide, provisions of an occupational pension scheme contravene this subsection to the extent that they would (apart from this section) have an effect with respect to: (a) the entitlement of any person to benefits under the scheme, or (b) the payment to any person of benefits under the scheme,
which would be different according to whether or not a place outside the United Kingdom is specified by that person as the place to which he requires payments of benefits under the scheme to be made to him.
In law and regulations governing state pensions, excluded from uprating benefit are both prisoners and those abroad. In the legislation covering Occupational Pensions, prisoners are again excluded from benefit, but there is no mention of expatriates who must therefore be included, contrary to what the Minister maintained.
Appendix 2 The Beveridge Report
The National Insurance scheme, introduce in 1948, was founded on the principles of the Beveridge Report, (November 1942, HMSO CMND 6404). One of the foundation principles of this report was that all benefits under the scheme (and particularly age pension) should be contributory.
Paragraph 10 says: . . . It is, first and foremost, a plan of insurance - of giving in return for contributions, benefits up to subsistence level, as of right and without means test, so that individuals may build freely upon it.
Paragraph 16 says: . . . Briefly, the proposal is to introduce for all citizens adequate pensions without means test by stages over a transition period of twenty years, while providing immediate assistance pensions for persons requiring them . . . to solve the . . . problem of passage from pensions based on need to pensions paid as of right to all citizens in virtue of contribution.
Among the proposals were a flat rate of subsistence benefit for a flat rate of contribution (para 17). Nevertheless it was envisaged that the scheme would take many years to mature, and special measures would be needed to compensate those who were already too old to acquire a full basic pension by right of contribution. Unemployment and disability benefit would be introduced at full rate immediately, but not retirement benefit (para 19 follows).
Para 19 (vi) Unemployment benefit, disability benefit, basic retirement pension after a transition period, and training benefit will be at the same rate, irrespective of previous earnings.
(vii) (I) i. . . Contributory pensions as of right will be raised to the full basic rate gradually during a transition period of twenty years, in which adequate pensions according to needs will be paid to all persons requiring them. The position of existing pensioners will be safeguarded.
Para 23 . . . Moreover for one of the main purposes of social insurance, provision for old age or retirement, the contributory principle implies contribution for a substantial number of years; in the introduction of adequate contributory pensions there must be a period of transition during which those who have not qualified for pension by contribution but are in need have their needs met by assistance pensions.
These may be seen in the scheme as it stands today.
Category C pensions were payable to people who had already reached pension age by 5th July 1948. Persons who started their working life prior to that date were credited with years of contribution for each year of such working life up to a maximum of 12 years.
The amount of the basic pension, though based on a flat rate of benefit, is scaled in proportion to the number of years contributions have been made or accredited.
Category D pensions are payable to people aged 80 and over if their pension would otherwise be less than the category D rate, which is approximately 60% of the basic pension.
It was also envisaged that benefits would be payable from a Social Insurance Fund.
Para 20 . . . All the principal cash payments, for unemployment, disability and retirement, will continue so long as the need lasts, without means test, and will be paid from a Social Insurance Fund built up by contributions from the insured persons, from their employers, if any, and from the State.
The need for citizen contributions to the fund (notice the use of the word 'fund') is further emphasised in para 21.
21. . . Payment of a substantial part of the cost of benefit as a contribution, irrespective of the means of the contributor, is the firm basis of a claim to benefit irrespective of means.
22. . . . whatever money is required for provision of insurance benefits, so long as they are needed, should come from a Fund to which the recipients have contributed and to which they may be required to make larger contributions if the Fund proves inadequate.
The scheme is described as a scheme of insurance, because it preserves the contributory principle. Although the British NIS does bear some resemblance to a 'social solidarity' scheme, there are two aspects which distinguish it from such a scheme. One is the scaling of the benefit according to contributory years, either paid or accredited. The second one arises from comments made in the Beveridge proposals, for instance:
24. . . . in providing for actuarial risks such as those of death, old age or sickness, it is necessary in voluntary insurance to fund contributions paid in early life in order to provide for the increasing risks of later life and to accumulate reserves against individual liabilities. The State with its power of compelling successive generations of citizens to become insured and its power of taxation is not under the necessity of accumulating reserves for actuarial risks and has not, in fact, adopted this method in the past.
In other words, the lack of a funding policy is not a matter of philosophy of social insurance, but only a matter of practical economics.
Paragraph 302 . . . a Plan for Social Security is outlined below, combining three distinct methods: social insurance for basic needs; national assistance for special cases; voluntary insurance for additions to the basic provision. Social insurance means the providing of cash payments, conditional upon compulsory contributions previously made by, or on behalf of, the insured persons, irrespective of the resources of the individual at the time of the claim.
305. Flat Rate of Contribution: Another fundamental principle of the scheme is that the compulsory contribution required of every insured person or their employer is at a flat rate, irrespective of their means. All insured persons, rich or poor, pay the same contributions for the same security. Those with larger means will pay more only to the extent that as tax-payers they pay more to the national Exchequer and so to the State share of the Social Insurance Fund. This feature distinguishes the scheme proposed for Britain from the scheme recently established in New Zealand under which the contributions are graduated by income, and are in effect an income-tax assigned to a particular service.
Retirement pensions from the British National Insurance Fund are still based on the principles outlined by Beveridge. Percentages of the basic pension are related to contribution years. There are special provisions for accrediting contribution years for persons who spend time out of the paid work force and for those on very low incomes. No doubt this is due to a proper sense of social solidarity. There are also provisions for non-residents and others to make voluntary (class 3) contributions, including contributions for former years, so they can increase their percentage of the standard basic pension.
Pensions discrimination is a deviant policy, totally alien to the principles of the Beveridge Report.
Appendix 3 Supporting ECHR Precedents
Appendix 3.1 Gaygusuz, Case Summary
Case: Gaygusuz v Austria 39/1995/545/631 16/9/96
Issue: Austrian authorities' refusal to grant emergency assistance to an unemployed man, who had exhausted entitlement to unemployment benefit, on the ground that he did not have Austrian nationality (section 33(2) (a) of the 1977 Unemployment Insurance Act)
Synopsis: Link between entitlement to uprated pension and payment of contributions to pension fund - pecuniary nature of right concerned.
Proceedings: Judgement delivered by a chamber
Article 14 of the Convention, in conjunction with Article 1 of Protocol No.1
Article 14 has no independent existence, but complements the other substantive provisions of the Convention and the Protocols.
Link between entitlement to emergency assistance and payment of contributions to unemployment insurance fund - pecuniary nature of right concerned: Article 1 of Protocol No.1 applicable without it being necessary to rely solely on link between entitlement to emergency assistance and obligation to pay 'taxes or other contributions' -Article 14 therefore applicable also.
Conclusion: applicable (unanimous)
Reiteration of case-law
The applicant was lawfully resident in Austria and worked there, paying contributions to unemployment insurance fund, in the same capacity and on the same basis as Austrian nationals. The authorities' refusal was based exclusively on the fact that he did not have Austrian nationality - the applicant being in a like situation to Austrian nationals - difference in treatment not based on any 'objective and reasonable justification'.
Conclusion: violation (unanimous)
Applicability to Frozen Pensions
Frozen expatriate UK pensioners paid contributions into the pension fund in the same capacity, and on same basis, as all other contributors (including all pensioners now resident in the UK, and almost half the expatriates). Authorities' refusal (to uprate frozen pensioners) is based exclusively on the fact that they reside in countries where no uprating agreement exists.
Appendix 3.2 Szrabjer, Case Summary
Case: Szrabjer & Clarke 27004/95 & 27011/95
Web address: www.lawgazette.co.uk/archives/1998-06-17/00000018.html
Issue: Whether a pension under SERPS (State Earnings Related Pension scheme) is property subject to protection of Convention Art 1 Prot 1; whether suspension of pension on imprisonment is discrimination against prisoners
Synopsis: Payment of SERPS contributions creates a 'possession' but the public interest proviso (among other things, the fact that the government already pays inmates' living costs) prevailed.
Proceedings: Two men in prison, appealing against suspension of benefit, took their cases to ECommissionHR and argued that suspension of SERPS constituted a breach of article 1 of protocol no 1. This provides that everyone is entitled to 'the peaceful enjoyment of his possessions', a term widely construed by ECourtHR. Under the article a person can only be deprived of his 'possessions' where the deprivation is in the public interest or for taxation and related purposes.
Each applicant's entitlement to SERPS was calculated by reference to the national insurance contributions they had paid. The ECommissionHR, relying on the court's decision in Gaygusuz v Austria (1996), agreed that entitlement to SERPS was a 'possession'. However, it went on to hold that the public interest proviso applied to persons serving terms of imprisonment and declined to allow the case to proceed to the court.
Relevance: The case is important because it is the first in which ECHR accepted that an element of the UK national insurance system comes within article 1 of protocol no 1. It reconfirms the link between contributions and benefits, as pronounced in Gaygusuz, and establishes that UK National Insurance benefits are 'possessions'.
Appendix 3.2.1 Correcting ECmHR Misapprehensions in Szrabjer
SZRABJER and CLARKE v UK. Applications Nos. 27004/95 and 27011/95
'The Facts' B. The relevant domestic law.
