Report for the Hearing delivered in Case 192/85

I — Facts and procedure

By an order dated 11 June 1985, which was received at the Court on 21 June 1985, the Employment Appeal Tribunal referred to the Court for a preliminary ruling under Article 177. of the EEC Treaty four questions regarding the interpretation of Article 119 of the EEC Treaty and Council Directives Nos 75/117 of 10 February 1975 (Official Journal L 45, p. 19) and 76/207 of 9 February 1976 (Official Journal L 39, p. 40).

Those questions were raised in the course of proceedings between Mr Newstead, a civil servant employed by the Department of Transport, and the Department of Transport and the Treasury regarding the compulsory deduction of 1.5% of his gross salary by way of contribution to a fund for widows' pensions.

That contribution was originally voluntary, but by virtue of the Principal civil service pension scheme 1974 it became compulsory for all male civil servants, regardless of their marital status.

In the case of a civil servant who has never married, it is provided that his contribution should be returned to him, with compound interest at the rate of 4% per annum, when he leaves the civil service. Should he die before then, that amount is paid to his estate.

Female civil servants, on the other hand, are not required to contribute to the fund but may in certain circumstances be permitted to do so.

Mr Newstead, who is unmarried, argues that the obligation to contribute to the pension fund in question has the effect of discriminating against him in comparison with a female civil servant in like circumstances, since the latter is not obliged to give up 1.5% of her gross salary, albeit temporarily, as a contribution to the fund.

Mr Newstead considered that such discrimination constituted a breach of both the Equal Pay Act 1970 and the Sex Discrimination Act 1975; he therefore brought proceedings before an industrial tribunal.

The industrial tribunal dismissed his application, holding that the difference of treatment complained of by Mr Newstead was not prohibited by the legislation referred to. Under Section 6 (1 A) of the Equal Pay Act 1970 a clause providing for equality between men and women workers shall not operate in relation to terms related to death or retirement, or to any provision made in connection with death or retirement. Section 6 (4) of the Sex Discrimination Act 1975 provides that the principle of nondiscrimination laid down in subsections (1) (b) and (2) do not apply to provisions in relation to death or retirement.

The matter then went before the Employment Appeal Tribunal; Mr Newstead accepted that the difference of treatment in question could not be considered illegal under the legislation referred to above, but relied in support of his application on Article 119 of the EEC Treaty and on Directives Nos 75/117 and 76/207.

The Employment Appeal Tribunal considered that Mr Newstead's argument raised questions of the interpretation of those provisions of Community law; it therefore stayed the proceedings and referred the following questions to the Court:

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice, written observations were submitted by the following: Mr Newstead, represented by Anthony Lester, QC, and David Pannick, barrister, instructed by Anne Saxon of the Equal Opportunities Commission, Manchester; the United Kingdom of Great Britain and Northern Ireland, represented by R. N. Ricks, of the Treasury Solicitor's Department, acting as Agent, assisted by Peter Goldsmith, barrister; and the Commission of the European Communities, represented by Julian Currall, a member of its Legal Department, acting as Agent.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

By a decision dated 29 January 1986 the Court assigned the case to the Fifth Chamber.

II — Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court

The first question

According to Mr Newstead, it is not disputed that on the ground of his sex he has been treated less favourably than a comparable woman is or would be treated, since a pensionable female civil servant who is unmarried and has no intention of marrying would not be required to have 1.5% of her gross salary deducted for the purposes of a spouse's pension. Mr Newstead emphasizes that he is deprived of a portion of his salary for a considerable period of time.

Mr Newstead takes the view that Article 119 of the EEC Treaty (read in conjunction with Directive No 75/117) is breached when men and women are awarded the same gross pay but deductions are made by the employer from the man's pay only, and not from the pay of a woman in comparable circumstances.

He points out in that regard that, contrary to Article 119, he receives an amount of pay different from that received by a female employee.

