Civil Service Law – Statute governing the Retirement of Public Sector Staff
Fundamental social rights;
Right to social security;
Public sector retirement;
General social security system;
System applicable to public administration staff;
Convergence of pensions;
Caixa geral de aposentações – public sector pension fund;
Principle of proportionality;
Principle of solidarity;
Principle of the irreversibility of fundamental rights;
Economic and financial crisis;
Right to the protection of trust.
RULING No. 862/13
19 of December of 2013
A number of norms contained in a Decree of the Assembly of the Republic were subjected to prior review. They sought to amend the Statute governing the Retirement of Public Sector Staff, and to revoke norms that add extra time to the length of service people have actually worked in certain especially demanding situations, for the purposes of calculating their retirement entitlements in cases in which pensions are paid by Caixa Geral de Aposentações (CGA, the public sector pension fund).
The Court held that these norms were in breach of the constitutional principle of the protection of trust.
It found that the measures did not adequately pursue the public interests invoked by the author of the norms (the sustainability of the CGA system, intergenerational fairness, and the need for the country’s different social protection systems to converge), in a way that would have made it acceptable for them to prevail over the injury caused to the rights already acquired by existing CGA pensioners and the latter’s legitimate expectations that the amounts of the pensions they will receive in the future will remain the same.
The Constitutional Court took the view that these measures would have resulted in a simple, abrupt cut in the pensions concerned, and did not form part of a framework of structural cross-cutting measures designed to ensure across-the-board progress in fulfilling the interest of convergence on other levels.
The petitioner in this case (the President of the Republic) argued that these norms brought about a coactive, unilateral and definitive reduction in pensions by cutting them by a fixed percentage of their gross amount. He said that this meant they should be seen as norms that created taxes. In this respect the Court was of the opinion that the norms affected social rights which are part of legal ‘institutes’ that inform the social security system. Classifying the norms as being covered by social security law would not in itself preclude them from possessing a fiscal nature, but some of the fundamental elements needed to categorise this cut in pensions as a tax were missing. There would be no direct payment to the state of the amount by which the pensions were reduced, inasmuch as within the legal relationship involved in public sector pensions, the entity with the duty to pay those pensions is the same as the one charged by the norms with cutting them. A cut in a pension is itself founded on a legal bond under which there is an obligation to pay that pension; whereas the legal precondition for the formation of the obligation to pay a tax is not linked to any relationship between the taxpayer and the Administration. A tax is a payment that is required of persons who possess the capacity to contribute, within the overall framework of the relationship between the fiscal state and citizens as a whole. This was not the case here, in addition to which the purpose of taxes is to provide general funding for public spending, and not to finance specific public expenses.
On the alleged violation of the principle of protection against reverses in fundamental social rights, the Court emphasised that purely forbidding going backwards in social terms is impracticable, because it would presuppose the idea that the available resources are always going to grow. It may be necessary to lower levels of essential benefits in order to maintain the essential core of the social right in question. From this perspective, guaranteeing the minimum content of the right to a pension may itself mean reducing the amount of that pension.
The Court noted that although the norms before it were intended to have effect in the future – the legal effects of the pension cut would only apply from 1 January 2014 onwards – they addressed legal relations regarding public sector retirement that were formed under an earlier regime. This was a situation of inauthentic or retrospective retroactivity, in which the force of the norms is ex nunc, but they affect rights that were constituted in the past and whose effects are ongoing at the present time.
There are no constitutional rules that would preclude retrospective laws which reduce the quantum of pensions that have already been recognised, but one must gauge whether such laws do respect a number of constitutional principles – namely the principle of the protection of trust, which itself arises out of the principle of legal certainty, which is in turn a material element of the state based on the rule of law.
The Court had already said in the past that from the point of view of the principle of the protection of trust, it is not unconstitutional to decrease the amount of the pensions of CGA beneficiaries. However, it held that the reasons underlying its earlier findings did not apply in the present case.
The budgetary consolidation reflected in these norms only addressed one part of the public pension system (the CGA social protection regime), not all of it. This meant it was the protection of the trust of certain pensioners that had to be considered and weighed against the position of the rest of the country’s public pensioners. At the same time, the new measure was not temporary, but indefinite, given that while reversing it at some time in the future was seen as a possibility, this would depend on a favourable evolution in macroeconomic variables directly linked to an increase in the capacity to fund the structural deficit of the CGA pension system by means of transfers from the State Budget.
