OPINION OF ADVOCATE GENERAL

delivered on 14 May 1996 (*1)

1.The preliminary questions on which the Court is to give a ruling in this case have been submitted by the Hessischer Verwaltungsgerichtshof (Higher Administrative Court, Hessen) to enable it to give a decision in the proceedings brought before it by Siegfried Otte against the Federal Republic of Germany, represented by the Bundesamt für Wirtschaft (Federal Office of Economic Affairs, hereinafter ‘the Bundesamt’).

2.From the documents before the Court, it appears that Mr Otte, who has possessed Netherlands nationality since 1981, is a migrant worker who was employed for long periods in the German mining sector. He was born on 3 January 1930; he was insured in Germany under the miners' sickness and invalidity insurance scheme from August 1948 to December 1958, and from December 1979 until he was laid off in 1987. From January 1959 to July 1968 he was insured in Germany under the general scheme for employees, and from August 1968 to November 1979 he was insured under the Netherlands general social security scheme.

3.In February 1988, Mr Otte applied for a benefit available, under certain regulations governing the adaptation allowance (Anpassungsgeld), (1) for workers in the mining sector, adopted by the Federal Ministry of the Economy on 13 December 1971, as in force on 16 June 1983. On 15 January 1988, Mr Otte had started receiving an invalidity pension from the Netherlands general social security scheme, by virtue of the Wet arbeidsongeschiktheid (Netherlands law on incapacity for work, hereinafter ‘the WAO’), a fact which Mr Otte did not mention when applying for the German adaptation allowance. He stated in his application that, as from 1 March 1988, he would receive, under the German Law governing the Mineworkers' Insurance Fund (Reichsknappschaftsgesetz, hereinafter ‘RKG’), a pension for reduction of capacity to work as a miner (Bergmannsrente) or, which comes to the same thing, an invalidity pension.

4.By decision of 29 August 1988, the Bundesamt fixed the amount of the adaptation allowance as DM 2604 per month. In making the calculation, applying mutatis mutandis the rules for calculation of miners' retirement pensions, the Bundesamt took into account not only his contribution periods in Germany but also his duly proved period of insurance in the Netherlands of 138 months. From that amount, the Bundesamt deducted DM 635 per month corresponding to the miners' invalidity pension granted by Germany, so that the sum payable by it by way of adaptation allowance became DM 1 969.

5.In May 1989, on learning that Mr Otte was in receipt of a Netherlands invalidity pension, the Bundesamt reduced the amount of the adaptation allowance, deducting the amount of the Netherlands pension, and at the same time called on Mr Otte to reimburse the sums unduly paid. Mr Otte's entitlement to the adaptation allowance expired on 31 January 1990, when he attained the age of 60. On the following day, his German miners' invalidity pension was converted into a retirement pension.

6.He appealed against the Bundesamts decision deducting the amount of the Netherlands invalidity pension from the German adaptation allowance and against the decision requiring reimbursement of sums unduly paid. In January 1992, the Verwaltungsgericht dismissed the appeal, considering both decisions to be lawful, in that the Netherlands invalidity pension should be treated, for such purposes, in the same way as the German occupational incapacity pension. Furthermore, if, both for determining entitlement to the adaptation allowance and for calculation of its amount, account is taken for the benefit of the recipient of insurance periods completed abroad, the foreign benefits granted on the basis of the insurance periods taken into account should, in turn, be deducted. Otherwise, there would be a duplication of benefit for the periods completed abroad.

7.Mr Otte appealed against that judgment to the Hessischer Verwaltungsgerichtshof. He contended that the calculation method applied by the respondent was contrary to Article 51 of the EC Treaty, since his benefit was lower than the benefit he would have received if he had been retired, since in the latter case he would receive at the same time the benefits calculated by reference to the contribution periods in the different Member States, without any reduction at all. The respondent considers that the lower court correctly decided that the adaptation allowance constitutes a pre-retirement pension (2) which, by contrast with other pensions, is not based on contribution periods but is a State subsidy falling outside the substantive scope of the Community social security regulations.

