C-196/98

OPINION OF MR SAGGIO — CASE C-196/98

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 12 October 1999 *

* Original language: Italian. 1 — OJ 1979 L 6, p. 24. 2 — Emphasis added.

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respective legal systems 'and of the possi­ in other words so as not to pay to workers bilities for reviewing them at a later date'. who had ceased work both the full pension and the full REA (which did not appear consistent with the function of those ben­ efits, both of which were intended to compensate for loss of earnings), cut-off or limiting conditions were imposed on the REA by reference to the different ages fői­ men and women, used by the statutory old- United Kingdom legislation age pension scheme.

3. Under the Social Security Act 1975, a benefit entitled 'Special Hardship Allow­ ance' ('SHA') was paid in Great Britain until 1986 to workers who had suffered an accident at work with consequent reduc­ tion of their working capacity.

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'frozen' REA. The RA, which is granted for Facts and procedure life, is equal to 2 5 % of the weekly amount of REA to which the beneficiary was last entitled or 1 0 % of the maximum rate of a disablement pension. 4

9. The five disputes referred to in the order for reference concern the methods of cal- culating the invalidity allowance, especially the impact of the different retirement age for men and women on the determination of its amount and, correspondingly, its impact upon the principle of equal treat- 7. With regard to the age at which workers ment between the sexes. There follows a retire in Great Britain, the system is flex- brief summary of the context of each of the ible. A person having ceased normal work disputes, based on the order for reference. may choose the moment to retire in the five years following attainment of pensionable age, which is 65 years for men and 60 years for women. 5A person not having made the choice within that time is deemed to have retired at the age of 70 in the case of a man and 65 in the case of a woman.

up to the age of 65, and that otherwise she and awarded her the full amount of the would be discriminated against in compar- REA until the male retirement age of 65. ison with male workers. In other words, The administration has appealed against she challenged the compatibility with Com- that decision. munity law of the legislative amendment reducing the REA to a fixed amount, arguing that a man in the same situation as herself would have kept the right to receive the full amount of the benefit. 13. Mrs Hepple and Mrs Stec arc thus essentially challenging the lawfulness under Community law of the legislative amend- ment whereby the REA was replaced by a different allowance at a fixed and lower rate, arguing that, under similar conditions, the downgrading in treatment occurred earlier for a woman than for a man. 11. Mrs Hepple was born in 1933, con- tracted an occupational disease, and was awarded the REA from 27 January 1987. That benefit was cut from 31 March 1996 as she was then over 60 and not working. On appeal, in which she claimed the full 14. Mr Lunn was born in 1923, suffered an amount of the REA on the basis of the accident, and was awarded the SHA, later principle of equal treatment between the converted to the REA, from 12 May 1974. sexes, the Social Security Appeal Tribunal He began to draw his statutory old age upheld the refusal of the administration. pension in 1993, having reached the age of Mrs Hepple has appealed against that 70. His REA benefit was cut to the RA decision, arguing that on the basis of the from 31 March 1996. On appeal by him, principle of equal treatment the allowance the Social Security Appeal Tribunal con- in question could not be reduced until she firmed the decision of the administration. reached the male retirement age of 65. Mr Lunn has appealed against that judg- ment, arguing that he was entitled to receive the fixed-rate REA for life, since a woman of his age would have received such a benefit from 1988.

16. M r Lunn and M r Kimber are thus ' 1 . Does Article 7 of Council Directive essentially challenging the fact that, as they 79/7/EEC permit a Member State to were not awarded the fixed-rate REA, impose unequal age conditions linked which under similar circumstances women to the different pension ages for men were entitled to receive in the same period, and women under its statutory old-age the amount they received under the RA pension scheme, on entitlement to a system was lower than a woman in the benefit having the characteristics of same situation as themselves received and Reduced Earnings Allowance under a was thus to be regarded as unlawful under statutory occupational accident and Community law. disease scheme, so as to produce dif- ferent weekly cash payments under that scheme for men and women in other- wise similar circumstances, in particu- lar where the inequality:

17. According to the national court, the central question in all these five disputes is whether national legislation providing for the payment of a benefit like the REA to persons too old to work is a sufficiently (a) is not necessary for any financial significant anomaly to justify its withdra- r e a s o n c o n n e c t e d w i t h either wal at different ages for men and women. It scheme; and

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(b) never having been imposed before, stances ("the comparator"), without- is imposed for the first time many regard to years after the inception of the two schemes and also after 23 Decem- ber 1984, the latest date for the directive to be given full effect until Article 8?

