The Advocate General's Opinion in the ASW case

The Advocate General's opinion in the ASW case brought against the UK government (Robins, Burnett and Others v Secretary of State for Work and Pensions) was issued today.

It concludes that:

• under the 1980 EC Insolvency Directive, the UK government should have taken steps to ensure that employees' benefits under final salary pension schemes were fully protected if the employer becomes insolvent, but the government failed to do so.
• although ultimately a matter for the UK High Court which referred the ASW case to Europe, on the limited evidence before the Advocate General the breach by the UK government is not sufficiently serious to give rise to successful claims for compensation against it by employees of insolvent companies such as ASW.

The Advocate General's Opinion is not a judgment of the European Court of Justice although the court follows such Opinions in about 4 out of 5 cases. If the court does follow it then:

• it will be down to the UK High Court to consider whether the UK government's breach was sufficiently serious to give rise to compensation payable by it to the members of relevant pension schemes. This will turn on the evidence that will be put before that court after a full disclosure process.
• going forward the UK government will probably have to improve the pensions safety net for employees when their employer becomes insolvent. The obvious method would be to increase the coverage of the Pension Protection Fund (PPF) so that it covers all members' benefits in full. If this happens, then PPF levies on employers could increase significantly and the Pensions Regulator may, in order to minimise claims on the PPF, take a tougher line on what constitutes adequate 'scheme specific funding' arrangements.

The Opinion does not consider the possibility of any temporal limitation on claims made relating to the case.

The Advocate General's Opinion can be accessed by clicking here.