8.In order to give judgment on the appeal, the Hessischer Verwaltungsgerichtshof has referred the following questions to the Court of Justice for a preliminary ruling:

‘(1) Are Article 4(1) and (2), and in particular Article 4(1 )(c), of Regulation (EEC) No 1408/71 of the Council 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, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6), to be interpreted as also applying to benefits granted by a Member State in the form of a national subsidy upon application and without legal entitlement (in this case in accordance with the Guidelines on the Granting of Adaptation Allowance to Employees in the Coal-Mining Industry) to older employees in the coal-mining industry laid off as a result of closure or rationalization measures?','prefix':'(1)','indentation':2,

(2)If the answer is in the affirmative: Does Article 4(1 )(c) of Regulation (EEC) No 1408/71 require the national subsidy granted by the Member State to be assessed in accordance with Article 46 of Regulation (EEC) No 1408/71, having regard to Article 46(2)(b) in particular?

(3)If the national subsidy granted by the Member State is to be assessed in accordance with Article 46 of Regulation (EEC) No 1408/71: Does the first sentence of Article 12(2) of Regulation (EEC) No 1408/71 permit a pension, within the meaning of Article 1(t) of Regulation (EEC) No 1408/71, paid by another Member State (in this case the Netherlands WAO pension) to be deducted, or does the second sentence of Article 12(2) of Regulation (EEC) No 1408/71 preclude such deduction?

(4) If a deduction in accordance with the first sentence of Article 12(2) of Regulation (EEC) No 1408/71 is permissible: Is such deduction limited by Article 7(1 )(b) of Regulation (EEC) No 574/72 of the Council of 21 March 1972 laying down the procedure for implementing Regulation (EEC) No 1408/71, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983?','prefix':'(4)','indentation':2,

The Community provisions

9.Regulation (EEC) No 1408/71 of the Council 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, as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (3) (hereinafter ‘Regulation No 1408/71’), provides, in Article 1: ‘For the purpose of this regulation: ...’

(t) “benefits” and “pensions” mean all benefits and pensions, including all elements thereof payable out of public funds, revalorization increases and supplementary allowances, subject to the provisions of Title III, as also lump-sum benefits which may be paid in lieu of pensions, and payments made by way of reimbursement of contributions;

10.The matters covered by the Regulation are laid down in Article 4, pursuant to which: ‘1. This regulation shall apply to all legislation concerning the following branches of social security:

(a)sickness and maternity benefits;

(b)invalidity benefits, including those intended for the maintenance or improvement of earning capacity;

(c)old-age benefits;

(d)survivors' benefits;

(e)benefits in respect of accidents at work and occupational diseases;

(f)death grants;

(g)unemployment benefits;

(h) family benefits.','prefix':'(h)','indentation':2,

Article 12(2) of Regulation No 1408/71 provides: ‘The provisions of the legislation of a Member State for reduction, suspension or withdrawal of benefit in cases of overlapping with other social security benefits or other income may be invoked even though the right to such benefits was acquired under the legislation of another Member State or such income arises in the territory of another Member State. However, this provision shall not apply when the person concerned receives benefits of the same kind in respect of invalidity, old age, death (pensions) or occupational disease which are awarded by the institutions of two or more Member States in accordance with Articles 46, 50 and 51 or Article 60(1)(b).’

11.Pursuant to Article 46 ‘Award of benefits 1. Where an employed or self-employed person has been subject to the legislation of a Member State and where the conditions for entitlement to benefit have been satisfied, without application of the provisions of Article 45 and/or Article 40(3) being necessary, the competent institution of that Member State shall, in accordance with the legislation which it administers, determine the amount of benefit corresponding to the total length of the periods of insurance to be taken into account in pursuance of such legislation. This institution shall also calculate the amount of benefit which would be obtained by applying the rules laid down in paragraph 2(a) and (b). Only the higher of these two amounts shall be taken into consideration.

