The defenestration of Prague

Last week, the ECJ passed an interesting judgment in the case C-343/08 EU Commission vs Czech Republic. The Czech Republic argued that there wasn't any point in transposing a number of provisions of the directive as IORPs were not provided for in the Czech retirement system which only knows the first and the third pillar. The Court however did not share that existentialist line of argument and took the constructivist view that a second pillar may be introduced at any time, in which eventuality the rules required by the directive already need to be in place.

While the Czech position appeals to a layman's common sense rather better than the somewhat fundamentalist approach taken by the Court, one important aspect has escaped IPE's attention: The judgment includes a thinly veiled hint (paragraphs 63, 64) that the Court may find the Czech prohibition on IORP establishment in the country in breach with the Treaties' rules on free circulation. That in itself is a valuable signal.

Pensions in Central & Eastern Europe

Allianz Global Investors has published a 96-pages comprehensive report about the pension systems and markets in Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia, and Slovakia with individual country profiles. This report is very useful due to the changing landscape in that region of the continent, combined with the unconventional pillar terminology utilised.

Discriminatory dividend taxation

The EU Commission has sent letters of formal notice to Italy and Finland about their rules under which dividends paid to foreign pension funds may be taxed more heavily than dividends paid to domestic pension funds. Italy and Finland are asked to reply within two months. These letters constitute the first step of the infringement procedure of Article 226 of the EC Treaty. Similar letters have been sent to the Czech Republic, Denmark, Spain, Lithuania, the Netherlands, Poland, Portugal, Slovenia and Sweden on 7 May.

Commission addresses differential taxation of investment income

Following complaints by the EFRP, the Commission has initiated Treaty infringement proceedings against a number of member states which do not grant the same preferential tax treatment of investment income (interest, dividends) to pension funds resident abroad as domestic funds receive. Even though there is no direct reference to the Pensions Directive in the text, the relevance of this step to an efficient investment regime of cross-border pension funds is obvious. (FT)

EU Commission sues Italy [IT] [CZ] [HU] [PL]

Following action against the UK and Slovenia, the Commission has decided to refer Italy to the European Court of Justice for non-transposition of the Pensions Directive. Apparently Italy has also not responded to the Commission's reasoned opinion - why it has taken the Commission four months longer than in the case of the UK and Slovenia to discover that they had not received a response is not quite clear.

IPE adds, although it is unclear on what source this information is based, that the Commission has sent letters of formal notice to the Czech Republic, Hungary and Poland. At any rate, the latter two countries have not been involved in infringement proceedings regarding the Pensions Directive to date, even though Poland definitely deserves attention as we noted earlier.

Commission takes action

The EU Commission has issued a reasoned opinion against Belgium, Cyprus, Czech Republic, Finland, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom for non- or partial transposition of the Pensions Directive into their national law, thereby capturing all the member states that it has identified earlier for lagging. The next step in the infringement proceedings according to Art. 226 EU Treaty would be court action in front of the ECJ after two months time (via IPE).