Year: 2009 (Date of Decision: 21 December, 2009)

Forum, Country: Constitutional Court; Latvia

Standards, Rights: Proportionality; Legitimate expectations; Right to social security

Summary Background: This case challenged the constitutionality of State pension law that temporarily restricted payment of pension funds to reduce the State’s budget deficit. The Parliament in response said that it was necessary as a step to effectively contain the country’s escalating financial crisis.

Holding: Based on the Constitutional mandate to harmonize human rights provisions within the Constitution with the international human rights regime, the Court cited article

Reaffirming its earlier case law, the Court stated that the principle of proportionality prescribes that, in cases where a public authority restricts the rights and lawful interests of persons, a reasonable degree of proportionality between the interests of persons and the interests of the State or society should be attained. To determine whether a legal provision adopted by the legislature satisfies the principle of proportionality, one should clarify 1) whether the means used by the legislature are appropriate for achieving the legitimate end; 2) whether such an action is indispensable, i.e. the end cannot be achieved by other means, namely less restrictive alternatives; and 3) whether the benefit for society will be more significant than the detriment to the rights of individual persons. If, while assessing a legal provision, it can be established that it does not comply with at least one of these criteria, it follows that the legal provision in question does not comply with the principle of proportionality and therefore is unlawful [para. 28]. The law failed the proportionality test because Parliament had not considered other less restrictive alternatives. Thus the new pension law provisions were held to be in violation of article 109, of an individual’s right to pension [paras. 30-30.2.1.].

The Court also held that the provisions violated the principle of legitimate expectations as protected by article 1 of the Constitution. This principle requires the State, when it alters the existing legal order, to maintain a reasonable balance between a person’s confidence in the currently effective legal order and those interests for the sake of which changes are being made.

The court held that in determining whether an appropriate balance has been struck, consideration should be given to whether the planned transition to the new legal order is sufficiently lenient and whether there has been an adequate transition period or granting compensation. Both these conditions were not met in this case where the transition was exceedingly rushed and there was no plan for future compensation of the reduced pensions [para. 32].

In reaching its overall conclusions in this case, the Court, citing the Limburg Principles, its own prior jurisprudence and the General Comment 19, considered that minimum essential levels must be guaranteed irrespective of resources and vulnerable groups such as pensioners must be particularly protected [paras. 28-31.2].

In addition and in response to the State’s reference to obligations under international loan agreements as a factor underlying the pension cuts, the Court ascertained that it was actually the Cabinet of Ministers who had proposed reductions of pension funds. But even if these conditions have been explicitly imposed by the creditors, the Court stated that conditions “cannot replace the rights established by the Constitution.” The Court held that international commitments assumed by the Cabinet of Ministers cannot by themselves serve as a basis for the restriction of the fundamental right to social security [para. 30.1].

Also important to note is that in analyzing compliance of the State to its human rights obligations, the Court held that the State has a threefold duty in the area of each fundamental right, namely to respect, protect and guarantee the rights of persons. Acting in conformity with human rights, States thus should enact a range of measures – both passive, for example noninterference with rights, as well as active, for example fulfilling people’s individual needs [para. 24].

In conclusion, the Court ordered that since the challenged pension provisions have been found unconstitutional and invalid, that the pension cuts must be discontinued and that the Parliament had to establish a reimbursement procedure for deductions already made [The Ruling Part at the end of the Decision, paras. 1-3].

Additional Comments: Given that social security systems in different countries are facing budget cuts and austerity measures in the wake of global financial crisis, this is an important case that elevates human rights considerations in the context of public policy decision making.

Link to Full Case: http://www.satv.tiesa.gov.lv/upload/Judgment%202009-43.htm