JUDGMENT OF 20. 10. 1977 -CASE 32/77 GIULIANI v LANDESVERSICHERUNGSANSTALT SCHWABEN

In Case 32/77 Reference to the Court under Article 177 of the EEC Treaty by the Sozialgericht Augsburg for a preliminary ruling in the action pending before that court between

THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco, Presidents of Chambers, A. M. Donner, P. Pescatore, Lord Mackenzie Stuart and A. O'Keeffe, Judges, Advocate-General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, the procedure and the written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

During his working life the plaintiff in the main action, Mr Giuliani, an Italian national residing in Italy, completed 156 insurance months towards a pension in Italy and 89 months in Germany. Since 1 February 1974 he has, on the ground of loss of working capacity, been in receipt in Italy of a yearly pension which after apportionment amounts to Lit 507030.

On his application, the competent German insurance institution, the defendant in the main action, granted him with effect from 1 February 1974 a pension fixed at DM 64.80 per month with effect from 1 July 1976. At first, pursuant to the first subparagraph of Article 46 (1) of Regulation No 1408/71, the pension was calculated in accordance with the conditions of German legislation alone: this produced a monthly payment of DM 102.60. Subsequently, applying the second subparagraph of the same provision, the defendant in the main action calculated the amount of the pension by adding together the Italian and the German insurance periods and carrying out an apportionment. This process produced a ‘theoretical amount of benefit’ (within the meaning of Article 46 (2)) of DM 2747.38 per year and a proportional amount of DM 81.30 per month.

Notwithstanding the judgment delivered by the Court in Case 24/75, Petroni v ONPTS ([1975] ECR 1149), the defendant in the main action, applying Article 46 (3), adjusted the German benefit to produce a figure of DM 64.80.

By order of 27 January 1977, the Sozialgericht Augsburg asks the Court of Justice to give a preliminary ruling under Article 177 of the EEC Treaty on the following questions:

1) Does the Court, having regard to the principle of equality, adhere to its ruling (judgment of 21 October 1975 in Petroni, Case 24/75) to the effect that Article 46 (3) of Regulation No 1408/71 of the Council is incompatible with Article 51 of the Treaty to the extent to which it imposes a limitation on the overlapping of two benefits acquired in different Member States by a reduction in the amount of a benefit acquired under the national legislation of a Member State alone?

2) Is Article 46 (3) of Regulation No 1408/71 of the Council, where appropriate, valid in so far as rights to payment are thereby limited which would not exist in the absence of Community law?

3) Do rights to payment exist in the absence of Community law or are such rights acquired under the legislation of a Member State alone if, in the case of a migrant worker resident in another Member State, they can be realized, by reason of national suspensory provisions, only through the waiving of residence clauses under Article 10 of Regulation No 1408/71?

4) How is the last question to be answered if bilateral or multilateral Conventions between the Member States concerned have already provided rules corresponding to those in Article 10 of Regulation No 1408/71?

The Sozialgericht Augsburg is in some doubt concerning the question whether the Court's interpretation in the Petroni case is consistent with the principle of equality of treatment. According to the decisions of the Bundesverfassungsgericht (the Federal Constitutional Court), the application of different treatment to situations which are identical in substance is regarded as contrary to that principle and, in consequence, as unconstitutional. This raises the question whether the case-law of the Court of Justice is not introducing fresh discrimination against workers who are subject to the law of a single Member State. Another consequence of that case-law is that, because of the fact that, under the German social insurance scheme, entitlement to a pension depends on the completion of a probationary period, a migrant worker who has not completed the requisite number of insurance months is treated less favourably.

The question arises whether the case-law of the Court does not come into conflict with the principle of the separation of powers recognized by German constitutional law. So long as there is no common social security scheme, the legislature must be accorded a wide measure of discretion in the amendment of laws and regulations.

Does the decision in Petroni apply in the case where effect can be given to a right arising under national law only by the application of Community law? Under German law the right to a pension is in principle held in abeyance where the recipient is not a German and so long as he voluntarily resides outside the Federal Republic of Germany. The right to payment of the benefit can be exercised only as a result of the waiving of the residence clause referred to in Regulation No 1408/71.

The order making the reference reached the Court on 14 March 1977.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

II — Summary of written observations submitted to the Court under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

The defendant in the main action states that the issue is whether Article 46 (3) of Regulation No 1408/71 is incompatible with Article 51 of the Treaty only ‘to the extent’ to which it imposes a limitation on the right to benefits in respect of a benefit acquired solely under the internal law of a State.

