Katholieke Universiteit Leuven Institute of Social Law

The meaning of “national social and labour legislation”

in directive 2003/41/EC on the activities and supervision of institutions

for occupational retirement provision

Prof. dr. Yves Stevens

Research report commissioned by the European Association of Paritarian Institutions (AEIP)

Leuven 2004

CONTENT

Introduction and background................................................................................................................... 5 I. Textual and historical analysis of the directive.................................................................................. 10

1.1. The making of the directive........................................................................................................ 10 1.2. The directive............................................................................................................................... 12 1.3. Contextual analysis of the notion “National social and labour legislation” ............................... 18

II. National social and labour law ......................................................................................................... 27 2.1. The meaning of “national social and labour law” ...................................................................... 27

2.1.1. What is social and labour law ?........................................................................................... 27 2.1.2. Who is (not) involved ? ....................................................................................................... 32 2.1.3. Paradigmatic pillars of social and labour law...................................................................... 34

A. Protection and the level of protection................................................................................... 35 B. Responsibility ....................................................................................................................... 37 C. Security of existence............................................................................................................. 38 D. Solidarity .............................................................................................................................. 39 E. Equality ................................................................................................................................. 43 F. Participation .......................................................................................................................... 46

2.2. National social and labour law: European Competition law as inspiration ? ............................. 48 2.3. Occupational pensions as social insurance scheme.................................................................... 51

2.3.1. Developments of social policy ............................................................................................ 51 2.3.2. Characteristics and indicators.............................................................................................. 53

2.4. A subjective and objective approach to “national social and labour law” ................................. 56 III. Development of a matrix for the analysis of the notion “national social and labour law”.............. 59

3.1. Working with the matrix ............................................................................................................ 59 3.2. The matrix .................................................................................................................................. 62

3.2.1. National legal status of the IORP ........................................................................................ 62 A. National legal qualification of the IORP .............................................................................. 62 B. Powers of supervisory or regulatory authorities ................................................................... 67

3.2.2. The introduction of a pension scheme................................................................................. 68 3.2.3. The changing of a pension scheme...................................................................................... 71

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3.2.4. Membership......................................................................................................................... 72 3.2.5. Contributions and benefits................................................................................................... 75 3.2.6. Acquiring pension rights ..................................................................................................... 81

A. Financing .............................................................................................................................. 81 B. Employee contribution – employers’ contribution ............................................................... 83 C. Benefit calculation ................................................................................................................ 85

3.2.7. Participation of the members............................................................................................... 86 3.2.8. Information.......................................................................................................................... 88

Conclusions ........................................................................................................................................... 90 Appendix 1: AEIP presentation of the report ........................................................................................ 92 Appendix 2: Directive 2003/41 ............................................................................................................. 99

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Abstract

This research report examines the notion of “national social and labour legislation” in

directive 2003/41/EC on the activities and supervision of institutions for occupational

retirement provision. The notion is looked at from a double angle. Firstly, the meaning of the

notion is examined within the directive. The conclusion of this contextual analysis is that the

directive clearly leaves a lot of discretion to the Members States to define the notion.

Furthermore, a host Member State (where the sponsoring undertaking is located) retains a

large competence to intervene if necessary. This necessity can arise when an IORP, located in

the home Member State, does not respect the social and labour law of the host Member State.

Secondly, the notion is considered from a broader perspective. Different national approaches

to the notion are looked at in order to define common (European) grounds. This leads to the

development of six paradigmatic pillars of social and labour law: protection (and the level of),

responsibility, security of existence, solidarity, equality and participation. Consequently the

question rises whether these pillars are present in the national social and labour legislations of

the Member States of the European Union. To answer this question a matrix is developed.

The matrix measures elements of social and labour law within the Member States. As a

working instrument the matrix needs permanent fine tuning and people who try to fill in the

matrix, should be aware of this. All reactions to the matrix are welcome.

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Introduction and background 1.

2.

3.

4.

The research question. The European Association of Paritarian Institutions (AEIP) has requested for a detailed research on the scope and impact of the notion “national social and labour legislation” as mentioned in directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision1.

Overview of the report. The research question contains two parts. On the one hand the notion “national social and labour legislation” is examined from an overall general perspective. The research question in this part can be summarized as follows: what does the notion mean ? This includes a textual and historical analysis of the notion within the directive (chapter 1) and an examination of the notion within the Member-States combined with a reading of the notion related to occupational pensions (chapter 2). On the other hand the research approaches the notion of “national social and labour legislation” from a more practical point of view. The research question in this part can be summarized as follows: how should the notion “national social and labour legislation” be interpreted to be practically applicable. On the basis of the research result of the two first chapters a theoretical legal matrix is developed. This matrix can be used as a general tool in the different member states.

Scope of the research: occupational pensions. The report only focuses on the second pillar pensions of the well known three pillar model. These three pillars are the state based pension arrangements (first pillar), the occupational pension schemes through institutions for occupational retirement provision (second pillar) and the personal pension arrangements through savings and insurance policies (third pillar)2. This three pillar model is well known throughout Europe. However it has no legal basis (on a European level or an a national level). This so-called key structure differs strongly between states. The three pillars in the UK do not for example reflect what the Germans consider the three pillars to be. The differences are too obvious between countries3. The strength of the three pillar model is of a rather sociological (or sometimes economic) nature: (nearly) everybody – irrespective of nationality - can recognise his proper national pension system within the model4. It is said that the used terms and definitions are so broad that the model has a very high visibility for all.

Terminology of the report. For the use of this report the following notions are used. Directive for directive 2003/41/EC of 3 June 2003 on the activities and supervision of

institutions for occupational retirement provision, off. J. EU, 23 September 2003, L. 235/10-21.

1 On the AEIP, see: www.aeip.net 2 S. BEGUERIE, Régimes privés de retraites complémentaires, Paris, L.G.D.J., 1998, 621 p. 3 Y. STEVENS, “Developing common definitions on European pensions’ policy”, in T. SAKELLAROPOULOS and J. BERGHMAN, Connecting welfare diversity within the European social model, Intersentia, Antwerp, 2004, 97-98. 4 The level of “recognasibility” of the model is initially due to the World Bank. The famous report titled “Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth” (Oxford University Press: Oxford, 1994), popularised the concept of a pension system supported by three pillars. Ever since there have been many interpretations (WORLD BANK, Averting the old age crisis: policies to protect the old and promote growth, Oxford, Oxford University Press, 1994, 402 p.).

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IORP for an institution for occupational retirement provision (for the analysis of the definition, see nr. 55). The Directive focuses mainly on pension funds. It is sometimes referred to as the “Pension Fund Directive”. However, Member States may opt to apply some provisions of the Directive to the occupational pension business of insurance undertakings covered by Directive 2002/83/EC concerning life assurance5.

5.

6.

Important preliminary remark: an evolving and imperfect matrix. The legal matrix developed in chapter 3 is a strictly theoretical framework. As every legal matrix, it is incomplete. Due to various reasons, every legal matrix is incomplete. Not only do national legislations continuously change, which makes it quasi impossible to have a permanently updated theoretical framework for the 25 Member States of the EU, a matrix is also considered to be biased. It would be ideal if the matrix could be written by 25 people of the 25 different Member States of the EU. However most, if not all, matrices are written by a handful of people with their own national background. This influences the items and description within the matrix. Although one should prevent to write the matrix with a national point of view, involuntarily and almost instinctively some items are influenced by one’s own national experience6. This “biased” nature of the matrix has consequences: the matrix is never finished. It should be considered as an evolving instrument which can always be improved. Due to national points of view or experiences items should be added or put aside. So, it is normal that some items in the matrix will seem completely irrelevant for some member-states. On the other hand, because of it is incompleteness it is logical that some member states will think that some items are forgotten or insufficiently put forward. Users of the matrix should be aware of this. The matrix is not a permanent instrument but evolves enduringly.

Background and basic ideas of the directive. For quite some years, the European commission has been determined to remove all obstacles to a single market for occupational pensions. Directive 2003/41 fits into this creation of a single market for occupational pensions. The directive enables IORPs to accept sponsorship by, and run a pension scheme for, a company located in other member states7. Consequently and on the long run, impediments to trans-national membership will be removed throughout the EU (part of the free movement of workers). At present, occupational pension providers, such as pension funds, operate for the most part only in the Member State in which they are established. A firm which has a presence in all 25 Member States must therefore call on the services of 25 different providers (insurance companies, pension funds or others). The directive however allows mutual recognition of Member States’ supervisory regimes. A mutually recognized pension provider will be able to manage the pension schemes of firms located in other Member States while applying the prudential rules of the Member State in which it is established. This is the so-called home-country

5 Where this option is applied, the liabilities and assets relating to the occupational pension business are required to be ring-fenced and separately managed, and are non-transferable to the other activities of the insurance undertaking. Also, the insurance undertaking would no longer, in respect of its occupational pensions business, be subject to Articles 20 – 26, 31 and 36 of Directive 2002/83/EC. The home Member State would be required to ensure that either the competent authority responsible for supervision of pension funds or the authorities responsible for supervision of insurance undertakings covered by Directive 2002/83/EC would verify the strict separation of the occupational pension business (art. 4 Directive 2003/41). 6 This danger is often described in comparative law. It is called the danger of an ethnocentric approach of comparative social research. On this theme, D. PIETERS, “Reflections upon social security comparison”, in in B. GREVE and D. PIETERS, Social security in an interdisciplinary perspective, MAKLU, 1999, 93. 7 Press release EC, 13 March 2003.

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control. It is believed that bigger multinational companies would benefit from the directive by soaking up additional costs of running pensions funds in different countries. Nevertheless the directive ensures that the social and labour legislation of the host Member States (i.e. those applicable to the relationship between the sponsoring undertaking and the members) will continue to apply.

7. The research question in detail. How should the insurance of the directive that the social and labour legislation of the host Member States will continue to apply, be understood ? The directive clearly allows an IORP to operate with a single license throughout the European Union. The IORP however must respect the different national social and labour legislations.

Example. Suppose an Irish pension fund finds companies in the Netherlands, Belgium, Germany and the United Kingdom for the managing of their pension schemes. The companies are the so-called sponsoring companies. They are employers of employees who work respectively in the Netherlands, Belgium, Germany and the United Kingdom. These are the host states of the sponsoring companies. The Irish pension fund resides in the so-called home state (Ireland) and must comply with the Irish prudential and solvency rules. Furthermore the Irish authorities are the competent supervision authority (Irish Financial Services Regulatory Authority (IFSRA)8). The Irish pension fund must respect the different national social and labour legislations.

B

D

NL

UK

HOME STATEpension fund

IRL

HOST STATEsponsoring company

HOST STATEsponsoring company

HOST STATEsponsoring company

HOST STATEsponsoring company

© Yves Stevens – ISR - 2004

Belgian

socia

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law appli

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Dutch social and labour

law appliesG

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Englisch social and labour

law applies

A pension fund working across different Member States must therefore comply with various social and labour regulations. A pension fund working across 25 Member States has to work with 25 different social and labour regulations. Obviously, this complicates the working of such a pension fund. The research question therefore is: what does the requirement of the respect of national social and labour law implies practically ?

8 www.ifsra.ie.

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8.

Example of a research problem indicating the necessity for the development of a matrix . The practical implications of the requirement to respect the national social and labour law are multifold. Imagine that there is a Member State where there is a legally binding guaranteed return on (a certain amount of) contributions. So each pension provider has to guarantee a minimal interest rate9. The question then arises whether this guaranteed interest is part of social and labour law or not. Several answers are possible: Some will argue that a guaranteed interest rate is meant to protect the members of the pension scheme and should therefore always be considered as part of social law.

Some will argue that a guaranteed interest rate is part of the governance of the pension provider and that in the end it is always the sponsoring company who has to deal with possible deficits in the guaranteed return. So it is not a problem of the pension provider but of the sponsoring company. Some will argue that legislation on pension providers is national economic law and that therefore a guaranteed return is not part of social or labour law. Some will argue that it is entirely up to the individual Member States to define what’s to be considered social and labour law, and what is not. Some will argue that even if the guaranteed return is to be considered national economic or social law, the European Court of Justice might think otherwise on the basis of overruling European law.

So there is no exact general answer to the question. The answer lies partially on a national level – which means it can be practically different for each of the 25 Member States – and partially on a European level. The developed matrix wants to be an instrument thereto.

9 This is also related to art. 17 of the Directive. Institutions operating pension schemes where the provider itself and not the employer underwrites the liability to cover against biometric risk (risks associated with death, disability and longevity), or guarantees either an investment performance or a given level of benefits, must hold on a permanent basis additional assets above the technical provisions to serve as a buffer. These assets shall be free of all foreseeable liabilities and serve as a safety capital to absorb discrepancies between the anticipated and actual expenses and profits. The minimum amount of such assets is to be calculated in accordance with Articles 27 and 28 of Directive 2002/83/EC. (Essentially, this means a 4% solvency margin will apply, calculated with reference to the technical provisions established in respect of the relevant pension scheme(s)).

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I.

Textual and historical analysis of the directive

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I. Textual and historical analysis of the directive 9.

10.

Overview. In chapter 1 the historical legislative process of the directive is briefly analysed (1.1. making of the directive). In chapter 2 the directive itself is examined (1.2. The directive). This chapter is meant to give a sufficient background for the analysis of the notion “social and labour law” (1.3. Contextual analysis of “National social and labour legislation” in the directive).

1.1. The making of the directive

Legislative process. The directive was put forward by the Commission in November 2000. However, the first attempt to create a prudential framework for IORPs (originally only pension funds) goes back to the early 1990s when the European Commission tried to establish an internal market for supplementary pensions10. At that time however, there was a great deal of opposition from the Member States. In 1997 the Commission tried to launch the idea again by publishing “the Green Paper on Supplementary pensions in the single market”11. This was followed in 1999 by a Communication entitled “Towards a Single Market for Supplementary Pensions”12. A proposal for directive was consequently published in November 2000. The current directive is part of an overall Financial Services Action Plan of the European Commission13. A single financial market is believed to be a key factor in promoting the competitiveness of the European economy, the development of the new economy and social cohesion.The table below highlights the most important steps in the legislative process of the directive14. The last column gives a direct link to the relevant official document of the European Union.

DATE INSTITUTION 13/11/2000 Commission proposal transmitted to Parliament and the Council

link

28/3/2001 Economic and Social Committee opinion

link

21/6/2001 Report on the proposal for a European Parliament and Council directive on the activities of institutions for occupational retirement provision – (the Karas report)

link

4/7/2001 Parliament opinion (first reading)

link

5/11/2002 Council's Common position

link

14/11/2002 Commission communication on the Council's common position to link

10 See: Proposal for a Council Directive relating to the freedom of management and investment of funds held by institutions retirement provision, COM(91) 301 final, OJ C 312, 3.12.1991, p. 3. This proposal was withdrawn in 1994. 11 COM(1997) 283 final of 10 June 1997 (http://europa.eu.int/scadplus/leg/en/cha/c10519.htm). 12 COM(1999) 134 final of 11 May 1999 (http://europa.eu.int/scadplus/leg/en/cha/c10523.htm). 13 For further details, see http://europa.eu.int/comm/internal_market/en/finances/actionplan/ 14 For a brief analysis of the legislative process within the EU, see: http://europa.eu.int/eur-lex/en/about/abc/abc_21.html. For an overview of the players in the legislative process, see: http://europa.eu.int/eur-lex/en/about/pap/process_and_players3.html.

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the European parliament

12/3/2003 Parliament opinion (second reading)

link

7/5/2003 Adoption of Commission opinion

link

13/5/2003 Council approval of second reading

link

23/09/2003 Signature by EP and Council following publication in the official journal

link

11.

Social and labour law. Already in the proposal of the commission of 13 November 2000 reference is made to the relevant local social and labour law (initial art. 20. 6.). The implications of the reference were relatively small compared to the definitive adopted version of the directive. Many of the current references to the social and labour law originate from the report on the commission’s proposal of the European parliament (the Karas report). This report contains a lot of amendments to the original text. One amendment imposes for example “a general notification requirement in respect of the social and labour law provisions to be applied. The relevant authorities are obliged to notify each other of changes in the relevant provisions. This prevents a situation in which the relevant information must be sought in every single case, with all the delays that this would involve15”. The proposed text amendment is very similar to the final adopted text of the directive.

15 Amendment 50, pg. 85 of the Karas report.

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1.2. The directive 12.

13.

14.

15.

General. On 13 May 2003 the Council of Ministers adopted directive 2003/41 approving amendments made in March by the European Parliament. The Directive provides a framework for the operation and supervision of institutions for occupational retirement provision (IORPs). Most IORPs are pension funds. The directive enables IORPs to be established in one member state and sponsored by employers based in other member states. The next step is for member states to implement the Directive, which must take place within 24 months of publication in the EU’s Official Journal16. The ultimate date for implementation is therefore 23 September 20005.

Objectives of the Directive. The European Commission, which proposed the Directive, set out a number of aims:

- to ensure a high level of protection for members and beneficiaries of pension schemes by subjecting IORPs to detailed rules of operation;

- to enable secure and efficient investment by allowing IORPs to follow an investment strategy tailored to the characteristics of their pension schemes;

- to enable institutions to choose their asset managers and custodians freely - to create a level playing field between all pension providers; - to facilitate cross-border activities by enabling IORPs to accept sponsorship by, and run a

pension scheme for, a company located in another Member State; - to build a single market for financial services, in particular supplementary pensions; - to make it possible for 'host' Member States (where the company sponsoring the pension fund

is established) to ask 'home' Member States (where the institution is located) to apply certain quantitative rules to assets held by cross-border pension schemes, provided the host Member State concerned applies the same (or stricter) rules to its own domestic funds; and

- to respect Member States' prerogatives in relation to social protection and pension schemes.

Application The Directive applies to IORPs which are defined as funded arrangements providing retirement benefits that are a separate legal entity from the employer17. This separation guarantees that the assets are safeguarded in the interests of members and beneficiaries in the event of employer bankruptcy. The Directive limits the types of arrangements that can be IORPs. In particular the following are excluded: social security arrangements, funds that operate on a pay-as-you go basis, funds under which employees have no legal rights to benefits and book reserves. Member states do not have to apply the Directive to insured schemes and schemes with fewer than 100 members. These rules mean that a significant number of pension arrangements operating within the EU are excluded from being treated as IORPs.

Prudential supervision The Directive sets out a number of safeguards for the protection of members. The Directive requires that an:

16 Directives bind Member States as to the objectives to be achieved within a certain time-limit while leaving the national authorities the choice of form and means to be used. Directives have to be implemented in national legislation in accordance with the procedures of the individual Member States. 17 Art. 2 juncto art. 6 directive 2003/41.

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IORP is registered in a national register; IORP is effectively run by persons of good repute; IORP has properly constituted rules; IORPs technical provisions (basically the pension scheme liabilities) are computed and

certified by an actuary or other specialist in the field. Further requirements are that the Member State ensures that the sponsoring employer is committed to regular financing and that members are kept sufficiently informed of the rights and obligations of parties involved in the pension scheme and the financial, technical and other risks associated with the scheme. The directive obliges each IORP to draw up an annual report and accounts providing a true and fair view of its assets, liabilities and financial position. 16.

17.