Questions 1 and 2 21. It makes sense to begin by examining Question 1(b), concerning the applicability of the standstill rule to the derogation in Article 7(l)(a). First of all, it is necessary to determine whether, under the directive, Member States may introduce new forms of discrimination linked by cause and effect to different pensionable age, which are new in the sense that they did not exist before 19. I am assuming that all parties agree the directive came into force. If the direc- that the British legislation in question is at tive is viewed as containing a standstill variance with the principle of equal treat- obligation, the extent of the derogation is ment, and that what needs to be deter- necessarily limited to those forms of dis- mined in this case therefore is whether that crimination existing at the expiry of the six- can be justified under Article 7(l)(a) of the year period fixed for the implementation of directive. the directive, that is to say as at 23 Decem- ber 1984. If that were so in this case, the forms of discrimination between men and women under the invalidity insurance scheme would have to be deemed unlawful, since the provisions which introduced them into the British system for the first time date from 1986, that is to say, after the directive came into force.

tain in force the exclusions provided for in directive seeks to achieve. Article 1 of the Article 7(1), but not to introduce further directive expressly states that the aims of exclusions ex novo. They submit that the the directive are to be implemented pro- use of the word 'maintain' and the obliga- gressively. In that respect, the Commission tion on Member States to justify 'maintain- cites the 1994 judgment in Bramhill, 7 in ing' such provisions in their respective which the Court upheld the compatibility systems support that argument. with Article 7(1)(d) of the directive (which permits the granting of increases in certain long-term benefits) of the abolition of such an instance of discrimination for some but not all women, on the ground that a measure of that kind, whilst not eliminat- ing all inequality of treatment, nevertheless The second subparagraph of Article 8(2) of had the merit of reducing the instances of the directive also leads to that interpreta- discrimination which existed initially. tion. It provides that the Member States 'shall inform the Commission of their reasons for maintaining any existing 6 pro- visions on the matters referred to in Arti- cle 7(1) and of the possibilities for review- ing them at a later date'. That wording 22. For a number of reasons, I cannot should be interpreted as presupposing that endorse the arguments put forward in the derogation referred to in Article 7(1)(a) support of a restrictive interpretation of applies only to forms of discrimination the derogation in Article 7(1)(a), and hence existing at the time of the entry into force the view that the United Kingdom legisla- of the directive. We have already seen that tion in question is incompatible with the the forms of discrimination at issue in this directive. dispute were introduced into the British system in 1986, whereas the directive, adopted in 1978, was to be implemented by 23 December 1984, as I said earlier.

must be capable of being easily grasped by to examine excluded matters in order to the persons concerned, essentially workers. ascertain whether there is justification for maintaining the exclusions and that they are to inform the Commission of their reasons for maintaining any existing provi- sions on the matters referred to in Arti- cle 7(1). Reference to Article 7(2) is irrele- vant because that provision concerns the possible reduction of the number of exclu- Any uncertainty may be dispelled, however, sions provided for in Article 7(1) and not if it is borne in mind that Article 7(1), the lapse of those same exclusions in where it defines the areas within which domestic legal systems. Nor is Article 8(2) Member States remain free not to apply the relevant, because, if Article 7(1) is inter- principle of equal treatment between men preted as I suggest above, the existing and women in social security matters, is provisions include not only those already expressed in general terms stating that the in force at the time when the directive came directive 'shall be without prejudice to the into force but also those adopted ex novo right of Member States to exclude from its after that date, since in relation to those as scope' a series of discriminatory measures well there is an obligation to 'inform' the including the fixing of an age limit for Commission, referred to in the second retirement, which differs according to sex, subparagraph of Article 8(2). and the consequences which may follow from that for other social benefits. By the way it is structured, that provision is obviously of general application in that it allows Member States first and foremost to exclude certain forms of discrimination from the ambit of the principle of equality by adopting the relevant provisions and moreover, a fortiori, to maintain in force the same forms of discrimination that may already have existed at the time of its entry into force. Furthermore, as the defence of the British Government points out, Article 7(1)(d) provides that Member States may exclude from the scope of the directive the con- sequences of the exercise ''before the adop- tion of this directive' 8 of a right of option There is therefore no justification for in social security matters. Such a provision holding that Member States may take makes it clear that, when the Community action in regard to the matters referred to legislature found it necessary to introduce a in Article 7(1) solely in order to eliminate limitation to the scope of the derogation, existing forms of discrimination or reduce linking it to conditions which should their scope. Such an argument, in my view, already have been fulfilled before the is not supported by Articles 7(2) and 8(2), which, as already stated, provide respec- tively that Member States are periodically 8 — Emphasis added.