He goes on to point out that according to Article 1 of Directive No 75/117 the principle of equal pay for men and women workers means, for the same work or for work to which equal value is attributed, the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of remuneration; he asserts that in this case he suffers sex discrimination in relation to an aspect and condition of remuneration.

With regard to the judgment of the Court of 11 March 1981 in Case 69/80 Worringham and Humphreys v Lloyds Bank Limited [1981] ECR 767, relied on in the course of the proceedings before the national court, Mr Newstead states that in that case the Court did not consider or decide the question whether it is a breach of Article 119 for an employer to award men and women the same gross pay but to give them different take-home pay, that is to say, where the sum received by men and women is different.

Furthermore, according to Mr Newstead, the object and purpose of Article 119 and Directive No 75/117 would be frustrated to a significant extent if the Court were to hold that those provisions are satisfied whenever men and women are awarded the same gross pay, irrespective of what deductions are made prior to them receiving that pay.

Mr Newstead considers that the discrimination which he suffers does not fall outside the scope of Article 119 or Directive No 75/117 simply because it concerns contributions to an occupational pension scheme.

He refers in that regard to the judgment of 11 March 1981, referred to above, and to the judgment of the Court of 18 September 1984 in Case 23/83 Liefiing [1984] ECR 3225. The former case concerned the precise situation at issue here, a contribution to an occupational pension scheme paid by an employer in the name of employees. The Court held that Article 119 applied to such a contribution.

That shows, says Mr Newstead, that Article 119 cannot be considered inapplicable simply because the aspect of remuneration at issue is a contribution to a pension scheme.

Like the judgments referred to, this case does not concern payments out of a scheme to which contributions were made, or the issue whether such payments do come within the scope of Article 119. On the contrary, according to Mr Newstead the issue in this case is the fact that deductions are made from the gross salary of male civil servants but not from that of female civil servants.

For the purposes of Article 119 it is irrelevant that the employer pays the sums deducted into a pension fund.

The United Kingdom points out first of all that the pension scheme at issue in the main proceedings is a contracted-out scheme under the Social Security Pensions Act 1975. That is to say, it is an occupational pension scheme provided by the employer as a substitute for the earnings-related part of the State pension scheme.

In order to be qualified as a contracted-out scheme under the Social Security Pensions Act 1975, a pension scheme chosen by the employer must meet certain conditions. Among those conditions, Section 36 of the Act requires that such a scheme must provide for a widow's pension. There is no requirement, however, concerning widower's pensions. The United Kingdom therefore points out that if Mr Newstead was exempted from the obligation to contribute to the pension fund at issue in the main proceedings, the scheme established by his employer would not qualify as a contracted-out scheme.

With regard to the reasons which led the legislature to impose a compulsory pension scheme for widows but not for widowers, the United Kingdom emphasizes that the death of a husband is more likely to give rise to financial hardship than the death of a wife and that women tend to live longer than men.

On the question whether Article 119 is applicable in this case, the United Kingdom submits first of all that there is no inequality of treatment between men and women since, as is stated in the tribunal's order, Mr Newstead's gross salary (before deduction of the relevant contributions), is the same as that of a female civil servant engaged in like work.

According to the United Kingdom, the fact relied on by Mr Newstead that after contributions to the pension fund the net salary of male employees is lower than that of female employees is irrelevant. In the United Kingdom it is usual for deductions to be made from a worker's wages, for tax, social security contributions and pension contributions. As a result, the net salary received by workers engaged in like work will probably differ in each case because of the varying incidence of these deductions according to the personal circumstances of the worker.

The United Kingdom argues that the judgment of 11 March 1981, referred to above, clearly shows that differences in the net pay received by men and women are irrelevant; in that case the Court rejected the argument that there was equality of remuneration where net pay was equal but gross pay was not.

Secondly, the United Kingdom emphasizes that the main proceedings concern the conditions of access to a pension scheme, in particular the payment of contributions. According to the judgment of 16 February 1982 in Case 19/81 Burton v British Railways Board [1982] ECR 555, that is a matter covered not by Article 119 or Directive No 75/117 but by Directive No 76/207.