(a)the institution shall calculate the theoretical amount of benefit that the person concerned could claim if all the periods of insurance or residence completed under the legislation of the Member States to which the employed or self-employed person has been subject had been completed in the Member State in question and under the legislation administered by it on the date the benefit is awarded. If, under that legislation, the amount of the benefit does not depend on the length of the periods completed then that amount shall be taken as the theoretical amount referred to in this subparagraph;

(b)the institution shall then establish the actual amount of the benefit on the basis of the theoretical amount referred to in the preceding subparagraph, and in the ratio which the length of the periods of insurance or residence completed before the risk materializes under the legislation administered by that institution bears to the total length of the periods of insurance and residence completed under the legislations of all the Member States concerned before the risk materialized;

3. The person concerned shall be entitled to the total sum of the benefits calculated in accordance with the provisions of paragraphs 1 and 2, within the limit of the highest theoretical amount of benefits calculated according to paragraph 2(a). Where the amount referred to in the preceding subparagraph is exceeded, any institution applying paragraph 1 shall adjust its benefit by an amount corresponding to the proportion which the amount of the benefit concerned bears to the total of the benefits determined in accordance with the provisions of paragraph 1.

12.For its part, Article 7 of Regulation (EEC) No 574/72 of the Council of 21 March 1972 laying down the procedure for implementing Regulation No 1408/71, as amended and updated by Regulation (EEC) No 2001/83 (4) (hereinafter ‘Regulation No 574/72’), provides, with regard to Article 12 of Regulation No 1408/71: ‘General rules for the implementation of provisions dealing with the prevention of overlapping of benefits — Application of those provisions to benefits in respect of invalidity, old age and death (pensions) 1. Where a person entitled to a benefit due under the legislation of one Member State is also entitled to benefits under the legislation of one or more of the other Member States, the following rules shall apply:

(a)if the application of Article 12(2) or (3) of the Regulation entails the reduction or the concurrent suspension of those benefits, none of them may be reduced or suspended by an amount greater than the amount obtained by dividing the sum which is subject to reduction or suspension under the legislation under which the benefit is due by the number of benefits subject to reduction or suspension to which the person concerned is entitled;

(b)as regards benefits in respect of invalidity, old age or death (pensions) awarded under Article 46(2) of the Regulation by the institution of a Member State, that institution shall take into account any benefits of a different kind and any income or remuneration likely to entail the reduction or suspension of the benefit due from that institution, not for the calculation of the theoretical amount referred to in Article 46(2)(a) of the Regulation but exclusively for the reduction or suspension of the amount referred to in Article 46(2)(b) of the Regulation. However, only a fraction of the total amount of such benefit, income or remuneration shall be taken into account, and that fraction shall be determined in proportion to the duration of the insurance periods completed, in accordance with Article 46(2)(b) of the Regulation;

(c)as regards benefits in respect of invalidity, old age or death (pensions) awarded under the first subparagraph of Article 46(1) of the Regulation by the institution of a Member State, that institution shall, where the provisions of Article 46(3) of the Regulation apply, take into account any benefits of a different kind and any income or remuneration likely to entail the reduction or suspension of the benefit due from that institution, not for the calculation of the amount referred to in Article 46(1) of the Regulation, but exclusively for the reduction or suspension of the amount resulting from the application of Article 46(3) of the Regulation. However, only a fraction of the amount of those benefits, income or remuneration shall be taken into account; such fraction shall be obtained by applying to that amount a coefficient equal to the ratio between the amount of benefit resulting from the application of Article 46(3) of the Regulation and the amount resulting from the application of the first subparagraph of article 46(1) of the Regulation.

The national provisions

13.The provisions governing the adaptation allowance appear in guidelines adopted by the Federal Ministry of the Economy on the granting of the adaptation allowance to employees in the coal mining industry of 13 December 1971 (5) and 22 September 1988. (6)

Paragraphs 3 and 4 of the 1971 guidelines, as in force from 1983, provide as follows:

‘Paragraph 3

An adaptation allowance may be granted only if the worker

(a) the miners' retirement pension (Paragraph 48(1) of the Reichknappschaftsgesetz (RKG) [Law governing the Mineworkers' Insurance Fund]),

(b) the miners' retirement pension following a period of unemployment (Paragraph 48(2) of the RKG),

(c) the miners' retirement pension for miners who have completed a specified length of service (Paragraph 48(1), point 2, of the RKG),

(d) the miners' retirement pension under Paragraph 48(3) or (5) of the RKG

(e) the compensatory benefit for miners (Paragraph 98a of the RKG),

3. in the cases covered by 2(a), (b) and (d), has completed, when he is laid off, an insurance period of at least 180 calendar months, and

The undertaking's social redeployment scheme under which the worker is laid off must have been drawn up in concert with the Federal Minister of the Economy ...

