Effective international enforcement of employee rights? Challenging Hungarian ‘unorthodox’ laws

2.1.1. ‘Termination without cause’ cases before international courts

At first glance, there is no clear piece of international labour law that would apply here. ILO Convention No. 158 and Recommendation No. 166 on termination of employment prescribes that a worker’s employment is not to be terminated, unless there is a valid reason for such termination, however, Hungary has not ratified this Convention. Neither was Article 24 of the Revised European Social Charter accepted by Hungary, which guarantees that all workers have the right not to have their employment terminated without valid reason. ¹²

The CJEU seems to have no competence over this issue either. According to Article 30 of the Charter of Fundamental Rights of the European Union, every worker has the right to protection against unjustified dismissal, in accordance with EU law and national laws and practices. Article 30 applies to all sectors, the civil service included, ¹³ and logically requires a tribunal to review the dismissal to determine whether the employer can justify it on reasoned grounds. ¹⁴ However, the EU Charter is addressed to the Member States only when they are implementing EU law. ¹⁵ Legal literature has already pointed out that this limited scope makes Article 30 an empty shell, as EU law does not cover the termination of employment ¹⁶ and more specifically the valid reasons for a dismissal. ¹⁷ This theoretical doubt is now proved to be valid. ¹⁸ The CJEU dismissed the case of eight Hungarian civil servants who were fired without valid reason on the grounds it had no competence as no EU law was applicable to the case, nonetheless, all cases referred to Article 30 of the Charter. ¹⁹ This conclusion is hard to question, nonetheless, it clearly shows how limited the CJEU is as a human rights court in the absence of a direct connection between EU law and a Charter right. ²⁰

Moreover, the ECHR does not explicitly cover a right to protection against dismissal without cause. Nevertheless, the ECtHR has already dealt with a series of cases where termination of employment was assessed from the perspective of different Articles. The Court relied upon the freedom of religion (Article 9) to find that the dismissal of a swimming pool manager solely on the basis of her religion was against the Convention. ²¹ Dismissing a geriatric nurse because she made a whistleblowing criminal complaint against her employer infringed the right to freedom of expression (Article 10). ²² A dismissed accountant or secretary working for an embassy could not be denied the right to access to court solely on the basis of the immunity enjoyed by the employer. ²³ The unfairness or the excessive overall length of proceedings concerning the termination of the employment also led to the violation of Article 6(1). ²⁴

In the present case, the ECtHR ruled that the Hungarian law requiring no reasons for the employer to dismiss a civil servant violated the right to a fair trial (Article 6). ²⁵ The Court stated that the maintaining in the domestic law of the right to bring a labour law claim does not in itself ensure the effectiveness of the right to access to a court, if that possibility is devoid of any substance and therefore of any prospect of success. As under the new law the civil servant has no idea of the reasons why he/she has been dismissed, labour law litigation would not offer the prospect of even remote success. Thus, the ECtHR held that a dismissal without cause amounts to a deprivation of a substantive right of action. ²⁶

2.1.2. The Constitutional Court’s decision

One and a half years before the ECtHR judgment, the Constitutional Court had already decided on the matter upon the application of trade unions. The CC could review the compatibility of the measure with a democratic legal order from a broader perspective and declared it unconstitutional on five grounds. ²⁷ First, the legal obligation to give a reason for a dismissal is a fundamental guarantee implied in the right to work, ²⁸ particularly in the civil service, where the principle of ‘undismissability’ applies, that is, the civil servant may be dismissed only in situations as set forth in statutory law.

Second, everyone must have the possibility to work as a civil servant, and this embraces the right to keep that position. If an employer was permitted to dismiss a civil servant without a reason, he/she would be deprived of this status without any legal justification. The employer’s excessively broad discretion would lead to the unconstitutional limitation of the right to hold a public office. ²⁹ Third, the principle of the rule of law also holds public administration to be bound by the law, ³⁰ and the dismissal of civil servants without cause would breach that principle.

Fourth, there would be no legal remedy against such a unilateral decision. Formally, the dismissed civil servant may turn to court, however, the dismissed employee would bear the burden of proof, that the termination was unlawful. Such a burden would limit his/her right to access to court. ³¹ Finally, it would present an unforeseeable threat to the civil servants’ and their families’ subsistence, leading to unconditional subordination. Treating civil servants as a mere tool to manage state administration would be against human dignity. ³²

2.1.3. Half-hearted remedies

It is not surprising that this law was found to be unconstitutional and contrary to the ECHR. Yet, it is rather disappointing to elucidate the legal remedies the Hungarian legal system finally offered for those who had lost their public office due to this statute.

The possible legal remedies were available only if the dismissed civil servant filed a court action within 30 days of dismissal. ³³ If not, or the court had finally rejected the claim before the above-mentioned CC decision, there was no remedy available. ³⁴ If the dismissed civil servant started court proceedings that were pending by the time of the CC decision, the following procedure would apply. Since the Constitutional Court did not declare the debated provisions inapplicable, thus, the labour courts could not automatically set aside the rules in any on-going litigation but must rather suspend the procedure and turn to the CC to declare it inapplicable in each case. ³⁵ Needless to say, this caused a time-consuming delay in the process. However, the claimant could finally be granted a remedy for an unlawful dismissal, which was limited to financial compensation without reinstatement. ³⁶

In summary, the dismissed civil servants could never get back their offices. Financial compensation was available only for those who had filed court actions within the statutory deadline. Moreover, the lawful status of a dismissal without cause remained in effect for three and a half months after the CC decision. The Court offered a technical reason for this solution: the annulment of the whole Article would have affected other institutions as well. Thus, the Court gave the legislature time to amend the text before it would be nullified. ³⁷ During this transitory period, all employers in the civil service knew that dismissal without cause would be unconstitutional but it was still an available lawful measure that could be applied. ³⁸

2.1.4. Aftermath of the ECtHR and CC decisions

Indisputably, dismissal without cause cannot be the main rule in civil service, neither from a constitutional nor from a human rights perspective. However, the rigidity of the regulation on dismissal was indeed an existing problem. The Constitutional Court did not dispute that the aim of a more efficient administration might justify the levelling down of civil servants’ protections against dismissal, but certainly not by the unlimited authorisation of the employer to terminate the employment relationship. ³⁹