The question from the Sozialgericht Augsburg asking whether the decision in Petroni does not create fresh discrimination to the detriment of employed persons subject to the provisions of the national legislation of one Member State alone cannot be answered in the affirmative. It cannot be assumed a priori that a purely national pension is necessarily higher than a pension calculated on the basis of Article 46 (2).

The decisions of the Court concerning Article 46 (3) do not conflict with the principle of the separation of powers. In ruling on the validity of acts of the institutions of the Community, the Court does not substitute its own discretionary power for that of the legislature. It ascertains and determines whether, from the standpoint of law, the contested legal rule is or is not consistent with the Treaty.

In Case 50/75, Caisse de Pension des Employés Privés v Massonet [1975] ECR 1473, the Court held that limitations may be imposed on migrant workers corresponding to the advantages which they derive from Community regulations and which they would otherwise be unable to obtain. If a right based on provisions of internal law can take effect only through the application of Community law, namely by the waiving of the residence clause as provided for in Regulation No 1408/71, it must be possible to allow a reduction carried out on the basis of Article 46 (3). Through the operation of this particular rule the employed person is in a more favourable position than that which would result from the application of the provisions of internal law alone, that is to say, in the circumstances of the main action, of Article 1315 of the Reichsversicherungsordnung (RVO), which results in the pension of a foreigner residing outside Germany being held in abeyance.

The decisive question appears to be that of the scope to be attributed to bilateral or multilateral social security agreements which had already been concluded when the EEC regulations entered into force and which embodied rules similar to those in Article 10 of Regulation No 1408/71. It is necessary to ascertain whether compliance with their provisions prevents a reduction of benefits under internal law provided on the basis of Article 46 (3).

As regards the Germano-Italian Convention on social security of 5 May 1953 the proceedings in the main action are not affected by the fact that it contained rules similar to those in Article 10, since even where the Convention applies in no case is the insured person in a more favourable position than where the provisions of Regulation No 1408/71 apply (under the provisions of Article 20 of the Convention, the total of reduced pensions was not permitted to exceed the level of the national pension, whereas Article 46 (3) ensures that the insured person receives in the aggregate at least the highest theoretical amount of pension). As regards the European Interim Agreement on Social Security Schemes relating to Old Age, Invalidity and Survivors, of 11 December 1953, it contains no reduction clause but rules similar to those in Article 10 of Regulation No 1408/71. But in this case, too, the pension to be allotted in accordance with Article 46 (3) appears to be in every case a better one. It remains to be decided whether it is lawful to reduce the pension pursuant to Article 46 (3) in view of the fact that the granting of the pension so reduced nevertheless places the recipient in a more favourable position than that which he would occupy if he availed himself of the provisions of the European Interim Agreement.

If the Court considered that in the circumstances of the case in the main action a reduction of pension produced by the application of Article 46 (3) was lawful, it would still have to be decided whether the reduction in the pension can lawfully result in the amount of the proportional pension to be calculated in accordance with the provision in Article 46 (2) (b) being in consequence lower. In any event the proportional pension is greater than the amount of the pension reduced in accordance with Article 46 (3).

A judgment delivered by the Court in proceedings for a preliminary ruling is binding on national courts and tribunals only in respect of the point of law which was the subject of the reference. Since the Court has not yet settled the point of law referred to it in connexion with the main action it is impossible to argue on the basis that, in another context, Article 46 (3) was declared void.

Accordingly the defendant in the main action concludes that the first two questions submitted by the Sozialgericht Augsburg are not the subject of dispute and ought to be answered in the affirmative. It awaits with special interest the decision of the Court on the last two questions.

The Commission first of all points out that the Sozialgericht Augsburg questions the very substance of the Petroni judgment although the Court again ruled to the same effect in Case 62/76 (Strehl v Nationaal Pensioenfonds voor Mijnwerkers, judgment of 3 February 1977 [1977] ECR 211). In its decisions to date the Court's preliminary rulings are declared to be binding only on the parties to the main action. In the abovementioned Case 62/76 it acknowledged by implication that questions which it has already answered may be resubmitted to it. That is, moreover, the view of most learned writers.

