Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Loss of two-thirds of old-age pension as a result of introduction of legislation effectively deciding outcome of pending litigation against the State: violation
Article 6
Civil proceedings
Article 6-1
Fair hearing
Introduction of legislation effectively deciding outcome of pending litigation against the State: violation
Facts – The applicants, who were Italian nationals, lived and worked for many years in Switzerland before retiring to Italy. On their return to Italy the Istituto Nazionale della Previdenza Sociale (INPS), an Italian welfare body, decided to re-adjust their pension claims to take into account the low contributions they had paid while working in Switzerland (where contributions came to 8% of salary, as opposed to 32.7% in Italy). The applicants brought proceedings to contest this method of calculating their pension rights. However, while the proceedings were still pending before the domestic courts, Law no. 296/2006 was introduced, which effectively endorsed the INPS’s interpretation of the relevant legislation. The applicants’ claims were thus dismissed and as a result they lost around two-thirds (67%) of their pensions.
Law – Article 6 ss 1: The need for legislative intervention had only arisen as a result of the State’s decision, in 1982, to reform the pension system so that the amount received in pension was no longer dependent on the contributions paid, but on the remuneration received. The State had thus itself created a disparity which it had not tried to amend until some 24 years later. Given that in the decades preceding the introduction of the new law, various individuals in the applicants’ position had successfully challenged the calculation used by the INPS and there had therefore been a majority interpretation in favour of the claimants, legislative interference shifting the balance in favour of one of the parties had not been foreseeable. Even assuming that the law did aim at reintroducing the legislator’s original wishes following the changes in 1982, the aim of re-establishing an equilibrium in the pension system, while in the general interest, was not compelling enough to overcome the dangers inherent in the use of retrospective legislation affecting a pending dispute. Indeed, even accepting that the State was attempting to adjust a situation it had not originally intended to create, it could have done so perfectly well without resorting to a retrospective application of the law. Furthermore, the fact that the State had waited 24 years before making such an adjustment, despite the fact that numerous pensioners who had worked in Switzerland had been repeatedly winning their claims before the domestic courts, also created doubts as to whether Law no. 296/2006 was really supposed to embody the legislator’s intention in 1982. The Court therefore reaffirmed its findings in the case of Maggio and Others v. Italy (46286/09 et al., 31 May 2011, Information Note 141).
Conclusion: violation (unanimously).
Article 1 of Protocol No. 1: In Maggio and Others, the fact that the applicant had lost considerably less than half of his pension, which had therefore amounted to a reasonable and commensurate reduction, had undeniably carried some weight in the finding that the provision had not been breached. Given the more substantial reduction in the instant case and in view of the contributions paid by the applicants, the Court had to reassess the matter and scrutinise the reduction more closely. A reduction of two-thirds of one’s pension (and not solely of a benefit linked to pensions) was indisputably, in itself, a sizeable decrease which must seriously affect a person’s standard of living. Of particular importance were the two factors already considered in Maggio and Others. Primarily, that the applicants had, on the one hand, paid lower contributions in percentage terms in Switzerland than they would have paid in Italy, but on the other had had to pay, in absolute terms, contributions of a considerable amount during long contributory periods of their entire active life in Switzerland. The second factor was that the reduction had been aimed at, but had not had the effect of, equalising a state of affairs and avoiding unjustified advantages (resulting from the decision to retire in Italy) for people in the applicants’ position.
According to statistical data for the year 2010, in Italy, the average old-age pension for that year was EUR 1,251 monthly and the minimum pension amounted to EUR 461 per month. The European Committee of Social Rights had observed that that level of minimum pension fell below 40% of the median equalised income (Eurostat) and was thus inadequate.
The applicants had received old-age monthly pensions varying between EUR 714 and EUR 1,820. Indeed, save for one applicant, all the applicants had received less than the average monthly pension in Italy, and six out of eight applicants had received less than EUR 1,000 per month. The difference in sums received between the applicants reflected their job category as well as the different periods of time they had spent in Switzerland and in consequence the actual contributions they had paid. When assessing a reduction of social-security payments, it was indeed of significance that such pensions had been based on actual contributions paid by the applicants (transferred to the relevant disbursing authority), albeit lower than those paid by others, and that therefore they had not been a gratuitous welfare aid solely funded by the tax-payer in general.
Relying on the conclusions of the European Committee of Social Rights, the Court found that the majority of the sums at issue, which did not exceed EUR 1,000 a month, had to be considered as providing for only basic commodities. Thus, the reductions had undoubtedly affected the applicants’ way of life and hindered its enjoyment substantially. The same could also be said of the higher pensions, despite them allowing for more comfortable living.
Furthermore, the Court could not lose sight of the fact that the applicants had made a conscious decision to move back to Italy at a time when they had had a legitimate expectation of receiving higher pensions, and therefore a more comfortable standard of living. However, as a result of the calculation applied by the INPS and eventually the impugned legislative action, they had not only found themselves in a more difficult financial situation but had further had to institute proceedings to recover what they had deemed was due and those proceedings which had been frustrated by the Government’s actions in breach of the Convention. Through those actions, the Italian legislature had arbitrarily deprived the applicants of their claims to the amount of pension which they could legitimately expect to be determined in accordance with the settled case-law of the domestic courts, an element which could not be ignored for the purpose of determining the proportionality of the impugned measure. No compelling general interest reasons had justified a retrospective application of the Law no. 296/2006, which was unforeseeable.
In conclusion, by losing 67% of their pensions based on contributions paid, the applicants had not suffered commensurate reductions but had been made to bear an excessive burden. Thus, despite the reasons behind the impugned measures, the Court could not find that a fair balance had been struck.
Conclusion: violation (five votes to two).
Article 41: EUR 12,000 to each applicant in respect of non-pecuniary damage. Question of compensation for pecuniary damage reserved.
Citations:
21838/10 – Legal Summary, [2014] ECHR 550, [2014] ECHR 769
Links:
Statutes:
European Convention on Human Rights
Jurisdiction:
Human Rights
Human Rights
Updated: 05 November 2022; Ref: scu.526274
