JUDGMENT OF 17. 12. 1981 — CASE 22/81 BROWNING

In Case 22/81 REFERENCE to the Court under Article 177 of the EEC Treaty by the High Court of Justice, Queen's Bench Division, Divisional Court, London, for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: O. Due, President of Chamber, P. Pescatore and A. Chloros, Judges, Advocate General : Sir Gordon Slynn Registrar: J. A. Pompe, Deputy Registrar

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Written observations submitted to the Court

III — Oral procedure

Decision

Costs

I —. Facts and written procedure

1. Is there a minimum benefit within the meaning of Article 50 of Council Regulation (EEC) No 1408/71 where the legislation of a Member State makes entitlement to retirement benefit at a flat rate conditional on the yearly average of weekly flat-rate contributions paid or credited to a claimant during the period between his entry into insurance and his attaining pensionable age being not less than 50, and, if that condition is not satisfied but the yearly average is not less than 13, provides for a reduced amount of retirement benefit determined solely by reference to the claimant's contribution average for that period?

2. If the answer to Question 1 is in the affirmative is the minimum benefit:

II —. Written observations submitted to the Court

(a). In 1973 entitlement to payment of a retirement pension depended on Article 30 of the National Insurance Act 1965 and the regulations made thereunder. It was subject to the condition that the person entitled had paid not less than 156 flat-rate contributions, payable weekly, for the period between that person's entry into the insurance scheme and the date on which he reached the age of retirement, the yearly average of the contributions paid by him or credited to him being not less than 50. Any insured person who failed to meet both of the contribution conditions was not entitled in principle to any retirement pension at all; however, provision was made in the National Insurance (Widows' Benefit and Retirement Pensions) Regulations 1972 for a reduced pension to be payable to insured persons who had paid more than 156 contributions but whose yearly average of paid or credited contributions was 13 or more, but less than 50.

(b). The view that a beneficiary residing in the United Kingdom is entitled by virtue of Article 50 of Regulation No 1408/71 to a supplement to secure payment to him of benefit calculated according to Article 46 (2) (a) of the regulation is based on a misconstruction of the concept of minimum benefit: it takes minimum benefit within the meaning of Article 50 to be equivalent to the theoretical amount of benefit referred to in Article 46 (2) (a). However, that interpretation corresponds neither to the wording of Article 50 nor to its objective and was rejected by the Court in its judgment of 30 November 1977 (Case 64/77 Torri [1977] ECR 2299).

(c). Further, Regulation No 1408/71 requires the declarations of Member States specifying the minimum benefits referred to in Article 50 to be notified and published in accordance with Article 96. Such a declaration presupposes the existence of a readily identifiable level of benefit, the minimum benefit, and is not apt if Article 50 is intended to secure the payment of a benefit which is dependent upon an assessment of the average of the contributions paid by the person concerned, his remuneration or other such variable factors. The concept of minimum benefit is to be identified by reference to domestic law; if it were a benefit to be determined by the application of the theoretical amount of benefit under Article 46 (2) (a) of the regulation it could not be a minimum benefit capable of being notified pursuant to Articles 5 and 96.

(a). As to the manner in which Regulation No 1408/71 is to be applied to the British flat-rate system it must be remembered that the British authorities are bound to take into account the fact that flat-rate contributions have been paid throughout the periods of insurance completed in Member States other than the United Kingdom; the difficulties encountered in the main action stem principally from a failure to grasp the fact that consideration of the number of flat-rate contributions paid amounts to consideration of the duration of a completed insurance period.

(b). Accordingly, Article 50 of Regulation No 1408/71 must be understood to mean that it assumes that flat-rate contributions have been paid throughout the periods taken into account in calculating the payment in accordance with the provisions of the preceding articles. The British legislation, it is submitted, fixes a minimum benefit for an insurance period of specified length once it is assumed that flat-rate contributions have been paid throughout that insurance period; it is not necessary to consider in addition matters personal to the claimant.

