State cut pension for retired aviation workers to avoid ‘unrest’, High Court told
Fund had deficit of €770m prior to sale of 25% stake
The Four Courts Monday January 28 2008File photos from the Four Courts for Law Matters . Photograph: Bryan O’Brien
The State used a law to cut payments to retired aviation workers to help address a €770 million pension fund deficit and avoid industrial unrest among existing workers before the sell off of Aer Lingus in 2014/15, the High Court has been told.
The circumstances of those still at work – active and deferred members of the Irish Airlines Superannuation Scheme (IASS) – “was improved by disimproving the lot of existing pensioners” under the 2014 restructuring of the defined benefit scheme, Paul Gardiner SC said.
The State decided to solve a problem of the €770 million deficit before Aer Lingus was sold to the International Airlines Group (IAG) by imposing the deficit on the existing pensioners because “they weren’t going to go on strike”, he said.
The State had a 25 per cent shareholding in the company and got €335 million from the sale.
Mr Gardiner was opening a test case by four of some 600 retired Aer Lingus and Dublin Airport Authority workers who are suing Ireland and the Attorney General over the restructuring.
They say entitlements were cut in the restructuring to address the airline workers’ pension fund deficit just before the sale of Aer Lingus to IAG.
The defendants oppose the case.
Using the 1998 Air Navigation (Amendment) Act, as amended by the Shannon Airports (Shannon Group) Act 2014, the State was able to present proposals to amend the superannuation scheme for presentation to the Pensions Authority for approval.
Mr Gardiner said this was a “unique” piece of legislation in the history of the State because it targeted a specific group rather than the population in general and interfered with the property rights of people without their consent.
Each of the IASS members had to compulsorily contribute to the scheme while they were working and they had therefore established constitutional property rights, counsel said.
It was a requirement of the scheme and a matter of law that the trustees would administer the pension fund in accordance with the rules of the scheme.
However, the law was changed to allow the State “unlawfully expropriate ten to 20 per cent of the money earned by the pensioners, some of who had paid into it for over 50 years”.
If the Constitution did not protect the citizen in those circumstance, then it was sorely deficient, counsel said. Their case was it was not deficient and the court should find in favour of the pensioners.
Mr Gardiner said his clients’ case was based both on contractual rights and property rights under the Constitution.
In this case, the pension trustees were able to apply to the Pensions Authority to restructure with the “security blanket” of the new law even though the State argued that it could have done so without that law, he said.
The State interfered with a private trust (pension scheme) to avoid industrial unrest and consequent risk to the economy, he said.
Although it received a €335 million “bounty” for the sale of its shares to IAG, the State claims it was not solely motivated by this enhanced value, counsel said.
It claimed that in introducing the legislation, it was part of a “complex social and economic” policy but an analysis of this matter would show that was not the case because it involved targeting a private trust and not the population generally.
Mr Gardiner said the court will first have to decide whether the pensioners are entitled to certain declarations as to whether the legislation used by the State was unconstitutional and in breach of the European Convention on Human Rights. After that, the court would go on to decide whether damages should be awarded.
Separate from the constitutional claim are claims for damages for intentional infliction of economic harm, interference with contractual relations and unjust enrichment by the State.
The case continues before Ms Justice Teresa Pilkington.