2003/06/03 - II. ÚS 405/02: Pension Insurance

03 June 2003

HEADNOTES   

In

this case § 61 of Act no. 155/1995 Coll., on Pension Insurance, by

referring to an international agreement, imposes a different manner of

calculating the amount of an early pension, depending on the criterion

of the location of a citizen’s employer’s registered address. If a Czech

citizen (with permanent residence in the CR) was employed in the Slovak

Republic at that time, in terms of pension insurance this is considered

“employment abroad,” which has negative consequences for his pension

entitlements in the Czech pension insurance system.

The Constitutional Court considers differentiation between citizens of

the Czech Republic, which is based on a fiction that employment in the

Slovak Republic of the then joint Czechoslovak state is “employment

abroad,” to be discriminatory, as it is not supported by “objective” and

“reasonable” grounds.

The CR’s international obligations vis-à-vis the SR, whose effects are

also aimed into the past an into the legal situations of their citizens,

which were created and developed inside Czechoslovakia and the

Czechoslovak legal order, must respect certain constitutional bounds.

The complainant met the condition of a minimum number of years of

insurance required by § 31 para. 1 of Act no. 155/1995 Coll. in the time

when the joint Czechoslovak state existed. The Constitutional Court

believes that application of an international agreement on the basis of §

61 of that Act can not lead to retroactively denying him fulfillment of

that condition. This is inconsistent with the principle of legal

certainty and the foreseeability of law, which form the very basis of

the concept of a state governed by the rule of law. The concept of a

state governed by the rule of law must be understood not in isolation,

but in connection to the constitutional requirement of respect for the

rights and freedoms of the human being and the citizen, as is stated in

Art. 1 para. 1 of the Constitution. This constitutional requirement of

respect for rights and freedoms must also be preserved when applying an

international agreement, all the more so because international law

itself honors the principle that “ratification of international

agreements does not affect more advantageous rights, protection and

conditions provided and guaranteed by domestic legislation” (see

Constitutional Court judgment of 24 May 1995, published under no.

164/1995 Coll.).

The

Constitutional Court is not authorized to evaluate the

constitutionality of an already ratified international agreement. On the

other hand it is required to be guided by Article 88 para. 2 of the

Constitution, under which the judges of the Constitutional Court are

bound in their decision making only by the constitutional order and the

statute under par 1. The Agreement between the CR and the SR on Social

Security is not an agreement which could be considered a component of

the constitutional order (see Constitutional Court judgment of 25 June

2002, published under no. 403/2002 Coll.). It is also not an agreement

under Art. 10 of the Charter, in the version before the

“Euro-amendment.” As its preamble clearly indicates, its purpose was not

to secure the fundamental rights and freedoms of citizens. The parties

were guided by “the desire to regulate their relationships in the area

of social security.” Therefore, the Constitutional Court can not accept

as constitutional an application of one of its provisions which would

result in a situation which is not in accordance with the Charter or the

Constitution as parts of the constitutional order.



CZECH REPUBLIC 

CONSTITUTINAL COURT

JUDGMENT

IN THE NAME OF THE CZECH REPUBLIC

 

 

A

Panel of the Constitutional Court decided, in the matter of the

petitioner J.H., on a constitutional complaint against a verdict of the

High Court in Olomouc of 21 March 2002, ref. no. 2 Cao 249/2001-27, with

the participation of the High Court in Olomouc as a party to the

proceedings and the Czech Social Security Administration, Prague 5, as a

subsidiary part to the proceedings, as follows:

The verdict of the High Court in Olomouc of 21 March 2002, ref. no. 2 Cao 249/2001-27, is annulled.
 



REASONING

 

In

a timely filed constitutional complaint, which reached the

Constitutional Court on 20 June 2002 and otherwise met the conditions

prescribed by Act no. 182/1993 Coll., on the Constitutional Court, as

amended by later regulations (the “Act on the Constitutional Court”),

the complainant contested the verdict of the High Court in Olomouc cited

in the heading. He claims that the High Court’s decision did not

respect the principle of observing obligations arising from accepted

international agreements, denied the complainant the right to material

security in old age in an amount corresponding to the length of the

insured period, and the level of income and taxes and insurance premiums

deducted from it, and thereby violated Article 1 of the Charter of

Fundamental Rights and Freedoms (the “Charter”), which guarantees

citizens’ equal rights. He petitioned the Constitutional Court to annul

the contested verdict.
 

