Protection of property (Article 1 of Protocol No. 1 to the Convention)
II. RELEVANT DOMESTIC LAW 20. Section 13(1) and (4) of the Seamen ’ s Pension Fund Act (Law no. 49/1974 – “the 1974 Act”) read: “ ( 1 ) Each Fund member who has paid premiums to the Fund for the past three calendar years, and for at least six of the past twelve months, shall be entitled to a disability pension if he suffers a loss of fitness for work that the senior consulting physician assesses at 35% or more. This disability assessment shall be based mainly on the Fund member ’ s incapacity to do the job in which he was engaged and on which his membership of the Fund is based. Despite being disabled, no person shall be entitled to a disability pension while retaining full wages for the job that he used to do, or while receiving equally high wages for another job which grants pension rights, and the pension shall never be higher than the equivalent of the loss of income demonstrably incurred by the Fund member as a result of his disability. ... ( 4 ) A disabled person who applies for a disability pension from the Fund or receives such a pension shall be obliged to provide the Board of the Fund with all the information on his health and earned income that is necessary to determine his right to receive the pension.” Under section 15(3) of the 1974 Act the applicant was eligible to receive child benefits. 21. Section 5 of Law no. 44/1992 (“the 1992 Act”) read: “ For the first five years after the commencement of this Act, the disability assessment of disability pensioners who already receive benefit due to loss of working capacity before the commencement of the Act shall be based on their incapacity for the job in which they were previously engaged and on which their membership of the Fund is based, but after that time it shall be based on their incapacity for work in general. Furthermore, the change in the child benefit entitlement of the recipients of disability pensions resulting from section 8 of this Act shall not take effect until five years after the commencement of the Act. ” 22. The 1974 Act, as amended by the 1992 Act, was replaced by Law no. 94/1994 (“the 1994 Act”) when it came into force on 1 September 1994. All the provisions covering the basis of disability pensions and child benefit payments were removed from the Act and included in the Regulations on the Seamen ’ s Pension Fund, which also came into force on 1 September 1994. According to the Government, this did not affect the applicant specifically, since the interim provision of the 1992 Act still applied to his situation until 1 July 1997. The applicant contended that the interim provision had been repealed on 1 September 1994. THE LAW I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 AND OF ARTICLE 14 OF THE CONVENTION 23. The applicant complained that the discontinuation of his disability pension had given rise to a violation of Article 1 of Protocol No. 1, taken on its own and in conjunction with Article 14 of the Convention. Those Articles provide: Article 1 of Protocol No. 1 “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” Article 14 of the Convention “The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.” 24. The Government disputed the applicant ’ s allegation and invited the Court to find that no violation had occurred in the present case. A. Alleged violation of Article 1 of Protocol No. 1 1. The applicant 25. The applicant argued that his pension rights fell within the scope of protection of Article 1 of Protocol No. 1 and that the national measures depriving him of these rights entailed an interference with the peaceful enjoyment of his possessions within the meaning of this provision. 26. The applicant further submitted that, contrary to former Article 67 (currently Article 72) of the Icelandic Constitution, the deprivation of his pension rights had not been based on any clear and unequivocal national legal provision. Indeed, the measure had been taken without any legal authority. The retroactive application of the new rules had been founded on an interim provision which had been repealed three years before the authorities decided to cease payment of his pension in June 1997. Thus, the interference with the peaceful enjoyment of his possessions had been unlawful. 27. In the applicant ’ s view, there was no reasonable relationship between the interference and the interests pursued. According to figures supplied by the Government, at the material time there were 689 persons receiving disability pensions from the Pension Fund. The applicant was one of 54 individuals who had lost their entitlement in similar circumstances, a tiny group constituting only about 0.1% of the Fund ’ s total membership, which last year comprised 38,584 members. On any analysis, the restrictions imposed affected only a very small minority and could by no means be regarded as having been of any significant financial advantage to the Fund or as having served the purpose of the Fund. 28. No comparable restrictions had been imposed on the pension rights of other Fund members. The contested measure could not be described as a general measure aimed at an unspecified group of persons in accordance with the principle of equality. In Iceland there was no legal tradition of depriving active pensioners of annuity rights without the payment of compensation. 