Ministers’ Deputies

CM Documents

CM(2004)69 (restricted) 26 April 2004

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883 Meeting, 5 May 2004
4 Human Rights

4.2 Review of Resolution(97)9 on the status and the conditions of service of the judges of the European Court of Human Rights

Proposal of the Secretary General

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I.          BACKGROUND

1.             The present social protection of judges of the European Court of Human Rights (the Court) is based on Committee of Ministers Resolution(97)9 on the Status and Conditions of Service of Judges of the European Court of Human Rights to be set up under Protocol No. 11 to the Convention for the Protection of Human Rights and Fundamental Freedoms, adopted on 10 September 1997.

2.             Article 1 of Appendix 1 to the Resolution, concerning the Conditions of Service of Judges stipulates:

The all-inclusive annual salary of judges, as holders of a full-time office, shall be 1,100,000[1] French francs [€167 694], payable in equal monthly instalments in advance.

3.         Article 5 of Appendix 1, Social protection, paragraph 1 states that:

Judges are required to ensure that they have arranged, at their own expense, for adequate insurance cover of the following risks, for the full period of their terms of office:

• temporary incapacity to work due to illness or accident - the cover must be such as to replace the loss of salary indicated under Article 3, paragraph ii above;
• costs of health care, including maternity expenses, for themselves and their dependants;
• permanent incapacity to work due to an illness or an accident;
• death.

Judges are also required to provide, at their own expense, for their retirement or pension benefits as regards the period of their terms of office.

4.             The broad economic effect of the existing arrangement is to treat the judges with regard to all forms of social security as self-employed persons.

5.         The arrangement was considered provisional. It was to be reviewed within one year from the date the resolution came into force (i.e. by 1st November 1999) on the recommendation of the Secretary General in consultation with the President of the Court.  This was, in fact, not carried out at the time.

6.         In February 2002, at their 784th meeting, the Ministers’ Deputies invited the Secretary General to:

… draw up, as a matter of urgency andin consultation with the President of the Court, proposals enabling the Committee of Ministers to proceed with the review of provisional regulations set out in the Appendices to Resolution(97)9, bearing in mind both the necessity to reassess the conditions of service of judges in the light of the needs of the proper functioning of the Court and the limited budgetary appropriations available.

In order to fulfil this mandate, the Secretary General, as an initial step, set up a Working Group of three independent experts (Mr Willi Fuhrmann, Sir Jonathan Mance and Mr Igor Tomes) to study the questions involved.

8.         The Working Group had extensive exchanges with judges and staff members of the Registry. It delivered its report in November 2002 and the judges were immediately provided with a copy of it.  The Ministers’ Deputies have also all received a copy of this document. (CM/Inf(2003)34-Add)

9.             In the Working Group’s report, a number of proposals regarding social protection were made, but the Group noted that it was not possible to proceed concerning the most pressing question (pensions) without professional actuarial studies on this issue. 

10.          As recommended in the report, and as subsequently requested by the Court, the Secretary General proceeded to the instruction of actuaries to provide a detailed cost breakdown of the various pension scheme options suggested by the experts.

11.          The actuarial consultants had, inter alia, direct consultations with the judges and members of the Registry of the Court, who presented to them detailed and extensive contributions.  The consultants delivered their report on 31 October 2003 to both the Secretary General and the judges of the Court.  The report outlined the possible pension scheme and its costs under six different scenarios.  In order to simplify this document, the only scenario taken into consideration in this document is that which was preferred by the judges, with the following significant parameters:

·         pension paid as from the age of 65 (or at the end of the judge’s mandate if later) but can be paid earlier (from the age of 55) at a reduced rate;

·         pension of 25 % (after a six year term) or 50% (after a 12 year term) of the final stipend (for these purposes calculated as €177,000 per year);

·         survivor’s pension payable to a surviving spouse and/or dependent children at the rate of 50% of the pension which the former judge was receiving or would have received at the age of 65;

and the following assumptions:

·         the pension plan will continue indefinitely;

·         the total number of judges on the bench will remain at the current level of 43;

·         new judges are appointed at age 53, the average age at appointment for the current judges.  To the extent that new judges are appointed with a range of starting ages, the cash flows will vary somewhat;

·         new judges will serve for twelve years;

·         percentage of judges married : 75%;

·         age difference between spouses  : 2 years (the man being older);

·         inflation of 3% per annum, salary increases exceed inflation by 0%;

·         valuation interest rate of 6.5% - this is the rate used to determine the present value of the liabilities for pensions incurred.  It is also the rate of return expected to be earned by a fund in a funded system – n.b. it includes inflation so that the real rate of return is in fact 3.5%.

12.          Given the high cost of the proposed pension scheme under all six scenarios, and in accordance with the mandate to take into account the “limited budgetary appropriations available”, the Secretary General instructed the Directorate General of Administration and Logistics to contact the actuaries to ask them to provide figures for a alternative, less costly scenario (based nevertheless on the parameters and assumptions as outlined above) and then to prepare, as requested, the proposals for the review of Resolution(97)9.

13.          In the meantime, the President of the Court sent a draft amended Resolution on the conditions of service of judges to the Chairman of the Liaison Committee, who transmitted it to the Secretary General and to the Chair of the Ministers’ Deputies on 19 January 2004.

14.        At the Ministers’ Deputies’ 869th meeting on 21 January 2004, having heard interventions from the judges’ representative and from the Secretary General, the following decisions were taken:

The Deputies:

took note of the information provided by the Court and by the Secretary General;

invited the Secretary General to submit:

·         by the end of February at the latest a comparative table showing the emoluments of judges in the leading international courts;

·         before the end of March 2004, proposals concerning the revision of Resolution(97)9 including, with regard to pension provision, alternative scenarios making it possible to examine the budgetary implications.

15.        The comparative tables were distributed on 27 February 2004 (CM/Inf(2004)7)and, taking into account a request from the Ministers’ Deputies, an updated  version with further information, including the Council’s A7 staff members’ remuneration , was distributed on 4 March 2004 and is attached as Appendix A.  It should be noted, in particular, when examining these tables, that the judges of the European Court of Justice and of the Court of First Instance of the Communities are liable to pay community tax on their salaries, a tax which would vary according to personal circumstances from 30% to 37% of the basic emoluments, reducing this basic salary to below the level currently enjoyed by the judges of the Court.