For

its discussion and decision in the matter, the Constitutional Court

requested the file of the Regional Court in Brno, file no. 41 Ca

201/2000, from which it determined the following:
 

The

Czech Social Security Administration in Prague (the “subsidiary party”)

by its decision of 22 November 1999, with effect as of 1 July 1999,

assigned the complainant a partial early old age pension of CZK 494 per

month (with effect as of 1 August 1999 it increased it to CZK 514 per

month), on the grounds that the amount of the pension corresponds to the

period insured in the Czech Republic from 1 August 1995 to 30 June

1999. The complainant then applied for an increase in the pension,

asking that his period of employment in the joint state until 31

December 1992 also be included. On 26 October 2000 the subsidiary party

rejected his application on the grounds that periods of employment until

31 December 1992 are, under the Agreement on Social Security concluded

between the CR and the SR under no. 228/93 Coll. (the “Agreement”),

Slovak periods. The complainant filed an appeal against this decision.

The Regional Court in Brno, by a verdict of 6 June 2001, ref. no. 41 Ca

201/2000-15, confirmed the contested decision. It based its legal

opinion on the determination that the complainant worked from 16 October

1962 to 31 July 1995 for an employer whose registered address was in

the territory of the Slovak Republic. Thus, it considered this period to

be a period insured abroad. It concluded that the subsidiary party

proceeded correctly in setting the level of pension, when it applied

Article 11 of the Agreement and § 31 of the Act on Pension Insurance. It

pointed out that if the Agreement did not exist, the complainant could

not be assigned an early old age pension at all, as he would not have

met the required insured period in the Czech Republic, and Act no.

100/1988 Coll., which is in effect in the Slovak Republic, does not

recognize an early old age pension.
 

The

complainant appealed against the decision of the Regional Court in

Brno. He referred to the conclusions of the Supreme Court of the CR

reached in proceedings under file no. 30 Cdo 120/98 and stated that if

the Agreement did not exist, the subsidiary party would consider the

Czechoslovak employment period as its own. He pointed to the fact that

the Slovak side can not address the question of whose the “Czechoslovak

period” is, as it does not recognize early old age pensions. He pointed

out that the court did not apply in its decision the principle “not to

damage, by the existence of the Agreement, a citizen who is a permanent

resident of a state, under the legal regulations of which his

entitlement would be more advantageous without the Agreement.”
 

The

High Court in Olomouc confirmed the contested decision in its verdict

of 21 March 2002, ref. no. 2 Cao 249/2001-27. It stated that the

subsidiary party, in calculating the complainant’s early old age

pension, proceeded in accordance with the Act on Pension Insurance and

the Agreement. It found no defects in its procedure when calculating the

partial early old age pension. In the opinion of the appeals court, the

complainant’s other request can not be granted. The High Court pointed

out that after the division of the CSFR the complainant’s employment

period from 16 October 1962 to 31 July 1995 must be considered a period

of employment abroad, as it was performed in the territory of the Slovak

Republic. The period until 31 December 1992 can not be separated from

this period as a Czechoslovak period, as this is not possible under

either the Act on Pension Insurance or the Agreement. Under the Act on

Pension Insurance it would be possible to include as the complainant’s

insured period for calculating the pension amount only the time from 2

April 1959 to 31 December 1959, from 1 January 1960 to 15 October 1962,

and from 1 August 1995 to 30 June 1999, i.e. a total of 10 years and 214

days. The court concluded that if only domestic regulations are

applied, the complainant would have no entitlement to an early old age

pension, as he would not meet the condition of the necessary insured

period, i.e. a period of at least 25 years. According to the appeals

court, the Supreme Court verdict file no. 30 Cdo 120/98 can not be

applied to this case. The beginning assumption for the procedure

contained in this verdict was the fact that the applicant, unlike the

complainant, met the required insured period in the territory of the

Czech Republic. The High Court reached the final conclusion that the

subsidiary party’s decision denying the complainant’s application for a

change in the amount of the partial early old age pension due to lack of

fulfillment of the conditions of § 56 of the Act on Pension Insurance,

with the application of Art. 11 and 20 of the Agreement, is a “lawful

decision.”
 