Moreover, a standstill obligation can arise only before the time-limit for implementing the directive has expired. 10 In this case, however, the new British legislation was clearly adopted after the expiry of the six- year period for implementing the directive, so that this case falls outside the typical framework of a standstill obligation arising 23. Although those are the rules of second- from a directive, which applies only prior ary Community legislation which come to the expiry of the period for its imple- into consideration, the reference to stand- mentation. In such a case, any conduct on still strikes me as not entirely relevant for a the part of a Member State that is incon- more general reason as well. Clearly, the sistent with its obligations under the direc- question whether or not a standstill obliga- tive constitutes an infringement not of the tion exists in relation to certain rules of standstill obligation but of the obligations secondary legislation does not arise where linked directly to the specific content of the there is an express provision to that effect, directive which has not been implemented since in that case a court is merely required and/or to general principles which it embo- to define the meaning of the express dies. limitation which it must apply, in contrast to a situation where there is no such provision. That is generally the distinguish- ing characteristic of directives, which has led some to maintain that, before the expiry of the period for their implementation in national law, directives have the effect of blocking the freedom of a State to enact legislation which might compromise their subsequent implementation. 9 But the pre- 24. Once the conclusion has been reached sent case cannot fall within either of those that there is no standstill obligation, it must be determined whether legislation of the 9 — See the Opinion of Advocate General Mancini in Case 30/85 Teuling v Bedrijfsvereniging voor de Chemische Industrie [1987] ECR 2507, especially pp. 2513 and 2514. See also 10 — See, in that regard, Case C-129/96 Inter-Environnement the Opinion of Advocate General Darmon in Case C-229/89 Wallonie v Région Wallone [1997] ECR I-7411, paragraph Commission v Belgium [1991] ECR I-2216, in particular 45; see also the Opinion of Advocate General Darmon, p. I-2222. cited above.

kind at issue in this case, which introduces concerning similar situations. Let me sum- a difference in treatment between men and marise the two most significant ones. women in the area of invalidity benefits, may be considered lawful under Arti- cle 7(1)(a); in other words, it is necessary to determine the nature of the link which must exist between the different pension- able age and the forms of discrimination in regard to other social benefits for such discrimination to be considered justified under Article 7(1)(a). It should be remem- bered that, under that provision, Member States retain the right to exclude from the scope of the directive the determination of the age at which workers acquire the right to receive 'old-age and retirement pensions' In its judgment of 30 March 1993 in and also the consequences which the choice Thomas, 1 1the Court examined the com- of certain age-limits may entail for other patibility with the principle of equal treat- social security benefits. ment of a national provision which exclu- ded the grant of invalidity benefits to persons who had passed retirement age on account of the fact that that age was different for men and women. The Court found that provision to be at variance with the aforesaid principle, but nevertheless held it to be justified under Article 7(1)(a) of the directive, since it was a consequence which might follow, for benefits other than In order to reply to the question, therefore, old-age pension, from the determination of it must be established whether the different different retirement ages. It stated that such system as between men and women for justification existed where the forms of granting the invalidity allowance in ques- discrimination are 'necessarily and objec- tion may be described as 'consequent' upon tively linked to the difference in retirement the fixing of different ages for men and age' and only where such discrimination 'is women acquiring the right to old-age and objectively necessary in order to avoid retirement pension within the meaning of disrupting the complex financial equili- Article 7(1)(a). brium of the social security system or to ensure consistency between retirement pen- sion schemes and other benefit schemes'. 12 Furthermore, whilst it is for the national court to determine whether such a necessity exists, 13 that does not prevent the Court of Justice from giving appropriate guidance to