As a comparison, ILO Convention No. 158 lists cases where employees may be excluded from its protections, inter alia, the justification for dismissal, for instance fixed-term employment, employees under probation or qualifying periods, and casual workers. ⁴⁰ Apparently, the exemptions are rather limited in scope and are to be interpreted in a restrictive way. For instance, the French law introducing a two-year ‘probation period’ for employees in enterprises with a maximum of 20 employees, during which the employer could dismiss the employee without having to give any reason, was found to be unreasonable for the purposes of the ILO Convention. ⁴¹ A similar Spanish rule was challenged on the same grounds, as it prescribed that companies with less than 50 employees could conclude a permanent employment contract with a one-year probation period. ⁴²

Exempting the employer from the obligation to give a valid reason for a dismissal for the entire civil service and for the complete duration of employment seems a way more extreme measure, beyond any adequate supporting reason. Even the highly controversial ‘employee shareholder status’ in the UK offers more protection. According to this institution, parties may agree that the employee receives shares in the employer’s organisation with a value of at least GBP 2000, but in consequence the employee becomes unprotected by core labour law provisions, inter alia, the right not to be unfairly dismissed. Such ‘commodification of the employee rights’ ⁴³ is clearly contrary to the function of labour law, yet, unlike dismissal without reasoning in the Hungarian civil service, it needs the consent of the employee and is conditional upon a financial counter value. Moreover, in Hungary the civil service has traditionally been regulated by more protective measures than private employment. Dismissal without reasoning in the 21st century’s civil service would have led to unprofessional, corrupt personnel slowly paralysing the execution of any task in the public administration. ⁴⁴

In 2012 another major reform to the legal regulation of civil service law took place. The new code on civil servants (Kttv.) ⁴⁵ explicitly lists all valid grounds for dismissal, moreover, it specifies that the dismissal shall clearly contain a reason. In case of a dispute, the burden of proof to verify the authenticity and substantiality of the reason is on the employer. ⁴⁶ However, some of the possible reasons for dismissal are rather vague and seem to overlap. The new law introduced two new reasons for dismissal: loss of trust and indignity. Regarding ‘loss of trust’, the law obliges civil servants to fulfil their tasks with professional loyalty to their superiors. This commitment includes accomplishing the professional merits as determined by the superior, creatively cooperating with colleagues, fulfilling tasks professionally, and exercising discipline and concentration. ⁴⁷ ‘Indignity’ is a behaviour which has the potential to seriously damage the reputation of the public office or the trust in good administration. ⁴⁸ Apparently, many malpractices of a civil servant could equally lead to loss of trust and/or indignity. Even the legislator seems to admit that there is no clear borderline between the two causes, therefore, the latest amendment merged them and prescribed that loss of trust is a form of indignity. ⁴⁹

Consequently, uncertainities and vaguely worded grounds vest public employers with an extremely wide discretion on subjective reasons for dismissal. Hungarian scholars share the view that the amended provisions may easily result in a general practice of dismissals with only formal reasons. ⁵⁰ Therefore, the decisions of the CC and the ECtHR have not resulted in eliminating subjective dismissals.

2.2.1. Age discrimination and mandatory retirement in EU law

Prohibition of age discrimination has become an important element of EU anti-discrimination law and CJEU case law since the Amsterdam Treaty and particularly the implementation of the Employment Equality Directive (EED). ⁵¹ The rationale for its introduction was to ensure the possibly highest employment rate, which stems from economic and social foundations relating to the need to combat unemployment and exclusion in the European workforce. ⁵² In primary EU law, Article 13 of the European Community Treaty established the legal basis of Directives prohibiting discrimination based on age, and five other discrimination grounds. Age could more easily have been left out, since the other grounds had a higher profile in the European Union. Therefore, the special ‘extra’ age justification clause of EED seems to be the cost of its inclusion as a discrimination ground. ⁵³ The importance of Article 6(1) of EED is that it allows justification of direct age discrimination.

Based on this special justification clause, the CJEU has adopted a four-stage age discrimination analysis: the Court considers first, whether the measure establishes a difference in treatment based on age; second, whether there has been a difference in treatment; third, whether the measure is objectively and reasonably justified by a legitimate aim; and fourth, the Court evaluates whether the means of achieving that aim are appropriate and necessary. ⁵⁴ It is apparent from Article 6(1), that the legitimate aims are social policy objectives, such as those related to employment policy, the labour market or vocational training. ⁵⁵

Mandatory retirement and its broad justification have become a crucial field of interpretation. Kilpatrick argues, that the Court has developed two proportionality tests in age discrimination cases: a looser one applicable to retirement and a tight test applicable to all other cases. When taking the tight proportionality route, the Court follows Article 6(1) faithfully by examining whether the means deployed are appropriate and necessary to achieve the legitimate aims identified (e.g., Kücükdeveci ⁵⁶ and Mangold ⁵⁷ ). The critical step differentiating between the looser proportionality test (laid in Palacios de la Villa) ⁵⁸ and the tighter one, is a key unreasonableness passage whose function is to provide a presumptive acceptance of retirement rules as appropriate and necessary. ⁵⁹

Schlachter also underlies, that there are almost no limits to the discretion of the Member States in adopting mandatory retirement rules, however, a looser standard applies to general systems for compulsory retirement (e.g., Rosenbladt), ⁶⁰ and a stricter standard to specific professional groups, such as in the Petersen, ⁶¹ Georgiev, ⁶² and Fuchs and Köhler ⁶³ cases and also in Commission v. Hungary. ⁶⁴ Schiek points out that age is seen as an important factor for Member States to rely on in their employment and social policy, and the European judiciary has reconciled these policy demands and the ban on age discrimination by relinquishing a strict standard of scrutiny in favour of a looser one at times. ⁶⁵

Thus, the Court regularly recognises, that Member States have broad discretion in defining their employment and social policies, including retirement schemes. For instance, in Fuchs two prosecutors could work as a civil servant after the age of 65 for another three years, only if that was deemed to be in the civil service’s interest. Retirement age had the legitimate aim of establishing a balanced age structure in the civil service. Prosecutors’ retirement at the age of 65 with a full pension was considered a proportionate, appropriate and necessary measure to reach this aim. ⁶⁶ Georgiev also demonstrates the operation of the loose test, as the Court dispatched the ‘retirement at 65 years old’ rule by applying the proportionality presumption, that those retiring were entitled to financial compensation. ⁶⁷ Consequently, the Court had already developed a loose test concerning justification of mandatory retirement age before Commission v. Hungary. ⁶⁸ We will therefore investigate the specialties of the Hungarian case, as well as how this judgment related to other decisions of the Court on the proportionality of such mandatory retirement schemes.