The complainant

contested the decision of the High Court in Olomouc in the adjudicated

constitutional complaint. In it he points to the advantages and

disadvantages of the criterion set in the Agreement for determining

which of the states parties will bear the expenses for pensions during

the period of the joint state, as being the location where the employer

had its registered address as of the day the federation was divided. He

understands the fact that his entitlement was evaluated under Slovak

regulations. However, he does not agree that he should bear the negative

consequences, i.e. that after 40 years of work in his own country he

should be left with a pension in the amount of about two thirds of the

pension which his fellow citizens receive for the same period and the

same income. He points out that the citizens of both republics were

assured that dividing the federation would not affect their

entitlements. After 1993 the Ministry of Labor and Social Affairs also

passed a measure to even out the pension level to the level of pensions

given under Czech regulations. However, since mid-1998 it has been

gradually ceasing to implement it. The complainant points to other

social international agreements which respect the fundamental principle

of not damaging the citizen through such an agreement. However, in his

opinion, the providers of pension insurance here ignore this principle.

He believes that the creators of the Agreement also did not intend to

not resolve the negative situation of many retirees on the Czech side,

although on the other hand they did not expect the possibility that the

economic situation in the two newly-created countries would not develop

the same way. He states that if the Agreement had not been concluded, he

would be entitled to an early old age pension under Czech regulations,

for 37 years worked in Czechoslovakia, and for 3 years of insurance in

the Czech Republic after 1992. Only the period of insurance in the

Slovak Republic after 1992 would not be included in calculating the

amount of the pension. The reality is such that after 40 years of

employment in his own country he received a pension of CZK 514. Thus,

the existence of the Agreement became for the complainant, who always

had permanent residence in the territory of the Czech Republic, a

disaster which, he claims, is unparalleled in the practice of

international agreements in the area of social security. He points to

the extraordinary measures of the Ministry of Labor and Social Affairs

on removing harshness and to a number of examples from actual practice

where, especially in recent years, the decision making of the allocation

commission, which evaluates individual applications for balancing

contributions as a way of removing harshness, is discriminatory. The

government ombudsman also pointed this out in his summary report on his

activities in 2001. However, the complainant is not entitled to a

balancing contribution. He also is not entitled to an early old age

pension from the Slovak side, as such a pension does not exist in

Slovakia. He was given only a partial pension. According to the

complainant, this situation could be corrected by allocating him a

“temporary early pension” until the time when he becomes entitled to an

old age pension under Slovak regulations.
 

The

complainant points to the contested decision of the High Court in

Olomouc, under which the complainant is not entitled to an early pension

either under the Agreement or under domestic regulations. He believes

that this conclusion is inconsistent with not only the purpose of

concluding bilateral social agreements (to not deprive a citizen of an

entitlement only because he worked in the other contracting state), but

also the citizen’s right to rely on future security in old age, if for a

number of years he met the conditions required by his own state.

According to the complainant, the High Court also did not respect the

principle of the Agreement concerning division of expenses and related

to the time of the joint state. It handled the complainant’s objection,

pointing to the legal opinion of the Supreme Court stated in decision

file no. 30 Cdo 120/98, by retroactively dividing employment until 1992

into periods in the territories of the Czech Republic and of the Slovak

Republic which, however, the Supreme Court did not do in the cited

verdict. Without any support whatsoever, the court evaluated the

complainant’s case using a different criterion than is contained in the

Agreement itself. The complainant is convinced that the practice which

the High Court in Olomouc confirmed in the contested verdict also

violates the principles of the multilateral ILO convention no. 102

concerning Minimum Standards of Social Security (published under no.