The Court said it was necessary to evaluate whether the public interest in reducing the transfers from the State Budget used to finance the CGA’s structural deficit justified cutting the pensions of the CGA’s beneficiaries. The outcome of that evaluation was negative. Firstly, because the CGA pension system was closed to new beneficiaries as of 1 January 2006. The legislator accepted the burden of the system’s financial unsustainability – to which the explanatory preamble to the Decree containing the norms in question specifically refers – as one of the costs of the convergence of the benefit regimes included in the overall public social security system. This is why the Decree said that public sector retirement and survivor’s pensions payable under the CGA regime would be co-funded by “transfers from the State Budget”. The Court noted that in the medium and long terms, a benefit system that no longer accepts new subscribers inevitably ceases to be self-financing and self-sustaining. The numerical ratio of subscribers to beneficiaries will gradually decrease as the former retire, until one eventually reaches the extreme situation in which there are no subscribers left. The continuous fall in this ratio will end up causing the CGA to be funded by transfers from the State Budget, and the contributory regime will turn into a non-contributory one. The future horizon for such a system can never be one of self-sustainability. The Court said that in a system that is closed to new subscribers, cutting pensions is not in itself a measure with the capability to safeguard the system’s sustainability. By itself, a closed system is unsustainable in the medium and long terms. This characteristic means that such a system must necessarily resort to funding from taxation and/or forms of capitalisation, in that it will no longer be viable to resort solely to techniques for sharing out the money that is already in the system.
Secondly, one cannot sacrifice the rights of CGA pensioners and no one else for these budgetary consolidation reasons, inasmuch as it is legitimate for the pensioners in both regimes (the general social security system and the protection system applicable to Public Administration staff) to be considered holders of rights to a pension that possess equal legal consistency: from the constitutional viewpoint, the pensioners in both systems are simply state pensioners, and it is up to the state to guarantee the system under which both types of pensioner have contributed as required to by law. Any inequalities between them at the level of the legal rules governing the two public regimes that have come from the past and have financial consequences in the present cannot be corrected solely on the basis of difficulties experienced by one of the two regimes and by exclusively sacrificing the constituted rights of the beneficiaries of that regime.
The possible solutions to the problem of the system’s lack of financial sustainability must be looked at in terms of the public system as a whole. The problem requires answers that safeguard the system’s fairness on both the intragenerational and the intergenerational levels.
Sacrificial solutions motivated by reasons linked to financial unsustainability are asymmetric or one-off measures, and are intended to achieve goals (avoiding increases in transfers from the State Budget by sacrificing CGA pensioners and no one else) that have no place in the constitutional design of a unified public pension system. The criterion underlying such solutions – the convergence of the systems – objectively contradicts the legitimacy of, and the good reasons for, the trust that had previously been engendered among those beneficiaries in terms of the amount of the pensions that were awarded to them.
The Decree of the Assembly of the Republic containing the norms before the Court for review was designed to deepen social-protection convergence mechanisms by bringing in measures regarding CGA old-age, retirement, invalidity and survivor’s pensions with a gross monthly amount of more than six hundred euros. It cut the value of pensions subject to the regime set out in the Statute governing the Retirement of Public Sector Staff by ten per cent and provided for the application of a new formula for calculating the pensions. It formed part of the general reform intended to ensure convergence between the general social security system and that protecting Public Administration staff – an idea that dates back almost to the creation of the CGA (which began operating in 1929) itself, albeit the intention was then abandoned more than once, before reappearing with the current Constitution.
Like its predecessors, the existing Basic Law governing Social Security (passed in 2007) maintained the idea that the social protection regime applicable to the public service should continue to converge with the social security system regimes.
The Retirement Statute, which regulates the complex of rights and duties that form the legal situation of public sector retirees, was successively amended by various legislative acts. In an initial phase, the first of those acts provided for regimes that differed from the general social security regime, both as regards the length of service needed in order to retire, and in the way in which pensions were calculated. A second phase began in 2004 and entailed new rules for both these questions, with a view to bringing the systems closer together and ensuring their sustainability.
It was decided that no new subscribers to the CGA would be allowed as of 1 January 2006, and that staff who began working from then onwards would obligatorily be registered under the general social security regime.
