Article preview
The Waterford Crystal Judgment and Solvency Relief Measures in Ireland
Deborah McHugh, Partner, Mason Hayes & Curran, Dublin, IrelandIntroduction
There has been much media and industry speculation concerning the likely consequences of the recent decision of the Court of Justice of the European Union (CJEU) in a preliminary reference made to it by the Irish High Court in the case of Hogan & Ors. v Minister for Social and Family Affairs, Ireland and the Attorney General (C398.11). The case examined the adequacy of Ireland’s transposition of EU Directive 2008/94/EC (the ‘Insolvency Directive’) on the protection of employees in the event of the insolvency of their employer, into Irish law.
There are diverging opinions on the merits of the judgment and multiple groups with vested interests in knowing what the State’s ultimate legislative response to it is going to be. For the time being, all that is clear is that the CJEU has found that on the facts of this case, Ireland is in 'serious breach' of its obligations to protect employees’ interests on the dual insolvency of their pension scheme and employer. What must now follow is an examination of the case in the wider context of existing and signalled solvency relief measures likely to shape the future of the pension’s landscape in Ireland in the short term.
Background
In 2009, Receivers were appointed over the assets and undertaking of Waterford Crystal Limited (the 'Company'). At that time, the Company sponsored two defined benefit pension schemes (the 'Schemes') for the benefit of its employees, past and present. On 7 January 2009, the Receiver notified the Schemes’ Trustees that the Company was terminating its liability to continue making contributions to the Schemes with immediate effect. Accordingly, the Trustees resolved to and subsequently wound up the Schemes with a reported aggregate deficit of EUR 110 million calculated on the statutory, minimum funding standard basis. Under Irish law, pension scheme trustees must distribute and secure pension scheme liabilities on wind-up in a specific statutory order of priority (the 'Priority Order'). In this case, because of the sizeable shortfall in the Schemes’ assets to meet their liabilities, taken with the effect of applying the Priority Order, members only received a fraction of their pension expectation when the Schemes wound up: Reportedly 18–29% calculated on a net present value basis.
In 2010, supported by the UNITE trade union, ten representative members of the Company’s pension Schemes sued the Minister for Social and Family Affairs, Ireland and the Attorney General for what they argued was the State’s failure to correctly transpose the Insolvency Directive into Irish law; arguing that the State had failed to honour its obligations under Article 8 thereof to:
'ensure that the necessary measures [were] taken to protect the interests of employees and persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivor’s benefits, under supplemental occupational or inter-occupational pension schemes outside the national statutory social security schemes'.
Copyright 2006 Chase Cambria Company (Publishing) Limited. All rights reserved.