Regulation. IORPs are supervised and regulated by national “competent authorities”. They need to be registered with the appropriate competent authority and they must fulfill a number of minimum conditions, such as being run by people of good repute and having properly constituted scheme rules. The competent authorities will be able to carry out inspections and intervene to help protect members’ rights. The competent authorities are empowered to carry out inspections into compliance with the supervisory rules and where necessary are given powers of intervention, including the levying of fines against the IORP and persons running the IORP. Competent authorities can require IORPs to provide various items of information:

investment policy principles; annual reports and accounts; all documents necessary for the purposes of supervision, such as

- internal interim reports; - actuarial valuations and assumptions; - asset-liability studies; - evidence of consistency with investment policy principles; - evidence that contributions have been paid as planned; - auditors’ reports.

Disclosure. Under the Directive, members and beneficiaries have the right to receive certain

information with regard to the scheme18. Most Member States already have similar disclosure regulations. The Directive distinguishes between information to be provided automatically and information to be provided on request.

Details of changes to the rules on pension schemes are to be provided automatically and within a reasonable time.

On request: annual reports and accounts statement of investment policy principles details of the target level of retirement benefits the level of benefits in the event of leaving employment details relating to transferring benefits details of benefits payable and payment options when the benefits become due

18 Art. 11 directive 2003/41.

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for money purchase schemes details of the investment options and the actual investment portfolio, together with information on risk exposure and costs

Following an amendment by the European Parliament, members will need to receive annually brief particulars concerning the situation of the institution and the current level of financing of their accrued individual entitlements. 18.

19.

Funding. The directive requires that there are sufficient and appropriate assets to cover the technical provisions19. The calculation of technical provisions must take account of all commitments with regard to benefits and contributions to enable both pensions and benefits already in payment to continue to be paid and also to reflect accrued entitlements. Where biometrical risks (death and spouse’s pensions) are also provided by the IORP it is also required that there are sufficient provisions to cover these benefits20. A formal valuation is required to take place annually, or triennially if the IORP provides an annual certification to the competent authorities. Schemes must normally be fully funded. A scheme that is in temporary deficit is required to adopt a recovery plan21. However, where a scheme undertakes cross-border activity it is required that the technical provisions shall be fully funded at all times22.

Investment. The key concept is that investment should be in accordance with the prudent person principle. Originally the Commission’s Communication strongly supported the prudent person approach and illustrated the case against quantitative investment restrictions. However, following pressure from a number of Member States, the Commission conceded that certain quantitative investment restrictions could be retained “as a safety net”. The Directive sets out a number of rules that fall within the prudent person principle, including:

investment in the best interests of the members and beneficiaries; diversification to ensure the security, liquidity and profitability of the portfolio; and limited investment in the sponsoring employer.

Furthermore assets are required to be predominantly invested on regulated markets. Where a Member State operates more stringent rules for its pension funds the Directive enables member states to apply more stringent rules to those funds operating within its territory. However, rules limiting pension scheme investment have to allow pension funds to invest up to 70 per cent of their portfolio in equities or corporate bonds and up to 30 per cent in foreign currencies and also enable them to invest in risk capital markets. The Directive prohibits member states from restricting the appointment of investment managers and custodians to those established in the home member state23. This will enable IORPs to select investment managers established anywhere in the EU. The investment policy put forward by the Directive delivers some liberalization of investment rules currently applied by some Member States.

19 Art. 16, 1 directive 2003/41. 20 Article 15(5) of the Directive enables member states to make the calculation of technical provisions subject to additional more detailed requirements. 21 Art. 16, 2 directive 2003/41. 22 Art. 16, 3 directive 2003/41. 23 Art. 19 directive 2003/41.

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20. Cross-border activities. A particularly important feature of the Directive is that it enables companies to sponsor IORPs based in other EU member states24. Cross-border activity only occurs where an institution based in one country is sponsored by any one or more undertakings in another country25. This means for example that a multinational employer could operate a single pension fund in one member state to cover all its employees within the EU. However a cross-border activity is not only intended to work on multilateral basis (i.e. a multinational paying contributions from several countries into a single scheme) but also on a bilateral basis (i.e. employer in one country, scheme in another).

IORP

hostMember

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hostMember

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hostMember State

hostMember

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multi-lateral bi-lateral

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In order to be able to accept sponsorship from companies located in another member state the IORP is required to disclose details to and gain prior authorization from the competent authorities of the home member state. 21.

Procedural aspects of cross-border activities. An IORP wanting to accept sponsorship from a foreign employer must obtain authorisation of the competent (supervisory) authority (or regulator) located in it’s own country (the home state). It must go through a notification procedure informing this competent authority. This involves providing the following information:

the host Member State(s). This means the Member State where the sponsoring company (or employer) is located); the name of the sponsoring undertaking (employer); and the main characteristics of the scheme to be operated for the employer.

If the home Member State’s competent authority is satisfied with the competence of the institution, on receipt of the above information it will, within 3 months, pass it to the competent authorities in the host Member State and inform the scheme accordingly. Prior to commencement of the institution operating a pension scheme for a sponsoring undertaking in another Member State, the competent

24 Art. 20 directive 2003/41. 25 Art. 20, 1 directive 2003/41.

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authorities of the host State shall, within 2 months of receipt of the above information, inform the competent authorities in the home State of any appropriate social and labour law relevant to the field of occupational pensions under which the institution must operate. The competent authorities in the home Member State will notify the institution accordingly. On receiving this information, or if no communication is received from the competent authorities in the home Member State within the 2 month period, the institution may start to operate cross-border. Institutions shall also be subject, in respect of the corresponding members, to any information requirements imposed by the competent authorities of the host State on schemes located within that State.

informs of 2a

information under 1 within three months

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INFORMATION - AUTHORISATION

notification including: a) the host Member State b) the sponsoring firmc) the main charachteristics

applicable social and labour law

within two monthsnotification of the applicable

social and labour law

Home State Host Statecompetent authority competent

authority

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Cross-border activities with respect of national social and labour law. Any cross-border activity must be developed in full compliance with the provisions of national social and labour legislation on the organisation of Member States’ pension systems, including compulsory membership. The directive does not intend to interfere directly with national pension schemes. An IORP is subject to supervision by the competent authorities of the host State in respect of the host States’ social and labour laws relevant to occupational pensions. Should irregularities occur, the host State authority shall inform the home State authority immediately. The home State authority, in co-ordination with the host State regulator, will take the necessary action to rectify matters. If the home State authority is unable to stop the breach in the host State’s requirements, the host State authority, after informing the home State authority, must take steps to prevent or penalize further irregularities – including preventing the scheme from operating in the host State.

A single license but with two categories of applicable law. Mutual recognition of pension sponsoring across Member States is the basis of the Directive. An IORP authorized within one single Member State can deploy it’s activities throughout the European Union. A single license suffices (the European passport). However, the Directive creates a distinction in applicable law. On the one hand the applicable legislation related to solvency, investment, governance and prudential matters is the

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legislation of the home state. On the other hand, the applicable legislation related to labour and social matters is of the host state.

authorisation solvency supervision governance investment

labour law

social law

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HOME STATELEGISLATION

DIRECTIVE 2003/41/EC

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1.3. Contextual analysis of the notion “National social and labour legislation” 24.

25.

Contextual analysis of the notion. Identifying what constitutes “National social and labour legislation”, requires first and foremost a contextual analysis. In what context is the notion used ? Therefore all references within the directive to the notion have to be looked at. The references are to be found in articles 6, 14 and 20.

Article 6.

Art. 6 j) ‘host Member State’ means the Member State whose social and labour law relevant to the field of occupational pension schemes is applicable to the relationship between the sponsoring undertaking and members.

26.

27.

28.

Classical definition. In the definition of “host Member State” reference is made to social and

labour law. The definition restricts the notion of social and labour to the relationship between the sponsoring undertaking and the members of the pension scheme (“the relationship between the sponsoring undertaking and members”). This concurs with the classical definition of social and labour law in the Member States of the EU (infra nrs. 48 and 49). After all, social and labour law are focused on the relationship between employer and employee. An IORP is classically not directly involved in the relationship between the sponsoring company and the members.

SPONSORING COMPANY

HOST STATE

MEMBERSsocial and labour law

Relevance in the field of occupational pension schemes. Why does the definition refer to the

relevance in the field of occupational pension schemes. What does this mean ? Is this a limitation or a clarification ? According to art. 2.1 of the directive, it is only applicable to IORPs (art. 2,1). This scope of the directive limits the relevance to occupational pensions schemes anyhow. So one could ask if there is a kind of other social or labour law that is not relevant for occupational pensions schemes. The definition seems to suggest this. This might seem a little awkward. After all, there is obviously no such thing as a non relevant social or labour law in relation to occupational pension schemes that is (still) applicable to IORPs. The “relevance” idea has to do with the indirect influence of social and labour law on IORPs (see nrs. 53 to 56).

In the definition of “Home Member State”, no reference is made to social and labour law. Does this mean the reference is only applicable in an international context (namely between Member States) ? The answer to the question is clearly affirmative. The notion of social and labour law in the directive is only significant in cross-border activities (see also nrs. 20 and 22).

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29.

30.

31.

32.

33.

The absence of a proper definition on “social and labour law” is remarkable. It would have been very helpful if the directive provided for a clear definition. Now, the Member States can define the notion themselves, with all consequences thereto (see nr. 117). Member States are entitled to define their own notion of social and labour law.

Article 20. 1.

Art. 20, 1. Without prejudice to national social and labour legislation on the organisation of pension systems, including compulsory membership and the outcomes of collective bargaining agreements, Member States shall allow undertakings located within their territories to sponsor institutions for occupational retirement provision authorised in other Member States. They shall also allow institutions for occupational retirement provision authorised in their territories to accept sponsorship by undertakings located within the territories of other Member States.

Basic article. This article is the basic article on cross border activities of IORPs. The article refers to the national social and labour legislation on the organisation of pension systems. Compared to the reference made in art. 6 (see nr. 25) regarding the field of occupational pension schemes, this reference is broader. It refers to the organization of all pension systems. The directive clearly does not intended to undermine national pension systems in any way. Furthermore there are two specifications to the reference. Compulsory membership and the outcomes of collective bargaining are included in the reference to national social and labour legislation.

Compulsory membership. Membership is not a direct matter for the IORP. It is the employer or sponsoring company who either decides on membership (company scheme) or executes a higher binding norm stating who has to be a member (e.g. in the Netherlands or Belgium a collective bargaining agreement of a branch of industry can decide on the membership). An IORP is (usually) only indirectly involved in membership in this sense that it is not the IORP that can decide who will adhere or who will not adhere. The IORP, although clearly involved in the execution of the rules on adhesion, cannot counter the adhesion of members who are rightfully entitled to the membership. Compulsory membership in the article clearly refers to Member States such as the Netherlands where membership of an occupational retirement provision scheme is virtually compulsory (for reasons of inter-generational solidarity).

The outcome of collective bargaining. The reference to collective bargaining is clearly intended to let the social partners know that there is no restriction by the directive of their bargaining power in social affairs. The question can be raised why the directive explicitly includes collective bargaining in the notion of social and labour law. After all, who could doubt that they are not included ? In most (if not all) Member States collective bargaining between employers and employees is recognized as a constitutive element of social and labour law. The specification that social law includes collective bargaining therefore clearly raises an important question. How far can the social partners go in their bargaining ? If the social partners for example decide on a specific theme in their collective bargaining it is, on a national level, clearly considered to be a part of social or labour law. Does this mean that the social partners can create rules that for example go against the directive ? Or imagine a national

19

collective agreement that makes it practically impossible for an IORP to comply with the national social rules of the Host State. One could say that the directive is a higher norm and that it precedes the collective agreement, however things are not that simple. After all, the directive itself actually specifies that it does not limit the negotiation freedom of the social partners. Otherwise there would be no specification.

Article 20, 8 juncto article 20, 9. 34.

3

3

3

otw

inlafodthM(osfaifre

inath

Art. 20, 8. The competent authorities of the host Member State shall inform the competent authorities of the home Member State of any significant change in the host Member State's requirements of social and labour law relevant to the field of occupational pension schemes which may affect the characteristics of the pension scheme insofar as it concerns the operation of the pension scheme sponsored by an undertaking in the host Member State and in any rules that have to be applied in accordance with Article 18(7) and with paragraph 7 of this Article. Art. 20, 9. The institution shall be subject to ongoing supervision by the competent authorities of the host Member State as to the compliance of its activities with the host Member State's requirements of labour and social law relevant to the field of occupational pension schemes referred to in paragraph 5 and with the information requirements referred to in paragraph 7. Should this supervision bring irregularities to light, the competent authorities of the host Member State shall inform the competent authorities of the home Member State immediately. The competent authorities of the home Member State shall, in coordination with the competent authorities of the host Member State, take the necessary measures to ensure that the institution puts a stop to the detected breach of social and labour law.

5.

6.

7.

Information : first responsibility of the Host State. The directive makes the competent authority f the Host State responsible for the information flows concerning social and labour law. There are

o elements related to this responsibility: the content and the procedural aspects.

Information: the content. The host Member state decides on the scope of the relevant formation. This is not only a matter of deciding what is supposed to be relevant social and labour w (see nr. 46 to nr. 102). It is also a question of the degree of detail of the information. The directive r example says that any significant change in the relevant law has to be communicated. But what

oes “significant” and “relevant” mean ? The directive does not say. So it is the discretionary power of e Member State to define the scope and degree of detail. This obviously leads to differences between ember States. Can a Member State for example simply refer to the website of its official journal ften only available in one language) ? Or is it obliged to make transparent leaflets on the applicable

ocial and labour law in the different official languages of the Member States ? In other words: how r does the information obligation reach ? The directive isn’t very clear on this point. It would be best CEIOPS (infra, footnote 26) develops a kind of charter indicating the scope and degree of detail quired. Otherwise, the directive risks to remain blocked on this point.

Information: procedural aspects. The directive does not specify the procedural aspects of the formation flows. It is up to the Member States to fill in these procedural aspects. These procedures

re important for an efficient application of the directive. A detailed and pragmatic collaboration is erefore necessary between the Member States. Fortunately, a start has been made. Not only have

20

some Member States already made bilateral agreements related to the supervision of IORPs, there is also the recent creation of CEIOPS or the Committee of European Insurance and Occupational Pensions Supervisors26. CEIOPS is composed of high level representatives from the insurance and occupational pensions supervisory authorities from Member States of the European Union. One of the mission of CEIOPS is exactly to constitute a forum for supervisory co-operation, including the exchange of information on supervised institutions. In the future CEIOPS can therefore constitute an important and necessary instrument in the development of information exchange between Member States. 38.

39.

Can an IORP still be sanctioned according to article 14 juncto article 20, 10 if the competent authority of the Host Member State hasn’t given the necessary information ? According to the directive the competent authorities of the host Member State must inform the competent authorities of the home Member State of any significant change in the host Member State's requirements of social and labour law relevant to the field of occupational pension schemes. What happens if the Host Member State hasn’t fulfilled its obligation and the IORP consequently breaches the law ? Can the IORP be held responsible ? The answer to this question is not easy but is predominantly affirmative.

By infringing the social and labour law the IORP still risks litigation of members of the pension schemes whose rights have been violated, even if it can be proven that the Host Member State was negligent27.

In such a case, the IORP can obviously involve the Host Member State in the litigation because of the negligence committed. However, in many Member States there is an adagium saying that everybody is presumed to know the law (although the pratical legal consequences can mostly be neglected).

It could be argumented that an IORP has a duty as diligent person to check any relevant information on social and labour law in order to protect the rights of the members of the pension scheme. The directive provides a clear legal basis for this. The reference in article 20, 8 and 9 to article 20, 7 is transparent: an institution sponsored by an undertaking located in another Member State shall also be subject, respect of the corresponding members, to any information requirements imposed by the competent authorities of the host Member State on institutions located in that Member State.

The information requirements are multifold according to article 11 of the Directive. Often the IORP will be able to involve the sponsoring undertaking operating in the Host Member State. This company is a contracting party for the IORP and subject to social and labour law in the Host Member State. It should be aware of the applicable rules. This is even more so if the contract between the IORP and the sponsoring company refers to the applicable social and labour law.

Reference to art. 18, 7. Article 20, 8 refers to article 18, 7. Article 18, 7 provides for a

specification concerning investment rules. If the IORP works on a cross-border basis, it may be asked by the competent authorities of the host Member State to apply limits for investment in shares and similar assets not admitted to trading on a regulated market, in shares and other instruments issued by

26 www.ceiops.org. The CEIOPS organisation and tasks are described in its Charter, and in Decision 2004/6/EC of the European Commission of 5 November 2003. 27 This could even be a class action if many members are involved.

21

the same undertaking or in assets denominated in non-matching currencies provided such rules also apply to institutions located in the host Member State. In such case, these rules shall apply only to the part of the assets of the institution that corresponds to the activities carried out in the particular host Member State. This means that an exception is made to the general principle whereby the home Member State can decide on these matters (see also nr. 6 and 23). The host Member State can therefore still play an important role in the investment rules when there are cross border activities. 40.

41.

42.

Reference to art. 20, 5. Before the IORP starts to operate a pension scheme for a sponsoring undertaking in another Member State it has to receive information on the social and labour law of the Host Member State. The competent authorities of the host Member State must therefore, within two months after receiving notification (see nr. 21) inform the competent authorities of the home Member State of the relevant requirements of social and labour law.

Practically. According to article 20, 9 the IORP is subject to ongoing supervision by the competent authorities of the host Member State as to the compliance of its activities with the host Member State's requirements of labour and social law and with information requirements. How should this be understood practically ?

Imagine that there is a Member State where there is a legally binding guaranteed return on (a certain amount of) contributions and this Member state clearly states that this guaranteed return is part of social law (see nr. 7). The IORPs has been timely and correctly informed of this obligation. So each pension provider has to guarantee a minimal interest rate (see also nr. 8) for sponsoring undertakings of this Member state. On the basis of article 20, 7 juncto article 11 of the directive the competent authority of the Member State can ask all necessary information directly from the IORP (see nr. 38). This means that the IORP can be obliged to show the actuarial basis of the returned guarantee as is asked of all pension providers of the Host Member State. If this guarantee requires for example specific solvency margins or specific accounting, then the IORP has to respect this.

Sanctioning: article 14, 4, d) juncto art. 20, 10.

Art. 14, 4, d)

The competent authorities may prohibit or restrict the activities of an institution located in their territories in particular if: … (d) in the case of cross-border activity, the institution does not respect the requirements of social and labour law of the host Member State relevant to the field of occupational pensions.

22

Art. 20, 10. If, despite the measures taken by the competent authorities of the home Member State or because appropriate measures are lacking in the home Member State, the institution persists in breaching the applicable provisions of the host Member State's requirements of social and labour law relevant to the field of occupational pension schemes, the competent authorities of the host Member State may, after informing the competent authorities of the home Member State, take appropriate measures to prevent or penalise further irregularities, including, insofar as is strictly necessary, preventing the institution from operating in the host Member State for the sponsoring undertaking.