The gradual move towards convergence between the CGA subscriber regime and the general social security regime also entailed changes in the length of service and age conditions required for both ordinary and early retirement from the public sector. The calculation of pensions was made subject to a differentiated regime depending on the date each beneficiary registered with the CGA.
The Law that approved the State Budget for 2013 (LOE13) subjected applications for retirement made after 1 January 2013 to immediate convergence of the conditions for retiring under both the public-sector and the general regimes.
Survivor’s pensions also became the object of a differentiated regime, depending on whether the deceased beneficiary was registered with the CGA or the general social security regime, with the Statute governing Survivor’s Pensions applying to the former. In 2005, it was decided that the right to, and the conditions for awarding, pensions should be subject to the general social security regime rules. The way in which survivor’s pensions were calculated was also changed in another move towards convergence, with provision made for two systems depending on the date of registration of the subscriber whose death caused the award of the pension.
These are social benefits included in a welfare and protection system based on the principle that the system will be contributory or self-financing. Cuts in pensions could thus be configured as social security contributions. In this case it would be the synallagmatic relationship between the legal obligation to contribute and the right to a pension that would justify the possibility of cutting the amount of the pension, in an economic context in which the contributions of current contributors are not enough for the protection system to fund itself; and the principles of solidarity and intergenerational fairness would justify the contributory effort of existing beneficiaries.
The Court pointed out that although the cut in pensions was presented as a structural measure, it was along the lines of similar measures that had previously been taken within the context of the economic and financial emergency in which the country found itself and had already been brought before the Constitutional Court for review.
Where serving Public Administration staff were concerned, the Court had already pronounced itself on norms that imposed a cut in gross monthly pay in 2011, suspended the extra holiday and Christmas months of pay in 2012, and maintained the pay cut and totally or partially suspended the holiday month (or equivalent) in 2013; while in the case of pensioners, the Court had ruled on the suspension of the extra holiday and Christmas months of pension in 2012, and the imposition of an Extraordinary Solidarity Contribution (CES) in 2013.
Reducing pensions is a legislative measure whose effects make it similar or equivalent to cuts in wages and salaries. The Court recalled that in its jurisprudence it has not recognised restrictions on the right to be paid that is inherent in the legal public employment relationship as possessing the nature of taxation, and said that that jurisprudence could also be applied to restrictions on the right to a pension linked to the legal relationship involved in retirement from the public sector. In the latter case the legal situation arises when the legal public employment relationship ends, but the retiree continues to be bound to the Public Administration by a new legal relationship (retirement). In the social protection system the pension is a monetary payment that replaces the work-based income lost as a consequence of the termination of the legal public employment relationship. On the constitutional level, interventions that restrict the complex of rights, duties and incompatibilities which goes to make up the ‘status of public sector retiree’ mobilise both the material principle of social security and the constitutional principles that condition restrictive measures.
The right to a pension is a positive constitutional-law social right with a co-respective element composed of true facere obligations on the part of the state. It is both an incumbency on the state (objective aspect) and a complex of rights and duties pertaining to individual persons (subjective aspect). It encompasses various concrete options – namely protection in the form of monetary payments (retirement, invalidity, survivor’s pensions) and payments in kind (e.g. the provision of care).
When it comes to determining the extent to which the right to social security is binding on the ordinary legislator, the relevant constitutional precepts have generally not been developed in operational terms, with some norms possessing a programmatic nature and thus implying a legally binding, but attenuated, status. However, there are other constitutional norms that require the state to perform concrete, defined tasks in terms of the implementation of social rights.
This different nature possessed by norms linked to fundamental social rights is reflected in the freedom with which the legislator can implement social rights and then later change their infra-constitutional configuration.
Some legal theorists argue that whenever the ordinary law has already implemented precise constitutional requirements, even if they are of a programmatic nature, the legislator’s scope for passing legislation that represents a backward step is diminished, at least when that step represents the creation or re-creation of a failure to comply with the Constitution by omission. They believe that the legislator’s freedom to shape legislation is limited by the level of legislative implementation that has already been attained and has established a place in the general legal awareness, which they say gives it the status of a materially constitutional right.
The Court recalled that complete fulfilment of the constitutional programme of social rights depends on the resources that are available at any given moment in time. The Constitution does not expressly create an autonomous right to a pension, but that right is one of the corollaries to the right to social security as a whole.
