1.

Are

“pay” within the meaning of Article 119 of the EEC Treaty?

2.

Are

“remuneration” within the meaning of Article 1 of the Equal Pay Directive?

3.

If the answer to Question 1 or 2 is in the affirmative, does Article 119 of the Treaty or Article 1 of the said Directive, as the case may be, have direct effect in Member States so as to confer enforceable rights upon individuals in the circumstances of the present case?

4.

If the answers to Questions 1 and 2 are in the negative:

Your Lordships observe that those questions make no reference to the 5% salary differential, or to any consequent inequality in redundancy payments, unemployment benefits or mortgage or credit facilities. This Court is not therefore concerned with those matters. The Court of Appeal has clearly taken the view that the outcome of this case depends upon whether or not the provisions of Community law relied on by the applicants apply to retirement benefits schemes of the kind here in question. That, it seems to me, involves a decision by that Court as to the nature of the arrangements from which the relevant discrimination arises. This Court cannot, in my opinion, on a reference under Article 177 of the Treaty, go behind such a decision of the national court. I say that because arguments were addressed to us on those matters.

Two further propositions were, as it seemed to me, clearly established as a result of the argument before this Court. The first is that the concept of equality between men and women cannot be applied to contributions paid by an employer to such a retierement benefits scheme. The reason is that they are global contributions, no particular part of which is attributable to any individual member of the scheme. The second proposition is that that concept cannot be applied to the benefits actually received by members from the scheme. That is because the amount of the benefits to be eventually drawn by a member from the scheme must inevitably depend on factors personal to him or to her, such as the age at which he or she dies, whether he or she leaves a surviving spouse or other dependants, and so forth.

Therefore, as Counsel for the bank submitted, and as I think Counsel for the applicants accepted, the only matter over which equality can be achieved is rights to benerits under the scheme, what Counsel for the bank called “identity of scheme terms”.

So, in my opinion, the first point for consideration is whether Article 119 of the Treaty, taken by itself, requires a pension scheme of the kind here in question to confer the same rights on a man and on a woman, and whether, if so, Article 119 has in that respect direct effect, in the sense of conferring on individuals such as the applicants rights enforceable in the courts of Members States. I take those questions together because, manifestly, even if rights to benefits under such a pension scheme are “pay” within the meaning of Article 119, it will avail the applicants nothing if that Article does not, in relation to such rights, have direct effect.

The authorities in this Court about Article 119 do not afford clear answers to those questions.

From the judgment in Case 90/70, the first Defirenne case [1971] 1 ECR 445, one can deduce that, whilst pension rights may constitute “pay” as defined by Article 119, that concept does not include rights under social security schemes established by legislation and partly financed from public funds, whether they be established for the benefit of workers generally or for the benefit of special categories of workers. That excludes, of course, from the ambit of Article 119 pension rights under the British State scheme, but it throws little further light on the problem. The opinion of Mr Advocate General Dutheillet de Lamothe in that case affords some additional help. He too thought that schemes established by national social security legislation, whether general or special, were outside the scope of Article 119. He thought on the other hand that retirement pensions paid directly by an employer to his former employees — sometimes called “deferred pay” — were undoubtedly within its scope. He had more hesitation about what he called “supplemental schemes” (“régimes complémentaires”), but came down in favour of the view that Article 119 did apply to them. His description of such schemes would cover the schemes here in question but for one feature of them, their link with the State scheme through the contracting-out system. Mr Advocate General Dutheillet de Lamothe did not consider such a case, presumably because no such system existed at the time in any of the Member States.

From the judgment in Case 43/75, the second Dejrenne case [1976]1 ECR 455, one may deduce three general propositions.

The first had already been briefly stated by Mr Advocate General Dutheillet de Lamothe in the first Dejrenne case. It is that Article 119 has two purposes, first to avoid a situation in which undertakings established in Member States with advanced legislation on the equal treatment of men and women suffer a competitive disadvantage as compared with undertakings established in Member States that have not eliminated discrimination against female workers as regards pay, and secondly to pursue the social objectives of the Community as expressed in the preamble to tne Treaty and in Article 117 of it.

