Constitutional Court defies EU with ruling on Czech-Slovak pensions

The Constitutional Court on Tuesday made a landmark ruling regarding the difference in pensions between the Czech and Slovak Republic. Cases exist where Czechs who worked in the other half of Czechoslovakia now receive the lower pension rate of the Slovak Republic. According to the new decision of the court, such citizens never worked in a foreign country and thus are entitled to compensatory payments to raise their pensions to Czech standards. Among the chaos this creates for the Social Affairs Ministry now is that fact that the ruling directly contradicts the European Court of Justice.

Photo: Barbora Kmentová
Czech employees who worked in the Slovak half of Czechoslovakia during the years of the federation and now receive lower pensions from Slovakia will likely remember the name of Karel Holubec. The railroad engineer from Pardubice had worked for the state-run Czechoslovak Railways since the early 1960s, spending some 25 years of that time in the Slovakian half of the country. When he applied for old-age pension in 2008, the Czech authorities awarded him a paltry 3,500 crowns a month, based on the fact that he had only worked “in the country” for a few years. The average pension in the Czech Republic today is roughly 10,500 crowns, or 422 euros.

After failing in both the district and Supreme Administrative courts to have recognised what he felt was a basic right, Mr Holubec turned to the constitutional bench, which at last on Tuesday confirmed that he had never been employed in a foreign country. Vlastimil Göttinger is the spokesman for the Constitutional Court.

Vlastimil Göttinger,  photo: Czech Television
“There is a treaty on social security between the Czech Republic and the Slovak Republic, and the Constitutional Court has found that a compensatory payment has to be made towards old-age pensions if the recipient was working for different periods in the Czech or Slovak Republics prior to 1993, so that the pensions of certain citizens are not unjustifiably lower.”

The decision – for the first time ever – flies in the face of a decision of the European Court of Justice, which ruled last year that the practice of compensatory pensions for those who worked for companies based in the Slovakian half of Czechoslovakia but live in the Czech Republic was discriminatory. The Constitutional Court, somewhat brazenly, contested that the European justices had failed to take into consideration the unique history and consequential situation of citizens of their divided state.

Director of the social insurance systems department of the Ministry of Labour and Social Affairs, Jiří Král, told Czech Radio the decision was incomprehensible.

Jiří Král
“We have to respect the decision of the court of course, but it is surprising nonetheless. For one thing, the court emphasises that it is not responsible for interpreting international treaties, which is exactly what it has done here. But even more surprising is the sharp criticism of the European Court of Justice for ignoring European history, while at the same time virtually all of the countries of Europe have broken up or shifted at some point, particularly the countries formerly in the Soviet Union.”

At the same time he calls the ruling a “disaster of lesser proportions”: had the Constitutional Court reverted to a decision from 2010, that the state must pay pensions for all former state enterprises, the damage would have been in the hundreds of billions. As it is, the new situation creates new and possibly unforeseeable consequences.

“Since these two courts have settled this issue in different ways, now if a Slovak citizen, for example, decides that he would prefer the higher pension available in the Czech Republic, I fear that Luxembourg could try the case, and the European Court of Justice has the option of enforcing its decision through fines and so on. The situation is very complicated. We thought we had resolved it legislatively last year, but here we are again. You will have to give us more time to think about how to deal with the Constitutional Court’s decision.”

How, exactly, the method of compensation will be reinstated in practical terms should be known by the end of the week.