(c). There is nothing in the Torri decision of the Court to contradict the clear wording of Article 50 of Regulation No 1408/71 to the effect that there is a minimum pension when the amount of the pension payable may be ascertained by reference solely to the duration of the insurance periods.

(d). If Article 50 of Regulation No 1408/71 is to be interpreted on the basis of the social aims pursued by the legislation of other Member States, namely to guarantee a minimum level of income, it must be observed that the flat-rate pension payable under the British legislation has all the essential characteristics of a minimum pension in the broad sense of the term. If the British system before 1975 had provided for both a minimum pension of a flat-rate kind payable once a claimant had been insured all his working life and an earnings-related element, there would be no difficulty in characterizing the pension as a minimum pension within the meaning of Article 50; the differences between the British position prior to 1975 and the hypothetical position in which there was no earnings-related element and entitlement to the flat-rate pension depended upon an annual average of the flat-rate contributions paid or credited, are not fundamental ones.

(e). Mr Stanley submits that, despite the change in terminology, it is the clear intention of the new British pensions scheme set out under the Social Security Act and the Social Security Pensions Act 1975 that every pensioner who has been insured in the United Kingdom all his working life should qualify for the basic component of a pension; further, the question whether a claimant qualifies for the flat-rate basic pension component may be determined by reference solely to the duration of the completed insurance periods, just as can the question of determining the amount of the basic pension component which is payable when the claimant has insufficient qualifying years to be eligible for the full flat-rate amount. On the other hand, the amount of the additional pension component may be ascertained only by reference to the actual earnings received by the claimant. It is submitted accordingly that there is no difficulty in identifying the basic pension component as the minimum pension within the meaning of Article 50 of Regulation No 1408/71 and that it would be anomalous to hold that there was no minimum pension before 1975 simply because the flat-rate pension was all that was provided for, without any additional component.

(a). The most recent declaration made by the United Kingdom pursuant to Article 5 of Regulation No 1408/71 for the purposes of Article 50 has the word none under the heading Minimum benefits referred to in Article 50 of the regulation (Official Journal 1977, C 89, p. 2). The declaration is identical with those made by four other Member States (Denmark, Ireland, Federal Republic of Germany and The Netherlands) whilst the declarations made by Belgium, France, Italy and Luxembourg contained more or less detailed references to national legislation (Official Journal 1980, C 139, p. 1); the same applies in respect of Greece (Official Journal 1981, C 143, p. 1).

(b). It was laid down in the Torri case that Article 50 of Regulation No 1408/71 is applicable only in cases in which provision is made in the legislation of a Member State in whose territory the worker resides for a minimum pension; it was further stated in the judgment that Article 50 covers cases where the periods of employment of the worker under the legislation of the States to which he was subject were relatively short with the result that the total amount of the benefits payable by those States does not provide a reasonable standard of living, and that in order to remedy that situation Article 50 provides that where the legislation of the State of residence lays down a minimum benefit, the benefit payable by that State shall be increased. The Court also referred to the limited object of Article 50.

(c). According to its introductory heading Article 50 is concerned with the award of a supplementary payment where, even after the benefits payable by the different Member States involved have been added together, the minimum amount laid down by the legislation of a particular Member State is not attained. The minimum benefit is defined in the first sentence of Article 50: it is to be at least equal to that fixed by the legislation of a particular Member State in respect of a period of insurance or residence equal to all the periods taken into account for the payment in accordance with the provisions of the preceding articles, which means, in the case at hand, the periods completed in Ireland and the United Kingdom; in other words, the basis for any payment of a supplement is the amount, that is to say, the minimum amount, established by the legislation of one Member State which would be payable provided that a given period of insurance or residence had been completed.