The basic state retirement pension was introduced in 1948 by the National Insurance Act 1946, it is not means tested and not dependent on contributions. It continues to be paid to all pensioners upon satisfaction of the basic eligibility criteria . . . The (SERPS) scheme was specifically designed to help the lower paid, widows and those suffering chronic ill-health . . .
Although the Commission correctly described the UK retirement pension as 'not means tested', it was quite mistaken about the 'basic pension' which is just as dependent on contributions as the 'additional pensions' (State Earnings Related Pension SERPS).
The facts were available from DSS Leaflet FB6 April 1988 entitled Retiring, page 4, How your State Retirement Pension is made up.
'Basic pension The amount of the Basic Pension you get depends on your NI contribution record. If you have not paid (or been credited with) enough contributions over your working life to get a full Basic Pension, you may get a reduced one. . . .
Additional Pension This is the earnings-related part of your Retirement Pension. The amount you get depends on your earnings since April 1978 on which you paid NI contributions.
Graduated Pension This depends on the amount of graduated NI contributions you paid between April 1961 and April 1975, when we had the graduated pension scheme.'
As to the Commission's belief that SERPS was specifically designed to help the lower paid, this is patently illogical since it is income related. Secretary of State for Social Security Alistair Darling himself stated, in letter 10 May 1999 to National Pensioners' Convention President Jack Jones: 'when SERPS was introduced it was intended that it would provide a high quality second pension for those in the middle range of earnings . . .'
The Law 1.para 8
'. . . Whilst there is a relationship between the amount paid into the scheme by and on behalf of an individual and the amount that individual will receive as a pensioner, the equation is complicated by the fact the National Insurance Fund (from which the pensions are paid out) receives Government grants and taxation monies and that solidarity policies mean that individuals who have not in fact contributed over the requisite period due to responsibilities in the home, can still benefit from the scheme. Thus there are elements of SERPS that resemble a state benefit as opposed to a private pension plan. . . .'
The Commission thus considers that, although SERPS contains a social solidarity element as opposed to being a purely earnings related pension, the right to such a pension is dependent on some contribution and therefore does constitute a pecuniary right for the purposes of Article 1 of Protocol No. 1'.
The Commission appeared fixated on government subventions to the National Insurance Fund, inferring ' . . a social solidarity element . . .' In fact, excepting frozen pensioners, all others receive, as basic pension, an amount which relates precisely to the number of monthly contributions made over the working lifetime, while the additional benefit, SERPS, relates precisely to their earnings-related contributions, uncontaminated in both cases by any social solidarity element.
Government subventions from the Consolidated Fund, (not 'grants and taxation monies' but a single amount) are rightly required to cover non-contributory expenditures, since:
'Entitlement to the contributory benefits (except invalidity benefit) depends on contribution conditions being satisfied. . . . .' (Whitakers Almanac, 1986, National Insurance and Related Cash Benefits)
They also performed the function, in years of high inflation, of maintaining an adequate reserve set by the Government Actuary at 2 months of benefit payments which include not just retirement and widow's pensions, but also unemployment and sickness benefit, invalidity benefit, etc. They ranged from 20% of outgoings in the worst years down to zero when increased levels of contribution had caught up with inflation.
The government grants 'grace and favour' pensions to many in need, not just those with home responsibilities but also as invalidity and chronic sickness benefit, despite the beneficiaries not having paid the requisite contributions. Such Social Welfare pensions are rightly met from taxes, and not from contributions by workers and their employers.
Despite these misconceptions, the final admission is sufficient to identify at least the earnings-related element of a UK pension as being subject to Article 1 of Protocol 1, thus establishing a pecuniary right which the UK government itself concedes:
Email from Yvonne Woolven, 15 April 2000
Web address: firstname.lastname@example.org
to BAPA Committee member Derrick Prance, Perth, Western Australia:
'I have received the following advice from the Policy Section dealing with SERPS . . .Our lawyers advise that SERPS is likely to be considered a possession under the terms of the European Convention on Human Rights . . . '
Appendix 3.3 Sutherland, Case Summary
Application No. 25186/94 Euan Sutherland v UK
Report of the Commission (adopted on 1 July 1997)
2. The applicant is a British citizen, born in 1977 and resident in London. He is represented before the Commission by Mr. S. Grosz, solicitor with Messrs. Bindmans, London, and Mr. Peter Duffy, a barrister in London.
4. The case concerns the age of consent for homosexual relations in the United Kingdom. The applicant invokes Articles 8 and 14 of the Convention.
26. On 21 February 1994, on a free vote, the House of Commons by 307 votes to 280 rejected an amendment to reduce the minimum age of consent to 16 but, by 427 votes to 162, accepted an amendment to reduce the minimum age to 18.
29. The amendments to the Bill were further debated in the House of Lords on 20 June 1994. The House voted, again on a free vote, by 245 votes to 71, not to reduce the minimum age of consent to 16 but, by 176 votes to 113, to reduce it to 18.
C. Articles 8 and 14 of the Convention
33. Article 8 of the Convention provides, so far as is material, as follows:
'1. Everyone has the right to respect for his private ... life ...
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society ... for the protection of health or morals, or for the protection of the rights and freedoms of others.'
36. Consistently with the Court's judgments in the Dudgeon, Norris and Modinos cases (Eur. Court HR, Dudgeon v. the United Kingdom judgment of 22 October 1981, Series A no. 45; Norris v. Ireland judgment of 26 October 1988, Series A no. 142; Modinos v. Cyprus judgment of 22 April 1993, Series A no. 259), the Commission considers that the maintenance in force of the impugned legislation constituted an interference with the applicant's right to respect for his private life (which includes his sexual life) within the meaning of Article 8 para. 1 of the Convention ... the very existence of the legislation directly affected his private life.
37. The Commission accordingly finds that the applicant was until he attained the age of 18 directly affected by the legislation in question and can claim to be a 'victim' thereof under Article 25 of the Convention.
42. The Government contend that the Commission should not depart from this jurisprudence and that the decision of Parliament ... is well within the margin of appreciation open to a Contracting State in serving the interests of the protection of the rights of others and of morals.
46. The applicant contends that the margin of appreciation is particularly narrow in cases involving an obligation to refrain from interference rather than the imposition of positive obligations on the state, and contends that no justification at all has been advanced for the different treatment ..., and that the justifications tendered for the difference ... are inadequate and fall outside the margin of appreciation. In particular, he considers that most of them amount to a bald assertion based on ... a vote of both Houses of Parliament.
48. The Commission recalls that Article 14 of the Convention affords protection against discrimination, that is, treating differently persons in relevantly similar situations without due justification (Eur. Court HR, Fredin v. Sweden judgment of 18 February 1991, Series A no. 192, p.19, para. 60). In particular, 'a difference of treatment is discriminatory, for the purposes of Article 14, if it "has no objective and reasonable justification", that is if it does not pursue a "legitimate aim" or if there is not a "reasonable relationship of proportionality between the means employed and the aim sought to be realised". Moreover the Contracting States enjoy a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment.' (Eur. Court HR, Gaygusuz v. Austria judgment of 16 September 1996, Reports 1996, para. 42).
55. The third question for the Commission is whether there was a reasonable relationship of proportionality between the means employed and the aim sought to be realised, and it is in this connection that the Commission must bear in mind the margin of appreciation which the respondent enjoys in assessing whether and to what extent differences justify a different treatment.
59. The Commission, however, observes that its Report in X. v. the United Kingdom is now nearly 20 years old. While it is true that the views expressed in that Report have been subsequently repeated, it is also true that major changes have in the meantime occurred ....
60. The Commission, accordingly, considers it opportune to reconsider its earlier case-law in the light of these modern developments
61. In contending that there remains a reasonable and objective justification ... the Government place considerable reliance on the fact that the issue was recently and fully debated by a democratically elected Parliament. Nevertheless, this factor cannot of itself be decisive. Of more importance is the sufficiency of the reasons advanced ....
67. The Commission concludes, by fourteen votes to four, that in the present case there has been a violation of Article 8 of the Convention, taken in conjunction with Article 14
Appendix 4 Main Precedents cited in ECHR judgements
Appendix 4.1 9776/82, JW & EW v UK
Council of Europe
European Commission of Human Rights
DECISION OF THE COMMISSION
As to the admissibility
Application No 9776/82 by (1) JW and (2) EW against the United Kingdom
The European Commission of Human Rights sitting in private on 3 October 1983, the following members being present:
MM. C. A. Nørgaard (President), J. A. Frowein, J. E. S. Fawcett, M. A. Triantafyllides, G. Jorundsson, G. Tenekides, S. Trechsel, B. Kiernan, M. Melchior, A. S. Gozubuyuk, A. Weitzel, H. G. Schermers, H. Danelius, G. Batliner, Mr H. C. Kruger (Secretary to the Commission)
Having regard to Art 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;
Having regard to the application introduced on 23 March 1982 by (1) JW and (2) EW against the United Kingdom and registered on 13 April 1982 under file No 9776/82;
Having regard to the report provided for in Rule 40 of the Rules of Procedure of the Commission;
Having deliberated, decides as follows:
The applicants are both United Kingdom citizens. The first applicant was born in 1917. The second applicant, his wife, was born in 1921. They live in Sussex and are emigrating to Australia to join their daughter and her family.
