Report for the Hearing in Case C-65/92

I — Relevant legislation

1. National Law

The Belgian Law of 1 April 1969 introducing a guaranteed income for elderly persons (Moniteur Belge of 29 April 1969, p. 3954), as amended by the Law of 4 May 1981, which was applicable at the material time, provides as follows:

‘1. A guaranteed income shall be granted to men and women of at least 65 and 60 years of age, respectively, who satisfy the requirements laid down by this law. 2. Recipients must either be Belgian nationals, stateless persons or recognized refugees within the meaning of the Law of 28 March 1952 on the Aliens Police or a national of a State with which, in this field, Belgium has concluded a reciprocal agreement or has acknowledged the existence of de facto reciprocity or any other foreign national, provided that he is entitled to an employed person's retirement or survivor's pension in Belgium ... Beneficiaries must actually reside in Belgium. Non-Belgian beneficiaries must also have actually resided in Belgium for at least the five years immediately preceding the date of entidement to the guaranteed income. The King shall determine the meaning of actual residence.’

Under Article 4 of the Law:

‘1. The guaranteed income may be granted only after an inquiry has been carried out into the applicant's resources. Without prejudice to the provisions of paragraph 2 and Article 10, all resources, whatever their nature or origin, which are available to the applicant and his spouse shall be taken into account ... 2. For the purpose of calculating resources, no account shall be taken of: ... 4. Pensions acquired as a result of voluntary contributions paid in accordance with the laws consolidated by the Regent's Decree of 12 September 1946 on old-age and premature death insurance or pensions acquired in accordance with the Law of 12 February 1963 organizing a system of retirement and survivors' pensions for voluntarily insured persons or retirement or survivors' pensions granted under a Belgian retirement or survivors' pension scheme.’

Article 8 of the Law provides that:

‘The amount of resources exceeding an amount to be fixed by royal decree adopted by the Council of Ministers shall be deducted from the amount of guaranteed income determined in accordance with Articles 2 and 3 ...’.

Finally, under Article 10 of the Law:

‘Retirement and survivors' pensions and all other advantages granted to the applicant or his spouse pursuant to a compulsory Belgian pension scheme introduced by or pursuant to a law or a provincial regulation or by the National Belgian Railway Company or pursuant to a foreign compulsory pension scheme or by way of allowances, grants or pensions granted as reparation or compensation to war victims or their successors shall be deducted from the amount of the guaranteed income. However, the King may order, by a decree adopted by the Council of Ministers, that such pensions and other advantages as he may determine shall not be deducted from guaranteed income to such extent as he may prescribe. Furthermore, for the purposes of the application of this article, only the amount actually paid shall be taken into account. However, the King may determine in which cases the reduction or suspension of a pension or an advantage shall not be taken into account for the purposes of the application of this article.’

2. Community Law

Article 46 of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community (as codified by Council Regulation (EEC) No 2001/83 of 2 June 1983, OJ 1983 L 230, p. 6) provides as follows:

‘1. Where an employed or self-employed person has been subject to the legislation of a Member State and where the conditions for entitlement to benefit have been satisfied, without application of the provisions of Article 45 and/or Article 40(3) being necessary, the competent institution of that Member State shall, in accordance with the provisions of the legislation which it administers, determine the amount of benefit corresponding to the total length of the periods of insurance or residence to be taken into account in pursuance of such legislation. This institution shall also calculate the amount of benefit which would be obtained by applying the rules laid down in paragraph 2(a) and (b). Only the higher of these two amounts shall be taken into consideration. 2. Where an employed or self-employed person has been subject to the legislation of a Member State and where the conditions for entitlement to benefit are not satisfied unless account is taken of the provisions of Article 45 and/or Article 40(3), the competent institution of that Member State shall apply the following rules: (a) the institution shall calculate the theoretical amount of benefit that the person concerned could claim if all the periods of insurance or residence completed under the legislation of the Member State to which the employed or self-employed person has been subject had been completed in the Member State in question and under the legislation administered by it on the date the benefit is awarded. If, under that legislation, the amount of the benefit does not depend on the length of the periods completed then that amount shall be taken as the theoretical amount referred to in this subparagraph; (b) the institution shall then establish the actual amount of the benefit 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 or residence completed before the risk materializes under the legislation administered by that institution bears to the total length of the periods of insurance and residence completed under the legislation of all the Member States concerned before the risk materialized; (c) if the total length of the periods of insurance and residence completed before the risk materializes under the legislations of all the Member States concerned is longer than the maximum period required by the legislation of one of these States for receipt of full benefit, the competent institution of that State shall, when applying the provisions of this paragraph, take into consideration this maximum period instead of the total length of the periods completed; this method of calculation must not result in the imposition on that institution of the cost of a benefit greater than the full benefit provided for by the legislation which it administers; (d) the procedure for taking into account overlapping periods, when applying the rules of calculation laid down in this paragraph, shall be laid down in the implementing Regulation referred to in Article 98. 3. The person concerned shall be entitled to the total sum of the benefits calculated in accordance with the provisions of paragraphs 1 and 2, within the limit of the highest theoretical amount of benefits calculated according to paragraph 2(a). Where the amount referred to in the preceding subparagraph is exceeded, any institution applying paragraph 1 shall adjust its benefit by an amount corresponding to the proportion which the amount of the benefit concerned bears to the total of the benefits determined in accordance with the provisions of paragraph 1. 4. When in a case of invalidity, old-age or survivors' pensions, the total of the benefits due from two or more Member States, under the provisions of a multilateral social security convention referred to in Article 6(b), is lower than the total which would be due from such Member States under paragraphs 1 and 3, the person concerned shall benefit from the provisions of this chapter.’

Article 51 of that regulation provides as follows:

‘1. If, by reason of an increase in the cost of living or changes in the level of wages or salaries or other reasons for adjustment, the benefits of the States concerned are altered by a fixed percentage or amount, such percentage or amount must be applied directly to the benefits determined under the provisions of Article 46, without the need for a recalculation in accordance with the provisions of that Article. 2. On the other hand, if the method of determining or the rules for calculating benefits should be altered, a recalculation shall be carried out in accordance with the provisions of Article 46.’

II — Facts and procedure

1. Facts of the main proceedings

Mrs Caterina Milazzo, an Italian national residing in Belgium, whose son Raffaele Levatino has succeeded to her rights in the main proceedings, received an employed person's retirement pension in Belgium from 1 October 1967 and an Italian retirement pension from 1 November 1967.

On 27 December 1972, Mrs Milazzo applied for the guaranteed income for elderly persons provided for by the Belgian Law of 1 April 1969.

Following the annulment of the decision of the Minister for Social Security of 20 February 1975 refusing to grant Mrs Milazzo that benefit by judgment of the Tribunal du Travail (Employment Tribunal), Liège, of 23 September 1975, the Office National des Pensions pour Travailleurs Salariés, succeeded first by the Caisse Nationale des Pensions de Retraite et de Survie and subsequently by the Office National des Pensions (hereafter ‘the ONP’), paid her a guaranteed income of BFR 20679 from 1 January 1973 and BFR 34160 from 1 July 1973. That income was paid until March 1984.

The amount of that benefit was determined by taking into account Mrs Milazzo's pensions, which amounted to an aggregate BFR 20102 per annum as at 1 January 1973 and to BFR 20268 per annum as at 1 July 1973.

By decision notified on 6 March 1984, the Caisse National des Pensions de Retraite et de Survie informed Mrs Milazzo that it ‘[had just] recalculated the amount of the Belgian pension to which [she was] entitled, taking account of the last known amount of [her] foreign pension and the exchange rate officially applicable ...’ and that, from April 1984, the sum of BFR 11530 would be paid to her ‘monthly’.

2. Procedure before the national courts

— Mrs Milazzo brought an action against that decision before the Tribunal du Travail, Liège, on 4 April 1984.

Following her death on 26 August 1984, Raffaele Levatino, her son, took over the proceedings.