the national court in making its decision. 14 ment pensions but also the existence of The Court also stated, with reference to the discrimination under other benefit schemes need to preserve financial equilibrium as which is necessarily and objectively linked between the old-age pension scheme and to the differences in pensionable age. other benefit schemes, that the grant of Pursuant to that provision, the Court benefits under non-contributory schemes to deemed lawful (under the directive) persons in respect of whom certain risks national legislation which, after setting have materialised, regardless of such per- the pensionable age for women at 60 and sons' entitlement to an old-age pension by that for men at 65, first provided that the virtue of contribution periods completed by rate of invalidity pension payable to per- them, 'has no direct influence on the sons becoming incapacitated for work financial equilibrium of contributory pen- before reaching pensionable age should be sion schemes'. 1 5Starting from that pre- limited to the actual rate of retirement- miss, the Court of Justice seems to be pension from the age of 60 in the case of indicating to the national court that the women and from the age of 65 in the case British legislation on invalidity benefits of men and, secondly, awarded an allow- should not be regarded as a consequence ance in addition to invalidity pension to of the different pensionable age since it is persons aged under 55, in the case of not necessary in order to ensure the coher- ence and financial equilibrium of the pen- women, and under 60, in the case of men, sion scheme, it being of course for the at the time when they first become incapa- national court to ascertain whether that citated for work. The Court reached that condition is met in a particular case. conclusion on the view that the discrimi- natory nature of those provisions inherent in the limitation and in the supplement to the invalidity pension for those purposes was justified in that they fell within the scope of the derogation in Article 7(1 )(a) of the directive by virtue of their being directly and necessarily linked to the differences in the pensionable age. 17 The Court stated in that respect that those forms of discrimina- tion were 'objectively necessary in order to avoid disturbing the financial equilibrium of the social security system or to ensure coherence between the retirement pension In its judgment of 11 August 1995 in scheme and other benefit schemes'. 18 It Graham, 16 the Court reiterates the general found that they were objectively linked to proposition which appears in the previous the setting of different pensionable ages for judgments, specifically that Article 7(1)(a) men and women inasmuch as they arose of the directive permits not only the setting directly from the fact that a different- of different ages for men and women for pensionable age had been fixed. 19 The the purposes of granting old-age and retire- forms of discrimination in question were

necessarily linked to the difference in them, as in the case of men, at the age of pensionable age since invalidity benefit 65. 22 was designed to replace income from employment, thus implying that there was nothing to prevent a Member State from providing for its cessation and replacement by a retirement pension at the time when 22 — See also, inter alia, the judgment in Case C-9/91 Equal the recipients would in any case stop Opportunities Commission [1992] ECR I-4297, in which the Court held that Article 7(1)(a) of the directive must be working because they had reached pension- interpreted as authorising not only the determination of a able age. 20 In the Court's view, an inter- different pensionable age according to sex for the purposes of granting old-age and retirement pensions but also other pretation of Article 7(1)(a) prohibiting forms of discrimination that are necessarily linked to that

graph 16). The Court adds that an interpretation of to the old-age pension to which such Article 7(1)(a) which excludes the application of the derogation, that is to say one which precludes contribu- persons would be entitled on retirement tions of different size from giving rise to a pension of the same amount as a result of the different pensionable age of would amount to a limitation on the very men and women, would be excessively restrictive because right to set different pensionable ages, on the one hand it would allow the introduction of different pensionable ages whilst on the other making such expressly conferred on Member States by a system impossible to attain in practice, requiring the Member State in question to undertake 'a general restruc- that provision. 21 Finally, the Court pointed turing of the system of contributions and benefits' within a very limited period, namely before the expiry of the six- out that such a restrictive interpretation year period [for that purpose] laid down by Article 8 of the would also have the effect of undermining directive, thus altering substantially the financial equili- brium based on an obligation to contribute until pension- the coherence between the retirement pen- able ages that differ for men and women (paragraph 18). According to the Court, the progressive manner (see sion scheme and the invalidity benefit Article 1 of the directive) in which the legislature decided to enact that the principle of equal treatment between men scheme because: (a) Member States would and women could not be ensured if the scope of the not be able to grant to workers still below derogation authorised by Article 7(1)(a) were to be interpreted restrictively.

