JUDGMENT OF 2. 2. 1982 — CASE 7/81 SINATRA v FNROM

In Case 7/81 REFERENCE to the Court under Article 177 of the EEC Treaty by the Cour du Travail [Labour Court], Mons, Seventh Chamber, for a preliminary ruling in the action pending before that court between

THE COURT composed of: J. Menens de Wilman, President, A. Touffait and O. Due (Presidents of Chambers), Lord Mackenzie Stuart, A. O'Keeffe, T. Koopmans and U. Everling, Judges, Advocate General: S. Rozès Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The judgment making the reference and the written observations submitted in pursuance of 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

Mr Antonino Sinatra, an Italian national, is in receipt of a Belgian invalidity pension as a married underground mine-worker pursuant to the Royal Decree of 19 November 1970.

Since 1 November 1970 Mr Sinatra has also received a pension from an Italian institution. The Belgian pension is reduced by the amount of the Italian pension.

By decision of 15 June 1976 the Mine-Workers' National Pension Fund decided that the amount of the Belgian invalidity pension fell to be reduced pursuant to Article 4 (1)(4) of the Royal Decree of 19 November 1970 since Mr Sinatra's wife was in gainful employment which provided an income exceeding the limits permitted under the rules. On that occasion the Mine-Workers' National Pension Fund decided that the alteration of the Belgian pension from the “married rate” to the “single rate” justified a recalculation, pursuant to Article 51 (2) of Regulation No 1408/71, of the benefits due to Mr Sinatra. The Mine-Workers' National Pension Fund therefore obtained from the competent Italian institution details of the amount of the Italian pension which was paid to Mr Sinatra on 1 January 1976, account being taken of various changes which had occurred up to that date, and deducted that amount from the Belgian pension awarded to Mr Sinatra from 1 January 1976.

That application of Article 51 of Regulation No 1408/71 was challenged by Mr Sinatra before the appropriate Belgian courts. It was within the context of that dispute that by judgment of 7 January 1981 the Cour du Travail [Labour Court], Mons, requested the Court of Justice to give a preliminary ruling on the following questions:

“1. Does the ‘revalorization’ referred to in the heading to Article 51 of Regulation No 1408/71 of 14 June 1971 constitute the general framework of application of paragraphs (1) and (2) of that article with the result that the cases mentioned in paragraph (2) only cover instances in which there is a revalorization or increase in benefits even though the word ‘alter’ used in Article 51 (2) usually means both improvement and deterioration? 2. Is the ‘method of determining or the rules for calculating benefits’ ‘altered’ within the meaning of Article 51 (2) of Regulation No 1408/71 where there is an alteration only in the position of the person insured under the social security scheme which requires, in his case, application by the Belgian institution of a different rule of Belgian law relating to the amount of the Belgian underground mine-workers' invalidity pension awarded to him with the effect of reducing the pension (Article 4 (1) (4) of the Roval Decree of 19 November 1970), without anv change having occurred at that time in the Belgian legislative provisions as such relating to the manner of fixing benefits or in those concerning the rules for calculating benefits? 3. Must Article 51 (2) of Regulation (EEC) No 1408/71 be interpreted as meaning that an alteration only in the amount of the invalidity pension awarded by the competent Belgian institution to a person insured under the social security scheme which has the effect of reducing that amount, in application of Article 4 (1) (4) of the Royal Decree of 19 November 1970, entails a recalculation of the benefits in accordance with Article 46 of Regulation No 1408/71?”

The judgment referring the questions to the Court was received at the Court Registry on 14 January 1981.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC written observations were submitted by the plaintiff in the main proceedings, represented by D. Rossini, and by the Commission of the European Communities, represented by its Legal Adviser, J. Amphoux, acting as Agent.

