The Pension Scheme is financed partly by employer's contributions and partly by employees' contributions of 5% of pensionable salary, less tax relief. Under the Pension Scheme, members are entitled to a pension at the normal retirement date or can choose to commute part of their annual pension for a tax-free cash sum. Under certain conditions they can also transfer to the Pension Scheme the value of pension rights accrued in previous employment.

Until ljuly 1991 the Pension Scheme provided that the normal pensionable age was 65 years for men and 60 for women. The Pension Scheme was amended with effect from 1 July 1991 to provide for a normal pensionable age of 65 for both men and women. According to the order for reference, the amendment applies both to benefits earned in respect of years of service after 1 July 1991 and to benefits earned in respect of years of service prior to 1 July 1991. More specifically, the consequences of the amendment are as follows:

(a)if a woman retires at the age of 60, her pension will be subject to an actuarial reduction of 4% per annum for each year by which her retirement preceded the age of 65. Under the previous rule she would have received a full pension;(b)if a woman leaves the Pension Scheme before the normal pensionable date, that is to say, before the age of 65, the acquired pension rights which could have been transferred to another approved scheme or which could have been applied to purchase an insurance policy will be calculated on the basis that her 65th birthday is the normal pensionable date;(c)if a woman retires at the age of 60, the pension benefits earned in previous employment on the basis that she would retire at the age of 60 will be subject to an actuarial reduction of 4% for each year that she retires before the age of 65. However, the total amount of these pension payments cannot fall below the level of a monetary guarantee given at the time of transfer of rights into the Pension Scheme. This may have the effect of limiting the net overall reduction in those pension benefits.

(a)female employees aged between 60 and 65 who retired after 1 July 1991. This is the case with Mrs Smith, Mrs Ball and Mrs McHugh. Under the new rules their pensions have been reduced by 20%, 8.3% and 11.28% respectively;(b)female employees who are still working and who have transferred to the Pension Scheme pension rights acquired in previous employment. This is the case with Mrs Parker. If employees in this category retire between age 60 and age 65, their pension rights will be liable to the abovementioned actuarial reduction of 4% per annum until their 65th birthday, subject to the monetary guarantee mentioned above;(c)female employees who are still working but are no longer affiliated to the Pension Scheme. This is the position of Mrs Vance, who left the Pension Scheme voluntarily. Although she is entitled to a deferred pension on the basis of the rights which she accrued when she was a member of the Pension Scheme, the value of that pension is calculated on the basis of a normal pensionable age of 65.

The order for reference also mentions a fourth category of female employees who were affiliated to the Pension Scheme but who have since died. Since none of the cases in the main proceedings concerns this category, I will not consider it further.

1.Where an occupational pension scheme has different normal pension ages for men and women (65 and 60 respectively), and where an employer seeks, in the light of Case C-262/88 Barber v Guardian Royal Exchange Assurance Group [1990] E CR I-1889, to eliminate that discrimination, is it inconsistent with Article 119 of the Treaty of Rome for the employer to adopt a common pension age of 65 for men and women

(i)in respect of occupational pension benefits received by employees which are based on years of service after the date of equalization which was 1 July 1991;(ii)in respect of occupational pension benefits received by employees which are based on years of service on or after 17 May 1990, but before the date of equalization, when the date of equalization was 1 July 1991;(iii)in respect of occupational pension benefits received by employees which are based on years of service prior to 17 May 1990, when the date of equalization was 1 July 1991?

Until 31 December 1984 the rules of that pension scheme drew a distinction between male and female employees in so far as the normal pensionable age for male employees was set at 60 years while that for female employees was set at 55 years. As a result, male employees could participate in the scheme for five more years than their female colleagues, which enabled them to build up a higher pension, although both sexes ceased to acquire pension rights once the maximum number of pensionable years of service had been completed.