2.2.2. Unconstitutional mandatory retirement of judges

Prior to 2011, Hungarian judges could remain in office until the age of 70, the mandatory retirement age since 1869. ⁶⁹ Traditionally, Hungarian judges could choose the date of their retirement any time between the ages of 62 and 70. However, the new Basic Law ⁷⁰ and the new Act on Judges ⁷¹ unexpectedly obligated them to retire at the general retirement age of 62. ⁷² According to the new law, if a judge (prosecutor or notary) ⁷³ reached the age of 62 before 1 January 2012, he/she would retire on 30 June 2012. If he/she reached this age between 1 January 2012 and 31 December 2012, he/she would retire on 31 December 2012. ⁷⁴ This amendment resulted in the termination of employment of 277 (approximately 10%) out of the 2996 Hungarian judges by the end of 2012. Since the affected judges belonged to the 62+ generation, they predominantly represented the higher executive positions, and 20 judges of the 74 (27%) at the Supreme Court level were removed from office. ⁷⁵

The official position offered two arguments. First, in contrast to other public employees, only judges could work until the age of 70, and receive a pension above the salary. Thus, the reform was designed to strike a balance within social security. Second, the government intended to establish a ‘more balanced age structure’ in the courts by replacing judges aged over 62 years with younger judges. It is submitted that there was a third assumed agenda. The President of the National Office for the Judiciary (OBH), elected by the governing conservative party by a qualified majority, has a fundamental role in selecting judges (except in the Supreme Court). Thus, the President of OBH could ‘choose’ almost 10% of judges, for the most part those in leading positions.

Six months after the new retirement regime came into force, the Constitutional Court held it to be unconstitutional ⁷⁶ because it breached formal ⁷⁷ and substantive constitutional requirements of judicial independence. The substantial problem was that the employment relationship of judges might be terminated within a very short time (at a minimum, three months) after notification. Although the upper age limit of retirement might be regulated by statute, it must be gradually introduced in order to provide for an appropriate transitional period. This approach would respect the principle of non-removability of judges, which is an important guarantee of judicial independence and the right to an impartial court procedure. Therefore, the upper age limit of judges must be determined by law unambiguously and foreseeably. Remarkably, the decision did not address age discrimination, despite complaints. ⁷⁸ Rather, the Court focused on institutional and political effects, but did not examine the legislative aims.

2.2.3. Commission v Hungary and its aftermath

The CJEU declared in its judgment shortly after the Constitutional Court’s decision that Hungary had failed to fulfil its obligations under the EED. Having found discrimination on grounds of age, the CJEU examined whether the contested provisions were objectively and reasonably justified by a legitimate aim and the means of achieving that aim were appropriate and necessary. In this respect, the CJEU explored the two official objectives: the standardisation of the compulsory retirement age in the public sector and the establishment of a more balanced age structure.

In accordance with established case law, ‘standardisation of compulsory retirement age’ can constitute a legitimate employment policy objective and, in principle, the Hungarian measures were an appropriate means of achieving this aim. They were designed precisely to ‘reduce significantly the diversity of the age-limits for compulsory retirement for all the professions attached to the public justice service’. Nevertheless, the provisions at issue were not necessary to achieve this objective, since they abruptly and significantly lowered the mandatory retirement age, without transitional measures to protect the legitimate expectations of the persons concerned. ⁷⁹ The establishment of a precise retirement age per se is not a subject of EU non-discrimination legislation, but the radical cutting of eight years from it is disproportional. ⁸⁰ Thus, the present lowering of the retirement age was considered disproportionate against an argument of legitimate expectations and economic loss for the individual, whereas a gradual staggering of the amendment may have been acceptable. ⁸¹

With regard to the second objective, the CJEU stated, in accordance with earlier case law (e.g. Fuchs), that the establishment of a more balanced age structure can constitute a legitimate aim of employment policy. However, the Hungarian measures were not appropriate to achieve that objective because the short-term effects were likely to reduce the possibility of achieving a truly balanced age structure in the medium and long term. The vacated positions would be occupied for a long time by young lawyers who would enter the profession in 2012 and 2013. In medium and long term, this law could distort the age structure in the profession. This may be perceived as a reference to the political motivations of the Hungarian ‘reform’ beyond its purely legalistic reasons. ⁸²

The focus of the Court’s analysis in existing case law was on the proportionality of national measures, that is, whether they were appropriate and necessary with regard to the projected goals. As it has been mentioned above, the Court’s retirement related case law, starting with Palacios de la Villa, suggested that age-related retirement measures are presumptively proportionate. ⁸³ Therefore, Member States can in principle successfully rely upon age determined life cycles as an objective justification of direct age discrimination. ⁸⁴

Commission v. Hungary is an instructive judgment for at least two reasons. First, it was the first time the CJEU found a standard statutory retirement measure to be unlawful. Notwithstanding, the CJEU does not suggest that compulsory retirement at a set age should not be seen as meeting the requirements of EED, provided there is an accompanying reasonable pension provision. ⁸⁵ Belavusau remarks that the Court leaves a guiding hint to labour lawyers and legislators in the Member States that a gradualism in lowering the age of retirement could be a sufficient remedy. On the one hand, it is a sober arrangement to facilitate transparent and democratic transition in public employment. On the other hand, it gives an incentive to simply spread any age pension reforms over several stages, thus safeguarding the passage of the proportionality test. ⁸⁶

Second, Commission v. Hungary was one of the few instances, ⁸⁷ in which the application of a strict proportionality test changed the outcome of the case. Andersen is the other decision of the Court, where strict proportionality made a difference and it indicates that some rules concerning older worker exit, especially those concerning early retirement management, may successfully be challenged using EU law. Kilpatrick states, that in the other retirement cases, the Court wished to avoid applying a standard discrimination analysis to retirement: this explains its proportionality presumption in retirement cases. ⁸⁸ At the same time, Commission v. Hungary has strengthened the analysis, that CJEU case law is inconsistent and incoherent on age discrimination. ⁸⁹

Case law shows that age discrimination law is full of dilemmas: it is about weighing individual rights against public interests of a more collective character, such as intergenerational solidarity and pension systems. ⁹⁰ It is submitted, that the Hungarian case added a new, political element, since the potential effect of this termination measure on the judicial framework contributed to the application of the strict proportionality test instead of the usual loose approach. Public interest is the main reason for allowing compulsory mandatory retirement provisions, however, the CJEU decision on judges is influenced by another public interest. Notwithstanding the fact that the CJEU avoids any explicit references to political changes in Hungary, the judgment is substantially informed by the considerations about judicial independence. It also reveals the scope and boundaries of EU intervention on what is permissible in mandatory retirement in the public sphere, as not only a sensitive welfare issue, but also an explicitly political matter. According to Belavusau, the significance of the judgment is in its unequivocal support of the Commission’s strategy in counteracting Hungary’s gradual slide towards authoritarianism via infringement proceedings. ⁹¹ Thus, the reasoning of the judgment has an individual character on the surface, but the underlying argument is also collective. ⁹²