461/1991 Coll.) and the European Social Security Code. He believes that

payment of the full Czech early old age pension until such time as he

becomes entitled to a “normal” Slovak old age pension would not be

inconsistent with the aim of Article 20 of the Agreement. He points to a

number of examples in practice and states that an international social

agreement can not annul or amend the laws of a state party. The

incorrect interpretation applied by the High Court would mean that a

state party ceases to fulfill its obligations vis-à-vis its citizens,

arising from its own laws, or permits some of its citizens to receive

worse security than others. In contrast, the previous practice respected

the legal opinion of the Supreme Court of the CSR, stated in decision

file no. Cpj 232/73, under which the fact that the Czechoslovak state

concluded an agreement on social insurance with another state may not,

under any circumstances, be to the detriment of a Czechoslovak citizen’s

pension entitlements. Such an agreement can bring benefits for the

citizen, but may not reduce his lawful entitlements under Czechoslovak

regulations. This principle is also used in the case law of the

Constitutional Court, which stated, in judgment file no. Pl. ÚS 31/94,

that “ratification of international agreements does not affect the more

advantageous rights, protection and conditions provided and guaranteed

by domestic legislation.” The complainant points to differing judicial

practice in addressing these issues, where some courts respect the

abovementioned legal opinion of the Supreme Court (e.g. decisions by the

High Court in Prague, file no. 12 Cao 12/96, the Regional Court in

Ostrava, file no. 21 Ca 280/99, the Regional Court in Brno, file no. 22

Ca 68/99, 22 Ca 69/99, and the Supreme Court in Brno, file no. 30 Cdo

120/98), but other courts do not. The contested verdict of the High

Court in Olomouc can be included in the second category. Yet, with

regard to the gravity of this issue, in view of the legal certainty of

citizens, court decisions should be foreseeable and practices should be

uniform.
 

The complainant

further points to Act no. 100/1932 Coll., on the domestic applicability

of international agreements on social insurance. He states that the

Agreement and domestic law apply side by side. However, in his opinion

the rule on priority application of the Agreement does not mean that it

has higher legal force, but indicates the order of application.
 

Thus,

the complainant is convinced that he should be allocated an “interim”

old age pension under Act no. 155/1995 Coll., on Pension Insurance, for

the period from 1 July 1999 to 2 April 2001, i.e. for the entire time of

employment in the joint state and the period of insurance obtained in

the Czech Republic after 1992, until such time as he becomes entitled to

an old age pension under Slovak regulations. The decision of the High

Court in Olomouc did not respect the fundamental principles of a state

governed by the rule of law and denied the complainant his right to

material security in old age in an amount corresponding to the length of

the insured period, the level of income, and the taxes and insurance

premiums deducted from it. It thereby violated Article 1 of the Charter

on the equal rights of citizens.
 

The

Constitutional Court, under § 32 of the Act on the Constitutional

Court, called on the party to the proceedings, the High Court in

Olomouc, and the subsidiary party to the proceedings, the Czech Social

Security Administration in Prague, to submit statements on the

adjudicated constitutional complaint.
 

The constitutional complaint is justified.
 

The

Constitutional Court has emphasized many times in the past that it is

fundamentally not authorized to intervene in the decision making

activity of the general courts, as it is not the top of that system (cf.

Art. 81, Art. 90 of the Constitution). If the courts proceed in

accordance with Chapter Five of the Charter, it cannot assume the right

of review over their activity (Art. 83 of the Constitution). On the

other hand, however, it is authorized to evaluate whether proceedings as

a whole were fair and whether they violated the complainant’s

fundamental rights or freedoms guaranteed by the Charter or the

Constitution. In the past the Constitutional Court has repeatedly

acknowledged that the interpretation and application of legal

regulations by the general courts can be, in some cases, so extreme,

that they diverge from the bounds of Chapter Five of the Charter and

thus interfere with a constitutionally guaranteed right. In that case it

is within the powers of the Constitutional Court to annul the contested

decision (cf., e.g., II. ÚS 433/98, or II. ÚS 474/2000).
 