II          THE SECRETARY GENERAL’S PROPOSAL

16.        The Secretary General is now in a position to submit a proposal to the Committee of Ministers.  This proposal, set out in Appendix B, is based on the initial considerations in determining the conditions of service of judges of the Court in 1997, the wishes of the judges for pension and other social security cover (as expressed in their proposal referred to in paragraph 13 above) and an analysis of possible funds available for offering the cover required (to take into account the proviso of “limited budgetary appropriations”).  The proposal highlights in bold character the changes compared to Resolution(97)9 and in italics the reasons for the proposed changes.

17.        The main proposed improvements are:

• a specific reference to the Sixth Protocol to the General Agreement on Privileges and Immunities;

·         a clear establishment of salaries for all judges, together with allowances for the President as well as the Vice-Presidents of the Court and the Presidents of Sections;

·         a provision for increases of salaries in line with any increases awarded to A7 staff members;

• provision for holiday and sick leave;
• the introduction of social protection:

–         social and medical insurance schemes;

–         pension provisions.

18.        Appendix B bis sets out in detail both the social and medical cover proposed and the costs of such cover.

19.        The attention of the Ministers’ Deputies is drawn to three important points on this question:

20.        Appendix B ter, sets out the costs of the proposed pension cover under the draft resolution, i.e. those as calculated by the actuaries as noted under paragraph 12 above.  It also indicates possible arrangements for funding this cover.

21.        As can be noted from the details in Appendix B ter, the proposal takes, as a starting point, existing financial constraints.  It also foresees the need for the input of an additional sum of €645.000 (43 * €15.000), which corresponds to the amount by which the Committee of Ministers reduced the Budget Committee’s recommendation for overall judges’ stipends in 1997. This additional sum would have to be made available either from the Court’s existing budgetary appropriations or through additional contributions from the member states, specifically for this purpose. It also takes into account the 12.5% of the judges current stipend deemed to represent the employers’ cost of social cover (health insurance and pension provision).

22.        Having deducted the cost of the social and medical insurance, the remaining funds available can be allocated to providing a defined benefit pension, which the actuaries have assessed, on the basis of those available funds, as being 16% of revised basic salary after 12 years of service.  16% represents an accrual rate of 1.33% per year of service, which, given that it is a non contributory system on the part of the judges is identical to the accrual rate of pension for staff members (2% per year of service, but with 1/3 of the cost being paid by the staff members.  If the judges were prepared to contribute on a one third/two thirds basis like staff members, their pension accrual rate would rise to 2%).

23.        This defined benefit pension should, based on the assumptions used by the actuaries, be sufficiently provided for by the funding available as noted. Clearly, the amount available for funding the pensions should be increased at the same time as the judges’ salaries (effectively the contribution to the pension scheme should be specified as (approximately) 18 % of judges’ net stipends and included in the Court’s budget – see Appendix B ter, paragraph 7).  At the same time, any shortfall in the funds resulting from the investment of the contributions will have to be made up for through contributions by the member states to a judges’ pension budget since the risk in a benefits defined pension scheme falls on the employer.  For more detailed information on contributions defined vs benefits defined pension systems and alternative ways of financing the latter, please see Appendix D. 

24.        It must be noted that the proposal would imply a reduction in the present basic salaries of the judges, to the extent that their current stipend already includes the equivalent of an “employer’s contribution” to social security cover costs (see Appendix B ter, paragraph 2). The pension as calculated is therefore payable only in respect of the basic revised salary and cannot take into consideration any extra allowances such as the President’s allowance.  Again, it would not be applicable to ad hoc judges.

25.        Finally, the calculations are based on the assumption that only future service would be taken into account for the pension rights (i.e. without taking into consideration any service effected before the introduction a such a scheme).  Indeed, the independent experts stated that:

The panel does not consider it feasible to provide any of the contemplated benefits retroactively. It recommends that existing judges should be entitled to them prospectively, on a pro rata basis and having regard to any future contributions made.

III         THE JUDGES’ PROPOSAL – COMPARATIVE ANALYSIS WITH THE SECRETARY        GENERAL’S PROPOSAL

26.        In Appendix B, those elements of the judges’ proposal (as set out in the Draft Resolution prepared by them) which differ from that of the Secretary General are shown as “shadowed”.  

27.        The provisions regarding social cover, apart from the pension scheme, are the same as under the Secretary General’s proposal and the costs are therefore explained in Appendix B bis.

28.        The judges’ proposal also includes the provision of an installation allowance to new judges.  However, as noted in Appendix B ter, the judges’ stipends were initially fixed by including an element, representing 12.5%, for displacement including the cost of regular travel to the home country etc.  This amount can be considered to have been intended to cover installation expenses.  It would of course be feasible for newly arriving judges to receive an advance of 12.5% of their first year’s salary on their arrival to deal with setting up costs.

29.        However, the main difference between the two proposals concerns the pension provisions.  The judges have made a case for receiving a pension at a rate of 50% of final stipend after twelve year term and 25% after a six year term, corresponding to an annual accrual rate of 4.17%.

30.        The provisions for this pension as proposed by the judges and their costs are detailed in Appendix C bis.

IV         CONSULTATION WITH THE PRESIDENT OF THE COURT

31.        As requested by the Ministers’ Deputies in February 2002, and as already noted the Secretary General has consulted the President of the Court at each stage in the development of this issue.  The most recent consultation, i.e. the submission by the Secretary General of his draft proposal for comments from the President resulted in a written reply from the President, which is set out in Appendix E to this document.