The Constitution does not set the pension system and the criteria for determining the award and amount of pensions in the form of a rule that can be directly applied. Depending on the amount of money available and within the limits of the applicable political choices, the ordinary legislator is given a freedom to decide, which itself varies depending on the extent to which each constitutional rule is determinable.
For example, the Constitutional Court has already held that the nature of the right derived from the so-called ‘principle of totalisation’, which requires that the whole of the time a beneficiary has spent working be counted in order to calculate his/her benefits, is analogous to that of constitutional rights, freedoms and guarantees. However, this principle does not mean the ordinary legislator is constitutionally bound to guarantee the pensioner a pension that precisely corresponds to the pay he/she earned during the period in which he/she contributed to the system. One cannot say there is a principle that the amount of contributions and the amount of benefits must be the same, given that the benefit system is based on mechanisms for sharing the funds that enter the system and not capitalisation mechanisms. Saying the Constitution recognises a right to a pension does not mean that one can say there is a right to a specific pension. The precise content of a pension is determined by ordinary legislation, and this in turn means that the precise pension’s binding nature is an infra-constitutional creation. It is only from the moment at which the ordinary legislator sets the exact content of the right to a pension, fulfilment of which can then be demanded of the state, that that right acquires a fully definitive status in the legal order. On the other hand, nor is there an absolute intangibility of the right to a pension – a right which from that moment on benefits from the specific protection derived in particular from the key principles that structure a state based on the rule of law, such as the principles of the protection of trust, and of proportionality.
The legislator is not prohibited from changing the way in which it materialises the right to a pension, and it can alter or even reduce the latter’s amount in the light of variations in economic or social circumstances. It is, however, forbidden to altogether do away with the ‘institute’ (retirement, invalidity and survivor’s pensions) or its essential content.
The right to a pension is particularly dependent on the funds the state has available, and is open to pressure from conjunctural factors. This special vulnerability is derived from the fact that the right to a pension results in the immediate allocation of financial resources, and lasts for a medium and long-term timeframe. The economic contexts in which the state exists can change radically over the lifetime of the benefit.
Pensions are also highly dependent on the reservation imposed by that which is possible, in that they form part of a solidary welfare and benefit system which itself exists within a generational context.
In a social protection system based on sharing the available funds, beneficiaries cannot ignore the risks involved, including the possibility that the rights which are in the process of being formed and accruing to them may change.
When the legislator shapes the right to a pension at any given moment in time, it must respect the various constitutional norms and principles that bind it – namely those derived from the principle of a state based on the rule of law. Any changes the legislator wants to make must be based on justified reasons (with particular emphasis on the financial sustainability of the system, for example), but they cannot affect the principles of equality, the dignity of the human person, the existence of a social minimum, and the protection of trust. In its jurisprudence, when it has applied the latter principle to the legislative power, the Constitutional Court has made the principle operable using a formula it has applied in successive cases: a) expectations cannot be unfavourably affected when this would constitute a mutation in the legal order which the targets of the norms in question could not reasonably be expected to predict; and b) nor are such effects permissible unless they are dictated by the need to safeguard other rights or interests to which the Constitution also affords its protection and which must be considered prevalent.
For the constitutional-law protection of trust to apply, the state (especially the legislator) must have behaved in ways that were capable of generating expectations among private entities that there would be continuity in the future; those expectations must be legitimate and founded on good reasons; the private persons concerned must have made life plans that took the prospect of the continuity of the state’s behaviour into account; and in addition, there cannot be public-interest reasons which, when weighed against the private interests, warrant the non-continuity of the behaviour that generated the expectant situation.
It is not possible to weigh up this balance with regard to the principle of the protection of trust without first knowing the legislative-policy interests that make a reduction and recalculation of pensions possible and justifiable.
The author of the challenged norms said that the main justification for cutting pensions was the need to ensure the sustainability of the public pension system; and that it was also seeking to promote proportional equality and solidarity between generations.
The legislator in this case highlighted the CGA’s financial situation as the reason why pensions should be reduced. It pointed to the CGA’s structural financial imbalance, with an annual deficit of 2.6% of GDP, which is covered by transfers from the State Budget that amount to around 60% of the benefits paid each year. This situation is linked to the economic/financial emergency the country is experiencing, and the imbalance is making the position unsustainable and demanding measures like the ones set out in the norms before the Court.