The applicants complain that on their emigration the retirement pensions which they receive from the United Kingdom authorities will be 'frozen' at the level applicable on the date when they leave the United Kingdom, and that they will not be entitled to future annual increases to keep pace with inflation. They state that if they were emigrating to an EEC country or to one of a number of other countries, they would benefit from the annual review.
From the information submitted by the applicants it appears that their entitlement to pension under United Kingdom social security legislation is modified as from their emigration to Australia by the terms of a Social Security Agreement between the United Kingdom and Australia. It appears that under the terms of the agreement persons migrating between the two countries are enabled to claim certain social security benefits in the country to which they migrate. The position as regards the applicants' retirement pension is as follows:
1. the retirement pensions to which they are entitled under United Kingdom social security legislation are frozen at the rate applicable when they left the United Kingdom and they are not entitled to receive the benefits of any increases in pension following on the annual review of pensions carried out under the relevant legislation;
2. by virtue of the Agreement they become entitled to Australian age pension minus the amount of their basic United Kingdom pensions. However the Australian pension is subject to a means test until the recipient is 70 years old and because the applicants have a pension from employment they will not satisfy this test and will therefore receive no Australian pension - only the frozen United Kingdom one;
3. as from the age of seventy the applicants will be entitled to receive Australian age pension minus the amount of the basic United Kingdom pensions;
4. after a ten year period of residence in Australia they will, it appears, become entitled to Australian age pensions in their own right, not merely under the agreement, and without deduction of the United Kingdom pensions, which they will receive in addition.
The applicants suggest that even after the age of seventy the first applicant is likely to receive a pension less than he would be entitled to if he received the full United Kingdom pension. They suggest that the Social Security Agreement is not truly reciprocal and that its operation will cause them substantial loss over the years. They estimate that with an annual inflation rate of 10% the amount of their overall loss would be in the region of £15,000.
The applicants complain that having contributed to the United Kingdom social security schemes for many years they are being deprived of the benefit of them simply because they wish to emigrate and live with their daughter. They submit that their 'index linked' pensions are possessions and allege the breach of Art 1 of Protocol No 1 to the Convention and of Art 8 of the Convention in so far as it guarantees the right to respect for 'family life'.
1. The applicants complain that the retirement pensions payable to them by the United Kingdom authorities will be 'frozen' at the rate applicable when they leave the United Kingdom. They have invoked Art 8 of the Convention and Art 1 of Protocol No 1 to the Convention.
2. The Commission does not consider that the limitations of the applicants' pension rights amounts in the circumstances of the case to an interference with the right to respect for family life guaranteed by Art 8, and finds no appearance of any breach of that provision.
3. The Commission has considered the applicants' complaint under Art 1 of the Protocol. It first recalls that it has previously held that although this provision does not as such guarantee a right to a pension, the right to benefit from a social security system to which a person has contributed may in some circumstances be a property right protected by it. However the Commission also held that Art 1 does not guarantee a right to a pension of any particular amount, but that the right safeguarded by Art 1 consists, at most, 'in being entitled as a beneficiary of the social insurance scheme to any payments made by the fund' (Application No 5849/72, Müller v Austria, 3 Decisions and Reports p25 at p31). It has further held that before the right to benefit protected by Art 1 can be established, it is necessary that the interested party should have satisfied domestic legal requirements governing the right (Application No 7459/76, X v Italy, 11 Decisions and Reports p114).
In the present case when the applicants emigrate to Australia their entitlement to benefit from the United Kingdom pension scheme will come to be regulated by different rules of domestic law, under which they will cease to qualify for payment of future pension increases contemplated by the relevant legislation. To that extent they will not satisfy domestic legal requirements to benefit from the United Kingdom pension scheme. Even if the right to benefit from a scheme will normally also apply to the regular increases this is not necessarily the case where a person leaves the country where the specific scheme operates. The Commission notes that in many countries specific restrictions as to the payment of social security benefits to foreign countries exist or have existed (cf Application No 6572/74, X v Federal Republic of Germany, 8 Decisions and Reports, p70). In the Commission's view such operation of domestic law does not amount to a deprivation of possessions infringing Art 1 of the Protocol and there is thus no appearance of any breach of this provision.
4. The Commission has nevertheless further considered the applicants' complaints in the light of Art 14 of the Convention which provides that enjoyment of Convention rights shall be secured without discrimination. In this respect it notes that one element of the applicants' complaint appears to be that they will receive less favourable treatment under the United Kingdom pension scheme than would other persons who have paid the same contributions but who have remained in the United Kingdom or emigrated to other countries. The Commission has therefore considered whether such differential treatment could amount to discrimination in the enjoyment of their rights under Art 1 of the Protocol contrary to Art 14.
The Commission notes that it is a common feature of international life that social security agreements are entered into by different countries for the purpose of regulating the rights of persons moving from one country to another under the social security systems of each country. Such agreements commonly provide for substitution, to a greater or lesser degree, of benefits under one system to those due under another. Under the Agreement between the United Kingdom and Australia the applicants' rights under the United Kingdom social security system are to some extent restricted and replaced by certain rights under the Australian scheme. The applicants, in their particular circumstances, will apparently be less well off than they would have been if they had remained in the United Kingdom or if they had gone to certain other countries. However it is almost inevitable that where a person in effect changes over from one social security system to another, he may find that his entitlements differ from those of persons in other countries. Depending on the circumstances such differences may or may not favour the individual. Furthermore the Commission notes that the applicants will only lose the benefit of future increases in their pensions, whose purpose broadly speaking is to compensate for rises in the cost of living in the United Kingdom. Given that they will not be living in the United Kingdom it appears reasonable that this element in their pension rights in particular should be replaced by the possibility of benefiting under the scheme of the country they are moving to.
In these circumstances in view of the applicants' move to Australia and the existence of the relevant social security agreement, the Commission considers that there is objective and reasonable justification for restricting the scope of their entitlements under the United Kingdom system. It finds that the differences of treatment they will face are not therefore such as to infringe Art 14.
5. Accordingly the Commission finds no appearance of any breach of the Convention or Protocol and finds that the application is manifestly ill-founded and inadmissible under Art 27 (2) of the Convention.
For these reasons the Commission
Declares this application inadmissible
Signed by H. C. Kruger (Secretary to the Commission)
and C. A. Nørgaard (President of the Commission)
Appendix 4.2 4130/69, X v Netherlands
Application No 4130/69, X against the Netherlands
Decision of 20 July 1971
The facts of the case as submitted by the applicants may be summarised as follows:
The applicants are Dutch citizens living in the Netherlands. They are members of the Women's Action Committee for Advanced Old-Age Pension (Vrouwenactie-Comité voor vervroegd AOW-Pensioen) which was set up in May 1962 in order to obtain advanced pension rights for unmarried and divorced women. In presenting their case to the Commission the applicants are advised by Mrs. X, a Lawyer resident at Oss.
The applicants alleged a violation of Article 14 of the Convention in conjunction with Art. 1 of Protocol No. 1. They contended that the Dutch social security system was discriminatory because it differentiates between married women and men on the one hand and unmarried and divorced women on the other. The object of their case before the Commission was to obtain a change of the applicable legislation to the effect that the age at which an unmarried or divorced woman becomes entitled to oldage pension benefits should be reduced from 65 to 60 years.
It appeared that for the last nine years the applicants had made various attempts to obtain that change of the Dutch social security system. They submitted that they addressed themselves to associations , political parties, several politicians and to the Dutch Government without success. It appeared that on various occasions they organised demonstrations which were reported by Dutch television and newspapers. It also appeared that a few thousand women showed their sympathy with these actions by sending letters and by completing a questionnaire concerning their status and living conditions. The result of this enquiry was laid down in a report which was handed to the members of the Government and Parliament as well as to the political parties. It followed from this report that the age limit to receive an old-age pension for unmarried and divorced women should be reduced to 60 years.
It appeared that the Dutch Government entrusted the Social Economic Council (Sociaal-Economische Raad), a body with certain functions in respect of the organisation of the economic life in the Netherlands and the main advisory body for the Government on matters of social and economic policy, with the task of drawing up a report about the social security system. According to the applicants the report of the Social Economic Council, which was completed on 22 March 1963, did not advocate a modification of the age limit for unmarried and divorced women, but was restricted to the payment of contributions. It further appeared that on 10 November 1964 members of Parliament suggested that the Social Economic Council should investigate the advisability to reduce the age limit under the social security system. However, on 21 October 1966 the said Council reported that it advised not to do so.
The applicants stated that on 31 October 1967 at the request of the Dutch Government an examination was made about the living conditions of unmarried women. In the applicants' opinion the report showing the result of this examination did not deal with the question of advanced old-age pensions.
The applicants further stated that, according to the replies given by the competent Dutch Minister to the letters sent by unmarried and divorced women, the funds available for advanced old-age pensions were insufficient.