The second general proposition laid down in that judgment is that, having regard to the context in which Article 119 is to be read, in particular that of the improvement of working conditions and of the improvement of the standard of living of workers referred to in Article 117, effect can be given to Article 119 only by “raising the lowest salaries”. The option of lowering the higher ones is not open. (See paragraph 15 of the judgment.)

Thirdly the judgment makes it clear that there is an area within which Article 119 has direct effect and an area within which it does not. As to that the judgment draws a distinction between “direct and overt” discrimination and “indirect and disguised” discrimination. The first can be identified by reference to the simple criteria of “equal pay” and “equal work” that are to be found in Article 119 itself. The second can be identified only by reference to implementing legislation enacted either at Community level or at national level.

I confess that I find the distinction thus made puzzling. I understand, of course, that Article 119 has direct effect in some areas and not in others; that it has direct effect in those areas where a court can apply its provisions by reference to the simple criteria that those provisions themselves lay down; and that it can have no direct effect where implementing legislation is necessary to lay down the relevant criteria. What puzzles me is why the concepts of “direct and overt” discrimination as distinct from “indirect and disguised” discrimination should be relevant in that connexion. We are all familiar with the cases in this Court that establish that covert discrimination is just as much discrimination as overt discrimination: Case 152/73 Sotgiu v Deutsche Bundespost [1974]1 ECR 153, Case 61/77 Commission y Ireland [197S] ECR 417 and Case 237/78 CRAM v Toia [1979] ECR 2645. In none of those cases, however, was it suggested, or could it sensibly have been suggested, that the distinction between overt and covert discrimination affected the question whether the relevant provision of Community law had direct effect or not. In the present case there is nothing indirect, covert or disguised about the different treatment of men and women under Lloyds Bank's pension arrangements. Yet, if such arrangements are within the scope of Article 119, the question manifestly arises whether that difference in treatment is a matter that can be dealt with directly by the courts under Article 119 itself or whether it can be dealt with only on the basis of legislation implementing it. At all events the decision of the Court in the second Defrenne case did not turn on the distinction, which is not mentioned in the actual ruling.

In Case 149/77, the third Defrenne case [1978] ECR 1365, the Court drew the distinction between equal pay, to which Article 119 applies, and the equal treatment of men and women in other respects which is to be achieved pursuant to Articles 117 and 118 of the Treaty. The judgment contains a passage (in paragraph 23) which could even be interpreted as meaning that there is no overlap between the spheres of application of Articles 117 and 118 and the sphere of application of Article 119.

Lastly, in Case 129/79 Macarthysw Smith (27 March 1980, not yet reported) the Court reiterated and further explained the difference between the type of situation in which Article 119 has direct effect and the type of situation where it does not, but again by reference to the test of direct and overt as opposed to indirect and disguised discrimination. No more, however, than in the second Defrenne case, did the decision of the Court turn on that distinction or was it mentioned in the ruling.

I turn to consider the language of Article 119. It is as follows:

“Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work.

For the purpose of this Article, ‘pay’ means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives, directly or indirectly, in respect of his employment from his employer.

Equal pay without discrimination based on sex means :

In my opinion one must not attach too much importance to the precise meaning of the words used in the English text of that Article. As was pointed out by Mr Advocate General Trabucchi in the second Defrenne case [1976]1 ECR 455, at p. 484, Article 119 is the “translation” into Community law of the International Labour Organization's Convention No 100 dated 29 June 1951“concerning equal remuneration for men and women workers for work of equal value”, which all the Member States of the Community have ratified. It is noteworthy that, whilst the French text of Article 119 uses, where the two texts correspond, the same words as Article 1 of the Convention, the English texts use different words. Thus, where the English text of the Convention has “remuneration”, Article 119 has “pay”, and where the English text of the Convention has “any additional emoluments whatsoever payable directly or indirectly, whether in cash or in kind, by the employer to the worker and arising out of the worker's employment”, Article 119 has the phrase that I read a moment ago, which uses the words “consideration” and “in respect of his employment”. “Consideration” has of course a technical meaning in the English law of contract, which it cannot bear here, where the corresponding French word is “avantage”; and an argument was addressed to us on “in respect of his employment” which could hardly have been sustained on “arising out of” his employment or on the French “en raison de l'emploi de ce dernier”.

