FOURTH SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 30517/96
by Alpo AUNOLA
against Finland
The European Court of Human Rights (Fourth Section), sitting on 15 March 2001 as a Chamber composed of
MrG. Ress, President,
MrA. Pastor Ridruejo,
MrL. Caflisch,
MrV. Butkevych,
MrsN. Vajić,
MrJ. Hedigan,
MrM. Pellonpää, judges,
and Mr V. Berger, Section Registrar,
Having regard to the above application introduced with the European Commission of Human Rights on 6 March 1996 and registered on 19 March 1996,
Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
The applicant is a Finnish national, born in 1924 and living in Kokkola (Finland). He is represented before the Court by Ms Kirsi Tarvainen, a lawyer practising in Helsinki (Finland) The respondent Government are represented by Ms Irma Ertman, Deputy Director General for Legal Affairs, Ministry for Foreign Affairs, and by Mr Arto Kosonen, Agent of the Finnish Government, Ministry for Foreign Affairs.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
The applicant started to work for company O. on 3 August 1954. At the time the company had a pension scheme which had been approved on 28 December 1943. The pension scheme involved a survivors' pension for the employee's survivors. The benefits of the pension scheme were guaranteed to the employee as part of his or her employment contract.
In 1955 company O. founded two pension funds; one for manual workers and another for clerical employees. A Pension Funds Act (eläkesäätiölaki, lag om pensionstiftelser; 469/1955) was enacted in 1955 and the rules of the pension funds were harmonized with the provisions of this new Act and approved by the Ministry for Social Affairs (sosiaaliministeriö, socialministeriet). The Pension Funds Act did not require that the assets of a pension fund should cover its liability for pensions.
In 1961 an Employees' Pensions Act (työntekijän eläkelaki, lag om pension för arbetstagare; 395/1961) was passed. In 1962 company O.'s pension fund for clerical workers was divided into Sections A and B. Section A provided pension benefits arising solely from the employment contracts of the employees, in excess of statutory pension rights.
On 31 January 1984, the applicant retired and started to receive a pension from company O.
According to the calculations made, between 1984 and 1985, on the costs of the pension scheme, the economic resources of the company would not have covered the pensions to be paid nor removed the deficit in the liabilities. On 12 August 1985, the managing director of the company sent out a letter to the persons who had already retired, informing them that the planned changes would mean, without compensation, the raising of the age of retirement of the persons still working, and that the modification of the rules would not have a reducing effect on the pension rights earned.
The planned modification of pension rights caused a threat of a strike. Therefore the matter was submitted to the National Conciliator (valtakunnansovittelija, riksförlikningsmannen) who gave his proposal for a solution on 16 September 1985. According to the proposal, the company and the personnel agreed to continue discussions in order to find a solution to the question of pensions. No retired employees participated in the group. When the Ministry of Social Affairs and Health urged a solution, the working group reached an agreement whereby it was decided to reduce the pension benefits. The collective agreement on working conditions was signed on 29 February 1988.
A delegation of pensioners met the Minister of Social Affairs and Health on 25 February 1988, in order to lodge a letter with the Minister and orally to demand negotiations and/or participation in the above-mentioned working group. The delegation of pensioners had also met the National Conciliator on 16 April 1988 in order to demand both in writing and orally participation in a negotiation by virtue of Act on Mediation in Labour Disputes (laki työriitojen sovittelusta, lag om medling i arbetstvister; 420/1962). The National Conciliator had, however, considered that he had no competence to negotiate on the matter with the pensioners.
Under the collective agreement the company offered the current workers the opportunity to exchange their special pension rights for company shares. The remaining shares were subscribed to by the pension fund. The exemption from taxes of the use of subscription rights was covered by a separate Parliament Act. Apart from the subscription of shares the collective agreement provided for a personal life-insurance cover paid by the company. This was not, however, offered to persons who had achieved the age of 60 before 1 July 1988. The company had further agreed to contribute to the creation of an additional pension scheme to be financed by the employees themselves, and to develop a benefit system based on the number of years in service. The collective agreement also provided for certain holiday arrangements.
On 30 May 1988, the Pension Fund’s management board decided to change the pension fund rules, abolishing survivors’ pensions in relation to the section A pensions. The rules concerning the calculation of index-linked increases were also amended so as to reduce such increases in the future. In compensation, the current employees of the company received life insurance cover and company shares. The retired pensioners did not receive any compensation for their loss of benefits.
On 31 May 1988, i.e. the following day, the Ministry for Social Affairs and Health (sosiaali- ja terveysministeriö, social- och hälsovårdsministeriet) confirmed the modification of the rules to be applied from 1 September 1988.
The pensioners complained to the Parliamentary Ombudsman (eduskunnan oikeusasiamies, riksdagens ombudsman) who, on 30 May 1989, considered that pensioners were not parties referred to in the Administrative Procedure Act and therefore the Ministry had no legal obligation under law to hear them.
On 4 January 1990, the applicant instituted civil proceedings against company O. before the City Court of Helsinki (raastuvanoikeus, rådstuvurätten), stating that the company had breached his employment contract as it had abolished his right to a survivors' pension even though such a benefit had been guaranteed as a term of his employment. His rights concerning the calculation of index-linked increases in his pension had also been reduced. The current employees of the company had received compensation for their losses but the retired pensioners had not. The retired pensioners had not been allowed to participate in the negotiations concerning the modification of the pension fund rules and had no effective remedy in this respect.
