JUDGMENT OF 19. 6. 1979 — CASE 180/78 BROUWER-KAUNE v BEDRIJFSVERENIGING VOOR HET KLEDINGBEDRIJF

In Case 180/78 REFERENCE to the Court under Article 177 of the EEC Treaty by the Centrale Raad van Beroep, Utrecht, for a preliminary ruling in the proceedings pending before that court between

THE COURT composed of: J. Mertens de Wilmars, President of the First Chamber, acting as President, Lord Mackenzie Stuart (President of the Second Chamber), P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges, Advocate General: F. Capotorti Registrar: J. A. Pompe (Deputy Registrar)

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the observations submitted under 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

1. Mrs Brouwer-Kaune (hereafter referred to as the appellant in the main action) was born in December 1912 in Germany, where she worked as an employed person, probably not continuously, from 1 April 1928 until 25 August 1950. She then settled in the Netherlands; she claims to have been employed full-time from 1951. The court which made the reference did not accept that claim, but considered that it was proved that the appellant in the main action worked, at least pan-time, as an employed person or in an activity treated as such for the purposes of the Netherlands social security legislation. Although she was subject to compulsory insurance in the Netherlands she continued none the less to contribute voluntarily to the German insurance from 1950 to 1957 in order to have the necessary number of years of contributions to become entitled to a pension. As from 20 July 1970 Mrs Brouwer-Kaune was recognized to be suffering from a partial incapacity for work and obtained, as from 1 August 1970, an occupational invalidity pension (Berufs-unfähigkeitsrente) from the competent German institution. As from 2 October 1972 the Netherlands insurance organization likewise considered that Mrs Brouwer-Kaune was suffering an incapacity for work. For one year she received sickness benefits under the Netherlands law on sickness insurance (Ziekenwet); then the competent institution, namely the Bedrijfsvereniging voor het Kledingsbedrijf [Trade Association for the Clothing Trade], by a decision of 25 October 1973, granted her a benefit for incapacity for work under the Netherlands law on insurance against incapacity for work (Wet op de arbeidsongeschiktheidsverzekering). That benefit was calculated on the basis of an incapacity for work of between 80 and 100 % and a corresponding percentage of the minimum daily wage. By a decision of 16 August 1974 the German insurance institution, at the request of the appellant in the main action, and with effect from 1 August 1973, convened the invalidity pension previously awarded to Mrs Brouwer-Kaune into an early old-age pension (‘vorgezogenes Altersruhegeld’). By a decision of 13 January 1976 the Netherlands institution then reduced the invalidity pension paid to the appellant in the main action by the amount of the German old-age pension with effect from 2 October 1973; it was thus applying the national provision against the overlapping of benefits contained in Article 1 of the Koninklijk Besluit [Royal Decree] of 22 December 1972 adopted pursuant to Article 52 of the Wet op de arbeidsongeschiktheidsverzekering. Considering inter alia that there was no overlapping in any particular period between the German old-age pension and the Netherlands invalidity benefit, Mrs Brouwer-Kaune brought an action against the decision of the Netherlands institution before the Raad van Beroep [Social Security Court], Amsterdam. When the Raad van Beroep declared the action unfounded Mrs Brouwer-Kaune lodged an appeal before the Centrale Raad van Beroep, Utrecht. Although satisfied that the reduction of the invalidity pension was correct with regard to the Netherlands legislation alone, the latter court was none the less in doubt as to whether that reduction was in conformity with Community law. Working on the assumption that Article 43 of Regulation No 1408/71 did not envisage the type of case in question, at least not directly, the Centrale Raad van Beroep raised the question whether Article 40 (1) of that regulation was applicable in the case or whether the latter was governed exclusively by the national law of the Member States concerned. That court decided, by an order of 16 May 1978, sent to the Court of Justice by a letter from its president dated 31 August 1978, to stay proceedings pursuant to Article 177 of the EEC Treaty and to refer to the Court the following question for a preliminary ruling:

‘Must Article 40 (1) of Regulation No 1408/71 considered in the light of Article 43 be interpreted to mean that Chapter 3 (especially Article 46) is also applicable by analogy when there is a right to invalidity benefit under the legislation of a Member State of the type referred to in Article 37 (1) of the regulation and the interested party satisfies the conditions laid down in one of the legislations, not listed in Annex III, of another Member State for the right to benefit if the first-mentioned benefit must be awarded to a person who already has a claim to an old-age pension under the legislation of the last-mentioned Member State?’