If however it is considered that the main proceedings concern the payment of pensions under the scheme at issue, the United Kingdom argues that such a benefit does not constitute pay for the purposes of Article 119, but falls under Articles 117 and 118.

That conclusion is confirmed by Article 3 (2) of Council Directive No 79/7 of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (Official Journal L 6, p. 24), according to which the directive, and thus the principle of equal treatment for men and women in matters of social security, does not apply to survivors' benefits.

The United Kingdom goes on to refer to the proposal for a directive made by the Commission on 5 May 1983 on the implementation of the principle of equal treatment for men and women in occupational social security schemes (Official Journal C 134, p. 7). The fact that the Commission found it necessary to make such a proposal shows that occupational pension schemes such as that at issue in this case are not yet covered by any directive or by Article 119.

In view of the importance and complexity of the interests concerned, the implementation of the principle of equal treatment in that area requires separate Community provisions. The United Kingdom mentions by way of example the fact that the average life expectancy of men is lower than that of women; it therefore costs more to provide a pension for a woman than for a man. The difference in cost will be increased where there are different retirement ages for men and for women.

It may be inferred from the judgment of 25 May 1971 in Case 80/70 De/renne ƒ [1971] ECR 445, where the Court held that retirement pensions established within the framework of a social security scheme laid down by legislation did not fall within the ambit of Article 119, that Article 119 does not apply to pension benefits. That conclusion must apply equally to the scheme in question, since it is established within the framework of a scheme laid down by legislation and its provisions have been laid before Parliament.

In support of its argument, the United Kingdom also relies on the judgment of 15 June 1978 in Case 149/77 Defrenne III [1978] ECR 1365, where the Court stated, or at least implied, that there is no overlap between Article 119 and Articles 117 and 118 and was careful to preclude the use of Article 119 for the purpose of intervening in an area reserved by Articles 117 and 118 to the discretion of the authorities referred to therein (at paragraph 23).

The United Kingdom therefore concludes that occupational pension schemes, or at least the scheme at issue in this case, fall outside the scope of Article 119.

As for Directive No 75/117, it adds nothing in the context of this case to Article 119.

The United Kingdom therefore submits that the answer to the tribunal's first question should be that:

In the Commission's view, in the circumstances at issue in this case the fact that male staff are placed at a disadvantage in relation to net pay, even though there is equality in gross pay, cannot be regarded as a case of inequal pay for the purposes of Article 119.

Article 119 has a dual purpose. First of all, it is intended to ensure social progress. At the same time, it has the purpose of preventing distortion of competition in favour of Member States which do not apply the principle of equal pay.

The Commission argues that in this case the cost for the employer of employing a man is the same as that of employing a woman on the same job, since it must pay the same amount in each case. The employer derives no economic advantage from the fact that 1.5% of the man's pay is not paid directly to him but goes to a fund for widows' and orphans' pensions.

It must be recalled, says the Commission, that the amounts paid into the fund in question are not in fact lost to a male employee; if he leaves the civil service he can reclaim the amount, with interest, and if he dies before then his estate will benefit. Whatever happens, the employer cannot keep the money.

The Commission argues that the issue raised in the main proceedings concerns not pay but other working conditions, and therefore falls under Directive No 76/207, not Article 119. It points out that in its judgment of 15 June 1978 (Defienne III, referred to above), the Court held that a condition of employment did not fall under Article 119 simply because it had financial consequences.

In this case, the content of a rule concerning contribution to a pension fund — voluntary or compulsory — can only be described as a term of service, or working condition, with financial consequences.

The Commission therefore proposes that the first question be answered in the negative.

The second question

Mr Newstead points out that the Court has consistently held that Article 119 applies directly to all forms of discrimination which may be identified solely with the aid of the criteria of equal work and equal pay referred to by that article, without national or Community measures being required to define them with greater precision in order to permit of their application.