Several hearings were held before the City Court of Helsinki and a number of witnesses were heard. The applicant was represented by counsel. The company denied its responsibility as it had only promised the benefits required by law and the pension fund rules at any particular time. There was no guarantee of a pension of a particular amount. The applicant had not been deprived of a survivors' pension in so far as such a right was guaranteed by law.
On 11 April 1991, the City Court of Helsinki found in favour of the company, rejecting the applicant's claims. The City Court gave the following reasons for its decision:
"[The applicant's] employment was based on a written contract signed on 8 February 1960. The rules of the pension fund and the Pension Funds Act form, as such, part of the employment contract.
The Pension Funds Act influences real pension rights, and includes a right to reduce a pension on certain conditions. These conditions have been legally examined and it is not in this court's competence to re-examine them.
Both parties to an employment contract are bound by the rules of the Pension Fund as ratified at the time in question. Pension fund rules and the provisions of the Pension Funds Act specify the contents of pension rights and liabilities. The pension fund is liable to pay pensions.
According to the Pension Funds Act and the pension fund rules for [company O.'s] clerical workers, [the applicant] has no grounds for his claims.
[The applicant] has also failed to establish that his adversary has acted in a manner which could have made it liable to pay damages in compensation to the applicant.
Thus, [the applicant's] claims are rejected."
The applicant appealed to the Court of Appeal of Helsinki (hovioikeus, hovrätt), which rejected his appeal on 30 September 1992.
The applicant appealed to the Supreme Court (korkein oikeus, högsta domstolen) which granted leave to appeal on 5 May 1993. There was an oral hearing before the Supreme Court on 4 and 8 September 1995. In its decision of 2 November 1995 the Supreme Court upheld the Court of Appeal's decision and gave the following reasons for its decision:
"General Aspects
[The applicant] began his service with the company on 3 August 1954. There is no exact information as to the contents of the employment contract. Apparently there was a reference to the rules of the pension fund for the clerical workers, which had been agreed on 28 December 1943. After [the applicant] was transferred to work as a chief clerk at one of [the company's mines], there was a written contract dated 8 February 1960. The rules of the pension fund for the clerical workers and the general terms of the employment contracts for the clerical workers were annexed to the contract. [The applicant] retired on 31 January 1984.
[The company] created a pension scheme for its workers in the 1930's. The scheme was a generous one for the workers and it has been improved since. At the time of [the applicant's] recruitment the pension fund rules were those which had been agreed on 28 December 1943. The right to the survivors' pension was included in the pension rights set out in those rules. In order to maintain the pension scheme, in 1955, the company founded two pension funds in accordance with the Pension Funds Act; one for clerical workers and another for manual workers. [The applicant] came under the first one, i.e. the pension fund for clerical workers. When the Pension Funds Act was enacted on 15 December 1955, the pensions fund's rules were harmonised with the provisions of that law. The Ministry for Social Affairs approved the pension fund rules on 1 November 1956. The rules have been changed several times since.
After the enactment of the Employees' Pension Act (8.7.1961/395), the pension fund's activities were divided into sections A and B. The modification of the pension fund rules was approved by the Ministry for Social Affairs on 4 December 1962. It was section B's duty to provide the pension rights arising from the law concerning the pension rights, while section A was responsible for those special pension rights which the company had arranged, or would arrange, for its employees and their survivors.
It was found in the 1980's that the pension fund's capital would not cover the cost of the special pension rights which the company had promised its employees, and that the company was not able to fulfil its pension obligations by transferring enough capital to the pension funds. The company started to take action with a view to lightening its pension liability. Finally, the company reached an agreement with the manual workers and clerical workers employed at the company at that time concerning the terms on which they would give up their special rights. As agreed, the pension fund rules of [the company's] pension fund for the clerical workers were modified. The modification was approved by the pension fund's board of directors on 30 May 1988 and ratified by the Ministry for Social Affairs and Health on 31 May 1988, in accordance with section 18(1) of the Pension Funds Act. The modified rules became effective on 1 September 1988. They were to be applied only to the pensions falling due subsequent to that date. The right to section A survivors' pensions was abolished as part of the modification of the rules and the index-linked increases in the special pensions were linked to the cost-of-living index.
Survivors' pension
Survivors' pension as a term of the employment contract
At the time of [the applicant's] recruitment he entered the pension scheme run by the company. As a part of the scheme, there was a right for the employee's spouse and children to receive a survivors' pension after the employee's death. The right to a survivors' pension was, thus, a term of the employment contract.
[The applicant] signed a new contract of employment on 8 February 1960. The general terms of employment, annexed to the contract, states that the employees belong to the company's pension scheme. There is nothing else in the contract about employees' pension rights. [The applicant's] pension rights were, therefore, determined according to the company's pension scheme of the time, i.e. the rules of the company's pension fund. In the light of [the applicant's] education and status, the Supreme Court finds it unlikely that he would have signed the contract as it was if he had considered himself entitled to better pension rights than those laid down in the Pension Funds Act and the pension fund rules applicable at the time.