The effects of the judgments are quite revealing regarding the efficiency of national and international sanctions. Under the new law, ⁹³ the mandatory retirement age of judges will be gradually reduced from 70 to 65 years by 2023. ⁹⁴ Judges will be required to choose between pension and work, if they are entitled to an old-age pension. Unlawfully dismissed judges have three possibilities. First, if they request reinstatement, it will be automatic with full compensation for financial losses. Second, they may also choose retirement with a compensation of 12 months’ salary. Third, they can also get a reserve position in judicial service for a maximum of two of every three years. Thus, the judgments have been successful in repealing this drastic law and also limiting its negative social consequences. However, most of the judges have not requested reinstatement, and for this reason, the measure has ‘successfully’ resulted in a substantial change in leading judicial positions.

2.3.1. ECtHR: President of the supreme court (Baka case)

Mr András Baka ⁹⁶ was elected by the Parliament as President of the Supreme Court in 2009 for a six-year term. Thus, he was just in the middle of his service, when the Basic Law came into effect, and his mandate was accordingly terminated. Mr Baka contested that the loss of his office constituted a breach of the right to access to court (Article 6 (1)) and was a result of his criticism on the mandatory retirement of judges, thus, was contrary to the right of expression (Article 10).

The person of the applicant was indeed special, nonetheless, it was not the first time high members of the judiciary appeared before the ECtHR. In Harabin, the applicant was the President of the Slovakian Supreme Court, who was the subject of disciplinary proceedings before the Constitutional Court. The ECtHR had to decide whether his right to a hearing by an impartial tribunal had been respected, since several members of the Constitutional Court had been unsuccessfully challenged for bias. ⁹⁷ In a similar Croatian case, the President of the Supreme Court faced disciplinary proceedings in front of the National Judicial Council, but two of the deciding judges had already made biased comments in the media on the case. ⁹⁸ Unlike in these previous cases, Baka turned out to be a more severe and direct breach of the right to access to court.

In Wille, the President of the Liechtenstein Administrative Court expressed his views on certain constitutional matters in a public lecture and consequently the Prince did not reappoint him to his office. ⁹⁹ In Kudeshkina, a judge ran in the general elections for the State Duma of the Russian Federation and she expressed grave criticism of the judicial system during her campaign, for which her mandate was terminated. ¹⁰⁰ Thus, cases on judges’ freedom of speech are again not new in the ECtHR’s jurisprudence. However, the Baka case seems unique in the severity and form of the sanction posed on the applicant due to his publicly expressed views (mid-term termination by a legally unchallengeable constitutional norm).

Even though Mr. Baka was not a regular civil servant, but the highest ranked member of the judiciary, the ECtHR could straightforwardly establish the applicability of Article 6 (1). In the 1990s, the Court gradually departed from its initial restrictive interpretation of the applicability of Article 6 to members of the civil service. ¹⁰¹ After the landmark decision in Vilho Eskelinen, ¹⁰² civil servants may be excluded from the protection of a fair trial on two conditions: first, national law must expressly exclude access to court for the given post, and second, the exclusion must be justified on objective grounds in the state’s interest. The Eskelinen test leaves little room to exclude civil servants from the coverage of Article 6, as the clear and express domestic exclusive laws are rather rare and their proper justification has to be demonstrated by the respondent State. ¹⁰³ The ECtHR invoked the above-mentioned cases, where this test was applied to judges or the President of the Supreme Court and saw no reason to depart from this approach. ¹⁰⁴

Hungarian law does not explicitly exclude any civil servant or judge ¹⁰⁵ from the access to court. However, in the present case, a constitutional norm terminated Baka’s time in office. The Court noted that even though such provision by its nature cannot be reviewed by any court (the Constitutional Court included), it does not mean that the applicant’s right to court is expressly excluded. It would be contrary to the rule of law if the interfering measure itself could be the legal basis for the exclusion. Moreover, this measure was not generally applicable (which would be required to fulfil the first requirement of the Eskelinen test), but it was directed against a specific person, contrary to the rule of law. ¹⁰⁶ As the first condition was not met, the Court did not analyse whether the exclusion could be justified, nonetheless, it seems clear that a rule which is in itself contrary to the rule of law could never be justified.

After the above considerations, the Court gave a short evaluation, whether the measure was compatible with the ECHR. As the premature termination of Mr. Baka’s mandate ‘was not reviewed, nor was it open to review, by an ordinary tribunal or other body exercising judicial powers’, the very essence of the applicant’s right of access to a court was impaired. Moreover, the lack of judicial review was the result of legislation whose compatibility with the requirements of the rule of law is doubtful. ¹⁰⁷

One facet of the case was that the applicant had been dismissed for having expressed his criticism in his professional capacity on several occasions concerning the constitutional reform in 2011. Expressing his views on the significance of the integrity and independence of the judiciary, he was particularly concerned with the compulsory retirement of judges. He expressed his opinions through his spokesman, in public letters and communiqués, by challenging legislation before the Constitutional Court, as well as in a speech to the Parliament. Nonetheless, the Orbán government contended that Mr. Baka’s mandate had been terminated only because of the fundamental changes in the judicial system.

The ECtHR viewed the facts as showing that the early termination of the President’s mandate was motivated by his public expressions of criticism. The Court emphasised that previously in 2011, the government had confirmed its will to keep Mr. Baka in office as the first President of the Kúria. In July 2011, such a statement was sent to the Venice Commission, and in April and October, members of the parliamentary majority declared in interviews that the President of the Supreme Court would continue as the President of the Kúria. The proposals to terminate his mandate were submitted to Parliament after he had publicly expressed his views on the legislative reforms at issue and were adopted within an extremely short time. ¹⁰⁸ Thus the Court found prima facie evidence in favour of the applicant’s version of the events and the existence of a causal link. Moreover, the ECtHR was not convinced by the government’s arguments that the termination procedure was a necessary consequence of the institutional reform. While the Court accepted that changing the rules for electing the Kúria’s President with a view to reinforcing this position’s independence could be a legitimate aim for interfering with the right of expression, the mid-term termination appeared to be clearly incompatible with that aim. ¹⁰⁹