Mr Levatino argued before that court that the recalculation effected by the Caisse de Pensions was contrary to Article 51 of Regulation No 1408/71.

In its judgment of 16 September 1987, the Tribunal du Travail, Liège, held that, in accordance with the case-law of the Court of Justice, the guaranteed income had to be treated as an old-age benefit (Case 1/72 Frilli [1972] ECR 457) and that the competent authority was not entitled to recalculate that benefit where the alteration in the benefit paid by the competent authority of another Member State was due to the change in the cost of living (Case 7/81 Sinatra [1982] ECR 137).

It went on to order ‘the defendant to pay the plaintiff the arrears of the guaranteed income for the period 1 April 1984 to 24 August 1984, the date of death, without effecting any deduction whatsoever on the ground that the original plaintiff had been in receipt of a foreign pension’.

On 11 January 1988 the ONP appealed to the Cour du Travail (Employment Court), Liège, against that decision.

The ONP submitted that, since the guaranteed income depended solely on the applicant's resources, it did not fall within the scope of Article 46 of Regulation No 1408/71, which related only to benefits determined on the basis of a period of insurance or residence, and that hence Article 51 of the regulation was not applicable to it.

By judgment of 3 February 1989, the Cour du Travail, Liège, held that it followed from the case-law of the Court of Justice (the judgments in Frilli and Sinatra) that the ONP had to ‘pay and index link the Belgian guaranteed income under Article 46 of Regulation No 1408/71 without taking account of adjustments in the Italian pension resulting from the change in the cost of living’, but observed that the Tribunal du Travail had erred when it referred in the operative part of its judgment to ‘any deduction whatsoever’ when the principle that the foreign pension had to be deducted was not contested.

The Cour du Travail upheld the judgment of the lower court but amended the operative pan as follows: ‘without effecting any deduction whatsoever on ground that the original plaintiff was in receipt of a foreign pension’ shall be replaced by the words ‘without taking account of changes in the Italian pension resulting from inflation and consequently from the increase in the index’.

On 25 March 1991 the ONP brought an appeal on a point of law against that decision.

Before the Belgian Cour de Cassation, the ONP took up essentially the same arguments that it had put to the Cour du Travail, Liège.

Considering that the dispute raised questions relating to the interpretation of Community law, the Belgian Cour de Cassation (Third Chamber) referred the following question to the Court of Justice for a preliminary ruling by judgment of 10 February 1992:

‘Must Articles 46 and 51 of Regulation (EEC) No 1408/71 be interpreted as meaning that they apply where an old-age benefit paid under the legislation of one Member State overlaps with a benefit supplementing an employed person's old-age benefit which guarantees an elderly person an income regardless of the length of the insurance periods and is paid under the legislation of another Member State, even if such application has the effect of conferring an advantage on a migrant worker in comparison with a non-migrant worker, although Article 3(1) of the said regulation provides that all nationals of Member States should be treated equally?'

3. Procedure before the Court

The judgment of the Cour de Cassation was received at the Court Registry on 4 March 1992.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the Office National des Pensions, the appellant in the main proceedings, represented by its general administrator, R. Masyn; by Mr Levatino, the respondent in the main proceedings, represented by Jules Raskin, of the Liège Bar, and by the Commission of the European Communities, represented by Dimitrios Gouloussis, Legal Adviser, and Marie Wolfcarius, of its Legal Service, acting as Agents.

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.

By order of 21 October 1992 the Court assigned the case to the Fifth Chamber.