The company's pension scheme was based on the Pension Funds Act enacted on 15 December 1955 and on the Ministry of Social Affairs' decision of 1 November 1956. According to section 18(1) of that Act, the rules of a pension fund could be modified on the terms and for the reasons set out in the law. There had been a similar provision in the previous law. A modification could also have the effect of reducing pensions and other pension rights. The statute does not assume that such a modification must be approved by the beneficiaries. The possibility of a reduction in the pension rights was also part of [the applicant's] employment contract. Therefore, the diminution in [the applicant's] pension rights was justified even though such a measure would not have been possible before the company transferred to a pension scheme complying with the Pension Funds Act.
By the modification of the pension fund rules on 31 May 1988, the right to section A survivors' pension was abolished for pensions falling due after the date on which the new pension rules became effective on 1 September 1988. The widow's pension had previously been half of a retired clerical employee's full pension. After the modification of the pension fund rules, it was to be half of the statutory pension. Thus, the special pension received by [the applicant] would no longer affect the amount of the survivors' pension.
The diminution of the pension rights accomplished by the modification of the pension fund rules were necessitated by the fact that the financial burden of liability for pensions was threatening the company's financial stability. The modification of the rules was carried out in accordance with the terms of, and in the order required by, section 18(1) of the Pension Funds Act. The statutory procedure laid down in that provision would be meaningless if the company would remain liable for undiminished special pension rights despite the modification of the pension fund rules.
Therefore, and as the possibility of diminution in the pension rights was included in the terms of [the applicant's] employment contract, as mentioned above, the Supreme Court does not deem it possible to order the company to pay the survivors' pension requested by [the applicant] for the reasons given by [the applicant] in support of his claim, i.e. that the right to a survivors' pension was promised to him as part of the terms of his employment contract.
Equality as between the beneficiaries
[The applicant] has, in his action, claimed that the beneficiaries were not treated equally in the rearrangement of the pension scheme. [The applicant] argues that according to the agreement signed by the company and its present workers, the latter were compensated for their loss of earned pension rights with company shares and life-insurance cover but the retired pensioners were not compensated for their loss.
The pension security of present workers and retired pensioners is defined in the Pension Funds Act and the rules of the company pension fund. According to section 18(1) of that Act, all the benefits have to be diminished in the same proportion if a modification of the pension fund rules leads to a reduction in the pensions or other pension rights, provided that no alternative procedure is approved by the Ministry for Social Affairs and Health. Accordingly, all the beneficiaries have to be treated equally when rearranging a pension scheme.
As JR [a witness] testified in the oral hearing before the Supreme Court, the Ministry for Social Affairs and Health had paid attention to the need for equality between the beneficiaries when approving the modification of the pension fund rules. The Ministry had found that the present workers would lose more than the retired pensioners both at an individual level and as a whole. The Ministry's decision is not binding as far as [the applicant's] claim is concerned but it can be regarded as evidence against [the applicant's] view.
The equality [of treatment] of the beneficiaries can be evaluated from different points of view. The benefits lost are not similar, which makes it difficult to compare.
Different points have been raised concerning the meaning of the rise in the retirement age from 52 to 60 years. According to insurance mathematics, the rise in the retirement age has considerably diminished the pension fund's liabilities, as pointed out by one of the witnesses, EG. Another witness, TT, told the court that the company's workers saw the early retirement age as a special benefit and that the possibility was used a lot. Those who already had retired at the time of the introduction of the new rules had had the opportunity to exercise their freedom of choice. The workers still employed at the time lost that benefit. As part of the evaluation it has, therefore, to be considered what was the value of the opportunity to take early retirement. Regardless of the fact that the value of the rise in the retirement age cannot be evaluated exactly from the beneficiary's point of view, the Supreme Court finds it necessary to consider the rise in the retirement age as a loss of a benefit when evaluating the equality of the beneficiaries.
It is also noted in [the applicant's] claim that the current workers of the company were offered the opportunity to exchange their special pension rights for company shares and to receive life-insurance cover paid by the company. This possibility was not offered to the retired pensioners. According to a comparative model presented by one of the witnesses, LK, the right to subscribe to company shares at an [allegedly] favourable rate and life-insurance cover seem to have compensated the present workers for their loss. However, the Supreme Court finds the comparative model to be defective, inter alia, in so as far as the benefit of the right to company shares, compared with later stock-market prices of the company's shares is concerned. In the financial situation of the [company] in 1988, the shares were a possible risk investment whose benefits could not be predicted precisely at the time. In such circumstances, it is appropriate to assess the value of the shares at the price guaranteed to them during the subscription period. It has also been established that workers who at the time were close to retirement, preferred the diminished special pension rights to the right to subscribe to company shares and life-insurance cover.
The rearrangement of the pension scheme and its effects have to be evaluated as a whole. The company has established that the agreement between the company and its workers was, in practice, a requirement for the success of the pension scheme. It has also been established that the alternative to the rearrangement of the pension scheme would have been the dissolution of the pension fund. That alternative would have been more unattractive to the retired pensioners and the workers.
There is no violation of the principle of equality as between the beneficiaries as argued by [the applicant]. The claim concerning the survivors' pension cannot be allowed on these grounds either.
The index-linked increases
There were no regulations concerning index-linking of the special pensions in the pension scheme for the clerical workers or in the pension fund rules. Between 1955 and 1965 the special pensions were reappraised as a matter of discretion. There were no reappraisals in 1961 and 1962. In 1965 the pension fund's board of directors decided that in the future the special pensions would be reviewed at the same time and according to the same criteria as the pensions paid pursuant to the Employees' Pension Act of 1962. After a large increase in the pension scheme's costs, their decision was annulled in 1977. After that the special pensions were reviewed annually. In 1978 and 1979 the increases in the pensions based on years of service were smaller than the increases in other special pensions. In other years the special pensions were reappraised according to an index referred to in the Employees' Pension Act.