(d). In the context of the declarations by the new Member States to be made under Article 5 of Regulation No 1408/71, the United Kingdom stated in relation to the minimum benefits referred to in Article 50 of the regulation (Official Journal 1973, C 43, p. 7) that ... The rates of flat-rate old-age pension and survivors' benefits depend upon the yearly average of contributions paid or credited throughout the insurance life and these rates are laid down in regulations made under, in particular, the National Insurance Act 1965 of 5 August 1965. This statement was interpreted at the time by the British authorities to mean that if the total amount was less than the amount which would have been payable had all the periods of insurance been completed in the Member State of the Community in which the person was permanently resident, that country would pay him a supplement equal to the difference between the two amounts.

(e). However, the declaration was modified in 1977 (Official Journal, C 89, p. 2) and replaced by the word none.

(f). The reply to be given to the questions which have been raised should be as follows:

III —. Oral procedure

1. By an order of 18 December 1980 which was received at the Court on 5 February 1981 the High Court of Justice, Queen's Bench Division, Divisional Court, London, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions concerning the interpretation of Article 50 of Regulation No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons (Official Journal, English Special Edition 1971 (II), p. 416; codified version: Official Journal 1980, C 138, p. 1), with particular reference to the meaning of the expression minimum benefit.

2. From the file on the case it appears that the respondent in the appeal before the High Court of Justice, Robert Stanley, an Irish national living in the United Kingdom, completed periods of insurance first in his country of origin and later in the United Kingdom. On reaching pensionable age in 1973 he was awarded, by a decision of the Insurance Officer of 27 March 1973, a retirement pension calculated in accordance with the provisions of Article 46 (1) of Regulation No 1408/71. In addition to the pension the Insurance Officer awarded him a supplement pursuant to Article 50 of the same regulation, according to which a recipient of benefits may in certain circumstances be entitled to receive a supplement to his pension equal to the difference between the total of the benefits payable under the regulation and the amount of the minimum benefit.

3. The Insurance Officer considered that the minimum benefit was the benefit payable under the United Kingdom legislation, and the difference referred to in Article 50 was the difference between that benefit and the pension which would have been payable had all the periods of insurance been completed in the United Kingdom. He therefore awarded Mr Stanley a pension equal to the theoretical amount defined in Article 46 (2) (a) of the regulation. The decision was based on the fact that at the time in question the United Kingdom Government had made a declaration pursuant to Articles 5 and 50 of Regulation No 1408/71 that certain benefits payable under, in particular, the National Insurance Act 1965 as subsequently amended were the minimum benefits referred to in Article 50 of the regulation (Official Journal 1973, C 43, p. 7, Section II).

4. That declaration, which was brought up to date in 1975 (Official Journal, C 245, p. 2, Section II), was subsequently replaced by a declaration published in the Official Journal of 14 April 1977, C 89, p. 2, worded as follows: Minimum benefits referred to in Article 50 of the regulation: None. It was shortly before that declaration was published, on 27 January 1977, that the Insurance Officer adopted a decision altering his earlier decision and withdrawing from Mr Stanley with effect from 6 January 1977 the extra payment he had previously been awarded under Article 50 of the regulation.

5. Mr Stanley's appeal against that decision to the local tribunal with jurisdiction in such matters was dismissed. He then appealed to the National Insurance Commissioner (now the Social Security Commissioner) who, on 13 September 1979, ruled that the Insurance Officer's original decision must stand, there being no grounds for amending it.

6. From the statement of the reasons on which the decision was based it is apparent that the National Insurance Commissioner considered that minimum benefit within the meaning of Article 50 of Regulation No 1408/71 must be understood to mean the lowest amount payable under the law of the United Kingdom for all the periods of insurance which are to be taken into account. The flat-rate pension calculated on the basis of such periods of insurance constitutes, according to the Commissioner, the minimum pension determined by United Kingdom legislation. The fact that the amount coincides with the theoretical amount referred to in Article 46 (2) (a) of the regulation is, in the Commissioner's view, a mere coincidence. In his opinion that interpretation is in accordance with Article 50 of the regulation and is not affected by the decision in the judgment of the Court of 30 November 1977 (Case 64/77 Torri [1977] ECR 2299), on which the Insurance Officer relied in the proceedings before him.