 

Appendix  A

REVISED SUMMARY COMPARATIVE TABLE 3/3/2004

	Court of Justice of the European Communities*	Court of First Instance**	International  Court of Justice***	European Court of Human Rights	International Criminal Court	Council of Europe (permanent, grade A7)
Number of Judges	15 8 Advocates General	15	15	43	18	10
Basic salary (BS) (monthly, in Euros)	President: 22,210.81 Judges: 18,106.64	President: 18,106.64 Judges: 16,738.58	President: 14,583.33 Judges: 13,333.33	President and Judges: 14,826	President and Judges: 15,000	A7/ step 1: 9 896.82 A7/ step 6: 11 885.13
Allowances (monthly, in Euros):
Entertainment allowance	President: 1,418.07 Judge, Advocate- General: 607.71	President: 607.71 Judges: 554.17	No	No	No	No
Residence allowance (expatriation allowance)	15% BS		No	No	No	16-20% BS depending on situation and recruited before 1/01/96 or 14-18% depending on situation and recruited after 1/01/96
Household allowance	5% BS		No, but Resident:  home leave every two years; and allowance = 140% of Daily Subsistence Allowance x (30 days + 15 days) every year Non-resident: paid home leave 3 times per year with one family member	No	No, but home leave every two years	6% BS
Allowance for dependent children	247.86		No	No	No	260.47
Education allowance	221.50		Yes, UN scale	No	Under consideration, similar to the UN, subject to approval by the Assembly of States Parties (ASP)	Yes
Special duty allowance	810.74 (Chamber Presidents, First Advocate General)	737.47 (Chamber Presidents)	94 USD per day (Judge acting as President)	1007.67 (President) 553.83 (2 Vice Presidents and 2 Chamber Presidents)	18,000 (President) (annual) and max. 10,000 (Vice-Presidents if act as President) è (100 per day)	No
Transitional allowance on leaving post	< 2 years – 40% of last BS > 2 years but < 3 years – 45% > 3 years but < 5 years – 50% > 5 years but < 10 years – 55% > 10 years but < 15 years - 60% > 15 years – 65%		5 years è 18 weeks’ BS 9 years è 24 weeks’ BS	No	Under consideration (relocation/repatriation allowance) similar to the International Court of Justice (ICJ), subject to approval by the ASP	No
Installation allowance Resettlement allowance	2 months’ BS 1 month BS		No No	No No	No No	1/6 annual BS with 2 or more dependent children; 1/8 annual BS with 1 child; 1/12 in other cases No
Social Security	1.7% BS or pension, contributory (1/3-2/3)		No	No	No	Contributory (1/3-2/3)

	Court of Justice of the European Communities*	Court of First Instance**	International  Court of Justice***	European Court of Human Rights	International Criminal Court	Council of Europe (permanent, grade A7)
Pension for life	From age 65, or with reduction coefficient from age 60, maximum 70% of last BS, non contributory		From age 60, maximum 50% of last BS, non contributory	No	From age 60, maximum 50% of last BS, non contributory	From age 60, max. 70% of last BS after 35 years of service; contributory (1/3-2/3)
Surviving spouse pension	60% of former Member’s basic pension, plus 10% for each dependent child, non contributory		50% of former Member’s basic pension, non contributory	No	60% of former Member’s basic pension, non contributory	60% of former Member’s basic pension, contributory
Disability pension	Min. 30% and max. 70% of last BS, non contributory		Equal to retirement benefits, non contributory	No	Under consideration, similar to the ICJ, non contributory, subject to approval by the ASP	Equal to retirement benefits, contributory

* and ** Judges' salaries are subject to the internal Community tax

Examples:

a) Single person                                                b) Head of household with two children

    BS = 18,106 Euros                                            BS = 18,106 Euros

    Effective tax rate of 37%                                   Effective tax rate of 31%

    Net salary (approximately) = 11 467 Euros          Net salary (approximately) = 12 500 Euros

*** Denominated in USD subject to protection against currency fluctuation

Inter-American Court of Human Rights

§  7 Judges

§  Social security and pension plan – the Court budget does not provide for such benefits

§  The Judges receive an honoraria of 150.00 USD for each working day at the seat of the Court

§  Per diem of 164.00 USD

Appendix B

DRAFT RESOLUTION

ON THE STATUS AND CONDITIONS OF SERVICE OF JUDGES

OF THE EUROPEAN COURT OF HUMAN RIGHTS[2]

Article 1

Elected members of the Court shall enjoy the special status of "judges of the European Court of Human Rights" ("judges").

Article 2

In accordance with Article 51 of the European Convention on Human Rights (“the Convention”), judges and ad hoc judges appointed pursuant to Article 27 § 2 of the Convention shall be entitled, during the exercise of their functions, to the privileges and immunities provided for in Article 40 of the Statute of the Council of Europe and in the agreements made thereunder, including in particular the Sixth Protocol to the General Agreement on Privileges and Immunities of the Council of Europe.

Article 3

The conditions of service of judges and ad hoc judges shall be governed by the Regulations set out in appendices I and II respectively to this Resolution.

The Regulations shall be implemented by the Secretary General of the Council of Europe, who, for this purpose, shall act in consultation with the President of the Court and may have regard to the rules applied concerning staff members of the Council of Europe.

Article 4

This Resolution shall enter into force on …..

Appendix I

Regulations governing the conditions of service of judges

Article 1 - Annual salary

1.         The annual salary of judges, as holders of a full-time office, shall be €155,673[3] 177,912€.

payable in equal monthly instalments in advance.

2.         Additional remuneration at the following annual rates shall be paid, on a pro rata temporis basis, to the following office-holders:

            - the President of the Court: 12,092€.

            - the Vice-Presidents of the Court and the Presidents of Sections: 6,046 €.

3.         The annual remuneration shall be adjusted in accordance with any adjustments made to salaries of the Council of Europe staff of Grade A7.

Article 2 - Place of residence

Judges shall reside at or near the seat of the Court.

Article 3 - Leave

1.         Holiday leave

The Court shall remain permanently in session. The duration of court vacations shall be determined by the President of the Court with due regard to the needs of business. During such court vacations judges shall make themselves available as required. Judges may absent themselves from Strasbourg outside court vacations only exceptionally and with the President’s authorisation.

2.         Sick leave

Whenever judges are absent and unable to perform their duties for health reasons they shall inform the President of the Court and provide appropriate medical certificates.

Article 4 - Payment of expenses by the Council of Europe

1.         The Council of Europe shall pay:

            (a)         the travel and subsistence expenses of a judge on an official journey;

            (b)        travel, subsistence and removal expenses incurred by judges and their household (spouse and children) when taking up or on termination of their duties;

            (c)         installation allowance amounting to one month’s remuneration for a judge who takes up residence in Strasbourg alone and two months’ for judges whose spouse and dependent children, if any, also take up residence in Strasbourg.