Paragraph 4

(1) the compensatory benefit for miners in the cases provided for by paragraph 3, point 2(e), and

(2) the miners' retirement pension in the other cases provided for in paragraph 3, point 2,

taking account of the rights acquired by the worker for the purposes of the miners' retirement pension, on termination of employment. In the cases provided for under (a), (b) and (d) of paragraph 3, point 2, for calculation of the adaptation allowance account shall also be taken of the rights acquired for the purposes of the retirement pension under the general scheme for employees ...

3. ...

In 1988, new rules adopted by the Federal Ministry of the Economy on the granting of an adaptation allowance for workers in the mining industry came into force, repealing the earlier guidelines. Paragraphs 3 and 4 of the new guidelines provide as follows:

‘3. Conditions for award of the allowance

An adaptation allowance may be granted only if the worker:

3.1 was laid off before 1 January 1995 for reasons not attributable to him;

3.1.1 would, if he had retained the post which he held in the undertaking until that time, have fulfilled, within a period not exceeding five years reckoned from the day on which he was laid off, the conditions for entitlement to:

(a) the miners' retirement pension (paragraph 48, point 1, of the RKG),

(b) the miners' retirement pension following a period of unemployment (paragraph 48, point 2, of the RKG),

(c) the miners' retirement pension for miners who have completed a specified length of service (paragraph 48(1), point 2, of the RKG),

(d) the miners' retirement pension under paragraph 48(3) of the RKG,

(e) the miners' retirement pension provided for in paragraph 48(5) of the RKG,

(f) the compensatory benefit for miners (paragraph 98a of the RKG);

3.1.3 in the cases covered by 3.1.2(a), (b) and (d), proves that, when he is laid off, he has paid contributions for at least 180 months and, in the case under (e), at least 60 months, and

3.1.4 has worked without interruption in German mining undertakings or mining brown coal during the two years immediately before he is laid off ...

3.2 The worker may only receive the adaptation allowance if the undertaking mining brown coal takes on a worker previously engaged in the mining of hard coal (Steinkohle) or one from a special mining undertaking.

3.3 The social redeployment plan of the undertaking laying off the worker must have been approved by the Federal Ministry of the Economy ...

The adaptation allowance

(1) the compensatory benefit for miners in the cases covered by 3.1.2(f), or

(2) the miners' retirement pension in the other cases covered by 3.1.2,

the amount of the adaptation allowance shall be calculated taking into account the rights acquired by the worker for the purposes of the miners' retirement pension when he is laid off. In the cases covered by 3.1.2(a), (b), (d) and (e), account shall also be taken, for calculation of the adaptation allowance, of the rights acquired for the purposes of the retirement pension for employees ...

In these proceedings, observations have been submitted by the appellant in the main proceedings, the German State as respondent, and the Commission.

The first question

It seems to me that, by this question, the national court wishes to know whether a benefit such as that received by the appellant from the time he was laid off by a German undertaking in the coal mining sector to the time at which he attained the retirement age for miners must be regarded as a social security benefit within the meaning of Regulation No 1408/71, in other words whether that benefit falls within its substantive scope.

The Hessischer Verwaltungsgerichtshof suggests two possibilities:

— either the adaptation allowance is excluded from the scope of Regulation No 1408/71, in which case it is merely a social advantage within the meaning of Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (7) (hereinafter ‘Regulation No 1612/68’). If that is the case, the appellant would not be the subject of discrimination by virtue of the deduction made, since the benefit he receives under the WAO may be regarded as equivalent to a German invalidity benefit, which, in accordance with domestic legislation, must be taken into account in calculating the amount of the adaptation allowance;

— or else the adaptation allowance must be regarded as falling within the scope of Regulation No 1408/71, in which case it must be calculated having regard to Articles 12 and 46 thereof.