From the point of view of the norms’ author, pursuit of the public interest in convergence justified only applying the pension-cutting measure to CGA pensioners, in that from the perspective of the desired goals, their pensions represent an extra charge or an excessive weight, compared to those received by pensioners under the general regime.
The Court noted that when the right to a pension is recognised, or when all the requisites for that recognition are in place, the right enters the public sector retiree’s legal sphere with the nature of a true subjective right – an acquired right, whose fulfilment can be demanded under the exact terms of the recognition. This kind of right is different from the so-called ‘rights in the process of formation’, in relation to which the future beneficiary has begun to contribute, but that contribution is not yet complete. Abstractly speaking, with regard to both the latter rights and those that have already been acquired, there is a situation involving the formation of expectations that deserve protection. There is always the trust that the amount of the pension, whether it is still only predicted or has already been fixed, will not change later on (except as a result of the periodic updating determined by law).
The formed right to a pension is more protected in relation to any subsequent legislative changes. Holders of these so-called ‘acquired rights’ are in a situation that demands stronger protection than that of a worker who is still forming his/her ‘contributory career’. In the case of pensions that are in the process of being formed, while there can also be expectations that warrant protection, the future beneficiaries can expect the possibility of changes, because the legislator warns them in advance that the public sector retirement regime is determined on the basis of the law that is in force and the situation that exists on the date on which the preconditions for taking retirement are met.
The trust generated in the exact maintenance of the amount of the pension determined when beneficiaries take retirement is also legitimate, because our system is one of defined benefits, in which each pensioner is guaranteed a fixed rate of replacement of the working income that served as a reference for the calculation.
What is more, in the exercise of its legislative function, the state has, over a period of time, driven and entrenched the idea of certainty and trust in the maintenance and even upward updating of the quantum of each pension set in the final order recognising the individual right to a pension.
The way in which the pension regime has evolved over time to date shows that whenever the legislator has intervened with regard to the regime in a way that was unfavourable to subscribers and pensioners, both in terms of the conditions required to take retirement and with regard to the formula for calculating pensions, it has safeguarded both legal situations in the process of formation and those that have already been formed.
The four Basic General Laws governing the Social Security System that have been published under the current Constitution have all established a principle that both acquired rights and those under formation should be safeguarded. This principle was also always respected in the successive legislation that gradually imposed more demanding conditions on the subscribers to and beneficiaries of the CGA social protection system. The legislator always created transitional rules within the various legislative acts, under which the amount of pensions that were being paid out on the date on which the new act came into force would not be reduced.
Where the convergent social protection system (which includes the people targeted by the challenged norms) in its own right is concerned, the legislator committed itself to maintaining the level of protection that existed prior to the convergence. The so-called ‘rights in the process of formation’ were also always taken into account in the form of provisions for regimes that were either transitional or came into force gradually.
The targets of the norms the Court scrutinised in this review case were a very specific group: the beneficiaries currently receiving CGA pensions. The persons who comprise this universe are in an especially vulnerable situation, in that the fact that they have already left the active life means it is no longer as easy for them to adapt to more demanding economic conditions. Since the moment at which they retired, this target group has been managing their daily lives on the basis of a given income, whose amount they thought was fixed. In the light of this fixed income and of their belief in its stability, these pensioners may even have made a variety of commitments which the measure could have rendered unviable.
Faced with the successive legislation which increased the retirement age and the number of years for which contributions were required and which changed the rules for calculating pensions, albeit while safeguarding their rights as subscribers and future beneficiaries, today’s pensioners were also able to make life plans from the perspective of the continuity of a given regime, which they believed to be more favourable. It is reasonable to accept that trust in the maintenance of a given legal regime may have been a determining factor in the irreversible choice they made to take retirement from the public sector on a given date. For example, someone who chose to retire early at the expense of a reduction in their pension of 4.5% or 6% for each year below the standard number provided for by law, certainly trusted that the lifetime monthly pension he/she was going to receive would not be the object of further cuts. Similarly, it is not hard to accept that the expectations based on positive forms of behaviour by the state suggesting that there would be continuity in the way in which their pensions were calculated on the date of their retirement were also a key factor in deciding not to invest in complementary protection systems.