It appeared that the Dutch laws concerned, namely the General Old-Age Pensions Act (Algemene Ouderdomswet, 1956) and the General Widows' and Orphans' Pensions Act (Algemene Weduwenen Wezenwet, 1959) presently provide as follows: everybody is insured and required to make contributions to the Pension Funds (Art. 23 AOW, 38 AWW). The amount of such contributions is based on the income of the insured person (Art. 26(1) AOW, 41(1) AWW), as established by the Dutch Income Tax Act Inspection.
It is assumed that married women do not have any income on the basis of which they would pay contributions to the social security schemes. However, if a married woman does work her income is added to that of her husband. Consequently, the husband must pay the contributions for his wife according to the Old-Age Pensions Act and the Widows' and Orphans' Pensions Act.
The applicants submitted that the amount of these contributions was lower for a married man than for an unmarried or divorced woman and, in any event, never exceeded the sum of 1,745 guilders, being 10% of 17,450 guilders which amount had been fixed at the time of the introduction of the application as the maximum income for purposes of the social security contributions. Furthermore, a person who did not work or had ceased working was not required to pay any contributions, but was nevertheless entitled to benefits under the pension scheme.
Everyone who has been insured and has reached the age of 65 years is entitled to an old-age pension regardless of contributions previously made by him (Art. 7 AOW). However, a married woman is entitled to such pensions even before attaining that age, namely when her husband is 65 and has his pension. If her husband dies she receives the same pension under the relevant provisions of the Widows' and Orphans' Pensions Act (Art. 8 AWW) prior to having reached the age of 65 years. That pension continues as an old-age pension after she has reached the age of 65 years.
The applicants complained to the Commission that they were subjected to discrimination both on the grounds of sex and status. According to the applicants this discrimination was, above all, to be found in the fact that, under the Dutch Old-Age Pension Act, unmarried and divorced women are obliged to pay contributions but do not qualify for a pension before reaching the age of 65 years.
Furthermore, they considered it as being discriminatory that, up to the age of 45 years, they were also required to make contributions under the Widows' and Orphans' Act, although their chances to marry and have children, and thus to benefit from the provisions of that Act, consistently decreased.
The applicants also submitted that more women than men at the age of 55 to 65 years were unable to work owing to frequent illness. The applicants concluded that this was the result of the biological difference between men and women. They also referred to the fact that normally women kept house themselves outside their working hours while men had no such obligations as, in most cases, they lived in boarding houses.
In the applicants' opinion the appropriate age for unmarried or divorced women to receive an old-age pension should be 60 instead of 65 years. They submitted that the Widows' and Orphans' Act envisaged an insurance against the risks of a woman to become a widow or a child to become an orphan and concerned only part of the population. On the other hand, the Old-Age Pension Act envisaged a general insurance scheme for the entire population against the financial risks deriving from the incapacity for working after a certain age. The applicants were of the opinion that the Dutch Government had to take into consideration the fact that unmarried and divorced women are earlier unable to work than the rest of the population.
The applicants finally seemed to allege that the first paragraph of Art. 1 of Protocol No. 1 as such had also been violated. They contended that contributions to the compulsory old-age pension scheme could be regarded as creating a vested interest in a pension which might be described as 'possessions' within the meaning of that article. Considering the fact that the Dutch Government had a share in covering the expenses of the old-age pension payments, the applicants contended that the Government's contributions to the Dutch social system were so little that pension rights were only acquired in respect of contributions paid by the insured persons.
The Commission examined the applicants' complaints on 5 February 1971 and decided to communicate the application, in accordance with Rule 45, 3(b) of its Rules of Procedure, to the Netherlands Government for observations in writing on admissibility. In the meanwhile it adjourned the further examination of the applicants' complaints.
The Government's observations were submitted on 5 May 1971 and the applicants replied on 18 May 1971.
Submissions of the Parties
1. The respondent Government first submitted that there was no relationship between the amount of an individual's contribution under the Old-Age Pension Act and the amount that he or she will receive from the age of 65 onwards. In fact, the Act was characterised by its underlying principle of solidarity which reflected the concept of the responsibility of the community as a whole to provide a minimum financial basis for its aged members. This branch of social insurance was based on a revolving fund and not, as was common in other insurance branches, on capital coverage. It was therefore irrelevant what share the Government contributed in financing old-age pensions. All persons satisfying certain residence requirements and having reached pensionable age received the same pension regardless of their individual contributions, the level of which was based on their income, or even without any contributions ever having been paid.
As regards the alleged discrimination between married women and unmarried or divorced women, the Government first pointed out that it was wrong to assume that the married woman was the recipient of a pension. In fact, it was normally the husband and not the wife who received the pension for the married couple and payment therefore depended on the husband's age.
Furthermore, the fact that an unmarried woman's chance of benefiting from the Widows' and Orphans' Pensions Act decreased with age, could not be said to constitute discrimination within the meaning of Art. 14 of the Convention. Here again the Act reflected the concept of the responsibility of the community to provide financially for survivors. The position of unmarried men and women was identical in this respect and it was simply one out of many collective statutory regulations where, either through taxation or through contributions, a citizen was obliged to give up part of his income, even though he himself might never be in a position to benefit directly from the relevant provisions.
The Government finally contended that, lowering the pensionable age of unmarried and divorced women on the ground that women become incapable of performing work at an earlier stage than men, would not only introduce a discrimination based on sex but would also bring the issue of incapacity to work under the provisions for old age while, in fact, both were quite separate matters.
The Netherlands Government therefore considered the application as being manifestly ill-founded and requested the Commission to declare it inadmissible.
2. The applicants first made some fundamental observations on the whole of their application. While admitting that the underlying principle of the Old-Age Pensions Act was that of solidarity, they intended to show that the contributions made by the unmarried woman were so much out of proportion that lowering the pensionable age should be regarded as constituting reasonable compensation for this over-payment. Solidarity implied equality, i.e. contributions to the pension fund should be the same for all persons making such contributions. This equality was not guaranteed with regard to married and unmarried women and, consequently, the applicants claimed that there was discrimination based on status in this respect. They said that they had never alleged discrimination based on sex.
According to the applicants, the drafters of the Old-Age Pensions Act had started from the fiction that normally a married woman did not have any earnings and was therefore not obliged to pay contributions. Even if this had been acceptable when the Act first came into force, it was no longer acceptable now, as many married women were in fact working and had an income of their own.
Furthermore, it was not correct to say that unmarried men were in the same position as unmarried women. It emerged clearly from the applicants' previous submissions that a man's incapacity to work owing to old age, as a rule, set in at a later stage than a woman's and that men did not have to concern themselves with the additional burden of housework.
The applicants concluded their fundamental observations by pointing out that the Disablement Act, relating to disablement as a result of accidents, permanent illness or physical defects, was not applicable to the inabilities as a result of old age.
The applicants then made detailed comments on the respondent Government's observations. They first pointed out that the Government had not dealt with the question of discrimination based on the status of the unmarried and divorced women. They referred in this connection to an ILO Resolution of January 1955 to the effect that the pensionable age for women should be five years less than that for men.
The applicants further submitted that there was indeed a relationship between the rights acquired under the Old-Age Pensions Act and the contributions paid. On the one hand, nobody was insured who did not pay contributions and, on the other hand, sanctions were applied where a person failed to pay such contributions.
Moreover, it was only partly correct to say that contributions were based on income. Firstly, the maximum income for purposes of contribution to the old-age pension fund was now limited to 18,800 guilders, and the exceeding part of a person's income, including the income of a working wife, was not calculated. Secondly, the contributions amounted to less where husband and wife both had an income and where taxes were assessed jointly, than where the assessment was made separately.
It was also not correct to say that everybody received the pension at the pensionable age of 65 because a married woman was, on an average, five years younger than her husband who, at the age of 65, received an extra 42% for his wife who had not reached 65. Furthermore, married women were unfair competitors to unmarried women on the labour market as they were frequently working secretly without declaring their income; thus they did not pay social security contributions on their earnings either.
The applicants then turned to the question of contributions to the Widows' and Orphans' Pension fund and maintained that the Netherlands was the only country in which such contributions had to be paid by a single woman. Moreover, they were obliged to pay contributions up to the age of 65 although their chances of marrying and having children constantly decreased and practically disappeared altogether by the age of 45.
On the other hand, a widow became entitled to a widow's pension already at the age of 35 to 40 years, irrespective of her own income, and this pension was equivalent to the old-age pension of an unmarried woman at the age of 65. Consequently, there was discrimination based on status between the unmarried and the married woman.
The applicants then turned once more to the question of the Disablement Act and submitted that the object of that Act was quite different from that of the Old-Age Pensions Act. While the Disablement Act was intended to meet the needs resulting from permanent sickness and disablement, the Old-Age Pensions Act dealt with the needs resulting from old age, e.g. chronic tiredness.
The applicants finally quoted excerpts from various reports and opinions to the effect that the pensionable age of women should be lowered, and also referred to the EEC Treaty in this report.
They concluded that unmarried women were subjected to discrimination on the ground of status by reason of the manner in which contributions for the old-age pension and widows' and orphans' pension were calculated. They claimed that a revision of these laws was urgently required.