The national court favours the second hypothesis, in view of the essential features of the adaptation allowance. It observes, first, that that benefit, which is limited in time, is intended to ensure a given level of income for older workers who have been laid off as a result of closure or rationalization of a mining undertaking, pending attainment of the age at which they are entitled to receive a compensatory allowance from the miners' insurance fund or an invalidity or retirement pension under the same scheme. Moreover, the periods for which the adaptation allowance is received are treated as periods of unemployment for the purposes of acquiring pension rights.

Secondly, the amount of the benefit is calculated, in accordance with the rules governing the miners' retirement pension, on the basis of the periods of contributions both to that scheme and to the general scheme, until termination of employment. In the national court's view, that adaptation allowance, which is similar to a pre-retirement benefit, could be equated with the old-age benefits referred to in Article 4(1 )(c) of Regulation No 1408/71, since the essential conditions for grant of the benefit are based on periods of membership of a social security scheme intended to cover a particular risk, and the fact that the benefit is granted out of public funds on the basis of regulations rather than legal provisions does not represent an obstacle in that regard. Even where, it adds, the decision to grant an adaptation allowance is discretionary, workers in mining undertakings who fulfil the conditions for that benefit enjoy, by virtue of the German Basic Law, the right to equal treatment, within the budgetary resources of the federal authorities and of each of the Länder concerned.

The national court concludes by pointing out that the adaptation allowance could also be regarded as a non-contributory social security benefit, in accordance with Article 4(2) of Regulation No 1408/71. In that case, it would be a kind of pre-retirement pension covering the periods for which a worker over a particular age would otherwise be regarded as unemployed. Since the requirements for its grant and the method of calculating it are based on the RKG, it would be classifiable as a retirement pension rather than an unemployment benefit within the meaning of Article 4(1 )(g) of Regulation No 1408/71.

The appellant in the main proceedings considers that the adaptation allowance serves the purpose of guaranteeing older workers deprived of their usual job as a consequence of closure or rationalization of a mining undertaking a certain level of income pending acquisition of the right to a retirement pension. In fact, it is a bridging benefit, limited in time, the amount of which is calculated by applying the same provisions as for the retirement pension and taking into account for that purpose the insurance periods completed in another Member State. It is also a benefit financed out of public funds, the grant of which is within the discretion of the authorities, but to which all mining workers who fulfil specified requirements are entitled, within the budgetary resources of the federal authorities and of each of the Länder concerned.

He concludes, with respect to the first question, that the adaptation allowance forms part of a non-contributory social security scheme for the purposes of Article 4(2) of Regulation No 1408/71, linked to one of the risks exhaustively listed in Article 4(1) — specifically sub-subparagraph (g) — which refers to unemployment benefits, and proposes that the Court of Justice answer the question from the national court to the effect that parts Article 4(1) and (2) of Regulation No 1408/71 must be interpreted as including the benefits granted in Germany in the form of subsidies, in accordance with the regulations governing the award of the adaptation allowance to older workers in coal mines who are laid off as a result of closure or rationalization measures.

The German Government on the other hand is of the opinion that the adaptation allowance in question is not a social security benefit covered by Article 4(1) of Regulation No 1408/71. It puts various reasons forward for that view:

First, Regulation No 1408/71 only applies to legislation governing the branches of social security exhaustively listed in Article 4(1), so that any not included on that list is excluded from its substantive scope, however much it confers on the recipients a legally defined position conferring entitlement to the award of a benefit.

Secondly, when notifying, in accordance with Article 5 of Regulation No 1408/71, the legislation and schemes covered by Article 4(1), (8) Germany did not mention the regulations governing award of the adaptation allowance for coal miners.