III — Summary of the parties’ written observations

1. After setting out the method for calculating the guaranteed income as prescribed by the Belgian Law of 1 April 1969, notably the provisions of Article 10 of that law, the ONP argues in the first place that the Court held in the judgment in Frilli that the minimum income guaranteed to elderly persons by the legislation of a Member State had to be regarded, in certain cases, as an old-age benefit within the meaning of the Community rules as far as the conditions for granting the benefit were concerned, but did not intend to hold that the rules laid down in Chapter III of Regulation No 1408/71 should be applied to the calculation of the benefit. Secondly, the ONP argues that the rules for calculating the guaranteed income provided for by the Belgian Law are incompatible with those laid down by Chapter III of Regulation No 1408/71. Only the resources of the person concerned are taken into account under the Belgian system, whereas the Community rules are concerned with the calculation of old-age benefits the amount of which depends on the periods of insurance completed under the legislation of two or more Member States or where the party concerned has been subject successively or alternately to the legislation of more than one Member State. Therefore, according to the ONP, the provisions of Article 46 of Regulation No 1408/71 are not applicable to the payment and indexation of the guaranteed income. As a result, the provisions of Article 51 of the regulation, which relate only to benefits determined under the provisions of Article 46, are not applicable to the guaranteed income. Lastly, the ONP argues that, if no account is taken of changes in the amount of pensions granted under foreign schemes when calculating the guaranteed income, this will give rise to an infringement, contrary to Article 3 of Regulation No 1408/71, of the principle of equal treatment of persons residing on Belgian territory, depending on whether they have a pension granted under Belgian law or a pension granted under the law of another Member State.

2. In contrast, Mr Levatino and the Commission argue that the provisions of Article 46 and 51 of Regulation No 1408/71 are applicable to the calculation of the guaranteed income and that their application is not contrary to Article 3 of the regulation. (a) First, Mr Levatino questions the ONP's argument to the effect that Article 46 of Regulation 1408/71 is not applicable to guaranteed income benefits granted under the Belgian Law of 1 April 1969. He contends that: the Court of Justice held in Frilli that the minimum old-age benefit guaranteed by the legislation of a Member State constitutes an ‘old-age benefit’ within the meaning of Article 2(l)(c) of Regulation No 3 of the Council of 3 December 1958 concerning the social security of migrant workers (Journal Officiel 1958, p. 561). entitlement to the minimum pension guaranteed by Belgian law depends on the amount of ‘old-age benefits’ within the meaning of Article 46 of Regulation No 1408/71, namely any retirement pensions to which the person concerned is entitled under the legislation of Member States where he worked, and remains subject to the provisions against overlapping applicable to those benefits. Mr Levatino goes on to reject the ONP's argument that Article 51 of Regulation No 1408/71 is consequently not applicable to those benefits. In his opinion, the provisions of Article 51(1) of Regulation No 1408/71 are applicable, not only to benefits the amount of which has been determined in accordance with the rules laid down by Article 46 of the regulation, but also to benefits granted on the basis of the amount of such benefits (Case 104/83 Cinciuolo [1984] ECR 1285). According to the judgment in Case C-85/89 Ravida [1990] ECR I-1063, paragraph 23, only when the alteration in entidements is due to a change in the worker's personal circumstances is it necessary to carry out a recalculation of the benefits. Mr Levatino proposes the following reply to the preliminary question: ‘1. In the event of overlapping of old-age benefits paid pursuant to the legislation of a Member State, Articles 46 and 51 of Regulation No 1408/71 are applicable where a retirement benefit and a supplementary guaranteed income overlap, even where, in principle, the latter is determined independently of the duration of periods of insurance recognized in one or more Member States. 2. Article 3(1) of that regulation, which establishes equality of treatment for all nationals of the Community, does not preclude the application of the regulation even if the said application will place the migrant worker in a more favourable position than a non-migrant worker.’ (b) In the view of the Commission, the national court is seeking to establish (a) whether — and, if so, how — the Community rules relating to pensions are applicable to noncontributory benefits of a hybrid nature (falling within the ambit of both social assistance and social security) such as the guaranteed income for elderly persons and (b) whether such application is contrary to the principle of equal treatment where it is more favourable to migrant workers.

