OPINION OF ADVOCATE GENERAL

delivered on 28 January 1993 (*1)

My Lords,

1. In this case the Tribunal du Travail, Brussels, has requested a preliminary ruling on the interpretation of Article 51 of Council Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community (in the consolidated version contained in Annex I to Council Regulation (EEC) No 2001/83 of 2 June 1983; OJ 1983 L 230, p. 6).

2. The applicant in the main proceedings, Mr Bogana, is an Italian national who worked both in Italy and in Belgium. On 24 October 1980 he became incapacitated for work. By decision of 27 January 1984 the competent Italian social security institution awarded him an invalidity pension with effect from 1 November 1981. The second defendant in the main proceedings — the Institut National d'Assurance Maladie-Invalidité (hereafter ‘INAMI’) — notified Mr Bogana on 10 May 1984 of its decision calculating his Belgian invalidity pension. At that date the Belgian pension amounted to BFR 472.23 per diem and the Italian pension amounted to the equivalent of BFR 27.21 per diem.

3. The calculation of the above pensions was governed by the provisions of Chapter 3 of Title III of Regulation No 1408/71. Those provisions were applicable to Mr Bogana's invalidity pensions by virtue of Article 40(1) of Regulation No 1408/71. The Italian pension was a pro rata pension calculated in accordance with the rules on aggregation and apportionment laid down in Article 46(2) of Regulation No 1408/71. When INAMI calculated Mr Bogana's Belgian pension it found that the same result ensued irrespective of whether it applied Belgian legislation alone (including a rule against the overlapping of benefits contained in Article 76 quater (2) of the Law of 9 August 1963) or the provisions of Article 46, including the rule against overlapping laid down in Article 46(3).

4. With effect from 1 October 1986 the relevant Belgian legislation was amended, with the result that Mr Bogana's pension was increased from 43.5% of remuneration lost to 45%. INAMI informed Mr Bogana that his pension had been recalculated accordingly on 17 February 1987. His Belgian pension thereafter amounted to BFR 606.64 per diem and his Italian pension amounted to the equivalent of BFR 35.79 per diem. It is not disputed that the aforesaid amendment to the Belgian legislation constituted an alteration in the ‘method of determining or the rules for calculating benefits’ within the meaning of Article 51(2) of Regulation No 1408/71. Article 51(2) therefore required the Belgian authorities to recalculate the pension in accordance with the provisions of Article 46.

5. The dispute between the parties arises out of a recalculation effected retroactively by the first defendant — the Union Nationale des Mutualités Socialistes (hereafter ‘the UNMS’) — in respect of the period from 1 January 1987 to 28 February 1991.

6. In order to understand the nature of that dispute it is necessary to consider certain provisions of Belgian law. Article 76 quater (2) of the Law of 9 August 1963 provides that the pensions in question are to be refused when the loss caused by sickness or injury (amongst other things) is effectively compensated for under other legislation, Belgian or foreign, but that if a lower sum is payable under that other legislation the person concerned is entitled to the difference. Article 241 bis of the Royal Decree of 4 November 1963 requires the Belgian pension to be adjusted whenever the foreign pension varies by 2% or more in relation to the original or previous calculation and whenever the parity of the foreign currency varies by 2% or more in relation to the parity taken into consideration for the original or previous calculation.

7. Although the precise facts have not been set out in the order for reference or in the observations of the parties, it would appear that in the period from 1 January 1987 to 28 February 1991 Mr Bogana's Italian pension increased considerably as a result of cost-of-living adjustments (‘indexation’). The defendants consider that, whenever such increases exceeded 2%, Mr Bogana's Belgian pension should have been reduced by a corresponding amount in accordance with the rule against overlapping set out above. The UNMS noted that no such adjustments to the Belgian pension had taken place and therefore adopted two decisions requiring Mr Bogana to repay sums of BFR 4572 and BFR 39093. Mr Bogana challenged those decisions before the Tribunal du Travail, Brussels. He contends that the contested decisions are contrary to Article 51 of Regulation No 1408/71, which provides:

1. ‘1. If, by reason of an increase in the cost of living or changes in the level of wages or salaries or other reasons for adjustment, the benefits of the States concerned are altered by a fixed percentage or amount, such percentage or amount must be applied directly to the benefits determined under Article 46, without the need for a recalculation in accordance with the provisions of that Article.