There are two respects in which the English and French texts of Article 119 both differ from the texts of Convention No 100. One is that in the Convention the definition of “remuneration” is introduced by the word “includes” (“comprend” in French), whereas in Article 119 it is introduced by “means” (“il faut entendre” in French). The other is that the Convention does not contain the tailpiece in Article 119 defining “discriminaiton based on sex” in the case of work at piece rates and work at time rates respectively. As to that tailpiece, however, it is to be observed that, whilst the English text of it uses the word “means”, the French uses “implique”, which has no restrictive effect.

I will spare Your Lordships a discussion of the other four authentic texts of Article 119, and say only that their wording is closer to that of the French text.

Viewing the language of Article 119 in that light, it seems to me perfectly capable of extending to rights under a retirement benefits scheme. The phrase “consideration, whether in cash or in kind” seems to me one of wide import. It was suggested to us that it would not cover anything to which the worker concerned was not entitled under his or her contract of employment. Perhaps that suggestion was based on the meaning of the word “consideration” in English law. At all events it is in my opinion wrong. Let me give an example. An employer may, in prosperous times, voluntarily distribute Christmas bonuses to his staff. No employee has a contractual right to such a bonus. But Article 119 would, in my opinion, clearly preclude an employer from discriminating between men and women in the distribution of it.

It was also submitted that rights under such a scheme were not received, even indirectly, from the employer. Others were concerned in their elaboration and in their financing: the trustees, the Occupational Pensions Board and the Inland Revenue. In my view the circumstance that the terms of a scheme have to be discussed with and to be approved by others does not detract from the fact that, at the end of the day, its adoption is the act of the employer. Nor is the element of tax saving in my opinion relevant. Wages and salaries, which are undoubtedly “pay”, are also deductible in computing the employers' profits for tax purposes; and I hardly think that the circumstance that a member of the scheme is taxable on benefits he receives from it and not on contributions he makes to it can affect the issue. It was also pointed out that some of the benefits under the scheme were payable not to the member but to his dependants. The conferment of the right to those benefits on his dependants can, however in my opinion, properly be regarded as an advantage to the member arising from his employment.

Thus I would, but for one factor, have come to the conclusion that rights under pension schemes such as those here in question were “pay” within the extended meaning given to that word by Article 119.

That factor is the link between such schemes and the State social security scheme created by the contracting-out system. To hold that Article 119 applied in relation to those schemes would mean holding that ever since that Article took effect (i.e. since the end of the first stage of the transitional period in the case of the original Member States and since 1 January 1973 in the case of the new Member States) a Member State operating such a system was under an obligation to ensure that a contracted-out scheme afforded equal rights for men and women whilst it was under no such obligation as regards its State scheme. That would, it seems to me, be an unbalanced result to reach, ás well as one calculated to deter contracting out. In my opinion, where a privately established pension scheme is designed, not as a supplement to the State social security scheme (as was envisaged by Mr Advocate General Dutheillet de Lamothe) but as a substitute for it or for part of it, it must be regarded as outside the scope of Article 119 and as falling to be dealt with under the broader headings in Article 118.