29. The applicant refuted the Government ’ s suggestion that his disability rating of 100% in terms of loss of fitness for work as a seaman did not affect his chances of earning income to support himself through work on shore. The applicant stated that he had been employed on shore since 1978, but as his disability had substantially reduced his employment possibilities, he had been employed in office work for a transport company on a salary which was only a fraction of what he would have earned as a seaman. Even if he had continued to receive a pension, his total income would have been considerably less than he would have earned as a seaman. 30. The applicant stressed that his income was irrelevant. As a result of the impugned measures, he had been totally deprived of his disability pension entitlements. This would have happened even if he had been unemployed. His subsistence had become completely dependent on his maintaining his office job on shore. 31. Finally, the applicant strongly objected to the Government ’ s contention that he had not suffered any financial loss in that, by reason of the level of his income from employment, the payment of a disability pension would normally have been discontinued under section 13 of the 1974 Act according to the rules operated by the Fund. However, to the applicant ’ s knowledge no such rules had been in force and accessible at the material time. Indeed, any such rules would have been inconsistent with the applicable legislation. The fact was that he would have received a much higher salary had he continued to work as a seaman. He had neither retained a full salary for the job that he used to do nor an equally high salary for another job. This was amply demonstrated by the figures he had presented to the Court and to which the Government had not objected. 2. The Government 32. The Government disputed the applicant ’ s submissions. It was clear that the legislative amendments in question were the logical and necessary consequences of the financial position of the Pension Fund at the material time. Their aim was to serve the general interest of its members and the amendments had been made in accordance with the law. The Government emphasised that the decision to adopt new criteria for the assessment of disability applied in an objective manner to all those who were in the same position. The changes made had been instigated by the Fund ’ s Board, composed of representatives of employers and employees, including those of the employees ’ organisation of which the applicant was a member. The purpose of a disability pension paid from the Fund was indisputably to provide financial assistance to those who had had their working capacity reduced and who had need of special assistance in order to ensure their subsistence. In instances where this mattered, recipients of a disability pension would be given time to adapt themselves to changed conditions, notably through the provision of retraining, irrespective of whether they had started to receive a disability pension before or after the entry into force of the new legislation. 33. The Government accepted that the impugned measure constituted an interference with the applicant ’ s peaceful enjoyment of his possessions for the purposes of the first paragraph of Article 1 of Protocol No. 1. However, they maintained that the interference was justified under the second paragraph of that Article. The measure was provided for by law, it was in accordance with the general interests of the community and there was a reasonable relationship of proportionality between the interference and the interests pursued. 34. The Government stressed that the applicant retained his full right to receive a retirement pension from the Pension Fund. 35. The right to disability pension benefits should be subject to the ordinary considerations of compensation, namely the basic principle in the law on liability that the claimant should receive full compensation, but not more. It had been noted that a considerable number of former seamen who had paid premiums to the Pension Fund and who were no longer considered capable of working at sea due to disability had been receiving disability pensions from the Fund, notwithstanding the fact that they were in full employment on shore. The applicant was such a person. He was in full employment on shore and thus earned income to support himself, but under the former rules he also received a full disability pension. 