Protection Of Employee Pension Benefits In Insolvency

Author:Mr Bryan Dunne, Brian Buggy, John Dunne and Paul Glenfield

The "Waterford Crystal" Judgment


The Court of Justice of the European Union ("CJEU") delivered its judgment in Hogan & Others v. Minister for Social and Family Affairs, Ireland, Attorney General [2013] CJEU Case C-398-11 on 25 April 2013. In summary, the CJEU held that the measures adopted by Ireland in transposing Article 8 of Directive 2008/94 EC ("Insolvency Directive"), did not fulfil the obligations imposed on it to protect employees' pension benefits in the event of the insolvency of their employer. Background In January 2009 a Receiver was appointed over the assets and undertaking of Waterford Crystal Limited ("Waterford"). At the time Waterford was the sponsoring employer of two defined benefit pension schemes both of which were significantly underfunded. On appointment, the Receiver immediately terminated contributions to both schemes and the trustees wound them up. On the winding-up of pension schemes in deficit in Ireland, pension scheme trustees are obliged to pay out the available assets in a particular order with pensioners taking first priority in the order of payments. The effect of the application of this priority order on the Waterford schemes was that benefits for active and deferred members were significantly underfunded. In 2010, UNITE, the union on behalf of some of the pension scheme members ("Waterford Members"), initiated an action in the Irish High Court against Ireland seeking damages for its failure to properly transpose Article 8 of the Insolvency Directive. Article 8 obliges Member States to ensure that "all necessary measures are taken to protect" members and pensioners of underfunded pension schemes where the sponsoring employer becomes insolvent. As these proceedings concerned the interpretation of EU law the matter was referred to the CJEU in July 2011. The CJEU found in favour of the Waterford Members earlier this year.

Ruling of the CJEU

The CJEU held that the measures adopted by Ireland in transposing Article 8...

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