Thirdly, it states that both the conditions for its grant and the method for calculating it provide grounds for the view that it is a preretirement benefit, the purpose of which is to cover the period of time until the worker is entitled to a retirement pension, adding that, according to the case-law of the Court of Justice, benefits of that kind are excluded from the scope of Regulation No 1408/71. Moreover, the adaptation allowance, of which the duration is limited in time and the raison d'être is closely linked with the present economic situation, cannot simply be treated as if it were a retirement pension within the meaning of the regulation. Whilst eligibility for a retirement pension depends solely on the circumstances of the recipient, namely attainment of a particular age, completion of the minimum contribution period and the fact of having retired, the grant of an adaptation allowance is essentially dependent on a condition outside the control of the recipient, namely his being laid off as a result of closure or rationalization measures. Moreover, the allowance in question cannot be regarded as a retirement pension since the periods in which it is received are taken into account for the purposes of entitlement to such a pension and determination of its amount.

Fourthly, the adaptation allowance cannot be treated as if it were unemployment benefit. Receipt of unemployment benefit carries with it the obligation for the worker to register with the appropriate employment centre and be available to accept any work which is offered and is suitable to his circumstances, whereas the recipient of the adaptation allowance is exempted from that requirement.

Finally, the German Government adds that if Regulation No 1408/71 were applied to the adaptation allowance, its amount would be calculated irrespective of whether or not the recipient was entitled to pensions in other Member States. In the present case, since Mr Otte has already become entitled to a Netherlands invalidity pension, that calculation would have positive repercussions, since the total figure would be higher. However, if it is borne in mind that most workers, when awarded an adaptation allowance, do not meet all the prescribed conditions for entitlement at the same time to a pension in another Member State, that is clearly an exceptional result. In accordance with the practice followed by the German administration, workers receive a benefit whose amount is increased as a result of the contribution periods in other Member States being taken into account for that purpose. If Regulation No 1408/71 were applied, they would only receive part of the possible allowance, which would be calculated either by taking account only of the contribution period in Germany or else by applying pro rata rules, resulting in failure to achieve the aim pursued, which is to provide workers laid off following closure or rationalization measures with sufficient financial resources until they become entitled to a retirement pension.

Before opening the oral procedure, the Court invited the German Government to explain a number of details concerning the benefit, namely: the way in which it is calculated, the financial involvement of the undertaking in determining its amount and the content of the redeployment plan agreed between the undertakings and the German authorities.

In its reply, the German Government stated that Mr Otte's allowance was calculated, initially, in accordance with the guidelines adopted in 1971, as in force in 1983. When it was subsequently recalculated, the new rules adopted in 1988 were applied. Regarding the calculation method, it stated that the allowance was determined by applying the rules governing retirement and invalidity insurance for miners and is paid like a pension, but that the amount is not charged to that insurance, being instead funded out of taxes. Account is taken of contribution periods in other Member States both in verifying whether the recipient meets the requirements for its grant and for determining the amount of the benefit and, if the recipient has also acquired entitlement to other benefits in Germany or in another Member State, the amount thereof is deducted from the German adaptation allowance, in order to ensure that there is no duplication of benefits for the same insurance period.

It explained that undertakings have no financial involvement whatsoever either in determining or in calculating the amount of the adaptation allowance but merely pay, where appropriate, a severance allowance.

It confirmed that the adaptation allowance serves a structural and employment-policy objective, since it is linked to a condition outside the control of the beneficiary, namely his cessation of employment as a result of closure or rationalization measures and that, in the case of workers in a company producing brown coal, that company is also required to recruit, in exchange, workers from mines producing hard coal or special mining companies.

Having suggested that the first preliminary question be answered in the negative, the German Government considers that it is unnecessary to answer the other three.

The Commission considers, first, whether the guidelines for grant of the adaptation allowance can be regarded as ‘legislation’ for the purposes of Regulation No 1408/71. It observes that, according to the case-law of the Court of Justice, the definition in Article 1(j) of that regulation is extremely broad, extending to all kinds of laws, regulations and other provisions relating to the branches and schemes of social security covered by Article 4(1) and (2), (9) only provisions of agreements being excluded. Since the German provisions were adopted by the federal administration, they are of an administrative nature and must be regarded as ‘legislation’ for the purposes of Regulation No 1408/71.