36. After it had been established by the methods prescribed by law, according to section 8 of the 1974 Act, that there was an operational deficit in the Seamen ’ s Pension Fund, the first obligation of the Board of the Fund was to reduce or stop expenditure such as the payment of disability pensions to those who had not suffered any loss of income through their loss of fitness for work, as they were demonstrably able to perform work other than as seamen. These measures, which curtailed the applicant ’ s rights to disability benefit, were no more extensive than was necessary in terms of the aim they were intended to achieve. Admittedly they only curtailed the rights of those Fund members who were no longer able to work as seamen, but this was done in such a way that this group had the full possibility of earning income on shore, and the majority of them were in fact already earning such income. 37. The Government strongly contested the applicant ’ s view that he could lawfully expect to receive an undiminished disability pension from his pension fund for the next twenty years in addition to the income he received from full employment, and that his financial plans for the future had been based on this premise. They pointed out that at no time was the applicant ’ s right unconditional in the way he maintained, and the 1974 Act gave him no grounds for harbouring any such expectations. Even if no amendments had been made to that Act, the applicant had already become ineligible to receive a pension, having regard to the terms of the condition stated in the final sentence of section 13(1). This clearly stated that no person was entitled to a disability pension if he received equally high wages for another job which granted pension rights, and that the pension could never be higher than the equivalent of the loss of income demonstrably incurred by the Fund member as a result of his disability. During the period until 1 July 1997 when it was making pension payments to him, the Seamen ’ s Pension Fund had no information about the applicant ’ s employment earnings, despite pension beneficiaries ’ duty under section 13 (4) of the Act to provide such information. At the time when the Act was in force, the Pension Fund did not actively monitor whether disability pensioners received wages from paid employment at the same time as drawing compensation payments; for example, disability pensioners were not required to submit tax returns to the Fund. In all likelihood, the applicant ’ s right to receive compensation had actually expired before 1 July 1997; judging by the information submitted by the applicant regarding his income as a head of department at Samskip after 1 July 1997 ( see his letter to the Court dated 12 June 2003), it could be stated with certainty that he was no longer entitled after that date. 38. The Government rejected the view that other Fund members had been treated differently from the applicant when it came to the restriction of their benefit rights, thus resulting in a violation of Article 1 of Protocol No. 1 taken in conjunction with Article 14 of the Convention. There were many Fund members in a similar or identical position to the applicant. The Government stressed that Fund members already in receipt of disability pensions had certainly not been singled out as a small and isolated group of beneficiaries who were expected to shoulder the entire burden of the Fund ’ s financial difficulties. Many other changes of various types had been made to the laws and regulations of the Fund as part of its measures to put its finances in order, the 1992 Act being a part of these, and they affected all Fund members in one way or another. Thus, in 1994, the 1994 Act and the regulations issued under it had made considerable changes to the rights of both current and potential beneficiaries of the Fund. The rights of Fund members aged 60 to 65 to receive old- age pensions had been altered, and considerably reduced. These changes also brought the rules of the Seamen ’ s Pension Fund on old- age pensions into line with those of other Icelandic pension funds, where entitlement to draw an old- age pension generally began at the age of 65. It was clear from the figures presented (see paragraph 13 above) that the new rules, which were based on general, objective and, not least, completely relevant considerations, had affected nearly 30% of all the members of the Fund who had acquired active disability pension rights prior to the commencement of the 1992 Act, and had had exactly the same consequences for all those who were in a comparable position. 3. The Court ’ s assessment 39. The Court reiterates that Article 1 of Protocol No. 1, which guarantees in substance the right of property, comprises three distinct rules ( see James and Others v. the United Kingdom, judgment of 21 February 1986, Series A no. 98, pp. 29-30, § 37). The first rule, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property. The second, in the second sentence of the same paragraph, covers deprivation of possessions and subjects it to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled, among other things, to control the use of property in accordance with the general interest. The second and third rules, which are concerned with particular instances of interference with the right to the peaceful enjoyment of property, are to be construed in the light of the general principle laid down in the first rule. According to the Convention institutions ’ case-law, the making of contributions to a pension fund may, in certain circumstances, create a property right and such a right may be affected by the manner in which the fund is distributed ( see Bellet, Huertas and Vialatte v. France ( dec .), nos. 40832/98, 40833/98 and 40906/98, 27 April 19 99, and Skorkiewicz v. Poland (dec.), no. 39860/98, 1 June 1999 ). Moreover, the rights stemming from payment of contributions to social insurance systems are pecuniary rights for the purposes of Article 1 of Protocol No. 1 ( see Gaygusuz v. Austria, judgment of 16 September 1996, Reports of Judgments and Decisions 199 6-IV, p. 1142, §§ 39-41). However, even assuming that Article 1 of Protocol No. 1 guarantees benefits to persons who have contributed to a social insurance system, it cannot be interpreted as entitling that person to a pension of a particular amount ( see Müller v. Austria, no. 5849/72, Commission ’ s report of 1 October 19 75, Decisions and Reports 3, p. 25, and Skorkiewicz, cited above ). An important consideration in the assessment under this provision is whether the applicant ’ s right to derive benefits from the social insurance scheme in question has been infringed in a manner resulting in the impairment of the essence of his pension rights ( see Domalewski v. Poland ( dec. ), no. 34610/97, ECHR 1999-V ). 40. In the instant case, the applicant had contributed to the Pension Fund from 1969 to 1981 under a system according to which he did not acquire any claim to an identifiable share in the Fund but only what could be characterised as a right to receive a pension subject to the fulfilment of certain conditions. It has not been contended that the measure amounted to a deprivation or a means of controlling the use of property. However, the parties agree that the termination of the applicant ’ s disability pension amounted to an interference with his right to the peaceful enjoyment of his possessions for the purposes of the first sentence of the first paragraph of Article 1 of Protocol No. 1. The Court sees no reason to hold otherwise. However, the Government disputed the applicant ’ s contention that the application of the new disability criteria to him was unlawful, discriminatory and disproportionate to the community interests pursued. As regards the issue of lawfulness, the Court notes that the applicant ’ s argument was rejected by the Icelandic Supreme Court and sees no need to consider that aspect of the matter any further. It is the issue of proportionality which lies at the heart of the case under the Convention. Accordingly, it will determine whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the individual ’ s fundamental rights. In this connection, regard will be had to whether unjustified differential treatment occurred in the instant case. Whereas the Government viewed the case from a broad angle as raising issues of fundamental principles pertaining to the entire Icelandic pension system, the Court will confine its examination to the concrete circumstances of the applicant ’ s case. 41. At the outset the Court takes note of the Government ’ s argument, based on information provided by the Pension Fund on 14 July 2003, that even if no amendment had been made to the Seamen ’ s Pension Fund Act 1974, the applicant had in all likelihood already become ineligible for a pension before 1 July 1997 by virtue of the last sentence of section 13(1) of that Act and thus did not have any legal ground for expecting to receive a full disability pension until the age of 65. The argument was not reviewed by the national courts, but was apparently developed for the first time at the merits stage of the proceedings under the Convention and was rejected by the applicant. The Court is not convinced by these submissions, which are based on facts that are both uncertain and unclear, and will not attach any weight to them in its examination of the case. In any event, whether the applicant, as argued by the Government, could have forfeited his entitlement to a disability pension under a different legal ground is a matter that falls outside the scope of the case, which concerns the effects of the legislative amendments that came into force on 1 July 1997. 42. Although the national authorities ’ decision to discontinue payment of the applicant ’ s disability pension was taken without reference to his income from his office job, the Court will have regard to this income in its examination of the question of proportionality under Article 1 of Protocol No. 1. In that connection, the Court notes that the introduction of the new pension rules had been prompted by legitimate concerns about the need to resolve the Fund ’ s financial difficulties. Furthermore, the changes made to disability entitlements were based on objective criteria, namely, an obligatory renewed medical assessment of each disability pensioner ’ s ability to carry out not just the same work he had performed before his or her disability but work in general ( see Bucheň v. the Czech Republic, no. 36541/97, § 75, 26 November 2002 ), the standard that already applied in other sectors in Iceland. According to the Government ’ s submission, the new rules on disability assessment were intended to ensure that a considerable number of former seamen did not receive disability pensions from the Fund despite being in full employment on shore. The applicant fell within that group of disability pension recipients. One hundred and four – over 30% – of the 336 persons who were in receipt of a disability pension on 1 July 1997 experienced a substantial reduction in their entitlements. Sixty of these experienced a reduction ranging from 50 % to 100 %. The Court is also mindful of the Government ’ s submission that, concurrently with those changes, the Pension Fund ’ s old- age pensions had also been considerably reduced by virtue of the 1994 Act. 43. However, the Court is struck by the fact that the applicant belonged to a small group of 54 disability pensioners (some 15% of the 336 persons mentioned above) whose pensions, unlike those of any other group, were discontinued altogether on 1 July 1997. The above-mentioned legitimate concerns about the need to resolve the Fund ’ s financial difficulties seem hard to reconcile with the fact that after 1 July 1997 the vast majority of the 689 disability pensioners continued to receive disability benefits at the same level as before the adoption of the new rules, whereas only a small minority of disability pensioners had to bear the most drastic measure of all, namely the total loss of their pension entitlements. In the Court ’ s view, although changes made to pension entitlements may legitimately take into account the pension holders ’ needs, the above differential treatment in itself suggests that the impugned measure was unjustified for the purposes of Article 14 of the Convention, which consideration must carry great weight in the assessment of the proportionality issue under Article 1 of Protocol No. 1. 44. The discriminatory character of the interference was compounded by the fact that it affected the applicant in a particularly concrete and harsh manner in that it totally deprived him of the disability pension he had been receiving on a regular basis for nearly twenty years. He had joined the Fund in 1969 and had contributed to it for nearly ten years when he had his accident, which left him 100 % unfit for work as a seaman. Under section 13 of the Seamen ’ s Pension Fund Act 1974, disability was to be assessed mainly on the basis of incapacity to perform the job occupied, and to which Fund membership related, at the time of the injury. According to the Icelandic Supreme Court, there was an unequivocal right to have disability so assessed. In the Court ’ s view, the applicant could validly plead an individual legitimate expectation that his disability would continue to be assessed on the basis of his incapacity to perform his previous job. Regard should be had to the fact that, under the former rules, gainful employment was not incompatible with a Fund member ’ s receipt of a full disability pension, provided that that pension did not exceed the member ’ s loss of income. Understandably, after becoming unfit for work as a seaman, and encouraged by the pension system to which he had contributed over a number of years, the applicant, like many other disability pensioners, had pursued alternative employment whilst at the same time receiving a disability pension. It is significant that, when the applicant lost his pension on 1 July 1997, this was not due to any circumstance of his own but to changes in the law altering the criteria for disability assessment. Although he was still considered 25% incapacitated to perform work in general, the applicant was deprived of the entirety of his disability pension entitlements, which at the time constituted no less than one - third of his gross monthly income, as can be deduced from the figures submitted to the Court. 45. Against this background, the Court finds that, as an individual, the applicant was made to bear an excessive and disproportionate burden which, even having regard to the wide margin of appreciation to be enjoyed by the State in the area of social legislation, cannot be justified by the legitimate community interests relied on by the authorities. It would have been otherwise had the applicant been obliged to endure a reasonable and commensurate reduction rather than the total deprivation of his entitlements (see Müller and Skorkiewicz, both cited above, and, mutatis mutandis, James and Others, cited above, p. 36, § 54, and Lithgow and Others v. the United Kingdom, judgment of 8 July 1986, Series A no. 102, pp. 44-45, § 121 ). Accordingly there has been a violation of Article 1 of Protocol No. 1 in the applicant ’ s case. B. Alleged violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No. 1 46. The applicant further alleged a violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No. 1, relying essentially on the considerations underlying his complaint under the latter provision taken on its own. 47. The Court, having already taken those arguments into account in its examination of the complaint under Article 1 of Protocol No. 1, finds that no separate issue arises under Article 14 of the Convention and that, accordingly, it is unnecessary to examine the matter under these provisions taken together. II. APPLICATION OF ARTICLE 41 OF THE CONVENTION 48. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 1. Pecuniary damage 49. The applicant sought compensation for the pecuniary damage he had suffered as a result of the termination of his disability pension on 1 July 1997. He claimed sums totalling 39,524,772 Icelandic krónur (ISK) ( currently corresponding to approximately 450,000 euros (EUR) ), broken down as follows : (a ) ISK 12,637,600 (approximately EUR 143,000) for the loss of his disability pension entitlements, of which (i) ISK 9,373,300 were for the loss of his own pension (ISK 61,356 per month until the age of 65), and ( ii ) ISK 3,264,300 were for the loss of child benefits in respect of his three children ( see paragraph 17 above); ( b ) default interest in respect of the above from 1 July 1997 until the date of payment, which on 26 November 2003 amounted to ISK 26,887,172 (approximately EUR 305,000). 50. The Government disputed the above claim, arguing that, irrespective of the legislative changes that had taken effect on 1 July 1997, the applicant ’ s disability pension entitlements ought to have been discontinued before that date anyway, because of his income from his office job (last sentence of section 13(1) of the Seamen ’ s Pension Fund Act 1974). 51. The Court is satisfied that the applicant has suffered pecuniary damage as a result of the violation found and considers that he should be awarded compensation in an amount reasonably related to any prejudice suffered. It cannot award him the full amount claimed, precisely because a reasonable and commensurate reduction in his entitlement would have been compatible with his Convention rights (see paragraph 4 5 above). Deciding in the light of the figures supplied by the applicant and equitable considerations, the Court therefore awards him EUR 6 0,000 in respect of item (a) above and EUR 15 ,000 for item (b), plus any tax that may be chargeable on those amounts. 2. Non-pecuniary damage 52. The applicant further asked the Court to award him ISK 3,000,000 (currently corresponding to approximately EUR 34,000) in compensation for non-pecuniary damage on account of the suffering and distress caused by the discriminatory deprivation of his disability pension entitlements and the financial insecurity in which he had been left. 53. The Government asked the Court to reject any claim for non-pecuniary damage. 54. The Court considers that the applicant must have suffered anxiety and distress as a result of the violation that cannot be compensated solely by the Court ’ s finding in his case and awards him EUR 1,500 under this head. B. Costs and expenses 55. The applicant requested the reimbursement of legal fees and expenses incurred during the period from 15 January 1997 to 25 November 2003, totalling ISK 3, 610,392 (currently corresponding to approximately EUR 41, 0 00), broken down as follows : (a ) ISK 2, 837, 100 for his lawyer ’ s work ( 111. 25 hours before the District Court, 67 hours before the Supreme Court and 111. 25 hours before the European Court, at ISK 9,800 per hour); (b) ISK 6 95,090 in value-added tax (VAT) in respect of the above; (c) ISK 78,202 in miscellaneous expenses. 56. The Government did not dispute the above claim. 57. The Court is not convinced that all the costs were necessarily incurred. Deciding on an equitable basis, it awards the applicant EUR 20 ,000 (inclusive of VAT). C. Default interest 58. The Court considers it appropriate that the default interest should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.
The Court held that there had been a violation of Article 1 (protection of property) of Protocol No. 1. It observed that the legitimate concern to resolve the Fund’s financial difficulties seemed hard to reconcile with the fact that the vast majority of the 689 disability pensioners had continued to receive disability benefits at the same level as before the adoption of the new rules, while 54 persons, including the applicant, had to bear the total loss of their pension entitlements. This was an excessive and disproportionate burden, which could not be justified by the legitimate community interests relied on by the authorities. It would have been otherwise had the applicant been obliged to endure a reasonable and commensurate reduction rather than the total deprivation of his entitlements.