2. Article 40 (1) of Regulation No 1408/71 provides that: Article 43 of the said regulation concerns the conversion of invalidity benefits into old-age benefits and Article 46, which belongs to Chapter 3 of the said regulation, deals with the award of old-age benefits and death benefits.

‘A worker who has been successively or alternately subject to the legislations of two or more Member States, of which at least one is not of the type referred to in Article 37 (1), (that is to say, legislation under which the amount of invalidity benefit is independent of the duration of periods of insurance), shall receive benefits under the provisions of Chapter 3, which shall apply by analogy, taking into account the provisions of paragraph (3)’.

3. The order making the reference was received at the Court Registry on 5 September 1978. Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the Government of the Kingdom of the Netherlands and by the Commission of the European Communities. After 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 — Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

A — Observations of the Government of the Kingdom of the Netherlands

The Netherlands Government remarks in essence that the preliminary question submitted by the Centrale Raad van Beroep is based on the assumption that the appellant in the main action continues, after the date on which she was granted a German old-age pension, to satisfy the conditions on which entitlement to benefits depends under the German legislation on invalidity insurance (not mentioned in Annex III to Regulation No 1408/71). The Netherlands Government considers that assumption false, claiming that the overlapping of an old-age pension and an invalidity pension is not possible in any of the Member States of the European Economic Community. Hence it considers that, as from the date on which a retirement pension was granted, it ceases to be possible under German law to benefit from an invalidity pension, with the result that the appellant in the main action no longer satisfies those conditions. The Netherlands Government considers that, if its analysis is correct, it would have to be admitted that the situation envisaged by the preliminary question cannot arise, with the result that it is not necessary for Regulation No 1408/71 to apply to it.

The Netherlands Government takes the view that Article 40 (2) of Regulation No 1408/71 is applicable in this case, in particular because, as she is in receipt of an old-age pension under the legislation of a Member State, the appellant in the main action ceases henceforth to satisfy the conditions on which entitlement to benefits depends under that Member State's legislation on invalidity, which is not mentioned in Annex III. Consequently the Government of the Kingdom of the Netherlands does not consider it appropriate to examine the preliminary question more deeply.

B — Observations of the Commission

Before submitting its observations on the question of interpretation as such, the Commission first makes some preliminary remarks. It points out that it is surprising to find that, although the minimum rate of incapacity for work required in order to become entitled to a pension under the Netherlands legislation, which is based on the risk involved, is lower than that required by the German legislation, the appellant in the main action did not receive invalidity benefits from the competent Netherlands institution in 1970 and her invalidity was not recognized in the Netherlands until October 1972. It goes on to point out that the German invalidity pension was granted in 1970 in respect of partial incapacity, while the Netherlands invalidity pension relates to total incapacity for work. It seems then that the German pension should have been reviewed to take account of the worsening of the invalidity in accordance with the provisions of Article 41 of Regulation No 1408/71. It goes on to observe that it is strange that the Netherlands pension was not reduced in 1973 pursuant to Regulation No 1408/71 and that it was reduced by a decision taken in 1976 under the national rules against overlapping of benefits, whereas the German pension was converted into an old-age pension. The Commission also points out that the German old-age pension seems to be based on a period of full-time employment, while the Netherlands invalidity pension is granted only for previous part-time employment.

Thus there is only a partial overlapping and it would be more just, in so far as the Netherlands rule against overlapping is applicable, to apply it only to that part of the Netherlands benefit which overlaps with a fraction of the German old-age pension corresponding to the pan-time employment. Finally, the Commission emphasizes that from 1950 to 1957 the appellant in the main action continued to pay voluntary contributions to the German insurance organization, while at the same time being compulsorily insured in the Netherlands. It follows that the present case raises the question whether, in applying the national rule against overlapping, account must be taken of the voluntary insurance periods which are superimposed on compulsory insurance periods. That question depends on the application of Article 46 of Regulation No 574/72 of the Council of 21 March 1972, fixing the procedure for implementing Regulation No 1408/71 (Official Journal, English Special Edition 1972 (I), p. 159). The Court was asked to interpret that article in Case 176/78, Schaap v Bestuur van de Bedrijfs-vereniging voor Bank en Verze-keringswezen, Groothandel en Vrije Beroepen. The Commission refers to the observations which it submitted in that case.