On 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 under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

A — Observations submitted by the plaintiff in the main action

Mr Sinatra considers that the exact scope of Article 51 (2) of Regulation No 1408/71 of the Council should be appraised by reference to the aims of the Treaty. As' the Court has frequently stated, Articles 48 to 51 of the Treaty are intended to foster freedom of movement for workers and to prevent the loss of rights to benefits acquired by virtue of the various laws to which the migrant worker has been subject. Those objectives are recalled in the preamble of Regulation No 1408/71.

The plaintiff in the main action accordingly concludes that it would be abnormal and contrary to the spirit of the Treaty for the competent institution of a Member State to use an alteration occurring in its own legislation as a pretext for making a double reduction in the amount of the benefits payable by it, namely, one reduction by application of rules of national law and another reduction as a result of pension increases which are awarded by the institution of another State and under Community law. Such an interpretation of Article 51 (2) of Regulation No 1408/71 would constitute a “punitive measure”, so far as the migrant worker is concerned, where the recalculation of the pension produced a result disadvantageous to him. It is clear that the Community regulations in this field have not been adopted in order to allow insurance offices responsible for paying benefits to evade payment of pensions due under national law alone or to make savings at the expense of migrant workers.

According to Mr Sinatra, any calculation based on Community regulations should improve the lot of the migrant worker and not reduce the rights which the worker already possesses pursuant to Article 46.

The plaintiff in the main action therefore suggests that the Court answer the questions submitted as follows:

“Article 51 (2) of Regulation No 1408/71 of the Council must be interpreted as meaning that a recalculation of benefits in accordance with the provisions of Article 46 should not be carried out if the recalculation is liable to reduce the amount of benefits previously awarded”.

B — Observations of the Commission of the European Communities

The Commission states that, according to well-established case-law of the Court, in seeking the meaning and scope of a rule of Community law it is important to consider the scheme of the body of rules of which that rule forms part and the end which that rule pursues.

As far as Article 51 of Regulation No 1408/71 is concerned, the exemption from the requirement to carry out a recalculation of the benefits which is set out in paragraph (1) of that article should be considered not as the expression of a principle but rather as an exception. In principle any alteration in the amount of a pension payable by one Member State should automatically entail the alteration of pensions payable by other Member States. However, because of the administrative difficulties which such a situation would create, Article 51 (1) restricts the number of cases in which it is necessary to recalculate benefits. Article 51 (1) refers in particular to periodical adjustments linked to increases in the cost of living or to the level of wages or salaries and also “other reasons for adjustment”, but those reasons may only be those of general application. On the other hand alterations to benefits which are made for reasons which relate to a particular recipient do not come within the provisions of Article 51 (1) of Regulation No 1408/71.

Article 51 (2) determines the cases in which a recalculation must be carried out. It refers in the first place to alterations which occur as a result of the bringing into effect of new legislative provisions but, according to the Commission, it may not be thought that the Council intended to confine recalculation of benefits to those cases alone. That paragraph is couched in more general terms and in the Commission's view it must be accepted that a change in the amount of pension consequent upon the spouse's taking up gainful employment represents an instance in which the method of determining the relevant benefit has altered within the meaning of Article 51 (2).

Moreover the Commission submits that if such a situation were not covered by Article 51 (2) it would be necessary to hold that the question of alterations to benefits which are caused by the individual circumstances of the recipient is not dealt with by any express provisions of Community regulations and has to be resolved in accordance with unwritten rules to be deduced from the scheme of that regulation. Those rules would lead to the conclusion that a recalculation of benefits must be carried out whenever there is an alteration caused by the particular circumstances of the recipient. Since such alterations do not have the same general and repetitive nature as alterations due to the causes covered by Article 51 (1) it is not possible, in the Commission's view, to set against the requirement to recalculate benefits the need for administrative simplicity which underlies Article 51 (1) of Regulation No 1408/71.

The Commission then deals with the question whether Article 51 (2) should be applied irrespective of whether its application would result in an increase or a decrease in the rate of the relevant benefits.