There is no relevance in the argument raised by the Sozialgericht in respect of fundamental rights (infringement of the general principle of equality) or in the charge that German constitutional processes have been ignored (encroachment on the powers of the legislature). Reference to national constitutional principles places the Community legal order in jeopardy. The opportunity should in consequence be taken to reiterate the principles already set out in Case 11/70 (Internationale Handelsgesellschaft v Einfuhr- und Vorratsstelle Getreide [1970] II ECR 1125).

The statement that the Court has infringed the principle of the separation of powers is quite wrong. Under Article 164 of the EEC Treaty, it is for the Court to review the legality of the acts of the Community institutions. According to the circumstances it has not only the right but also the duty to declare void or inapplicable to a particular case the legal acts of the Council and of the Commission in so far as they infringe higher Community law or general legal principles. There can be no doubt whatever that this power is conferred by Articles 173, 177 and 184 of the Treaty. The Court exercised this right in connexion with Article 46 (3) not in order to substitute its own discretionary power for that of the Community legislature but because it has always held that, if there is a right to pension in more than one Member State, it is incompatible with Article 51 of the Treaty to wish to limit the pension to the amount which the person concerned could have obtained as the ‘highest theoretical amount’ if his whole working life had been spent in a single Member State. This is the effect of a long series of decisions handed down in relation to Regulation No 3 (Cases 100/63, 1 and 2/67, 11 and 12/67, 27 and 28/71, 140/73 and, finally, 191/73). The judgment in Petroni is based exclusively on legal considerations: neither the wording nor the purpose of Article 51 authorizes a diminution of rights acquired under national legislation alone; there is no question of an attempt to bring indirect pressure to bear on the Council to set up a uniform social security scheme; and, if there is a duplication of insurance periods or an overlap of type A benefits with type B benefits, the Council is free to adopt provisions for the prevention of overlapping.

It is by no means certain that the prohibition on the reduction of benefits acquired under national law alone in every case places the migrant worker in a more favourable position than insured persons who have never left the country where they work. There are such differences between the pension schemes of the Member States that a migrant worker might in the end receive a total pension which is lower than that which he would have received if he had worked all his life in one Member State. Moreover, Community law provides against inequality of treatment only on grounds of nationality.

The position of a migrant worker who has had the courage and the resourcefulness to move to another State in order to take up employment cannot be compared with that of a worker who has spent his whole working life in one Member State. There can be no question therefore of migrant workers' being at an advantage. Moreover, the prohibition on the infringement of acquired rights conflicts with the argument, mistakenly submitted, regarding equality.

In asking the second question the Sozialgericht is endeavouring to ascertain whether, within the meaning of the judgment in Petroni, it is also possible to speak of benefits acquired ‘without having recourse to Community law’ or ‘acquired under the legislation of a Member State alone’ where a right which exists under national law can take effect only through the application of Community law. Under Article 1315 of the RVO, pensions due to non-German nationals are in principle not paid so long as the person entitled is of his own free will domiciled in a country other than the Federal Republic of Germany. In fact, therefore, the second and fourth questions relate to the same issue.

It is inconceivable that the rules provided for in Article 51 (b) of the Treaty (the obligation to make benefits available abroad) may be used only when entitlement to the benefit in question can arise only by application of the rules regarding aggregation contained in Article 51 (a).The case-law of the Court is based entirely on the fundamental principle of the rules regarding aggregation and has nothing to do with the provisions of subparagraph (b) of Article 51. The form of words repeatedly employed to the effect that ‘benefits acquired under national legislation alone’ must not be reduced has, accordingly, a bearing only on the question whether the right to a pension was acquired solely under national legislation or solely by the application of the rules which, in Article 51 (a), the Treaty laid down for the benefit of migrant workers. But the conclusion must also be drawn from these decisions of the Court that they constitute no authority for the reduction of a pension if the right to payment of a pension acquired under national legislation was available only by recourse to the obligation to make benefits available abroad as provided for by Article 51 (b) of the Treaty and by Article 10 of Regulation No 1408/71.

Consequently, the further hypothesis described by the Sozialgericht in its fourth question has no bearing on the outcome of the proceedings in the main action.

The defendant in the main action, represented by R. Traub, and the Commission of the European Communities, represented by its Legal Adviser, P. Karpenstein, acting as Agent, submitted their oral observations at the hearing on 7 July 1977.

The Advocate-General delivered his opinion on 20 September 1977.