Although this measure did not pursue a ‘legitimate aim’, the Court nonetheless gave a lengthy analysis on whether it was ‘necessary in a democratic society’. The applicability of Article 10 to civil servants can no longer be disputed. ¹¹⁰ However, the Court recalled its balancing approach to measure the fundamental right of the civil servant’s freedom of expression with the legitimate interest of a democratic State in ensuring that its civil service properly furthers the purposes enumerated in Article10 (2). National authorities have a certain margin of appreciation in determining whether the impugned interference is proportionate to these aims. Case law shows a rather complex set of relevant facts the Court weighs in these cases. ¹¹¹ To highlight the most important ones: if the judge preserves his/her image as an impartial judge, ¹¹² makes statements on issues relating to important matters in a democratic society ¹¹³ and carries out his/her views with moderation and propriety, ¹¹⁴ the interference with the right to freedom of expression is held to be unnecessary in a democratic society. The proportionality of the sanction imposed is also a factor to evaluate. ¹¹⁵

The Court found that the interference was contrary to the ECHR from all these aspects. The views Mr. Baka had expressed were mere criticism from a strictly professional perspective without any gratuitous personal attacks or insults. Moreover, since the applicant was also the head of the National Council of Justice, he was under an explicit statutory obligation to express an opinion on parliamentary bills that affected the judiciary. An important lesson from Baka is that the higher the need for protection, the narrower the margin of appreciation afforded. ¹¹⁶ The Court considered that the applicant’s position and statements, which clearly fell within the context of a debate on matters of great public interest, called for a high degree of protection for his freedom of expression and strict scrutiny of any interference, with a correspondingly narrow margin of appreciation being afforded to the national authorities.

2.3.2. Constitutional Court and ECtHR: Vice-President of the SupremeCcourt (Erményi case)

Unlike the other two cases, the termination of the Supreme Court Vice-President’s mandate was adjudicated by the Constitutional Court, as it was regulated by an act (not the Basic Law). The Vice-President, Mr. Lajos Erményi anticipated a favourable decision because the Constitutional Court had already decided three analogous cases on premature termination of office holders’ mandate. ¹¹⁷ In these cases, the Constitutional Court acknowledged the freedom of the legislature to design and change the structure of state institutions. Nonetheless, the legislature cannot abuse its powers by dismissing head officials by legislation. If the legislature amends the relevant laws simply by adding new grounds to dismiss the current leader of an institution before the end of his/her mandate, it breaches the prohibition on retroactive law-making. Moreover, such an abusive exercise of legislative power precludes the leader from judicial remedy. For instance, the Constitutional Court found it incompatible with the rule of law and the right to access to court when the Parliament enacted a law that terminated the mandate of the Hungarian Energy Authority’s President and Vice-President in the middle of their terms of office.

In the light of the foregoing decisions, the outcome of the present case was somewhat surprising. The Constitutional Court rejected the complaint on the ground that this termination was sufficiently justified by the full-scale reorganisation of the judicial system ¹¹⁸ Note that seven judges out of 15 accepted the complaint, essentially on the same grounds as in the previous decisions.

After this decision, Mr. Erményi turned to the ECtHR. ¹¹⁹ As the applicant invoked (among others) Article 6, the Court could have easily copied its reasoning in Baka, since premature termination was carried out in the same manner. Nonetheless, the Court followed a different path and established that this termination constituted an interference with Erményi’s right to respect of private life. As to the legitimacy of such interference, it adopted the findings of the Baka case, and concluded that the full-scale reorganisation of the judicial system should not have prompted the premature termination of his term of office. ¹²⁰

Apparently, the Court was of the view that all had been told on the Hungarian judicial reform in Baka. Instead of repeating the merits of the latter, it decided to use the Vice-President’s case to further enhance the broad interpretation of Article 8. While the right to private life unquestionably does not end when the individual enters the workplace, ¹²¹ the laconic reasoning in Erményi seems a debatable step towards the ‘integrative approach’ of the right to privacy and social rights. ¹²² As Judge Kūris put it in his dissenting opinion, the Court did not elaborate why the applicant’s dismissal interfered with his right to private life, and ‘a person’s private life would really be poor, feeble and sorrowful if his or her “relationships with the outside world” depended, mainly or to a considerable extent, on him or her holding a certain official position within the administration’. ¹²³

2.3.3. CJEU: Data Protection Ombudsman (Jóri case)

Mr. András Jóri, elected for a six-year term as Data Protection Ombudsman in 2008, lost his office on 1 January 2012 due to the transitional provisions of the Basic Law. The reason was that his office was replaced by the new act on data protection with a new institution, the National Authority for Data Protection and Freedom of Information. ¹²⁴ While the ECHR does not contain a separate article on judicial independence, EU law explicitly requires the independence of the national data protection authority. Thus, unlike in the previous cases, this termination could be questioned directly on the grounds of independence. ¹²⁵

The case was brought to the CJEU by the European Commission in an infringement procedure. ¹²⁶ The Commission argued that Hungary had infringed the Data Protection Directive ¹²⁷ by terminating the ombudsman before the end of his full term, thus, it violated the requirement of ‘full independence’. ¹²⁸ The Hungarian government, again, argued that the ombudsman and the new authority were fundamentally different in terms of their organisation, making it necessary to appoint a new leader.

Case law shows that supervisory authorities are considered as an essential component of the protection of personal data. A German case shows that no state scrutiny is permitted over these institutions, not even to guarantee compliance with the applicable national and EU provisions. ¹²⁹ Similarly, Austrian provisions were rejected by the CJEU as breaching the principle of independence, which placed a hierarchical link between the managing member of the data protection authority and another state authority. ¹³⁰ Compared to these cases, Mr. Jóri’s dismissal is a more direct and severe infringement of ‘full’ independence.

The CJEU agreed with the Commission’s observations. The threat of premature termination could lead the ombudsman to enter into prior compliance with the political authority, which is incompatible with independence. Undoubtedly, Member States are free to change the institutional model of data protection, nonetheless, this change cannot objectively justify compelling the ombudsman to vacate his office before the expiration of his full term. ¹³¹ After the decision, the government and Mr. Jóri agreed upon financial compensation for his lost salary and he was also offered a public apology by the Minister for Justice. Nonetheless, Mr. Jóri stated that he did not want reinstatement. ¹³²

2.3.4. Personal and constitutional dimensions

The above described early termination cases may be evaluated from two perspectives. From a personal perspective, they can be approached as litigation by individuals holding public offices who were deprived of such fundamental rights as access to court and freedom of speech through legislation that had terminated employment before the end of the terms of office. From this view, if the breach of law was established, human rights forums could award proportionate financial compensation, and such public decisions could also serve as an acknowledgment that the law was inherently and morally wrong.