Against this background, the reduction in pensions brought about by the norms under review constituted a regressive measure that undermined pensioners’ legitimate trust in the maintenance of the amount of the pension that was set on the basis of the legislation in force on the date on which they took retirement. The guarantee that this amount would be maintained was given at the moment at which each person’s pension was set in the final CGA decision that definitively regulated that beneficiary’s right to a pension and the amount thereof. The same guarantee continued to be affirmed in the successive modifications of and limitations contained in the pension-calculation regime, in which the state gave clear and express signs in the letter of the law that the amount of people’s pensions would remain untouchable.
This means that although pensioners can count on new legislative activity in relation to this matter, they cannot legitimately be expected to foresee one-off measures that abruptly interfere with their already consolidated legal positions. On top of this, the trust that pensioners place in the inalterability of the rules which served as the basis for calculating the pension that was set for each one when he/she took retirement, also results from the contributory nature of the social protection system. Even if there is no direct correlation between the contribution a person pays and the pension he/she is then awarded, the right to a pension not only presupposes fulfilment of the obligation to contribute, but also constitutes a benefit that replaces the income the pensioner used to earn by working.
Each subscriber contributes a proportion of his/her income with a view to obtaining a pension whose amount will proportionately reflect the pay which formed the basis of the calculation. This means that one must see the right to a certain amount of pension – a right that was formed in accordance with a given monthly remuneration – as deserving an especially strong protection. This amount is also a counterpart for the sums that were paid over the course of the pensioner’s contributory career, without which the right would not have been formed in the first place. This heightens the importance of the values of stability, trust, continuity and legal certainty that must guarantee validly acquired and consolidated pensions.
The Court also highlighted the fact that the alleged disparity between the retirement regimes applicable to CGA and social security beneficiaries – said to favour the former – was far from evident. To begin with, it is not actually possible to compare the pensions that are effectively awarded in the two cases, because historically, different pension-calculation criteria have always been applied to the two regimes, and their practical effects still persist today.
Under the general social security regime the amount of a person’s pension is determined by a reference remuneration that represents the total pay received in the whole of his/her lifetime of contributions (the so-called ‘principle of contributivity’). However, this method only became fully applicable to contributors who registered with the system on or after 1 January 2002, whereas the legislator has always created safeguard clauses and more favourable transition regimes for beneficiaries registered prior to that date, in such a way as to uphold both their acquired rights and those of their rights that were still in the process of being formed. These regimes are still in force today.
The previous regime objectively gave people higher pensions by basing that calculation on the most favourable period at the end of the beneficiary’s working life (not to mention a number of situations in which the calculation of the amount of pensions was deliberately manipulated). This enabled a category of contributors to receive high pensions that were not matched by the average income declared over the course of their contribution history. This was particularly evident in the case of members of the governing bodies of legal persons, who were dispensed from contributing to the social security system in accordance with their actual remuneration. They were able to fulfil their obligation to contribute by paying a minimum amount based on the highest minimum monthly salary required by law for workers in general, but then pay contributions on the basis of their real pay during the final phase of their working lives, thereby obtaining a higher pension.
In the CGA system on the other hand, subscribers had to contribute a ‘quota’ in the shape of a percentage set by law of the total remuneration applicable to their position, and their retirement pension was based on their monthly pay, less the quota itself. In other words, in this system there was always a tendency towards a co-respective relationship between workers’ contributions (linked to the pay they effectively received) and the right to pension payments, all subject to a rigorous ‘principle of contributivity’.
Against this legislative background, the disparity between the rate at which pensions have been formed under the public sector social protection regime and under the general social security regime (setting aside any other elements of the systems and of the differentiation between the various formulas used to calculate specific pensions) is not one that demonstrates the existence of a material benefit or advantage in the way in which the amount of the pensions of CGA subscribers is calculated, compared to that applicable to their general social security regime counterparts (and assuming the beneficiaries have been registered as receiving pay for the same number of calendar years). The rate at which the pensions are formed cannot therefore in its own right be seen as a structural measure designed to ensure that pensions converge, nor would it have any effect that would restore intergenerational fairness or equity within the public social security system. It instead represented a mere one-off measure designed to cut spending by affecting the already constituted rights of CGA pensioners, and to reduce the budgetary imbalance in the public sector social protection system, which at the end of the day was caused by the legislator’s own choice not to admit new CGA subscribers, thereby inevitably making it impossible for the system to fund itself.