1. The applicants have complained that the Dutch legislation on old-age pensions violates the Convention by reason of the fact that it fails to provide that such pensions should be granted to unmarried and divorced women at the age of 60 instead of 65 years. However, under Art. 25(1) of the Convention, it is only the alleged violation of one of the rights and freedoms set out in the Convention that can be the subject of an application presented by a person, non-governmental organisation or group of individuals. In particular, no right to receive a pension under the national insurance scheme of a particular country is as such included among the rights and freedoms guaranteed by the Convention, and in this respect the Commission refers to its previous decisions on the admissibility of applications No. 2380/64, X v the Federal Republic of Germany and No. 2116/64, Collection of Decisions, Vol. 23, pp 10 and 12.
It follows that this part of the application is incompatible ratione materiae with the provisions of the Convention within the meaning of Art. 27(2).
2. The applicants have further complained that Art. 1 of Protocol No. 1 has been violated in that the Dutch social security system providing for compulsory contributions to the Dutch old-age and widows' and orphans' insurance interferes with their 'possessions' within the meaning of that provision.
Art. 1 of Protocol No. 1 provides as follows:
'Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.'
Under Art. 5 of Protocol No. 1 the provisions of the Protocol shall be regarded as additional Articles to the Convention and all provisions of the Convention shall apply accordingly.
The Commission has examined this complaint with regard to two separate aspects: on the one hand, with regard to the obligation to pay contributions to the pension fund concerned, and on the other, with regard to the benefits accruing under the insurance scheme.
As regards the first of these aspects, the Commission notes that, under the relevant provisions of the General Old-Age Pensions Act 1957, as amended, and the General Widows' and Orphans' Pensions Act of 1959, as amended, every insured person is required to make contributions to the relevant pension fund. The contribution is a percentage of the taxable income of the person insured up to a certain maximum above which no contribution is levied. The contribution percentages in force in 1970 were 9.1% under the General Old-Age Pensions Act and 1.5% under the General Widows' and Orphans' Pensions Act, up to a maximum of 17,450 guilders per year. The Government contributes to the Old-Age Pensions Fund a certain amount which, in 1970, had been fixed at 202 million guilders per calendar year. This amount is increased or reduced according to the rise or fall of the general wage index figure.
In these circumstances the Commission finds that, although compulsory contributions to a pension fund necessarily interfere with a person's possessions such contributions are not, under the above provisions of the Dutch law, disproportionate to the incomes taxed. It follows that the imposing of the obligation to make such contributions to the Dutch national insurance scheme according to the law in force in the Netherlands is clearly within the right of the State 'to secure the payment of taxes or other contributions' within the meaning of the second paragraph of Art. 1 of Protocol No. 1. In this connection the Commission also refers to its constant jurisprudence (see, for example, decisions on the admissibility of applications No. 1497/62, Free Reformed Church of X v the Netherlands, Yearbook 5, pp 286, 298, No. 2065/63, Yearbook 8, pp 266, 270, and No. 2248/64, Yearbook 10, pp 170, 174).
With regard to the second aspect of the applicants' complaint under Art. 1 of Protocol No. 1, the question arises whether or not, as a result of making compulsory contributions to the Dutch national insurance scheme, rights have come into being which may be described as being 'possessions' within the meaning of that provision. The Commission is of the opinion that, while it is clear that no right to a pension is as such included in the Convention, the making of compulsory contributions to a pension fund may, in certain circumstances, create a property right in a portion of such fund and that such right may be affected by the manner in which the fund is distributed.
In this connection the Commission notes that, for entitlement to a pension under the General Old-Age Pensions Act, a person must have been insured in the Netherlands and have reached the age of 65. This applies to single and married men. A married woman is only entitled to an old-age pension if she is the breadwinner and her husband is not yet 65 years of age, if the husband is 65 years of age or older but is not himself entitled to an old-age pension, or if both spouses received an old-age pension before their marriage. If the spouses are permanently separated or if they are divorced, they are considered as single persons for the purpose of the Act. In 1970 the annual pensions paid under the General Old-Age Pensions Act amounted to a maximum of 3,774 guilders for single, and to a maximum of 5,358 guilders for married persons.
The General Widows' and Orphans' Act has a similar structure. A Widow, who at the time of her husband's death was 40 years or older but not yet 65, is entitled to a widow's pension. A younger widow is also entitled to a pension if she has or expects a child or is physically incapacitated. As soon as a widow becomes 65 years of age, her pension under the General Widows' and Orphans' Act ceases and she is then entitled to a pension under the General Old-Age Pensions Act. Furthermore, a widow, who does not qualify for a widow's pension, is in any case entitled to a temporary widow's allowance but the Act also provides that in certain cases neither an allowance nor a pension is payable to a widow.
The Commission further notes that, for the financing of the above two schemes under the Acts, the legislator has chosen a system under which payments made over a certain year are financed from contributions received in that year. Collection of contributions is effected by the Internal Revenue Office which pays them over to the Old-Age Pensions Fund and Widows' and Orphans' Pensions Fund. These funds are administered by the Social Insurance Bank. The contribution percentage referred to above is always fixed for a period of a few years by the Board of the Social Insurance Bank, subject to the Minister's approval after consultations with the bank. Under the Acts, contributions must be fixed in such a way that the total of contributions to be received thereunder during the period concerned will be sufficient to cover the expenditure and to form, together with the Government's contribution, a legally prescribed reserve in the Old-Age Pensions Fund.
It is therefore clear , both from the manner in which the funds are administered and from the system of distribution adopted, that this branch of the Dutch social insurance legislation is based on the principle of solidarity which reflects the responsibility of the community as a whole to provide a minimum financial basis for its aged members and for survivors. The contributions which the younger members of the community are obliged to make are collected in a revolving fund from which the older or surviving members of the community receive their pension. The distribution of the pension funds takes into account the economic realities of the period concerned to the extent that persons benefiting from this system receive their pension in accordance with the wage index established for the period in which the pension is paid and not according to that established for the periods in which they made contributions. There is, therefore, no relationship between the contributions made and the pension received in the sense that the amounts paid by the insured person are accumulated with a view to covering the pension benefits accruing to him when reaching pensionable age. Consequently, a person does not have, at any given moment, an identifiable share in the fund claimable by him but he has an expectancy of receiving old-age or survivors pension benefits subject to the contributions envisaged by the Acts concerned.
In these circumstances the Commission finds that the benefits accruing under old-age and widows' and orphans' pension schemes provided for under Dutch law do not constitute a property right which could be described as being 'possessions' within the meaning of Art. 1 of Protocol No.1.
An examination, including an examination made ex officio, of the applicants' complaint that the Dutch social security system interferes with their 'possessions' within the meaning of Art. 1 of Protocol No.1, does not therefore disclose , with regard to either of the above aspects of the complaint, any appearance of a violation of the rights and freedoms set forth in the Convention. It follows that this part of the application is manifestly ill-founded and must be rejected in accordance with Art. 27(2) of the Convention.
3. The applicants have finally complained that the scheme envisaged by the Dutch Old-Age Pensions Act and Widows' and Orphans' Pensions Act differentiates between unmarried or divorced women on the one hand and married women on the other, such distinction being inconsistent with their right under Art. 14 of the Convention to enjoy the rights and freedoms set forth in the Convention, in casu the right to peaceful enjoyment of possessions in accordance with Art. 1 of Protocol No. 1, without discrimination on the basis of their status.
The Commission had first regard to the interpretation given by the European Court of Human Rights in its judgment of 23 July 1968 on the merits of the Belgian Linguistic Case to Art. 14 of the Convention, and to its own case law in this respect. The principles that have been established regarding the interpretation of Art. 14 can be stated as follows:
The guarantee laid down in Art. 14 has no independent existence in the sense that under the terms of that Article it relates solely to 'rights and freedoms set forth in the Convention'. This does not mean, however, that it is necessary first to find a violation of one of those rights and freedoms before Art. 14 becomes operative; 'a measure which in itself is in conformity with the requirements of the Article enshrining the right or freedom in any question may (...) infringe this Article when read in conjunction with Art. 14 for the reason that it is of a discriminatory nature,' (Eur. Court H. R., Belgian Linguistic Case, Section 1 B, para. 9 of THE LAW).
Art. 14 does not, however, 'forbid every difference in treatment in the exercise of the rights and freedoms recognised.' The 'principle of equality of treatment is violated if the distinction has no objective and reasonable justification. The existence of such justification must be assessed in relation to the aim and effects of the measure under consideration, regard being had to the principles which normally prevail in democratic societies. A difference of treatment in the exercise of a right laid down in the Convention must not only pursue a legitimate aim: Art. 14 is likewise violated when it is clearly established that thee is no reasonable relationship of proportionality between the means employed and the aims sought to be realised' (Eur. Court H. R., Belgian Linguistic Case, Section 1 B, para. 10 of THE LAW).
In applying these principles to the case of the applicants the Commission has again distinguished between the contributions made by, and the benefits accruing to, them under the relevant Dutch legislation.