However, these cases have a constitutional dimension as well. There was a parliamentary majority in Hungary that was empowered to adopt constitutional provisions without restraint and threatened the independence of democratic institutions, such as the Supreme Court and the Data Protection Authority. The metaphorical angel would ensure that such threats would be overcome by human rights litigation, but this is not the case. In the view of the authors, at least two elements of the mentioned cases show that there is also this second, albeit concealed, reading behind the lines, that is, the ineffectiveness of human rights legislation.

First, the ECtHR did not address the problem, that constitutional provisions were challenged. ¹³³ Interestingly, not even the Hungarian government used the argument that the ECtHR was without jurisdiction to revise domestic constitutional norms. ¹³⁴ Nonetheless, this time the doubts about the authoritative hierarchies of the ECHR and the Member States’ constitutions did not stop the Court from ruling that the relevant part of the Hungarian Basic Law was contrary to the ECHR. The Court clearly attributed direct supra-constitutional effect to the ECHR, ¹³⁵ probably because of the high significance of the case: the interference was clear and affected the core merits of the Convention.

Second, it is quite apparent that the ECtHR and CJEU decisions in the Baka and Jóri cases could not restore the constitutional turbulence, namely the harm done to the independence of the affected institutions. In such instances, the courts are not empowered to reinstate the dismissed officials. Neither in Baka nor in Erményi did the Court oblige the government to apply any direct individual measure, like reinstatement. ¹³⁶ Nonetheless, Judges Pinto De Albuquerque and Dedov were of the opinion that Hungary must reinstate the applicant as President of the Supreme Court for the entire duration of his interrupted mandate. ¹³⁷ However, if it had happened, the dismissal of Mr. Baka’s successor would have raised similar constitutional doubts regarding judicial independence, new legally protected interests would have been harmed. ¹³⁸ In Jóri, one possible execution of the CJEU’s judgment could have been to reinstate the former Data Protection Ombudsman. But it is in the Member State’s competence to choose the way to comply with the Court’s decisions and Mr. Jóri himself decided not to return to office.

The Hungarian Constitutional Court could have assessed the cases from a more constitutional perspective, but that did or could not happen in these cases. ¹³⁹ The public apology to Mr. Jóri clearly illustrates the difference between remedies for individual and constitutional harms. The Minister of Justice apologised to Mr. Jóri, but not to the Hungarian public. Nonetheless, it is the people whose rights for an independent data protection authority that were breached.

3.1.1. Unconstitutional variations of the ‘98% tax’

Several scandals came to light, where state-owned companies paid huge severance payments to high level managers. The Orbán government declared shortly after the elections of 2010, that they would punish ‘unabashed severance payments’. ¹⁴⁰ Accordingly, the Parliament imposed an extraordinary 98% tax in October 2010 ¹⁴¹ on all employees paid from the public budget (e.g. civil servants), covering any payment in connection with termination of employment (e.g. severance pay or a non-competition payment). ¹⁴² Thus, 98% of these payments had to be reimbursed to the Tax Authority after the amount exceeded HUF 2m (about EUR 7,000). It was a retroactive law, ¹⁴³ as it applied to any such income acquired after 1 January 2010. ¹⁴⁴ This new law had two separate aims. First, the political goal was to prohibit and remedy this unpopular practice in the public sector. Second, the budgetary aim was to provide extra income for the central budget. Since the revenue generated from this tax was so meager as to be almost negligible, ¹⁴⁵ the symbolic political factor seemed to be more important than the austerity one.

The Constitutional Court stated unconstitutionality of this repeatedly amended measure three times. In its first judgment (in October 2010) ¹⁴⁶ it struck down relevant sections ¹⁴⁷ of the law. The amended Constitution ¹⁴⁸ paved the way for the Parliament to treat those incomes differently and retroactively, which violate the bona fide principle. However, the 98% tax must be levied also on those payments that are regulated by law and not an agreement of the parties, therefore, these payments cannot violate the principle of bona fide. Moreover, it infringes upon the prohibition of retroactive legislation ¹⁴⁹ and the rate of the tax is inordinately high.

In response, the government declared that during a dire economic crisis, certain constitutional principles could be temporarily disregarded. Accordingly, the Parliament amended the Constitution to restrict the authority of the Constitutional Court concerning financial topics, such as taxes, and only the violation of human dignity and freedom of religion are exceptions to this restriction. ¹⁵⁰ Furthermore, the Parliament amended the law on the 98% tax ¹⁵¹ and the most important novelty of the new regulation was its retrospective effect back to 2005 ¹⁵² based upon the repeated amendment to the Constitution. The reference to the violation of bona fide was removed, nonetheless, the Constitution as amended permitted the confiscation of the subject’s termination payment with a retroactive effect of up to five years. ¹⁵³

As expected, the Constitutional Court stated for second time (in May 2011), that the amended law was unconstitutional in part, and the Court struck down the provision giving retrospective effect back to 2005. All the other detailed provisions on the 98% tax remained in force, due to the above-mentioned restriction of its jurisdiction by the Constitution. Thus, the Court stated only the unconstitutionality of the retroactive effect based on the infringement of human dignity of taxpayers, since it levied a retroactive tax, without any constitutional reason, on the lawful income of individuals. ¹⁵⁴

The third decision of the Constitutional Court (in February 2014) ¹⁵⁵ followed the three judgments of the ECtHR (see later) and the various amendments of the 98% tax act. The judgment was based on the jurisdiction of the Court to state the breach of international treaties, which jurisdiction had not been objected by the constitutional amendment. ¹⁵⁶ The Court stated that the rate of the tax (i.e. 98%) breached the right to property in the ECHR ¹⁵⁷ and prohibited the application of this provision in the pending cases, since this article was replaced from 1 January 2014 (see below). ¹⁵⁸ The breach of an international treaty also violates the domestic constitutional provision on the rule of law. ¹⁵⁹

Evidently, the three judgments of the Constitutional Court struck down certain elements of the law (e.g. the retroactive effect and the high rate). It held that a pecuniary burden was unconstitutional if it was of a confiscatory nature or its extent was clearly exaggerated. ¹⁶⁰ Remarkably, the Court found its way to hold the law unconstitutional in spite of the various amendments targeting the ‘created’ constitutionality of this strange measure and the limitation of the Constitutional Court’s powers.