With effect from 1 January 1985 that distinction was abolished: the normal pensionable age for all members of the scheme was set at 60 years. The following transitional arrangements were adopted. Female employees who were already members of the scheme on 1 January 1985 had the choice of either taking part in the new scheme and accepting the raising of the pensionable age from 55 to 60 years, or of taking part in the scheme but maintaining the pensionable age of 55 years. The election had to be made by 31 December 1986. In the absence of an express election for a pensionable age of 60, it was provided that the person concerned would be deemed to have opted for a pensionable age of 55. All the applicants in the main proceedings elected expressly or by implication to maintain the pensionable age of 55.

The following compensatory provisions were introduced at the time of the amendment. First, the amount of the reduction in the cash value of the pension rights acquired for the period up to 17 May 1990 resulting from the amendment was calculated. That reduction was then offset by allowing each member of the scheme to opt, by 1 December 1991 at the latest, for early pension entitlement (corresponding to the cash value) without the early-entitlement abatement provided for in the rules. If no declaration had been made by that date, the person concerned was deemed to have elected for that option.

It appears from the order for reference that the Pension Fund agreed to reconsider the amendment if it were to prove that non-implementation of the amendment would not give rise to a risk of a breach of Article 119 of the EC Treaty. The Pension Fund fears that if the amendment were held to be in breach, male employees in the same position would, if it were not implemented, claim entitlement to the same rights as those conferred on their female colleagues by the transitional arrangements adopted in 1985 and that they would in particular opt for a pensionable age of 55 years.

The Kantongerecht has considered it necessary to refer the following questions to the Court for a preliminary ruling:

A.In a pension scheme adopted in the framework of a labour agreement in which, after 1 January 1985, the pensionable age for both male and female members is set at 60 years, is it contrary to Article 119 of the EC Treaty for the pensionable age for a limited group of female members to remain fixed at 55 years after 17 May 1990, where:

(a)that results from transitional provisions adopted with effect from 1 January 1985 (when, as a result of an amendment to the rules, the pensionable age previously fixed for men at 60 years and for women at 55 years was changed to a uniform pensionable age of 60 years), and(b)the transitional provisions are solely applicable to female members (prospective members) who on both 31 December 1984 and 1 January 1985 were employed by an employer affiliated to the defendant (the persons aggrieved), and(c)the transitional provisions also provided that the persons aggrieved could elect for a pensionable age of either 55 or 60 years, which election had to be made during a period which had already expired by 31 December 1986?

I shall first examine this central question from the point of view of principle and then give a reply to the questions referred to the Court in the two cases.

When applying that case-law, account must naturally be taken of the limitation of the effects in time of the Barber judgment. As the Court recently made clear in its judgments in Ten Oever, Moroni and Neath, this means that

the direct effect of Article 119 of the EEC Treaty may be relied upon, for the purpose of claiming equal treatment in the matter of occupational pensions, only in relation to benefits payable in respect of periods of service subsequent to 17 May 1990, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law.

Judgment in Case C-109/91 Ten Oever v Stichting Bedrijfspensioenfonds voor het Glazenwassers- en Schoonmaakbedrijf [1993] ECR I-4879, paragraph 20 and point 2 of the operative part; judgment of 14 December 1993 in Case C-110/91 Moroni v Firma Collo, paragraph 31 and point 3 of the operative part; judgment of 22 December 1993 in Case C-152/91 Neath v Hugh Steeper, paragraph 18 and point 1 of the operative part.

In other words, in the sphere of occupational pensions, the case-law on the only valid frame of reference to which I have just referred can be applied only in respect of periods of service completed after 17 May 1990.

Contrary to the arguments of the applicants in both cases, the judgment in Defrenne II does not detract from that conclusion. It is true that in that judgment the Court held that, given the social objective underlying Article 119 — as expressed in the improvement in workers'standard of living and working conditions provided for in Article 117

The Court has pointed out many times that, although this provision may be relevant to the interpretation of other Community provisions, it is essentially in the nature of a programme and the attainment of the objectives must be the result of a social policy to be defined by the competent authorities (see the judgment in Case 126/86 Giménez Zaera v Instituto Nacional de la Seguridad Social y Tesoreria General de la Segundad Social [1987] ECR 3697, paragraphs 13 and 14). The Court has more recently confirmed this view at paragraphs 25 and 26 of its judgment in Joined Cases C-72/91 and C-73/91 Sloman Neptun Scbiffahrts v Seebetriebsrat Bodo Ziesemer der Sloman Neptun Scbiffahrts [1993] ECR I-887, in which it added (at paragraph 27) that Article 117 does not allow any judicial review of the social policy pursued by Member States.

women alike, had the result that women would in future be deprived of rights which until then they had derived from the direct effect of Article 4(1) of Directive 79/7/EEC

Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ 1979 L 6, p. 24).

