Olympic Airlines case – Supreme Court rules
The Supreme Court has unanimously upheld the 2013 Court of Appeal ruling (see Pensions Bulletin 2013/25) which overturned an earlier order of the High Court to wind up Olympic Airlines SA, a Greek company which had been wound up by the Greek court on 2 October 2009.
The point of the original application to the High Court was to plug a gap in the UK pension protection framework – an insolvency in Greece is not a “qualifying insolvency event” for the purposes of admission to the PPF whereas the UK winding up order would have been.
In the event the UK Government acted to plug the regulatory gap in this case only (see Pensions Bulletin 2014/27) by regulations. One reason why the trustees will have spent money on taking this to the Supreme Court is that they want certainty on the date of the qualifying insolvency event. If the High Court ruling was upheld this would have been 29 May 2012, but as they now need to rely on the DWP regulations it is 2 October 2014. There is reference in the judgment to the trustees possibly having to claw back any overpaid benefits from 2 October 2009 to the qualifying insolvency event date but it is not clear why.
Under EU insolvency law, whether the UK court has jurisdiction in this sort of case depends on whether the overseas company has an “establishment”, which in turn depends on whether it conducts “economic activity”. The Court of Appeal held that there was no establishment or economic activity. The Supreme Court agreed.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
Comment
For trustees of underfunded schemes which are directly sponsored by an overseas company the position remains unsatisfactory. If the Olympic Airlines scenario was to be repeated they might be hopeful that the Government would intervene again, but there is no guarantee of this and so it might have been better if the Government had defined a general “qualifying overseas insolvency event” for PPF entry purposes.
As things stand, as part of their covenant monitoring activities, trustees of directly overseas sponsored schemes should consider taking advice in how to manage the risk that an overseas insolvency might leave the members without PPF coverage.
Making the case for an Independent Retirement Savings Commission
In a pamphlet published by the National Association of Pension Funds, ten leading pension policy thinkers, including those from the ABI and TUC, set out their thoughts as to why the next Government should establish a standing independent Retirement Savings Commission.
A number of reasons why are stated, but the common thread is a clear worry that without some form of independent and evidence-based oversight on the policy making process, politicians will take decisions that are more to do with the short-term political cycle. As a result, there will be no pension consensus and pension policy will be in a constant state of flux with destabilising effects.
The contributors have various ideas of what such a Commission could usefully undertake and how it should be structured. They point to precedents such as the Office for Budget Responsibility which oversees fiscal policy and the public finances. Whilst accepting that politicians have to take political decisions, having a Commission working alongside Government is thought to be a good means of building consensus and to ensure that decisions are taken in the context of a stable long-term framework for retirement savings.
Comment
The case for such a Commission is well argued. Although the idea is not new (one of the Turner Commission’s recommendations was that such a body should be established), it has become very timely as politicians of all hues see pensions tax as an area ripe for the plucking in order to fund policies in unrelated areas.