1) In the opening words of the article 14, 4, d) the word “territories” is used. Does this mean that both states (Home Member State and Host Member State) have to agree on the breach of law ? Do both States always have to act together ? Can one State restrict or prohibit the activities of an IORP even if the other Member State does not agree ? What if there is a contradiction between the legislations of the two Member States ? Which one would prevail in such a situation ? The answer to these questions lies in article 20. 10. The competent authority of the Host Member State prevails over the competent authority of the Home Member State. This means the Host state can intervene even if the Home member state does not think it is appropriate. Article 20. 10 is therefore an essential stipulation in the directive. Without the article there would be a clear risk of blocking the directive. It is remarkable that the directive does not oblige the competent authority of the Home Member State to intervene if the competent authority of the Host Member State asks to. The directive does not provide a specific procedure or legal framework for possible conflicts of law between the different competent authorities. The solution foreseen in the directive is much more practical and probably more efficient than a legal procedure: the competent authority of the Host Member State can intervene if it sees fit.

2) What’s a restriction or a prohibition under article 14, 4, d ? Most breaches of social or labour law are not sanctioned by restrictions or prohibitions but by fines. Can a competent authority fine an IORP for a breach of social or labour law, or is this impossible ? Art. 20. 10 of the directive provides the answer. The Host Member state can penalize the IORP or take other appropriate measures.

3) Another more fundamental question is : how it is possible that an IORP does not respect the

requirements of social and labour law ? Most requirements of social and labour law in the Member States are obligations for employers (the sponsoring companies) (see nr. 55 about the indirect influence of social law). Therefore the breach of law will usually originate from the employer. Consequently and logically, the competent authority of the Host State can always act against the sponsoring employer on the basis of national law. Furthermore in a national context, most Member States have rules on responsibility in solidum if both the pension provider and the employer are to blame.

4) What happens if the competent authority of the Home state refuses, for one or the other reason, to

collaborate with the competent authority of the Host state ? The competent authority of the Host state can act alone (see nr. 1) above). However the directive does not provide for a sanctioning mechanism towards the competent authority of the Home Member State. From a European legal point of view this is logical. Social law is a strictly national competence and the sanctioning of another Member State because of a refusal to follow up the social legislation of another Member State falls out of the classical jurisdiction.

Example 1. 43. An IORP is situated in Ireland (Home state). The IORP runs a pension scheme for an Italian employer (sponsoring company). What can the Italian competent authority of the host state (Commissione di vigilanza sui fondi pensione (COVIP)) do if the IORP in

23

Ireland breaches Italian social or labour law. COVIP cannot restrict or prohibit any activities that aren’t located within it’s own territory. That is inherent to territorial national competences (restricted jurisdiction). So, the Italian Competent Authority cannot “touch” the Irish IORP in Ireland. The Irish competent authority (the Pensions Board) has to be involved. On the basis of their national competence they can act. If the Pension board does not act and does not intervene because it considers that the request of the Italians is irrelevant to the notion of social and labour law, then COVIP can act against the IORP on Italian soil (!) by penalizing them or taking other “appropriate” measures. Such a measure could for example be the refusal to fiscally validate the payment of contributions. This would also have a clear impact on the sponsoring company.

44. Example 2. Another possible problem is the contradiction of legislation. What if the requirements of social and labour law (recognised as such within the particular Host Member State) are incompatible with other legal obligations in the Home Member State of the IORP. These problems often occur because of the indirect effect of labour and social law on IORPs (see nr. 55). Conflicts of law often occur within a Member State. Most of the time these conflicts are solved whereby one rule is supposed to overrule the other. Adagia such as “lex generalis, lex specialis derogat” and “lex posterior lex prior derogat” are common solutions. But how will this work between Member States ? Most regulations on IORPs are founded on economic law (in a broad sense) and not on social law. This can give rise to quite complicated situations.

Imagine a Dutch pension scheme (the Netherlands are the Host State) with an IORP situated in Belgium. The Dutch law has a quite elaborate set of rules on participation of employees and pensioners in the IORP (e.g. the so-called deelnemersraden). A Belgian IORP, in practice a pension fund, can take several legal forms. The most common form is the so-called “association without profit aim”. The rules on the this association can be found in civil law and partially in economic law. According to these rules an association such as a pension fund cannot have more people on the board of the fund then there are members. This is in absolute contradiction with the Dutch law. Which law precedes ? Can the Dutch law be put aside by the Belgian authorities or can the Host state demand that the Belgians apply the Dutch law, irrespective of a breach of Belgian law ?

24

MEMBER STATE A

host state

MEMBER STATE B

home state

= national labour law

= social law = economic law

= civil law

indirect effect of national labour or social law

25

II.

National social and labour law

26

II. National social and labour law 45.

46.

47.

Overview. There is a large diversity in definitions of social and labour law in the 25 Member States of the European Union (2.1. The meaning of national social and labour law). The European Court of Justice however appears to be a permanent source of inspiration to find common grounds between Member States (2.2. National social and labour law: European Competition law as inspiration). The evolution whereby occupational pensions are increasingly considered to be part of social policy is obviously linked to this inspiration of the European Court (2.3. Occupational pensions as social insurance scheme). Nonetheless, within the EU the main competences in social affairs remain with the Member States and there are few common grounds to be discovered till now (2.4. A subjective and objective approach to national social and labour law).

2.1. The meaning of “national social and labour law”

Overview. There is no such thing as a unique European definition of “social and labour law”. The different Member States have accentuated their social policies differently according to their national needs. Historically quite some discrepancies occur (2.1.1. What is social and labour law ?). In order to find the relation with directive 2003/41, it is important to find out the involvement of the different actors in occupational pension schemes (2.1.2. Who is (not) involved ?). An analysis of the basic values and principles, the so-called paradigmatic pillars is the final backbone of the matrix (2.1.3. Paradigmatic pillars of social and labour law).

2.1.1. What is social and labour law ?

The defining of a notion based on work. A lot of national and international research has been done on the meaning and scope of notions such as social law and labour law28. There is an ever-ongoing debate between scholars over the exact extent of these notions29. Often these debates are ideologically coloured. At the beginning of the 20th century some even argued that a notion such as “social law” had little to no meaning. The idea was that “social” referred to society at large. In this “societal” view all law was considered to be social law because every aspect of law touches the society30. Nowadays, it is generally accepted that there is a common basis to all forms of social law: employment or the lack of it31. Employment or work links an employer to an employee and vice versa. This relationship is governed by labour law. Their mutual rights and duties are stipulated in an

28 J. BERGHMAN, “History of social security”, in D. PIETERS and B. GREVE, Social security in interdisciplinary perspective, MAKLU, Antwerpen-Apeldoorn, 1999, 13-15. 29 See for example, P. ORIANNE, La notion du droit social, CIBDS, Nivelles, 1962, 127 p. ; A. LAGASSE, Sécurité sociale et droit du travail, Annales de Droit et de Sciences politiques, 1951, 224-234. 30 For a similar idea, see the description of Yves Saint-Jours in his historical overview of French social legislation. Y. SAINT-JOURS, "France" in A. KOHLER and F. ZACHER, Un siècle de sécurité sociale 1881-1981, Max-Planck Institut für ausländisches und internationale Sozialrecht, Munich, 1982, 145-168. The author states quite correctly that at the beginning of social development, the state remained ideologically loyal to liberalism. 31 G. LYON-CAEN, Manuel de droit social, LGDG, Paris, 1987, 7.

27

employment contract32. These contracts can be individual or collective. The link, namely employment for the employee (or work for the self-employed), creates rights in a social security scheme. If this link isn’t present there are benefits in a more general social protection or welfare scheme. These schemes are not solely or exclusively based on work but often on citizenship. Most poverty programs fall within these schemes.

EMPLOYER

EMPLOYEE

WORK LABOUR LAW SOCIAL

SECURITY

EMPLOYERS

EMPLOYEESself-employed

SOCIAL PROTECTION

LAW

WELFARE LAW

SOCIETY AT LARGE

SOCIETY AT LARGE

-

citizens

citizens

48.

Origin and nature. Member States social law and labour law have grown gradually within the existing civil or common law system33. This progressive penetration of social and labour law makes that in most Member States there has been no systematic approach of these fields of law. Most social and labour laws originate from the social misery at the end of the 19th century, the so called industrial era34. In all Member States labour law and social law are primarily intended to protect the employee35. Therefore labour law and social law are mainly to be considered compulsory and not optional36.

32 The area of labour law is defined in part by its subject-matter, in part by an intellectual tradition. Its immediate subject-matter consists of the rules which govern the employment relationship. However, a broader perspective would see labour law as the normative framework for the existence and operation of all institutions of the labour market (S. DEAKIN and G. MORRIS, Labour law, Butterworhts, London, 1995 1.) 33 Both common law (for the Anglo-Saxon Member States) and civil law (for the Member States with a Roman law tradition) have been traditionally hostile to collective self-organisation of workers. It is only by means of statutory intervention and legislation, in the form of “immunities” from common law or civil law liability, that a space has been created within which trade unions, in particular, may operate lawfully for the purposes of collective bargaining. 34 The Italian author Pera says quite correctly in this context: Il diritto del lavoro è una materia relativamente nuova, tipica dell’età contemporanea. Ĕ venuta in essere e si è sviluppata a partire dagli ultimi decenni dell’Ottocento, all’inizio con varia denominazione nei diversi paesi di progressiva industrializzazione (diritto “operaio”, legislazione “sociale” o “industriale” etc.), in ragione dello sviluppo del vario movimento sociale delle classi lavoratrici, ed in particolare della classe operaia (“movimento operaio” e sindacalismo) in contestazione della situazione sociale di massa derivata dalla rivoluzione industriale nel regime liberale-liberistico. G. PERA, Diritto del lavoro, CEDAM, Milani, 2000, 1. 35 Nearly all labour law authors formulate this need of protection differently. An English example: Labour law stems from the idea of the subordination of the individual worker to the capitalist enterprise (S. DEAKIN and G. MORRIS, Labour law, Butterworhts, London, 1995, 1.) A Spanish example: El derecho del trabajo regula las

28

49.

Polysemic notion. Even if there is a common basis to the notion, namely work or employement (see nr. 47), there is no such thing as “the social law” or “the labour law”. With twenty-five Member States in the EU, there are (at least) twenty five different definitions or notions, although some are very similar37. Often there are even several definitions within one Member State38. Social law and labour law are therefore definitely polysemic notions within a European context. In a comparative law perspective it becomes clear that the polysemic notion of social law is very different in so-called Roman law Member States and in so called Anglo-Saxon Member States.

In Member Sates with a strong Roman law tradition such as France, there is a very large perception of social law (droit social)39. The term “Droit social” includes not only social security law but also the social protection schemes40.

In German law the notion “Sozialrecht” usually only refers to social security schemes (or sometimes to social protection in a very sense)41. Under the influence of European terminology the notion “Sozialer Schutz” or “Sozialschutz” becomes more popular and refers to a wider notion.

relaciones entre empresarios y trabajadores dentro de la empresa. ... En una concepcíon puramente civilista, contractual de las relaciones jurídicas, el legislador no podía ir más allá. En la relacíon de trabajo que supone la existencia de un contrato entre dos personas −empresario y trabajador− la ley se limitaba a asegurar la proteccíon contra el riesgo y el abuso. ... Significa que el sentido y alcance de aplicación de la norma debe interpretarse en el sentido que resulte más beneficioso para el trabajador. X. Memento Practico: derecho laboral – seguridad social, Ediciones FL, Madrid, 2000, 4. 36 In German law for example, see H. BLEY, Grundbegriffe des Sozialrechts, NOMOS VERLAGSGESELLSCHAFT, Baden-Baden, 1988, 13: Das Sozialrecht ist verwaltungsrecht und damit öffentliches Recht. Die Erbringung von Sozialleistungen als zentrale Aufgabe aller Leistungsträger läßt es als Teil des Rechts der Leistungsverwaltung erscheinen. 37 This idea can already be found in 1957 when a study was commissioned on the notion of labour law within the six (!) Member States of the Community (EUROPESE GEMEENSCHAP VOOR KOLEN EN STAAL, Vergelijkende studie van de bronnen van het arbeidsrecht in de landen van de Europese Gemeenschap voor Kolen en Staal, Publikatiedienst van de Europese Gemeenschap, Luxemburg, 1957, 15-17. 38 This becomes very clear by reading an analysis of labour law research in twelve countries of the European Community, S. EDLUND (ed.), Labour law research in twelve countries, Almqvist&Wiksell, Stockholm, 1986, 296 p. 39 O. KAUFMANN, « Le droit social comparé », Electronic Journal of Comparative Law, vol. 8.1 (March 2004), 10. 40 Gérard Lyon-Caen finds a circle movement in French social law. He states that there was originally a unified social law. It became separated after the second world war into social security law and labour law. Nowadays he sees those two branches of law coming back together under the notion of social law (his tree steps: (1) Unité de droit social, (2) Séparation du droit du travail et de la sécurité sociale, (3) Rapprochement). La rupture entre le droit du travail et le droit de la securité sociale était consommée. G. LYON-CAEN, Manuel de droit social, LGDG, Paris, 1987, 7-9. 41 Helmar Bley gives a detailed description in his “Grundbegriffe des Sozialrechts”. The notions he uses go far further than in most other Member States by referring to the human development and family protection: Sozialrecht im formellen Sinne sind die Rechtsgebiete, die „nach Namen oder Sache als sozial erkennbar sind“, insbesondere das Recht des Sozialgesetzbuchs unter Einbeziehung der Gesetze, die bis zu ihrer Einordnung nach Art. II § 1 SGB I als dessen besondere Teile gelten. Sozialrecht im materiellen Sinne sind die Rechtsgebiete, die das Sozialstaatsprinzip eigenständig und primär realisieren sollen, indem sie individuelle Güterdefizite und hierauf beruhende Bedarfe mittels transitiver Leistungen (Sozialleistungen) eines Trägers öffentlicher Verwaltung (Sozialleistungsträgers) verhindern, mindern oder beseitigen. Realisierung des Sozialstaatsprinzips bedeutet nach § 1 Abs. 1 SGB I Verwirklichung sozialer Sicherheit und sozialer Gerechtigkeit durch Sicherung eines menschenwürdigen Daseins, Schaffung gleicher Voraussetzungen für die freie Entfaltung der Persönlichkeit, Schutz und Förderung der Familie, Gewährleistung des Erwerbs des Lebensunterhalts durch eine frei gewählte Tätigkeit sowie Abwendung und Ausgleich besonderer Belastungen des Lebens. H. BLEY, Grundbegriffe des Sozialrechts, NOMOS VERLAGSGESELLSCHAFT, Baden-Baden, 1988, 13.

29

The anglo-saxon world refers very little to the notion of social law as a positive branch of law. Commonly, welfare law, social protection law, social security law or labour law are used. In the UK social law can be seen as all legal measures related to the “Welfare state legislation”42.

In the Netherlands and in Belgium the notion of “Sociaal recht” is usually used as the umbrella term for labour law and social security law (often including welfare law).

A similar idea as the one in the Netherlands and in Belgium can be found in Spain where social legislation (legislación social) is often seen as the link between labour law (derecho del trabajo) and social security law (seguridad social)43.

In Portugal however the notion of social protection (protecçao social) is used as umbrella term44.

In Italy preference is usually given to the more general term of social providence (previdenza sociale)45.

Especially for Belgian, Dutch and Spanish lawyers the reference made by the Directive 2003/41 makes to social and labour law can be considered peculiar. For them the term social law includes labour law. While in other countries this is often not the case. In the UK for example there is a rather strict division between social security law and labour law46. 50.

Non concurrent terms. The German “Sozialrecht” does not cover the French “Droit Social” or the Dutch “Sociaal Recht”47. Even terms such as “social security legislation” in the UK do not concur with the Belgian “Sociale Zekerheid” or the Portugese “Segurança Social”. So it would be a mistake to try to find a common legal definition for all Member States. The best reference for directive 2003/41 would therefore probably be the European directives on social matters such as directive 1408/71 or 574/72 on the coordination of social security schemes. However the directive 2003/41 clearly refers to the national notions. This is obviously linked to the national sovereignty of the Member States in social matters such as pensions (see nr. 117). Politically this was probably the only reachable compromise, whether it is the best solution for all, can be doubted (see nr. 52).

42 O. KAUFMANN, « Le droit social comparé », Electronic Journal of Comparative Law, vol. 8.1 (March 2004), 11. 43 X. Memento Practico: derecho laboral – seguridad social, Ediciones FL, Madrid, 2000, 7: El derecho del trabajo presenta características comunes con el de la Seguridad Social. Ambos constituyen construcciones originales tanto por su objeto como por las fuentes jurídicas utilizadas. 44 A. CONCEIÇÃO, Segurança social, Editora Rei dos Livros, Lisboa, 2001, 2. For a general overview of Portugese social law: J.B. PALLISSER, Le droit social au Portugal, LAMY, Paris, 1991, 301p. 45 In his handbook on Italian labour law Pera writes: Infine, c’è il diritto della previdenza sociale che ancor oggi si deve continuare a studiare nel diritto del lavoro in senso lato, essedo in corso un’evoluzione a compimento della quale, forse, dovrà adottarsi une diversa sistemazione. Fino alla seconda guerra mondiale, questa tutela era essenzialmente preordinata per il solo rapporto di lavoro subordinato. G. PERA, Diritto del lavoro, CEDAM, Milani, 2000, 2. For a general overview of Italian social law: M. VILLA and C. ROBINE, Le droit social en Italie, LAMY, Paris, 1992, 298 p. 46 In their handbook on labour law Deakin and Morris write: It schould be remembered that social security law constitutes a body of principle which is studied in its own right, since it extends far beyond the employement relationship to embrace, in a wider sense, many aspects of the relationship between the citizen and the state in the distribution of economic resources. S. DEAKIN and G. MORRIS, Labour law, Butterworhts, London, 1995 2. 47 See for example: O. KAUFMANN, F. KESSLER and P. KOHLER, Le droit social en Allemagne, LAMY, Paris, 1991, 2.

30

51.

52.

Evolutionary concepts. Another problem in defining social or labour law, is the permanent evolution. Social law and labour law change permanently due to the ever changing socio-economic situation48. The theories and philosophies behind these laws are continuously changing. Often because of the changed employment relations in society. The best example is the emancipation of women. Because of this emancipation more women started working which led to changes in social security schemes throughout the European Union. Another trend is the increasing demand for flexible employment relations. Forty years ago labour law was conceived as legislation meant to protect the worker with life-long-employment with the same employer and with a full time contract. Nowadays, part-time work is often demanded by both the industry and the employers (workers with children for example)49. Recent evolutions such as the globalization, the employee demand for telework, the individualization of social security benefits makes that social legislation and labour legislation are currently being revised in all Member States50.