The existence at a given moment in time of legal regimes that differ in terms of the conditions required for retirement and the calculation of the ensuing pension undoubtedly resulted from recognition that there were sufficient material grounds to justify the difference between them. One cannot consider the Statute governing the Retirement of Public Sector Staff and the legal rules that complemented it to have been arbitrary pieces of legislation without a legitimate sense and lacking in serious and reasonable grounds. The staff and other agents of the Public Administration who retired under this regime could not but trust that these rules existed in order to protect them in old age and/or invalidity, and that the rules’ ultimate objective was to make the fundamental right to retirement a concrete reality. The existence of a different regime for calculating pensions is entirely the responsibility of the state, which felt it necessary to ensure the protection of Public Administration workers in old age and invalidity in a different way. The principle of trust becomes particularly important in connection with the state’s responsibility for its own actions, in that the increase in the expectation of trustworthiness can only be attributed to the legislator’s own behaviour. The current beneficiaries of the CGA regime fulfilled all the legal obligations that were imposed on them in order to benefit from their pension; they could not have chosen otherwise, so now they cannot be the only ones to pay the price for the difference, on the pretext of the need to restore equality.
The Court also said that safeguarding the system’s fairness on both the intragenerational and intergenerational levels required that possible solutions be looked at in terms of the public system as a whole, and not just within the scope of one of that system’s component parts. The circumstance that the cut in pensions only encompassed part of the beneficiaries of the convergent social system, taken in isolation from the other elements that make up the social security system, would have produced a solution that was both inappropriate and potentially unjust in terms of the system as a whole.
By definition, the principle of systemic solidarity – i.e. that social solidarity must be systemic – is a requisite if the social security system is to be constructed in accordance with the fundamental values of equality and fairness. However, the regulatory force of this principle does not mean that any differences that may have existed in the past between two legal regimes – both of which were normal at the time – should be combated solely on the basis of the difficulties experienced by one of those regimes and by sacrificing only the consolidated rights of that regime’s beneficiaries. For a solution to be appropriate to the system and be recognised as just, it must be one whose point of reference is the system as a whole, and not just one of its parts.
The a-systemic nature of the legislative measure that sought to cut the amount of pensions was also confirmed by its dubious nature. On the one hand, the Decree’s “Exposé of Reasons” justifies it as a measure that was intended to contribute to the reform of the system; on the other, the challenged norms themselves said they were temporary, and they were accompanied by other measures designed to ensure their transitional nature (whether or not this was achievable is another matter).
The so-called “reversibility clause” contradicted the measure’s alleged structural nature: in the event the economic situation improved, the state would entirely discard the importance of the interests it invoked when it decided to take the pension-cutting measure. As such, the reduction in pensions was a one-off, short-term measure designed to resolve immediate budgetary balance and consolidation problems, and not a measure intended to ensure the CGA’s financial sustainability.
The Court concluded that the breach of the expectations at stake could only be justified within the context of a structural reform that included an across-the-board weighing up of various factors.
The public interests of the sustainability of the public pension system as a whole and of intergenerational fairness might justify a revision of the amounts of pensions that have already been awarded. However, the revision criteria would have to envisage placing all the beneficiaries of both systems on the same level.
The Court therefore declared the norms before it to be unconstitutional.
The Ruling was unanimous. However, while concurring, two Justices disagreed with the use of the principle of trust as the key control parameter without an autonomous analysis centred on the principle of proportionality. In their view only part of the norms was unconstitutional: the part in which they affected pensions by cutting amounts which, from a normal point of view, are likely to have been allocated to paying expenses that are a mandatory and unavoidable element in providing for pensioners’ needs and commitments, and in which, by so doing, they exceeded the reasonable extent of the sacrifice the citizens in question could be asked to make and excessively hit the most disadvantaged among them.
Rulings nos. 581/95 (31-10-1995); 369/97 (14-05-1997); 435/98 (16-06-1998); 99/99 (10-02-1999); 411/99 (29-06-1999); 72/02 (20-02-2002); 675/05 (06-12-2005); 302/06 (09-05-2006); 437/06 (12-07-2006); 432/07 (26-07-2007); 351/08 (01-07-2008); 128/09 (12-03-2009); 188/09 (22-04-2009); 3/10 (06-01-2010); 396/11 (21-09-2011); 353/12 (05-07-2012); 187/13 (05-04-2013); and 474/13 (29-08-2013).