The Supreme Court recalls that pensions are reviewed according to different laws, generally in order to maintain their purchasing power. These reviews can be made in different ways provided that the means employed realise the aim sought. The means employed in relation to [the applicant's] pension by the company did realise the aim sought. [The applicant] did not agree with the company that the reviews should be done according to the index referred to in the Employees' Pension Act. The use of the above-mentioned index has not been established as a practice which could be regarded as binding the company.
Accordingly, [the applicant] has no right to receive the index-linked increases requested in his claim."
Two of the Supreme Court judges and the Referendary of the Supreme Court appended dissenting opinions to the judgment.
B.Relevant domestic law and practice
The Pension Funds Act which was in force until the end of 1995 has been applied to the case. Under Section 18(1), the rules of a pension fund could be modified when it was found to be necessary because of changed circumstances or for some other reason. Approval by the Ministry of Social Affairs and Health was necessary for the modification of rules. In case the modification of rules amounted to the reducing of pensions or other benefits, all the benefits were to be cut to the same extent, in accordance with the second sentence in Section 18(1), unless the Ministry for a good reason approved some other procedure. Under the same provision, the said benefits could nevertheless not be reduced more than it was necessary for continuing the activities.
Under Section 2(2) of the Pension Funds Act, the Ministry of Social Affairs and Health must approve the rules of the pension fund, if they have been drafted in accordance with the Act.
The Pension Funds Act did not contain provisions on the hearing of employees as regards the approval of modified rules by the Ministry of Social Affairs and Health. The only provision related to hearing was Section 12 of the Decree Implementing the Pension Funds Act (asetus eläkesäätiölain täytäntöönpanosta, förordning ang. verkställighet av lagen om pensionsstiftelser; 509/1955), according to which an order by the Ministry of Social Affairs and Health, given under Section 29 of the Act, to abolish a pension fund was to be notified to the persons entitled to pensions or other beneficiaries.
According to Section 1(2) of the Administrative Procedure Act (hallintomenettelylaki, lag om förvaltningsförfarande; 598/1982), “administrative procedure” means the consideration of administrative matters before public authorities. According to Section 3(1) of the Act, the administrative authorities of the State and the authorities of municipalities and federations of municipalities as well as organs of the Social Insurance Institution (kansaneläkelaitos, folkpensionsanstalten) and the University of Helsinki shall be authorities subject to this Act. The Act shall also apply to the courts of justice in the consideration of matters falling under judicial administration. According to Section 3(3) of the Act, stipulation given by decree may order that the Act shall apply in the consideration of an administrative matter also when such consideration is being carried out by an independent institution subject to public law, an association subject to public law, a joint stock company in which the State is the majority shareholder or a private person.
According to the rules of the pension funds, the decision on the modification of the rules was to be made by the board of directors of the pension fund. There were no provisions concerning the hearing of beneficiaries.
In so far as the domestic case-law and practice is concerned, it is noted that in its decision of 6 September 1991 (3017) the Supreme Administrative Court rejected the applications of two clerical workers for the annulment of the decisions of the Ministry of Social Affairs and Health made on 31 May 1988. The decisions in question concerned the approval of the modified rules of the pension funds of company O. The Supreme Administrative Court founded its decision on several facts which it considered as proof that the objections of the pensioners had been known when the modifications were being planned and when they were approved. The Supreme Administrative Court, for example, considered that arranging an hearing would have been difficult in practice since the pensioners had not formed an association (in the light of the documents there were some 3,900 pensioners). The company had given account of the matter to a delegation of pensioners on 15 January 1988 and 1 March 1988. The matter had also been discussed in newspapers and a working group which had participated in the preparation of the modifications had sent out a letter to the pensioners.
COMPLAINTS
1. The applicant complains that his right to a fair trial has been infringed as he was not a party to the rearrangement proceedings of the pension scheme. The applicant also claims that the Supreme Court's judgment of 2 November 1995 was founded on a decision given by an administrative authority in proceedings to which he was not a party. He invokes Article 6 § 1 of the Convention.
2. The applicant complains that his right to the peaceful enjoyment of his possessions has been violated as the Supreme Court decision deprived him of pension rights which he had earned during his employment. He invokes Article 1 § 1 of Protocol No. 1 to the Convention in this respect.
3. The applicant complains that he has been discriminated against on the basis of his status as a retired pensioner as he has not received any compensation for his losses even though the current workers of the company did. He invokes Article 14 of the Convention.
THE LAW
1. The applicant complains that his right to a fair trial has been infringed as he was not a party to the rearrangement proceedings of the pension scheme and as the Supreme Court decision was based on a decision made during the above-mentioned rearrangement proceedings. The applicant invokes Article 6 § 1 of the Convention which, in so far as relevant, reads as follows:
“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”
The Government note that the applicant could have appealed against the decision of the Ministry of Social Affairs and Health by virtue of Section 4 of the Act on Appeal in Administrative Matters (laki muutoksenhausta hallintoasioissa, lag om ändringssökande i förvaltningsärenden; 154/1950) by lodging an application with the Supreme Administrative Court. This is not affected by the fact that in the Pension Fund Act the possibility to appeal was explicitly expressed only in Section 29, according to which a decision by the Ministry of Social Affairs and Health to abolish a pension fund could be appealed against. In the Government’s opinion the remedy referred to would also have offered reasonable prospects of success, and thereby this normal remedy cannot be substituted in the sense of the exhaustion of domestic remedies under Article 35 § 1 of the Convention by a later recourse to the Supreme Court.
The Government, further, note that were the Court to be of the opinion that the remedy referred to above had not been effective enough, meaning that it would not have been necessary for the applicant to use it, the period of six months should have begun to run from the time when the applicant became aware of the said decision of the Ministry of the Social Affairs and Health. This is considered to have taken place at the latest on 4 January 1990 when the applicant brought an action against the company O. The applicant did not introduce his application until 6 March 1996, i.e. at least over six years after the applicant became aware of the decision. According to the Government, the application has not been submitted within the period of six months as required by Article 35 § 1 of the Convention.
The Government argue, moreover, that all the impugned measures took place before Finland had ratified the Convention on 10 May 1990. Consequently, the application could also be rejected under Article 35 of the Convention as being incompatible ratione temporis with the provisions of the Convention.
The applicant submits that he was deprived of certain pension rights, agreed as a part of his employment contract, without a fair trial, in violation of Article 6 of the Convention. The applicant emphasises that there was no contractual relationship between him and the pension fund, which is a separate judicial person, although established by the applicant’s employer. When the Ministry of Social Affairs and Health made its decision in 1988, neither the applicant nor the company O. were considered as parties to the proceedings through which the pension fund rules were modified and approved. Therefore, the diminution of the applicant’s contractual rights in such proceedings cannot bind the applicant or his employer. The Supreme Court’s decision of 2 November 1995 was the first decision which legitimately affected the applicant’s pension rights by finding that a decision of an administrative body, releasing the company from its liability to pay the applicant the benefits based on the employment contract signed between the company and the applicant, had a binding effect on the applicant’s pension rights. Prior to the Supreme Court’s decision nothing in the legislation or in the domestic practice had referred to the possibility that a modification of pension fund rules could positively affect the contents of an employment contract. As the applicant’s pension rights were based on an employment contract between him and the company, there was, before the Supreme Court ruling of 2 November 1995, no reason why he should have appealed against the amendment of the pension fund rules which could be seen to affect only the responsibility of the fund, not that of the company. By instituting proceedings against the company, i.e. the other party to his employment contract, the applicant has exhausted the available domestic remedies.
The applicant notes that, as the Supreme Court gave its decision on 2 November 1995, the application has been submitted within six months time-limit.
In so far as the Government has argued that the proceedings complained about fall outside the Court’s competence ratione temporis, the applicant notes that it was only through the Supreme Court ruling of 2 November 1995 the applicant had suffered the final loss of his pension benefits. This event clearly occurred after the entry into force of the Convention in respect of Finland.
The Court recalls, first, that under Article 35 § 1 of the Convention, the Court may only deal with a matter after all domestic remedies have been exhausted, according to generally recognised rules of international law, and within a period of six months from the date on which the final decision was taken. In the present case, the Government has stated that the applicant could have appealed against the decision of the Ministry of Social Affairs and Health by lodging an application with the Supreme Administrative Court, and that having failed to do so, the applicant has failed to exhaust the domestic remedies available to him. The Court recalls in this respect that, according to the Convention institutions’ established case-law, the obligation to exhaust domestic remedies requires only that an applicant make normal use of effective and sufficient remedies, that is, those capable of remedying the situation at issue. Failure to exhaust domestic remedies cannot, moreover, be invoked against someone who, at the time a remedy was available, could not have thought that he was adversely affected by the situation (see, amongst others, Farmakopoulos v. Belgium, 11683/85, decision of 8 February 1990, DR 64, pp. 62-71; and 11613/85, Kolompar v. Belgium, Decision of 16 May 1990, DR 65, pp. 82-88). In this respect, the Court recalls that the applicant has insisted that he was under the impression that company O. was responsible for his pension benefits, whatever was decided in the proceedings concerning the modification of the pension fund rules, to which the applicant and his employer were not parties. This impression is supported, firstly, by the fact that the applicant has instituted civil proceedings against the company O. - and not against the pension fund, which is a separate judicial person. The applicant’s impression is, secondly, supported by the appended dissenting opinions to the Supreme Court’s judgment of 2 November 1995, according to which company O. was responsible for the lack of the necessary funding to the Pension Fund (finding by 3 votes to 2 that the company was not responsible). The Court further notes the Ombudsman’s decision of 1989, according to which individual pensioners were not parties to the procedure concerning the change of pension fund rules. While, due to the Supreme Administrative Court’s more recent case-law, a similar situation might have to be assessed differently today, the applicant can be excused for not having appealed against the decision of 31 May 1988 of the Ministry of Social Affairs and Health. Having said so, the Court finds that the application was made within the six months’ time-limit, and that the facts referred to have occurred after the Convention’s entry into force in respect of Finland.
Turning to the substance of the complaint under Article 6, the Court recalls that its task is not to take the place of the competent national courts in the interpretation of national law. It is in the first place for the national authorities, notably the courts, to interpret and apply the domestic law, as the national authorities are, in the nature of things, particularly qualified to settle issues arising in this connection (see, mutatis mutandis, the Barthold v. Germany judgment of 25 March 1985, Series A no. 90, § 48) unless the interpretation of the domestic authorities can, exceptionally, be regarded as arbitrary or without legal justification.
The Court notes that the applicants’ civil rights were finally determined by the Supreme Court in its judgment of 2 November 1995. In the light of this, the fact that the applicant was not a party to the preceding rearrangement proceedings of the pension scheme, which took place before the entry into force of the Convention with regard to Finland, does not as such raise any issue under Article 6. Regarding the allegation that the Supreme Court based its decision on the decision reached in the preceding administrative proceedings, the Court notes that the Supreme Court’s judgment was, rather, founded on an interpretation of the applicant’s employment contract. In a reasoned judgment the Supreme Court came to the conclusion that, according to the contract of employment concluded between the applicant and the company O., the applicant’s pension benefits were determined in accordance with the rules of the pension fund. The Supreme Court held it unlikely that the applicant would have signed the employment contract if he had considered himself entitled to better pension rights than those laid down in the Pension Funds Act and the pension fund rules applicable at the time. The Court does not find that the interpretation by the Supreme Court of Finnish law and the contract in question in this case was arbitrary so as to disclose any appearance of a violation of Article 6 of the Convention.
It follows that this part of the application must be rejected as being manifestly ill-founded within the meaning of Article 35 § 4 of the Convention.
2.The applicant complains, under Article 1, first paragraph, of Protocol No. 1 to the Convention, that his right to the peaceful enjoyment of his possessions has been violated as the Supreme Court decision deprived him of his pension rights which he had earned during his employment. Article 1 of Protocol No. 1 reads as follows:
“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.”
The Government, firstly, note that the applicant arguably cannot claim to be a victim under Article 34 of the Convention as the survivors’ pension under the Employment Pension Act does not relate to him, but to his wife. Moreover, at the moment the question is not of a concrete, but only of a potential measure. As it could be argued that in the present case the applicant is an indirect victim, however, the Government leaves the question to the Court’s consideration.
The Government note that the applicant did not contribute to his pension scheme in any way as, according to Section 191) of the Pension Funds Act, the employees may not contribute to the pension funds.
They observe that, by the modification of the pension fund rules, approved by the Ministry of Social Affairs and Health in 1988, the right to survivors’ pension was abolished for pensions falling due after the date when the new pension rules became effective on 1 September 1988. The modification concerned both employees who were still working and retired employees. The modification did not affect survivors’ pensions which were already being paid. As regards the applicant, the modification meant that, should he die before his wife, his widow would be entitled to the survivors’ pension under the Employment Pensions Act but not to the additional pension paid from the pension funds. In case the applicant had died in 1988, his widow would have been entitled to a monthly survivors’ pension of FIM 4,370.64 under the Employment Pensions Act. In addition she would have benefited from an additional monthly survivors’ pension of FIM 2,026.04 to be paid from the pension fund. According to the index applicable in 1999, those sums would have corresponded to FIM 6,134.47 and FIM 2,288.23, respectively. However, the applicant has not suffered any concrete loss of additional pension benefits, nor would he suffer such a loss if his wife died before him.
According to the Government, the pension fund rules and other terms of employment contained no rules or provisions according to which the pension fund or the employer would have been under an obligation to proceed to index-linked increases of pensions, but such increases were voluntary and at the discretion of the fund’s board of directors. Along with the modification of the rules in 1988, the index-linking of pensions became binding on the pensions funds and employer company. The increases were between 1988 and 1992 linked to a certain part of the cost-of-living index, and, as from 1993 with the change of the cost-of-living index as a whole.
The Government also note that the applicant has, in his claims against the company, demanded that the company be ordered to pay FIM 2,867 in respect of 1988 and FIM 5,314 in respect of 1989 because, in his opinion, he would have been entitled in those years to an index-linked increase of additional pension, corresponding to these sums. The applicant had based his claims on the fact that index-linked increases of pensions had regularly been made in several years in accordance with the Employees’ Pensions Act. Whereas the index-linked increases had earlier, with one exception, been made in accordance with the Employment Pension Act, after the modification of the rules the increases were based on the cost-of-living index and, between 1988 and 1992, were linked to a certain part of the cost-of-living index.
The Government, further, observe that there is no general right to a pension to be found in Article 1 of Protocol No. 1. It has, however, been allowed that for the purposes of the said Article a person has a protected right in a contributory pension scheme. As the situation in the present case is non-contributory, no interference has taken place with the applicant’s rights under Article 1 of Protocol No. 1.
The Government accept that the right to a pension based on employment can in certain cases be assimilated to a property right. This may be the case either where the special contributions have been paid by the applicant or where employer has given a more general undertaking to pay a pension on conditions which can be considered part of the employment contract. As to index-linking, no such general undertaking as referred to above can be found in the present case. As regards the survivors’ pension, the issue at stake was only the claim eventually to obtain such possessions. According to the Government, it appears that in the present case the applicant did not have such possessions as referred to in Article 1 of Protocol No. 1.
Finally, the Government consider it clear that the possible deprivation of the applicant’s possessions took place in the public interest and subject to the above-mentioned provisions of law. As to the survivors’ pension, the Government deny any interference with existing possessions, as the applicant at the most had an expectation to obtain such possessions in the future. As far as other reductions are concerned, they do not create a situation where the fair balance between the public interest identified and the burden on the individual applicant would have been affected in a way that Article 1 of Protocol No. 1 can be considered to be violated. Here the Government also refer to the wide margin of appreciation left to governments in application of the said Article.