With regard to the contributions made to the old-age and the widows' and orphans' pension funds, the Commission has already noted that, in principle, such contributions are assessed on the basis of annual income up to a certain limit in excess of which no contributions are required. No distinction is made in this respect between married and unmarried or divorced women having an income, except in the case of a married couple where both spouses have an income of their own. In that case a joint assessment is possible with the consequence that the contributions payable by both spouses together amount to less than if they were assessed separately.
The Commission finds, however, that this difference, insofar as it can be said to amount to an inequality of treatment between married and unmarried or divorced women, is justified as being based on the legislator's appreciation of the general family pattern while making allowances for the generally different situation of a married couple in comparison with that of a single person. Such a difference, which is to be found in many spheres of the law, is legitimate and any inequality in the present case is not out of proportion to the purpose of the national insurance schemes concerned. Consequently, there cannot be, in this respect, any discrimination within the meaning of Art. 14 of the Convention.
With regard to the applicants' complaint that there is unequal and discriminatory treatment as regards the distribution of the benefits accruing under the General Old-Age Pensions Act, the Commission first had to decide whether or not it has competence to examine the question of discrimination within the meaning of Art. 14 of the Convention in this respect. As has been found above, no property right, which could be described as possessions within the meaning of Art. 1 of Protocol No. 1, has been created by the making of contributions to the pension funds under the above Acts and the Commission recalls that Art. 14 of the Convention has no independent existence but must be related to the rights and freedoms set forth in the Convention.
However, Art. 14 secures without discrimination the enjoyment of the rights and freedoms set forth in the Convention, and it is sufficient that discrimination has been alleged in relation to any such right regardless of the fact whether or not the right in question has been acquired by the applicant in a particular case. Although, in the present case, the Commission has found that the applicants have not, in the circumstances, acquired any property right, the circumstances of another case might justify the finding that the making of compulsory contributions to a pension fund may create rights amounting to 'possessions' within the meaning of Art. 1 of Protocol No. 1. It follows that the Commission has competence to examine the question whether or not, with regard to the benefits accruing under the Dutch Old-Age Pensions Act and Widows' and Orphans' Pensions Act, Art. 14 of the Convention read in conjunction with Art. 1 of Protocol No. 1 has been violated.
In examining this final question, the Commission (finds) that there is no appearance of any such violation and refers to the reasons already given for finding that there was equally no discrimination in respect of the contributions made by the applicants. It is true, as has already been noted, that the General Old-Age Pensions Act differentiates between the pension benefits accruing to single persons and those accruing to married couples. This difference in treatment, however, is based on the reasoning of the Dutch legislator appreciating the difference of the situation of single persons from that of a married couple living together. This distinction is made in a legitimate interest taking into account the general family pattern of the society and is not out of proportion to the general purpose of the legislation concerned, namely to provide for an adequate standard of living for old people and survivors. Consequently, in this regard as well, there cannot be any discrimination within the meaning of Art. 14 of the Convention.
In these circumstances the Commission concludes that, both as regards the contributions made and the benefits accruing under the General Old-Age Pensions Act and the General Widows' and Orphans' Pensions Act in force in the Netherlands, an examination of the applicants' complaint under Art. 14 of the Convention, including an examination made ex officio, does not disclose any appearance of a violation of the rights and freedoms set forth in the Convention and, in particular, Art. 14 read in
conjunction with Art. 1 of Protocol No. 1. It follows that this part of the application is also manifestly ill-founded and must be rejected in accordance with Art. 27(2) of the Convention.
For these reasons, the Commission
Declares this application inadmissible.
Appendix 4.3 5849/72, Müller v Austria
Report adopted by the Commission on 1 October 1975 in pursuance of Article 31 of the Convention
Article 1 of Protocol No. 1: Even if it assumed that the provision guarantees persons who have paid contributions to a social insurance system the right to derive benefit from the system, it cannot be interpreted as entitling that person to a pension of a particular amount.
Article 14 of the Convention: Before Article 14 becomes operative, it is not necessary first to find a violation of one of the rights and freedoms set out in the Convention. In the present case, differential treatment based on an objective and reasonable justification.
Summary of the facts of the case
1. The applicant, an Austrian national born on 11 May 1905 in Göfis (Vorarlberg), is now retired. He was represented before the Commission by Mr Theodore Veiter, a barrister practising at Feldkirch.
The Facts (The decision on the admissibility of the application is in D.H. 1/46.)
I The applicant's membership of the Old Age Insurance Scheme
9. The applicant was first employed as a skilled worker (locksmith) by various firms in Vorarlberg (Austria). By 23 February 1963, when he ceased to be employed by Austrian firms, he had been a member of the Austrian Workers' Old Age Insurance Scheme for 37 years, which, however, was not sufficient to entitle him to a full pension on reaching retirement age.
On 27 February 1963, the applicant found employment with a Liechtenstein firm, while continuing to reside in Austria. At that time there was no social security convention between the two countries.
However, Section 17 of the Austrian Social Security (General Provisions) Act (Allgemeines Sozialversicherungsgesetz BGBL, 189/1955) entitled any worker or employee who had previously compulsorily insured in a pension fund to continue his membership on a voluntary basis while abroad by paying his contributions.
The applicant applied to the Workers' Old Age Insurance Authority (Pensions-versicherungsanstalt der Arbeiter) for the benefit of this clause. On 27 July 1963, the authority informed him that his request had been approved with effect from 1 March 1963. Thus the applicant paid contributions both to the Liechtenstein Compulsory Old Age Insurance scheme and to the Austrian Workers Old Age Insurance scheme.
II Convention between Austria and Liechtenstein
10. Austria and Liechtenstein concluded a Social Security Convention (Abkommen im Bereiche der Sozialen Sicherheit, BGBL 72/1969), which came into force on 1 March 1969. Article 5(a) of the Final Protocol (Schlussprotokoll) to this Convention prohibits voluntary insurance in an Austrian pension scheme in future for anyone compulsorily insured in Liechtenstein.
Article 13, para. 5(a) of the Convention specifies when a period of compulsory insurance (Plichtversicherungszeit) completed under the legislation of one Contracting State coincides with a period of voluntary insurance (Zeit Freiwillinger Versicherung) completed in accordance with the law of the other, only the period of compulsory insurance shall be taken into consideration.
Article 13, para. 5(c) of the Convention provides that when under para. (a) above, the periods of voluntary insurance in an Austrian pension scheme cannot be taken into account in determining the amount of the pension, the contributions paid during such periods shall be treated as having been made with a view to the grant of a supplementary pension (Höhersversicherung).
Finally, Article 29 of the Convention provides that it shall come into force retroactively.
III Proceedings before the Austrian authorities
11. The Workers Old Age Insurance Authority informed the applicant by letter of 18 August 1969 that the contributions he had paid with a view to voluntary continued insurance (freiwillige Weiterversicherung) would be regarded as contributions to a supplementary pension. By a decision (Boschold) of 2 October 1969, the above mentioned authority ruled that in future voluntary insurance was no longer authorised in his case; this decision contained no reference to the period 1963-69.
In May 1970, on reaching retirement age (65 years), the applicant claimed his pension. By a decision of the Old Age Insurance Authority of 14 August 1970, the amount of the pension was fixed at 3,218 schillings per month. In computing this amount, the contributions paid since 1963 under the voluntary scheme were treated as contributions to a supplementary pension scheme. The result was a financial loss amounting to 97.70 schillings monthly.
12. The applicant appealed to the Vorarlberg District Social Security Court claiming a declaration that the contribution paid from 1 March 1963 to 1 January 1969 under the voluntary insurance scheme should be taken into account in fixing the amount of the pension and not as contributions to a supplementary pension scheme. The court allowed the appeal on 23 June 1971 considering that the contrary solution ... adopted by the bilateral Convention ... violated the applicant's rights and more generally the principle of international law known as 'pacta sunt servanda'.
The Workers' Old Age Insurance Authority lodged an appeal. The Vienna Court of Appeal gave judgment on 13 April 1972. Applying the Social Security Convention strictly, it held that periods of voluntary insurance could not be taken into account when computing the amount of the pension; contributions made during such periods must be considered as having been made with a view to the grant of a supplementary pension. The Court considered that such a measure did not violate the applicant's fundamental rights. It also recalled the principle that a treaty can alter an earlier Act. Finally, in reply to the applicant's argument based on Article 1 of the First Protocol to the European Convention on Human Rights, the Court held that the interference with the applicant's property was justified under para. 2 of that Article.
A constitutional appeal brought by the applicant was rejected on 27 September 1972. The Constitutional Court has always held that a Court of Appeal when dealing with a social security case must be considered as an ordinary court against whose decisions an appeal to the Constitutional Court is inadmissible.
Submissions of the Parties
In their observations on the merits of the application, the parties made, in substance, the following submissions:
I Article 1 of the Protocol
a. Submissions of the respondent Government
13. Article 1 of the First Protocol lays down three conditions under which it is permitted to interfere with the right of ownership:
1. the general principles of international law must be respected;
2. such interference must be provided for by law;
3. it must be in the public interest.
The general principles of international law must be taken to mean the principles that are applied in international law with respect to the expropriation of aliens' property. These principles do not affect the measures taken by a State in respect of the property of its own nationals. This interpretation, which the Convention has always upheld in its decisions, is confirmed by the travaux préparatoires.
