FABIAN v. HUNGARY - 78117/13 (Judgment (Merits and Just Satisfaction) : Court (Fourth Section)) [2015] ECHR 1108 (15 December 2015)

In the case of Fábián v. Hungary,

The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:

          Vincent A. De Gaetano, President,
          András Sajó,
          Boštjan M. Zupančič,
          Nona Tsotsoria,
          Paulo Pinto de Albuquerque,
          Krzysztof Wojtyczek,
          Iulia Antoanella Motoc, judges,
and Françoise Elens-Passos, Section Registrar,

Having deliberated in private on 24 November 2015,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in an application (no. 78117/13) against Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Hungarian national, Mr Gyula Fábián (“the applicant”), on 5 December 2013.

2. The applicant was represented by Mr A. Grád, a lawyer practising in Budapest. The Hungarian Government (“the Government”) were represented by Mr Z. Tallódi, Agent, Ministry of Justice.

3. The applicant complained under Article 1 of Protocol No. 1 read alone and in conjunction with Article 14 of the Convention that the suspension of disbursement of his pension for the duration of his post-retirement employment amounted to an unjustified and discriminatory interference with his property rights.

4. On 25 August 2014 the application was communicated to the Government.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

5. The applicant was born in 1953 and lives in Budapest.

6. The applicant, already in receipt of an old-age pension, took up employment with Budapest XIII District Municipality as a civil servant, as of 1 July 2012.

7. On 1 January 2013 an amendment to the 1997 Pension Act entered into force, according to which the disbursement of those old-age pensions whose beneficiaries are simultaneously employed within certain categories of the public sector will be suspended for the duration of their employment. No such restriction was put in place in respect of those who are in receipt of an old-age pension while being employed within the private sector.

8. In application of this new rule, on 2 July 2013 the disbursement of the applicant’s pension was suspended. The applicant’s administrative appeal to the National Pension Board was to no avail.

II. RELEVANT DOMESTIC LAW

9. The Fundamental Law of Hungary provides as follows:

Article XII

“(1) Everyone shall have the right to freely choose his or her work, occupation and to engage in entrepreneurial activities. Everyone shall be obliged to contribute to the enrichment of the community through his or her work, in accordance with his or her abilities and opportunities.

(2) Hungary shall strive to create the conditions to ensure that everyone who is able and willing to work has the opportunity to do so.”

10. Act no. LXXXI of 1997 on Social Security Pension Benefits (hereinafter: the “SSPBA”) provides as follows:

Section 83/C

“(1) The disbursement of old-age pension shall be suspended ... if the pensioner is employed as a civil servant, a government official, a senior state official, a public official, an official in charge of public service administration, a judge, an officer of the court or the prosecutor’s office, a professional of the armed forces, or a professional or contractor of the Hungarian Defence Force.

...

(3) For the period of suspension of the old-age pension, the person concerned shall qualify as a pensioner.

(4) Disbursement of the old-age pension may be continued at the pensioner’s request, if the beneficiary proves that the employment in subsection (1) above has been terminated.

....”

Section 102/I

“(1) Beneficiaries of old-age pension working in any of the employments listed in section 83/C(1) on 1 January 2013 shall notify the pension disbursement agency thereof by 30 April 2013.

(2) The old-age pension of persons working in any of the employments listed in section 83/C(1) on 1 January 2013 shall be suspended from 1 July 2013, provided that such employment is maintained on that date.”

11. The lawmaker’s explanation of section 83/C contains the following passage:

“The amendment introduced the prohibition of double compensation in respect to employment relationships of civil servants, government officials, senior state officials, public officials, officials in charge of public service administration, judges, officers of the court or the prosecutor’s office, professionals of the armed forces, as well as professionals and contractors of the Hungarian Defence Force. Accordingly, persons working in such employments may not receive old-age pension ... in addition to their remuneration, so such payments shall be suspended by the pension disbursement agency for the term of the employment.”

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL NO. 1 READ ALONE AND IN CONJUNCTION WITH ARTICLE 14 OF THE CONVENTION

12. The applicant complained that the suspension of disbursement of his pension during a civil-service employment he undertook as a pensioner represented an unjustified and discriminatory interference with his property rights. He relied on Article 1 of Protocol No. 1 read alone and in conjunction with Article 14 of the Convention.

Article 1 of Protocol No. 1 provides:

“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.”

Article 14 of the Convention provides:

“The enjoyment of the rights and freedoms set forth in [the] 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.”