The

Charter states in Art. 30 para. 1 that “Citizens have the right to

adequate material security in old age and during periods of work

incapacity, as well as in the case of the loss of their provider. The

subject of this right is a “citizen,“ although previously valid laws

used this concept to mean “resident with permanent residence in the

territory of the CR.” The adequacy of pension security payments means

commensurateness to the earnings of a given “citizen” before the

entitlement to a pension arose. The complainant is a citizen of the CR,

has permanent residence in the territory of the CR, and was given a

partial early old age pension in the amount specified above, which, in

his opinion, is much less than he should be entitled to as an ordinary

Czech citizen in the pension insurance system (see p. 18 of the

constitutional complaint). The Czech Social Security Administration and

the general courts calculated the amount of the pension taking into

account the wording of the agreement between the CR and the SR on social

security of 29 October 1992, which gives as a criterion for calculation

of the amount of pension the location of the employer’s registered

address. In view of the fact that the complainant was employed by an

employer with its registered address in Myjava, SR, the agreement refers

to Slovak law. Slovak law, of course, does not recognize the

institution of an early old age pension. The High Court, as the appeals

court, confirmed the procedure and the decision of the Czech Social

Security Administration and the court of the first level, and described

them as “lawful.”
 

The

provision of § 61 of Act no. 155/1995 Coll., on Pension Insurance, which

was applied in this matter, really does require, in the matter of

setting the base amounts and percent amounts of a partial pension,

applying the international agreement first, so the procedure of the

Czech Social Security Administration and the general courts was prima

facie lawful.
 

The

Constitutional Court does not agree with the manner in which the High

Court understood the concept of lawfulness in its decision. The

Constitution of the CR, in Art. 1 para. 1 (before the “Euro-amendment”

of Art. 1), at the beginning of the fundamental provisions, states that,

“The Czech Republic is a sovereign, unitary, and democratic state

governed by the rule of law, founded on respect for the rights and

freedoms of man and of citizens.” Thus, it is evident that the framers

of the Constitution did not connect the constitutional existence of the

Czech state with a mere formal postulate of a “state governed by the

rule of law,” but with a state governed by the rule of law whose real

effect is respect for the rights and freedoms of man and of citizens.
 

In

this case the law (by referring to an international agreement) imposes a

different manner of calculating the amount of an early pension,

depending on the criterion of the location of a citizen’s employer’s

registered address. Art. 1 of the Charter provides that people are free,

have equal dignity, and enjoy equality of rights. Art. 3 para. 1 of the

Charter declares that everyone is guaranteed the enjoyment of her

fundamental rights and basic freedoms without regard to differences

based on factors cited in the paragraph, or on “other status.” Thus,

this provision of the Charter provides a ban on discrimination in the

enjoyment of any of the rights guaranteed by the Charter. The

Constitutional Court thus had to answer the question whether the

interpretation and application of the relevant statutory provisions by

the Czech Social Security Administration and the general courts,

relating to the complainant’s exercise of his right to “adequate

material security in old age” (Art. 30 para. 1) is a discrimination

which is forbidden by Art. 3 para. 1 of the Charter.
 

Not

every differentiation between citizens is of a discriminatory nature.

Different treatment of citizens is constitutionally acceptable if it is

based on “objective” and “reasonable” grounds. In this case the

differentiation is based on whether a citizen of the CR was, during the

existence of the Czechoslovak state, employed by an employer with its

registered address in the Czech Republic or in the Slovak Republic. If a

Czech citizen (with permanent residence in the CR) was employed in the

Slovak Republic at that time, in terms of pension insurance this is

considered “employment abroad,” which has negative consequences for his

pension entitlements in the Czech pension insurance system.
 

The

Czech Republic and the Slovak Republic were created as of 1 January

1993 by the division of the joint Czechoslovak state. This joint state

was characterized by a uniform pension insurance system, and so, in

terms of the law at the time, it was legally irrelevant, which part of

the Czechoslovak state a citizen was employed in, or where his employer

had its registered address. Czech National Council constitutional Act

no. 4/1993 Coll., on Measures Connected with the Dissolution of the

Czech and Slovak Federal Republic (Art. 1), implements reception of the

CSFR legal order in Czech law, such that constitutional acts, statutes,

and other legal regulations of the CSFR which were valid in the

territory of the CR on the day the CSFR ceased to exist remain valid.

Thus, the Czech Republic accepted the principle of continuity of the

legal order at the constitutional level. The cited constitutional Act of

the Czech National Council is part of the constitutional order of the

CR under Art. 112 para. 1 of the Constitution. Therefore, a period of

employment with an employer whose registered address was in the Slovak

part of the Czechoslovak state can not be seen as “employment abroad.”