2.         On the death of a judge during his or her term of office, the Council of Europe shall defray:

            (a)         the cost of transporting the body of the judge from the place of death to the place         of funeral;

            (b)        the cost of transporting the deceased judge's personal belongings;

            (c)         the travel costs of the survivors who were dependent on the judge and were part of  the judge's household.

3.         The rules issued by the Secretary General of the Council of Europe applicable to payment of expenses to staff members of the Council of Europe shall apply to judges, save that the amounts payable in respect of travel and subsistence expenses shall be governed by the rules issued by the Secretary General applicable to the reimbursement of the expenses of members of the Parliamentary Assembly and Ministers' Deputies when travelling at the charge of the Council of Europe.

Article 5 - Social protection

1.         Judges shall benefit from a social and medical insurance scheme, covering medical care costs, temporary incapacity and invalidity/death benefits, under a scheme organised by the Council of Europe.  This scheme shall be obligatory for all judges.

2.         (a) There shall be set up a pension scheme applicable to judges in accordance with the following general conditions:

(i) Judges who have reached the age of sixty-five and have ceased to hold office

shall be entitled to a pension for life.

(ii) The amount of such pension shall be 8% of basic  annual remuneration after six years’ service and 16% after twelve years’ service.

(iii) The pension of judges serving terms other than six or twelve years shall be adjusted on the basis of an accrual rate of 1.33% of annual remuneration per year of service, save that pension entitlement shall not exceed 25% of annual remuneration.

(iv) Judges ceasing to hold office before reaching the age of sixty-five may take a pension of equivalent actuarial value at a minimum age of 60.

(v) Surviving spouses shall be entitled to a survivor’s pension. Where there is no surviving spouse and the deceased judge leaves dependent children, they shall be entitled to a survivor’s pension.

(vi) Judges shall be entitled to a disability pension.

Detailed rules for the implementation of this scheme shall be adopted by the Committee of Ministers, after consultation with the President of the Court, and shall be appended to the present Resolution as Appendix III.

Article 5 - Social protection

1.         Judges shall participate in the Council of Europe staff medical and social insurance scheme on the same basis as the staff.

2.         (a) There shall be set up a pension scheme applicable to judges in accordance with the following general conditions:

(i) Judges who have reached the age of sixty-five and have ceased to hold office

shall be entitled to a pension for life.

(ii) The amount of such pension shall be 25% of annual remuneration after six years’ service and 50% after twelve years’ service.

(iii) The pension of judges serving terms other than six or twelve years shall be adjusted on the basis of an accrual rate of 4.17 % of annual remuneration per year of service, save that pension entitlement shall not exceed 70% of annual remuneration.

(iv) Judges ceasing to hold office before reaching the age of sixty-five may take a pension of equivalent actuarial value.

(v) Surviving spouses shall be entitled to a survivor’s pension. Where there is no surviving spouse and the deceased judge leaves dependent children, they shall be entitled to a survivor’s pension.

(vi) Judges shall be entitled to a disability pension.

(vii) Qualifying service for currently serving judges shall commence on 1 November 1998 or at such latter date as the judges took up their duties.

(b)        Detailed rules for the implementation of this scheme shall be adopted by the Committee of Ministers, after consultation with the President of the Court, and shall be appended to the present Resolution as Appendix III.

Appendix II

Regulations governing the conditions of service of ad hoc judges

1.         For each day on which they exercise their functions ad hoc judges shall receive an allowance of an amount equal to 1/365th of the annual salary payable to judges of the Court by virtue of Article 1 § 1 of Appendix I above. The allowance shall be free of all taxation.

2.         The Council of Europe shall also reimburse to ad hoc judges travel and subsistence expenses incurred by them in connection with the performance of their functions. The rules issued by the Secretary General of the Council of Europe applicable to the reimbursement of the expenses of members of the Parliamentary Assembly and Ministers' Deputies when travelling at the charge of the Council of Europe shall apply.

Appendix B bis

I.          BASIC PROVISIONS OF THE PROPOSED SOCIAL AND MEDICAL COVER

The following guarantees are proposed:

1.         Life insurance/permanent and total disability insurance

Until the age of 65 the benefits are the same as those applicable to serving staff of the Council of Europe, i.e. 24 times the monthly salary if the judge/staff member is unmarried and 48 times the monthly salary if the judge/staff member is the head of the family. However, from the age of 55 the capital sum payable in the event of disability is reduced and beyond the age of 65 the capital sum payable in the event of death is also reduced.  Both guarantees are subject to an age-limit of 70 years.

2.         Cover for temporary incapacity

Until the age of 65 the benefits are the same as those applicable to serving staff of the Council of Europe, i.e. no payment by the insurer for the first three months (Resolution (97)9 provides that the salary is paid in full by the Council of Europe for the first three days, and at 90% for the following 87 days), 50% of salary from the 91^st to the 180^th day (the other half being paid by the Council of Europe), and full payment of salary thereafter, for a maximum period of 36 months. After three years staff members/judges receive, where applicable, the capital sum for disability referred to above.

No benefits are payable after the age of 65.

3.         Cover for medical treatment

The benefits are the same as those payable to serving staff of the Council of Europe who are insured “from the first euro”.

Insured: the judge, his or her spouse, dependent children under the age of 20.

Age-limit for guarantee: 70 years

4.         The following premiums are payable

If the judge is unmarried: 7.13% of annual salary

If the judge is head of family: 8.485% of annual salary

Split between the judge (1/3) and the Council of Europe (2/3) as for staff members.

II.   COSTS OF THE PROPOSED SOCIAL AND MEDICAL COVER PROVISIONS

Assuming the same demographic representation as for the pension scheme - i.e. 75% of judges are heads of families - the cost can be estimated as:

(43 * 75% * 8.485% * €177,912) + (43 * 25% * 7.13% * 177,919) = €623,200

of which the Organisation would have to bear 2/3 – i.e.  €415,500 per year.

Appendix B ter

FINANCING THE SECRETARY GENERAL’S PROPOSAL FOR SOCIAL COVER

1.         To arrive at the figure which could be set aside for social cover, the proposal takes as a starting point an amount of €15 000 which corresponds to the amount by which the Budget Committee’s recommendation regarding each judge’s annual stipend was reduced when the Committee of Ministers adopted Resolution(97)9.