According to Mr Newstead the circumstances of this case fall within that principle.

In view of the reply which it proposes should be given to the first question, the United Kingdom considers that it is unnecessary to reply to the second question.

However, should the Court consider that occupational pension schemes constitute pay for the purposes of Article 119, the United Kingdom argues that the implementation of the principle of equal treatment in this area requires the adoption of provisions more explicit than Article 119 itself.

The issue raised in the main proceedings therefore falls outside that area of Article 119 which the Court has held to have direct effect.

The Commission considers that in view of the reply which it suggests should be given to the first question, it is not necessary to reply to the second question.

The third question

In the event that the Court should decide to reply in the negative to the first two questions, Mr Newstead submits that the difference in treatment to which he is subject constitutes a breach of Directive No 76/207.

That is to say, in this case the employer applies a working condition that discriminates against men, contrary to Articles 1 (1), 2 (1) and 5 (1) of that directive, in that although men and women receive the same gross pay there is a working condition applied only to men such as Mr Newstead but not to woman in comparable circumstances. That working condition provides that 1.5% of gross pay is deducted by the employer and not immediately paid to the employee.

Mr Newstead emphasizes that this case does not concern the payment of benefits out of an occupational pension fund or the payment of a social security benefit but only a detriment imposed on male workers by means of the deduction of 1.5% of their gross pay.

In assessing that difference of treatment in the light of Directive No 76/207 it is irrelevant, says Mr Newstead, that the sum deducted is paid into a pension fund. Neither the directive nor any other provision of Community law excludes this case from the scope of the directive by reason of the fact that the sum deducted is paid into a pension fund.

Mr Newstead therefore submits that the tribunal's third question should be answered in the affirmative.

The United Kingdom argues that Directive No 76/207 leaves the implementation of the principle of equal treatment in social security matters to be dealt with by subsequent instruments. It refers in that regard to the fourth recital in the preamble to the directive and to Article 1 (2). There is no doubt, says the United Kingdom, that this case is concerned with matters of social security.

It argues that the wording of Article 5 (1) of the directive, on the application of the principle of equal treatment with regard to working conditions, including the conditions governing dismissal, is not appropriate to cover the terms of a pension scheme or of a survivor's pension.

The United Kingdom points out that according to Article 3 (2), Directive No 79/7, referred to above, adopted on the basis of Article 1 (2) of Directive No 76/207, does not apply to the provisions concerning survivors' benefits ... . Article 3 (3) provides that with a view to ensuring implementation of the principle of equal treatment in ocupational schemes, the Council, acting on a proposal from the Commission, will adopt provisions defining its substance, its scope and the arrangements for its application.

The United Kingdom also refers to the proposal for a directive prepared by the Commission, to which it referred in its submission on the first question. According to Article 2 (1) of that draft directive occupational schemes means schemes whose purpose is to provide workers, whether employees or self-employed, in an undertaking or group of undertakings or an occupational sector or group of such sectors, with benefits intended to supplement the benefits provided by statutory social security schemes or to replace them, whether affiliation to such schemes is compulsory or optional. In the United Kingdom's view the scheme at issue in this case certainly falls within that definition.

Furthermore, Article 9 (1) provides that the direttive shall not prejudice the right of Member States to defer compulsory application of the principle of equal treatment with regard inter alia to a pension awarded to a surviving spouse.

The United Kingdom therefore concludes that the difference of treatment complained of by Mr Newstead does not constitute discrimination prohibited by Community law. It refers to the judgment of 16 February 1982, referred to above, in which the Court arrived at the same conclusion with regard to the setting of different minimum retirement ages.

The United Kingdom therefore proposes that the answer to the tribunal's third question should be that:

The Commission takes the view that in principle a term of employment requiring the employee to spend a part of his earnings in a particular way is normally to be considered a working condition for the purposes of Article 5 (1) of Directive No 76/207 and that the fact that such an obligation is confined to male employees, female employees being exempted, is a form of discrimination in working conditions to which Article 5 (1) will normally apply.