I shall begin with the last situation, where there is a common pensionable age of 65 for male and female employees for pension benefits based on periods of service prior to 17 May 1990. From the point of view of Community law, the matter is clear: such a situation is not affected by Article 119 of the EC Treaty since that article has — at any rate as regards discrimination arising from differences in pensionable age — no direct effect as far as those benefits are concerned and no other rule or principle of Community law requiring occupational pension schemes to be adapted to the principle of equal treatment through the introduction of a general (higher or lower) pensionable age can be pointed to. While I sympathize with the position taken by the applicants in the main proceedings and by the German Government, who say that an increase in the pensionable age for women may amount to an impairment of acquired rights comprised in the occupational pension scheme as subsequently modified, this problem can be resolved only by reference to national law, given the absence of Community rules during the relevant period. Actually, the observations submitted by the intervening Governments show that a number of possibilities are available under national law; the United Kingdom here mentions rules of the law of contract and trusts applicable in that Member State, while the German Government mentions the principles of the protection of legitimate expectations and acquired rights existing in German law (Prinzip des Vertrauens- und Bestandsschutz) as well as the case-law of the Bundesarbeitsgericht (Federal Labour Court).

At points 14 and 15 of its written observations the German Government refers in particular to the Widows Pension' judgment of the Bundesarbeitsgericht of 5 September 1989 (3 AZR 575/88, also published in Betriebs-Berater, 1989, p. 2400, and in Der Betrieb, 1989, p. 2615), in which a three-level theory was applied in the context of the protection of acquired rights in the implementation of the principle of equal treatment in the case of private widows' pension insurance schemes. According to that theory, an employer will be able to introduce retroactive levelling-up of pensionable ages only if he can specifically demonstrate compelling reasons (zwingende Gründe), such as the existence of an economic crisis, the reduction of an unplanned over-provision of benefits and a serious breach of fiduciary duty.

Unlike the Commission (which considers that only the date of payment of the pension is relevant for determining whether Article 119 of the EC Treaty has been complied with),

At the hearing, counsel for the applicants in the Smith case correctly pointed out that the Commission's argument failed to take account of the inherent characteristics of occupational pension schemes. As the Court pointed out in its judgments, cited above in footnote 6, in Ten Oever (paragraph 17), Moroni (paragraph 29) and Neath (paragraph 14), it is characteristic of occupational pension schemes that there is a time lag between the accrual of entitlement to the pension, which occurs gradually throughout the employee's working life, and its actual payment, which is deferred until a particular age.

There is no need for me to examine the position regarding benefits relating to periods of service between 17 May 1990 and the date of levelling; as I have said, Article 119 here precludes a levelling-up of pensionable ages.

What, then, about levelling for future periods of service (that is to say, the years after the levelling date of 1 July 1991, which is the date laid down in the scheme rules)? Mrs Smith and her co-applicants submit that the employer is here bound by the Community principle of proportionality. The method selected for abolishing the prohibited discrimination should not be allowed to reduce the pension benefits of women more than is strictly necessary to meet the needs of the undertaking. Here account must be taken of, inter alia, any surpluses in the Pension Fund or alternative methods of financing such as increasing premiums and the extent to which the employer has profited in the past from the maintenance of a discriminatory pension scheme (which is considered to be the case since Avdel Systems Limited has not paid any contributions since 1 June 1989).