In view of the foregoing, the Constitutional Court considers such 

differentiation between citizens of the Czech Republic, which is based

on a fiction that employment (or the registered address of the employer)

in the Slovak Republic of the then joint Czechoslovak state is

“employment abroad,” to be discriminatory, as it is not supported by

“objective” and “reasonable” grounds.
 

The

CR concluded the abovementioned agreement on social security with the

SR as a newly-created entity under international law. It used the

opportunity to exercise its sovereignty by regulating its relationships

with the SR. The regulation of these relationships in the future does

not create any specific problem of an international law or

constitutional law nature. However, much more complicated from that

point of view is the circumstance that the bilateral agreement on social

security with the SR interferes with legal relationships which arose

and continued to exist during the former joint state and during the time

when Czechoslovak law, which was subsequently received into Czech law,

was valid. The CR’s international obligations vis-à-vis the SR, whose

effects are also aimed into the past an into the legal situations of

their citizens, which were created and developed inside Czechoslovakia

and the Czechoslovak legal order, must respect certain constitutional

bounds.
 

The Constitutional

Court of the CSFR declared, in its judgment no. 15 of 10 December 1992

(Pl. ÚS 78/92), that “the principles of a state governed by the rule of

law, legal certainties which can be derived from the requirement of

democratic organization of the state, require that every

constitutionally possible case of retroactivity be established expressis

verbis in the Constitution, or in a statute, and that cases connected

to it be resolved so that the acquired rights are duly protected.” The

Constitutional Court of the CR also accepts this principle. The

complainant met the condition of a minimum number of years of insurance

required by § 31 para. 1 of Act no. 155/1995 Coll. in the time when the

joint Czechoslovak state existed. The Constitutional Court believes that

application of an international agreement on the basis of § 61 of that

Act can not lead to retroactively denying him fulfillment of that

condition. This is inconsistent with the principle of legal certainty

and the foreseeability of law, which form the very basis of the concept

of a state governed by the rule of law.
 

As

the Constitutional Court already emphasized above, the concept of a

state governed by the rule of law must be understood not in isolation,

but in connection to the constitutional requirement of respect for the

rights and freedoms of the human being and the citizen, as is stated in

Art. 1 para. 1 of the Constitution. This constitutional requirement of

respect for rights and freedoms must also be preserved when applying an

international agreement, all the more so because international law

itself honors the principle that “ratification of international

agreements does not affect more advantageous rights, protection and

conditions provided and guaranteed by domestic legislation” (see

Constitutional Court judgment of 24 May 1995, published under no.

164/1995 Coll.).
 

The

Constitutional Court is not authorized to evaluate the constitutionality

of an already ratified international agreement. On the other hand it is

required to be guided by Article 88 para. 2 of the Constitution, under

which the judges of the Constitutional Court are bound in their decision

making only by the constitutional order and the statute under par 1.

The Agreement between the CR and the SR on social security is not an

agreement which could be considered a component of the constitutional

order (see Constitutional Court judgment of 25 June 2002, published

under no. 403/2002 Coll.). It is also not an agreement under Art. 10 of

the Charter, in the version before the “Euro-amendment.” As its preamble

clearly indicates, its purpose was not to secure the fundamental rights

and freedoms of citizens. The parties were guided by “the desire to

regulate their relationships in the area of social security.” Therefore,

the Constitutional Court can not accept as constitutional an

application of one of its provisions which would result in a situation

which is not in accordance with the Charter or the Constitution as parts

of the constitutional order.
 

Because

the contested decision of the High Court in Olomouc applied the

relevant statutory provisions without the requisite regard for the

requirements imposed by the constitutional order, it interfered with the

complainant’s right to judicial protection guaranteed by Art. 36 para. 1

of the Charter. It also violated Art. 3 para. 1 of the Charter, a ban

of discrimination, in connection with Art. 30 para. 1 of the Charter.
 

With regard to the foregoing, the Constitutional Court granted the

constitutional complaint and annulled the contested decision of the High

Court in Olomouc of 21 March 2002, ref. no. 2 Cao 249/2001-27, under §

82 para. 3 let. a) of the Act on the Constitutional Court.

Notice: Decisions of the Constitutional Court can not be appealed.

Brno, 3 June 2003