Lest, however, Your Lordships should differ from me on that point, I will add that, in my opinion, if Article 119 does apply to rights under such schemes, it cannot have direct effect in relation to them. I do not say that because of the different expectations of life of men and women, a factor on which the bank laid much stress. That, so far as I can see, merely affects the cost of providing the same pensions for women as for men, without giving rise to the sort of choice of method that only a legislature can make. Unequal contributions by men and women would themselves be a breach of the principle of equal pay, so that the extra cost can only be borne by the employer. I say it because, as appears from a Report of the Occupational Pensions Board to which we were referred (“Equal Status for Men and Women in Occupational Pensions Schemes”, Cmnd. 6599, August 1976) the conferment of equal rights on men and women under such schemes gives rise to some problems that can be solved only by legislation. A court cannot decide, for instance, on the basis of a general provision like Article 119, whether a period of maternity leave should or should not be treated as pensionable service. In the case of the United Kingdom a problem arises for contracted-out schemes from the circumstance that the State scheme is based on different retirement ages for men and women, 65 and 60 respectively, and that a scheme cannot be contracted out unless it provides benefits at least as good as those provided by the State scheme. In the case of Lloyds Bank that problem is solved by the fact that both men and women retire from its service at 60. But, for an employer from whose service the normal retiring age was 65, only legislation could resolve the conflict between the requirement that men and women should be treated equally and the requirement that they should receive not less than they would under the State scheme.

I will not detain Your Lordships for so long on the directives relied upon by the applicants. The considerations that lead me to think that the applicants cannot succeed on Article 119 lead me to the same conclusion as regards those directives.

The provision in the Equal Pay Directive on which the applicants rely is the first paragraph of Article 1, which reads:

“The principle of equal pay for men and women outlined in Article 119 of the Treaty, hereinafter called ‘principle of equal pay’, means, for the same work or for work to which equal value is attributed, the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of remuneration.”

Nothing turns on the change from the use of the word “pay” in Article 119 to the use of the word “remuneration” in the Directive. That is a feature of the English texts only. In all the other texts the same word is used in Article 119 and in the Directive: “rémunération” in French, “Entgelt” in German, and so forth. Bearing that in mind, it does not seem to me that, for present purposes, the Directive adds anything to Article 119.

Article 9 of the Equal Treatment Directive provides that Member States are to put into force the laws, regulations and administrative provisions necessary in order to comply with the Directive within 30 months of its notification. Notification took place in February 1976, so that the Directive cannot on any view be invoked in these proceedings which were started in 1977. The Court has been pressed none the less to answer the question that the Court of Appeal has asked about it, so that the bank should know what its obligations are. I think that the Court can properly respond to that request, as it responded to a somewhat similar request of the Bundesgerichtshof in Case 120/79, the second De Cavel case [1980] ECR 731.

Article 1(1) of the Directive provides:

“The purpose of this Directive is to put into effect in the Member States the principle of equal treatment for men and women as regards access to employment including promotion, and to vocational training and as regards working conditions and, on the conditions referred to in paragraph 2, social security. This principle is hereinafter referred to as ‘the principle of equal treatmen’.”

Article 2(2), read in conjunction with the preamble, makes it clear that, although the principle of equal treatment is to apply to social security, the manner of its application in that field is not covered by the Directive but is to be the subject of subsequent instruments.

Article 5(1) provides:

“Application of the principle of equal treatment with regard to working conditions, including the conditions governing dismissal, means that men and women shall be guaranteed the same conditions without discrimination on grounds of sex.”

That language does not appear to me apt to cover the terms of a pension scheme, at all events one linked to the national social security scheme. But, if I am wrong about that, there are, in my opinion, the same obstacles in the way of giving direct effect to it as there are in the case of Article 119. That being so, I refrain from discussing the wider and more difficult question whether a directive can directly impose obligations on private persons.

In the result I am of the opinion that, in answer to the questions referred to the Court by the Court of Appeal, Your Lordships should rule that, where a retirement benefits scheme is designed as a substitute for all or part of a State social security scheme, neither contributions paid by the employer to it nor the rights or benefits of a worker under it are “pay” within the meaning of Article 119 of the EEC Treaty, or “remuneration” within the meaning of Article 1 of Council Directive 75/117/EEC, or within the scope of any provision of Council Directive 76/207/EEC.