2.         Furthermore, the Working Group of independent experts noted, in their report, that:

“(i) The judicial stipend is €177 000 per annum, while the top salary of COE staff members (A7) is €140 000 per annum; thus a judge’s stipend exceeds the top salary by 25%;

(ii) When calculating the judicial stipend the extra 25% was intended (a) to cover judges’ travel costs (12.5%) not otherwise covered (i.e. for return trips home during their term of office) while (b) 12.5% represented the “employer” contribution to social protection”

3.         Incidentally, €15 000 represents some 8% of the judges’ stipend which, when added to the 12.5% totals 20.5% of the stipend. This is as a percentage close to the percentage contribution which the Council of Europe makes in respect of social protection for its staff members.

4.         Thus, if the judges’ stipend were to be reduced by 12.5% (representing the “employer contribution”), it would be appropriate for  the Organisation to allocate that 12.5% of the salary (today equal to €177 912 * 12.5% = €22 239 per year per judge) - together with the addidtional amount of €15 000  per year per judge (see paragraph 1 above) – i.e. a total of €37 239 per year and per judge to cover social benefits. 

5.         This would give an annual amount of 43 * 37 239 = €1 601 300 per year.  The cost to the Organisation of the medical insurance scheme (see Appendix B bis above) can be estimated at €415 500 which would leave approximately €1 185 800 which could be invested in a pension fund. 

6.         Taking this amount and applying the same parameters and assumptions of the judges’ proposal as set out in paragraph 11 of the main document, the following pensions could be envisaged after a 12 year term:

Scenarios
Inflation	Real salary increases	Net rate of return (long term)	Possible pension rate  (percentage of full current stipend (177 000)	Possible pension rate  (percentage of revised basic salary  (156 000)
3%	0%	4%	14%	16%
2%	0%	4%	14%	16%
0%	0%	4%	14%	16%

7.         Clearly, these assumptions also rely on the amount available for funding the pensions being increased at the same time as in the judges’ salaries (effectively the contribution to the pension scheme should be specified as (approximately) 18%[4] of judges’ net stipends and included in the Court’s budget).  While any shortfall in the funds resulting from the investment of the contributions will have to be made up for through contributions by the member states to a judges’ pension budget, should the assumptions prove to be correct no further contributions would be necessary.

8.         However, an amount of €645 000 (43 * €15 000), which corresponds to the amount by which the Committee of Ministers reduced the Budget Committee’s rcommendation for overall judges’ stipends in 1997, would have to be financed either through redeployment of the Court’s existing budgetary appropriations or through additional contributions from the member states, specifically for this purpose.

Appendix C

SUMMARY AND COSTS OF THE PENSION PROVISIONS AS PER THE DRAFT RESOLUTION SUBMITTED BY THE JUDGES

SUMMARY:

A pension is paid as from the age of 65 (or at the end of the judge’s mandate if later) but can be paid earlier (from the age of 55) at a reduced rate.

The pension is 25 % (after a six year term) or 50% (after a 12 year term) of the final stipend (currently €177 912 per year)

A survivor’s pension is payable to a surviving spouse and/or dependent children at the rate of 50% of the pension which the former judge was receiving or would have received at the age of 65.

1.         Demographic assumptions

In general the population of judges is considered as:

- 75% Married;

- spouse age differential - 2 years;

- maximum term - 12 years;

To reflect the effect of new judges appointed to replace those who retire, the following assumptions were made:

- the pension plan will continue indefinitely;

- the total number of judges on the bench will remain at the current level of 43;

- new judges are appointed at age 53, the average age at appointment for the current judges.  To the extent that new judges are appointed with a range of starting ages, the cash flows will vary somewhat;

- new judges will serve for twelve years.

2.         Economic Assumptions:

Inflation of 3% per annum, salary increases exceed inflation by 0%.

Valuation interest rate of 6.5% - this is the rate used to determine the present value of the liabilities for pensions incurred.  It is also the rate of return expected to be earned by a fund in a funded system – n.b. it includes inflation so that the real interest rate is in fact 3.5%.

Attached for information are the actuaries’ full table indicating the costs of a pension system under these assumptions, as well as a glossary of terms used.

COSTS OF THE PENSION PROVISIONS:

The following costs reflect the basic provisions and assumptions as outlined under point I above.

A fully funded system, taking into account liabilities as regards past service from 1 November 1998 (which explains the highs costs of the funded scheme for current judges – the past as well as future years of service have to be paid for over the remainder of their terms of office) would cost as follows up until 2025, and then as indicated in the years 2030, 2040 and 2050:

Year	Contributions to Fund (in €)
2003	2 048 936
2004	4 199 913
2005	4 325 910
2006	4 455 687
2007	4 589 358
2008	4 727 039
2009	4 868 850
2010	5 014 915
2011	5 165 363
2012	5 320 324
2013	5 479 933
2014	5 644 331
2015	5 813 661
2016	5 988 071
2017	6 167 713
2018	6 352 745
2019	6 543 327
2020	6 739 627
2021	6 941 816
2022	7 150 070
2023	7 364 572
2024	7 585 509
2025	7 813 075
2030	9 057 495
2040	12 172 516
2050	16 358 844

At the same time, a budgetised scheme, under which the member states would pay the pension liabilities as and when they arose has been assessed by the actuaries as costing (over the same period): 

Year	Contributions in respect of current judges	Contributions in respect of future judges	Total Contributions (in €)	Net Present Value (in €)
2004	39 516	-	39 516	38 365
2005	237 907	-	237 907	224 250
2006	242 734	-	242 734	222 136
2007	306 426	-	306 426	272 255
2008	607 295	-	607 295	523 858
2009	618 619	-	618 619	518 083
2010	1 026 354	-	1 026 354	834 519
2011	3 031 103	-	3 031 103	2 392 781
2012	3 096 296	-	3 096 296	2 373 053
2013	3 222 018	-	3 222 018	2 397 484
2014	3 596 083	-	3 596 083	2 597 887
2015	3 664 027	-	3 664 027	2 569 875
2016	3 740 177	424 692	4 164 869	2 836 073
2017	3 859 357	2 557 935	6 417 292	4 242 586
2018	3 916 048	2 616 504	6 532 552	4 192 997
2019	3 966 502	3 138 314	7 104 816	4 427 486
2020	4 009 717	5 525 929	9 535 646	5 769 223
2021	4 044 607	5 644 871	9 689 478	5 691 547
2022	4 070 083	5 814 260	9 884 343	5 636 903
2023	4 085 077	6 194 477	10 279 553	5 691 539
2024	4 088 514	6 308 175	10 396 689	5 588 733
2025	4 079 357	6 502 269	10 581 626	5 522 471
2030	3 815 969	11 078 006	14 893 975	6 705 105
2040	2 270 963	17 558 147	19 29 110	6 642 413
2050	651 960	26 711 625	27 363 604	6 820 618

The judges’ contention is that the full costs of any pension scheme – whether established on a funded or a budgetised basis, should be paid for entirely by the Organisation (i.e. the member states).

