UK may face €5.9bn ECJ insolvency payout
The UK government may have to pay out £4bn (€5.9bn) of taxpayers’ money if the European Court of Justice finds it failed to adequately cater for workers who lost pensions due to insolvency between 1997 and April 2005.
An additional £1-2bn could be added to the bill if workers as far back as 1983 are factored in. This is according to private sector trade union Amicus, which together with Community union, is taking the government to the ECJ claiming it failed to comply adequately with the 1980 European Insolvency Directive.
The unions - representing 1,000 Allied Steel and Wire workers who lost their jobs and part of their pension entitlements due to insolvency in 2002 - are using this as a test case for some 100,000 other workers from roughly 120 companies.
“If we win our case to the effect that the government has failed in its obligation to give effect to the directive and if the court decides too that its failure was culpable, then the court may decide that the damages should be sufficient to make good the entire loss of pension entitlements of employees whose companies became insolvent without covering their pensions obligations,” stated a Community spokesperson. “That would be several billion pounds,” he added.
The directive required member states to take “necessary measures” to protect the interests of employees, pensioners and deferred pensioners. Article 8 required member states to ensure that pension entitlements were fully funded at all times.
However, the Conservative government under Margaret Thatcher and subsequent regimes failed in this regard, according to the claimants.
The Financial Assistance Scheme (FAS) - introduced to assist people in companies, which become insolvent like ASW - has been allocated £400m.
“We calculate that this is wholly inadequate to cover the losses of the people affected. Recipients of help from the scheme would be able to obtain only a small part of the pension to which they were entitled,” said the Community spokesperson.
Meanwhile, the Pension Protection Fund (PPF) established under the Pensions Act 2004 has been labelled as “too late” for many of these claimants by Amicus .
In November 2004 an English court referred certain European matters - such as whether UK legislation complied with the directive - to the ECJ for consideration before it makes its final ruling.
While lawyers for the claimant, Thompson Solicitors, requested fast-tracking the case, the government did not support the move, says Thompson partner Ivan Walker.
Written submissions have been given to the ECJ, and a decision is expected to take between 15 months and two years, according to Walker.
“It must be a fundamental right that people who save in a company pension scheme should be protected by law,” says Amicus general secretary Derek Simpson. “Our legal advice is sound and the union is confident of a victory on behalf of our members.”
According to Amicus, the government could make a £4bn settlement out of court and spread the payment over as much as 40 years.