1. The Commission argues in the first place that the income guaranteed to elderly persons by the Belgian Law falls within the scope ratione materiae of Regulation 1408/71 and constitutes an old-age benefit within the meaning of Article 4(c) of that regulation. It argues that, as the Court has consistently held, the scope rattorte materiae of the regulation also covers certain noncontributory benefits of a hybrid nature, falling within the ambit of both social assistance and social security, since, among other things, the relevant legislation confers on the beneficiary a legally defined position and relates to one of the risks expressly listed in Article 4 of Regulation No 1408/71. It observes that in the judgment in Fritti the Court held that the guaranteed income granted by the legislation of a Member State to persons who were entitled to a pension in that State constituted an ‘old-age benefit’ within the meaning of Community social security rules. The Commission also observes that in its judgment in Case 261/83 Castelli [1984] ECR 3199 the Court held that a dependent relative in the ascending line of a worker from a Member State was entitled, under Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475), to the income guaranteed to elderly persons by the legislation of the worker's Member State, even though she had never worked in that State and was in receipt of a pension only under the legislation of another Member State. In the Commission's view, the Court has not settled whether a national of a Member State who receives retirement benefits only pursuant to the legislation of one Member State, as it seems to be the case in this instance, is entitled to receive income guaranteed by the legislation of another Member State. Lastly, it points out that the grant of a guaranteed income is not contested in this case; only the rules concerning its calculation are at issue.

2. Secondly, the Commission suggests that it be held that the provisions of Article 46 of Regulation No 1408/71 are applicable to benefits paid independently of periods of insurance or residence. The Commission argues, in the first place, that the general provisions set out in Chapter III of the regulation (Article 44) do not restrict their application to benefits depending on the duration of periods of insurance or residence. Next it argues that it is possible to consider that the amount of the benefits referred to in Article 46(1), which has to be calculated without taking account of the national rules against overlapping (see, in particular, the judgments in Joined Cases 116/80, 117/80, 119/80, 120/80 and 121/80 Celestre and Others [1981] ECR 1679, Case 58/84 Romano [1985] 1679 and in Case 117/84 Ruzzu [1985] 1697), is the amount of the income guaranteed by the Belgian Law as it would be if the amount of the pension paid under the Italian scheme were not taken into account. It also argues that it is possible to consider that the theoretical amount of the benefit referred to in the second sentence of Article 46(2)(a) constitutes the amount of the guaranteed income. Therefore, under Article 46(2)(b), there is nothing to prevent the amount of benefit from being calculated in proportion to the length of the periods of residence (and even of insurance) completed by the party concerned, prior to entitlement, in the territory of the Member State paying the guaranteed income. Thus, in the Commission's view, the double calculation provided for by Article 46 of the regulation, the purpose of which — as the Court has consistently held — is to secure favourable treatment for migrant workers in order to promote the free movement of persons, is possible and may result in the payment of higher benefits. That interpretation of Article 46 enables effective protection of the person concerned to be secured.

3. Thirdly, the Commission argues that Article 51 of Regulation No 1408/71 is therefore automatically applicable, since the guaranteed income is calculated in accordance with the rules set out in Article 46, and that, according to that which the Court has consistently held (see in particular the judgments in Sinatra and Ravida, cited above, and in Case C-93/90 Cassamali [1991] ECR I-1401), that article must be interpreted as precluding the recalculation of an old-age benefit when a retirement benefit paid by another Member State is revalorized in order to take account of the general evolution of the economic and social situation in that State. The Commission considers that that interpretation also holds good for noncontributory benefits of a hybrid nature. To hold otherwise would be difficult to justify and would lead to an infringement of the principle of equal treatment as between migrant workers. A restrictive interpretation would also go against the objective sought by the Community rules of achieving the freedom of movement of persons.