It then considers whether the benefit in question constitutes social assistance, by virtue of the fact that it is awarded on a discretionary basis by the administration, this being one of the criteria which, according to the case-law of the Court of Justice, characterize a benefit of that kind. (10) However, in the case of the adaptation allowance, the awarding authority does not enjoy unfettered discretion, since every worker who meets the requirements is entitled to receive it, provided that the budgetary resources for the time being so allow. Moreover, both a refusal and the calculation of the amount are open to appeal.

The grant of an allowance according to the personal needs of the beneficiary is another decisive criterion for defining a social assistance benefit. However, it is not a precondition for award of the adaptation allowance that the personal needs of the person concerned be considered individually. The Commission therefore concludes that the adaptation allowance must not be regarded as a social assistance benefit.

Thirdly, it states that the fact that the adaptation allowance is classified as a ‘subsidy’ under German law is not decisive in determining whether or not it falls within the scope of Regulation No 1408/71 since, as is apparent from the case-law of the Court, the decisive factor is the objective served by the benefit. (11)

Finally, the Commission states that the benefit in question could be regarded as a preretirement pension and considers the possibility of the application to it of Regulation No 1408/71, despite the fact that it is as yet not covered by it as such. (12) It points out that, until such time as a provision has been adopted governing pre-retirement benefits, in accordance with the case-law of the Court Regulation No 1408/71 may be applied to them if they relate to any of the risks expressly listed in Article 4(1). (13) In that regard, it states that there are two possibilities: to regard the adaptation allowance as similar to a retirement pension or to equate it with an unemployment benefit:

there are, of course, reasons for considering that the adaptation allowance is very similar to an unemployment benefit: it is granted to a worker for loss of employment, it is received for a limited period, the period for which it is received is taken into account for the acquisition of entitlement to a retirement pension, and the fact that the beneficiary is not obliged to make himself available to the employment services is not decisive for the purposes of determining whether or not it is to be regarded as a benefit of that nature, since long-term unemployed may also receive allowances, without having to be available on the labour market;

it considers, however, that the decisive criterion for determining to which risk the benefit in question might be linked is the way in which it is calculated. In the case of the adaptation allowance, the national legislation governing calculation of the retirement pension applies by analogy and account is taken not of the income for the last period worked, as would be the case for an unemployment benefit, but of the contribution periods for a retirement pension, including periods in another Member State.

The Commission reaches the conclusion that the adaptation allowance is sufficiently linked with one of the risks referred to in Article 4(1) of Regulation No 1408/71 and that there are grounds for considering that it is a benefit closer to a retirement pension than to an unemployment benefit. Accordingly, it suggests that the Court say in reply to the first question that Article 4(1) and (2) and, more specifically, Article 4(1)(c) must be interpreted as applying also to benefits which a Member State grants in the form of a national non-compulsory subsidy at the request of workers who have attained a specified age and have been laid off by a company in the mining sector as a result of closure or rationalization measures.

The issue is in fact whether or not Regulation No 1408/71 must be applied to an adaptation allowance of the kind in question. The consequences for the beneficiaries will differ considerably, as both the national court and the German Government indicate, and as I shall have occasion to demonstrate below.

The German Government states in its observations that, when it made the declaration provided for in Article 5 of Regulation No 1408/71, it did not mention the guidelines governing the adaptation allowance. The said Article 5 provides that the Member States are to indicate, by means of a declaration to be notified to the President of the Council and published in the Official Journal of the European Communities, the scope of the regulation, specifying the national legislation and schemes referred to in Article 4(1) and (2).

However, that statement is not relevant to deciding whether or not the adaptation allowance must be regarded as a social security benefit for the purposes of the Community legislation. As the Court of Justice has held on many occasions, the fact that a Member State has not mentioned a law in that declaration does not ipso facto remove that law from the scope of Regulation No 1408/71. (14)

This Court has had to decide, fairly frequently, whether a specific, but not easily classifiable, benefit granted by one of the Member States should be regarded as a social security benefit within the meaning of the regulation. As a result, there is well-known case-law on the point.