13. The Government contested the applicant’s arguments.

A. Admissibility

14. The Court notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.

B. Merits

1. The applicant’s submissions

15. The applicant submitted that his pension entitlement was an uncontested right protected by the domestic law. Any encroachment in it must be convincingly justified; and a mere reference to the general interest without concrete facts or circumstances for restricting such a right was insufficient. The Government’s contention that the prohibition of double compensation was part of the measures which aimed to reduce public debt and help escape the European Union’s excessive deficit procedure lacked substantiation since no elements were adduced about any actual saving made through the measure or the purpose for which such savings were used. In any case, the applicant noted the number of persons affected by the impugned rule (see paragraph 20 below) as being only a fraction of the overall number of pensioners in Hungary which exceeded two million. Any savings made on the pension of such a small group could not be material in regard to reducing the public debt or escaping the excessive deficit procedure.

16. Furthermore, the interference with this right was retroactive, notwithstanding the grace period referred to by the Government (see paragraph 22 below), since it restricted a right that had already been acquired by reaching the age of retirement. It was further discriminatory in that, unjustifiably, it treated differently: (i) the public sphere and the private sphere; and (ii) certain categories of State employees and others (for example: government ministers or mayors, being exempt from the rule). Indeed, while the applicant’s pension was being suspended, numerous other pensioners were in receipt of payment for working in the public sphere and of pension at the same time - because the suspension of disbursement of the pension only concerned pensioners with the status of a civil servant, government official, etc. as enumerated in the law.

17. With regard to the presence of similar rules in some OECD countries, the applicant conceded that there were such restrictions in a number of jurisdictions; however, to his knowledge, none contained any such distinction between various State employees.

18. Lastly, the applicant argued that the new rules had resulted in a situation where he had effectively to choose between his job and his pension. Either way, he was to lose about half of his income, which was indeed an excessive individual burden to bear.

2. The Government’s submissions

19. The Government emphasised that the interference with the applicant’s rights under Article 1 of Protocol No. 1 was legitimate and in accordance with the general interest. The elimination of “double compensation” in the public sector was part of the measures aimed to reduce public debt and to escape the EU excessive deficit procedure. Government Decree no. 1700/2012 prohibited the employment of workers entitled to old-age pension by agencies supervised by the Government, and stipulated that vacancies created in this way may only be filled in exceptional cases. Moreover, section 83/C of the SSPBA prohibited the simultaneous disbursement of remunerations financed from the central budget and of old-age pensions. In so far as the Government were aware, similar measures were applied in the public sector by 15 other OECD Member States.

20. This rule predominantly affected those career officers of the armed forces who became entitled to pension several decades earlier than the retirement age applicable to them. These pensions were not meant to secure the beneficiaries’ livelihood in their old age but to provide them with the opportunity to retire at an active age. In November 2014, 4,259 persons were affected by the suspension of provisions under section 83/C of the SSPBA. Altogether HUF 10 billion was saved by the pension system through this measure in 2013 and the first half of 2014.

21. The measure did not place a disproportionately heavy burden on the applicant. First of all, he could have undertaken employment in the private sector without any restriction of the kind he complained of. Moreover, in the Hungarian pension system only those persons might be granted old-age pension who were no longer in an employment relationship subject to compulsory insurance. Consequently, retirees could benefit from old-age pension - that is, a set amount of compensation for the lack of income from work - only once the active period of their lives had ended. However, persons falling within the scope of section 83/C, being employed while in receipt of pension, had income from work as well, and therefore the suspension of pension payments did not endanger their livelihood.

22. The law provided a sufficient grace period, of six months, to prepare for the compulsory suspension of disbursements for those who had established public employment as pensioners before the entry into force of section 83/C on 1 January 2013. During the grace period, old-age pensions were continued to be disbursed to them.

23. Furthermore, no unjustified distinction was made by prohibiting “double compensation” in the public sector alone. The members of this group cannot be compared to the employees of the private sector, and even if this comparison was made, a distinction according to the employer is not prohibited by Article 14. The distinction was founded on the reasonable ground that in this sector the State paid both the employees’ remuneration and the pension which had been originally meant to be compensation for the lack of income after reaching the retirement age. The impugned rule was not aimed to prevent pensioners from supplementing their pension with the work-related-income earned or from appearing on the labour market. Rather, the purpose was to eliminate an anomaly in the public sector which made it possible for individuals to receive income from the same source under two legal titles. The applicant had the opportunity and the time, during the grace period, to choose between the legal titles of income originating in the State budget.

24. In sum, the interference with the applicant’s rights under Article 1 of Protocol No. 1 was based on a legitimate aim serving the public interest, it was necessary and proportionate, it did not impose an intolerable burden on the applicant, and the distinction between public and private sphere did not constitute a violation of Article 14 of the Convention.

3. The Court’s assessment

25. According to the Court’s established case-law, Article 14 of the Convention complements the other substantive provisions of the Convention and the Protocols. 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 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 them (see, among other authorities, Karlheinz Schmidt v. Germany, § 22, 18 July 1994, Series A no. 291-B).

