The French Pension Case: The Defence Based on Compensation of Structural Disadvantages Consigned to Oblivion

Headnote

Annotation on the Judgment of the Court of Justice of the European Union (First Chamber) of 26 October 2016 in Case C-211/15 P Orange v. European Commission

On 26 October 2016, the Court of Justice of the European Union (hereinafter 'the CJEU') rejected France Télécom's (now rebranded Orange) appeal in the case relating to the reform of the arrangements for financing the pensions of civil servants working for that company. The Court followed its Advocate General (hereinafter 'the AG') and upheld the European Commission's (hereinafter 'the Commission') decision. By doing so, the CJEU strongly affirmed that there is no room left for a defence based on the compensation of a structural disadvantage.

Keywords: Compensation; Structural Disadvantage; Selectivity; Dual Derogation.

I.Background: The Commission Decision and General Court's Judgment

In the early 90s, the French State started a privatisation process of its historic public provider of telecommunication services, France Télécom (now rebranded Orange, hereinafter 'Orange'). This entailed the gradual alignment of Orange's status to that of a private company. As a first step, French public authorities enacted in 1990 a law that gave legal personality to Orange, which then became a separate legal entity from the French State.

Civil servant staff employed by Orange retained the privileges they enjoyed as State employees, including pensions, which differed from those of ordinary employees. In this respect, the 1990 Law provided that pensions of retired officials would be paid by the State, but fully financed by Orange in form of social charges paid to the Public Treasury.

In 1996, the French State enacted anew law amending certain provisions of the 1990 Law. The aim was inter alia to align Orange's pension regime with that of its competitors. In particular, this law ended the system of full funding of pensions by Orange.

Before 1996, to fully fund the pensions of its retired officials, Orange made a deduction from the salary of its civil servants and added its own contribution in cash. The reform introduced a modification on the second element, effectively lowering it to a level where the contribution of Orange alone did not allow anymore for the full funding of the pensions of Orange's civil servants. The modified contribution aimed at reproducing similar costs borne by Orange's private competitors.