Glossary of Terms
Accrual Rate	The rate at which pension benefits are earned, per year of service, expressed as a percentage of salary.  For example, a pension plan formula that pays an annuity equal to 25% of pay after 6 years of service or 50% of pay after 12 years of service, can be said to have an Accrual Rate of 4.1667% per year.
Actuarial Equivalence	Two streams of benefits are said to be Actuarially Equivalent if, based on the demographic and economic assumptions chosen, the benefit streams have the same net present value.
Aggregate Cost Method/Basis	A method for funding a Benefits-Defined Pension Plan wherein the Plan's Sponsor attempts to fund the Plan via contributions that are a level percentage of pay.  This is one of several actuarial cost methods.
Benefits-Defined (Defined Benefit) Plan (Scheme)	A pension plan where the level of benefits is determined by a set formula, usually expressed as a monthly or annual benefit payable for the life of a participant (and/or the life of a beneficiary). The ultimate cost of the pension plan depends on demographic experience and the actual time value of money until the benefits are paid off.
Cash Flow	A stream of retirement benefit payments (or a stream of contributions to a funded pension scheme)
COLA	Cost of Living Adjustment.  This is presumed to equal the prevailing level of inflation.
Contributions-Defined (Defined Contribution) Plan (Scheme)	A pension plan where the level of contributions is determined by a set formula (for example, employer pays into participant’s plan  5% of pay each year); and the ultimate level of benefits depends on investment performance.  Participants have separate, individual account balances.  The Plan Participants bear all investment risk.
Demographic Assumptions	These include mortality before and after employment, as well as rates of termination, retirement and (where applicable) disability.  Other demographic assumptions that may be necessary include the percentage of work force that is married and the average age differential between husbands and wives.
Early Retirement Factor	If a plan participant chooses to receive benefits prior to their Normal Retirement Age, benefits are reduced so that the benefit stream is Actuarially Equivalent to a stream that would have started at Normal Retirement.  The fraction by which the Normal Retirement benefits are multiplied to achieve Actuarial Equivalence is called an Early Retirement Factor.
Economic Assumptions	These include: ·         Valuation interest rate (investment return) ·         Real interest rate ·         Rate of inflation ·         Salary Scale
Joint & Survivor Annuity	A series of benefits-defined pension payments, where the full periodic benefit amount is payable to the retiree for life, and X% of that periodic amount is payable after the death of the retiree, to the surviving beneficiary for the life of the beneficiary.
Liability	Net Present Value (as of 1 July 2003) of future benefit payments discounted for the time value of money using the Valuation Interest Rate.
Normal Retirement Age/Date	The age or date at which benefits are payable to a participant without incurring a reduction due to early retirement.
Open Group Contribution Rate	Theoretical contribution rate used to determine the annual contributions required to be paid into a fund established to finance payment of pensions as they become due in the future.  Contribution rate is expressed as a level percentage of the pensionable remuneration of the current and future judge populations (assumes replacements for the current judges will also qualify for pension benefits, i.e. the Court will continue indefinitely).
Past-Service Liability	The Present Value of benefits attributable to service rendered prior to the Plan's inception.
Present Value (PV)	The Net Present Value as computed using the Valuation Interest Rate
Real Interest Rate	The rate of interest in excess of inflation; thus if the valuation interest rate is 6.50% and inflation is expected to be 3%, the Real Interest Rate would be approximately 3.5%.
Salary Scale	Annual rate of Salary Increase.
Straight-Life Annuity	A series of benefits-defined pension payments, where the full periodic benefit amount is payable to the retiree for life only.
Valuation Interest Rate	The interest rate used to determine the time value of money until a benefit is paid out.  In the case of a funded pension scheme, this also means the rate of return expected to be earned by the plan's assets over the life of the plan.

Council of Europe

European Court of Human Rights

Proposed Judges’ Pension Plan

Illustration A/65-1 – With Reappointment of Judges

Judges assumed to retire after twelve year term (or age 65 if earlier)

Reflects Future Judge Populations

APPENDIX D

Pension schemes fall into two major categories –

Benefit-defined scheme – in such a scheme the retirement benefits are defined from the outset (usually by reference to stipends received, e.g. the pension will be 2% of average salary in respect of each year of service – thus someone with 10 years’ service would receive a pension of 20% of their average salary during those ten years).  The costs of such a scheme may simply be budgetised and borne out of future income. Alternatively, contributions may be paid, by the pension provider and/or by the beneficiaries, upon an actuarial basis. But the investment risk falls on the pension provider. Under such a scheme, benefits can only be taken at or after a predefined age (usually 60 or 65).

Contribution-defined scheme – in such a scheme the contributions (employer and employee) are decided and the amounts paid into what is usually termed a “provident” fund. The amount of pension will depend on the amount of total contributions, together with whatever may have been earned by managing the fund.  The investment risk falls in this case on the beneficiaries. The capital amount representing the contributions together with earnings can be paid out as a capital lump sum, or transformed into annuities, based on the life expectancy at the time of retirement.  Such a scheme can be structured to allow for a lump sum benefit to be drawn on termination of service or for a pension to be paid at a stated pensionable age.