As regards the preliminary question properly so-called, the Commission observes that, although it does not emerge directly from the question, it is clear from the decision making the reference that the problem raised in the present case concerns once again the question whether it is legitimate in relation to Community law to apply a national rule against overlapping in the event of overlapping between two benefits acquired in two Member States. However, whereas in the other cases referred to the Court it was question of overlapping between benefits of the same type, in particular invalidity benefits, here it is a question of overlapping between two benefits which are not of the same type, namely in the one case an old-age benefit resulting from the conversion of an invalidity pension and in the other case an invalidity benefit. The Commission goes on to state that Regulation No 1408/71 contains a special provision covering the problem of overlapping between such an old-age pension, resulting from the conversion of an invalidity pension, and an invalidity pension; the provision in question is Article 43 of that regulation. However, that provision only concerns the case of a worker who is already in receipt of an invalidity pension under the legislation of two Member States when one of those two benefits is converted into an old-age pension. As the said Article 43 authorizes the overlapping of the two benefits within certain limits, the question submitted to the Court of Justice by the national court in fact amounts to asking whether in the case in question, where entitlement to the Netherlands pension arose after the conversion of the German invalidity pension into an old-age pension, it is proper to apply Chapter 3 of Regulation No 1408/71, which would in all cases allow workers to be guaranteed a pro rata pension where the application of the national legislation against overlapping proves less favourable than the scheme established by Article 46 of Regulation No 1408/71.

As the problem of applying Chapter 3 of Regulation 1408/71 by analogy is raised in the light of Article 43, the Commission recalls the mechanism set up by that article and also the ratio legis of the provision in question. With regard more particularly to paragraphs (2) and (3) of Article 43, the Commission observes essentially that they concern invalidity benefits which are not or have not yet been converted into old-age benefits. According to paragraph (2) the institution responsible for providing the invalidity benefit must continue to pay it until such time as it must convert that benefit into an old-age pension. That provision thus permits overlapping between an invalidity pension and an old-age pension without any reduction other than that which the invalidity pension underwent, where appropriate, at the time when it was first granted. Consequently it should be interpreted as meaning that the application of the first sentence of Article 12 (2) of Regulation No 1408/71 is excluded and thus national provisions against overlapping are not applicable. As regards Article 43 (3), that provision covers the particular situation of an individual who has been subject exclusively to legislation of type A and is at a given moment entitled to an old-age pension under the legislation of at least one Member State which did not grant him any invalidity pension, whilst he remains entitled to a full invalidity pension under the legislation to which he was subject at the time when the risk materialized. In such a case where Chapter 3 has not been applied for the award of the invalidity pension, paragraph (3) of Article 43 provides a corrective factor in relation to paragraph (2) of the same provision. The institution responsible for providing the invalidity benefit may recalculate the amount of the benefit pursuant to Article 46, to which Article 49 (1) (a) refers, as if the worker satisfied the conditions required by the legislation which it applies for entitlement to old-age benefits, replacing the theoretical amount provided for in Article 46 (2) (a) by the amount of the invalidity benefit. That would permit the reduction provided for in Article 46 (3) to be applied and would in all cases guarantee the worker the pro rata amount when that is higher than the amount resulting from the application of the national provisions against the overlapping of benefits.

The Commission goes on to state that the ratio legis of Article 43 confirms the conclusion that, apart from the corrective factor provided for in paragraph (3), Article 43 of Regulation No 1408/71 excludes the application of national provisions against overlapping. In fact, if Chapter 3 of Regulation No 1408/71 was applied for the award of invalidity pensions, the invalidity pension which is not converted into an old-age pension and which therefore continues to be paid will have been reduced where appropriate. Besides, the old-age pension which replaces the invalidity pension is often of the same amount as the latter. If, on the other hand, Chapter 3 was not applied when the invalidity pension was awarded, and if the worker completed a long period of insurance in the Member State responsible for providing an old-age pension, the granting of an old-age pension which overlaps with a full invalidity pension could then lead to unfair overlapping. For that reason Article 43 (3) introduced a corrective factor permitting the reduction to be applied which had not taken place when the invalidity pension was awarded.

