Over 50 UK-based multinational companies threw their support behind the bid to bring a landmark test case on tax provision for occupational pension schemes before the European Court of Justice, at a meeting in London on 26 June.

The initiative, championed by the Anglo-Norwegian group Kvaerner and UK group Zeneca in conjunction with UK law firm Eversheds, is seeking to overturn current European tax relief restrictions, which it is claimed are hampering companies wanting to set up Europe-wide pension funds.

According to Lyn Ellis, pension fund manager at Kvaerner, support for the case was unanimous:Once reassurances had been given that the case would be approached in the correct manner, not as a tax avoidance scheme, but a real aid to the development of pan-European pension funds for multinationals, the reaction from all the companies was extremely enthusiastic." Financial help to cover court costs and enable the case to proceed, which it is suggested could run to around £500,000 ($875,000), will, she says, be requested from multinational groups when the campaign takes its next step onto the continent, at a meeting in either Paris or Brussels in September, to gain support from European multinationals.

Robin Ellison, a pensions lawyer at London law firm Eversheds, believes their case is strong: "I think we have about a 70% chance of victory, as question marks have already been raised over the legality of the restrictions in light of EU provisions for employment mobility."

Precedent for change was also favourable, he says, with personal pension or insurance court cases such as the 'Wiellockx' affair in Belgium and 'Safir' case in Sweden having re-sulted in individual allowances to take benefit schemes in a country of choice with no tax penalties incurred.

Ellison adds that the EC, along with a prominent member state were "very sympathetic"to the argument being put forward.

Ray Martin, pension fund manager at Zeneca and vice president of the European Federation for Retirement Provision, explains that member states discriminated against pension funds in other countries in two ways.

"The first is that you cannot be in a scheme in another country and claim tax relief on contributions for both employer and employee,"he says.

Secondly, he adds that the dividend received by a pension fund in one member state investing in another was subject to withholding tax, whereas a member state fund would not be.

EC Commissioner Mario Monti commented in London on the case: "Everything that goes in the direction of a pan-European pensions market is something we see with pleasure. The Safir ruling has made it more urgent to find an agreement on harmonised prudential rules, the lack of which has been the major stumbling block on the way to Europe-wide pension funds and tax regulations."

*The latest developments in the court case will be discussed at the 'Pensions in the global environment', an international one-day conference being organised by the NAPF in London on September 17. Details from NAPF on: +44 171 730 0585. Hugh Wheelan"

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