Need for a social European defining of common and concurrent notions. The notion of “social and labour law” is (1) polysemic, (2) non concurrent between Member States and (3) evolves permanently within these Member States. From a pragmatical European point of view, this is not efficient. There is a clear need for more uniformity on a European scale. This however raises quite a lot of questions on competence and jurisdiction. Nevertheless, one could basically argue that the European welfare states are confronted with the same (or similar) social problems. The more the European market gets integrated within the European Monetary Union, the more this will become reality. This is obviously linked with the contrast between the ongoing new European economic legislation and the absence of new European social legislation. If disputes occur on a European level, it is therefore clear which side will win51. Consequently the problems should be dealt with on a European level. Both policy initiatives to improve labour demand without social dismantling and shifts towards new sources of social security financing are in need of a policy framework at the European level. This is not to say we need a single European social protection system52. Quite on the contrary. Although the social problems the Member States face in an integrated market, there remain local and regional circumstances requiring specific measures53. It is exactly this idea that can be found in paragraph 2 of article 5 of the EC dealing with the principle of subsidiarity54. The article says that :

48 For a clear analysis of this evolution, see: A. CONCEIÇÃO, Segurança social, Editora Rei dos Livros, Lisboa, 2001, 29-30: Qualquer aproximação ao estudo do desenvolvimento das formas de protecção social terá de ter sempre em conta a correspondente periodização da história económico-social geral. Na verdade, não se deve perder de vista toda e qualquer classificação que possa servir de suporte e enquadramento de evolução das sociedades. Uma periodização em particular nos tem merecido uma forte atenção dada a sistematização que dela se pode retirar e as explicações que se conseguem obter, a saber: Periódo pré-capitalista − ate sec. XII; Periódo capitalista e dentro deste: capitalismo comercial (sec. XIII a sec. XVIII); capitalismo industrial (desde sec. XVIII); capitalismo financeiro (sec. XX). 49 A. JACOBS en H. VAN VOSS, Elementair sociaal recht, Samson, Alphen aan den Rijn, 1996, 23. 50 An interesting overview of the problems linked to these evolutions can be found in : F. CARINCI, R. DE LUCA TAMAJO, P. TOSI, T. TREU, Diritto del Lavoro, UTET, Torino, 2003, 8 – 148. See especially chapters 6 and 7 of the introduction. 51 M. KARI, Meeting with EU social policy, MAKLU, Antwerpen, 1998, 41. 52 J. BERGHMAN, “Social protection and social quality in Europe”, in W. BECK, L. VAN DER MAESEN, A. WALKER (ed.), The social quality of Europe, 1997, 263. 53 The regional development of social law will become increasingly important within the European Union. A first example is the relative autonomy of Catalonia in Spain on social matters (J.B. PALLISSER, Le droit social en Espagne, LAMY, Paris, 1990, 2. A second example is the development of a Flemish dependency or care

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In areas which do not fall within its exclusive competences, the community shall take action, in accordance with the principle of subsidiarity, if and only in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or the effects of the proposed action, be better achieved by the community.

For social law and labour law, this principle is obviously linked to article 2 of the Treaty stating the common community objective of promoting “a high level of employment and social protection”. Most people (and Member States) obviously still believe that Member States are best capable of achieving these objectives. However, they should realize that there is an ongoing diminishing of national sovereignty in economic and budgetary and hence social or fiscal matters. The directive is a proof of this. The only reasonable conclusion is therefore that there is need for a clearly defined new form of shared sovereignty of the Member States on a European level.

2.1.2. Who is (not) involved ? 53.

54.

55.

An easy - difficult question. Since the society at large is involved in social protection schemes (see nr. 48) the answer to the question who is involved in social or labour law seems relatively easy: everybody. As easy as the answer is, as difficult it is to know the extent of involvement. The correct answer is therefore: what’s the exact extent of involvement of the different actors in social policy ? This theoretical question can be placed in different contexts of the welfare state. We refrain ourselves by only looking at the directive 2003/41 for the analysis of this question.

Directive 2003/41 and the extent of involvement of the actors. Directive 2003/41 is more embedded in labour law than in social law (as defined above, nrs. 48 to 51).This is apparent in the used definitions and by the scope of the directive.

The defintion of an IORP: labour law has only indirect effect. The directive defines an ‘institution for occupational retirement provision’ as an institution, irrespective of its legal form, operating on a funded basis, established separately from any sponsoring undertaking or trade for the purpose of providing retirement benefits in the context of an occupational activity on the basis of an agreement or a contract agreed (a) individually or collectively between the employer(s) and the employee(s) or their respective representatives, or (b) with self-employed persons, in compliance with the legislation of the home and host Member States, and which carries out activities directly arising therefrom (art. 6, a directive 2003/41/EC). The defintion refers to agreements or contracts between employer(s) and employee(s). The intended agreements are either collective or individual labour agreements. The process of collective bargaining can indeed lead in quite some Member States whereby a pension scheme is set up and an IORP (usually a pension fund) is appointed to administer the scheme. However, according different national labour legislations there is apparently no Member State whereby the IORP or pension fund is a contracting party of such an agreement. It is only

insurance (for a detailed analysis: see: LOOSVELDT, G. en VAN BUGGENHOUT, B., "De zorgverzekering in Vlaanderen: laten we wel wezen!", R.W. 2000-01, 329-334. 54 For a detailed analysis: F. DELPEREE (ed.), Le principe de subsidiarité, LGDJ-Bruylant, Brussel-Paris, 2002, 538 p.

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indirectly involved in the agreement because the IORP is not involved in the work relationship between employer(s) or employee(s).

INDIRECT EFFECT on IORP

employersponsoring undertaking

only indirect effect

IORP

labour law

worker

Consequently, the used reference to labour law in article 20 has little to no direct meaning for the IORP as such. Labour law does not regulate an IORP. In most Member States IORPs are regulated by insurance law, prudential law or (more broadly) economic law. So it is only indirectly that an IORP can be asked to execute elements of labour law. This partial implementation of labour law is not regulated by labour law either. It is mostly based on a contract of civil or common law between the sponsoring undertaking (or the social partners) and the IORP. Social law however has a broader meaning and encompasses labour law for most Member States. This broader meaning does not change the indirect nature of the relationship the IORP has with the employer and the employee. The relationship of the IORP is indirect in this way that it’s relationship is a consequence of the relationship between the employer and the employee. If this basic relation would not exist, there would not be the relationship with the IORP. 56.

Scope of the directive: an IORP as an instrument of social security. Apart from the indirect link with labour law, the question arises whether an IORP can be considered to be a part of social policy. A comparative law study clearly indicates that there are differences between Member States. In a Member State such as the Netherlands there can be no doubt about the direct involvement of IORPs in social law. In Member States such as Spain and Portugal IORPs are not considered to be directly involved in the development of social law. The directive itself also tries to block the interference of IORPs in social law. The scope of the directive clearly indicates that the directive does not apply to55:

(a) institutions managing social-security schemes which are covered by Regulation (EEC) No 1408/71 and Regulation (EEC) No 574/72;

55 Art. 2 Directive 2003/41.

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(b) institutions which are covered by Directive 73/239/EEC, Directive 85/611/EEC, Directive 93/22/EEC, Directive 2000/12/EC and Directive 2002/83/EC;

(c) institutions which operate on a pay-as-you-go basis; (d) institutions where employees of the sponsoring undertakings have no legal rights to benefits

and where the sponsoring undertaking can redeem the assets at any time and not necessarily meet its obligations for payment of retirement benefits.

All these institutions are part of social protection schemes. Another element pointing in the same direction is the partial application to institutions operating social-security schemes. IORPs which also operate compulsory employment-related pension schemes which are considered to be social-security schemes covered by Regulations (EEC) No 1408/71 and (EEC) No 574/72 shall only be covered by the Directive 2003/41 in respect of their non-compulsory occupational retirement provision business56.

2.1.3. Paradigmatic pillars of social and labour law 57.

58.

1. 2. 3. 4. 5. 6.

Idea: a normative exercise. Although there are many differences between the concepts of social and labour law throughout the European Union, some basic principles and values always reoccur. These principles and values are the paradigmatic pillars of social and labour law57. These pillars could form both a first beginning for the development of a newly defined form of shared sovereignty of the Member States in the field of social policy (see nr. 52) as a basis for a common ground once the matrices have been filled in (see nr. 130). Since the values and principles are abstract notions, the matrix allows a concrete and precise filling in of these notions. Searching for these basic principles and values of social and labour law is evidently a normative exercise. The values and principles at stake are those a legislator is supposed to use as beacons when writing social and labour legislation in a kind of ideal world without political opportunism. For obvious reasons, reality is often different: political power tends to strive for the maintenance of the existing concentrations of power and control58. The normative exercise looks at the philosophy that should be present when writing social or labour law as part of the legal system.

The paradigmatic pillars: six basic values and principles. There are six basic values and principles of social and labour law that can be found within the existing legislation of the Member States. These are:

Protection and the level of protection Responsibility Security of existence Solidarity Equality Participation

56 In that case, the liabilities and the corresponding assets shall be ring-fenced and it shall not be possible to transfer them to the compulsory pension schemes which are considered as social-security schemes or vice versa. 57 P. VAN DER HEIJDEN en F. NOORDAM, De waarde(n) van het sociaal recht, Deventer, Tjeenk Willink, 2001, 74. 58 Individual politicians can sometimes (or often) be found to vote in favour or against a certain proposal of legislation although they personally believe the opposite. The maintenance of governmental power or the upholding of the existing coalition can have priority.

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They form the paradigmatic pillars of social and labour law and are – clearly – very closely linked to one another. There is for example an apparent connection between equality and solidarity. We do not pretend that the six values and principles are exhaustive. Probably other people will put other accents and bring consequently other values forward. Neither are the values of a permanent nature: evolution is of all times. Nevertheless, the six values can be considered as fundamentally embedded in the social policy of the European Member States59. 59.

60.

61.

62.

Social Justice. Defining the six values and principles brings along the inevitable idea of social justice. This so-called building-stone of the integrated social society has been the object of many works and therefore social justice can mean many things to many people. Already Hobbes with his Leviathan as a social construction or Rousseau with his social contract referred to the notion. In modern welfare states social justice usually refers to such a distribution of goods or services that can be provided both through the market mechanism and through the process of public choice, and is at the same time considered as fair by the majority of society according to ethical criteria60.

Legal and economic rationality. The six paradigmatic pillars can be found within the existing legislation of the Member States of the European Union. They correspond to a legal and an economic rationality.

Labour law and social law originate from common or civil law (see nr. 48). Both civil law and common law remain therefore the points of reference when defining the legal technique for social and labour law. Individual labour law is qua legal rationality more linked to private law, while social security law and collective labour law are more linked to public law.

Economics play a very significant role in the development of social and labour law. Labour law and social law correspond to economic realities such as employment market, unemployment, efficiency costs of social security, managed care models, … Within the European context it is apparent that the integrated market and the Monetary Union have a significant role to play in the development of social and labour law in the different Member States.

Solidarity and equality. Two pillars are more closely examined than others. These are equality

and solidarity. The reason for this slightly more in depth analysis is clear. Both concepts reoccur as very important in the developing of the matrix. Furthermore they are closely linked. Solidarity is based on equality. A. Protection and the level of protection

General recognition. Labour law and social law are mutually focused on protection. Both fields of law intend to protect the economically weaker person. This can either be in a labour relation (labour law protection) or in society at large for social benefits (social security protection). This is so fundamental that it is internationally embedded. Access to an adequate level of social protection is for

59 Historically, these pillars have gradually grown within Member States. Some Member States will therefore have different accents on some pillars then others. In the Netherlands for example, participation has been much more developed than in Member States such as Belgium. 60 T. SIROVATKA, “Goals, impacts and effects of social security: an overview”, in B. GREVE and D. PIETERS, Social security in an interdisciplinary perspective, MAKLU, 1999, 34.

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example recognised in the famous Declaration of Philadelphia, in subsequent ILO policy texts and in a number of International Labour Standards as a basic right of all individuals61. 63.

64.

65.

Labour law. From a general legal point of view, labour law intends to protect the workman who’s in an economically weaker position than his employer. Germans say Arbeitsrecht ist Schutzrecht (see nr. 49). Increasingly, Dutch lawyers tend to accentuate this aspect of labour law as well. They refer to the notion of “ongelijkheidscompensatie”, which means that the inequality within the labour relation between the employer and the employee should be compensated by law62. Most Member States have adopted similar visions on labour law. Safety regulations, rules on unfair dismissal, prohibition on unilateral changes of the important employment conditions or restrictions of overtime are but examples of labour law as a protective instrument. As such, protection can nearly be found in every aspect of labour legislation.

Social Security. Social security offers protection – often a financial compensation – against loss of income related to certain so-called social risks: social security protects because it compensates. Social risks typically cover old age, retirement and age-related dependency, the death of a provider, disability, sickness, maternity, dependent children and unemployment, and, sometimes, the need to care for the frail elderly and disabled or sick relatives. Social protection ensures that these social risks do not result in poverty and that the lack of resources does not prevent the access to services that are essential for a human life in dignity63. There is a clear insurance and a clear savings objective in this approach of social protection as a compensation method. The insurance objective concentrates on the protection of accustomed living standards. Unemployment benefits or maternity benefits are for example protective measures to ensure that no one should face an unexpected and unacceptably large drop in their living standards. The savings objective focuses on the reallocation of consumption (and wealth) over a lifetime. Pension schemes are classically seen as a part of this objective. The two objectives are obviously also clearly connected to one another.

Who needs to be protected ? Protection is a fundamental social value. However, the range of protected people can differ in time and space. There can be major differences between Member States and there can be major differences within one Member State over a lapse of time. The group of protected people can vary. Perhaps one should expect that only those who really require immediate protection do get protection. This group, the so-called economic weak, are indeed one the major concerns of protection. However, most Member States on the European continent have long abandoned this selective approach. In the UK characteristics of this selective approach to social protection are still clearly visible today (both in labour regulations as in the social security schemes). After the second world war the selective nature of protection disappeared. “Social protection for all”

61 The ILO's commitment to enhancing the coverage and effectiveness of social protection for all is of long standing. The Preamble to the ILO Constitution (1919) recognizes the need to ensure that all workers have access to an adequate level of social protection, based on the notion that "the failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions of their own countries." 62 BETTEN L., et al. (ed.), Ongelijkheidscompensatie als roode draad in het recht, Deventer, Kluwer, 1997, 392 p. 63 It currently accounts, on average, for about 27.5% of GDP in the EU Member States retain full responsibility for the financing of their systems.

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seemed to be the slogan throughout continental Europe in the late 1950s. More and more Member States evolved towards social protection schemes for all. This so-called universality of social protection can be found in many European constitutions as a fundamental right for the individual. This also meant that social protection became a responsibility for all (see nr. 66). However, nowadays it is believed there is a return to a more selective approach of social protection. National social security schemes and labour law regulations are increasingly selective. The overall idea is that employees (especially the better paid employees with higher functions) are becoming ever more capable of claiming their own rights. Especially labour law is thought to be too conservative for these “independent” employees. The constraints of labour law is said to block possible forms of flexibility (remuneration, working hours, holidays, etc.). Also in social security schemes selectivity reoccurs. It is becoming more and more an acceptable idea that people who earn more than a certain remuneration level should be able to take care of themselves by turning to the private market. It is still to early to pinpoint the exact extent of the reoccurrence of selectivity, however other trends such as privatisation and individualisation seem to indicate that the development towards more selectivity is broad. B. Responsibility 66.

Who ? In what order ? Who’s responsible for the protection and the security of existence ? Many actors are involved:

the individual; the nucleus in which the individual lives (mostly the family); the employer; the social partners and the state.

Many responsibilities are multi-dimensional and involve many actors. In our complicated welfare states most responsibilities are shared. In matters of social protection or security of existence the main question is often the order and the degree of responsibility. In western welfare states, the main emphasis for one’s protection lies without any doubt with the individual himself64. Every individual is assumed to be responsible for his own existence. This means he has to provide for himself: income, housing, risk insurances, … Furthermore, the increased complexity of our welfare state has led to more state intervention. This often equals more state’s responsibilities. Apart from these two major actors, the individual and the state, there are – often well-defined – responsibilities for the social partners and the individual’s employer. The complexity and the multi-dimensionality of the responsibilities interlinks the different actors. Depending on socio-politico and economic factors, responsibilities can also shift from one actor to another over time. For example, with an increased individualism in most social protection schemes, it is clear that some responsibilities shift away from the state. In pension matters this is translated in an increasing

third pillar whereby the individual has a savings objective (see nr. • ); second pillar whereby the social partners and the employers are supposed to take up more responsibilities.

64 P. VAN DER HEIJDEN en F. NOORDAM, De waarde(n) van het sociaal recht, Deventer, Tjeenk Willink, 2001, 76.

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Individuals are supposed to be pro-active for their own protection (see also nr. 65) and security of existence. Furthermore social partners are – in close corporation with the state - included in the development of (the level of) social protection.

employer

state

individualfamily

socialpartners

ACTORS IN SOCIAL PROTECTION and SECURITY OF EXISTENCE

RESPONSIBILITY

protection-security of existence

social lawlabour law

social lawlabour law

67.

68.

The state. The state is a peculiar actor. On the one hand, the complexity of the welfare state leads to more responsibilities for the state. On the other hand, the individualisation of society leads to lessening of state intervention in some well-defined areas of social protection. The translation of the different responsibilities in states’ interventions is a matter of degree. Nonetheless, the state remains a crucial actor with a gigantic level of responsibility and corresponding powers of intervention in the welfare state. C. Security of existence

Obligatory nature of law corresponds to security. One of the fundamentals of law in general is to provide stability through security and legal certainty65. This is translated into security of existence for labour and social law. Both labour law and social security law correspond to the objective of stability. In most Member States both bodies of law are therefore predominantly of an obligatory nature. This means that individual contracting parties cannot deviate from the rules: social and labour legislation are not suppletive by their nature. The minimum wage is the classical example in labour law and the obligation to pay social security contributions is an example of social security legislation. It is this obligatory nature that connects the required protection by an individual to his security of existence. Legal certainty by means of obligatory rules leads to security of existence. OBLIGATORY NATURE LEGAL CERTAINTY SECURITY OF EXISTENCE

65 C. GITS en J. DELVA, Natuurrecht, Mys&Breesh, Gent, 2000, 47.

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69.

70.

71.

72.

Expectations. The legal certainty leading to the security of existence is based on predictability and continuity. In social law and labour law this means that an individual has a right to well defined and guaranteed benefits when all criteria and conditions are fulfilled. For example, an individual knows what he will get when he becomes unemployed. Or he knows that he will get a higher wage when he changes to another position in the firm. The problem is of course that the responsible actors (see nr. 66) cannot always guarantee the benefit. Socio-economic factors can change. When the benefits are raised, there are practically no problems. When the benefits are cut down, there are usually major problems because people are focused on the continuity of a legal right presumed to last eternally. When benefits are reduced, people feel that their expectations were let down. Politicians usually solve this problem by installing long periods of transition.

What is security of existence ? Security of existence is far more than just poverty relief and the instalment of a minimum standard of living. These are of course essential but in a modern welfare state the objectives of security of existence reach far further. There are two variants on the security of existence. There is income security and work security66. Income security is the security one has because he has an income and can provide for himself (and his family (see nr. 66 on the individual and his family). Labour is the classical way to get income security. When a social risk occurs and one can no longer actively participate in the labour process, social security schemes or welfare schemes prevent a poverty trap. This is why income security is often seen as a synonym for social security. Work security is related to the responsibility of the state within a modern welfare state to create favourable economic conditions wherein there is a high demand for labour. Work security leads to income security and personal development. D. Solidarity

Basic value of social law: solidarity as a means for stability. People live together in community. We live in a group and so we have to be responsible for one another. Solidarity is one of the techniques to be responsible for another. In social law it gets an essential role. For example in social security schemes. Often originated from social misery at the end of the 19th century, social security schemes install solidarity within a community. This leads to rest and peace in society whereby the economy can thrive and flourish. Solidarity leads to stability and stability in turn leads to prosperity67.