The Commission goes on to observe that it is none the less worth noting that it is clear from the very wording of Article 43 of Regulation No 1408/71 that it presupposes that the entitlement to an invalidity pension under the legislation of one Member State precedes entitlement to the old-age pension under the legislation of another Member State. Hence the court making the reference was quite right to consider that in principle that provision was not applicable to this case. Thus it seems, according to the Commission, that in this case only Article 49 of Regulation No 1408/71 is applicable. That provision in fact lays down the rules according to which a benefit is awarded when the person concerned does not simultaneously satisfy the conditions imposed by all the bodies of legislation under which periods of insurance or residence have been completed. The said Article 49 belongs to Chapter 3 of Regulation No 1408/71 which, in accordance with Article 40 (1), applies by analogy for the award of invalidity pensions when one of the bodies of legislation to which the worker has been subject is not of the type referred to in Article 37 (1) (type A). Hence the Commission considers that the answer to the question submitted can only be in the affirmative.

The Commission then points out that the problem raised by the case of the appellant in the main action is not completely solved by such an answer. Taking account of the scope of Article 43, it is necessary also to ascertain how the provisions of Chapter 3 must be applied. Article 49, and more particularly paragraph (1) (b) (ii) thereof, is the provision applicable to this case. The application of that provision entails the granting of an independent invalidity pension, the overlapping of which with an old-age pension may entail the application of the national provisions against overlapping of benefits by virtue of the first sentence of Article 12 (2) of Regulation No 1408/71. One is then in a surprising situation, to say the least, whereby, according as the right to old-age benefits arises after or before the acquisition of the right to the invalidity benefit, overlapping is either permitted totally or partially, or prohibited and the benefit reduced to zero if the national provision against overlapping is particularly severe. That difference in treatment is due solely to the restrictive wording of Article 43. It results from the application of the provisions in force and is due solely to a lacuna in the Community rules. The Commission goes on to state that the same treatment, namely the guarantee provided by Article 43, should be accorded to all cases of overlapping between an invalidity pension and an old-age pehsion. The application by analogy of Chapter 3 provided for in Article 40 (1) of Regulation No 1408/71 implies that it is necessary to have recourse to the provisions of Article 46, which moreover is in accordance with the case-law of the Court on the overlapping of pensions.

Consequently the Commission proposes the following answer to the question submitted by the court making the reference:

‘Article 40 (1) of Regulation No 1408/71 must be interpreted as meaning that when a worker has been successively subject to invalidity legislation based on the materialization of the risk and to legislation which makes the amount of the invalidity benefit dependent on periods of insurance or vice versa, Chapter 3 of Regulation No 1408/71, and in particular Article 46, is applicable by analogy to the payment of the invalidity benefits.’

III — Oral procedure

The Commission, represented by its Legal Adviser, Mrs J. Jonczy, acting as Agent, assisted by A. Haagsma, a member of its Legal Department, presented oral argument at the hearing on 5 April 1979.

In essence it contended that Article 43 of Regulation No 1408/71 should be applied by analogy and that the written observations of the Netherlands Government concern a situation which has not arisen in this case.

The Advocate General delivered his opinion on 16 May 1979.

Decision

1. By an order of 16 May 1978 which was received at the Court on 5 September of the same year, the Centrale Raad van Beroep requested a preliminary ruling, pursuant to Article 177 of the EEC Treaty, on the interpretation of Article 40 (1) of Regulation 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 (Official Journal, English Special Edition 1971 (II), p. 416).

2. The question has arisen in the context of a dispute concerning the calculation, by the competent Netherlands institution, of an invalidity pension payable to a worker who, after working in Germany between 1928 and 1950, settled in the Netherlands, where she worked as an employed person from 1951 to 1972. It emerges from the letter by which the Centrale Raad van Beroep transmitted its decision to the Court that, from 1 August 1970, the person concerned received in Germany an occupational invalidity pension which was converted into an early old-age pension with effect from 1 August 1973. In the Netherlands she was granted benefit for incapacity for work as from 2 October 1973, that is to say, as from a date subsequent to the conversion of the German invalidity pension into an old-age pension.

3. Because of the order in which those benefits were granted the Centrale Raad van Beroep considered that Article 43 of Regulation No 1408/71 on the conversion of invalidity benefits into old-age benefits is not applicable, at least not directly, in the present case. In fact, that article deals with the case where invalidity benefits are acquired in two Member States before conversion into old-age benefits and paragraph (2) provides that, even after such a conversion in one of the Member States, the institution responsible for providing invalidity benefits in the other Member State shall continue to provide the recipient with the invalidity benefits to which he is entitled under the legislation which it administers.

4. As that provision is not applicable to the case in point, the problem which the Netherlands authorities must resolve concerns the question whether the national legislative provisions which, in the event of overlapping of benefit in respect of incapacity for work due under Netherlands law with a foreign old-age benefit, provide that the national benefit shall be reduced by the total amount of the foreign benefit, are in accordance with the other provisions of Community law involved, in particular with Article 40 of the regulation. Faced with this problem, the Centrale Raad van Beroep submitted a request for a preliminary ruling on the question of interpretation of Article 40.

5. That article, which is in Chapter 2 of Title III of the regulation, concerning invalidity, provides for the case where a worker has been subject to the legislation of two or more Member States, of which at least one, like the German law applicable in this case, is of the type whereby the amount of invalidity benefit is dependent on the duration of periods of insurance. By way of a reference to Chapter 3 on old-age and death pensions, the effect of Article 40 (1) is, in particular, to render the provisions of Article 46 on the calculation of old-age benefits applicable also to the calculation of invalidity benefits.

6. In a series of judgments, the last of which was delivered on 14 March 1978 in Case 98/77 Schaap [1978] ECR 707, the Court has ruled that, so long as a worker is receiving a pension by virtue of national legislation alone, the provisions of Regulation No 1408/71 do not prevent the national legislation, including the national rules against the overlapping of benefits, from being applied to him in its entirety, provided that if the application of such national legislation proves less favourable than the application of the scheme set up by Article 46 of the regulation, the provisions of that article must be applied. As regards Article 46 (3), however, the Court ruled in its judgment of 21 October 1975 in Case 24/75 Petroni v ONPTS [1975] 2 ECR 1149 that that provision 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 the benefit acquired under national legislation alone.

7. That case-law, which concerns in the first place cases in which a worker has been subject to the legislation of two or more Member States in the field of old-age insurance, has been extended without modification, by virtue of Article 40 (1), to cases of invalidity insurance. A similar effect is produced by Article 43, as mentioned above, in cases where one of two invalidity benefits already acquired is converted into an old-age benefit. The problem in this case is to know whether a different solution must be found solely for a case in which the conversion of the invalidity benefit in one Member State took place before the award of the invalidity benefit in another Member State.

8. The absence of any express provision covering that type of case must be regarded as a lacuna. There is no objective reason to apply in that type of case a rule different from that applied in the cases expressly referred to. The protection of the rights which the person concerned possesses by virtue of national legislation alone, without having recourse to the system of aggregation and apportionment, and respect for any advantages resulting from that system, are mandatory principles applying equally in all situations. Consequently, the systematic interpretation of the provisions of the regulation enables Article 40 (1) to be applied by analogy to cases such as the present one. If it were not possible to adopt that solution, it could even be said that the Council had failed to carry out completely the duty incumbent upon it, by virtue of Article 51 of the Treaty, to adopt such measures in the field of social security as are necessary to provide freedom of movement for workers.

9. Therefore the answer to the question submitted must be that Article 40 (1) of Regulation No 1408/71 of the Council must be interpreted as meaning that it also relates to the award of invalidity benefits in a Member State in which the right to such benefits has been acquired by a worker on the basis of legislation of the type referred to in Article 37 (1) in a case where the person concerned, before the acquisition of such right, had already become entitled, by virtue of the legislation of another Member State not being of that type, to an old-age benefit resulting from the conversion of an earlier invalidity benefit.

Costs

10. The costs incurred by the Government of the Netherlands and by the Commission of the European Communities, which have submitted written observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, 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 question referred to it by the Centrale Raad van Beroep by order of 16 May 1978, hereby rules: