JUDGMENT OF 26. 6. 1980 — CASE 793/79 MENZIES v BUNDESVERSICHERUNGSANSTALT FÜR ANGESTELLTE

In Case 793/79 REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundessozialgericht [Federal Social Court] for a preliminary ruling in the action pending before that court between

THE COURT (Third Chamber) composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart, Judges, Advocate General: G. Reischl Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure

1. Mr Menzies, the plaintiff in the main action, born on 15 July 1937, is a national of the United Kingdom living in Germany. In December 1975 he became incapacitated for work. Up to that date the plaintiff had paid 24 monthly contributions to the German invalidity and old-age pension insurance fund and had 248 months of insurance paid to a United Kingdom fund. At his request the defendant granted him an occupational invalidity pension starting in January 1976. Since the plaintiff had not completed the waiting period of 60 months required by Article 23 (3) of the German Law on invalidity and old-age pension insurance for clerical staff, the defendant took into account, in accordance with Article 45 (1) of Regulation No 1408/71, the periods of insurance completed in the United Kingdom and calculated the pension on the basis of Article 46 (2) (a) and (b) of that regulation. When determining the theoretical amount of the benefit referred to in subparagraph (a) thereof, besides the 24 months of German insurance and the 248 months of United Kingdom insurance, the defendant took into account as relevant “years of insurance” within the meaning of Article 35 of the German Law on invalidity and old-age pension insurance for clerical staff (Angestelltenversicherungsgesetz, hereinafter sometimes referred to as the “AVG”) a supplementary period of 199 months on the basis of Article 37 of that Law. This supplementary period is credited to insured persons who have suffered occupational incapacity before reaching the age of 55. It is calculated on the basis of the length of time between the date on which the risk materializes and the date on which the insured person reaches the age of 55. In order to calculate the amount of pro rata pension actually payable under Article 46 (2) (b), however, the defendant did not take account of the supplementary period. The apportionment ratio was thus 24 : 24 + 248. On that basis the defendant fixed the amount of the pension at 8.82% of the theoretical amount which amounted to a monthly benefit of DM 82,90. The plaintiff, on the other hand, argued that the notional supplementary period must also be taken into account in the calculation of the actual amount of the benefit. He argued that the correct ratio of the benefits was 24 + 199 :24 + 248 + 199. This results in a pension to be paid by the defendant amounting to 47% of the theoretical amount, instead of 8.82%.

2. After the plaintiff's objection, the action which he brought before the Sozialgericht [Social Court] and his appeal to the Landessozialgericht [Higher Social Court] had failed, the plaintiff lodged an appeal on a point of law before the Bundessozialgericht. By an order of 19 September 1979 that court stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling: The considerations which led the Bundessozialgericht to refer this question to the Court are basically these: 1. Although according to the seemingly unambiguous wording of Article 46 (2) (b) of Regulation No 1408/71, to Decision No 95 of the Commission and to academic opinion, supplementary periods are not periods completed before the risk materializes, nevertheless the context of the provision should also be taken into consideration, as well as its spirit and purpose. 2. Article 37 of the German Law on invalidity and old-age pension insurance for clerical staff provides that supplementary periods must be added to completed periods of insurance. Article 46 (2) (a) of Regulation No 1408/71 provides that all completed periods of insurance must be taken into account. According to the definition of period of insurance contained in Article 1 (r) of the Community regulation, periods of insurance include all periods treated as such and therefore a supplementary period. 3. The supplementary period is not really a completed period since it cannot start to run until after the risk has materialized. It is nevertheless possible to perceive in Article 37 of the German Law on invalidity and old-age pension insurance for clerical staff an instruction specifically directed at the German insurance institutions and providing the method of calculating the theoretical amount. 4. If, on the other hand, a supplementary period is regarded as a completed period of insurance, it is difficult to see why it is not one of the periods completed before the risk materializes. Its notional character does not preclude this; substitute periods and interrupted periods are also notional but they are still taken into account in the calculation of the time-apportioned ratio. 5. The interpretation which the plaintiff wishes to see upheld would in any case assist in providing freedom of movement for workers.

“Must the expressions ‘periods of insurance... completed’ and ‘periods of insurance... completed... before the risk materializes’ contained in Article 46 (2) (a) and (b) of Regulation (EEC) No 1408/71 of the Council of the European Communities be interpreted as also including those periods treated as such within the meaning of Article 1 (r) of the regulation which can only start to run when the risk materializes but which must, in order to obtain an appropriate pension, be added on to the periods of insurance completed when the risk materializes, such as the German supplementary period (Zurechnungszeit) within the meaning of Article 37 of the AVG?”

3. The order making the reference was received at the Court Registry on 5 November 1979. Having verified that no Member State and no institution, being a party to the case, has requested that it be dealt with by the full Court, the Court by an order of 12 March 1980 assigned the case to the Third Chamber pursuant to Article 95 (1) and (2) of the Rules of Procedure. Pursuant to Article 20 of the Protocol on the Statute on the Court of Justice of the European Economic Communities written observations were submitted by Mr Menzies, represented by Herman Plagemann, Advocate at Frankfurt, by the Bundesversicherungsanstalt für Angestellte, represented by Mr Gerdts and by the Commission of the European Communities represented by its Legal Adviser Norbert Koch, acting as Agent. On hearing the report of the Judge-Rapporteur and the opinion of the Advocate General the Court (Third Chamber) decided to open the oral procedure without any preliminary inquiry.

II — Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice

A —. In support of his contention that the periods of insurance referred to in Article 46 (2) (b) of Regulation No 1408/71, which must have been completed before the risk materializes, include the supplementary period referred to by Article 37 of the AVG, Mr Menzies basically argues as follows : 1. By Article 1 (r) of Regulation No 1408/71 “periods of insurance” means “periods of contribution or periods of employment as defined or recognized as periods of insurance by the legislation under which they were completed or considered as completed, and all periods treated as such, where they are regarded by the said legislation as equivalent to periods of insurance”. Therefore by this definition periods which are “considered as completed” by national law are also periods of insurance. This is also true of the supplementary period within the meaning of Article 37 of the AVG. This latter period must be considered as “completed before the risk materializes” since under German legislation it cannot be dissociated from the periods of insurance qualifying the insured person for entitlement to a pension which were acquired by him before the risk materialized. 2. The interpretation of Article 46 advocated by the defendant would cut down the rights which the national legislation of the Federal Republic of Germany gives to the plaintiff. The EEC Treaty does not empower the Community legislature to cut down rights in this way. By Articles 2, 7 and 51 of the EEC Treaty, upon which the Council expressly based the adoption of this regulation, the Council has power to harmonize social security laws only to the extent to which such harmonization assists in providing freedom of movement for workers and consequently positively promotes the establishment of the Common Market. The Bundesversicherungsanstalt would not suffer any loss if it recognized that the plaintiff is entitled to a supplementary period. The taking into account of the supplementary period would not alter the apportionment of the cost of the pension in favour of the United Kingdom insurance institution and to the detriment of the insurance institution in the Federal Republic of Germany. It would not alter the fact that the United Kingdom insurance institution is obliged to pay the plaintiff a pension corresponding to the period of insurance which is attributable to that institution. The interpretation now contested by the defendant would lead to discrimination against persons who have spent a large part of their active life in other Member States. 3. In the way in which it is interpreted by the defendant, Article 46 (2) (b) of Regulation No 1408/71 is contradictory: on the one hand it is supposed to exempt the insured person from proving that he has paid a given number of minimum contributions and on the other hand to deprive the insured person of the benefit of Article 37 of the AVG. The method of calculation used by the defendant, allegedly in accordance with Article 46 (2) (b) of Regulation No 1408/71, is nonsensical in its result and is not in keeping with the social policy objectives indicated in Article 51 of the EEC Treaty.