3.1.2. Unjustified deprivation of property

The ECtHR stated in three judgments in 2013 ¹⁶¹ that the levying of a tax at a rate of 98% on part of the severance pay had amounted to an unjustified deprivation of property. ¹⁶² Article 1 of Protocol No. 1 holds that protection of property does not ‘impair the right of a State to enforce such laws as it deems necessary to…secure the payment of taxes’. ‘Possession’ has been given a broad interpretation by ECtHR extending to things with an economic value. ¹⁶³ ‘Although the levying of tax in principle constitutes an interference with property rights, this phrase has generally withheld the Court from reviewing tax issues. Taxing is considered a national prerogative par excellence, and in the light of a particularly broad margin tax issues usually do not pass the admissibility test.’ ¹⁶⁴

However, this tax was, exceptionally, considered by ECtHR in N.K.M. v. Hungary as ‘possession’ within the meaning of Article 1, because this legitimate expectation of obtaining an asset is an existing revenue, which has already been earned by a civil servant, who accepts limitations on some of his fundamental rights and a remuneration unilaterally dictated by law. The statutorily stipulated severance represents a long-term expectation on the side of the civil servant and a commitment on the side of the State as employer.

It may be questioned, whether prospective applicants could infer from this judgment that the taxing of severance payments allows for Convention review as possession. ¹⁶⁵ The concurring opinion emphasised in this respect, that ‘the imposition of taxes as a general rule is for the States to decide and that only if the system or the way it has been applied in a particular case is arbitrary or devoid of reasonable foundation can the imposition of taxes be challenged under Article 1 of Protocol No 1.’ ¹⁶⁶ It must be emphasised, that this case does not simply concern property, it also concerns the social right of protection against the risk of loss of employment. ¹⁶⁷ In addition, property rights in constitutions and under ECHR have been employed throughout the crisis, creating an efficient (indirect) way of protecting social rights. ¹⁶⁸

The other interesting part of the judgment is on proportionality. In its case law (e.g. Broniowski v. Poland) ¹⁶⁹ the Court has already stated, that an interference with the peaceful enjoyment of possessions must strike a fair balance between the general interest of the community and the protection of the individual’s fundamental rights. The Court’s test is, whether the person had to bear a disproportionate and excessive burden by the State’s action. ¹⁷⁰ The Hungarian government did not dispute that the contested deprivation of revenue had amounted to an interference with the applicant’s right to property. However, in its view, this interference was prescribed by law, and it pursued the legitimate aims of satisfying society’s sense of justice and of protecting the public purse. ¹⁷¹

The Court accepted that the ‘sense of social justice of the population’, in combination with the interest to protect the public purse and to distribute the public burden satisfies the Convention requirement of a legitimate aim. However, this tax cannot be justified by the legitimate public interest. It affected the applicant being in good faith and deprived her of the larger part of a statutorily guaranteed, acquired right serving the social interest of reintegration. She was subjected to this measure while unemployed, together with the unexpected and swift nature of the change which made any preparation virtually impossible, thus, she was exposed to substantial personal hardships. Overall, she was made to bear an excessive and disproportionate individual burden, therefore the measure cannot be held reasonably proportionate to the aim sought to be realised. ¹⁷² Palmstorfer points out, that the outcome was due to the fact that the applicant could be exposed to a substantial personal hardship by a retroactive measure and lacking a transitional period. ¹⁷³

Proportionality allows the Court to participate in the current dialog about who bears the burden of the crisis. Contiades and Fotiadou concluded that the judicial proportionality scrutiny of rights infringements can keep social rights alive throughout the crisis. ¹⁷⁴ N.K.M. illustrates the flexibility that proportionality creates for courts to tailor their responses to political realities. Here flexibility allowed a court to apply proportionality in more muscular ways than other courts had in earlier cases. ¹⁷⁵

Violation was indeed justified by the very peculiar way this tax legislation was applied. ¹⁷⁶ National and international courts were not impinging on the right to tax income, but rather that this measure was confiscatory and punitive. It is a restatement of the Court’s long-held position, that such measures are disproportionate if they are manifestly without reasonable foundation. Nannery summarises the ‘low threshold test’ of ECtHR regarding crisis measures, as it must have unsound legal basis, pursue an aim not remotely connected to the measure, and place such a heavy burden on a person that can be adequately balanced against the public interest. ¹⁷⁷ Even this low thershold was not passed by the Hungarian measure. The extent to which one is inclined to criticise the N.K.M. judgment might depend on whether one favours an ‘individual justice’ or rather a more ‘constitutional’ approach of the Strasbourg Court. ¹⁷⁸

As a consequence of these judgments, the rate of the tax was decreased from 98% to 75% from 1 January 2014. ¹⁷⁹ However, the general income tax applies to income due before 31 December 2013 (15-40% between 2010 and 2013). ¹⁸⁰ It is doubtful whether the decrease from 98% to 75% and the retrospectively levied lower tax fully compensate for losses actually sustained, and whether this move adequately addresses the social and constitutional consequences.

3.2.1. The ‘nationalisation after privatisation’ trend

From the 1980s, several countries fully or partially replaced their pay-as-you-go (PAYG) systems with private pension funds in different parts of the world. This process is commonly referred to as pension privatisation. ¹⁸¹ After Latin America, CEE countries were the pioneers of introducing mandatory private funded schemes into their pension systems in the late 1990s, following the model laid out by the World Bank in 1994. ¹⁸² CEE countries already had the PAYG model during the communist regime. ¹⁸³ By the late 2000s, the overwhelming majority of these countries (except the Czech Republic and Slovenia) had transformed their national pension system to three parallel pillars. In this model, the PAYG scheme is the first pillar, mandatory private pension funds are the second, and voluntary private accounts are the third pension pillar. The second pillar was created by diverting contributions from the first pillar (privatisation). ¹⁸⁴

As early as 1998, the Hungarian pension system was based on the above-mentioned three pillars. ¹⁸⁵ As a result of the reform, 2.1 million workers, mostly under age 40 and about 50% of the workforce, have diverted part of their pension contributions (6% of payroll) to private pension funds in 1999. It was compulsory for the career-starter employees to join a pension fund. Similarly, in Poland workers between the ages of 30 and 50 were given the choice in 1999 to divert one fifth of their overall pension contribution (7.2% of payroll) to private pension funds, but workers under 30 automatically joined the new scheme. In Latvia, a smaller 2% of payroll pillar was introduced in 2000 and in Croatia a second pillar at 5% of payroll began in 2002. ¹⁸⁶

Argentina was the very first country reversing pension privatisation in 2008 by the elimination of private funds. ¹⁸⁷ Similar reform reversals were undertaken in Bolivia in 2010, Hungary in 2011–2012 and Kazakhstan in 2013–2014. The debt crisis of 2008 was a turning point in the pension systems in CEE, as by 2014 seven CEE countries implemented significant reform reversals, although they did so in rather different ways. ¹⁸⁸

At one extreme, Hungary, the regional pioneer of pension privatisation, de facto nationalised its mandatory private pension pillar, and returned to its pre-1998 PAYG public scheme. ¹⁸⁹ The reform reversal was launched in November 2010, when payments into the second-pillar were suspended. In December, the Parliament approved an amendment to pension law pursuant to which members of the second pillar could remain in the private pillar, if they submit an application until the end of January 2011. ¹⁹⁰ As a result, only 3.12% (97,400) of all members decided to remain in the private pillar, the majority of them young workers. ¹⁹¹ Those who returned to the statutory first pillar would receive their pension exclusively from the state. As the final step compulsory private pension funds were terminated in 2012. ¹⁹²

Almost the total assets of mandatory private pension funds accumulated between 1998 and 2010 (about EUR 12 billion from over 3 million members), were fully nationalised and incorporated into the state budget. ¹⁹³ The efficient protection of pensioners and improvement of the budget balance deteriorated by the second pillar were the official explanation for this measure, ¹⁹⁴ and it really ensured a huge initial asset and a stable continuous contribution (about 1.4% of GDP yearly) ¹⁹⁵ for the state budget. Nationalisation took place without allowing a transitional period for members to adapt to the legal changes (like compulsory retirement of judges in the same year).

The other CEE reform reversals stopped at curtailment, since they ‘kept their second pillars operational but decreased the level of contributions paid into them, either permanently – as in Poland and Russia – or initially on a more temporary basis – as in Estonia, Latvia, and Lithuania. Finally, Slovakia saw governments alternating between a willingness to weaken or to maintain private accounts.’ ¹⁹⁶ This tendency is primarily about the funding gap related to the diversion of contributions from the public pension system to private schemes, a key issue that was underestimated in the first wave of reforms. ¹⁹⁷

Consequently, the most radical reforms were those embraced by Argentina and Hungary. ‘These reforms were part of a package of incremental interventionist policies serving state centralisation agendas in both countries.’ ¹⁹⁸ Datz and Dancsi argue, that in settings, where institutional weakness contribute to policy instability and institutional replacement, majoritarian governments were presented with extensive room of manoeuvre in pension reform. Thus, the assumption and main argument for privatisation, that mandatory pension funds would be better insulated from politics than PAYG systems, was overly optimistic. ¹⁹⁹ The situation of private pension pillars is extremely uncertain, when it comes to other targets like adherence to the Maastricht criteria. ²⁰⁰ Simonovits points out, that ‘governments can target the accumulated capital of pension funds as a source of finance to bankroll projects without having to raise personal income tax rates or reduce public expenditures. This temptation may be especially strong in times of crises when short-terms needs overshadow long-terms objectives. From this perspective, Hungary is a typical case how not to do pension reforms and counter-reforms.’ ²⁰¹

3.2.3. Effective protection of property rights?

Nationalisation of pension funds was probably the most debated legislative step of the Orbán government, therefore, numerous complaints were submitted at the Constitutional Court. However, the new Basic Law and Constitutional Court Act ²⁰² required that its open cases had to be resumed de novo in 2012. Since the complaints on nationalisation of the private pension funds had not been decided by that date (despite disputes within the politically divided Court), it was among those that must be again commenced. In addition, the authority of the Constitutional Court to examine the constitutionality of financial measures was remarkably restricted by the amendment of the Constitution in 2011 (see above), the violation of human dignity remained as a cause of action challenging the government’s action. ‘Given that prior decisions of the Constitutional Court had said that people had a property interest in the payments they had made into the state pension system, the new pension law was surely unconstitutional under the standards that the Court had previously set. But rather than reiterate its previous arguments, the Court simply said nothing.’ ²⁰³

In the meantime, close to 8000 complaints went to the ECtHR, which required all new applications to be channelled via trade unions. ²⁰⁴ In its only decision on the case, in E.B. v. Hungary, ²⁰⁵ the applicant complained under Article 1 of Protocol No. 1 that the new law confiscated her private pension contributions to the benefit of the State budget. In her view, full state pension falls short of the guarantees of a private pension scheme, being based only on the State’s promise, while a private pension is directly related to her contributions and investment strategy.

However, the complaint was declared inadmissible. According to ECtHR case law, pension entitlements fall within the notion of ‘possession’, ²⁰⁶ even if the right to a pension is not guaranteed under the Convention. Thus, the reduction or discontinuation of pension entitlements may constitute an interference with the right to peaceful enjoyment of possessions, ²⁰⁷ however, Article 1 of Protocol No. 1 does not guarantee any right to a pension of a particular amount. ²⁰⁸ When examining whether a fair balance has been struck between public and individual interests, the Court considers among other factors to what extent the interference diminishes the applicant’s entitlement. ²⁰⁹ Another consideration is whether the deprivation of pension rights leaves the affected person entirely without financial means ²¹⁰ and whether the applicant is obliged to pay money back. ²¹¹ However, the forfeiture of the applicant’s pension rights fails to strike a fair balance between the interests of the general public and the individual. ²¹² Therefore, pension reductions may be disproportional in very limited cases. The risk of a conversion of pension rights resulting in a breach of the property right under the Convention is extremely small, since ‘the case law of the ECtHR suggests that ECHR Member States have a wide margin of appreciation in implementing social policies’. ²¹³

In the Hungarian case, the Court observed that E.B.’s contributions to the private funds before 1 November 2010 remained intact under the new legislation, and that any contributions she made afterwards were transformed into an entitlement under the statutory first pillar. Similarly, her service time was recognised in the periods both before and after the change in legislation and she was entitled to future pension payments through the contributions she had made during the entire period of her employment, either to the private pension fund or the State fund. The Court held that there had therefore been no interference with her property rights, including her legitimate expectation to receive a pension in the future. The main argument of the Court is that pension is provided for her, even if in a different fund and under differing rules. However, the Court did not refer to the lack of an appropriate transitional period for members to adapt to the legal changes.

Van Meerten and Borsjé argue that the outcome would be different when transformation of second pillar pension entitlements is tested under EU law (Charter of Fundamental Rights) rather than ECHR, since the former may offer pensioners a more effective protection. Infringement of pension entitlements has not been tested against the Charter, but an alleged breach of Article 17 on property rights (having direct horizontal effect) could be reviewed in the light of the EU’s economic and social objectives. ²¹⁴