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Czech faces ECJ over IORP non-compliance

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  • Czech faces ECJ over IORP non-compliance

CZECH REPUBLIC - The European Commission has referred the Czech Republic to the European Court of Justice for only partially implementing the IORP directive, as the Czech Republic does not provide access to occupational pensions at present.

Czech officials and pensions experts argue the reasons for not fully implementing the Institutions of Occupational Retirement Provision (IORP) directive are complex because it does not have an occupational pensions regime at present.

Under the current system, the Czech Republic has a first and third pillar pensions, but no second pillar, despite reform proposals suggesting government officials would like to implement them. (See earlier IPE story: Fragile coalition could doom Czech reforms)

 A spokeswoman for the internal markets and services DG said the case has automatically been sent to the ECJ as the government was given two previous opportunities to explain why it had not implemented the directive, but did not reply to the authority's ‘reasoned belief' letter despite having several months to do so.

An official statement issued by the EC says it recognises member states' pensions systems differ widely but the directive "provides harmonised rules for prudential supervision and capital requirements for these institutions" and Czech officials say it is the "non-existence of a typical occupational pension pillar" which has created the conflict.

But the IORP directive should have been fully implemented by September 23, 2005, and this includes a requirement to offer cross-border access to occupational pensions, so the Czech Republic is now being called to account because this access is currently not available, according to EC officials.

"The Czech Republic does not have any institutions for occupational retirement provision, therefore they believe they don't have to transpose the directive. But our opinion is the opposite. They have to allow IORPs from other markets to have access," said the spokeswoman.

Elsewhere, the Portugese government has been sent a formal request by the European Commission to amend legislation applying a withholding tax on investments deriving income from outside the country, and gives more favourable terms to domestic residents when they invest locally.

The EC has been cracking down on such issues over recent months and several countries have been ordered by to change their rules, to give both domestic and overseas equal treatment concerning tax on investments. (See earlier IPE story: EU issues new warnings over tax discrimination)

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