Judgment of the Court (Fifth Chamber) of 9 October 1997. - Antonio Naranjo Arjona v Instituto Nacional de la Seguridad Social (INSS), Francisco Vicente Mateos v Instituto Nacional de la Seguridad Social (INSS) and Tesorería General de la Seguridad Social (TGSS) and Instituto Nacional de la Seguridad Social (INSS) v Laura García Lázaro. - Reference for a preliminary ruling: Tribunal Superior de Justicia de la Comunidad de Extremadura, Cáceres - Spain. - Social security - Invalidity - Old-age pensions - Article 47(1) of Regulation No 1408/71 - Calculation of benefits. - Joined cases C-31/96, C-32/96 and C-33/96.



European Court reports 1997 Page I-05501



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

Social security for migrant workers - Insurance in respect of old age and death - Insurance against invalidity - Calculation of benefits - National legislation determining benefit by reference to an average contribution basis over a reference period - Detailed rules for application to a worker ceasing his activity in a Member State applying different legislation and who has not contributed under the applicable legislation during the reference period - Calculation of the average contribution basis by reference to contributions actually paid under the legislation applicable, with the theoretical amount of the corresponding benefit being revalorized and increased as if the persons concerned had continued to work under the scheme of the legislation applicable - Derogation - Bilateral social security convention prior to the regulation's entry into force in the Member State in question and more advantageous for the workers concerned

(Council Regulation No 1408/71, Art. 47(1)(e))

Summary

Article 47(1)(e) of Regulation No 1408/71, as amended and updated by Regulation No 2001/83 and as adapted by Annex I, Part VIII, of the Act concerning the Conditions of Accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties, and which has become Article 47(1)(g) following the entry into force of Regulation No 1248/92, implies that, where retirement and invalidity pensions are calculated under the legislation of a Member State whereby the amount of those pensions is calculated from an average contribution basis corresponding to the salary received over a certain number of years preceding retirement or the onset of invalidity, calculation of the average basis for contributions rests, in the case of workers who, after having been subject to the legislation of that Member State, resumed employment in another Member State and carried it on until the end of their working lives, solely on the amount of contributions actually paid under the legislation concerned, and further implies that the theoretical amount of the benefit thus obtained is to be duly revalorized and increased as if the persons concerned had continued to work under the same conditions in the Member State in question.

However, where application of that provision so interpreted proves less advantageous, for workers who were already employed in another Member State before the regulation entered into force in the first Member State, than the application of a previous convention between those two States, the competent court should, by way of exception, apply the rules laid down by that convention.

Parties

In Joined Cases C-31/96, C-32/96 and C-33/96,

REFERENCES to the Court under Article 177 of the EC Treaty by the Tribunal Superior de Justicia de la Comunidad de Extremadura, Cáceres (Spain) for a preliminary ruling in the proceedings pending before that court between

Antonio Naranjo Arjona

and

Instituto Nacional de la Seguridad Social (INSS),

and between

Francisco Vicente Mateos

and

Instituto Nacional de la Seguridad Social (INSS)

Tesorería General de la Seguridad Social (TGSS),

and between

Instituto Nacional de la Seguridad Social (INSS)

and

Laura García Lázaro,

on the interpretation of Article 47(1) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6) and as adapted by Annex I, Part VIII, of the Act concerning the Conditions of Accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties (OJ 1985 L 302, p. 23), and subsequently amended by Council Regulation (EEC) No 1248/92 of 30 April 1992 (OJ 1992 L 136, p. 7),

THE COURT

(Fifth Chamber),

composed of: J.C. Moitinho de Almeida, acting for the President of the Chamber, D.A.O. Edward, J.-P. Puissochet (Rapporteur), P. Jann and L. Sevón, Judges,

Advocate General: A. La Pergola,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

- Naranjo Arjona, Vicente Mateos and Laura García Lázaro by Abelardo Vázquez Conde, of the Orense Bar,

