The Court of Justice has handed down a neat judgment on the liability of the member States when faced with the implementation of a provision of a directive which leaves a certain margin of discretion to the States on how it should be implemented.
Case C-278/05 Carol Marilyn Robins and Others concerns claims for old-age benefits under Directive 80/987/EEC on the protection of workers in the event of the employer’s insolvency. That Directive requires that the member States ensure that the necessary measures are taken to protect the interests of employees and former employees in the event of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits under supplementary occupational pension schemes. The claimants in the national proceedings, Ms Robins and 835 others, were former employees of an English company which went into liquidation in April 2003. They were members of final-salary pension schemes funded by their employer. The schemes were terminated in July 2002 and are in the process of being wound up. There were insufficient assets to cover all the benefits of all members, and the benefits of non-pensioners will therefore be reduced. According to United Kingdom legislation, the claimants will not receive all the benefits to which they were entitled. Two of the claimants will receive only 20% and 49% respectively of those benefits.
The claimants considered that the United Kingdom legislation did not provide them with the level of protection called for by Directive 80/987/EEC. Consequently, they brought an action against the British Government before the High Court for compensation for the loss suffered. The English High Court referred questions to the Court of Justice on whether the member States are required to fund themselves the rights to old-age benefits and if so to fund them in full, whether the United Kingdom legislation compatible with the directive and what is the liability of the member State in the case of incorrect transposition of Directive 80/987/EEC.
In the first place, the Court held that the Directive does not oblige the member States themselves to fund the rights to old-age benefits: The directive leaves the member States some latitude as to the means to be adopted to ensure protection and may impose an obligation on employers to insure or provide for the setting up of a guarantee institution in respect of which it will lay down the detailed rules for funding, rather than provide for funding by the public authorities. Moreover, the Court held that the directive does no more than prescribe in general terms the adoption of the measures necessary to ‘protect the interests’ of the persons concerned and thus gives the member States considerable latitude which excludes an obligation to guarantee in full.
Secondly, the Court held that the system of protection as provided for in the United Kingdom was in principle compatible with the directive.
Finally, on the issue of the liability of the State in damages, the Court repeated its settled case-law (see, in particular, Joined Cases C-46/93 and C-46/93 Brasserie du Pêcheur and Factortame, paragraph 51; Case C-5/94 Hedley Lomas, paragraph 25; Case C-424/97 Haim, paragraph 36; and Case C-63/01 Evans, paragraph 83), for a Member State to incur liability for damage caused to individuals by a breach of Community law it is necessary that:
– the rule of law infringed should be intended to confer rights on individuals;
– the breach should be sufficiently serious;
– there should be a direct causal link between the breach of the obligation incumbent on the State and the damage sustained by the injured parties.
The condition requiring a sufficiently serious breach of Community law implies manifest and grave disregard by the member State of the limits set on its discretion, the factors to be taken into consideration in this connection being, inter alia, the degree of clarity and precision of the rule infringed and the measure of discretion left by that rule to the national authorities (Joined Cases C-46/93 and C-46/93 Brasserie du Pêcheur and Factortame, paragraphs 55 and 56). If, however, the member State was not called upon to make any legislative choices and had only considerably reduced, or no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach (see Case C-5/94 Hedley Lomas, paragraph 28). The discretion enjoyed by the member State thus constitutes an important criterion in determining whether there has been a sufficiently serious breach of Community law. That discretion is broadly dependent on the degree of clarity and precision of the rule infringed.
The liability of a member State by reason of incorrect transposition of that provision is conditional on a finding by the national court of manifest and serious disregard by that State for the limits set on its discretion. In order to determine whether that condition is satisfied, the national court hearing a claim for compensation must take account of all the factors that characterize the situation put before it (Case C-224/01 Köbler). Consequently, in the present case the national court will have to take into account the clarity and precision of the Directive with regard to the level of protection required.
Interestingly, the Court set out some pointers for the national court. It noted for instance that none of the member States and the Commission which have submitted observations had been able to suggest with precision the minimum degree of protection that in their view is required by the Directive. Also, the Court indicated that the national court may also take into consideration Commission report COM(95) 164 final of June 15, 1995 concerning the transposition of the Directive by the Member States which concluded that the United Kingdom had implemented Directive 80/987/EEC correctly.