2. On the other hand, if the method of determining or the rules for calculating benefits should be altered, a recalculation shall be carried out in accordance with Article 46.’

8. According to Mr Bogana, the increases in his Italian pension since 1 January 1987 are covered by Article 51(1), the effect of which is to preclude the Belgian authorities from adjusting his Belgian pension on account of the increases in the Italian pension. A series of judgments of the Court of Justice appear to support that contention: see, in particular, Case 7/81 Sinatra v FNROM [1982] ECR 137, Case 104/83 Cinciuolo v Union Nation-ale des Fédérations Mutualistes Neutres [1984] ECR 1285, Case C-85/89 Ravida v Office National des Pensions [1990] ECR I-1063 and Case C-93/90 Cassamali v Office National des Pensions [1991] ECR I-1401. INAMI, which intervened in support of UNMS, maintains that that case-law is not applicable in the present case because the Belgian pension was determined solely under national law (the amount thus fixed being identical to the amount produced by applying Article 46 of Regulation No 1408/71).

9. The Tribunal du Travail has referred the following question to the Court of Justice:

10. ‘Where the comparative calculation of a benefit made on the basis of national legislation (Article 76 quater (2) of the Law of 9 August 1963) and of Article 46(3) of Regulation (EEC) No 1408/71 produces the same result, must that benefit — after the date on which entitlement to it has been acquired — be adjusted in accordance with Article 51 of Regulation (EEC) No 1408/71 or in accordance with a provision of national law (Article 241 bis of the Royal Decree of 4 November 1963) which provides for the benefit due under national law to be recalculated so as to reflect changes in the foreign benefit which are associated in particular with fluctuations in average exchange rates and economic developments (indexation)?’

11. I cannot see any reason to depart from the Court's existing case-law in the circumstances alluded to by INAMI. There is nothing in the present case to justify a result different from that reached in previous cases, in particular Ravida and Cassamali. In my Opinion in the latter case I made the following comments (paragraph 12):

‘The scheme of Article 51 of Regulation No 1408/71 is to distinguish between two situations: (i) index-linked adjustments and (ii) adjustments due to a change in the method of calculation. In the latter situation a complete recalculation takes place. In the former situation a fixed percentage or amount is added to the benefits hitherto payable and, apart from that adjustment, no recalculation takes place. Article 51 does not envisage a third possibility whereby an index-linked increase in one Member State may be taken into account in another Member State for the purposes of a national rule against the overlapping of benefits. Article 51(1) lays down the principle of the autonomous development of social security benefits. Once benefits have been calculated in accordance with Article 46, they develop autonomously in each of the Member States concerned; an adjustment in one Member State does not affect the benefit paid in the other. Article 51(2) lays down an exception to the principle where there are changes in the method of calculating benefit. That exception is necessary because the effect of such changes might be to put the person concerned in a position where a different formula would be more favourable to him. In this regard, it must be remembered that Article 46 has consistently been interpreted by the Court as entitling the individual to the application of either the whole of national legislation or the whole of Community legislation, including their respective rules against overlapping, whichever is more favourable (see, for example, Case 22/77 FNROM v Mura [1977] ECR 1699). It is unlikely that the circumstances referred to in Article 51(1), i. e. an adjustment of benefits due to an increase in the cost of living or in the level of wages or salaries, would affect the outcome of the comparison between the two alternatives.’

The justification for that principle, according to the Court's case-law, is that it simplifies the administrative task of the social security authorities, which are spared the inconvenience of constantly having to recalculate benefits as a result of cost-of-living adjustments made to benefits paid in other Member States. That justification does not cease to apply simply because the pension payable to Mr Bogana under national law alone, including a national rule against the overlapping of benefits, is identical to the pension that he would have been entitled to under Article 46 of Regulation No 1408/71, including the rule against overlapping in Article 46(3). On the contrary, the same justification appears to apply with equal force in such circumstances.