The Commission considers that the fact that application of Article 51 (2) may result in a decrease in the relevant benefits is of no account. The only point which may be advanced as an argument to the contrary is the wording of the heading to Article 51: “revalorization and recalculation of benefits”. It is well settled that the headings given to the various provisions of Regulation No 1408/71 do not in themselves have any legislative content and it is clear that the word “revalorization” refers solely to Article 51 (1) whereas the words “recalculation of benefits” refer to Article 51 (2).

The Commission adds that in its view there is no reason to regard a recalculation of the benefits due to the recipient of social benefits under Article 46 as being necessarily unfavourable to him where the alteration justifying the recalculation produces a decrease in one of those benefits. On the one hand, the recalculation may just as easily lead to an increase in the social benefits as to a disadvantageous result and, on the other hand, since a recalculation under Article 46 has to be carried out not only by the institution responsible for paying the reduced national benefits but also Dv the institutions of the other Member States concerned, that recalculation may lead to a revalorization of the benefits payable by other Member States.

In conclusion the Commission suggests that the Court should give the following answer to the questions submitted to it:

“Articles 46 and 51 of Regulation No 1408/71 must be interpreted as meaning that an alteration in the method of determining or the rules for calculating the benefits paid to an insured person which results from a change in his personal circumstances requires the competent institutions to earn' out a recalculation of the benefits in accordance with the provisions of Article 46, irrespective of whether the alteration produces an increase or a decrease in the benefit in question. Such is the case in particular where the fact that the insured or his spouse are in gainful employment requires that benefits paid by one of the Member States pursuant to the law of that State should be calculated on the basis of a difterent rate.”

III — Oral procedure

At the sitting on 14 July 1981 oral argument was presented by the following: D. Rossini for Mr Sinatra; Mr Stein for the Fonds National de Retraite des Ouvriers Mineurs; and J. Amphoux, Legal Adviser, acting as Agent, for the Commission of the European Communities.

The Advocate General delivered her opinion at the sitting on 22 October 1981.

Decision

1. By judgment of 7 January 1981, which was received at the Court of Justice on 14 January 1981, the Cour du Travail [Labour Court], Mons, referred to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty three questions on the interpretation of Article 51 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. Those questions arose in the context of proceedings between Mr Sinatra, an Italian national, and the Fonds National de Retraite des Ouvriers Mineurs [National Pension Fund for Miners], a Belgian social security institution. Since 1 April 1971 Mr Sinatra has been in receipt, under Belgian legislation alone, of an invalidity pension paid by the Belgian institution. Applying national rules against the overlapping of benefits, that institution deducts from the Belgian pension the amount of the pension paid by the Italian authorities since 1 November 1973 pursuant to the relevant Community rules. Because of the gainful employment of Mr Sinatra's wife the amount of the Belgian pension was reduced, with effect from 1 January 197b. to the “single rate”. The Belgian institution considered that, by virtue ot Article 51 (21 of Regulation No 1408/71, that alteration made it necessary to recalculate the benefits in accordance with Article 46 of that regulation. On 2 November 1978 it was informed of the amount of the Italian benefits paid on 1 January 1976 and, applying Belgian provisions against the overlapping of benefits and taking account of the value of that amount as at 1 January 1976, claimed from Mr Sinatra for the period from 1 January 1976 to 31 January 1979 an overpayment of BFR 38800.

3. The Cour du Travail, Mons, considering that the outcome of the main action depended upon the interpretation of Article 51 of Regulation No 1408/71 of the Council, referred to the Court the following questions for a preliminary ruling:

“1. Does the ‘revalorization’ referred to in the heading to Article 51 of Regulation No 1408/71 of 14 June 1971 constitute the general framework of application of paragraphs (1) and (2) of that article with the result that the cases mentioned in paragraph (2) only cover instances in which there is a revalorization or increase in benefits even though the word ‘alter’ used in Article 51 (2) usually means both improvement and deterioration?