The applicant complains that the Supreme Court’s decision deprived the applicant, without compensation, of part of the pension benefits already earned by him. Therefore, he has been deprived of his possessions contrary to Article 1 § 1of Protocol No. 1.
As to the question of whether he can claim to be a victim, the applicant submits that the survivors’ pension, being based on the employment contract between the applicant and the company, is an economic right of the applicant personally, the pecuniary value of which can be calculated according to the principles of insurance mathematics. A survivors’ pension benefit based on a private law contract could in many cases be an object for negotiations and exchange against another type of a benefit, e.g. a lump-sum payment.
The applicant argues that the pension scheme was contributory in nature. It is clear from the outset that the application does not relate to any pension benefits of a public law nature, based on legislation and/or funded from public funds. Only benefits based on a private law employment contract are at issue. The applicant, however, admits that he did not pay a separate and identifiable premium to finance his benefits. This was due to the fact that the pension benefits in question were guaranteed to him under the terms of the employment contract. Hence, he contributed regularly to his pension scheme through his work and this contribution was taken into account when his salary and increases to it were decided. The applicant notes that the salary paid to him was, throughout his long service with the company, some ten percent lower than that of an employee performing equal work in another company. The amount of the applicant’s contribution to the pension scheme could also be calculated by estimating the monthly premium needed to finance an identical pension scheme through a voluntary supplementary pension insurance with an insurance company. According to the applicant’s calculations, the decision to cancel the survivors’ pension benefit without compensation amounted to an economic loss of FIM 230,934, assuming that women in Finland outlive their husbands by seven years.
In so far as the index-linked increases are concerned, the applicant notes that, although the earlier well-established system of index-linked increases was not based on an explicit provision in the applicant’s employment contract, it should be seen as a constitutive part of the contract taken as a whole. According to the applicant’s calculations, the cuts in his old-age pension benefits amount to FIM 148,155 between the entry into force of the Convention in respect of Finland, i.e. 10 May 1990, and 31 December 1999.
With reference to the above-mentioned calculations, the applicant observes that he has been deprived of certain individual economic rights of pecuniary value without consultation or compensation. As the loss amounts to the applicant’s income of several years, there is a question of a serious infringement of the applicant’s rights under Article 1 of Protocol No. 1. The applicant emphasises that no appropriate justification under the criterion of public interest has been presented.
Finally, the applicant submits that the absence of a proper justification based on public interest for the infringements in question is evident from the discriminatory way in which the reductions to pension benefits were implemented through a collective agreement between the company and the then employees. Moreover, the Government has not even identified which public interest was served by the pension benefit reductions at issue. The generous nature of compensation for reductions in pension rights, offered and given to the then employees, shows that there was no urgency or necessity to cut the pension benefits of the retired pensioners in such a drastic way as took place. By way of example, the applicant mentions that Mr P.V., who signed the collective agreement on behalf of the employer, personally benefited in the amount of some FIM 2,435,000 of the deal as a compensation for his reduced pension benefits. The applicant repeats his position that the reductions to his pension rights amount to a violation of Article 1 of Protocol No. 1, both taken alone and in conjunction with Article 14 of the Convention.
As regards the question of the applicant’s status as a victim of the alleged violation, the Court recalls that in order to be able to claim to be a victim of a violation, the applicant must be directly affected by the act or omission complained of. The Court recalls that, in accordance with the Convention organs’ established case-law, the concept of “victim” must be interpreted independently of concepts of domestic law concerning such matters as interest or capacity to take legal proceedings. The Court accepts that the applicant was affected by the deprivation of the survivors’ pension benefits and can be regarded as a victim of the alleged violation in this respect.
In so far as Article 1 of Protocol No. 1 is concerned, the Court first recalls that, according to the Convention organs’ established case-law, the right to an old-age pension or related pension benefits is not included as such among the rights and freedoms guaranteed by the Convention and the Protocols thereto. The Convention organs have nevertheless recognised that payment of compulsory contribution to a compulsory pension fund may, at least in certain circumstances, create a property right in a portion of such a fund and that such a right might be affected by the manner in which the fund is distributed (see, e.g., Müller v. Austria, 5849/72, Comm. Report of 1 October 1975, DR 43, pp. 25, 31). However, the Court notes in the present case that, as was also admitted by the applicant, he has not paid any identifiable premium to the pension fund to finance his benefits. Even assuming that the applicant could be regarded as having paid such a contribution, there is no right guaranteed in the Convention to a specific amount of pension. Nevertheless, the Court accepts that the reduction of the applicant’s pension has affected his property interests protected by Article 1 of Protocol No. 1.
Even so, there has been no direct interference by public authorities comparable to expropriation or similar measures. The Court recalls the Supreme Court’s finding that, according to the applicant’s employment contract, his pension rights were determined in accordance with the rules of the company’s pension fund. Thus the pension benefits of the applicant, as a matter of Finnish law, were determined by a private law contract which set out the mutual obligations of the parties. The fact that the State, through its judicial system, provided a forum for the determination of those rights and obligations does not automatically engage its responsibility under Article 1 of Protocol No. 1. While the State could be responsible for losses caused by such determination by its courts, if their decisions amounted to an arbitrary and disproportionate interference with possessions, this is not the case here.