Many synonyms: no meaning. Although it is such an important notion, solidarity has no clear meaning. On the contrary within the European legal framework, it has many meanings. It is often used without a clear description and as an incorrect synonym68, whereby solidarity stands for altruism,

66 P. VAN DER HEIJDEN en F. NOORDAM, De waarde(n) van het sociaal recht, Deventer, Tjeenk Willink, 2001, 84. 67 There is an increasing awareness for the development of profound studies on the impact of solidarity as a whole. Organisations, such as the AEIP, are supporting these developments. 68 Schokkaert and Spinnewyn refer hereby to the ignorance of the political and social discussion (E. SCHOKKAERT en F. SPINNEWYN, “Fundamenten van Sociale Zekerheid: solidariteit en verzekering, overheid en markten”, in M. DESPOTIN en M. JEGERS (ed.), De sociale zekerheid verzekerd, Brussel, VUBPRESS, 1996, 240-242).

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redistribution, mutualisation, collective aid, social security, tax, social cohesion, oneness, etc69. These concepts are however not synonyms from one another. One of the best examples of this urge to use solidarity as a synonym for all possible concepts can be found in the Charter of fundamental rights of the European Union. A separate chapter entitled solidarity deals with solidarity as70:

Workers' right to information and consultation within the undertaking Right of collective bargaining and action Right of access to placement services Protection in the event of unjustified dismissal Fair and just working conditions Prohibition of child labour and protection of young people at work Family and professional life Social security and social assistance Health care Access to services of general economic interest Environmental protection Consumer protection

I believe this kind of “synonymatis” undermines the concept as a legal basic notion of social and labour law. It takes away the difference between rules of law and moral norms71. Consequently, solidarity looses its meaning. A court cannot enforce a moral norm, it can enforce a legal norm. 73.

74.

75.

A legal concept. Since solidarity is embedded in various rules of law which have a clear influence on the subjective rights of the individual, one should strive to limit further “synonymatis”. For a lawyer solidarity can be found in various rules of law and can be enforced by a court of law. This is exactly the difference with altruism. Legally, solidarity is simultaneously the duty to contribute and the right to receive. In the legal debate the obligatory nature to contribute and to receive is an essential element. Legally, people live in solidarity with one another because they have to by the rule of law. It is a duty with a corresponding right.

Solidarity is a duty to contribute and a right to receive. Solidarity is double sided. On the one hand the state obliges the citizen to contribute to solidarity. This obligatory contribution entitles the citizen to an enforceable subjective right of a benefit. The relation between the duty to contribute and the right to receive is the legal basis of solidarity. This vision on solidarity corresponds closely with the notion of tax as synonym for solidarity. In a large sense, it deals with the redistribution of money whereby the obligation to pay, the right to receive and the legal enforcement are very similar in social and tax matters. It is the socially recognized need – real or supposed – of the one who receives the money that forms the basis of redistribution.

Definition. With regard to occupational pensions, solidarity can be defined as follows72:

69 A study on solidarity within the family was made in 1990 by Rossi and Rossi. They define four forms of family solidarity (A. ROSSI en P. ROSSI, Of Human Bonding, Parent-Child Relations Across the Life Course, New York, de Gruyter, 1990, 262). 70 Chapter IV (art. 27 to 38) Charter of fundamental rights of the European Union, PB. C. 18 December 2000, 364/15-17. 71 On the difference between a moral norm and the rule of law, see K. RAES, "Grondrechten en sociale solidariteit", R&K (Recht en kritiek) 1992/18, 102-125.

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Solidarity is the obligatory transfer of income whereby factually unequal situations are treated formally equal for the duty to contribute and for the right to benefits on the basis of a relationship between the paid contributions, the benefits and the risk.

This defintion is technically based on the notion of mutualisation. The basic idea is that factual different situations are formally treated the same for money transfers. The absence of a clear link between on the one hand the contributions paid and on the other hand the benefits is a clear example. 76.

77.

78.

79.

Mutualisation knows three basic principles. First there needs to be a relation between the premium (contribution), the insured risk and the statistics. The premiums must be sufficiently high to pay all insured risks. The involved statistics are the mortality tables. Secondly, the number of insured people has to be sufficiently high so the risks can be spread over time and space. Thirdly the risks have to be equally spread. The nature, the frequency, the amplitude and the number of risks have to be well spread within a group of insured people73. This requirement is also called homogeneity. This balance or risk spreading makes that the relation between the premium and the benefit remain equal. The third principle, the equal spreading of risks leads to segmentation as the counterpart for solidarity.

Segmentation. Risk selection, differentiation or segmentation are a characteristic of insurance. The answer to an unequal spreading of risks within a group of insured people is to divide the group in smaller groups with people that have similar risk profiles corresponding to a same level of expected casualties. The creation of homogenous groups leads to a (better) balance in the relation between premium, benefit, risk and statistics. This balance can be disturbed by moral hazard or anti-selection.

Moral hazard. Moral hazard is the negative influence on the attitude of the insured person because of the insurance. This influence originates form the knowledge of “being insured” whereby the insured person knows that he does not have to pay himself possible casualties. Therefore he will be less careful and less preventive. Without intending to fraud, insured persons will put less effort in trying to prevent damages than when they wouldn’t be insured. In order to impede moral hazard, two measures are normally taken. There is either a waiting period during which the insured person does not get benefits or there is a franchise (an amount of money the insured person has to pay himself when the risk occurs.

Anti-selection. When an insured person realizes that he pays a premium or contribution that is too high in relation to his risk profile, he will try to get out of the insurance and try to optimize his economic efficiency. Anti-selection or unravelling is the – legally correct – leaving of an insured group by an insured person because of economic efficiency reasons. This means the constituted group was not homogeneous enough. The segmentation wasn’t sufficient. Traditionally, there are two remedies for anti-selection. There is premium differentiation or compulsory insurance. The two are opposite.

72 Y. STEVENS, Gelijkheid en solidariteit in aanvullende werknemerspensioenen, KULeuven, Leuven, 2002, 516. 73 P. BAEKELAND, Lifecat 2001-naslagwerk over de levensverzekeringen in België, Heverlee, Verba, 2001, 18-19.

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80.

81.

82.

83.

Premium differentiation. Depending on the risks a different tarification is used: the “better” risks pay less than the “worse” risks. This differentiation in premiums corresponds with a further segmentation74.

No selection. The opposite of premium differentiation and segmentation is the compulsory insurance. There is no anti-selection because there is no selection. The aim of compulsory insurances is the spreading of risks over a larger number of people. Even those people who normally would be prepared to carry the risk themselves without insurance are obliged to step into the system. Examples of these systems are most statutory social security schemes. Under the rule of law it is indeed possible that everybody is treated formally equal whereby there can be no segmentation or differentiation. So called universal social security schemes work according to this rule of law: everybody, irrespective of personal characteristics, is insured. The mere “memberschip” of society entitles the individuals to some rights. Legally, the obligation is the opposite of anti-selection.

Forms of solidarity. Solidarity can be applied in many different ways75: 1) in terms of integration into the system

a) through inclusion of all (universality); b) through mandatory affiliation (prohibition of opting-out); c) through mandatory acceptance in the administering bodies (prohibition of exclusion);

2) in terms of funding a) through a progressive income-related contribution; b) through contributions independent of individual risk factors (medical history, age, sex, etc.); c) through cross-subsidising among schemes;

3) in terms of benefits a) through equivalent cover (equal treatment); b) through a progressive cover according to needs (positive selection for the benefit of deprived categories or categories at risk).

Level of solidarity. The level of solidarity applied in the different occupational pension schemes

can vary according to: 1. the application of a ceiling on contributions; 2. the limitation of the scope for levying contributions; 3. the exemption of certain categories from contributions; 4. the application of individual and/or nominal (not income-related) premiums; 5. the exclusion of certain categories from compulsory protection (personal scope); 6. the limitation of services covered (material scope).

74 Segmentation has its limits. Segmentation that is too far pushed leads to the impossibility of insurance. The premiums become too expensive for the “bad” risks and the “good risks” do not require an insurance. 75 Based on: W. PALM, “Voluntary Health Insurance and EU insurance directives” in M. McKEE, E. MOSSIALOS and R. BAETEN (eds.), The impact of EU law on health Care Systems, P.I.E. Peter Lang, Brussels, 2002, 196-197.

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E. Equality 84.

85.

86.

87.

Plan. In 1981 Callebaut wrote: “Only a fool could pretend to offer an all-embracing account of inequality nowadays. If the vast literature on the topic has taught us one thing, it is to be modest in our aspirations at a complete understanding of inequality76”. This citation learns that modesty is a necessity in discussing themes such as equality and non-discrimination. The plan is therefore not to give an all embracing analysis of the equality principle but to offer a general indication of the meaning of equality. Legally, a difference is made between the equality for the rule of law and equality in the rule of law.

Equality for the rule of law. Equality for the rule of law means that the law is upheld in the same manner for all, irrespective of the content of the law77. As such equality leads to legal certainty and excludes arbitrariness78. Equality for the rule of law aims to provide legal certainty and stability and is also referred to as formal equality. It is a cornerstone of each modern state: formal equality prevents the government or the jurisdictions from breaching the law by prohibiting discrimination between people which the law considers to belong to one and the same category79.

Equality in the rule of law. Equality in the rule of law realises the transition from formal to real equality. Equality in the rule of law is also referred to as material equality because it is aimed at lessening or excluding factual inequalities between individuals (for example in relation to income, education, social situation or schooling). Law is impregnated by the strive towards material equality. One could say that law is full of inequalities for the promotion of material equality. The inequality in the rule of law is a consequence of the factual unequal situation of people. An example of a compensating equality exercise in the rule of law is the prohibition to treat part time workers differently than full time workers regarding the membership of an occupational pension scheme. Although there is a clear factual difference, the law tries to lift this difference by treating two different situations equal.

Equality: a specialisation of social and labour law80. Most social and labour law is focused on the realisation of more material equality. A special protection is created for categories of people with

76 W. Callebaut, "Inequality in the light of social indicators and quality of life research", in L. INGBER (ed.), Gelijkheid, Brussel, Bruylant, 1981, 95. 77 The equality for the rule of law is clearly visible in one the first modern constitutions. The so-called "Constitution Thermidorienne" of 22 August 1795 says : "L'égalité consiste en ce que la loi est la même pour tous, soit qu'elle protège, soit qu'elle punisse. L'égalité n'admet aucune distinction de naissance, aucune hérédité de pouvoirs". (E. GRIFFIN-COLLART, "Egalité naturelle et société civile chez Hobbes, Locke et Hume", Annales de l’institut de Philosophie, 1970, 101.) 78 L. INGBER, "Recht en gelijkheid", in L. INGBER (ed.), Gelijkheid, Brussel, Bruylant, 1981, 16. 79 Meersschaut states : "Het grondbeginsel van de rechtszekerheid treedt als één van de voornaamste algemene rechtsbeginselen op de voorgrond : een wetgever kan niet zonder objectieve en redelijke verantwoording afbreuk doen aan het belang van de rechtsonderhorigen om in staat te zijn de rechtsgevolgen van hun handelingen te voorzien". F. MEERSSCHAUT, "Overzicht van rechtspraak. De rechtspraak van het Arbitragehof ten behoeve van de private rechtspraktijk 1992-1997", T.P.R. 1998, 902; equally: C. PERELMAN, "Egalité et valeurs", in X. (ed.), L'Egalité (Vol. I), Brussel, Bruylant, 1971, 323. 80 "Ouvrez un traité de droit social, ou écoutez un discours d'homme d'Etat proposant une loi sociale nouvelle: il sera bien rare que vous n'y trouviez pas dit d'une manière ou d'une autre que ce droit forme le domaine par excellence de la valeur égalité, étant né d'une perfectionnement de cette valeur, c'est-à-dire né d'une exigence d'égalité qui ne se contentait plus d'égalité juridique et entendait passer de là à l'égalité de fait. … Est-il

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factual lesser or worse positions (restraint material of financial resources or a socio-economic arrearage). Social or labour law do not equalise the starting positions of the parties involved in an employment relationship, but allow the weaker party to defend himself legally or refrain the stronger party from being arbitrary81. Social and labour law are built around differences and differentiations based on profession, sex, age, etc. No wonder equality is seldom free of values and ideology. This is linked to the struggle for more social justice (see nr. 59). Social law and labour law may seem to be paradoxical: in order to achieve more real material equality an unequal treatment must be installed82. 88.

89.

Opportunities of outcome. Linked to the notion of social justice (see nr. 59) equality is either seen as equality of opportunities or equality of outcome. In general it is believed these two correspond with two ways of achieving equality: the use of income transfers leads to equality of outcome while the production and provision of free public goods leads to equality of opportunities. The choice of extent or the level of equality is important: it can be equality to a particular, socially defined minimum standard or an equality at a higher level of standard, to a standard that is sometimes universal for all individuals (e.g. universal social benefits) or to one that more often relates – at least to a certain extent - to a social and economic status (e.g. social insurance benefits)83. The reduction of inequality can be achieved:

a. Vertically: social policy should aim to be redistributive towards individuals with lower incomes (means tested benefits versus non-means tested benefits or flat rate benefits (or in between forms: more benefits to people with lower incomes on the basis of proportional but progressive contribution)

b. Horizontally: differences in benefits should take account of age, family size, … Because of these income transfers, social security is often considered as a vital correction to the income distribution based on the participation of the production process. Horizontal and vertical equality obviously cross one another.

Equality. The difference between equality and discrimination lies within the criterion that differentiates one group from another. Men are for example different from women on the basis of the criterion sex. If an equal treatment is required, the criterion is neutralized. If an unequal treatment is wanted the criterion is upheld. The difference between equality or inequality must be accurately measured. Beguelin has developed five criteria to which equality/unequality must correspond in order not to be arbitrary. These are84: • objective. The criterion to differentiate cannot be dependent on a personal appreciation. The one who differentiate may not be biased by personal considerations. • general. The criterion must be applicable to an unlimited number of persons, even if in reality only one is actually involved.

nécessaire de rappeler que le droit du travail est né sous le signe de l'inégilité ?" (E. VOGEL-POLSKY, "Considérations sur l'égailité en droit social", in X. (ed.), L'Egalité (Vol. IV), Brussel, Bruylant, 1975, 23.) 81 L. INGBER, "Recht en gelijkheid", in L. INGBER (ed.), Gelijkheid, Brussel, Bruylant, 1981, 21-22. 82 G. FLETCHER, Basic concepts of legal thought, Oxford, Oxford University press, 1996, 121. 83 T. SIROVATKA, “Goals, impacts and effects of social security: an overview”, in B. GREVE and D. PIETERS, Social security in an interdisciplinary perspective, MAKLU, 1999, 34. 84 H. BEGUELIN, "Réflexions sur l'égalité devant la loi", in X. (ed.), L'Egalité (Vol. IV), Brussel, Bruylant, 1975, 94.

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• legal. The criterion must not be forbidden by law. For example it is illegal to differentiate membership to an occupational pension plan in the EU on the basis of race. • adequacy. The criterion must allow a clear differentiation between those who are part of a category and those who the criterion tries to exclude. For example, the length of hair of a person is a very inadequate criterion. • reasonable. The criterion must stand in a logical relation with the aim of the differentiation. This relation is based on the economic and social reality whereby reasonableness is dependent on the perception of that time. The debate on social justice in relation with equality is a consequence of the criterion of reasonableness. Reasonableness is not a given fact but evolves through time85. It is even a political fact because parliaments vote laws installing or prohibiting equality. In a democracy one can only hope that this is done with respect of the minority that needs protection86. 90.

Equality as a basic right87. “Basic rights are subjective rights considered fundamental by objective (material) laws. Furthermore, these rights have been put into legal norms which have been conferred the highest formal authority. Yet no basic right is absolute. The rights of oneself are, for example, limited by the similar rights of a fellow citizen. The admissibility of such limitations is dependent on the wording of the basic right88”. Equality and non-discrimination are seen as basic rights in both the national and supranational system of law functioning in both a vertical and horizontal manner. This has often been made explicit in the special (concrete?) rule of equality itself. If quantity was a parameter, it would certainly be article 141 EC-treaty – the principle of equal remuneration - which is the best known example of this because of its very elaborate jurisprudence concerning this principle of equality. The principle of non discrimination is a fundamental principle within the European Union89. Numerous rules and regulations prohibit discrimination. Examples within the EU-treaty are: discrimination based on nationality (art. 12, 39, 43, 49, 50 EU-treaty), gender (art. 137 and 141 EU-treaty), the agricultural market between consumers and producers (art. 43 EU-treaty), taxes between member states (art. 90 EU-treaty). Moreover, non-discrimination has entered as one of the principles of EU-law in article 13 EU-treaty which authorizes the council to take appropriate measures in order to prevent any discrimination based on gender, race or ethnicity, religion or persuasion, handicap, age or sexual preference90. Apart from the EU-treaty there are of course many other legal instruments within the European system of law which impose equality. For example, the European Charter for Fundamental rights recognizes equality before the law91. On a

85 On the notion “public interest”, see, J. DABIN, Théorie générale du droit, Paris, Dalloz, 1969, 217-223. 86 K. RIMANQUE, "Noodzakelijkheid in een democratische samenleving - een begrenzing van beperkingen aan grondrechten", in X. (ed.), Liber Amicorum Fréderic Dumon, Antwerpen, Kluwer Rechtswetenschappen, 1983, II, 1217-1234. 87 See extensively: J. WOUTERS, "Constitutional limits of differentiation: the principle of equality", in B. DE WITTE, D. HANF en E. VOS (ed.), The many faces of differentiation in EU Law, Deurne, Intersentia, 2001, 301-349. 88 E. DIRIX, l.c., 1982, 37-38. 89 S. ROBIN-OLIVIER, "La référence aux droits sociaux fondamentaux dans le traité d'Amsterdam", D.S. 1999, 609-621. 90 See concerning the proper scope of applicability of article 13 EU treaty and concerning the absence of direct effect: L. WADDINGTON, "Testing the limits of the EC treaty article on non-discrimination", Industrial Law journal, 1999/28, 133-151. 91 Art. 20 European Charter for Fundamental rights, PB. L. 18 december 2000, 364/15-17.

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supranational level the principle of equality is recognized as a basic right in human rights treaties such as the ECHR92, the ICCPR93, certain conventions of the ILO and UN treaties94. F. Participation 91.

92.

93.

94.

Responsible involvement. Participation is a process of complex social change. Basically participation is a partnership built on dialogue between various stakeholders. As an act of sharing in the activities of a group, participation leads to commitment and accountability within this group95. In social and labour law participation stands for responsible involvement.

Forms. Participation has a very broad meaning and can take several forms. Going from a very general participation in the labour process to the participation in the direction or management of social institution of governmental body. In the latter participation stands for co-decision making power with corresponding responsibility. Member States throughout the EU have adopted measures whereby the employees are represented in social and labour matters. This form of participation is usually axed on the competence of labour unions. The powers given to representative labour unions can however differ strongly between Member States. The Charter of fundamental rights of the European Union recognises the right of collective bargaining and action. Under the Charter workers and employers, or their respective organisations, haven the right to negotiate and conclude collective agreements96.