B —. In support of its contention that the supplementary period referred to in Article 37 of the AVG must be taken into account only when the theoretical amount is determined, the Bundesversicherungsanstalt für Angestellte argues as follows: 1. This contention is supported by Decision No 95 of the Administrative Commission of the European Communities on Social Security for Migrant Workers of 24 January 1974 (Official Journal C 99, p. 5). 2. A supplementary period is not a period of insurance actually completed, as are, for example, periods of contribution and periods treated as such (Articles 27 and 28 of the AVG) or interrupted periods (Article 36, of the AVG). Article 37 is based on grounds of social policy alone and is meant only to be compensation, paid for by the community, for the difficulties arising out of the premature invalidity or the premature death of an insured person. German legislation no longer provides for a “minimum pension”, the amount of the pension in principle being solely dependent on the amount relating to contributions paid and the duration of insurance, and so a formula had to be found to evaluate a pension granted to a premature invalid or his or her survivors. From among all the conceivable formulae (granting of a supplement, revaluation of contributions or even, in certain cases, the granting of a minimum pension) German legislation opted for that contained in Article 37 of the AVG. The supplementary period referred to in that provision is not based on any contributions and is therefore extraneous to the pension system itself. 3. Supplementary periods cannot be equated with periods treated as such and with interrupted periods: unlike the latter, they have not been completed; no specific value can be attached to them and they cannot serve to buy back contributions unpaid in the past. 4. The theoretical amount calculated by taking into account the amount of the benefit relating to the supplementary period is only payable pro rata by the institution of the Member State, in accordance with Article 46 (2) (b) of Regulation No 1408/71. That provision reflects the actual situation in the Community characterized as “mere coordination” of the social security systems. Apportionment works basically on the ratio between the periods of insurance (and of residence) completed under the legislation of the Member State responsible for the provision of benefits and the total duration of the periods of insurance (and of residence) completed under the legislation of all the Member States in question before the risk materialized. From the wording of that provision it can be seen that it refers to the periods actually completed before the risk materialized and not to any notional periods later calculated in addition. 5. The argument advanced by the plaintiff would lead to a difference in treatment between the Member States depending on the manner in which they arrange entitlement to the pension. States such as the Federal Republic which have opted for the “supplementary period” formula have a relatively heavier burden in the determination of a pro rata pension than the States which have opted for other formulae such as a minimum benefit for example. 6. Finally the argument advanced by the plaintiff in the main action would be contrary to the purpose of Articles 48 to 51 of the EEC Treaty which requires that workers who have taken advantage of the freedom of movement should not be barred in the matter of social security from certain advantages to which they are entitled in any event by virtue of the legislation of a single Member State. There cannot on the other hand be any question of any disadvantage suffered by the plaintiff owing to his change of residence within the Community since in the absence of the provisions of Regulation No 1408/71, he would not have been entitled to a pension within the German invalidity and old-age pension insurance scheme and consequently would not have been entitled to a part of the benefits relating to a supplementary period either.

C —. The Commission thinks that the legal nature of the supplementary period referred to in Article 37 of the AVG is a question of interpretation for national German law and not for Community law. There is therefore no need for the Commission to consider whether that period should be regarded as a period of insurance or as just a factor in calculation. Having weighed up all the arguments the Commission is rather inclined to regard the supplementary period as a factor in the calculation used in national law which is binding only on the national German insurance institution. In conclusion the Commission thinks that the answer to the question referred to the Court by the Bundessozialgericht could be formulated in terms similar to these :

“According to the definition in Article 1 (r) of Regulation No 1408/71, ‘periods of insurance... completed’ in Article 46 (2) (a) of that regulation means all periods of insurance and periods treated as such, completed or considered as completed under national legislation. The phrase ‘periods of insurance... completed before the risk materializes’ contained in Article 46 (2) (b) of the regulation includes all periods of insurance and periods treated as such, completed or considered as completed under national legislation before the risk materializes. The same applies to periods treated as such provided that the legislations under which they were completed or are considered as having been completed not only take them into account in the calculation of the amount of the pension without directly linking them to the period of insurance completed, but regard them as equivalent to periods of insurance.”

