In a judgment issued today the Court of Justice of the EU held that Article 49 TFEU (freedom of establishment) limited the ability of the UK, in its insolvency rules, to give less favourable treatment to a bankrupt’s pension in a scheme registered in another Member State than it would have given had the pension been in an equivalent UK pension scheme.
The case concerned an Irish property developer, Mr M, who had put assets into an Irish pension scheme approved under Irish tax law. Subsequently, he moved to the UK to start a self-employment as a business consultant. He was then made bankrupt in the UK. The trustees in bankruptcy claimed that the assets in the Irish scheme formed part of the bankruptcy estate. However, UK insolvency law generally excludes assets in a UK pension scheme registered with HMRC from the bankruptcy estate. Mr M argued that Article 49 of the Treaty on the Functioning of the EU required his Irish pension assets to be treated in the same way as if they were in a registered UK scheme. The trustees in bankruptcy argued that Article 49 did not apply. In January 2020, the High Court referred that question to the CJEU (here). It added that, if Article 49 did apply, it would be possible to “read down” the relevant statutory provisions so that the general exclusion for pension assets in UK schemes registered with HMRC also applied to equivalent schemes in other Member States.
In today’s ruling, the CJEU agreed with Mr M that Article 49 applied and that, unless there was a justification for the difference of treatment (a point not taken by the trustees before the High Court, and as to which the Court saw a number of significant difficulties) then Article 49 precluded the difference in treatment between Mr M’s assets in hisIrish pension scheme and assets in an equivalent UK scheme.
This reference was made before the end of the transition period on 31 December 2020: under Article 86 of the Withdrawal Agreement the Court of Justice of the EU continues to have jurisdiction to rule on references from UK courts made that date, and the ruling is binding on the UK.
George Peretz QC acted for Mr M in the High Court and in the Court of Justice of the EU.