14. Any infringement of the right of ownership must be in compliance with the law. Under Austrian law, a treaty which makes amendments or additions to domestic law is considered equivalent to a law.
The Government explained how a treaty was incorporated into domestic law and concluded the bilateral Convention must be deemed to constitute a legal basis, justifying an infringement of the right of ownership.
15. Any infringement of the right of ownership must be in the public interest. However, according to the Government the public interest is proved by the fact that as a general rule international conventions in the field of social security - and in particular the Convention between Austria and Liechtenstein - are based on five principles aimed at ensuring full protection of migrant workers. These principles are: equality of treatment, the determination of applicable legal rules, the maintenance of vested rights, the maintenance of rights in the course of establishment, and the payment of benefits abroad. All the methods used to implement these principles formed part of the technique of legal co-ordination in the social security field.
An essential feature of international conventions on social security is that they secure almost complete territorial integration of the contracting States in the sector of social insurance. Of course, some complex technical problems arise when aggregating the periods of insurance. The extent to which the periods of insurance are reckoned for benefit often depends on applicable legislation and the provisions of the conventions governing the calculation of benefits. Rules on the conflict of laws, which may apply retrospectively, determine the procedure to be followed when periods of insurance which have accrued in several contracting States coincide.
16. With regard to the Convention between Austria and Liechtenstein, the provision of Article 5(a) of the Fist Protocol (see para. 10 of this report) is necessary in order to prevent further coincidence between periods of voluntary insurance in Austria and periods of compulsory insurance in Liechtenstein. This provision complies with the principle of territorial integration of the rights of the contracting States, and the notional reconstitution of a standard insurance record. The problem is moreover settled in a similar manner both by the EEC and in the European Convention of Social Security (see Appendix III to this report [not reproduced]).
The same principles govern the provisions of Article 13, paras. 5(a) and (c) of the bilateral Convention (see para. 10 of this report). The solution adopted amounts to a compromise to the advantage of the insured person and indeed similar cases of re-allocation of contributions existed within the Austrian general social security scheme.
17. On the question whether the contributions paid to social insurance authorities can be regarded as 'contributions' within the meaning of Article 1, para. 2 of the First Protocol, the Government state that the authorities in question are public law corporations whose organs were constitutionally bound to act in strict accordance with their statutory powers. Moreover, insurance benefits are covered not by the contributions alone but also by State subsidies. Insurance contributions may therefore be considered as taxes which are governed by public law. It follows that States are entitled to enforce whatever legislation they consider necessary.
b. The applicant's submissions
18. According to the applicant, the Government are wrong in invoking the general principles of international law in support of the statement that the contracting States may deprive their own nationals of their property without compensation. As a general rule, a State may expropriate its own nationals, even without compensation, without violating any principle of international law, because the relation between a State and its nationals are not governed by international law. Nevertheless, exceptions may arise under international law. In the present case, one such exception exists by virtue of the fact that Austria has acceded to the European Convention on Human Rights. If the Government's argument is correct, it would be possible by law to deprive Austrian nationals of their fundamental rights and grant them only to foreign citizens, insofar as those rights are recognised in the general principles of international law.
19. It is not true to say, as he Government argue, that Article 1 of the First Protocol provides that expropriation is possible only subject to the conditions prescribed by law; it provides that appropriation is possible only when the public interest demands it, and then only as an exceptional measure. The other two conditions are subordinate to the first condition, that is to say the public interest. Both conditions, i.e. 'provided for by law' and 'provided for by the general principles of international law' must be fulfilled. If either is not, then expropriation violates Article 1 of the First Protocol. In the present case, one of the conditions ('provided for by the general principles of international law') is not satisfied. That being so, the Government's contention - which is admitted - that a convention between Austria and Liechtenstein constitutes a law, does not solve the problem.
20. Since the principles of international law on which the applicant relies authorise expropriation only in return for reasonable, rapid and effective compensation, the Government's claim to be acting in the public interest carries no weight, because no compensation is offered. Even if compensation were offered, expropriation would still be possible only if the public interest demanded it. Expropriation is in the public interest only when this aim can be achieved by no other means. This, admittedly, is often a question of appreciation (cf. No. 3039/67, Yearbook 10, pages 506 and 516) and in the Gudmundsson case (No. 511/59, Yearbook 3, page 394) the Commission considerably extended this margin of appreciation to the applicant's detriment.
However, one cannot accept the Government's interpretation that the expropriations constitute a necessity in the case of the Social Security Convention. Furthermore, the Government confuse 'foreign labour' and 'frontier worker' under the single label of 'migrant worker'. whereas legal theory draws a clear distinction between the two categories. Moreover, the expropriation in question was only provided for at the request of the Austrian Government, while the Liechtenstein Government desired nothing of the sort. Consequently, the Government are wrong to invoke the public interest.
21. The Government recognise that the Convention between Austria and Liechtenstein involves an infringement of the right of ownership. But in fact this expropriation is tantamount to confiscation because the applicant has been dispossessed of the contributions he has paid voluntarily for several years.
The Government are wrong in claiming that the applicant has received benefits in return under a supplementary insurance scheme (Höherversicherung). This is because in the scheme of voluntary continued insurance (freiwillige Weiterversicherung) the insured person is entitled to the successive revalorisations due to the 'dynamic' computation of pensions in terms of the cost of living index, and his pension is thus higher than under the system of supplementary insurance.
22. The respondent Government treat the voluntary contributions as 'contributions' in the public law meaning of the term - or at least suggest that this may be so. No support can be given to this argument.
The contributions paid under the voluntary continued insurance scheme are not compulsory contributions but voluntary payments for which the person concerned must even lodge an official application. State imposed contributions cannot be compared to voluntary social insurance contributions. Moreover, Austrian tax law makes no mention of social insurance contributions. The Government's argument that the benefit is covered in part by tax revenue is not wholly valid since the contributions are paid in 'good money', whereas the pensions are subject to devaluation through inflation since there is inevitably a delay in making the necessary readjustments.
II Article 14 of the Convention
a. Submissions of the respondent Government
23. The Government contest the applicant's allegation that Article 14 can be invoked in isolation without being associated with a particular right guaranteed by the Convention and refer to the judgment of the European Court of Human Rights in the case concerning certain aspects of the laws on the use of languages in education in Belgium. Distinctions which are objectively justified are compatible with the Convention, and only arbitrary discrimination is prohibited.
The applicant was not a victim of discrimination. The regulations adopted in the bilateral Convention are an attempt to provide a generally satisfactory solution on a fair and just basis. Difficulties are inevitable with any regulations of this kind.
24. In support of their thesis, the Government refer to their arguments relating to the public interest (see para. 15 of this report). They explain, in particular, that the situation of migrant workers requires persons in this category to be given special treatment. This treatment is not discrimination because it is objectively justified by the specific situation of migrant workers. It is not possible to take account of each particular case; what must be considered are the interests of the migrant workers as a whole; and these must be measured by comparing them with the benefits which could be claimed by a worker who stays at home.
The principles underlying the regulations in question were formulated as early as 1935 in ILO Convention No. 48 and occur in all international instruments concluded by Austria in the social security field both before and since the war. The system adopted in the Convention between Austria and Liechtenstein is also to be found in the 11 Conventions concluded by Austria since 1963, in particular those with its neighbours: the Federal Republic of Germany, Switzerland and Yugoslavia. Similar regulations exist within the framework of the European Communities. Finally, the Supplementary Agreement for the Application of the European Convention on Social Security treats the problem in the same way.
b. The applicant's submissions
25. The applicant admits that Article 14 of the Convention cannot as a rule be taken into consideration except in conjunction with the violation of another fundamental right. However, since the judgment of the European Court of Human Rights in the Belgian linguistic case, this article could be invoked in isolation. In the present case, however, Article 14 was relied on in conjunction with Article 1 of the First Protocol.
26. The applicant is well aware that Austria has signed similar social security agreements with other neighbouring States. But it must be acknowledged that under these Conventions, frontier workers are similarly deprived of the contributions paid to voluntary insurance schemes without compensation.
In the present case, the applicant is discriminated against because frontier workers suffer a tax disadvantage in comparison with other Austrian nationals. Frontier workers are subject to income tax (Einkommensteuer) and have to pay a higher rate of tax than their colleagues who work for Austrian employers and only pay salary tax (Lohnsteuer) at a lower rate. Moreover, frontier workers are deprived of numerous welfare benefits, not to mention the journeys they have to make. It is with full knowledge of the facts that the frontier worker takes up employment abroad to obtain a higher salary, for which he is usually required to work longer hours. However, the Convention in question deprives him of the benefit of these efforts i.e. the hope of receiving a higher retirement pension.
Opinion of the Commission
I Article 1 of the First Protocol
27. The Commission has already held on many occasions that the right to an old age pension is not included as such among the rights and freedoms guaranteed by the Convention (see for example the decision of 17 December 1966 on the admissibility of application No. 2116/64, Yearbook 23, pages 9 and 11).