In the first place, there are specific types of regime which, for various reasons, are excluded from the scope of Regulation No 1408/71. They are, pursuant to Article 4(4), social and medical systems, benefit schemes for victims of war or its consequences and special schemes for civil servants and persons treated as such.

It is clear that the adaptation allowance received by Mr Otte was not medical assistance, that he did not receive it under a scheme for victims of war and that he is not a member of a civil service scheme. It remains to be seen whether it constituted social assistance.

The Court of Justice has clarified the requirements for a benefit to be classifiable as social assistance. Thus, in its judgment in Case 39/74, (15) it considered that, although by virtue of some of its features, the specific legislation of a Member State concerning the grant of benefits to handicapped people is akin to social assistance, especially when need is the essential criterion in its implementation and there are no conditions as to periods of employment, membership or contributions, it is nevertheless within the sphere of social security to the extent to which, departing from the consideration of each case on its merits — a characteristic feature of assistance — it confers upon beneficiaries a legally defined position. The discretion of the authorities in granting a particular benefit is another criterion to be applied in deciding whether a benefit falls within the sphere of social security or that of social assistance. (16) The Court held on that occasion that the benefits in question were not within the sphere of social security, inter alia because they were granted on a discretionary basis as far as nationals residing abroad were concerned.

In view of the fact that the legislation governing award of the adaptation allowance requires a minimum contribution period and takes no account of the needs of the beneficiary and that the condition regarding availability of budgetary resources cannot be assimilated to a discretion on the part of the administration, it is clear that the benefit in question does not constitute social assistance.

However, that does not mean that it must therefore be regarded as coming within the concept of social security for the purposes of Regulation No 1408/71. As the Court has held in a number of decisions, the distinction between benefits which are excluded from the scope of the regulation and benefits which come within it rests entirely on the factors relating to each benefit, in particular its purpose and the conditions for its grant, and not on whether the national legislation describes the benefit as a social security benefit or not. In order to fall within the field of social security covered by Regulation No 1408/71, legislation must in any event satisfy, in particular, the condition of covering one of the risks expressly specified in Article 4(1). It follows that that list is exhaustive and therefore a branch of social security not mentioned in it does not fall within that category for the purposes of Regulation No 1408/71, even if it confers upon individuals a legally defined position entitling them to a benefit. (17)

From a simple reading of Article 4(1), it is apparent that adaptation allowances are not listed as such. Consequently, it will be necessary to see whether, on examination of its characteristics, and, in particular, its purpose and the requirements for its grant, that benefit may possibly be sufficiently closely linked with one of the risks contained in that list, which, in this case, are limited to two: retirement benefits and unemployment benefits, referred to in Article 4(1)(c) and (g) respectively.

From the documents before the Court, it appears that the features of the adaptation allowance are as follows:

it is a benefit available to workers in a specific mining sector,

who have reached a certain age but who are not yet entitled to a retirement pension, and

have been laid off as a result of a plan for redeployment of the workforce of an undertaking, which must have been approved by the Federal Ministry of the Economy;

it is a benefit granted for a limited period, available between cessation of employment and attainment of retirement age, subject to a maximum of five years;

it is a ‘bridging’ benefit intended to ensure a certain level of income for laid-off workers until they become entitled to a retirement pension;

the periods when the benefit is received are taken into account for the purposes of acquisition of the right to a retirement pension and determination, in due course, of its amount;

the amount of the benefit is determined by applying the rules governing invalidity and retirement insurance for miners, by reference to the rights accrued upon cessation of employment,

account is taken of contribution periods for pensions under the general scheme for employees, and of contribution periods under social security schemes in other Member States, both to verify whether the requirements for its award are met and to establish its amount,

the amount of any other pensions received in Germany or in other Member States is deducted from it in order to ensure that there is no duplication of benefits for the same insurance period;

it is paid out of public funds, not from retirement pension insurance;

its award is a matter of discretion for the authorities — however, that discretion is limited to the budgetary resources of the federal administration and of each Land concerned;