12.Any lingering doubts on this point should be dispelled by a brief examination of the documents contained in the national court's case-file. These set out laborious calculations performed by the UNMS which take into account, month by month, changes in the value of Mr Bogana's Italian pension, including changes due to small fluctuations in the exchange rate as well as those caused by an index-linked increase in the Italian pension. In some instances the amount in issue is as little as one franc a day. That is precisely the kind of disproportionate administrative burden that Article 51 seeks to eliminate.

13.It is, moreover, important to bear in mind that the financial consequences of the rule laid down in Article 51(1) will not normally be dramatic. If a large index-linked increase has been granted in one of the two countries concerned, the apparent gain will normally, for reasons which I pointed out in my Opinion in Cassamali (paragraph 13), soon be cancelled out by monetary depreciation. Whatever gain there is will normally be a short-term phenomenon of relatively small dimensions which should be tolerated in the name of administrative convenience.

14.The question submitted by the Belgian court enquires expressly about the consequences of a change in the value of the foreign benefit as a result of monetary developments. In my view, the Belgian authorities are also precluded from adjusting Mr Bogana's pension to take into account any increase in the value of his Italian pension caused by variations in the exchange rate. That view is consistent with Decision No 99 of 13 March 1975 of the Administrative Commission on Social Security for Migrant Workers (OJ 1975 C 150, p. 2), which I referred to in my Opinion in Cassamali, at paragraph 14. The decision deals with the interpretation of Article 107 of Regulation No 574/72, which prescribes a quarterly reference period for determining the rate of conversion into one national currency of amounts shown in another national currency. The decision interprets Article 107 as determining the rate of conversion applicable when benefits are fixed or when they are recalculated in accordance with Article 51(2) of Regulation No 1408/71. It goes on to state that, on the other hand, Article 107 ‘involves no obligation to recalculate current benefits (especially pensions) every three months by applying the rate of conversion specified in Article 107’. The Administrative Commission on Social Security is not of course empowered to adopt legally binding decisions on the interpretation of Community legislation: see Case 98/80 Romano v INAMI [1981] ECR 1241, at paragraph 20. I consider none the less that the approach adopted by the Administrative Commission is correct and that a benefit paid in one country should not be reduced on the ground that the value of a foreign benefit has increased as a result of monetary factors.

15.Although Article 51(1) does not refer expressly to changes in the value of benefits as a result of monetary factors, there is a strong case for applying the principle of the autonomous development of benefits in such circumstances. As I remarked in my Opinion in Cassamali, an increase in the value of the lira, in relation to the Belgian franc, has the same effect as an increase in the amount of an Italian pension, at least as regards the value of the pension in Belgium. It would be illogical to adjust Mr Bogana's Belgian pension where the value of his Italian pension increases as a result of monetary developments but not to adjust it where the value of the Italian pension increases as a result of indexation.

16.In fact, there are particularly strong arguments for applying the principle of autonomous development when the value of a pension changes as a result of monetary factors. Variations due to currency fluctuations are likely to occur more erratically and more frequently than variations due to indexation. In this regard it must be noted that Belgian law requires a variation as low as 2% to be taken into account. Thus, even if both the currencies involved were participating fully in the exchange rate mechanism of the European Monetary System, which permits fluctuation margins of plus or minus 2.25% (or 6% in some cases), their relative values might still vary sufficiently to trigger off the adaptations provided for by Article 241 bis of the aforesaid Royal Decree. The principle of autonomous development laid down in Article 51(1) of Regulation No 1408/71 would become pointless if it were not applied to changes in the value of benefits caused by monetary factors.

17.I am accordingly of the opinion that the question submitted by the Tribunal du Travail, Brussels, should be answered as follows:

Article 51 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 must be interpreted as meaning that, where a benefit has been calculated under national legislation, including a rule against the overlapping of benefits, and that calculation produces the same result as Article 46(3) of Regulation No 1408/71, the benefit may not subsequently be reduced so as to take into account a change in the value of a benefit paid in another Member State if that change is due to an adaptation made on account of the general evolution of the economic and social situation or if it results from variations in the exchange rate.

*1 Original language: English.