A group of British steel workers who lost their pensions seem unlikely to be awarded compensation by the European Court of Justice (ECJ).The court’s Advocate General has said the UK is not obliged to make good their pension losses.

About 1,000 staff at ASW in Cardiff and Sheerness lost most of their pension savings when it went bust in 2002.

The workers had argued that the UK government failed to adopt properly an EU directive to protect pension funds.

The trade unions Community and Amicus took the workers’ case for compensation to the High Court last year, which referred the issue to the European Court of Justice.

The unions have argued that the government should pay up because it had not properly incorporated into UK law an EU directive first issued in 1980.

This was designed to protect employees’ pensions if their employer went bust.

Advocate’s opinion

The Advocate, Juliane Kokott, agreed that the directive required full protection of pension benefits and that the UK government had failed to bring about a proper level of protection.

But she said the law did not impose an obligation on the UK government to dip into its own pockets.

“Member states cannot incur liability under the Directive in respect of shortfalls in benefits that have not been adequately secured,” she said.

“Member states are therefore not required to step in as ultimate guarantors and are thus not themselves obliged to pay pension benefits,” she added.

An Advocate General gives independent legal advice and opinion to the ECJ.

This is usually a good indication of the court’s eventual decision, which is expected in a few month’s time.

In principle EU governments could be told to pay compensation to individuals if they have breached community law.

But in this case the advocate said it was doubtful that the breach was sufficiently serious as the UK government had in fact taken some measures to adopt the EU directive.

She referred that point back to the High Court.

Continued claim

Despite the Advocate’s opinion, a spokesman for the unions said they would still pursue their case.

“We are delighted that the Advocate General has said that article 8 of the Insolvency Directive is clear and means what we have always said.

“ASW pension scheme members should have had 100% of their expected pension benefits protected,” he said.

“Given all the evidence that we have - which was not presented to the ECJ - that the UK Government was aware of what the directive required and yet failed to take the necessary action, we hope that the High Court will find in our favour.”

Despite this set back for the former steel workers, the recently expanded Financial Assistance Scheme will now give some compensation to about a third of the members of the two ASW pension schemes.

Ombudsman

In March this year, the UK government rejected a recommendation of the Parliamentary Ombudsman, Ann Abraham, that it should compensate about 85,000 people who lost all or part of their pensions when their schemes collapsed between 1997 and 2005.

She said the government had been guilty of maladministration because it had published misleading information about the underlying security of occupational pension schemes and had weakened a solvency standard for pension funds.

The government denied it had done anything wrong and said it rejected the Ombudsman’s ruling because there was no clear link between the alleged maladministration and the losses that had been suffered by pensions scheme members.