See also the more recent judgment in Case C-137/94 R v Secretary of State had continued to work; (b) women would for Health, ex parte Richardson [1995] ECR I-3407, in which the Court examined the question whether Arti- receive an invalidity pension at the rate of a cle 7(1)(a) permits a Member State which, pursuant to that provision, has set the pensionable age for women at 60 and full retirement pension if, to ensure equal for men at 65 to lay down also that women are to be treatment between men and women, the exempt from prescription charges from the age of 60 and men only from the age of 65.

(paragraphs 25 to 27). 20 — Paragraph 14. 21 — Paragraph 15.

26. This case-law shows that, for discrimi- equal treatment, the invalidity allowance nation in social security matters to be were granted to them at the same age as capable of being regarded as justified under men, namely at 65. Article 7(1)(a), it must constitute the neces- sary 'consequence' of the fixing of a different pensionable age for men and women. The Thomas and Graham judg- ments, the essential passages from which are cited above, supply the guidelines for solving this case. In those judgments, the Court makes it clear that a form of discrimination which has been introduced, that is to say, resulting from the different retirement age (those cases, like the present case, concerned invalidity benefits the scheme of which varied with the retirement age), may be regarded as the 'consequence' of the different retirement age when it is objectively necessary in order to ensure the 27. In this case, the forms of discrimination financial equilibrium of the social security considered by the Social Security Commis- system or coherence between the retirement sioner concern women in three cases and pension scheme and other benefit schemes. men in two. Mrs Spencer argues that the It also makes clear that those forms of replacement of the full REA with the frozen discrimination are objectively linked to the REA for workers who like herself retired pensionable age since they flow directly between April 1987 and April 1989 ren- from the fact that the age has been fixed dered her benefit less favourable than the differentially according to sex, and that analogous benefit for men, who, retiring at they are necessarily connected to the same the later age of 65 and all other conditions precondition because invalidity benefits are being equal, had the possibility of retaining in substitution for earnings, so that, in entitlement to the full REA.

Mr in two respects: first, because Member Lunn and Mr Kimber complain of reverse States should not be prevented from grant- discrimination, in favour of women and to ing to workers who become incapacitated their own detriment, arguing that, whereas for work before reaching pensionable age they were not paid the fixed-amount REA invalidity benefits corresponding to the on the ground that in the period between earnings which they would have continued April 1987 and April [989 they had not yet to receive if they had been able to continue reached pensionable age, women of the working; and, secondly, because women same age and in the same circumstances would receive an invalidity benefit equal to were able to request retirement and thus the retirement pension if, in order to ensure acquire the right to the full (albeit 'frozen') amount of REA.

29. The applicants argue that the British legislation, by establishing a link between pension rights and invalidity benefits, con- 31. Those observations seem reasonable to flicts with the principle of equal treatment me. In my view, it is difficult to maintain protected by the directive and cannot be that the different retirement age necessarily regarded as justified under Article 7(1)(a). entails the sex discrimination, to the detri- In support of that argument, they empha- ment of both men and women, to which the sise that, before the reforms of 1986, the invalidity allowance scheme in force in the pension system and the invalidity allow- United Kingdom gives rise. Such discrimi- ance system (which at the time was not nation would seem rather to arise from the linked to the retirement age and was paid (unforced) choice of the national legisla- to entitled persons for life) existed side by ture, which has sacrificed equal treatment side without any problem. That is con- in order to achieve, as the order for firmed by the Social Security Commis- reference puts it, the removal of a blatant sioner, who states expressly that the differ- anomaly and, in particular, not 'to go on ences in pensionable age had 'co-existec with the Industrial Injuries Scheme [...] for nearly 40 years from 1948', and that. 23 — Paragraph 27 of the order for reference.

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working because they have reached pen- pensionable age, that is to say, before the sionable age'. 25 age of 60, be entitled up to the age of 65 to an invalidity allowance equal in amount to the retirement pension. 26

25 — Paragraph 14. 26 — Paragraphs 16, 17 and 18.