While it is clear that a contributions defined system, by its very nature, relies on the creation of a fund, into which fixed amounts are paid each year with a view to providing a lump sum or a certain rate of pension when such falls due, a benefits defined system can be financed in two ways, viz:

a.   a “budgetised” system of financing

b.   a “funded” system of financing.

a.         A “budgetised” system basically means that the pension liabilities are paid for as they fall due.  Such a system is attractive at the beginning of any scheme, where very few (if any) of the potential beneficiaries are retired.  As a result, the tables in Appendix C indicate a very limited cost of the pension scheme in the early years of its existence.  Indeed, the Council of Europe’s staff members’ pension scheme was based on a budgetised scheme.  The Deputies will no doubt recall that actuarial studies showed that as an Organisation (and therefore its pensioners) grows and ages, the liabilities grow at an exponential rate.  The result was the establishment of a pension reserve fund in order to even out over time the financing of the cost of the pension obligations of the member states.

b.         Funded system. It is widely accepted, in financial circles, that a budgetised pension system will, in any long term perspective, become untenable.  It is, clearly, only sound financial management to provide for financial obligations as they are incurred and not wait until they fall due to find the resources to pay them.  As such, pension rights, which are in financial terms considered as forming part of remuneration (albeit remuneration which is deferred until a later date), should be financed when the obligation to pay them is incurred – i.e. at the same time as the salaries of active personnel are paid.

The table in Appendix C shows the costs of the benefit defined system which the judges would like to see in place under both a budgetised and a funded system.  While in the first years the budgetised system seems more attractive, a close analysis shows that a funded system would become more affordable than a budgetised system as of its fourteenth year of operation and that, thereafter, the funded system has the advantage of showing relatively stable yearly costs while the budgetised system is subject to significant growth in the subsequent years.

APPENDIX E

8 April 2004

Response to the Secretary General’s proposal for the revision of Resolution(97)9

on the status and conditions of service of Judges

unanimously adopted by the Court’s at its 47th plenary administrative session

on 7 April 2004

I.          Background

In February 2002 the Secretary General was invited by the Deputies to draw up, as a matter of urgency and in consultation with the President of the Court, proposals enabling the Committee of Ministers to proceed with a review of the provisional regulations governing the Judges’ status and conditions as set out in Appendix I to Resolution (97) 9.

At the Court’s suggestion the Secretary General commissioned firstly a report by an independent panel of international experts, which submitted its conclusions in November 2002, and secondly an actuaries’ report. In January 2004 the Secretary General was invited to submit before the end of March 2004 proposals concerning the revision of the provisional regulations including, with regard to pension provision, alternative scenarios making it possible to examine the budgetary implications.

In the meantime (January 2004) the Court had sent to the Chair of the Liaison Committee draft amended regulations with, among other things, a proposal for a pension scheme.

II.          Secretary General’s proposal

The Secretary General has now produced a proposal for permanent regulations governing the conditions and status of Judges. In several respects this proposal corresponds to that put forward by the Judges in their draft amended regulations and in that sense is welcomed by the Court. There is thus, for example, agreement on the mechanism for the adjustment of salaries as well as on the new provisions on leave.

The main difference is in relation to the pension arrangements. Nevertheless the Secretary General’s proposal represents important progress with regard to the acceptance of certain issues of principle in relation to Judges’ social protection.

Firstly, he has accepted that Judges should have access to social and medical cover equivalent to that available to Council of Europe staff and “hors cadre” officials, entailing an “employer’s” contribution of 2/3.

Secondly, his proposal embraces the assumption that the Judges’ pensions should be non-contributory and benefit-defined as is standard practice in comparable institutions.

The Secretary General’s proposal is to be financed as follows:

(a) A contribution of € 15,000 per annum per Judge from the Council of Europe budget presumably to be used to finance the “employer’s” contribution to the medical insurance scheme, the outstanding amount to go towards the pension scheme.

(b) A reduction in the Judges’ salary by 12.5% (€ 22,125) to € 155,673 to finance the pension scheme.

The pension scheme has the following main characteristics:

(a) It is a prospective scheme, i.e. service since 1 November 1998 would be ignored. Qualifying service for pension entitlement would commence with the entry into operation of the scheme.

(b) Pension entitlement, which would be from age 65, would amount to 8% of salary after a single term of six years, 16% after two terms i.e. 12 years. By way of example this would give a Judge who has served 12 years a monthly pension of 2,075 euros from the age of 65.

III.         Major flaws in the proposed pension scheme

There are however major flaws in the pension scheme set out in the Secretary General’s paper and the premises on which it is based.

Firstly, although purporting to be a non-contributory scheme, it is in effect a contributory scheme since it depends on a substantial reduction in the Judges’ current salary (12.5%). 

Secondly, the effect of this reduction would be to bring Judges’ salary to a level significantly below that of judges of other international courts and of the senior Registry staff, as the following table illustrates:

Monthly salary in Euros               Pension arrangement

Judges ECHR                             € 14,826                          No pension scheme

(all inclusive)

Judges ECHR                             € 12,972                          SG’s pension scheme

(SG’s proposal)

Staff ECHR A7 step 6                 € 15,516                          Staff pension scheme

(all inclusive)

Judges ECJ                               € 22,530                          Standard pension scheme

(all inclusive)                                                                     for international judges

[subjected to

Community tax                           € 16,918]

Judges ICJ                                 € 14,011                          Standard pension scheme

(all inclusive                                                                      for international judges

i.e. education grant

max. €668.30 per month)

Judges of ICC                            € 15,668.30                     Standard pension scheme

(all inclusive                                                                      for international judges

ie education grant

max. €668.30 per month.)

In examining levels of remuneration, care must be taken to compare like with like and not therefore an “all-inclusive” salary as currently paid to the ECHR Judges with a basic salary which does not take into account additional allowances and benefits (for example expatriation allowance paid to CE staff and ECJ Judges).

Thirdly, the level of pension achieved by the Secretary General’s scheme is far lower than that available in other international courts. This is illustrated by the following table:

              ECJ        ICJ          ICC       ECHR*      SG*

Pension after

6 years term                    27%        34%        34%     25%          8%

Pension after

12 years term                  54%        67%        67%     50%          16%

*Proposals currently under discussion

Fourthly, two of the main premises which define the Secretary General’s proposal make it impossible to deliver a scheme that satisfies what is the generally accepted standard for international courts. These are: (a) that the scheme is funded, whereas for a small population acquiring entitlement over a limited period of time budgetisation is the only workable solution, as is shown by the practice in all the other international courts; and (b) that a pension scheme could be introduced without a more significant increase in appropriations. The pursuit of a budgetary neutral pension scheme is doomed to failure.

