UK - The UK government may have to fork 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 £1bn to £2bn could be added to the tab if workers as far back as 1983 are factored in.
This is according to private sector union Amicus, which together with Community union, is taking the government to the ECJ claiming it failed to adequately comply 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 approximately 100,000 other workers from roughly 120 companies in the same position.
“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 told IPE.
The directive required member states to take “necessary measures” to protect the interests of employees, pensioners and deferred pensioners. Article 8 required that member states ensured 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” by Amicus for many of these claimants.
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 counsel for the claimant, Thompson Solicitors, requested fast tracking the case, the government did not support the move, said Thompson partner Ivan Walker.
Written submissions have just been given to the ECJ, and a decision is expected to take anywhere 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,” said 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.
However, if the ECJ finds in favour of the claimants the government would have to pay out immediately. This money will have to come from the Treasury.
“In the past the government has paid out approximately £4bn in instances such as foot and mouth disease. They gave in there without an argument. Here you have people that did as they were told, invested in a pension fund but the government did not protect them.”
The UK Treasury refused to comment on where these billions would come from, stating it was not willing to “hypothecate” on the matter.
The Department for Work and Pensions said: “The government is vigorously defending the action.
“The government feels it has met its obligations under Article 8 of the European Insolvency Directive.”
The DWP declined to comment on where the billions would come from should the ECJ find against the government, saying it would be inappropriate to speculate further on issues before the Court.
European Trade Union Confederation (ETUC) General Secretary John Monks stated that the unions had approached the organisation for procedural assistance.