That conclusion does not hold, however, where the pay deduction is made for a compulsory contribution to a social security scheme and the social benefit in question is not covered by any of the Community rules on equal treatment for men and women. It is not possible, in the Commission's view, to dissociate the payment of the contribution from the existence of a benefit, so as to treat the deduction in the same way as any other deduction from salary pursuant to the terms of employment. The two elements must be seen as part of a whole, so that it is not possible to answer the third question without first deciding whether survivors' pensions are a subject to which the Community rules on equal treatment for men and women apply.

The Commission refers in that regard to Article 1 (2) of Directive No 76/207, which states that the implementation of the principle of equal treatment in matters of social security will be dealt with in subsequent provisions to be adopted by the Council.

Pursuant to Article 1 (2) the Council has adopted Directive No 79/7; Article 3 (3) of that directive refers equal treatment in occupational schemes to a future instrument, and Article 3 (2) provides that the directive does not apply to survivors' benefits.

Since no instrument has been adopted under Article 3 (3) the Commission concludes that at present no Community instrument provides for equal treatment in relation to occupational social security schemes, in particular with regard to survivors' pensions.

The Commission therefore considers that a provision such as that at issue in the main proceedings does not amount to discrimination prohibited by Community law as it now stands, although it may become prohibited in the future, according to the outcome of the discussions on the Commission's proposed directive referred to above.

The Commission therefore proposes that the third question should be answered in the negative.

The fourth question

With regard to the direct effect of Directive No 76/207, Mr Newstead adopts the submissions made to the Court in Case 151/84 Roberts v Tate & Lyle [1986] ECR 703 and in Case 152/84 Marshall y Southampton and South-West Hampshire Health Authority [1986] ECR 723, on behalf of Miss Roberts and Miss Marshall, to the effect that the directive in question may be relied upon in national courts.

He considers that the relevant provisions of the directive are unconditional and sufficiently clear and precise to be capable of producing direct effects.

Furthermore, Mr Newstead points out that in this case the respondents are government departments. To deny direct effect would be to enable the United Kingdom to take advantage of its own wrong in failing to comply with the provisions of the directive.

Mr Newstead therefore proposes that the fourth question should be answered in the affirmative.

The United Kingdom submits that the directive in question cannot be given direct effect for the sole reason that the defendant in the main proceedings is a Member State, where it is a party to these proceedings only in its capacity as employer.

The United Kingdom further argues that the provisions of the directive are not sufficiently precise or unconditional to give rise to direct effect. Article 2 (2), (3) and (4) provides for derogations from the general prohibition of discrimination between men and women in the areas covered by the directive, but the extent and detail of those derogations are not defined in the directive itself. Reference is made to future instruments, and no such instrument has been adopted on the point at issue here.

According to the United Kingdom the language of Article 5 (1) is very imprecise.

For its part, the Commission considers that in view of the reply which it proposes should be given to the third question there is no need to reply to the tribunal's fourth question.

III — Oral procedure

At the sitting on 7 May 1986 Mr Newstead, represented by A. Lester, QC, the United Kingdom, represented by P. Goldsmith, barrister, and the Commission of the European Communities, represented by J. Currall, a member of its Legal Department, presented oral argument and replied to the questions put by the Court (Fifth Chamber).

The Advocate General delivered his Opinion at the sitting on 8 July 1986.

IV — Continuance of the procedure

By a decision of 25 November 1986 pursuant to Article 95 (4) of the Rules of Procedure, the Court (Fifth Chamber), after hearing the views of the Advocate General, referred the case to the Full Court.

By a decision of 17 December 1986 the Court, after hearing the views of the Advocate General, ordered the reopening of the oral procedure pursuant to Article 61. For that purpose it invited the United Kingdom to reply in writing before the hearing to the following questions:

By letter received at the Court Registry on 12 February 1987 the United Kingdom replied as follows to those questions:

1 Language of the Case: English.