- the Spanish Government, by Alberto José Navarro González, Director General of Community Legal and Institutional Coordination, and Rosario Silva de Lapuerta, Abogado del Estado, of the State Legal Service, acting as Agents,

- the Commission of the European Communities, by Isabel Martínez del Peral and Maria Patakia, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Naranjo Arjona, Vicente Mateos and Laura García Lázaro, of the Spanish Government and of the Commission at the hearing on 17 April 1997,

after hearing the Opinion of the Advocate General at the sitting on 17 June 1997,

gives the following

Judgment

Grounds

1 By orders of 15 and 17 January 1996, received at the Court on 7 February 1996, the Tribunal Superior de Justicia de la Comunidad de Extremadura, Cáceres (High Court of Justice of the Community of Extremadura, Cáceres) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the interpretation of Article 47(1) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6) and as adapted by Annex I, Part VIII, of the Act concerning the Conditions of Accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties (OJ 1985 L 302, p. 23; hereinafter `the regulation'), and subsequently amended by Council Regulation (EEC) No 1248/92 of 30 April 1992 (OJ 1992 L 136, p. 7).

2 The question was raised in three disputes between, first, Mr Naranjo Arjona and the Instituto Nacional de la Seguridad Social (National Social Security Institute; `the INSS'), secondly, Mr Vicente Mateos and the INSS and the Tesorería General de la Seguridad Social (General Social Security Revenue Authority; `the TGSS'), and, finally, the INSS and Mrs García Lázaro, concerning the calculation of old-age and invalidity pensions.

3 By order of the President of 12 March 1996, these three cases were joined for the purposes of the written and oral procedure and of the judgment.

4 The documents supplied by the national court show that, under Spanish legislation, the amount of employed persons' old-age and permanent invalidity pensions does not vary in amount according to the number of contribution periods or the length of employment of the person concerned, but is calculated from an average contribution basis corresponding to the salary received over a certain number of years preceding the retirement or the onset of the invalidity. More particularly, pursuant to Article 3(1) of Law No 26/85 of 31 July 1985, which was in force at the relevant time, `The basis of assessment for pensions in respect of retirement and of permanent invalidity arising from an ordinary illness shall be equal to the quotient obtained by dividing by 112 the contribution bases of the person concerned during the 96 months immediately preceding the month in which the risk materialized'. Under that provision, the bases for the 24 months prior to the month in which the risk materialized are calculated at their face value, whilst the others are updated in accordance with the consumer price index. Article 3(4) of the Law provides that, if a contribution obligation is lacking for all or part of the period under consideration, the gaps are filled by applying the minimum bases applicable to workers aged over 18 years.

5 In Case C-31/96, Mr Naranjo Arjona, a worker of Spanish nationality, was employed in Spain from 1952 until 1965, and then in Germany from 1966 until 1991, while continuing to contribute to the Spanish social security system until 1968. In 1994, the INSS awarded him, with effect from 1 April 1991, a retirement pension calculated on the basis of contributions paid in Spain between 1962 and 1968, the amount of which Mr Naranjo Arjona disputes on the ground that the reference period to be taken into account should be the period between 1982 and 1991, that is to say the end of his career in Germany.

6 In Case C-32/96, Mr Vicente Mateos, a worker of Spanish nationality, was likewise employed in Spain from 1942 until 1962, and then in Germany from 1963 until 1989. The competent German institution acknowledged his entitlement to a permanent invalidity pension with effect from 1 February 1989. In Spain, the INSS granted him an invalidity pension only under the old Spanish security system, corresponding to an exclusively national base and at a permanently fixed amount. Mr Mateos disputes the amount of that pension, maintaining that account should be taken of his contribution periods in Germany.

7 In Case C-33/96, Mrs García Lázaro, of Spanish nationality, was also employed in Spain between 1961 and 1964, then in Germany from 1961 until 1987. The competent German institution having acknowledged her entitlement to an invalidity pension in 1987, she applied to the INSS for a permanent invalidity pension, which was refused her in 1992. However, she brought an action challenging that decision, and the court acknowledged her entitlement to a total permanent invalidity pension in respect of her normal occupation, the amount being calculated on the basis of the contribution ceilings applicable to her occupational category in Spain in respect of the contribution periods in Germany.

8 Hearing those three disputes on appeal, the Tribunal Superior de Justicia de la Comunidad de Extremadura referred the following question to the Court for a preliminary ruling:

`Where Article 47(1)(e) of Regulation (EEC) No 1408/71 - now Article 47(1)(g) - uses the phrase "shall determine that average by reference only to those periods of insurance completed under the legislation of the said State", is it to be construed as referring to:

1. the theoretical maximum, minimum or average basis for the time being laid down by the legislation of a Member State for payment of the relevant social security contributions; or

2. the average of the actual bases of what was actually contributed by the person concerned, regardless of what he would have had to contribute in the periods worked in Spain in accordance with the legislation of that State?'

Legislative background

9 Before replying to the question, it will be useful to recall the provisions of the regulation at issue in the main actions.

10 As the documents before the Court show, the legislations of the two Member States in which the persons concerned are to draw invalidity benefits are not of the same type. The Spanish legislation is mentioned in Annex IV to the regulation as one of those referred to in Article 37(1), according to which the amount of invalidity benefits is independent of the duration of periods of insurance. The German legislation, on the other hand, is not among their number.

11 Article 40(1) of the regulation provides that for invalidity in the case of workers who have been successively subject to both types of legislation the provisions of the chapter of the regulation on old-age and death benefits, that is, Articles 44 to 51, are to apply by analogy. Those provisions are therefore applicable both to Case C-31/96, which concerns a retirement pension, and to Cases C-32/96 and C-33/96, which concern invalidity pensions.

12 Article 46 of the regulation lays down the rules for the award of benefits. Article 46(2) provides, inter alia, as follows:

`(a) the institution shall calculate the theoretical amount of benefit that the person concerned could claim if all the insurance periods completed under the legislation of the Member States to which the employed or self-employed person has been subject had been completed in the Member State in question and under the legislation administered by it on the date the benefit is awarded. If, under that legislation, the amount of the benefit does not depend on the length of the periods completed, then that amount shall be taken as the theoretical amount referred to in this subparagraph.'

13 Article 47 lays down additional rules for calculating benefits. Article 47(1) deals specifically with the calculation of the theoretical amount referred to in Article 46(2)(a), and includes the following provision:

`(e) where, under the legislation of a Member State, benefits are calculated on the basis of average contributions, the competent institution shall determine that average exclusively by reference to those periods of insurance completed under the legislation of the said State.'

14 Finally, it should be noted that, in the version of the regulation resulting from Regulation No 1248/92, Article 47(1)(e) has become Article 47(1)(g). In addition, Annex VI which, in accordance with Article 89 of the regulation, refers to special procedures for applying the legislations of certain Member States, has had the following wording added under heading D. Spain:

`4. (a) Under Article 47 of the Regulation, the calculation of the theoretical Spanish benefit shall be carried out on the basis of the actual contributions of the insured person during the years immediately preceding payment of the last contribution to the Spanish social security.

(b) The amount of the pension obtained shall be increased by the amount of the increases and revalorizations calculated for each year after and up to the year preceding the materialization of the risk for pensions of the same kind.'

The question referred

15 In its question, the national court essentially asks whether the average contribution basis referred to in Article 47(1)(e) (now Article 47(1)(g)) of the regulation, in the version resulting from Regulation No 1248/92, is to be determined by reference to theoretical contribution bases (maximum, minimum or average), or by reference to the actual contribution bases of the insured.

16 Mr Naranjo Arjona, Mr Vicente Mateos and Mrs García Lázaro maintain that the various options put forward by the national court are impossible to put into effect, especially because the concept of `salary-dependent bases' was unknown to Spanish legislation until 1974 and migrant workers to whom a reference period prior to that date applies are thereby penalized. They therefore propose that the Court should rule that Article 47(1)(e) of the regulation, which has become Article 47(1)(g) since the entry into force of Regulation No 1248/92, and Annex VI, D (Spain), paragraph 4(a) of the same amended regulation are contrary to Article 51 of the Treaty in so far as they establish a system of calculating benefits which differs from that laid down by Spanish legislation and does not take into account periods of insurance or employment in another Member State.

17 The Spanish Government, on the other hand, argues that it is obvious from the clarifications for applying Article 47 of the regulation made in paragraph 4 of heading D of Annex VI that it is necessary to take into account the insured's actual contribution bases during the years immediately preceding payment of the last contribution to the Spanish social security system and adjust the amount of the pension thus obtained to the level applicable on the date the risk materialized.

18 The Commission maintains that none of the provisions of Article 47(1) applies to the calculation of the amount of an invalidity benefit under a system whereby such amount does not depend on the length of the insurance periods. As regards old-age and death benefits, it considers that the provision in question must be interpreted in such a way as to take account of the amount of actual salary payments immediately prior to the materialization of the risk, irrespective of the Member State where they were received, so that the application of national legislation interpreted in the light of the objectives of Articles 48 and 51 of the Treaty does not result in penalizing workers who have exercised the right of free movement compared with those who have not.

19 Contrary to what the Commission maintains, and as the Court ruled in Case C-251/94 Lafuente Nieto v INSS and TGSS [1996] ECR I-4187, Article 47(1)(e) of the regulation, renumbered as Article 47(1)(g) in the version currently in force, covers a system for calculating invalidity benefits on an average basis for contributions, as laid down by the Spanish legislation. That rule applies not only to old-age and death benefit schemes but also, by analogy pursuant to Article 40(1) of the regulation, to invalidity benefit schemes where the worker concerned has, as in these cases, been subject successively to legislations of different types (judgment in Lafuente Nieto, paragraph 28).

20 It should also be noted that the same rule constitutes an additional provision for the calculation of the theoretical amount referred to in Article 46(2)(a) of the regulation. It must therefore be interpreted in the light of that provision and, as the Court held in Case C-406/93 Reichling v INAMI [1994] ECR I-4061, in the light of the objective laid down by Article 51 of the Treaty, which implies in particular that migrant workers must not suffer a reduction in the amount of their social security benefits as a result of having availed themselves of their right of free movement.

21 Nevertheless, contrary to what the individuals concerned maintain, such an obligation does not mean that the contested provision is necessarily contrary to the above objective because it does not allow the amount of contributions paid in another Member State to be taken into account in order to determine the average contribution basis. It merely implies that that basis must be the same for the migrant worker as it would have been if he had not availed himself of his right of free movement.

22 Thus, in circumstances such as those at issue in the main proceedings, although in accordance with Article 47(1)(e) of the regulation (Article 47(1)(g) by virtue of the effect of Regulation No 1248/92) account is to be taken only of contributions paid under the legislation concerned, that amount must be updated and revalorized so as to correspond to what the persons concerned would have paid had they continued to work under the same conditions in the Member State in question (judgment in Lafuente Nieto, paragraphs 39 and 40).

23 That interpretation is confirmed by the new provisions which Regulation No 1248/92 introduced into Annex VI, heading D, paragraph 4 of the regulation, whereby `the calculation of the theoretical Spanish benefit shall be carried out on the basis of the actual contributions of the insured person during the years immediately preceding payment of the last contribution to the Spanish social security' and `the amount of the pension obtained shall be increased by the amount of the increases and revalorizations calculated for each year after and up to the year preceding the materialization of the risk for pensions of the same kind'.

24 Those new provisions are not in principle applicable to pensions awarded before 1 June 1992, subject only to the possibility which the new Article 95a of the regulation confers upon the persons concerned to request revision of their rights to take account of those rules. But in any event, as the Court held in paragraph 42 of the Lafuente Nieto judgment, the provisions in question do no more than set out the detailed rules for determining the average basis for contributions with sole reference to insurance periods completed under the legislation concerned, whilst leaving the content of Article 47(1)(e) unaltered, and are intended only to ensure the compatibility thereof with the principles set out in Article 51 of the Treaty.

