ECJ cites Ireland for failing to protect pension benefits adequately
IRELAND – The Irish government's failure to not guarantee at least half of the pension benefits from an insolvent company's defined benefit (DB) scheme poses a "serious breach" of its responsibility as a European Union member state, the European Court of Justice (ECJ) has ruled.
The verdict comes days after a detailed report on the country's pension system by the OECD criticised the absence of adequate protection of benefits for DB members, including the absence of a protection fund.
Publishing its verdict in case C-398/11 – brought against the Irish government by employees of Waterford Crystal, which declared insolvency in 2009 – the court's third chamber ruled that Ireland had not met its obligation under European law to protect benefits held within DB schemes, and that the country's current economic situation could not be used to justify this failure.
Examining both the importance of a European Directive from 1980 concerned with employee protection in case of company insolvency and the 2007 case brought by the UK's Carol Robins against then-secretary of state for work and pensions John Hutton over the loss of her pension, the ECJ noted that guaranteeing less than half a member's pension had already been deemed insufficient.
Waterford Crystal Ireland's pension fund held assets of €130m when it was wound up at the end of March 2009, reporting a €110m deficit that an actuarial assessment estimated would result in members only receiving 28% of their pension.
The ECJ ruling said Ireland's failure in the wake of the Robins case to ensure at least half of benefits would be protected marked a "serious breach of that member state's obligations".
It added that Ireland's economic situation did not constitute "an exceptional situation capable of justifying a lower level of protection of the interests of employees".
Union Unite's regional secretary Jimmy Kelly said it was now clear the government's failure to adequately protect pension benefits represented a "breach of its obligations".
"It is regrettable that the state chose to contest what should have been an open-and-shut case, causing distress and uncertainty for the workers involved and forcing the taxpayer to pick up a substantial legal bill," he said.
Unite supported the legal action filed in 2009.
However, both parties agreed at the time to seek clarification from the ECJ.
A spokeswoman for the Department of Social Protection said the case would now be referred back to the High Court and that, until the hearings concluded, the department would be unable to comment further.