26. In the present case, it has not been in dispute between the parties - and the Court sees no reason to hold otherwise - that the central issue of the application is the non-payment of the applicant’s old-age pension. The Court is satisfied that the pension right in question is a pecuniary right for the purposes of Article 1 of Protocol No. 1. The subject matter of the case thus falls within the ambit of that provision.

27. As the applicant was denied payment of that pension on the ground of being simultaneously employed in the public sphere - which can be considered as “other status” covered by Article 14 (see mutatis mutandis Carson and Others v. the United Kingdom [GC], no. 42184/05, § 70, ECHR 2010) - that provision is applicable (see Gaygusuz v. Austria, 16 September 1996, § 41, Reports of Judgments and Decisions 1996-IV).

28. According to the Court’s case-law, a difference of treatment is discriminatory, for the purposes of Article 14, if it “has no objective and reasonable justification”, that is, if it does not pursue a “legitimate aim” or if there is not a “reasonable relationship of proportionality between the means employed and the aim sought to be realised”. Moreover the Contracting States enjoy a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment (see Gaygusuz, cited above, § 42).

29. The Court notes in the first place that, in the Government’s submissions, the “legitimate aim” pursued by the legislation underlying the differential treatment in question is to protect the public purse. It considers that - even if it only concerned a limited number of pensioners, as the applicant argued - the measure was indeed capable of reducing the public spending to some extent and for that reason the aim referred to by the Government can be accepted as legitimate.

30. The applicant asserted that the difference in treatment was twofold: between the private and the public sphere and, moreover, between various State employments. The Government submitted that the statutory provision in question was not discriminatory, notably, because a differential treatment based on different employers was not a discrimination for the purposes of Article 14 and was in any event reasonable in that it targeted the specific anomaly represented by the fact that pensioners like the applicant were benefiting from two incomes at the same time secured by the State budget.

31. However, the Court observes that the Government have not put forward any convincing argument - indeed, no reasons at all - for limiting the scope of the amendment to those categories of State employees which are enumerated in the law, rather than including all public employments. The applicant pointed out - and this was not refuted by the Government - that pensioners taking up public service as government ministers or mayors were exempt from the restriction. From the perspective of reducing public expenditure, the Court cannot see any justification for this difference in treatment and accepts that the exempted State employees are in fact in a situation analogous to that of the applicant.

32. Moreover, as regards the other limb of the alleged discrimination, that is, difference in treatment between the public and the private sphere, the Court considers that while it is true that only the former group is susceptible to receiving double income from public sources, the core argument put forward by the Government (namely, that no State pension should be paid to persons who, employed, do not need a substitute for salary) should in fact equally hold true for those retirees who then take up employment in the private sphere, earning a salary. Seen from that angle, pensions paid out to retirees employed in the private sphere may also be regarded as redundant public expenditure. Again, the two groups are in an analogous situation from that perspective.

33. The Court therefore finds the arguments put forward by the Government unpersuasive. It considers that the difference in treatment between publicly and privately employed retirees on the one hand, and between various categories of civil servants on the other hand, as regards entitlement to the continued receiving of old-age pension, of which the applicant was a victim, is not based on any “objective and reasonable justification”, even taking into account the margin of appreciation afforded to the Contracting Parties in this field (see paragraph 32 above).

34. There has accordingly been a breach of Article 14 of the Convention read in conjunction with Article 1 of Protocol No. 1. In the light of this finding, the Court considers that it is not necessary to examine whether the facts of the case constituted as well a violation of Article 1 of Protocol No. 1 read alone.

II. APPLICATION OF ARTICLE 41 OF THE CONVENTION

35. Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

A. Damage

36. The applicant claimed 11,583.4 euros (EUR) in respect of pecuniary damage (that is, lost pension) and EUR 10,000 in respect of non-pecuniary damage.

37. The Government contested these claims.

38. The Court considers that the applicant must have sustained some pecuniary and non-pecuniary damage and awards him, on the basis of equity, EUR 15,000 for both claims combined.

B. Costs and expenses

39. The applicant also claimed EUR 3,000 for the costs and expenses incurred before the Court, which corresponds to the sum billable by his lawyer.

40. The Government contested this claim.

41. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the full sum claimed.

C. Default interest

42. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Declares the application admissible;

2. Holds that there has been a violation of Article 14 of the Convention read in conjunction with Article 1 of Protocol No. 1;

3. Holds that it is not necessary to examine the alleged violation of Article 1 of Protocol no. 1 taken alone;

4. Holds

(a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(i) EUR 15,000 (fifteen thousand euros), plus any tax that may be chargeable, in respect of pecuniary and non-pecuniary damage combined;

(ii) EUR 3,000 (three thousand euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;

(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

5. Dismisses the remainder of the applicant’s claim for just satisfaction.

Done in English, and notified in writing on 15 December 2015, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Françoise Elens-Passos Vincent A. De Gaetano
Registrar President

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