2. Is the ‘method of determining or the rules for calculating benefits’ ‘altered’ within the meaning of Article 51 (2) of Regulation No 1438/71 where there is an alteration only in the position of the person insured under a social security scheme which requires, in his case, application by the Belgian institution of a different rule of Belgian law relating to the amount of the Belgian underground mineworkers' invalidity pension awarded to him with the effect of reducing the pension (Article 4 (1) (4) of the Royal Decree of 19 November 1970), without any change having occurred at that time in the Belgian legislative provisions as such relating to the manner of fixing benefits or in those concerning the rules for calculating benefits?

3. Must Article 51 (2) of Regulation (EEC) No 1408/71 be interpreted as meaning that an alteration only in the amount of the invalidity pension awarded by the competent Belgian institution to a person insured under the social security scheme which has the effect of reducing that amount, in application of Article 4 (1) (4) of the Royal Decree of 19 November 1970, entails a recalculation of the benefits in accordance with Article 46 of Regulation No 1408/71?”

4. It is clear from an analysis of those questions that the national court is essentially seeking to ascertain whether, according to Article 51 of Regulation No 1408/71, a recalculation of benefits in accordance with Article 46 of that regulation is necessary where an alteration in the personal circumstances of the insured entails a reduction in the benefits paid to him.

5. The system of aggregation and apportionment which is provided for in Article 46 of Regulation No 1408/71 and which is based on Article 51 of the Treaty is intended to remedy situations in which the laws of one Member State do not by themselves allow the person concerned the right to benefits by reason of the insufficient number of periods completed under its laws, or only allow him benefits which are less than the maximum.

6. That system may not therefore be applied if its effect is to diminish the benefits which the person concerned may claim by virtue of the laws of a single Member State on the basis solely of the insurance periods completed under those laws.

7. However, where the application of such national laws proves less favourable than the application of the rules regarding aggregation and apportionment those rules must, by virtue of Article 46 of Regulation No 1408/71, be applied.

8. The right thus conferred upon the migrant worker to benefit from the most favourable social security system implies in principle that, whenever there is an alteration in the benefits granted under that system, a fresh comparison between the national system and the system of aggregation and apportionment is to be carried out in accordance with Article 46 of Regulation No 1408/71, in order to determine which system is the most advantageous following the alteration.

9. However, in order to reduce the administrative burden which a fresh examination of the insured's situation following even alteration of benefits received would represent, Article 51 of Regulation No 1408/71 establishes a distinction between alterations in benefits “by a fixed percentage or amount” resulting from “an increase in the cost of living or changes in the level of wages or salaries or other reasons for adjustment” and alterations in the “method of determining” or “the rules for calculating” benefits. Paragraph (1) of that article provides that alterations of the first type must be applied directly to the benefits paid without any need for the recalculation expressly provided for in Article 51 (2) in respect of alterations of the second type.

10. The regulation was thus intended to exclude a fresh calculation where the alterations in the benefits result from events unconnected with the personal circumstances of the insured and are the consequences of the general evolution of the economic and social situation.

11. Such exclusion may not, in the absence of appropriate specific provisions, be extended to alterations in benefits due to a change in the personal circumstances of the insured, such as his transition from the “household” category to the “single” category, particularly as it is not possible to envisage an application, by analogy, of Article 51 (1) in such cases, since changes in the personal circumstances of insured workers, as opposed to the “reasons for adjustment” referred to in that paragraph, are not of a general nature.

12. Therefore the answer to be given to the questions raised by the Cour du Travail, Mons, is that a recalculation in accordance with the provisions of Article 46 of Regulation No 1408/71 is necessary in respect of each alteration in benefits paid by a Member State, save where such alteration is due to one of the “reasons for adjustment” provided for in Article 51 (1) of Regulation No 1408/71 which do not include supervening changes in the personal circumstances of the insured.

Costs

13. 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 Cour du Travail, Mons, by judgment of 7 January 1981, hereby rules: