DA SILVA CARVALHO RICO v. PORTUGAL
Inadmissible
András Sajó;Erik Møse;Julia Laffranque;Khanlar Hajiyev;Linos-Alexandre Sicilianos;Mirjana Lazarova Trajkovska;Paulo Pinto De Albuquerque
The applicant, Mrs Maria Alfredina da Silva Carvalho Rico, is a Portuguese national, who was born in 1942 and lives in Porto. She was represented before the Court by Mr J. J. Ferreira Alves, a lawyer practising in Matosinhos. 1. The applicant is a pensioner eligible to receive social-security benefits under the public-sector pension scheme. In 2009 she was granted a retirement pension which amounted to 1,980.72 euros (EUR) gross per month. 2. In April 2011 Portugal requested financial assistance from the European Union (EU), the euro area Member States and the International Monetary Fund (IMF). An Economic Adjustment Programme was negotiated in May 2011 between the Portuguese authorities and officials from the European Commission, the European Central Bank (ECB) and the IMF including a joint financing package of EUR 78,000,000,000 (EUR 26,000,000,000 from the European Financial Stabilisation Mechanism, EUR 26,000,000,000 from the European Financial Stability Facility and EUR 26,000,000,000 from the IMF). The programme was agreed and formally adopted on 17 May 2011 at a Eurogroup/ECOFIN meeting in Brussels, where the Portuguese Government signed a Memorandum of Understanding on Specific Economic Policy Conditionality (the “M.o.U.”) with the EU, the ECB and the IMF and thereafter two related documents: the Technical Memorandum of Understanding and the Loan Agreement. The M.o.U. set out the economic and social policies, including tax and social-security measures, that Portugal should implement for the duration of the programme (2011-2014) in order to improve its financial situation and receive financial support from the EU. It stipulated, inter alia, that Portugal would: “... 1.11 Reduce pensions above EUR 1,500 according to the progressive rates applied to the wages of the public sector as of January 2011, with the aim of yielding savings of at least EUR 445 million.” 3. On 31 December 2012 the Official Journal (Diário da República) published Law no. 66-B/2012 on the State budget (Lei do Orçamento de Estado para 2013, hereinafter “the 2013 State Budget Act”), which was designed to continue the implementation of the M.o.U. initiated by Law no. 64-B/2011 of 30 December 2011 on the 2012 State Budget. Pursuant to section 78 of the 2013 State Budget Act, the scope of application of the existing extraordinary solidarity contribution (contribuição extraordinária de solidariedade, hereinafter “the CES”) was extended in order to include pensioners receiving a gross amount of EUR 1,350. This provision was to apply in 2013 and only during that year. 4. The applicant’s pension was subsequently taxed at 3.5% on a part corresponding to EUR 1,800 and 16% on the part exceeding it. The excess was EUR 180.72. The total amount deducted because of the CES thus amounted to EUR 91.92. 5. With the entry into force of the 2013 State Budget Act, the applicant’s pension was reduced accordingly, resulting in a cumulative loss of EUR 1,286.88 in 2013. This loss amounted to 4.6% of the applicant’s total annual social security benefits. 6. On 31 December 2013, the Official Journal published the 2014 State Budget Act (Law no. 83-C/2013), which reintroduced the CES for 2014 with the same threshold and rates as the ones applied under the 2013 State Budget Act. Consequently, the CES was again applied to the applicant’s pension as provided for in section 76 of the 2014 State Budget Act. 7. On 14 March 2014 a law amending the 2014 State Budget Act entered into force (Law no. 13/2014). Pursuant to the amendments to section 76, the scope of application of the CES was extended to pensions of a gross amount of EUR 1,000, while the rates applied to larger pensions were increased. The rates applied to the applicant’s pension remained unchanged. 8. In 2014 the applicant sustained a cumulative loss of EUR 1,286.88, amounting to 4.6% of her total annual pension payment. 9. In June 2014 Portugal exited the three-year Economic Adjustment Programme and is currently under post-programme surveillance until at least 75% of the financial assistance received has been repaid. “1. All citizens have the same social dignity and are equal before the law.” “1. Everyone is entitled to social security.” 10. The extraordinary solidarity contribution, introduced in Portugal by section 162 of Law no. 55-A/2010 of 31 December 2010 on the 2011 State Budget (Lei do Orçamento de Estado para 2011), reads as follows: “Pensions, grants and any other benefits of a similar nature paid to a single person, whose monthly amount is above EUR 5,000, are subject to an extraordinary contribution at a 10% rate applicable to the amount exceeding that value.” 11. When the 2012 State Budget Act (Law no. 64-B/2011 of 30 December 2011) entered into force, the CES was increased to 25% on the part of pensions which exceeded EUR 5,030.64 and 50% on the part that exceeded EUR 7,545.96. 12. With the entry into force of the 2013 State Budget Act (Law no. 66-B/2012 of 31 December 2012) the CES was again reconfigured. Accordingly, section 78 of the 2013 State Budget Act was to be applied to pensions between EUR 1,350 and EUR 1,800 at a 3.5% rate. With regard to pensions between EUR 1,800 and EUR 3,750, the CES was set at 3.5% on the first EUR 1,800.01, and at 16% on the part exceeding that amount. As to pensions exceeding EUR 3,750, the CES was payable at 10%. As a budgetary measure provided for in the 2013 State Budget Act, the CES was only to be applied in 2013. 13. On 1 January 2014 the CES was reintroduced in Portugal through the enactment of the 2014 State Budget Act (Law no. 83-C/2013 of 31 December 2013). Pursuant to section 76, its scope of application remained the same as the one provided for in the 2013 State Budget Act. According to the 2014 Budget Act, the CES was an exceptional and temporary measure applicable in 2014. 14. Following the tenth EC/ECB/IMF review mission to Portugal in February 2014, the Portuguese Government amended the 2014 State Budget Act including, inter alia, the scope of application of the CES through the adoption of Law no. 13/2014 of 14 March. Pursuant to the amendment, the CES became applicable to pensions of EUR 1,000 and above. 15. The 2015 State Budget Act (Law no. 82-B/2014 of 31 December 2014) provided for a new reconfiguration of the CES by raising the threshold at which it applies, which is currently set at EUR 4,611 at a 15% rate. Pensions exceeding EUR 7,127 are currently taxed at a 40% rate (section 79). 16. On 2 January 2013 the President of the Portuguese Republic challenged the constitutionality of section 78 of the 2013 State Budget Act before the Constitutional Court on the grounds that its provisions were in breach of the principle of equality, the principle of proportionality and the principle of protection of legitimate expectations (princípio da confiança). 17. In a ruling of 22 April 2013 the Constitutional Court considered that section 78 of the 2013 State Budget Act was not disproportionate or excessive, bearing in mind its exceptional and transitory nature. In the court’s opinion, the CES was, therefore, not unconstitutional. 18. The Constitutional Court’s decision contained in particular the following considerations: “75. ... Imposing an obligation on pensioners to contribute to the financing of the social-security system in order to reduce the need for public financial allocation, within a framework of distinct and articulated fiscal consolidation measures which also include tax increases and other cuts in public expenditure, is based on a coherent reasoning in line with a strategy still within the margin of the “free policy prerogative” of the legislature. ... 78. ... The CES was solely designed, in conjunction with other measures, to overcome the situation of economic and financial crisis which has temporarily also required, within the framework of the basic options open to the executive and legislature, an urgent strengthening of the financing of the social-security system at the expense of its beneficiaries. [Background factors are as follows:] ... a decrease in revenues accruing to the social-security system; the dramatic increase in unemployment; the reduction of wages; new migration trends; an increase in expenditure on support given to those in unemployment and poverty, and the consequent need for the State to finance the social-security system thereby aggravating the public deficit. As a result, the legislature, exceptionally and in an emergency situation, chose to extend to pensioners the payment of contributions into the social-security system from which they are directly or indirectly beneficiaries for the present tax year only. Compliance with the underlying principles of the democratic rule of law must be evaluated, therefore, in light of the exceptional and temporary nature of this measure and its purpose of meeting the public deficit targets demanded by the Economic and Financial Assistance Programme. 79. ... However, given the constraints that surrounded the implementation of the CES, not only do the expectations of continued financial stability appear to be diminished, there is also a particular, relevant and defensible public interest that justifies an exceptional and temporary discontinuation of the State’s normal conduct. The public interest needs to be safeguarded, as has already been stated in the course of the balancing exercise carried out in earlier cases with regard to the principle of legitimate expectations, is of crucial importance and urgent which gives it a clear prevalence, even though the depth of the sacrifice caused to the private sector by the new contribution should not be ignored. ... There is not, therefore, any evidence in this whole context of an infringement of the principle of protection of legitimate expectations. 80. Neither does it seem that the principle of proportionality could be considered to have been breached in any of the aspects of adequacy or necessity or due measure. ... In the current case, it is clear that the imposition of this extraordinary tax on pensioners as a means of reducing, exceptionally and temporarily, expenditure on payment of pensions in order to obtain additional financing for the social-security system, is an appropriate measure for the purposes set out by the legislature. As to whether, in order to achieve this goal, the means chosen are actually necessary or required owing to the possible existence of other more suitable or effective means which could achieve the same result in a less burdensome way for those affected, analysis of the evidence shows that there are no other alternatives which could maintain a consistency with the system in which these measures are established, and which could attain public interest objectives to the same degree, and which could affect the holders of the these legal expectations to a lesser degree. Accordingly, the measure complies with the principle of necessity. ... 83. ... In the light of the above, the court holds that section 78 is not unconstitutional.” 19. In March 2014, Law no. 13/2014 amending section 76 of the 2014 State Budget Act was challenged before the Constitutional Court by a group of members of the Portuguese Parliament within the framework of an ex post facto review, on the grounds, inter alia, that the CES was no longer temporary and exceptional on account of its re-introduction in 2014. In particular, the group of members of the Portuguese Parliament challenged the amendments made to section 76 of the 2014 State Budget Act. On 30 July 2014 the Constitutional Court found that the relevant provision was not unconstitutional. In its ruling the court took into account that it had already weighed up the constitutionality of the CES in previous rulings and considered that the reconfiguration of the measure remained within the limits outlined by the constitutional-law principle of legal certainty. The Constitutional Court further considered that the CES was an exceptional and transitory measure imposed through a budgetary law and had been designed to respond to an economic and financial emergency in Portugal. As to the proportionality of the reconfigured CES, the court ruled that there had been no breach of this principle and that there were no reasons to depart from its previous ruling on the appropriateness of and need for a CES. 20. The Constitutional Court’s decision contained in particular the following considerations: “4. ... The court is aware that ... considerations with regard to the generic nature of the CES have been raised, and also considerations in relation to its scope and extension; thus the measure must be analysed in the light of the fundamental right to social security, from which a constitutional right to a pension results. However, according to the applicants, it is the differences vis-à-vis the solution previously analysed by this court in 2013, in particular the extension of the measure, that justify a separate ruling to the one then adopted. ... 10. ... Thus, one cannot fail to recognise that, in the way in which it was normatively brought about – that is, a budgetary measure designed to be in force for the year 2014 – the CES has, indeed, an exceptional and temporary nature which is directly related to the immediate objectives pursued by the legislature of achieving a balanced budget and sustainability of public finances. Therefore, it is with regard to the CES in and of itself, as normatively set, and with regard to its own nature without taking into account the different nature of any potential subsequent and functionally substitute measure, that the ruling about its temporariness should be made. We can thus conclude that it is permissible for the Constitutional Court, following its previous case-law, to consider that section 76 of Law no. 83-C /2013, as amended by Law no. 13/2014, still establishes a transitory or temporary measure, which should be taken into account in the weighting underlying the assessment of constitutionality. ... 14. ... In fact, as recognised in Ruling no. 187/2013, legitimate expectations of the State are not as consistently present with regard to an extraordinary and transitory measure, thus justifying an exceptional and temporary discontinuation of the State’s conduct. Given the exceptionality of the facts that increased the need for assistance – the financial and economic emergency that has reduced transfers from the State budget to the social protection system – the lower the expectations of those who were affected by it appear to be. ... 17. There are no reasons to depart in the present case from the ruling delivered by the court on the adequacy and necessity of the CES as part of a balanced budget programme. Indeed, this is highlighted by the conflict – established on the basis of the principle of proportionality – between the measure under scrutiny and the objective pursued. It is clear that, in general, the extension of the threshold of the CES is not an inappropriate means of achieving a balanced budget... And the same can be said with regard to the necessity or enforceability of the option chosen – the second test of proportionality – since, in the light of the aim pursued and of the potential alternative solutions, it cannot be considered that the extension of the scope of application of the CES is not the least burdensome measure for those adversely affected by the achievement of that goal. ... 19. ... And with regard to the contribution affecting pensions between EUR 1,350 and EUR 4,650, the previous regime remains unchanged. ... 22. ... Indeed, various reasons indicate that the reconfiguration of the CES by Law no. 13/2014 of 14 March is still within the limits of reasonableness. Firstly, the CES still maintains the characteristics of exceptionality and transience that in 2011 marked its entry into the tax universe. ... In an absolutely exceptional financial situation including a fiscal imbalance that led to international and European commitments, the CES constitutes an exceptional measure which, in conjunction with other measures, aims to overcome the seriousness of that situation. ... For all these reasons, it is acceptable that the monthly contribution required of the beneficiaries of social security affected by the expansion of the scope of application of the CES, owing to its temporariness of the norms supporting it and the objectives it seeks to pursue, does not amount to a particularly excessive and unreasonable sacrifice which would involve a violation of the principle of proportionality, constitutionally objectionable.” 21. In a series of rulings, the Constitutional Court established the legal principles applicable to cases in which restrictions on social rights could be allowed within a constitutional framework with a particular reference to the concept of “proviso of the possible” (reserva do possível, known in German as the Vorbehalt des Möglichen). “6. ... It should be noted that, within the scope of economic, social and cultural rights, the responsibility of the legislature is to ensure that social benefits integrate those rights, within the budgetary constraints, the economic and financial plans and the social conditions of the country. As Gomes Canotilho has said, the fulfilment of economic, social and cultural rights are made within a “proviso of the possible”, as these rights depend on “economic resources”. “24. Thus, the legislature is not prohibited from changing the way it brings about the right to a pension as it may change or even reduce its amount by taking into account the evolving economic or social circumstances. However, the legislature is prohibited from eliminating the provision of “retirement, old-age, invalidity or survivor’s pensions” or even their essential scope. Indeed, the right to a pension is particularly dependent on State financial resources and is, accordingly, more vulnerable to the “pressure of circumstances” in particular in the most critical times of economic uncertainty. That particular vulnerability is justified not only by the fact that the right to a pension allocates immediate financial resources, but also because of the particular structure of the law. The right to a pension is subject to a medium and long term time frame within which the economic circumstances of the State may change radically. On the other hand, in addition to their prolonged duration, pensions are still particularly dependent on the “proviso of the possible”, simply because they are part of the inter-generational social contract. “18. Under these constraints, the legislature has leeway to outline the specific or final scope of the right to a pension subject to the relevant constitutional limits. ... The right to a pension is indeed particularly dependent on State financial resources and is, accordingly, more vulnerable to the “pressure of circumstances”, in particular in the most critical times of economic uncertainty. That particular vulnerability is justified not only by the fact that the right to a pension allocates immediate financial resources, but also because of the particular structure of the law. The right to a pension relies on a medium and long term time frame during which the economic circumstances of the State may change radically. On the other hand, in addition to its prolonged duration, pensions are still particularly dependent on this “proviso of the possible”, simply because it is part of the inter-generational social contract.” ... However, it is important to reaffirm that the legislature, in confirming the right to a pension is, at any moment, in time legally bound by constitutional rules and principles. Thus, despite a clear recognition that the legislature is free to change the conditions of, and the rights to enjoyment of, and the calculation of pensions, even in the most demanding way, it has to respect the existing constitutional limits, namely those which derive from the rule of law. Thereby, the changes that the legislature intends to pursue must have reasonable grounds – in particular the financial sustainability of the system – and cannot affect either the social minimum or the principles of equality and human dignity or the protection of legitimate expectations.” 22. The relevant information with regard to the EU assessment of the 2011 economic situation in Portugal can be found in the case of Da Conceição Mateus and Santos Januário v. Portugal (dec.), nos. 62235/12 and 57725/12, § 11, 8 October 2013. 23. As part of the economic adjustment programme, the EU and the IMF organised regular review missions to Portugal in order to monitor the implementation of the M.o.U. signed between Portugal and the European Commission, the European Central Bank and the International Monetary Fund on 17 May 2011, and to assess the results of the reforms prepared by the Portuguese Government. 24. The relevant excerpts of the EU mission reports conducted in 2013 and 2014 read as follows: 1. The Economic Adjustment Programme for Portugal - Eighth and Ninth Review (November 2013) “13. Social Security recorded a positive cash balance in the first eight months of the year. ... Nevertheless, the overall collection of social contributions is in line with projections due to the over-performance of the ‘extraordinary solidarity contribution’ (CES) on pensions, the better macroeconomic environment and increased collection efficiency. ... 27. The fiscal consolidation is predominantly based on the savings measures identified in the framework of the public expenditure review (PER). ... The PER aimed at identifying savings and the potential for streamlining processes in the public administration ... The savings identified include permanent expenditure-reducing measures amounting to EUR 3.1 billion (1.8 percent of GDP) in 2014. ... The ‘extraordinary solidarity contribution’ introduced in 2013, worth 0.3 percent of GDP, will be maintained. However, this measure will be adapted to take into account the cumulative impact of other pension reforms. 2. The Economic Adjustment Programme for Portugal - Tenth Review (February 2014). “29. The fiscal plans for 2014 received a setback on 19 December 2013, when the Constitutional Court ruled the provision aimed at aligning the rules of the public-sector pension scheme with the general pension scheme as unconstitutional. This measure was foreseen to yield EUR 321 million (0.2 percent of GDP) in net terms (after accounting for losses in PIT revenue and for the non-accumulation of this measure with the ‘extraordinary solidarity contribution’ on pensions, (CES). The Government has proposed to fill this gap by redesigning two measures: (i) an increase in the CES including through the lowering of the threshold below which pensions are exempted and of the thresholds from which the highest contribution rates apply ... The changes to the CES will be implemented via a Supplementary Budget. ...”