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Cyprus

AG to review court decision nullifying law that cut public sector pensions

Attorney-general Costas Clerides (Christos Theodorides)

By Elias Hazou

Attorney-general Costas Clerides said on Thursday his office was carefully reviewing the court decision to assess whether an appeal would be filed.

He was responding briefly to the administrative court’s decision this week that declared null and void a 2012 law which had imposed cuts on the pensions of public sector employees, ordering the government to retroactively compensate the affected individuals.

A group of 115 former civil servants and people employed in the broader public sector had challenged the 2012 law, enacted then to rein in the state payroll as part of an austerity drive.

The legal action against the law was filed in 2013.

In its ruling, the administrative court said the 2012 law was in breach of the right to property, protected by the constitution.

A prior court decision had determined that pensions are considered property.

The court said the 2012 law violated article 23.3 of the constitution, which allows for restrictions on the right to property but under very specific and explicit circumstances.

None of these restrictive conditions held in the matter under consideration, the court found.

Article 23.3 of the constitution states: “Restrictions or limitations which are absolutely necessary in the interest of the public safety or the public health or the public morals or the town and country planning or the development and utilization of any property to the promotion of the public benefit or for the protection of the rights of others may be imposed by law on the exercise of such right.”

Moreover, in its ruling the court annulled the 2012 law.

As such, the plaintiffs must now receive the amounts that were deducted from their pensions. The total is estimated at €2m.

The same article of the constitution also stipulates that “Just compensation shall be promptly paid for any such restrictions or limitations which materially decrease the economic value of such property; such compensation to be determined in case of disagreement by a civil court.”

It also follows from the court’s decision that the practice of pension cutbacks across the board must be terminated.

The ruling benefits both regular civil service employees as well as state officials on a pension.

The 2012 law was amended several times. Initially it provided for a 6.5 per cent reduction in pensions in the €1,001 to €1,500 bracket; 8.5 per cent in the €1,501 to €2000 bracket; 9.5 per cent in the €2,001 to €3,000 bracket; 11.5 per cent in the €3,001 to €4,000 bracket; and 12.5 per cent for over €4,000.

Amounts under €1,000 were not affected.

The government must now decide whether to appeal the court decision. If it does appeal, the state would not be required to compensate the affected civil servants until the final outcome of those judicial proceedings.

Meanwhile the administrative court’s decision could have broader ramifications on the state’s accounts, as it could set a precedent for an ongoing case – filed with the Supreme Court – where the main civil servants’ trade union is also challenging salary cuts likewise imposed in the midst of the financial squeeze.

Pasydy, the trade union, wants that law as well to be declared unconstitutional. Should they win the case, retroactive compensation could run in the tens or hundreds of millions.

A decision in that case is expected sometime in early 2019.


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