Court Of Justice Of The European Union Issues Decision In Waterford Crystal Case

Author:Mr Declan Drislane, Philip Smith, Catherine Austin, Sarah McCague and Orla Ormsby
Profession:Arthur Cox

The CJEU issued judgment on 25 April 2013 in respect of the questions put to it by the Irish High Court in July 2011 in relation to the claims of ten former employees of Waterford Crystal that the State had failed to properly implement Directive 2008/94 (the "Insolvency Directive") to protect their pension benefits on the insolvency of Waterford Crystal. As such this case concerns the protections provided by the State for members of insolvent pension schemes of insolvent sponsoring employers.

Findings of the CJEU

In summary, the CJEU found that:

the State pension could not be taken into account when assessing whether the State had satisfied the requirements of the Insolvency Directive; there is no requirement to identify the causes of the employer's insolvency or of the underfunding in the pension scheme to benefit from the protection of the Insolvency Directive; the protection afforded by the Protection of Employees (Employers' Insolvency) Act, 1984 (the "1984 Act") is insufficient to meet the required level of protection under the Insolvency Directive; and as a result of this, the Irish State is in serious breach of its obligations under the Insolvency Directive. The CJEU also noted its previous judgment in the Robins decision requires that members must receive in excess of 49% of the value of their accrued benefits under a pension scheme where there is an employer insolvency event.

The Insolvency Directive and the action taken by the former Waterford Crystal employees

Article 8 of the Insolvency Directive requires Member States to ensure that necessary measures are taken to protect the interests of employees and former employees on the employer's insolvency in respect of occupational pension schemes other than national statutory social security schemes.

Ten former employees of Waterford Crystal had commenced litigation in the Irish High Court following the closure of their employer in early 2009.

They claimed, amongst other things, that the State had not met its obligations under the predecessor to the Insolvency Directive and the Insolvency Directive itself by simply implementing the 1984 Act. The High Court found that the issues before it required the opinion of the CJEU and so applied to that court for a preliminary ruling. The decision issued on 25 April 2013 is the result of that reference - it is not a decision in respect of the High Court litigation for the ten former employees. The High Court must now review the decision...

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