Decision

1. By order of 27 January 1977, which reached the Court Registry on 14 March 1977, the Sozialgericht Augsburg referred certain questions under Article 177 of the EEC Treaty concerning the validity of Article 46 (3) of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community (OJ, English Special Edition 1971 (II), p. 416).

2. Those questions are referred in connexion with proceedings concerning the way in which the competent German institution calculated the invalidity pension of an Italian national, the plaintiff in the main action, who resides in Italy and who worked first in Italy and subsequently in Germany. The file shows that the plaintiff in the main action satisfies the conditions for entitlement to a pension under German legislation alone but that, failing the application of Article 10 of Regulation No 1408/71, payment of the pension would have had to have been held in abeyance by virtue of a residence clause contained in that legislation. Acting under the rule laid down in Article 46 of Regulation No 1408/71, for the limitation of benefits, the German institution calculated the pension of the person concerned by aggregating the Italian and German periods of insurance and apportioning the benefit, which it subsequently adjusted in accordance with paragraph (3) of the said article. The plaintiff in the main action claims that he should be granted a pension calculated exclusively in accordance with the provisions of German legislation.

3. The first question asks whether the Court of Justice, ‘having regard to the principle of equality, adheres to its ruling (judgment of 21 October 1975 in Petroni, Case 24/75) to the effect that Article 46 (3) of Regulation No 1408/71 of the Council is incompatible with Article 51 of the Treaty to the extent to which it imposes a limitation on the overlapping of two benefits acquired in different Member States by a reduction in the amount of a benefit acquired under the national legislation of a Member State alone’. It is then asked whether ‘Article 46 (3) of Regulation No 1408/71 of the Council is, where appropriate, valid in so far as rights to payment are thereby limited which would not exist in the absence of Community law’. It is further asked whether ‘rights to payment exist in the absence of Community law or whether such rights are acquired under the legislation of a Member State, they can be realized, by reason of national suspensory provisions, only through the waiving of residence clauses under Article 10 of Regulation No 1408/71’. The final question is: ‘How is the last question to be answered if bilateral or multilateral Conventions between the Member States concerned have already provided rules corresponding to those in Article 10 of Regulation No 1408/71?’.

4. The first subparagraph of Article 10 (1) of Regulation No 1408/71 provides: ‘Save as otherwise provided in this regulation, invalidity, old age or survivors' cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in a territory of a Member State other than that in which the institution responsible for payment is situated’.

5. As the Court has already ruled, in its judgment of 21 October 1975(Petroni,Case 24/75 [1975] ECR 1149), Article 46 (3) of Regulation No 1408/71 of the Council is incompatible with Article 51 of the Treaty to the extent to which it imposes a limitation on benefits acquired in different Member States by a reduction in the amount of a benefit acquired under national legislation alone. Article 51 of the Treaty refers to two objectives which, although connected, are different, namely (a) aggregation, for the purpose of acquiring the right to benefit, of all periods taken into account under the laws of the several countries, and (b) payments of benefits to persons resident in the territories of Member States. However, the decision referred to by the Sozialgericht relates specifically to a benefit acquired by virtue of the national legislation of a Member State alone without its being necessary to have recourse to the arrangements for aggregation and apportionment as provided for under subparagraph (a) of Article 51.

6. Consequently, the answer to be given to the first two questions is that Article 46 (3) is applicable only in cases where, for the purpose of acquiring the right to benefit within the meaning of Article 51 (a) of the Treaty, it is necessary to have recourse to the arrangements for aggregation of the periods of insurance. It follows from the foregoing that, since the waiving of residence clauses pursuant to Article 10 of Regulation No 1408/71 has no effect on the acquisition of the right to benefit, it cannot involve the application of Article 46 (3) of that regulation.

7. The answers to the first three questions make it unnecessary to answer the fourth.

Costs

8. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Sozialgericht Augsburg by order of 27 January 1977 hereby rules:

1 Article 46 (3) of Regulation No 1408/71 is applicable only in cases where, for the purpose of acquiring the right to benefit within the meaning of Article 51 (a) of the Treaty, it is necessary to have recourse to the arrangements for aggregation of the periods of insurance.

2 Since the waiving of residence clauses pursuant to Article 10 of Regulation No 1408/71 has no effect on the acquisition of the right to benefit, it cannot involve the application of Article 46 (3) of that regulation.