This argument is not tenable. Under Article 119 of the EC Treaty employers are obliged to abolish any inequality of pay between male and female employees. In my view, the principle of proportionality cannot be relied on where it would impair implementation of as fundamental a rule of Community law as that of equal treatment between men and women.

Paragraph 36 of the judgment in De Weerd (née Roks).

I am inclined to adopt a restrictive view here. The duration of the period in question and the related costs are, after all, matters in the employer's control: the more rapidly the Pension Scheme is adapted to the principle of equal treatment, the shorter will be the period in which the rule based on the only valid frame of reference will apply and consequently the lower will be the resulting costs for the employer and the Pension Scheme. It does not therefore seem appropriate to me to take, as Avdel Systems Limited suggests, a flexible approach towards application of the criteria which the Court in, inter alia, its judgment in the Bilka case,

Judgment in Case 170/S4 Bilka-Kaufhaus v Weber von Hartz [1986] ECR 1607, at paragraph 36. Those criteria are that the measures should correspond to a real need on the part of the undertaking, be appropriate with a view to achieving the objectives pursued and be necessary to that end.

It is obviously for the national courts to assess and review these factors: in particular, it is for them to determine whether the grounds of justification relied on by an employer and/or an occupational pension scheme are unrelated to any discrimination on grounds of sex

See the judgment in Case 171/88 Rinner-Kühn v FWW Spezial-Gebandereinigung [1989] ECR 2743, paragraph 15.

According to the Pension Fund, on the other hand, it follows from the Barber judgment that the transitional arrangements here in question are now prohibited. In view of the way in which the Court restricted the effect in time of its judgment in Barber, it is no longer permissible, in the case of entitlements accruing after 17 May 1990, to discriminate by maintaining pensionable ages differing according to sex.

The Commission agrees with this argument. The applicants in the main proceedings cannot, in its view, object to the abolition of the transitional arrangements by relying on Article 119 of the EC Treaty. According to the Commission, Article 119 does not preclude pension benefits for the advantaged group from being lowered in the future to the level of those of the disadvantaged group, so long as the principle of equal treatment continues to be respected. The question whether the applicants' acquired rights have been impaired is a separate question which in principle must be answered by reference to national law. Nor does the Commission consider it necessary to qualify its view in the light of the facts mentioned by the Kantongerecht in points (a), (b) and (c) of its first question. In particular, the Commission takes the view that the Court's case-law on social-security benefits provides sound arguments supporting the view that the principle of equal treatment must be strictly complied with, even in relation to the transitional arrangements here at issue.

the directive does not provide for any derogation from the principle of equal treatment laid down in Article 4(1) in order to authorize the extension of the discriminatory effects of earlier provisions of national law. It follows that a Member State may not maintain beyond 22 December 1984 any inequalities of treatment which have their origin in the fact that the conditions for entitlement to benefit are those which applied before that date. That is so notwithstanding the fact that those inequalities are the result of transitional provisions adopted at the time of the introduction of a new benefit.

Paragraph 10 of the judgment in Borrie Clarke; sec also the judgments in Dik (paragraph 9) and in Johnson (paragraph 32).

This Directive shall not preclude rights and obligations relating to a period of membership of an occupational scheme prior to revision of that scheme from remaining subject to the provisions of the scheme in force during that period.

Unlike Directive 79/7, therefore, Directive 86/378 thus contains an express provision stipulating that the new law is to respect pre-existing situations.

The original Commission proposal did not contain this transitional provision. However, Article 10 of the proposal did contain a similar transitional provision regarding the use of actuarial calculation factors differing according to sex.

social security schemes or benefits such as, for example, retirement pensions, which are directly governed by legislation without any element of agreement within the undertaking of the occupational branch concerned and which are obligatorily applicable to general categories of workers.