25 The Commission maintained at the hearing, however, that application of those rules should not entail the loss of advantages which would result from the inapplicability, following the entry into force of such rules, of the social security convention concluded between the Federal Republic of Germany and the Kingdom of Spain on 4 December 1973, which entered into force on 1 November 1977 (`the convention'). The Commission points out that application of Article 25(1)(b) of that convention, which would allow the contribution basis level attained by the worker at the end of his career in Germany to be taken into account whilst referring to the contribution bases in force in Spain for the occupational category concerned, would lead to a more favourable result for the persons concerned than that flowing from the provisions of the regulation.

26 In that respect, the Court held in Case C-227/89 Rönfeldt v Bundesversicherungsanstalt für Angestellte [1991] ECR I-323 that Articles 48 and 51 of the Treaty preclude the loss of social security advantages which would result from the inapplicability, following the entry into force of Regulation No 1408/71, of conventions operating between two or more Member States and incorporated in their national law. However, the Court stated in Case C-475/93 Thévenon v Landesversicherungsanstalt Rheinland-Pfalz [1995] ECR I-3813 that that principle cannot be applied to workers who did not exercise their right of free movement until after that regulation came into force.

27 In the main proceedings, there is no dispute that the persons concerned were already employed in Germany before 1 January 1986, when the regulation, whose provisions were substituted for those of the bilateral convention in the normal way pursuant to Article 6 of the regulation, came into force in Spain. That substitution cannot be allowed, where the issue arises, to deprive those persons of their rights and advantages under that convention.

28 It should be noted, however, that, at the hearing, the Spanish Government challenged the Commission's argument that application of the convention would be more advantageous for the persons concerned than application of the regulation. As the Advocate General points out at paragraph 37 of his Opinion, the updating of the contributions, in accordance with the provisions of the regulation as interpreted by the Court and referred to in paragraph 21 of this judgment, pursues the same objectives as the convention and should normally permit them to be attained.

29 It is therefore for the national court to verify whether application of that convention would in practice be more or less advantageous for the workers concerned than application of the regulation. In the former case, by way of exception and in accordance with the principle stated in the Rönfeldt judgment cited above, the rules laid down by the convention should be applied. In the latter case, it is the rules laid down by the regulation, as interpreted by the Court, that must be applied.

30 The answer to the question referred must therefore be that Article 47(1)(e) of the regulation, which has become Article 47(1)(g) in the version resulting from Regulation No 1248/92, implies that, in situations such as that at issue in the main proceedings, calculation of the average basis for contributions rests solely on the amount of contributions actually paid under the legislation concerned, and the theoretical amount of the benefit thus obtained is to be duly revalorized and increased as if the persons concerned had continued to work under the same conditions in the Member State in question. However, where application of that provision so interpreted proves less advantageous, for workers who were already employed in another Member State before the regulation entered into force in the first Member State, than the application of a previous convention between those two States, the competent court should, by way of exception, apply the rules laid down by that convention.

Decision on costs

Costs

31 The costs incurred by the Spanish Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT

(Fifth Chamber),

in answer to the question referred to it by the Tribunal Superior de Justicia de la Comunidad de Extremadura, Cáceres, by orders of 15 and 17 January 1996, hereby rules:

Article 47(1)(e) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 and as adapted by Annex I, Part VIII, of the Act concerning the Conditions of Accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties, and which has become Article 47(1)(g) following the entry into force of Council Regulation (EEC) No 1248/92 of 30 April 1992, implies that, in situations such as that at issue in the main proceedings, calculation of the average basis for contributions rests solely on the amount of contributions actually paid under the legislation concerned, and the theoretical amount of the benefit thus obtained is to be duly revalorized and increased as if the persons concerned had continued to work under the same conditions in the Member State in question. However, where application of that provision so interpreted proves less advantageous, for workers who were already employed in another Member State before the regulation entered into force in the first Member State, than the application of a previous convention between those two States, the competent court should, by way of exception, apply the rules laid down by that convention.