It has nevertheless stated that 'the making of compulsory contributions to a pension fund may, in certain circumstances, create a property right in a portion of such fund and that such right might be affected by the manner in which the fund is distributed' (see the decision of 20 July 1971 on the admissibility of application No. 4130/69, Yearbook 14, pages 224 and 240 et seq).
28. In the present case, the Commission is called upon to extend this line of reasoning. The applicant does not complain of having been deprived of all the rights resulting from his membership of the pension fund, but only of having had some of his voluntary contributions reallocated by reason of the bilateral Convention between Austria and Liechtenstein.
29. Assuming that the payment of contributions to an old age insurance scheme gives rise to a right safeguarded by Article 1 of the First Protocol, the question arises whether this right simply consists in being entitled as a beneficiary of the social insurance scheme to any payments made by the fund, or whether it relates to the payment of a particular sum calculated, for example, according to the actuarial rules. The Commission considers that the interpretation of Article 1 of the First Protocol justifies, at most, the first of these solutions.
30. Now, whereas it is conceivable that the right to be a beneficiary of an old age insurance system to which one has paid contributions is a right of ownership guaranteed by Article 1 of the First Protocol, the same is not necessarily true where the exact amount of the pension is concerned. The Commission considers that even if it is assumed that Article 1 of the First Protocol guarantees persons who have paid contributions to a social insurance system the right to derive benefit from the system, it cannot be interpreted as entitling that person to a pension of a particular amount.
31. The operation of a social security system is essentially different from the management of a private life insurance company. Because of its public importance, the social security system must take account of political considerations, in particular those of financial policy. It is conceivable, for instance, that a deflationary trend may oblige the State to reduce the nominal amount of pensions. Fluctuations of this kind have nothing to do with the guarantee of ownership as a human right. In the case in point, it was harmonisation of social security systems on a bilateral, if not European basis, that brought about a similar result for the applicant.
32. It is true that, in some cases, a substantial reducing of the amount of the pension could be regarded as affecting the very substance of the right to retain the benefit of the old age insurance system. However, in the present case, this problem does not arise because of the difference of which the applicant complains amounts to 97.70 schillings, that is to say approximately 3% of his pension.
II Article 14 of the Convention in conjunction with Article 1 of the Protocol
33. As to the question whether the applicant is a victim of discrimination in violation of Article 14 of the Convention in conjunction with Article 1 of the First Protocol, the Commission recalls that Article 14 embodies the principles of non-discrimination only in the enjoyment of the rights and freedoms set forth in the Convention (see for example No. 2333/64, Yearbook 8, pages 338 and 360).
This does not mean, however, that it is necessary first to find a violation of one of those rights and freedoms before Article 14 becomes operative. The European Court of Human Rights has ruled that 'a measure which is itself in conformity with the requirements of the Article enshrining the right or freedom in question may ... infringe this article when read in conjunction with Article 14 for the reason that it is of a discriminatory nature' (Belgian linguistic case, Section 1B. para. 9 of THE LAW). Article 14 does not, however, 'forbid every difference in treatment in the exercise of the rights and freedoms recognised ... The principle of equality of treatment is violated if the distinction has no objective and reasonable justification' (Ibid. Section 1B, para. 10 of THE LAW).
34. Even on the assumption that Article 14 is operative, the Commission finds that, in the present case, there is no discrimination. The differential treatment of frontier workers in comparison with workers leaving the compulsory insurance scheme for other reasons is justified on the grounds that the frontier worker is also a member of the fund of the country in which he works and therefore receives two pensions simultaneously. Furthermore, a similar scheme applies to all frontier workers, so that there is no difference between frontier workers employed in Liechtenstein and other frontier workers.
35. The Commission therefore considers
- by 13 votes for, 0 against and 2 abstentions, that in the present case there has been no violation of Article 1 of the First Protocol,
- by 12 for, 0 against and 2 abstentions, that in the present case there has been no violation of Article 14 of the Convention in conjunction with Article 1 of the First Protocol.
The separate opinion of Mr Trechsel was annexed to the present report (not reproduced)
Appendix 4.4 7459/76, X v Italy
Decision of 5 October 1977 on the admissibility of the application
Article 1 of the First Protocol:
If this provision can, in some circumstances, include the right to derive benefits from a social security system, the interested party must, in order to establish that right, satisfy the conditions set by domestic law.
Summary of the relevant facts
The applicant was a post office official. He was suspended from his duties; and later dismissed, on the grounds of a criminal conviction. He complains that the initial decision was premature, having been taken prior to the actual indictment, and that it had the additional effect of depriving him of his pension.
The Law (Extract)
The applicant complains that the decisions by the Ministry of Communications, marred, according to him, by irregularities, had the effect of depriving him of both his pension and a maintenance allowance to which he is entitled from the State. He invokes Article 1 of the First Protocol, which guarantees to each person the peaceful enjoyment of his possessions.
It is true that the Commission has in the past held that the fact of having contributed to a social security system may, in some cases, give rise to a right protected by Article 1 of the First Protocol; that is, the right to benefit, when the time comes, from such an arrangement (cf. especially the Report of the Commission on Application 5849/72, DR 3 pp 25-31). In order that such a right may be established, however, it is necessary that the interested party should have satisfied domestic legal requirements governing the right, in principle, to an annuity. Such requirements generally include a minimum number of years of contribution.
In the present case, the applicant had not fulfilled these conditions, as he was dismissed before attaining the required seniority. This, therefore, involves a question of fact, the examination of which falls outside the competence of the Commission, as the Convention does not guarantee the right to employment in public service (cf. Decision No. 1103/61. Coll. of Decisions 8, p.112).
It does not appear therefore that the denial of the applicant's pension, or other analogous advantages, resulted from an act committed by the Italian authorities in breach of the Convention.
An examination of this complaint by the Commission, as it has been submitted, including an examination ex officio, does not disclose any appearance of a violation of the rights and freedoms set out in the Convention, and in particular of the above article.
It follows that this part of the complaint is manifestly ill-founded within the meaning of Article 27, paragraph 2 of the Convention.
Appendix 5 German Constitutional Court Case
Legal Assets - Expatriate Pensioner Property Rights
Jurisdiction: German Constitutional Court
Case: 1 BvR 111/74 and 283/78 20 March 1979
Web address: www.coe.fr/cm/ta/res/xh/1998/300/98xh372.htm
Issue: Two women, non-German nationals resident overseas, made separate complaints regarding non-payment of age pensions due to their Status (foreign nationals) and residence (overseas).
Synopsis: Non-payment of pensions to certain categories of overseas residents is unreasonable and contrary to Constitution
Lower Courts ruled:
The first plaintiff, with Guatemalan nationality, was the widow of a German insured under the German pension system by reason of his contributions, but had no entitlement to pension since she was a foreign national and lived voluntarily overseas.
In 1957 a Parliamentary majority determined that withholding payment of emigrant pensions would facilitate the negotiation of reciprocal social security agreements.
The constitution was not breached since from the outset overseas pension payments were limited by law and therefore an insured emigrant suffered no loss of legal rights.
The second plaintiff, resident in Brazil, had been trapped by WWII in Germany and, by taking employment, had become liable for insurance contributions. After the war she returned to Brazil, exchanged German nationality for Brazilian, returned to Germany, again entered employment subject to contributions, then returned once more to Brazil, thus she too had become a foreign national living voluntarily overseas.
Both Plaintiffs maintained that overseas residence of a foreigner did not justify withholding pensions when pensions are paid to foreigners resident in Germany. Unequal treatment of two groups of people who had both paid the same contributions; German nationals overseas had their pensions paid but it was denied to foreign nationals. In no way could the withholding of pensions be justified as providing a necessary incentive to foreign countries to conclude reciprocal agreements.
The Minister for Social Security (equivalent) argued:
The regulations under challenge were constitutional. There was no intention of making any change.
Pensions law had from the outset contained non-payment provisions for overseas pensions. The reasons for them had changed over time, now the differentiation found its justification in the basis it provided for the conclusion of bilateral reciprocal social security agreements.
The Consulate General in Curitiba, Brazil, reported that each year dozens of Germans submitted applications for German pensions and, after the law had been explained, could not understand why they were denied entitlement.
The Court determined:
According to Article 3, Para 1 of the Basic Law, the Government must not arbitrarily treat unequally what is basically equal.
The unequal treatment of insured people who, through equal contributions have achieved an equal legal foundation and an equal insurance entitlement, cannot be reconciled with the Basic Law.
The Government cannot withhold an insured person's entitlement, resulting from payment of contributions, in order to achieve other objectives.
The question whether, when and for what reason a reciprocal social security agreement can be sought or concluded, lies completely outside the sphere of the insured person.
What makes the regulation unconstitutional is its blatant unreasonableness.
Nota Bene UK Department of Social Security Research Report #23, published in 1993, entitled Crossing National Frontiers by Helen Bolderson and Francesca Gains of Brunel University, summarised the above case as follows:
'The court ruled that contributory pension rights should be seen as the "property" of the contributor and therefore the state must justify occasions when pension rights are withdrawn if a person leaves the country. The case law became incorporated into subsequent revisions of the RVO, and altered the policy towards payment of benefit abroad.'
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