4. Fourthly, the Commission argues that the fact that the application of Articles 46 and 51 of Regulation No 1408/71 would put migrant workers at an advantage over national workers is not contrary to Article 3 of the regulation. It argues that, as the Court has consistendy held (see in particular the judgments in Case 24/75 Petroni [1975] ECR 1149 and Case C-227/89 Rönfeldt [1991] ECR I-323), application of the Community rules should not lead to a less favourable result for the worker than the straightforward application of the legislation of a Member State. In its view, the case-law treats migrant and non-migrant workers differently because they are in different situations; it is the opposite interpretation which would be discriminatory. It also observes that the Court even held in the judgment in Case 1/67 Ciechelski [1967] ECR 181 that social security regulations might ‘in certain circumstances, ... benefit the migrant worker as compared with the situation which would result for him from the exclusive application of national law’, thereby constituting incentives to the exercise of free movement. Lastly, it argues that Article 3 of Regulation 1408/71 seeks equality as between nationals of a Member State and nationals of other Member States and not to equality as between migrants and non-migrants. Moreover, Article 3(1) provides for national legislation to be applied subject to contrary provisions contained in the regulation. In this instance, the application of those provisions proves to be more favourable to the migrant worker. Therefore, the Commission suggests that the Court reply as follows to the national court's question:

‘Article 46 and Article 51 of Regulation (EEC) No 1408/71 must be interpreted as being applicable where an old-age benefit paid under the legislation of one Member State overlaps with a “guaranteed income” granted under the general legislation of another Member State which secures an entidement to a minimum pension for elderly persons residing in that State regardless of the length of periods of insurance, even if such application may place confer an advantage on a migrant worker in comparison with a non-migrant worker.’

IV — Replies to questions put by the Court

The Court asked the ONP to answer the following questions:

The decision addressed to Mrs Milazzo on 6 March 1984, which gave rise to the main proceedings, informed her that:

‘... the Caisse National des Pensions de Retraite et de Survie has just recalculated the amount of the Belgian pension to which you are entitled, taking account of the last known amount of your foreign pension and the exchange rate officially applicable in accordance with the Royal Decree of 29 July 1981. As from April 1984 you will be paid BFR 11530 per month.’

The ONP is requested to:

1) describe in detail how the guaranteed income initially paid to Mrs Milazzo was calculated (as at 1 January 1973), while specifying, in particular, the national provisions on the basis of which the competent institution determined this amount and the nature and the exact amount of the resources of the person concerned which were taken into account for the purposes of that calculation;

2) indicate on which dates, by which methods and on the basis of what provisions of national law the amount of guaranteed income paid to Mrs Milazzo was (if at all) altered (revalorizations, recalculations, etc.) during the period 1 January 1973 to 31 March 1984;

3) describe in detail how Mrs Milazzo's guaranteed income was recalculated on 1 April 1984, while specifying, in particular, the provisions of national law on which the recalculation was based, the reasons for which the recalculation was carried out and the nature and the exact amount of Mrs Milazzo's resources which were taken into account for the purposes of that recalculation.

In response to those questions, the ONP produced to the Court:

the decision of the Office National des Pensions pour Travailleurs Salariés of 20 September 1977 by which Mrs Milazzo was granted a guaranteed income benefit with effect from 1 January 1973;

the forms calculating the residuary benefits in respect of Mrs Milazzo for the period 1 February 1973 to 1 August 1984;

a table of legal provisions relating the amount of guaranteed income for the period 1 May 1969 to 1 January 1991;

a table of so-called ‘immunized’ pension amounts for the period 1 January 1969 to 1 May 1984.

It appears from those documents that the amount of the guaranteed income benefit paid to Mrs Milazzo, which amounted to BFR 20679 per annum as at 1 January 1973, was regularly altered in order to take account of the changes in the amount of the guaranteed income, the Belgian pension and the Italian pension paid to Mrs Milazzo. The amount of guaranteed income benefit came to BFR 170822 per annum on 1 January 1984 and was reduced to BFR 57793 per annum on 1 April 1984. It amounted to BFR 75401 per annum on 1 August 1984.

The various calculations of the benefit were effected pursuant to Article 10 of the Belgian Law of 1 April 1969 introducing a guaranteed income for elderly persons.

The details of the calculation of the guaranteed income benefit paid to Mrs Milazzo for the four dates stated above is shown in the table below (the amounts are expressed in Belgian francs).

F. Grévisse

Judge-Rapporteur

1 Language of the case: French.

2 Unchanged since 1 January 1975.