Waterford Crystal ruling: High Court to determine payments

Waterford Crystal workers and the State could return to the High Court in the coming months to thrash out future pension payments to 1,700 former employees following a European Court of Justice (ECJ) ruling yesterday.

That decision stressed that the Government must protect the pension rights of former Waterford Crystal workers, meaning it is likely the State will have to find the money to cover some or all of what they would have been owed if the firm and its pension scheme had not gone bust.

Yesterday the Unite trade union, while celebrating the ruling, said it was open to meeting with the Government, but a court date is likely to determine the level of protection for workers’ pension entitlements and thereby the amount they will be paid. Solicitors for the workers said a High Court application will be lodged in the coming weeks.

Unite said negotiating a deal could mean the Government paying about €13m a year rather than a “bullet” payment of anything up to almost €300m for 100% protection.

The victory for the workers comes four years after 10 individuals launched a legal challenge under the 2008 EU Insolvency Directive over pension entitlements. The ECJ ruled in its favour on all seven points raised.

Walter Cullen of Unite said: “The Government has no choice but to accept and implement the decision.”

However, he said the Government could look at paying out now rather than waiting and paying out a larger sum later. He also referred to a request for grant aid of €40m in 2008 for the company — an offer that was refused.

It is unclear if the Government plans to legislate to avoid similar problems arising in future.

Yesterday, a spokesman for the Department of Social Protection said: “The Government will study the full judgement of the European Court of Justice in detail. The ECJ decision follows a reference from the High Court for its opinion on a number of questions of European law. As such, the ruling of the ECJ will now be the subject of a full hearing by the High Court. The matter will, therefore, proceed in the High Court in the coming months. Until then, the matter remains sub-judice.”

John O’Connell, the actuary who helped the Waterford workers’ case and the founder of Trident Consulting, said he expected the Government would need to bring in legislation simiar to that in Britain, which set a protection rate of 90% after the so-called Robins ruling of 2007, which along with the 2008 Insolvency Directive influenced the ECJ ruling.

The Robins ruling meant more than 49% of a pension had to be paid in a case of double insolvency.

“From Jan 2007 on we knew that 49% or less was not compatible with EU law,” said Mr O’Connell. “It is a pity that we are dealing with the thing so late [but] we have got clarity on what this directive means.”

After existing pensioners who were already past retirement age were paid, the remaining former workers who lost their jobs when Waterford Crystal shut as well as during previous rounds of redundancies were left with just 18% to 28% pension cover.

After Waterford Crystal went into receivership in 2009, the brand was sold to KPS Capital Partners, which set up a new firm, WWRD Holdings Ltd.

State failure

Ireland did not properly adopt and implement EU legislation on protecting the pension funds of employees, according to the European Court of Justice which ruled on issues raised by former Waterford Crystal workers.

The EU directive on the protection of employees in the event of the insolvency of their employer says that the State must ensure employers can meet their obligation to workers’ pension schemes, or a pensions body must meet any shortfall if the employer becomes insolvent.

The court also said that employees must receive at least 49% of the pension rights they have built up and the State old-age pension cannot be taken into account in calculating the sum.

They said the State did not adopt the relevant article of the directive and ignored the findings of a court ruling from Jan 2007. This said that the correct adoption or transposition of Article 8 in the directive “requires an employee to receive in the event of the insolvency of his employer at least half of the old age benefits arising out of the accrued pension rights for which he has paid contributions”.

In the case of the Waterford Crystal employees who took their case to the courts, they were obliged to join one of two company pension schemes when they went to work for the company.

The scheme, of which the 10 who took the case were members, provided for their pension to be the same as their final salary minus the state pension with two thirds coming from the pension fund. Instead the scheme was found to be in deficit of €110m with total assets of €130m but liabilities of €240m. The actuary for the workers estimated they would receive between 18% and 28% of the amounts to which they would have been entitled while the state put it at between 16% and 41%.

The issues ruled on were referred to the ECJ by the High Court and the case will now return to there for a final judgment.

— Ann Cahill

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