Firstly, while the applicant’s pension rights were diminished, their substance was left intact. Secondly, the Court notes the Supreme Court’s finding that it was unlikely that the applicant, in the light of his educational status, would have signed the contract as it was, had he considered himself entitled to better pension rights than those laid down in the Pension Fund Act and the pension fund rules applicable at the time. The Supreme Court also concluded, after an analysis of the index-linking of the special pensions, that the use of a certain index was neither part of the contract between the parties nor had it become a practice binding on the company. The Court, which normally will rely on the assessment of facts and on the interpretation of domestic law by domestic courts, has no reason to question the correctness of this conclusion.
In the light of this reasoning and of the terms of the contract, the Court cannot regard as arbitrary the interpretation given to the latter by the Supreme Court. The Court further notes that the applicant could defend his interests in proceedings on three judicial levels, ending with a lengthy and reasoned judgment of the Supreme Court. There is therefore no appearance of a violation of Article 1 of Protocol No. 1.
It follows that this part of the application must be rejected as being manifestly ill-founded within the meaning of Article 35 § 4 of the Convention.
3. The applicant has further alleged that he has been discriminated against on the basis of his status as a retired pensioner, as he has not received any compensation for his losses even though the current workers of the company did. He invokes Article 14 of the Convention, in conjunction with Article 1 of Protocol No. 1. Article 14 of the Convention reads as follows:
“The enjoyment of the rights and freedoms set forth in this 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.”
The Government note that when an assessment is made of whether the applicant was discriminated against on the basis of his status as a retired pensioner, attention should be paid to the fact that in national court proceedings such discrimination was not found to have occurred. According to the decision of the Supreme Administrative Court, the modification of the rules had taken place in accordance with Section18(1) of the Pension Funds Act, by reducing the pension rights of the different groups of beneficiaries to the same extent. The Supreme Court also found that different beneficiaries had been treated equally. The equality of beneficiaries could be assessed from different points of view. As regards the persons still working, the Supreme Court considered that the economic value of the benefits lost was difficult to estimate, whereas it was justified to estimate the value of the exchange of special pension rights for company shares, considering that the subscription to the shares at the relevant time was an option that could be compared with risk investments. The value of the right to subscribe to shares was to be assessed as it was at the relevant time, and not on the basis of a subsequent development of exchange rates. The Supreme Court did emphasise that the pension arrangements and their effects were to be considered as a whole. As regards the use of the index referred to in the Employees’ Pensions Act, the Supreme Court found that there were no provisions to that effect in the pension fund rules; indexing was not an established practice comparable with a contract, from which the company could not have deviated; and the applicant had not been able to prove that he had separately agreed with the company to have the increases linked to the said index.
The Government note that the applicant’s pension as a whole, consisting of the pension under the Employees’ Pensions Act and of additional pensions, was increased by some 24,5 % between the end of 1987 and the beginning of 1993. The Government note that during the same period of time the salaries of clerical employees of the company only increased by some 11,8 % in accordance with the general increases based on contracts.
The Government, finally, note that although there has been a difference of treatment, it may be questioned whether those working and those already retired were at the relevant time in analogous positions. In any case, the reasoning by the Supreme Court shows that there has been an objective and reasonable justification for the differences and thus no violation of Article 14 of the Convention.
The applicant submits that the deprivation of his pension benefits has been discriminatory because he has been deprived of his benefits without compensation, even though the employees still working at the company, at the time of the modification of the rules, were compensated for the diminution of their pension benefits. According to the applicant, he has been discriminated against on the basis of his age and his status as a retired pensioner.
According to the Court’s established case-law (see, among others, the judgment of 28 May 1985 in the case of Abdulaziz, Cabales and Balkandali v. the United Kingdom, Series A no. 94, § 71; and the judgment of 21 February 1997 in the case of Van Raalte v. the Netherlands, Reports 1997-I, § 33), Article 14 of the Convention complements the other substantive provisions of the Convention and the Protocols thereto. It has no independent existence since it has effect solely in relation to “the enjoyment of the rights and freedoms” safeguarded by those provisions. Although the application of Article 14 does not necessarily presuppose a breach of those provisions - and to this extent it is autonomous - there can be no room for its application unless the facts at issue fall within the ambit of one or more of the latter.
The Court does accept that the facts of the case fall within the ambit of Article 1 of Protocol No. 1. Thus Article 14 is applicable. The Court, however, recalls the reasoning of the Supreme Court, according to which there was no violation of the principle of equality as between the beneficiaries as argued by the applicant. According to the Supreme Court’s decision, the benefits lost were not similar as, for example, the retirement age of the workers still working had been increased and as those who already had retired at the time of the introduction of the new rules, had had the opportunity to exercise their freedom of choice. While only the current workers of the company were offered the opportunity to exchange their special pension rights for company shares and to receive life-insurance cover paid by the company, the court noted that this possibility was of a doubtful value, as in the then financial situation of the company the shares were a risk investment. The Supreme Court in essence concluded that the disadvantages from which the applicant as a retired worker allegedly suffered were balanced by other elements of the new pension scheme. The Court recalls that it normally relies on the findings of national courts. That is also the case in the examination of the present application as the Court finds that the Supreme Court’s reasons provide objective and reasonable justification for the difference in treatment between the two groups of the pension fund beneficiaries.
It follows that this part of the application must be rejected as being manifestly ill-founded within the meaning of Article 35 § 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Vincent BergerGeorg Ress
Registrar President
Full & Egal Universal Law Academy