7. The Insurance Officer appealed against that decision to the Divisional Court, Queen's Bench Division, of the High Court of Justice. Contrary to the opinion of the National Insurance Commissioner his view, based on the declaration made by the United Kingdom Government in 1977, is that the minimum benefit referred to in Article 50 of the regulation is in fact unknown to United Kingdom legislation.

8. In order to obtain clarification of this concept the High Court of Justice referred to the Court two questions worded as follows :

9. With a view to giving a reply to those questions the heading and wording of Article 50 of Regulation No 1408/71 must first be recalled:

10. The wording of that provision makes it clear that the minimum benefit to which the article refers is to be defined primarily not on the basis of the concepts employed in the regulation itself but by reference to the minimum benefits fixed by the laws of the various Member States. An examination of the declarations which have been made in that context by the Member States pursuant to Article 5 of the regulation reveals that minimum benefits, within the meaning of Article 50, are provided for by the law of only some of the Member States. Since the question of the existence of such benefits under United Kingdom legislation is in dispute it would appear appropriate to examine the nature of such benefits in those national legal systems in which their existence is not contested.

11. According to the information contained in the case-file and that furnished by the Commission in the course of the proceedings the relevant provisions in the Member States which have minimum benefits within the meaning of Article 50 are designed, in various forms, to guarantee to recipients of retirement pensions a minimum income in excess of the amount to which they would normally be entitled on the basis of the periods of insurance completed by them and the contributions which they have paid. The purpose of such provisions is, in general, to provide the recipients with a guaranteed minimum income.

12. That was the objective in view of which the Court made reference in its decision of 30 November 1977, cited above, where in paragraph 5 it is stated that Article 50 covers cases where the periods of employment of the worker under the legislation of the State to which he was subject were relatively short with the result that the total amount of the benefits payable by those States does not provide a reasonable standard of living.

13. That view may be deduced from the actual wording of Article 50, where reference is made in the heading and in the body of the article to the award of a supplement, meaning an additional payment in excess of the minimum payable in application of the normal rules under a particular national legal system. That view may likewise be deduced from the second sentence of Article 50, which states that a recipient of benefits to whom the regulation applies is entitled to payment of the difference between the total of the benefits payable under the regulation, that is to say, the sum resulting from the normal application of the rules concerning aggregation and apportionment laid down in Article 46, and the minimum benefit which is guaranteed by the law of the State of residence. Such a method of calculation implies that what is meant is a minimum resulting from a specific guarantee laid down under national legislation and not the minimum benefits which may result from the normal operation of the rules concerning the determination of rights to retirement pension on the basis of the insurance periods which have been completed and the contributions which have been paid.

14. Those considerations make it clear that the minimum benefits referred to in Article 50 are distinct from the theoretical amount referred to in Article 46 (2) (a), which does not represent a sum the actual payment of which is guaranteed, but forms the basis of calculation used in applying the rules concerning aggregation and apportionment.

15. The reply to the question which has been raised must therefore be that Article 50 of Regulation No 1408/71 is to be interpreted as meaning that a minimum benefit exists only where the legislation of the State of residence includes a specific guarantee the object of which is to ensure for recipients of social security benefits a minimum income which is in excess of the amount of benefit which they may claim solely on the basis of their periods of insurance and their contributions.

16. In view of the foregoing the second question raised by the national court has no purpose.

17. The costs incurred by the Commission of the European Communities which has submitted observations to the Court are not recoverable. As the proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the proceedings before the national court, the decision as to costs is a matter for that court.

On those grounds, THE COURT (Second Chamber), in answer to the questions referred to it by the High Court of Justice, Queen's Bench Division, Divisional Court, by order of 18 December 1980, hereby rules :