Fifthly, although mention is made of a disability pension in the Secretary General’s proposal, there is no indication as to the rate of such pension or as to whether the proposed financing would be sufficient to cover it. The award of a disability pension presupposes that the beneficiary is unable to earn any income as a result of an accident or illness. Special arrangements should therefore apply, and particularly if the accident arises in the course of the performance of duties or if the illness is an occupational disease. Is it suggested that a Judge injured in the course of his duties would be entitled to a mere 8% of salary if still serving a first term under present rules? This is in striking contrast to the situation of Council of Europe staff, for whom the invalidity pension will be the pension that they would have been entitled to if they had worked up to retirement age (under any circumstances not less than 120% of the salary payable at C1 step 1 - in 2004 this would amount to 2,260.51 compared to 1,027 euros for an incapacitated judge) and 70% of salary if the staff member’s invalidity arises from an accident in the course of the performance of his duties, from an occupational disease, from a public-spirited act or from risking his life to save another human being. This clear impossibility of transposing the rate of pension proposed by the Secretary General to a situation of invalidity further highlights the inadequate nature of that rate.

IV.        Cost of a budgetised scheme

The Secretary General as requested by the Ministers’ Deputies has also reproduced the Judges’ proposal which corresponds to the standard scheme. He has used inflation adjusted figures to show the actuarially assessed cost of this budgetised scheme for 25 years into the future together with the sample figures for 2030, 2040 and 2050. These are correct figures but give a distorted sense of the cost in the future when viewed from today at today’s values. Set out below are two columns of figures, both prepared by the actuaries. The figures in constant Euros show the value of future cost in today’s Euros.

The inflation adjusted figures show the cost in Euros adjusted for almost half a century of inflation. According to these calculations, everything then will cost approximately four times what it costs now. To ascertain what the cost in today’s value would be, the Court in its proposal used constant Euros i.e. without adjustment for 50 years inflation at 3% p.a. These constant Euro figures give a truer picture of the meaning of the cost in 2050 in today’s terms. The inflation adjusted figures seem daunting until it is recollected that, if the forecasts are accurate, everything will cost four times as much.

Year                                             Total Contributions (in €)

                                    Inflation adjusted          Constant (present day value)

2004                                      39,516                          38,365

2005                                    237,907                        224,250

2006                                    242,734                        222,138

2007                                    306,426                        272,255

2008                                    607,295                        523,083

2009                                    618,619                        518,083

2010                                 1,026,354                        834,519

2011                                 3,031,103                     2,392,781

2012                                 3,096,296                     2,373,053

2013                                 3,222,018                     2,397,484

2014                                 3,596,083                     2,597,887

2015                                 3,664,027                     2,569,875

2016                                 4,164,869                     2,836,073

2017                                 6,417,292                     4,242,586

2018                                 6,532,552                     4,192,997

2019                                 7,104,816                     4,427,486

2020                                 9,535,646                     5,769,223

2021                                 9,689,478                     5,691,547

2022                                 9,884,343                     5,636,903

2023                               10,279,553                      5,691,639

2024                               10,396,689                      5,588,733

2025                               10,581,626                      5,522,471

2030                               14,893,975                      6,705,105

2040                               19,290,110                      6,642,413

2050                               27,363,604                      6,820,618

V.         Installation allowance

A further point of disagreement with the Secretary General concerns the installation allowance. It is one thing if, as a matter of budgetary policy, it is decided not to grant Judges an installation allowance. However, the argument advanced by the Secretary General does not stand up to scrutiny. The Secretary General claims at paragraph 28 of his review that Judges’ stipends were initially fixed by including an element representing 12.5% “for the cost of travel etc.”. However, the Budget Committee in the report of their meeting from 2 to 5 June 1997 expressly designated this amount as being in respect of “displacement” (see paragraph 46 of the report), which is usually taken as being intended to cover the same type of expenditure as an expatriation allowance. If allocating part of remuneration to cover such recurring expenditure inherent in working abroad renders budgetarily unjustifiable the payment of a one-off installation or settling-in allowance, then it is difficult to understand why others in receipt of an expatriation allowance paid out of the Council of Europe’s budget should also receive an installation allowance, as indeed they do.

VI.        Conclusions

The Deputies’ decision of February 2002 instructed the Secretary General to deal with the matter of Judges’ social protection “in the light of the needs of the proper functioning of the Court and the limited budgetary appropriations available”. The Secretary General has interpreted this as requiring him to make a proposal which is, in so far as possible, budgetary neutral. Yet that was surely not the Deputies’ intention. It was never going to be possible to introduce a scheme which offered a comparable pensions regime to that available in all other international courts and, indeed, other international institutions without having recourse to some additional resources. The extra 15,000 € per Judge, corresponding to the initial calculation of the Budget Committee and the majority of which goes to fund the “employer’s contribution” for the medical cover, appears to be insufficient, with the result that it is the Judges themselves who must bear the full burden of financing the scheme, which in any event provides a level of pension which is extremely low by international standards. Under the Judges’ proposal, the gradual lead-in, it is submitted, makes it possible to take account of the limited budgetary appropriations available over the first few years of the scheme’s operation.

As it stands, the proposal fails completely the test of comparability with other international Courts and also that of the Council of Europe’s own charter for Judges which provides at paragraph 6.4 that judicial pensions should be fixed at a level “as close as possible to the level of their final salary as a Judge”. Judges have difficulty in understanding why they should be treated differently in this way when their counterparts in other international courts who, employed often by the same governments, benefit from the standard pension scheme.

The proposal of the Secretary General is also, as has been indicated, prospective. The service of the current members of the Court would count for nothing. The effect of this is that Judges would suffer from the delay in amending the provisional regulations, which were intended to be reviewed during their first year of operation. This would mean that they will have served perhaps six years without acquiring any pension entitlement despite the consensus which now appears clear that the non-provision of pensions for international judges is wrong in principle.

In sum, the proposed substantial reduction in salary, the low level of pension resulting and the non-retroactivity of the scheme combine to make the Secretary General’s proposal unacceptable to the Court, which maintains the position set out in its own proposal. The Court seeks pension cover comparable to that provided to other international judges.