Wilson & Anor v McNamara & Ors

Whether the effect of bankruptcy on accrued pension rights falls within the scope of the freedom of establishment under art 49 TFEU was a question of EU law requiring a preliminary reference. The different protection given by the Welfare Reform and Pensions Act 1999 to UK tax-approved arrangements and overseas arrangements could constitute indirect nationality discrimination if that subject matter fell within art 49. The court held provisionally that it did. A conforming interpretation could then extend the statutory protection to an overseas pension scheme recognised for tax purposes in another EU member state, provided that interpretation remained consistent with the legislation’s underlying purpose.

The joint trustees in bankruptcy sought to bring into the bankruptcy estate rights under an Irish occupational pension scheme. The bankrupt had moved his centre of main interests from Ireland to England, became bankrupt in England, and argued that EU law required his Irish pension rights to receive the same protection as rights under a UK registered pension scheme.

The preliminary issue concerned arts 21, 45, 49 and 56 TFEU, art 24 of Directive 2004/38/EC, art 7(2) of Regulation 492/2011/EU, and ss 11 and 12 of the Welfare Reform and Pensions Act 1999. The central questions were whether the UK rules were within the scope of the freedom of establishment and, if so, whether a conforming interpretation was available.

1. Reference to the CJEU. The court decided to refer to the CJEU the question whether the impact of insolvency on accrued pension rights fell within the scope of art 49 TFEU. The issue was critical to the decision, was not acte clair, and could not be resolved with complete confidence from existing authority.
2. Separate freedoms. The basic principles applicable to freedom of movement for workers, freedom of establishment and freedom to provide services were similar, but the rights were not identical. Whether a measure was an obstacle to establishment required consideration of the facts and the particular situation of self-employed persons. This was explained by reference to Ramrath v Ministre de la Justice and Commission v Denmark.
3. Deterrent effect and indirect discrimination. A measure need not have actually deterred movement if it was liable to have such an effect. However, the court accepted that the UK pension provisions had not been shown to have a tendency to deter establishment because the UK insolvency regime had to be considered as a whole and no comparison with the Irish regime had been established. The court nevertheless provisionally concluded that, if pension treatment was within art 49, the differential operation of ss 11 and 12 of the Welfare Reform and Pensions Act 1999 was liable to affect a substantially higher proportion of nationals of other member states and therefore constituted prohibited discrimination in the enjoyment of a social advantage.
4. Provisional view on the answer. The judge provisionally considered that the connection between insolvency and accrued pension rights was sufficiently close to self-employed establishment, even where the insolvency arose from earlier activities in the home state. On that basis, the Irish scheme’s rights should receive equivalent treatment.
5. Conforming interpretation. If the CJEU confirmed that conclusion, the appropriate remedy would be to read s 11(2)(a) of the Welfare Reform and Pensions Act 1999 as extending to a pension scheme established in another EU member state and recognised for tax purposes within the meaning of the 2006 Regulations. The judge considered that interpretation compatible with the legislation’s purpose and supported by Vodafone 2 v Revenue and Customs Commissioners.
6. The parties were invited to agree the draft order and schedule for the reference. If they could not agree, the matter was to be relisted for argument.

Not an appeal. The judgment determined a preliminary issue and directed a reference to the CJEU.