Paragraph 9 of the judgment in Ten Oever, cited above in footnote 6, with reference to paragraph 7 of the judgment in Case 80/70 Defrenne v Belgium (Defrenne I) [1971] ECR 445. See also paragraph 14 of the judgment in Moroni, also cited above in footnote 6. Compare this with the definition given in the Court's established case-law of the term social security benefit in Regulation No 1408/71, namely a benefit which is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position and provided that it concerns one of the risks expressly listed in Article 4(1) of Regulation No 1408/71; see, inter alia, the judgments in Case C-78/91 Hughes v Chief Adjudication Officer [1992] ECR I-4839, paragraph 15, and in Case C-111/91 Commission v Luxembourg [1993] ECR I-817, paragraph 29.

For such schemes the principle of immediate effect of the new law invariably applies.

For the rationale of this direct applicability, see the classic work by P. Roubier, Le droit transitoire, Paris, Dalloz, 1960, p. 340 et seq.

Occupational pension schemes, on the other hand, are based on agreement. Here transitional law is subject to considerations, such as respect for the free choice of the parties and for the contractual balance, which differ from those governing statutory schemes of general application. In general, where agreements are concerned, the non-retroactive effect of the new law in relation to the old is accepted; immediate application of the new rule must only be guaranteed in so far as the public interest is seriously affected by the continuation of situations which arose under the old law.

See, among others, H Chabas in Mazeaud, Mazeaud and Chabas, Leçons de droit civil, I, introduction à l'étude du droit, Paris, Montchrcstien, 1991, No 147, pages 197 and 198; J. Ghestin and G. Goubeaux, Traité de droit civil, introduction générale, Paris, L. G. D. J., 1990, No 373, pages 333 and 334; P. Roubier, Le droit transitoire, p. 380 et seq.

is mandatory in nature, the prohibition on discrimination between men and women applies not only to the action of public authorities, but also extends to all agreements which are intended to regulate paid labour collectively, as well as to contracts between individuals.

Paragraph 39 of the judgment in Defrenne 11, cited above in footnote 9, subsequently confirmed by the Court in settled case-law, inter alia in its judgments, cited above in footnote 5, in Case C-33/89 Kowalska, paragraph 12, and in Case C-184/89 Nimz, paragraph 17 (in the latter judgment solely in relation to collective labour agreements).

The direct (and, in principle, immediate) application of Article 119 to horizontal schemes, in particular contractual schemes, was thereby accepted.

In the Barber judgment, as also in the judgment in Defrenne II, however, the Court restricted such immediate application by limiting the effect of the judgment in time, thereby conferring on the provision nonretroactive effect. It seems to me, therefore, that the Court, by establishing a transitional rule in its judgments, has itself undertaken the balancing of interests underlying the principle of respecting pre-existing situations and weighed the general Community interest (in having, in particular, uniform and general application of Community law) against the interest of individuals (in having, in particular, legal certainty and protection of legal relations established in good faith). Consequently, it is this transitional rule laid down in the Barber judgment which must be applied for the purpose of interpreting Article 119 of the EC Treaty in relation to occupational pension schemes.

overriding considerations of legal certainty preclude legal situations which have exhausted all their effects in the past from being called in question.

Finally, it must be pointed out that no restriction on the effects of the aforesaid interpretation can be permitted as regards the acquisition of entitlement to a pension as from the date of this judgment.

When explaining the effect in time of Barber in its judgments in Ten Oever (paragraph 19), Moroni (paragraph 31) and Neath (paragraph 16), the Court expressly referred to the reasoning in paragraph 44 of its judgment in Barber.

It is not contrary to Article 119 of the EC Treaty for an employer, following the judgment of the Court in Case C-262/88 Barber v Guardian Royal Exchange Assurance Group [1990] ECR I-1889, to raise, in an occupational pension scheme, the pensionable age of female employees for future periods of service to the pensionable age of male employees, provided at least that the principle of equal pay for men and women laid down in that provision is fully respected. Given the limitation in time of the effects of the Barber judgment, Community law likewise does not preclude such a step in relation to periods of service completed prior to 17 May 1990. Community law does, however, preclude such a step in relation to periods of service completed between 17 May 1990 and the date on which pensionable ages are levelled. In the case of the lastmentioned periods of service, the principle of equal treatment must be implemented by applying the rules enjoyed by the members of the more favoured sex to members of the less favoured sex.