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Those are all matters of fact which must in 36. I would add, finally, that in interpreting any event be established by the national Article 7( J )(a), account must be taken of court, and the Court of Justice must confine the principle of equal treatment in the light itself to providing it with general guide- of the second paragraph of Article 5 of the lines. 27 EC Treaty (now Article 10 EC) whereby '[Member States] shall abstain from any measure which could jeopardise the attain- ment of the objectives of this Treaty', 29 which must also include the equality of treatment which the directive seeks to achieve in a given sector. 30

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regarded as contrary to Community law adequate compensation or adjustments to even where it falls within the wording of the rules for calculating the invalidity the derogation. That purpose may also be benefit with a view to counteracting the undermined by the fact that the same result effects of the discriminatory provisions. In might have been achieved, as already that case as well, it is for the national court mentioned, by means of different provi- to carry out the necessary assessments, sions which, in terms of their intrinsic establishing whether there are grounds on content and through being supplemented which the discriminatory provisions can be by additional provisions with compensa- justified. tory effects, do not involve sacrificing equal treatment, or do so to a lesser extent.

Question 3

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in the absence of national legislation minated against may in some cases benefit- implementing the directive, workers who by reason of other aspects of the same have been discriminated against may, social security scheme. The Commissioner through the principle of direct effect, apply also wishes to ascertain, clearly along the to the national court for an additional same lines, whether that calculation must payment, and in particular how the amount also take into account the various options thereof should be calculated. offered to workers (and possibly exercised) by reference to the different pensionable age according to sex, which may include the grant to the person discriminated against of benefits which may from time to time be more or less favourable com­ pared with those paid to the comparator. 40. Under the case-law of the Court of Justice, persons who have been discrimi­ nated against in breach of Article 4(1) of the directive are entitled to be treated in the same way as persons not so discriminated against who are in the same position as themselves, sex being the only difference. Where the directive has not been imple­ 41. That question must be answered in the mented, the treatment accorded to such affirmative. I have reached that conclusion persons is generally regarded as 'the only for the following reasons. valid point of reference' for eliminating the consequences of the discrimination. 3 1

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ent and wider in scope than is the case and duty in particular because it has been found would thereby substantially alter the source that judicial action as a result of the direct of the right to the additional benefit, which, effect of the Community principle of equal as I have said, is to be found within the treatment is liable to meet major practical Community system and not the national obstacles on account of the difficulty of systems. Furthermore, in determining the evaluating in each case the differential amount of the additional payment, it is not advantage of the comparator to be used sufficient to refer to the different advan- as a parameter for the additional payment, tages or disadvantages related to age, but it and because in any event, in the case of is also necessary to consider what impact judicial action, there is always the possibi- the options referred to in Question 3(b) lity of inconsistency and the difficulty of may have on that amount; these also affect reconciling divergent trends. the advantages which the system guaran- tees to the persons concerned and may therefore vary or even overturn the rela- tionship between the benefits granted to men and women.

(1) On a proper interpretation of Article 7(1)(a) of Council Directive 79/7/EEC, Member States may, for entitlement to a benefit such as the Reduced Earnings Allowance (REA) provided for under United Kingdom legislation in respect of accidents at work and occupational illnesses, lay down different age conditions according to sex linked to the age conditions for pension entitlement, which are also differentiated according to sex. That is so, however, only if that link and the resultant differences in the amount of the invalidity benefits by reference to sex are necessary to ensure coherence between the pension scheme and the invalidity benefit scheme. Such coherence exists if the enactment of a different pensionable age requires a derogation from the principle of equal treatment, inasmuch as such differentiation could not be introduced without a corresponding adjustment to the scheme of invalidity benefits, and is also proportionate to the result pursued thereby. It is for the national court to carry out the relevant assessments. That option on the part of Member States may also, exceptionally, be used to introduce discriminatory provisions which did not exist on the expiry of the period for the implementation of the directive, provided always that the above conditions are met, and providing at the same time where necessary for adequate compensation or adjustments to the rules for calculating the invalidity benefit with a view to counteracting the effects of the discriminatory provisions. In that case as well, it is for the national court to carry out the necessary assessments, establishing whether there are grounds on which the discriminatory provisions can be justified.