Information and consultation. A generally recognised form of participation is the worker’s right to information and consultation within his undertaking. Article 27 if the charter of fundamental rights of the European Union states that: Workers or their representatives must, at the appropriate levels, be guaranteed informatioan and consultation in good time in the cases and under the conditions provided for by Community law and national law and practices.

Social policy. There is no Member State whereby the state has a full monopoly on social security and welfare institutions. There is always some form of participation by citizens, mostly translated in powers given to the social partners. This participation takes usually the form of:

direct governmental involvement by the social partners in the social security institutions with regard to financing, level of benefits, …;

the partial execution of a social security scheme (for example in unemployment schemes there is often an involvement of labour unions);

92 Art. 14 EVRM. F. SUDRE, "Les droits sociaux et la Convention européenne des droits de l'homme", R.U.D.H. 2000, 28-32 (II); M. SOUSSE, "Le principe de non-discrimination. Les rapports entre le système européen de protection et le système français", AJDA (Fr.) 1999, 985-991; P. LAMBERT, "Vers une évolution de l'interprétation de l'article 14 de la Convention européenne des droits de l'homme?", Rev. trim. D.H. 1998, 497-505. 93 Art. 26 ICCPR. For more details: H. VERSCHUEREN, "Het niet-discriminatiebeginsel van artikel 26 Internationaal Verdrag inzake burgerrechten en politieke rechten en de rechtspositie van vreemdelingen", R.W. 1988-89, 689-696. 94 International Convention of 7 march 1966 on the Elimination of All Forms of Racial Discrimination; Convention No. 111 of 25 june 1958 concerning Discrimination in respect of Employment and Occupation; Convention No. 100 of 29 june 1951 concerning Equal Remuneration for Men and Women Workers for Work of Equal Value 95 See responsibility, nr. 66. 96 Art. 28 Charter of fundamental rights of the European Union, PB. C. 18 December 2000, 364/15-17.

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the jurisprudence whereby the social partners have a role as judge or advisor. Historically governments thought it reasonable to include the social partners in social policy because it would render them co-responsible.

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2.2. National social and labour law: European Competition law as inspiration ? 95.

96.

97.

Inspiration by a difficult combination. Over the years, the European Court of Justice has proven to be a source of inspiration on the development of notions of social and labour law in a series of judgements on competition law. Most cases deal with the fine borderline of competition law in relation to social policy. The combination of both is often problematic. Francis Kessler writes correctly: “Il n’est apparement peu de branches du droit plus étrangères l’une à l’autre que le droit de la concurrence et celui de la protection sociale”97. Apparently there are no disciplines of law so unfamiliar with one another than competition law and social protection. The tension between social policy and competition law was long predicted. The treaties upon which the European Union is founded are more economically than socially oriented and are commonly believed to stand for a neo-liberal society98. However, most Member States have a widely developed system of collective responsibility and solidarity in social policy. The combination of the two requires a legal fine-tuning. This fine-tuning is an ever-on going process whereby the ECJ plays the most important role.

IORP: no overall exemption of competition law. A series of judgements by the ECJ have now clarified that while social security systems enjoy some protection, they are not entirely exempt from competition law99. Rules governing competition will therefore apply to IORPs unless a government structures the system in such a manner that the activities of the institutions can be classed as non-economic. There are some exemptions to the application of competition law. The relevant exemption for an IORP in relation with the notion of social and labour law is when the concerned entity is performing “a purely social activity”. The question arises what this means in the context of an IORP. The definition of social activity has evolved as a result of a series of European Court of Justice rulings.

The social character. In the Poucet and Pistre Cases100, the ECJ identified provision of insurance by insurance institutions with compulsory membership, organised on the basis of solidarity, as a task with an exclusively social character. To determine the social nature of the activity of an institution it established a series of criteria :

the social function; the principle of solidarity; the disregard for the insured persons’

o financial situation, o health status at enrolment, o contributions paid

the state control the statutory regulation of benefits the performance of tasks in conformity with legal provisions the incapability to influence:

97 F. KESSLER, “L’incidence du droit communautaire de la concurrence sur le fonctionnement des régimes de protection sociale : un bilan à partir du cas français” T.S.R. 1997, (246) 249. 98 F. KESSLER, l.c., ( 246) 250. 99 E. MOSSALIOS and M. McKEE, EU Law and the social character of Health care, P.I.E.-Peter Lang, Brussels, 2002, 165. 100 ECJ, C-159/91, Judgement of 17/02/1993, Poucet and Pistre AGF and Cancava. Joined case with C-160/91.

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o the contribution rate o the use of funds o the scope of benefit provision.

In the Court’s view, solidarity exists when contribution payments geared to income and benefits are the same for all recipients, thus leading to redistribution of income and protection for those who would otherwise be disadvantaged by virtue of their financial circumstances or health101. As a result, redistribution of income takes place between the well-off and those who, for financial, health or other reasons, would otherwise lack necessary social protection. 98.

99.

100.

A matter of degree. The criteria of the ECJ are clearly a matter of degree. It is not a question of just filling in the criteria. One has to look at the specific situations of the envisaged insurance of institution.

The non-social character. In contrast, the Court refuses to acknowledge a social character where social insurance institutions perform an economic activity in competition with private insurance companies. It took this view in the Fédération française des sociétés d’assurance (FFSA) case102, which provided insurance within a system of voluntary supplementary pension insurance. Moreover, it also deemed the work of compulsory supplementary pension funds, based on insurance principles, to be economic in the Albany103, Brentjens104, Bokken105, and Pavlov106 cases. The key issue for the Court was the fact that all these systems functioned according to the capitalisation principle. It also noted that qualification as an economic activity was unaffected by the pursuit of a social objective, individual aspects of solidarity, or by restrictions or controls on investments by the social insurance establishment. In the FFSA case, it saw only very limited solidarity because of the voluntary nature of the insurance. With regard to the criterion of economic efficiency, the ECJ also pointed out, in both the judgements Höfner and Elser107 and Job Centre108, that the existence of genuine or potential competition was decisive.

Social protection : do the social criteria dominate ? The more pronounced the principles of solidarity and social protection, the greater the manifestation of an activity’s social character. There can be for example no doubt that most statutory pension schemes in the EU form social protection: there is not only a statutory insurance obligation but also a disregard of individual risks. These are – amongst others – essential features of a social activity (see nr. 97). The decisive issue is whether the social of the economic criteria predominate. Social elements, if emphasised, create a product that differs from that from private suppliers, not only from the point of view of private insurance undertakings but also from that of persons demanding benefits. From the latter viewpoint, the crucial difference arises from the principles of solidarity and social protection; from the perspective of private

101 E. MOSSALIOS and M. McKEE, EU Law and the social character of Health care, P.I.E.-Peter Lang, Brussels, 2002, 165. 102 ECJ, case C-244/94, FFSA, ECDR [1995] I-4019, paragraph 17. 103 ECJ, case C-67/96, Albany, ECR [1999] I-5751, paragraphs 81 ff. 104 ECJ, joined cases C-115/97, Brentjens, ECR [1999] I-[1999] I-6025, paragraphs 81 ff. 105 ECJ, case C-219/97 to C-117/97, Bokken, ECR [1999] I-6121, paragraphs 71 ff. 106 ECJ, joined cases C-180/98 to C-184/98, Pavlov, paragraphs 114 ff. 107 ECJ, case C-41/90, Höfner and Elser, ECR [1991] I-1979, paragraph 22. 108 ECJ, case C-55/96, Job Centre, ECR [1997] I-7119, paragraph 22.

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undertakings, it emerges from the resultant “hostility to profit-making”, which excludes private companies from performing social activities. 101.

102.

Difficult debate. The debate is significantly more complicated than slogans may imply. It is wrong to present matters as if it were a debate between those who wish not simply to open the common market to free trade but also to regulate that market versus those who would limit the role of law to the elimination of national barriers to trade109. The issue is an aspect of diverse political traditions within the Member States and does not necessarily proceed along left/right ideological lines.

The European social model. Directive 2003/41 should be read and understood in the light of a so-called European social model. The merit of the European social market economies or European welfare state has been to preserve the tension between on the one hand the individual and on the other hand the society. This specific equilibrium between the state and the citizen prevents Europe from falling into a rough kind of individualism or a flagrant collectivism. Europe’s goal should be to retain this equilibrium and prevent extremes. In such a model, the economic cohesion is built on the social cohesion, often upheld by the complicated but precious and valuable interplay between the social partners.

109 S. WEATHETILL and P. BEAUMONT, EU Law, Penguin books, London, 1999, 716.

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2.3. Occupational pensions as social insurance scheme

2.3.1. Developments of social policy 103.

104.

Increasing importance. Social developments of recent years have altered the role of complementary social insurance schemes, such as occupational pensions, in the overall social policy of several Member States. Although reality is often more complex, one could state that governments are increasingly involving “private” actors in the field of social policy. There is definitely no clear shift towards privatisation of existing social security schemes110, but there is an increasing interest in developing alternative methods to secure social protection with involvement of private or semi-private partners. This corresponds to figures on IORPs. The volume of total contributions to autonomous pension funds for EU Member States for which data are available, reached 84 bio euro in 2000, growing by 62% over the period 1997-2000111. The total expenditure of these funds in the EU increased by 47% during the same period. Spain recorded the highest growth by 84% followed by Austria with 60%, Italy 58%. Furthermore, it is believed by the private pension fund sector itself that the European pension market will grow by 7,5% a year for the coming decades112.

National reforms including occupational pensions. Occupational pensions are gradually more seen as an instrument of social policy in order to attain the preservation of socially responsible and sustainable old age systems. Socially oriented adjustments can help to uphold a decent standard of living for all elderly and prevent financial polarisation in old age. This includes a future involvement of occupational pension providers in social policy. The development of new rules taking into account both the private and technical mechanisms of occupational pensions and the social dimension of complementary social insurances seems inevitable in many Member States. It is likely that governments will adapt the state based pension scheme alongside the further introduction of occupational pension schemes. In countries where the pension model is based on social insurance, more selectivity – with respect to benefits – will be introduced in the coming years. In countries where the state based pension system is not based on social insurance but on an overall coverage of the entire population of the territory, there will be less need to create more selectivity. Several second pillars. Occupational pensions cannot be considered monolithic within the European Union. Occupational schemes differ immensely within the Union. One could say that there are different second pillars in Europe. This has mainly to do with the voluntary or obligatory nature of the schemes113, which also defines the scope of the second pillar within a given Member State. Contrary to the state based pension schemes, occupational pension schemes are within most Member States often

110 On the notion of privatisation, see J. VAN LANGENDONCK, “Privatiseringstendenzen in de Sociale Zekerheid”, in Aktuele uitdagingen voor de Sociale zekerheid - Economische en sociale problematiek, B. CANTILLON, H. DELEECK, G. DOOGHE, J. MOMMAERTS, I. NICAISE, D. SIMOENS, F. SPINNEWIJN, B. VAN BUGGENHOUT, J. VAN LANGENDONCK, (eds.), Brugge, die Keure, 1990, nr. 1, 29-34. 111 EUROSTAT, Special feature on pension funds, data 1997-2000, Luxembourg: Office for Official ISBN 92-894-4203-4, Publications of the European Communities, 2002, 107 p. 112 H. AVERY, “Europe’s pension market “to grow by 7,5% a year”, IPE - 10 march 2003. 113 A. BROXSON, “Voluntary complementary pension schemes”, in ISSA (ed.), Complementary pensions : European perspectives, Geneva, ISSA, 1994, 52-78.

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limited to a sub-group of the population. Inequality and discrimination were consequently more or less accepted as a given fact114. The voluntary or obligatory nature of the schemes explains this. 105.

The future115. The primary function of occupational pension plans is to provide employees during retirement a more satisfactory living standard than is available solely from public pensions116. As long as the state based pension scheme was adequate to maintain the standard of living, few questions were asked about equity or solidarity. As long as the future prospects of the state based pension schemes were not as hazy as they are today, there was very little need to look at redistributive aspects of occupational pensions. Redistribution could be found within the state based pension scheme itself. Still, ideas about occupational pensions are altering. As long as they were considered to be a specific kind of remuneration for some important workers, their discriminatory nature was negligible by politicians. With the increasing importance of occupational pensions, questions of equity arise and new ideas develop. The growing importance of the second pillar will enhance the need for social protection within this system.

114 E. WHITEFORD, Adapting to chance: Occupational Pension Schemes, Women and Migrant Workers, London, Kluwer Law International, 1996, 374 p. 115 Y. STEVENS, “Developing common definitions on European pensions policy”, in T. SAKELLAOPOULOS and J. BERGHMAN, Intersentia, Antwerpen, 2004, 93. 116 H. YOUNG, “Adequacy and private pensions : how adequate are they ?”, in OECD (ed.), Private pensions and public policy, Paris, OECD, 1992, 51.

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2.3.2. Characteristics and indicators 106.

107.

108.

Question. The need for a social character in occupational pensions gives rise to the question how this social character should be interpreted. What is the social character of an occupational pension ?

“Social insurance”. In more and more Member States the notion of social insurances is no longer exclusively reserved for public social security schemes117. Historically some Member States retained the notion “social” for the publicly organised insurance schemes whereby the difference was made with so called private schemes118. Nowadays however, social protection is seen as the whole of benefits covering social risks irrespective of the system (private or public) used119. Both public social security schemes as private schemes can be “social” on the basis that there is coverage of social risks120. Two questions can be raised. Firstly, what’s a social risk ? And secondly, how is it still possible to differentiate between public and private schemes if both cover the same risk under the notion “social insurance”.

What is a social risk ? There is no general legal definition of a social risk within the EU. Some international treaties enumerate risks that are supposed to be social risks, but they do not define the concept121. Commonly reference is made to ILO convention nr. 102 of 1952 which enumerates the nine classical social risks. The legal doctrine has over time tried many times to define what a social risk is122. In the end, it seems that a risk can be defined as social when society feels the need to socialize the risk. Dependent on time and socio-economic values, risks will be considered social or

117 In a Member State such as the Netherlands, the notion “sociale verzekering” historically already included private pension schemes. 118 J.J. STRYCKMANS, Droit des assurances, Brussel, Universitaire Pers, 1995-96, 185; L. MOK, Sociale en particuliere verzekering, Deventer, Kluwer, 1988, 32; P. PESTIEAU, “Social protection and Private Insurance: reassessing the role of Public sector versus Private sector in Insurance”, The Geneva Papers on risk and insurances Theory 1994, nr. 19, 81-92. 119 B. VAN CROMBRUGGHE, “L’assurance contre les accidents du travail: un modèle d’avenir”, De Verz. 1995, 206-239. 120 F. WALEFFE, “Sociale verzekeringen, private verzekeringen”, B.T.S.Z. 1963, 46-67. 121 J. VAN LANGENDONCK, “Het doel van de sociale zekerheid”, in 50 jaar sociale zekerheid... en daarna?, 1995, deel 1, 51-66; E. ALFANDARI, “L’évolution de la notion de risquie social - Les rapports de l’économique et du social”, Revue international de Droit Economique 1997, nr. 1, 13-15. 122Legal doctrine often refers to DURAND who wields a very broad definition of social risks. In 1953 he described social risks as risks which are inherent to the social life, whereby the social character is situated in the nature or cause of the events. P. DURAND, La politique contemporaine de sécurité sociale, Paris, dalloz, 1953, 15-17. Considering its broad scope and the fact that nearly every risk to which man is exposed can be labelled as social, the efficiency of this definition is diminished by its vagueness. A different approach can be found with Dupeyroux, who does not deduct so much from the cause, but from the consequences that a certain risk is to be qualified as a social risk. He describes social risks as risks which are a threat to the economical security of the individual, either through lack of economical security, through loss of income or through an increase in expenditures. The risks would have to be economical in their nature and get their social dimension through the collective insurance that is set up. A similar but more recent formulation is that of Binon who defines social risks as events which hinder a person (or his claimants) in procuring an income based on his professional activities (i.e. being incapable of working because of disease or injury, old age or premature death, loss of work) or which give rise to burdens or lead to a diminishing of the standard of living (costs associated with sickness, injury, old age or family burdens).

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not. When society at large esteems it necessary to take away the uncertainty linked to the risk, the risk can be considered social. 109.

110.

111.

112.

No distinction ? There is no clear distinction between a so-called private and so-called public social insurance. In all Member states there are social insurances that are neither entirely private nor entirely public. In many so-called public social security schemes there are private partners which intervene and administer schemes. Although the state keeps the responsibility at the end of the day, such schemes cannot be considered entirely public. On the other hand, in all member States there are so-called private social security schemes where the State still plays an important role. For example, the third pillar pensions are nearly everywhere considered to be private social security schemes. However one should not forget that the fiscal treatment of these schemes is a state affair. As such it is the states responsibility to promote or demote third pillar pensions by fiscal measures.

A matter of degree. The question whether an insurance is social or not, is a clear matter of degree. The more public elements that are present, the more it is likely that the scheme is social and vice versa. This matter of degree is important for the matrix because it shows the relevant indicators.

Indicators. There are seven indicators in measuring the social character of an occupational pension. These are (in no particular order) :

1. The presence of profit 2. The obligatory or voluntary nature 3. The collective or individual nature 4. The finance technique 5. The level of solidarity 6. The responsibility 7. The state intervention

None of these seven indicators are conclusive on its own. One has to look at the combination of indicators in order to pinpoint the social or non-social character of the occupational pension scheme. In some schemes it is even possible that six indicators show the opposite of the seventh indicator but that in an overall judgement on the nature the eight indicator will prevail because of its importance linked to national characteristics.

Is there a profit linked to a business activity ? The fact that the occupational pension is provided by an institution that makes profit and develops other business activities, indicates that the activity is non-social123. According to the prevalent view, remuneration or profit is a qualifying feature of business activity. In the Höfner and Elser case, the Court of Justice held that an economic activity existed although the cost of employment placement was not borne by the job seeker124. Consequently, it is irrelevant whether payment for the benefit is by its recipient or a third party125. The only issue is that the activity is not offered completely free of charge. However, the presence of profit or a business

123G.M.J. VELDKAMP, Individualistische karaktertrekken in de Nederlandse sociale arbeidsverzekering, Alphen aan den Rijn, Samsom, 1949, 12. 124 ECJ, case C-41/90, Höfner and Elser, ECR [1991] I-1979. 125 Regarding the freedom to provide services, see ECJ, case C-352/85, Bond van Adverteerders, ECR [1988] 2085, paragraphs 14 and 16.

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activity is not conclusive on its own. For example in the Belgian occupational pension system private insurers are allowed to offer so called solidarity based pension schemes which are legally qualified as social. The fact that there is profit involved, does not hinder the national (!) qualification as social law. 113.

114.

115.

116.

Is the scheme obligatory or voluntary126 ? Is the scheme of a collective or an individual nature ? An obligatory membership or affiliation is usually an indicator for a social scheme falling under social law. However, the opposite is not always true. Some voluntary schemes can be considered as social as well. Similarly, most collective pension schemes fall within social law. It is a matter of degree.

What is the finance technique ? A PAYG scheme usually indicates the social character. However a pension scheme based on capitalisation can also be social. For example the Dutch sectoral pension funds operate with social parameters (annuities, indexing, etc.).

What’s the level of solidarity ? See nr. 82 and 83.

