Waterford: government at risk of pension damages claims

The Irish government may face large claims for damages for its failure to protect the pension benefits of Waterford Crystal employees in the event of insolvency of the glass plant, according to a lead…

The Irish government may face large claims for damages for its failure to protect the pension benefits of Waterford Crystal employees in the event of insolvency of the glass plant, according to a leading EU law specialist. On 30 January 2009, the receiver appointed by its banks to the Waterford Wedgwood group told workers that manufacturing would stop at the plant with loss of 480 jobs in the 700-strong workforce. Deloitte“s David Carson said he was “continuing negotiations with interested parties““ about a takeover of the plant, and two of those include US-based investors KPS and Clarion Capital, a consortium fronted by John Foley, the company“s former chief executive. The group“s pension scheme is more than EUR 111 million in debt, and may have to be closed down if the company cannot be sold as a going concern. In that case pensions would be significantly reduced. David Hourihane, head of EU, competition and regulatory law at BCM Hanby Wallace, said there is “a compelling argument““ that Irish legislation, meant to implement the provisions of a European Community insolvency directive of 1980, is “incompatible with that directive”, as it fails to ensure a minimum protection of employee“s pension benefits in the event of their employer“s insolvency. “Under Irish pensions law, certain secure members receive priority if a pension scheme is wound-up due to the insolvency. If there are remaining funds, they will be distributed to the remaining members on the basis of the resources available”. “The potential situation now facing thousands of Irish employees, is that there will be a significant shortfall for those current and deferred members, which in many cases will result in major losses to those employees”. “This should have been where the necessary government protection would step in. The Irish government, for whatever reason, has chosen not to provide this… and may face damages claims under EU law as a result”, he said.