III — Oral procedure

Mr Menzies represented by H. Plagemann and the Commission of the European Communities represented by N. Koch presented oral argument at the sitting on 24 April 1980.

The Advocate General delivered his opinion at the sitting of 28 May 1980.

Decision

1. By an order of 19 September 1979 received at the Court Registry on 5 November 1979 the Bundessozialgericht referred a question to the Court of Justice under Article 177 of the Treaty on the interpretation of Article 46 (2) 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 referred to the Court by the Bundessozialgericht is worded in this way:

“Must the expressions ‘periods of insurance... completed’ and ‘periods of insurance... completed... before the risk materializes’ contained in Article 46 (2) (a) and (b) of Regulation (EEC) No 1408/71 of the Council of the European Communities be interpreted as also including those periods treated as such within the meaning of Article 1 (r) of the regulation which can only start to run when the risk materializes but which must, in order to obtain an appropriate pension, be added on to the periods of insurance completed when the risk materializes, such as the German supplementary period (Zttrec/mungszeit) within the meaning of Article 37 of the AVG?”

3. This question is asked in the context of a dispute between a national of the United Kingdom residing in the Federal Republic of Germany, the plaintiff in the main action, and the Bundesversicherungsanstalt für Angestellte (Federal Insurance Office for Clerical Staff), Berlin, the defendant in the main action. The plaintiff suffered an accident at work in the Federal Republic in December 1975 at a time when he had 24 months of insurance contributions in Germany and 248 months in the United Kingdom.

4. In order to determine the amount of the occupational invalidity pension to which the plaintiff was entitled, the defendant, for the purpose of calculating the theoretical amount referred to in Article 46 (2) (a) of Regulation No 1408/71, took into account not only periods of insurance actually completed by him in Germany and in the United Kingdom but also a supplementary period (Zurechnungszeit) of 199 months pursuant to Article 37 of the Law on Insurance of Clerical Staff (Angestelltenversicherungsgesetz). That supplementary period which is intended to help evaluate the benefits granted in the case of premature invalidity or death of an insured person, is credited to insured persons who have suffered occupational invalidity before reaching the age of 55 and is equal to the period between the month in which the risk materialized and the last month of the year in which the insured person reaches the age of 55. In the calculation of the actual amount of the benefit pursuant to Article 46 (2) (b) of Regulation No 1408/71 the defendant refused however to take that supplementary period into account and consequently calculated the time-apportioned ratio of the benefits on the following basis: 24:24 + 248, amounting to 8.82% of the theoretical amount in Germany.

5. The defendant has argued in particular that this method of calculation is in keeping with Decision No 95 of the Administrative Commission of the European Communities on Social Security for Migrant Workers of 24 January 1974 concerning the interpretation of Article 46 (2) of Regulation No 1408/71 on the calculation of pro rata pensions (Official Journal C 99, p. 5). According to that decision of the Administrative Commission — whose task under Article 81 (a) of the Regulation is to deal with all questions of interpretation arising from the provisions of the regulation without prejudice to the right of the authorities, institutions and the persons concerned to have recourse to the procedures and tribunals provided for by the legislations of Member States, by the regulation or by the Treaty — the competent institution of the Member State whose legislation provides that the amount of benefits must be determined by taking into account periods presumed to have been completed after the occurence of the event insured against shall take these periods into consideration solely for calculating the theoretical amount referred to in Article 46 (2) (a) of Regulation No 1408/71, and not for calculating the actual amount referred to in Article 46 (2) (b) of that regulation.

6. The plaintiff on the other hand argued that the supplementary period in question must be taken into account for the purpose of calculating the actual amount as well. He consequently brought an action for a declaration that he is entitled to a benefit calculated on the following basis: 24 + 199 : 24 + 248 + 199, equivalent to 47.34% of the theoretical amount in Germany.