Who’s responsible, what’s the role of the social partners and how strong is the state intervention ? See nr. 66 and 91.

126L.F. MOLIN, "Fonctions des assurances privées et des assurances sociales", Assurance française 1962, 405-407; P. PESTIEAU, “Social Protection and Private Insurance: Reassessing the Role of Public Sector versus Private Sector in Insurance”, The Geneva Papers on Risk and Insurance Theory, 1994, 82.

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2.4. A subjective and objective approach to “national social and labour law” 117.

118.

119.

120.

National competence: A Member State can freely decide. Under the treaties, each Member State is free to determine the organisation of its social security system, including pensions. Issues such as solidarity, compulsory membership and the distribution of benefits can be decided by Member States. With regard to the notion of “national social and labour law” in the directive 2003/41 the same applies. It belongs to the competence of a Member State to decide on the scope of the notion of national social and labour law. This is what we call the subjective approach to the notion. It is subjective because the Member State alone decides on the extent of the notion. The Member State qualifies its own legislation. Mostly this is directly visible by looking at the competent minister. The directive clearly opts for this approach. This becomes clear when looking at the procedural aspects of the directive (see nr. 21) or the framework for cross border activities of an IORP (see nr. 22). The Host Member State is competent to give the relevant social and labour legislation and is competent to sanction (see nr. 42). This approach respects the national competences in social affairs.

However: no national carte blanche. The national competence does not, however, imply that the pension schemes are all of a sudden beyond the reach of Community law. The ECJ has clearly stated that Member States must observe Community law when organising these systems127. The question then is what community law exactly means in this context. We believe it refers at least to two elements. First of all, the directive 2003/41 itself. A Member State cannot define the scope of its national social and labour legislation so wide that it blocks the implementation of the directive itself. That’s a clear higher norm. Secondly rules governing competition will apply unless a government structures its system in such a manner that the activities of its institutions can be classed as non-economic128.

Consequence for the matrix. Because of the subjective approach, whereby it is the competence of the Member State to define the notion of its national social and labour law, it is important to know the position of a particular Member State on a certain topic. This element always reoccurs in the matrix by the question, is this topic recognised as national social or labour law within the Member State ?

The objective approach. The subjective approach, although legally correct embedded, leads to the difficulty: it is not always certain what a Member State will consider as being part of national social and labour law. Furthermore huge differences may occur between Member States. What is considered part of social law is perhaps not considered social law in another Member State. The objective approach wants to tackle this problem by developing a matrix whereby the content of the scheme and the IORP are examined separately from the national qualification. Although the matrix is obviously filled in on a national level, it allows a comparison between the Member States on the basis of the same criteria. Furthermore, the overall analysis of the different filled in matrices can lead to the development of a common ground in social policy for occupational pensions.

127 ECJ, C-158/96, Judgement 28-4-1998 KOHL and ECJ C-120/95 of 28/4/1998, Decker. 128 See also nr. 95 and further. E. MOSSALIOS and M. McKEE, EU Law and the social character of Health care, P.I.E.-Peter Lang, Brussels, 2002, 166.

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121.

122.

Practical difficulties. It will not be easy for a foreign control authority (namely of the Home Member State) to check whether the IORP has applied the correct material protective measures written down in social and labour legislation of another Member State. Furthermore, it is possible that an IORP has to comply with national social and labour legislation of different Member States. This obviously complicates matters. At the same time, it will not be easy for the Host Member State to cheque whether everything is done as it should be. The outcome of the different filled in matrices could help to overcome some of these problems.

Collaboration. Looking at the procedural aspects of the directive collaboration between the different national competent authorities is vital. This collaboration is best developed on a European level. CEIOPS is the institute that could do this (see nr. 37). The transfer of data and the development of a European matrix for national social and labour law should become tasks of CEIOPS.

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III.

Development of a matrix

for the analysis of the notion “national social and labour law”

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III. Development of a matrix for the analysis of the notion “national social and labour law”

3.1. Working with the matrix 123.

124.

125.

126.

127.

A matter of degree. Measuring elements such as “social and labour law” is most of the time a matter of degree (see nrs. 67, 98, 110, 113) Many questions are therefore followed by the general remark “please specify”. These specifications are vital for a good understanding of the answers given in the matrix. This is even more so because of the imperfect nature of the matrix129. The specifications will allow the fine tuning of the matrix in a later stage if wanted.

Partitioning. In many cases several answers will be possible to a particular question. This means the question needs to be partitioned. The same question will therefore be answered as many times as required. If for example in a Member State, three possible pension schemes exist with proper peculiarities, the question will need to be answered three times. Afterwards, when comparing with the other countries, the relevance of the answers can be measured or the question can be altered. The portioning of questions must be seen as a vital element for the success of the comparison of the matrices.

Cheque and balance. Some questions might seem a little bit awkward at first sight. This can either be related to a particularity of occupational pension schemes non existing in the examined Member State, but existing in others. However, as in every matrix, some questions are scientifically embedded in the know system of cheque and balance whereby it is possible to cheque whether the responses concur with one another throughout the matrix.

Limits. As stated in the introduction, every matrix has faults (see nr. 5). Questions can be biased or questions can be forgotten. To improve the matrix permanently a particular question always reoccurs. The question is:

Are there other relevant aspects on … that are not covered by the current matrix ? o If yes, please specify … o If yes, do you think they require to be taken into account in the matrices of the

other Member States ? The answers allow a fine tuning of the matrix.

Measuring the subjective approach. One reoccurring particular question measures the so-called subjective approach of Member States (see nr. 117 and further). The question is:

Are the rules related to the … recognised as national social or labour law within the Member State ?

In some Member States such recognitions are rare. The answers to the question will therefore not always be to interpret.

129 See nr. 5.

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128.

129.

130.

NRQ. A special column in the matrix is provided for the so-called non relevant question. When the questions seems to deal with an issue that is not relevant for the examined Member State, this needs to be answered. These answers actually measure the impact of the matrix in a country. If for example – strictly imaginary – that all questions are NRQ for a Member State, then this Member State does not have any form of occupational pension. The more NRQs in a Member State, the smaller the regulation on NRQs and probably the greater the liberty to organize occupational pension schemes.

Remarks. The last column gives some remarks and links to the relevant numbers of the text. For the most obvious elements no link is provided. It’s also possible that no link is given because of the multitude of required links.

The next stage: linking the matrices to the paradigmatic pillars. The answers of the different Member States need to be compared in order to develop a common ground (see nr. 46). This operation will allow to build a link between the paradigmatic pillars (see nr. 58) and occupational pensions.

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IMPORTANT PRELIMINARY REMARKS FOR THE WORKING OF THE MATRIX

please read the matrix entirely before filling in – some questions are specified in other sections

the matrix is a working instrument, please try to partition where possible (see nr. 124) it will make the later assessment of the matrix straightforward

the correct filling in of the matrix requires between two and three hours work

ideally, two independent packages of answers of each Member States are required

3.2. The matrix

3.2.1. National legal status of the IORP A. National legal qualification of the IORP QUESTIONS Y N NRQ

nr.128REMARKS

1) Is there a specific national law or regulation on IORPs, such as a pension funds, that is explicitly recognised as a part of social law or labour law ?

- If yes, please specify … - If no, is there other institutional legislation on IORPs within the Member State

that is not recognised as a part of social law or labour law, but regulates IORPS ? - If yes, is this legislation specific on IORPs or is it also applicable for other

institutions of another nature (not related to pensions, eg. mutual sickness funds) ? - If yes, which ones and which legislation is it ? ….

- If no, is an IORP solely based on common or civil law ? - If no, is the IORP based on the same legislation as life insurance

companies ? - If no, is the IORP based on other legislation (e.g. company law) ?

- If yes, which ones …

See nr. 119 and 127.

2) Is there a national legal definition of a IORP - If yes, does it refer to social law or labour law ? - If yes, does it refer to “solidarity” (as a concept) ?

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- If yes, does it refer to the social partners ? - If yes, does it refer to the sponsoring (s) undertaking(s) ? - If yes, how is it defined …

3) Is an IORP a legal person of - private law ? - public law ?

4) Is the IORP, according to national law, - a private legal person for tax treatment ? - a public legal person for tax treatment ? - a mixed legal person for tax treatment ? - a sui generis legal person ? - other, please specify …

5) Can an IORP have fiscal advantages compared to life insurance companies ? The question is related to nr. 82. 6) Does an IORP require fiscal approval before operating ?

7) Does the IORP play a fiscal role ? - If yes, please specify …

This could be for example the obligation to provide fiscal fiches for the employer and/or the employee

8) Can an IORP have shareholders as if it were a stock company ? 9) Does the creation of an IORP requires a founding capital ?

See nr. 112

10) Are there special conditions of establishment for IORPS which are linked to social or labour law ?

- If yes, please specify …

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11) Who owns the IORP ? - The members - The social partners - The company - No ownership - Other, please specify

This relates to the level of participation of the different actors carrying different responsibilities; see nr. 66 and 92.

12) Is the minister of social / labour affairs competent for IORPs ? - If yes, is he alone competent or are other ministers also competent ?

- If yes, which ones … - If no, who is competent ? …. - If yes, is this minister also competent for occupational pension schemes ?

See nr. 117 and 91.

13) Is there a specific competent authority for IORPs ? - If yes, is this an authority under social/labour legislation ?

- If yes, which one … - If no, which is the competent authority …

Has this other competent authority also competence or jurisdiction in matters regarding social or labour law ?

- If no, is there a legal connection to another competent authority in social or labour matters for occupational pension schemes ?

- If yes, which authority … - If yes, in which matters …

14) If a conflict arises between a member of the pension scheme and the IORP, which court will (under normal circumstances) be competent:

- civil court, please specify … - economic/trade court, please specify …

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- social court, please specify … - other court, please specify …

15) Can an IORP be profit making ? - If no, are there exceptions ?

- If yes, which exceptions ? … - If yes, are these exceptions considered to be part of social or

labour law ? - If yes, are these exceptions provided for in insurance law ?

- If no, in which legislations can the exceptions be found ? …

See nr. 112.

16) Is the IORP allowed to develop other (business) activities ? - If yes, can it operate as an life insurance company ? - If yes, can it be qualified as a seller of goods within national legislation ? - If yes, can it be qualified as a seller of goods within European legislation ? - If yes, which activities ?

- Private health insurances - Disability allowances - Unemployment allowances - Other …

See nr. 112.

17) Is it under national legislation possible to deviate from the legal qualification by pension scheme rules or statutes of the IORP ?

- If yes, how and according to which regulation ? …

- If yes, can you give an example … If you can give an example, do you think this is valuable element for the

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matrix that should be integrated within the overall matrix so that other Member States can react to it ? …

18) Is there a national ombudsman for occupational pension schemes, who’s authority also includes IORPs ?

See nr. 92.

19) Are there other relevant aspects related to the national legal qualification of an IORP which are not covered by the current matrix ?

- If yes, which ones … why …

- If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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B. Powers of supervisory or regulatory authorities QUESTIONS Y N NRQ REMARKS20) Does an IORP require according to national law approval (a license) from a competent supervisory/regulatory authority before it can be operational ?

- If yes, which authority - Prudential - Economic - Social - Fiscal - Other, please specify

21) Is there a social authority such as a social inspection (or equivalent competent for the controlling an IORP) ?

If yes, please specify … If yes, can this authority take measures if … - the conditions for coverage / affiliation are not fulfilled (e.g. discrimination) - other conditions are breached, please specify …

22) Are there other relevant aspects related to the national legal qualification of an IORP which are not covered by the current matrix ?

- If yes, which ones … why …

- If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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3.2.2. The introduction of a pension scheme QUESTIONS Y N NRQ REMARKS23) Are the rules related to the introduction of a pension scheme recognised as national social or labour law ?

See nr. 127.

24) Who is able or authorized by law to establish an occupational pension scheme ? - The state - The social partners

- On the level of the state - On the level of the branch of industry - On the level of the undertaking

- A group of employees linked to a profession - A group of undertakings - The employer - The individual - Other, …

This relates amongst others to the level of participation of the different actors carrying different responsibilities; see nr. 66 and 92.

25) Who can sponsor an occupational pension scheme ? - The state - The social partners

- On the level of the state - On the level of the branch of industry - On the level of the undertaking

- A group of employees linked to a profession - A group of employees - The employer

This relates amongst others to the level of participation of the different actors carrying different responsibilities; see nr. 66 and 92.

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- The individual - Other, …

26) Is it usually a particular sponsor that establishes a particular kind of plan ? If yes, please specify …

This question wants to examine if there are specific national types of plans.

27) Are there sector-wide (related to a branch of industry) IORPs active ? If yes, can a particular employer opt-out of the scheme and nominate another institution ?

If yes, does this other institution has to fulfil the same conditions as the IORP on the sector wide level ? If yes, are these IORPs regulated differently than IORPs active for a single employer/sponsoring undertaking ?

If yes, are these differences related to: - Affiliation, please specify … - Tax issues, please specify … - Financing issues, please specify … - Management issues, please specify … - Control issues, please specify … - Prudential rules, please specify … - Other issues, please specify …

28) Are there differences to be noted between employer, multi-employer or industry wide occupational pension schemes which have a relevance in national social or labour legislation ?

- If yes, which ones … - If yes, do you think they require to be taken into account in the matrices of the

other Member States ? Or are they strictly national specifications ?

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29) Is there an interdependence between the right to establish/sponsor a plan with the state based pension scheme (social security) ? (e.g. a contracting out of the state based pension scheme by an occupational pension scheme)

- If yes, are there minimum requirements ? - If yes, what are they …

- If yes, who decides on the contracting out ? … - If yes, do the social partners have a role to play ? - If yes, does the benefit level remain the same ? - If yes, is there a way back into the state based pension scheme ?

See amongst others nr. 111.

30) Are there any other institutions involved in the collection or payment of the contributions than the IORP ?

If yes, please specify …

31) Are there other elements related to the introduction of a pension scheme which seem relevant but are not questioned in the matrix ?

- If yes, which ones … - If yes, do you think they require to be taken into account in the matrices of the

other Member States ? Or are they strictly national specifications ?

See nr. 126.

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3.2.3. The changing of a pension scheme QUESTIONS Y N NRQ REMARKS32) Who decides (chooses) to alter the pension scheme ?

- The state - The social partners

- On the level of the state - On the level of the branch of industry - On the level of the undertaking

- A group of employees linked to a profession - A group of employers - The employer - The individual - Other, please specify

This relates amongst others to the level of participation of the different actors carrying different responsibilities; see nr. 66 and 92.

33) Are there other elements related to the changing of a pension scheme which seem relevant but are not questioned in the matrix ?

- If yes, which ones …

- If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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3.2.4. Membership QUESTIONS Y N NRQ REMARKS34) Are the categories of members (or covered employees) of the occupational pension scheme defined by …

- The state - The social partners - The (sponsoring) undertaking(s) - Other, which ones: …

See nr. 32 on compulsory membership. The question is also linked to art. 20 of the directive. This relates amongst others to the nrs. 66, 92 and 86 …

35) Is adhesion to an occupational pension scheme: - Voluntary for the employee - Optional for the employee - Compulsory for the employee - Other form of adhesion,

Please specify …

The question is amongst others related to nr. 82.

36) What types of regulation determine the adhesion to an occupational pension scheme ?

- law - collective agreement - corporate regulations - other

please specify …

This question is linked with nr. 33 on the outcome of collective bargaining.

37) Are membership regulations different for company IORPs than IORPs that are sector wide?

If yes, please specify …

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38) Are there waiting periods for membership/ adhesion ? If yes, please specify …

The question is amongst others related to nr. 82.

39) Are there legal maximum/minimum age conditions for participating in a pension scheme ?

If yes, please specify …

e.g. an employee cannot participate in a scheme before age 20 and cannot contribute after age 65.

40) Are there mandatory minimum vesting provisions ? If yes, please specify …

After how many years of membership do employer and employee contributions vest

41) Are employees entitled to a refund of contributions, if they withdraw from the scheme before satisfying vesting requirements ?

If yes, does this include interest ? If yes, does this apply to:

His own employee contributions The employers’ contributions

42) Do members/participants have consumer status in the national legal order vis-à-vis the IORP ?

43) Are there general non-discrimination rules applicable on IORPs ? - If yes, please specify …

Attention: the question is about IORPs. The relationship between the employer and employee is not questioned.

44) Can an IORP decide on its own to exclude a member from a pension scheme ? If yes, please specify …

45) Can an IORP refuse on its own to accept a member ? If yes, please specify …

The question is amongst others related to nr. 82.

46) Are there other elements related to the membership which seem relevant but are not questioned in the matrix ?

- If yes, please specify … - If yes, do you think they require to be taken into account in the matrices of

The question is amongst others related to nr. 82.

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the other Member States ? Or are they strictly national specifications ? 47) Are there other elements related to the non-discrimination which seem relevant but are not questioned in the matrix ?

- If yes, please specify … - If yes, do you think they require to be taken into account in the matrices of

the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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3.2.5. Contributions and benefits QUESTIONS Y N NRQ REMARKS48) On what can the level of contributions be dependent ?

- Pay - Final pay - Moderated final pay - Average career pay - Fixed amount (non pay related) - Other, please specify …

- Working years - Real - Fictive

- If yes, on what basis and why ? … - Family relations - Other, please specify

The question is amongst others related to nr. 82 and 83. For the family relation, see nr. 88.

49) Is it possible to have an entitlement to pension rights for periods during which the employee was :

- unemployed - sick - disabled - child rearing - in military service - other, please specify …

If yes, is this regulated by

This question deals with so-called equivalent periods. Most state based pension schemes know similar periods.

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- national legislation - collective agreements - pension scheme rules - statutes of the employer - labour contract - other, if yes, please specify …

The second part of the question is linked with the nrs. 66 and 92.

50) Is it possible that certain categories of employees are exempted from contributions ?

If yes, please specify the categories …

The question refers to nr. 83.

51) Is it possible that periods of employment before the adoption of the pension scheme are credited ?

If yes, are there special conditions ? Please specify …. If yes, is this regulated by

- national legislation - collective agreements - pension scheme rules - statutes of the employer - labour contract - other, if yes, please specify …

The question is linked with the nrs. 66 and 92.

52) Is it possible that periods of employment in other firms are taken into account ? If yes, are there special conditions ? Please specify …

53) Are pension benefits paid in the form of … - Annuities

If yes, are they indexed ? If yes, is the index regulated by

- Law ?

For those Member States where the index is regulated by the social partners: the question is linked with nr. 33 on the outcome of collective bargaining.

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- collective agreement ? - bye laws of the IORP ? - bills of the controlling authority ? - the free will of the sponsoring undertaking ? - otherwise, please specify …

If yes, does the index have - a maximum

- in amount - in frequency

- a minimum - in amount - in frequency

If yes, are there legal requirements for unisex mortality tables ? If yes, are there age restrictions on the purchasing of the annuity ?

- Lump sums If yes, are there legal requirements on the minimum/maximum amount ? Please specify …

- Mixed forms, please specify …

For the use of mortality tables, see nr. 76.

54) Is it possible to have a ceiling on contributions for some employees ? If yes, please specify …

55) Is it possible to exempt certain categories employees from contributing ? If yes, please specify …

The questions are amongst others related to nr. 82, 83 and 88.

56) Is it possible to have a medical examination to determine the level of contributions or benefits of the members ?

If yes, please specify …

The question is linked with the nrs. 66 and 92.

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If yes, whose decision is it, to install a medical examination ? - The state - The social partners - The sponsoring undertaking(s) - The IORP - Other, please specify …

57) Is it possible to have a link between the individual risk profile of the member and the level of contribution ?

If yes, is this exclusively linked to mortality tables ? If yes, can this be linked to the so-called biometric risks ?

If yes, please specify …

See also nr. 18 on funding. The use of biometrical risks is not excluded by the directive. The question is also linked to nrs. 76 and 97.

58) Are there any other institutions involved in the payment of the pensions than the IORP ?

If yes, please specify …

59) Is there a legal minimum age requirement for benefits ? If yes, please specify…

60) Is there a legal maximum age requirement for benefits ? If yes, please specify

61) Is there a legal provision allowing early retirement ? If yes, are there, legally provided, actuarial reductions ?

62) Is there a legal provision allowing deferred retirement ? If yes, are there, legally provided, actuarial increments ?

63) Is there a legal provision prohibiting early retirement ? 64) Is there a legal provision prohibiting deferred retirement ?

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65) If there are no legal provisions on early or deferred retirement, can the statutes of the pension scheme itself provide form early or deferred retirement ?

If yes, please specify …

66) Are there provisions allowing benefits to be paid before the early or normal retirement age ?

If yes, what can they be used for ? - Housing - Holidays - Cars - Private health insurance - No restrictions If yes, these provisions emanate as rules from … - the state (parliament, government, …) - the social partners - the sponsoring undertaking(s) - other, please specify … If yes, are there also provisions that these early payments must be paid back before the early / normal retirement ?

67) Is there a floor to: - Pension benefits

If yes, how much (amount or percentage) … - The pensionable salary (e.g. average salary)

If yes, how much (amount or percentage) … - The length of the pensionable service

If yes, how much (amount or percentage) …

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68) Is there a ceiling to: - Pension benefits

If yes, how much (amount or percentage) … - The pensionable salary (e.g. average salary)

If yes, how much (amount or percentage) … - The length of the pensionable service

If yes, how much (amount or percentage) …

69) Are pension schemes obliged to integrate social security pensions ? - If yes, how is it realised (please specify) ? … - If no, can it be done voluntary ?

If yes, how often is it done ? (percentage of total number of plans) … If yes, is this voluntary integration regulated in any way in the national legislation ?

70) Are there other elements related to contributions/benefits which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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3.2.6. Acquiring pension rights A. Financing QUESTIONS Y N NRQ REMARKS71) Can an IORP, according to national law, work on a PAYG basis ? See also nr. 18 on funding and

nr. 56 on the scope of the directive. The directive does not apply to institutions which operate on a PAYG basis.

72) Are there situations in which the IORP is obliged to work on a PAYG basis ? If yes, please specify, …

73) Who decides on the DB, DC or CB character of the pension scheme ? - The state - The social partners

- On the level of the state - On the level of the branch of industry - On the level of the undertaking

- A group of employees linked to a profession - A group of employers/undertakings - The employer - The individual employee - Other, …

The question is amongst others linked with the nrs. 66 and 92.

74) If defined benefit, are there legal incentives compared to defined contributions ? If yes, are these incentives fiscal ? Please specify …

75) If defined contributions, are there legal incentives compared to defined benefits ? If yes, are these incentives fiscal ? Please specify …

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76) In the case of DC, do contributions accumulate in individual accounts ?

77) Are there other elements related to financing which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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B. Employee contribution – employers’ contribution QUESTIONS Y N NRQ REMARKS78) Are there maximum employee contributions ?

If yes, please specify …

79) Are there maximum employers’ contributions ? If yes, please specify …

80) Are there minimum employee contributions ? If yes, please specify …

81) Are there maximum employers’ contributions ? If yes, please specify …

This question is linked with the security of existence, see nr. 70.

82) Are the employee contributions considered remuneration under national - social law - fiscal law

83) Are the employers’ contributions considered remuneration under national - social law - fiscal law

84) May an employer make additional voluntary contributions to a pension scheme ? - If yes, is he free to choose whom to ? - If yes, are there equality rules to respect ?

If yes, please specify …

85) May a member/employee make additional voluntary contributions to a pension scheme ?

86) Are there other sources of funds than contributions (employer/employee) and investments ?

If yes, can it be:

See also nr. 19 on investements. The question is also related to nr. 82.

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- state subsidies ? - rebates on social security schemes ? - other, please specify

87) Are there other elements related to financing which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

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C. Benefit calculation QUESTIONS Y N NRQ REMARKS88) If a member leaves the scheme before the normal retirement age, are there provisions in social or labour law (recognised as such) that regulate the preservation of the rights?

89) Are the preserved rights of those who have left the scheme indexed ? 90) Can an employee who has left the plan, continue to contribute to the scheme ? 91) Can pension rights be transferred from one scheme to another on changing jobs ?

If yes, what’s the legal basis to determine the transfer value ? - National legislation - Collective agreements between social partners - The pension industry by conventions - The controlling authorities by bills (or equivalent) - Other, please specify … If yes, are there any legal limits on fees that may be deducted from the transfer value upon transferring it to another scheme ? Please specify …

92) Is there a legal minimum guaranteed return for the investment ? If yes, please specify …

See also nr. 19 on investments.

93) Is there a legal obligation of profit allocation, apart from investment return, to the members ?

94) Are there other elements related to benefit calculation which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

85

3.2.7. Participation of the members QUESTIONS Y N NRQ REMARKS95) Are the employees represented in the IORP ?

96) Are the rules related to the representation of employees in the IORP recognised as national social or labour law ?

97) Are the rules related to the representation of emplparticipation of social partners in the scheme bodies recognised as national social or labour law ?

98) Are there voting rights of employees or employee representatives in one of governing bodies of the IORP ?

99) Are the employee’s or employee representatives elected by the members of the pension plan ?

If no, how is the representation organised ? Please specify … If yes, are the elections procedures decided

- by law - by the statutes of the IORP - the employer(s)/uindertaking(s) who set up the IORP - the social partners - other, please specify …

100) The representation of employees includes: - the right to being heard - the right to advise - the right to co-decide - other rights, please specify …

See nrs.91 and 92. The democratic character is measured.

86

101) Is there a legal connection between the employee representation and the legal structure of trade-unions ?

102) Does the national legislation allow national representatives of employees to be representative on the international level (for example in a foreign IORP) ?

103) Are the pensioners represented in one of the governing bodies of the IORP ? 104) Are there other elements related to representation which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

87

3.2.8. Information QUESTIONS Y N NRQ REMARKS105) To what information is the member legally entitled ?

- none - pension scheme regulation - bye laws of the IORP - financial status of the IORP - personal acquired rights - personal projected benefits at (early) retirement - other, please specify …

See nr. 93.

106) Who’s responsible for the information on the pension scheme to the member ? - the IORP - the sponsoring undertaking(s) - the social partners - other, please specify

107) Are the information requirements part of national social/labour legislation ? See nr. 93. 108) Are there language requirements for information ?

- If yes, are these language requirements part of national social/labour law ? - If yes, does the language requirement apply to:

- The IORP - The sponsoring undertaking(s) / employers - The social partners - Others, please specify …

In some Member States employment relations are regulated under specific language requirements (often protecting an ethnical minority). This can have an impact on an IORP wanting to develop a cross-border activity.

88

109) Are there national legal requirements for the IORP to disclose the following information

- benefit statement - financial statement - fees - other, please specify …

110) Are there other elements related to information which seem relevant but are not questioned in the matrix ?

If yes, please specify … If yes, do you think they require to be taken into account in the matrices of the other Member States ? Or are they strictly national specifications ?

See nr. 126.

89

Conclusions 131. Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision (or IORPs) fits into the development of a single market for occupational pensions. The directive therefore enables IORPs to accept sponsorship by, and run a pension scheme for, a company located in other member states. Consequently and on the long run, impediments to trans-national membership will be removed throughout the EU. The basic article of the directive on cross border activities of IORPs states that the organisation of cross border activities is without prejudice to the national social and labour legislation on the organisation of pension systems. This research report examines this notion of “national social and labour legislation”. The conclusions of the research are:

1. The directive does not intended to undermine national pension systems in any way. 2. The notion of social and labour law is based on the notion of work throughout the European

Union. However the scopes of the different national notions are not concurrent. This means that there is no common or unique definition of the notion of social and labour law. Furthermore the national notions evolve permanently due to the ever-changing national socio-economic situations.

3. Each Member State is free to determine the organisation of its social security system,

including pensions. It also belongs to the competence of a Member State to decide on the scope of the notion of “national social and labour law”. In Europe each Member State qualifies its own legislation. This national competence does not, however, imply that the pension schemes are all of a sudden beyond the reach of Community law. The European Court of Justice has clearly stated that Member States must observe Community law when organising these systems. This means firstly that a Member State cannot define the scope of its national social and labour legislation so wide that it blocks the implementation of the directive itself. That’s a clear higher norm. Secondly rules governing competition will apply unless a government structures its system in such a manner that the activities of its institutions can be classed as non-economic.

4. A host Member State (where the sponsoring undertaking is located) retains a large

competence to intervene if necessary in the home Member State (where the IORP is located). This necessity can arise when an IORP, located in the home Member State, does not respect the social and labour law of the host Member State.

5. Given there is a double freedom for Member States: one to define the notion of national

social and labour law and one to intervene in other Member States on the basis of the notion of national social and labour law, the following conclusions and actions should be taken:

(a) A common European approach in defining the notion of “national social and labour

law” is necessary. This definition should be based on the six paradigmatic pillars of

social and labour law that can be found throughout the European Union. These are protection (and the level of), responsibility, security of existence, solidarity, equality and participation.

(b) The functioning and success of the directive 2003/41 with respect to the notion of

“national social and labour law” depends largely on the cooperation between Member States. This cooperation includes the exchange of relevant legislation and data. The cooperation between Member States should therefore not be exclusively focused on prudential matters. The functioning of CEIOPS should therefore include social matters.

6. To develop a common European definition of the notion of social and labour law and to

establish an efficient cooperation between the Member States in the field of social and labour law with regard to occupational pensions, a legal matrix can be helpful. This matrix can measure elements of social and labour law within the Member States. As a working instrument such matrix needs permanent fine-tuning and people who try to work with the matrix, should be aware of this.

Leuven, 27 October 2004

91

Appendix 1: AEIP presentation of the report

The meaning of “national social and labour legislation”

in directive 2003/41/EC on the activities and supervision of institutions

for occupational retirement provision

Prof. dr. Yves StevensProf. dr. Yves Stevens10 September 200410 September 2004

AEIP AEIP -- BRUSSELSBRUSSELS

THE DIRECTIVE

2

Overview of the report

Introduction and backgroud

I. Textual and historical analysis of the directive

II. National social and labour law

III. Development of the matrix

5

Basic ideasan IORP can accept sponsorship from a company located in another Member Stateconsequently: all impediments to transnational membership have to be removedthe directive allows mutual recognition of Member States’ supervisory regimescommonly believed: major interest for multinationalshowever: of the sponsoring undertaking continues to apply

social and labour law

SINGLE LICENCEIN THE EU

3

Double research question

1) What does the notion « national social and labour law » mean ?

2) How should the notion be interpreted to be practically applicable with respect to occupational pensions ?

6

B

D

NL

UK

HOST STATEsponsoring company

HOST STATEsponsoring company

HOST STATEsponsoring company

HOST STATEsponsoring company

HOME STATEpension fund

IRLBelg

ian so

cial a

nd la

bour

law ap

plies

Dutch social and labour

law applies

Ger

man

soc

ial a

nd la

bour

law

appl

ies

Englisch social and labour

law applies

EXAMPLE

7

The directive

ObjectivesApplicationPrudential supervisionRegulationDisclosureFundingInvestment

page 12 – 15

11

Contextual analysis

Art. 6 j)

– Classical definition• Restricted application to employer and employe• An IORP is not involved

– Relevance ?• Why mention it ? Other relevant law ?• Can only be the indirect effect ? …

8

Cross-border activities of an IORP

IORP

hostMember

State

hostMember

State

hostMember State

hostMember

State

multi-lateral bi-lateral

IORP

hostMember

State

C

hostMember

State

C

hostMember

StateC

hostMember State

C

12

Contextual analysis

Art. 20, 1

9

IORP Home Statecompetent authority

Host Statecompetent authority

applicable social and labour law

within two months3

information under 1 within three months 2a

notification of the applicable

social and labour law 4

informs of 2a 2b

notification including: a) the host Member State b) the sponsoring firmc) the main charachteristics

1

procedural aspects

13

Contextual analysisArt. 20. 1.= Basic article on cross-border activities

Compulsory membership• Normally: not a matter of the IORP• Usually: sponsoring company, social partners, mostly a

higher binding norm

The outcome of collective bargaining• Why include it ? It’s part of it !• How far can the social partners go ?

– The directive is a higher norm …– The directive allows the exception …

10IORP

labour law

social law

HOST STATELEGISLATION

authorisation solvency supervision governance investment

HOME STATELEGISLATION

DIRECTIVE 2003/41/EC

14

Contextual analysis

Art. 20. 8 juncto 9

93

15

Contextual analysis

19

Contextual analysis

Art. 14, 4 d) juncto art. 20, 10

16

Contextual analysis

Art. 20. 8 juncto 9 : on social and labour law: first responsability of the host state– Content

• « significant » ?• « relevant » ?• Scope and degree of detail ?• How communicate ?

– Website, …– Leaflet, …

– the procedural aspects : directive says nothing

information Sanctioningprevails

20

Contextual analysis

Art. 14, 4 d) juncto art. 20, 10: The Host state !Most breaches for IORPS are not of social or labour law ! Furthermore, most Member States know the « responsibility in solidum » between employer and IORPConflicts of law are possible !Example

Dutch pension scheme and Belgian IORP (pension fund).

17

Contextual analysis

Can an IORP still be sanctioned if the competent authority of the Host state hasn’t given the necessarry information ?

violation of members’ rights – Subjective right to litigation– Irrespective of information

involvement of the sponsoring undertaking(s)

NATIONAL SOCIAL AND LABOUR LAW

18

Contextual analysis

Art. 14, 4 d) juncto art. 20, 10

22

Basis is « work »

There is no such thing as « a » social and labour law A large diversity within the EUEverything is « social »Generally: the basis is – « work » or – « the lack of work »

94

23

EMPLOYER

EMPLOYEE

LABOUR LAW

EMPLOYERS

EMPLOYEESself-employed

SOCIAL SECURITY

OCIETY AT LARGE

OCIETY AT LARGE

-SOCIAL PROTECTION

LAW

WELFARE LAW

citizens

citizens

WORK

S

S

labour law

27

INDIRECT EFFECT on IORP

only indirect effect

IORP

employersponsoring undertaking

worker

24

Origin and nature

Misery 19th centuryWithin common or civil law– Often with link to criminal law– Nowadays: common or civil law are still

the « ius commune »Compulsory nature

28

The paradigmatic pillars of social and labour law

« Social justice »

Correspond to legal and economic rationality

Six basic values and principles– Non-exhaustive– Interlinked

25

Polysemic notion

FranceGermanAnglo-saxonNetherlands – Belgium – SpainItaly…

NON CONCURRENT TERMSEVOLUTIONARY CONCEPTSNEED for A COMMON DEFINITION

29

The paradigmatic pillars of social and labour law1. Protection and the level of protection

2. Responsibility

3. Security of existence

4. Solidarity

5. Equality

6. Participation

26

Who’s involved ?

An easy – difficult question ?

Directive 2003/41 : more labour law– Definition of IORP (art.6, a))– Collective bargaining

IORP : directive : indirect effect

30

Protection

General aim of social and labour lawLabour law– « Schutzrecht »– « ongelijkheidscompensatie »

Social security => « compensation for risks theory »Who needs protection ?– Different schools– Different influences and trends in Europe

95

31

Responsibility

Who ?– Many actors– Cross linked

Role of the state

35

Level of solidarity1. the application of a ceiling on contributions;2. the limitation of the scope for levying

contributions;3. the exemption of certain categories from

contributions;4. the application of individual and/or nominal (not

income-related) premiums;5. the exclusion of certain categories from

compulsory protection (personal scope);6. the limitation of services covered (material scope)

32

employer

state

individualfamily

socialpartners

protection-security of existence

social lawlabour law

social lawlabour law

ACTORS IN SOCIAL PROTECTION and SECURITY OF EXISTENCE

RESPONSIBILITY

36

Equality

« for the rule of law »« in the rule of law »Specialisation of social and labour lawOpportunities of outcome: redistributionEquality– Objective– General– Legal– Adequacy– Reasonable

33

Security of existence

« Security »: obligatory nature of law

OBLIGATORY NATURE

LEGAL CERTAINTY

SECURITY OF EXISTENCE

What is security of existence ?– Income security– Work security

37

Participation

Responsible involvementDifferent forms throughout the EUInformation and consultationSocial policy

⇓

⇓

38

European competition law:inspiration

Social law and competition law: a difficult combination

IORP: no exemption

Measuring the « social character »

34

Solidarity

Means for stability

Many synonyms

A legal concept

A duty and a right

96

39

Measuring the « socialcharacter »

the social functionthe principle of solidaritythe disregard for the insured persons'

– financial situation – health status at enrolment – contributions paid

the state control the statutory regulation of benefitsthe performance of tasks in conformity with legal provisions the incapability to influence:

– the contribution rate – the use of funds – the scope of benefit provision

AT EE

EE

43

« Subjective » approach

A national competence

The Member State can freely decide

However: no carte blanche

A MT R OF

D GR

O OGANS

/

The presence of profit The obligatory or voluntary nature The collective or individual natureThe finance technique The level of solidarity The responsibility The state intervention

40

Measuring the « socialcharacter »

SOCIAL ECONOMIC

44

« Objective » approach

Common indicators

The Matrix

Collaboration necessary: CEIOPS ?

41

Measuring the « socialcharacter »

SOCIALECONOMIC

NSL

THE MATRIX

42

Occupational pensions and the social character

Social – private public – insuranceA matter of degreeSeven indicators:

1.2.3.4.5.6.7.

46

The matrix

Always biaised ideal: 25 nationals with knowledge

Always evolving

Always imperfect

Normative excercise

97

47

The matrix

LEGAL

!

IDA :

IDA :t

p rs

t p rs+/+/-- ,5 h

rs,5 h

rs

48

The matrix

A matter of degree !Please specify …

PartitioningCheque and balanceLimitsMeasuring the subjective approachNon Relevant Question - NRQThe NEXT stage …

E LE Lwo

eons

woe

ons2ou

2ou

49

Overview1. National legal status of the IORP

1. National legal qualification of the IORP2. Powers of supervisory or regulatory authorities

2. The introduction of a pension scheme3. The changing of a pension scheme4. Membership5. Contributions and benefits6. Acquiring pension rights

1. Financing2. Employee contribution - employers' contribution3. Benefit calculation

7. Participation of the members8. Information

50

PAGE

61

98

Appendix 2: Directive 2003/41 Directive 2003/41/EC of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision, off. J. EU, 23 September 2003, L. 235/10-21.

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© Institute Social Law – KU Leuven – 2004 –Yves Stevens Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or otherwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use.