7. The question referred to the Court by the Bundessozialgericht is meant to establish the extent to which a supplementary period such as that provided for by Article 37 of the Angestelltenversicherungsgesetz must be taken into account in the calculation of the benefits referred to in subparagraphs (a) and (b) of Article 46 (2) of Regulation No 1408/71, bearing in mind Article 1 (r) of that regulation which defines “periods of insurance” as meaning “ periods of contribution or periods of employment as defined or recognized as periods of insurance by the legislation under which they were completed or considered as completed, and all periods treated as such, where they are regarded by the said legislation as equivalent to periods of insurance”.

8. It should be observed at the outset that the answer to the question referred to the Court must be sought first in the light of the provisions and the purpose of Article 46 (2) of the regulation quoted which governs the calculation of the benefits in question. If it emerges that taking the supplementary period into account at some stage in the calculation provided for by Article 46 (2) runs counter to the scheme of that provision, that period must be left aside and its exclusion may not be called in question by invoking Article 1 (r) of the said regulation.

9. The calculation of the benefits referred to in Article 46 (2) can be broken down into two stages. At the first stage referred to in subparagraph (a) of that provision, where a worker has been subject to the legislation of a Member State, the competent institution of that Member State must first calculate the theoretical amount of the benefit which the person concerned could claim if all the periods of insurance completed under the legislations of the Member States concerned had been completed in the State in question and under the legislation administered by it. At the second stage referred to in subparagraph (b) of the same provision, the institution then establishes the actual amount of the benefit for which it is responsible on the basis of the theoretical amount referred to in the preceding subparagraph and in the ratio which the length of the periods of insurance completed before the risk materializes under the legislation administered by that institution bears to the total length of the periods of insurance completed under the legislations of all the Member States concerned before the risk materialized.

10. As regards the theoretical amount, the express effect of Article 46 (2) (a) is that it must be calculated as if the insured person had carried out his occupational activity exclusively in the Member State in question. It follows that if, in order to evaluate the benefit awarded in the event of premature invalidity or death of the insured person, the legislation of that State provides that the benefit must be calculated in relation to not only periods of insurance completed by the insured person but also in relation to a supplementary period equivalent to the interval of time between the age of the insured person at the time at which the risk materialized and the time at which he reached the age of 55, that supplementary period must also be taken into account in the calculation of the theoretical amount referred to in subparagraph (a).

11. Such a period, which is intended to ensure that the level of benefits is calculated as if an insured person was at least 55 years of age at the time at which the risk materialized, irrespective of his true age, cannot however be taken into account in the calculation of the actual amount referred to in subparagraph (b). Although the calculation to be carried out under subparagraph (a) is intended to give a worker the maximum theoretical amount which he could claim if all periods of insurance had been completed in the State in question, the purpose of the calculation under subparagraph (b) is different. The latter provision is intended solely to apportion the respective burdens of the benefit between the institutions of the Member States concerned in the ratio of the length of the periods of insurance completed in each of the said Member States before the risk materialized. The taking into account, in the calculation of the apportionment, of a supplementary period like the one in this case, which does not correspond to any period of insurance or even of actual residence in the Member State in question completed before the risk materialized, results in unilaterally and artificially upsetting the balance of the burden of the benefits existing between Member States in a way which is incompatible with the scheme of Article 46 (2).

12. Consequently the answer to the question referred to the Court should be that a supplementary period (Zurechnungszeit) which the legislation of a Member State adds to the periods of insurance completed before the risk materialized in order to evaluate the benefit awarded in the event of the premature invalidity or the premature death of an insured person must be taken into account in the calculation of the theoretical amount referred to in Article 46 (2) (a) but not in the calculation of the actual amount referred to in Article 46 (2) (b) of Regulation No 1408/71.

Costs

13. The costs incurred by the Commission of the European Communities which has submitted observations to the Court are not recoverable. Since the 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 (Third Chamber) in answer to the question referred to it by the Bundessozialgericht by an order of 19 September 1979, hereby rules: