EHRM, 25-10-2011, nr. 2033/04, nr. 19125/04, nr. 19475/04, nr. 19490/04, nr. 19495/04, nr. 19497/04, nr. 24729/04, nr. 171/05 , nr. 2041/05

Section 47(5) of the Pensions Act 1957, in force until February 1991, provided that a retired person could not receive a pension exceeding his or her highest monthly wage during the last ten years of his or her employment.

In January 1990 section 47b(2) of the Pensions Act 1957 was amended to provide that the amount of the one or more monthly pensions received could not exceed BGL 500. The cap also applied to pensions that had already been granted (paragraph 3 of the transitional and concluding provisions of the Act for the amendment of the Pensions Act).

Section 47c of the Pensions Act 1957, inserted in June 1992, capped the amount that could be paid to an individual as a result of his or her entitlement to one or more pensions at three times the amount of the social pension.

The amount of the social pension was set by the Council of Ministers pursuant to a proposal by the NSSI (sections 45a(4) and 46b(4) of the Pensions Act 1957). It was superseded by the social pension for old age under Article 89 of the Social Security Code 1999 (see paragraph 32 below). Its amount, and the corresponding capped pensions, were as follows:

In December 1997 the Chief Prosecutor challenged section 47c before the Constitutional Court, arguing that it ran counter to Articles 51 § 1 and 57 § 1 of the Constitution (see paragraphs 23 and 24 above) and to Article 9 of the International Covenant on Economic, Social and Cultural Rights. In a judgment of 15 July 1998 (реш. № 21 от 15 юли 1998 г. по к. д. № 18 от 1997 г., обн., ДВ, бр. 83 от 21 юли 1998 г.) the Constitutional Court rejected the challenge by seven votes to five. It held as follows:

The five dissenting judges were of the view that the cap was contrary to the constitutional principle of justice because it disregarded the individual contribution of each person to the public good.

Paragraph 6(1) of the transitional and concluding provisions of the Social Security Code 1999, which came into force on 1 January 2000 and superseded the Pensions Act 1957, read as follows:

The social pension for old age, which superseded the social pension under section 45a of the Pensions Act 1957 (see paragraph 28 above) is currently governed by Article 89 of the Code (repealed with effect from 1 January 2012). It is set by the Council of Ministers on the basis of a proposal by the NSSI and the Ministry of Labour and Social Policy (Article 89 § 2 of the Code). Its amount, and the corresponding amount of the pensions cap, were as follows:

As an exception to that general rule, paragraph 6(6) of the transitional and concluding provisions of the Code, in force between 1 January 2002 and 31 December 2003, capped the pensions received by retired military personnel or personnel from certain other national security institutions at five times the social pension for old age. In a judgment of 23 February 2004 (реш. № 1579 от 23 февруари 2004 г. по адм. д. № 5004/2003 г., ВАС, І о.) the Supreme Administrative Court held that the exemption was strictly personal and did not apply to the heirs of the persons mentioned in paragraph 6(6).

On 23 December 2003, a few days before the date on which the cap was due to expire (see paragraph 31 above), Parliament amended paragraph 6(1) with effect from 1 January 2004 to read as follows:

It appears that the percentage was set at 35% because that is equivalent to the expected average pension replacement rate in Bulgaria (the ratio between a retiree's preretirement income and his or her pension — see paragraph 48 below).

With effect from 1 January 2005, the basis for calculating the cap was changed to the maximum monthly income for social security purposes for the previous calendar year (see paragraph 54 below).

With effect from 1 January 2007, the date for recalculating the cap was moved from 1 January to 1 July. In 2009, the cap was exceptionally set at BGN 700 with effect from 1 April of that year (paragraph 22h(1) of the transitional and concluding provisions of the Code).

Thus, during the period 2004-11 the cap was as follows:

With effect from 1 January 2010, the cap was extended to all pensions granted before 31 December 2011. The explanatory notes to the draft bill that the Government laid before Parliament related the content of the proposed amendment without further explanations.

With effect from 1 January 2011, the cap was extended to all pensions granted before 31 December 2013. The explanatory notes to the draft bill that the Government laid before Parliament said that the proposal was to abolish the cap in respect of pensions granted after 1 January 2014 and gradually to increase it in respect of pensions granted before that date.

The cap does not apply to individuals who have held the posts of President or Vice-President of the Republic of Bulgaria, Speaker of the National Assembly, Prime Minister, or judge in the Constitutional Court (paragraph 6(3) of the transitional and concluding provisions of the Code). Nor does it apply to military invalids who have reached the general retirement age (paragraph 6(5) of the transitional and concluding provisions of the Code). In a judgment of 2 October 2001 (реш. № 7218 от 2 октомври 2001 г. по адм. д. № 1127/2001 г., ВАС, I о.) the Supreme Administrative Court held that this exemption is strictly personal and does not apply to the heirs of the persons mentioned in paragraph 6(3).

In 2001 an individual whose pension had been capped in application of paragraph 6(1) sought judicial review of the NSSI's decision in relation to his pension. In a final decision of 18 March 2002 (реш. № 2491 от 18 март 2002 г. по адм. д. № 6065/2001 г., ВАС, І о.) the Supreme Administrative Court dismissed his application, holding that the NSSI had properly applied the substantive law and that the courts were not competent to rule on the constitutionality of statutory provisions such as paragraph 6.

In December 2004 an association of pensioners affected by the cap asked the Chief Prosecutor to refer paragraph 6(1) to the Constitutional Court. In a letter of 10 February 2005 the Chief Prosecutor's Office informed the association that the Chief Prosecutor had turned down the request because he considered that the pensions cap did not fall foul of the Constitution.

In February 2008 a pensioner affected by the cap asked the Ombudsman of the Republic of Bulgaria to refer paragraph 6 to the Constitutional Court. In July 2008 the Ombudsman refused, saying that the cap appeared reasonable, and that in any event the matter had been settled with the Constitutional Court's judgment of 15 July 1998 (see paragraph 29 above) and could not be revisited.

In 2009 another individual whose pension had been reduced from BGN 995.29 to BGN 700 in application of paragraph 6 sought judicial review of the NSSI's decision in relation to his pension. In a judgment of 9 December 2009 (реш. № 96 от 9 декември 2009 г. по адм. д. № 5932/2009 г., САС, І о., 14 състав) the Sofia Administrative Court dismissed the application. The litigant appealed on points of law, asserting, inter alia, that the cap was contrary to the Constitution and to Article 1 of Protocol No. 1 to the Convention. He requested the Supreme Administrative Court to stay the proceedings and refer the constitutionality of paragraphs 6(1) and 22h(1) of the Code (see paragraphs 34 and 36 above) to the Constitutional Court.

On 7 August 2010 (опр. от 7 август 2010 г. по хода на адм. д. № 1407/2010 г., ВАС, VІ о.) the Supreme Administrative Court acceded to the referral request, stayed the proceedings and referred to the Constitutional Court the question whether the impugned provisions were compatible with the Constitution, Article 14 of the Convention, and Article 1 of Protocol No. 1.

In a decision of 10 February 2011 (опр. № 1 от 10 февруари 2011 г. по к. д. № 18/2010 г.) the Constitutional Court, over the dissent of one judge, refused to take the matter up for consideration. It held that, in so far as it concerned the compatibility of the pensions cap with the Constitution, the subject matter of the case was essentially the same as that of the case that it had decided in 1998 (see paragraph 29 above). It was immaterial that the two cases concerned different legal provisions. The court went on to hold, in relation to the alleged incompatibility of the cap with Article 1 of Protocol No. 1, that under the Constitution the Supreme Administrative Court was not competent to refer to it the alleged incompatibility of statutory provisions with international treaties.

In view of that decision, on 28 February 2011 (опр. от 28 февруари 2011 г. по хода на адм. д. № 1407/2010 г., ВАС, VІ о.) the Supreme Administrative Court decided to resume the proceedings. It heard the case on 21 April 2011. The litigant argued, inter alia, that paragraph 6(1) was in breach of Bulgaria's international obligations and that it was still open to the court to rule on that issue. The prosecutor who took part in the proceedings ex officio argued, inter alia, that the pensions cap did not run counter to the Constitution or to Article 1 of Protocol No. 1.

In a final judgment of 7 July 2011 (реш. № 10139 от 7 юли 2011 г. по адм. д. № 1407/2010 г., ВАС, VІ о.) the Supreme Administrative Court upheld the lower court's decision and thus the NSSI's decision to cap the litigant's pension. It held that the NSSI had correctly applied the statutory rules, which required it to apply a ceiling to the pension. That ceiling was set at 35% of the maximum income for social security purposes (see paragraph 54 below) because that was the average pension replacement rate in Bulgaria. The previous version of the cap had been upheld by the Constitutional Court (see paragraph 29 above) and could therefore not be regarded as unconstitutional. Nor did it run counter to any international treaties to which Bulgaria was party, or to European Union law.

Between 1957 and the end of 1999, the pension system in Bulgaria was a monopillar system; the Pensions Act 1957 made provision for just one tier of retirement pension (sections 2–11). Until 1995, the pension fund's budget was part of the general State budget (Article 170 of the Labour Code 1951). After that, the pension scheme continued to be based on an unfunded, pay-as-you-go model, but the pension fund was separated from the State budget and its management was entrusted to the newly created NSSI (sections 1–13 of the Social Security Fund Act 1995). Before March 1996, social security contributions were charged only to employers, not employees, and employers were barred from deducting those contributions from the remuneration paid to employees (Article 148 of the Labour Code 1951, as worded from its adoption in 1951 until the beginning of March 1996). In March 1996 contributions began to be charged, in specified proportions, to both employers and employees (Articles 147, 147a and 148 of the Labour Code 1951, as amended with effect from 1 March 1996).

An individual became entitled to a retirement pension after a specified number of years of contributions (as a general rule, twenty-five years for men and twenty years for women — section 2(1)(c) of the Pensions Act 1957; there were more favourable conditions for certain categories of work — section 2(1)(a) and (b)). The pension age was sixty years for men and fifty-five years for women (ibid.). However, the age requirement did not apply to military personnel, police, and some other categories of civil servants, who could, in addition, retire after a shorter period of contributions (twenty years — sections 6(1) and 7(1) of the Act). Air Force pilots could retire after ten years of service (section 6(2) of the Act). As a rule, the amount of an individual's retirement pension was calculated as a percentage of the average gross monthly earnings for three years picked by the pensioner out of his or her last fifteen years of service (section 11(1) of the Pensions Act 1957, as in force between 1967 and 1996). In 1996, that basis was changed to three years of the pensioner's choice until 1 January 1997, plus the entire period of service after that.

Pensions were not subject to taxation (section 2(1)(c) of the Income Tax Act 1950).

The Social Security Code 1999 came into force on 1 January 2000 and brought about significant changes in the retirement pension model. It makes provision for a multipillar pension system, with three tiers of general retirement pension. The first-tier, or basic, pension scheme is mandatory, public, and defined-benefit. It is based on an unfunded, pay-as-you-go model (Articles 21 and 22 of the Code), and consists of public pension funds managed by the NSSI. The general fund's main sources of financing are social security contributions and subsidies from the State budget (Article 21 of the Code). Contributions are charged to both employers and employees, in a specified proportion, with the exception of judges, prosecutors, investigators, civil servants, police, national security agents, and military personnel, whose contributions are fully covered by the State budget (Article 6 §§ 3 and 5 of the Code). The part of the contributions payable by employers cannot be deducted from remunerations under any form (Article 6 § 12 of the Code). The amount of the annual State subsidy to the fund is fixed in the annual State social security budget Act (Article 21 § 4 (b) of the Code). Apart from retirement pensions, the fund is used to pay out survivor's and disability pensions, as well as certain health-related benefits (Article 22 of the Code). The second-tier scheme is also mandatory. It applies to all individuals born on or after 1 January 1960, and is a funded defined-contribution scheme, with contributions fixed by law and going into funds consisting of individual accounts and managed by private companies subject to special regulation (Articles 120a–123i and 124–203 of the Code). The second-tier scheme is open only to individuals born on or after the above-mentioned date because at the time when it started operating (1 January 2002) they were aged forty-two years or less and could thus be expected to make contributions for a longer period of time and build up the funds on which the scheme relies (Средкова, К., Осигурително право, 3 издание, Сиби, 2008, стр. 216; Мръчков, В., Осигурително право, 5 издание, Сиби, 2010, стр. 380 и 389). The third-tier scheme is voluntary and open to all persons above the age of sixteen. It is also a funded defined-contribution scheme, with contributions going into funds consisting of individual accounts and managed by private companies subject to special regulation. However, unlike the second-tier scheme, the amount of the contributions is not fixed by law but freely decided upon by the persons concerned (Articles 120a–123i, 209–59 and 317–43 of the Code).1.

An individual becomes entitled to a retirement pension after a specified number of years of contributions (currently thirty-seven for men and thirty-four for women, set gradually to rise to forty and thirty-seven years, respectively — Article 68 §§ 1 and 2 of the Code). The pension age is currently sixty-three years for men and sixty years for women, set gradually to rise to sixty-five and sixty-three years, respectively (Article 68 § 1 of the Code). However, the age requirement does not apply to military personnel, police, and some other categories of civil servants, who can, in addition, retire after a shorter period of contributions (Article 69 of the Code). Air Force pilots can retire after fifteen years of service (Article 69 § 3, subsequently § 4, of the Code). The amount of the basic, or first-tier, retirement pension is calculated in the manner laid down in Articles 70 and 70a of the Code. It is a function of the length of service (‘осигурителен стаж’) and the average monthly income for social security purposes (‘средномесечен осигурителен доход’), multiplied by an individual coefficient. The coefficient is based on the ratio between the retiree's monthly earnings and the average monthly salary (for the period before 1 January 1997) and the average monthly income for social security purposes (for the period after 1 January 1997). For the period before 1 January 1997, the calculation is based on the retiree's monthly earnings during three consecutive years of his or her choice out of the last fifteen years of service. For the period after 1 January 1997, the calculation is based on the retiree's monthly earnings during the entire period of service between that date and the date of retirement.

The monthly income for social security purposes (‘осигурителен доход’) is used as the basis for calculating not only pensions and welfare benefits, but also social security contributions. It has a lower and an upper limit. The upper limit serves to cap the amount of the monthly social security contributions. In 2000-01, that limit was ten times the minimum monthly salary4. (Article 9 § 2 of the Code, as worded until 31 December 2001). Since 2002, it has been fixed in monetary terms in the annual State social security budget Act (Article 6 § 2 (1) of the Code, as worded after 1 January 2002). In 2002 it was BGN 850 (section 8(4) of the State social security budget Act for 2002). In 2003 it became BGN 1,000 (section 8(5) of the State social security budget Act for 2003). In 2004 it became BGN 1,200 (section 8(5) of the State social security budget Act for 2004). In 2005 it became BGN 1,300 (section 8(5) of the social security budget Act for 2005). In 2006 and 2007 it became BGN 1,400 (section 8(5) of the social security budget Acts for 2006 and 2007). In 2008-11 it became BGN 2,000 (section 8(5) (later (4)) of the State social security budget Acts for 2008-11).

Pensions received under the first- and second-tier schemes are not subject to taxation (section 12(1)(2) of the Physical Persons Income Taxation Act 1997, superseded on 1 January 2007 by section 13(1)(6) of the Physical Persons Income Tax Act 2006).

Section 4 of the Protection Against Discrimination Act 2003, which came into force on 1 January 2004, prohibits any direct or indirect discrimination on the basis of gender, race, nationality, ethnicity, human genome, citizenship, origin, religion or belief, education, convictions, political affiliation, personal or social status, disability, age, sexual orientation, marital status, property status, or on any other grounds established by law or by an international treaty to which Bulgaria is party.

The authority responsible for ensuring compliance with the Act and with other statutes containing equal-treatment provisions is the Commission for Protection Against Discrimination (section 40).

Section 47 empowers the Commission to, inter alia, make recommendations for the enactment, repeal or amendment of statutes and regulations (subsection 8).

In a decision of 17 September 2009 (реш. № 163 от 17 септември 2009 г. по пр. № 56/2008 г.), given in proceedings brought by a number of individuals affected by the pensions cap under paragraph 6(1) of the transitional and concluding provisions of the Social Security Code 1999 (see paragraphs 31–39 above), the Commission found that the cap amounted to indirect discrimination on the basis of property status and was in breach of the principle of equal treatment of the pensioners affected by it. In the view of the Commission, those who had had higher salaries and had accordingly paid higher pension contributions, and had done so for a longer period of time, were just as entitled to the full amount of their pensions as those who did not fall into that group. The Commission went on to note that paragraph 6(1), as amended in 2004, envisaged that pensioners whose pensions were granted from 1 January 2010 onwards would not face a cap on their pension. That difference in treatment lacked an objective justification and was also in breach of the principle of equal treatment. In view of those considerations, the Commission recommended to Parliament to repeal paragraph 6(1).

On the other hand, the Commission found that paragraph 6(5) of the transitional and concluding provisions of the Code (see paragraph 40 above) did not amount to discriminatory treatment under the Act, because it was necessary and objectively justified in view of the special status of the persons to whom it provided an advantage and of the restrictions that those persons faced in carrying out their public duties.

In a decision of 18 May 2010 (реш. № 117 от 18 май 2010 г. по пр. № 122/2009 г.) the Commission again found that the existence of a cap on pensions granted before a certain date (at that time, the end of 2011 — see paragraph 38 above) and the lack of such a cap on pensions granted after that date lacked an objective justification and amounted to indirect discrimination. The Commission recommended to the Council of Ministers to table a bill in Parliament for the amendment of paragraph 6(1).

Under section 71(1) of the Act, a person who considers that his or her right to equal treatment stemming from the Act or from other statutes has been violated can bring a claim, seeking declaratory or injunctive relief or an award of damages.

Under section 73 of the Act, a person who considers that an administrative decision has breached his or her right to equal treatment stemming from the Act or from other statutes can seek judicial review of the decision.

Under section 74(1) of the Act, a person who has obtained a favourable ruling by the Commission for Protection Against Discrimination and seeks compensation for damage suffered as a result of the violation of his or her right to equal treatment stemming from the Act or from other statutes can bring a tort claim against the persons or authorities that have caused the damage. If the damage stems from unlawful decisions, actions or omissions of State authorities or officials, the claim must be brought under the State Responsibility for Damage Act 1988 (section 74(2)).

The Government submitted that the cap on the maximum amount of pension had been prompted by financial considerations. Such a cap had existed under different forms ever since the adoption of the Pensions Act 1957. Pensions in Bulgaria were based on the principle of social solidarity, which required that all those who reached a certain age be provided with a pension, but also that the personal input of each individual be taken into account in fixing its amount. A pension ceiling was not a uniquely Bulgarian occurrence, but existed in a number of countries, such as Germany, without being regarded as infringing the principles of social justice or equal treatment. Moreover, it could not be overlooked that the Social Security Code 1999 had made provision for a second-tier pension, based on individual contributions, in respect of persons born on or after 1 January 1960. It was also noteworthy that recently the maximum amount of pension had been increased to BGN 700.

The Government agreed that social security rights fell within the ambit of Article 1 of Protocol No. 1, but pointed out that that provision did not guarantee a particular amount of pension, and did not require States to choose a particular social security model. Even if it was theoretically possible to pay the applicants the full nominal amount of their pensions, there existed a number of factors that would make that difficult to achieve in practice. The population was getting older and the ratio between pensioners and persons in active employment was deteriorating. If the authorities opted to pay the full amount of pension, even if it exceeded the cap, it could result in a shortfall of funds to pay the pensions of others who had contributed less to the funding of the pension system. That could lead to a breach of the principle of equal treatment, which guaranteed a minimum revenue for each pensioner. All the more so in the midst of a severe economic and demographic crisis. The applicants could not maintain that they had had a legitimate expectation that they would receive the full amount of their pensions after 31 December 2003, because it was impossible to predict how the legislation would evolve in the future. Legislation was a product of social developments, which were rapidly changing. It was for the applicants to show that the cap on their pensions had caused them to suffer an individual and excessive burden.

In the Government's view, the capping of pensions to 35% of the maximum monthly income for social security purposes was in the public interest. The pension system in Bulgaria was based on a pay-as-you-go model, and the legislature's intent was to guarantee a minimum amount of pension and the potential for it to increase. The existence of a pensions ceiling went hand in hand with the existence of a maximum income for social security purposes. It was intended to guarantee social justice, and was necessary for the sound financial management of the pension system. The Constitutional Court had made those points in its 1998 decision.

The applicants submitted that they had had a legitimate expectation that they would receive the full amount of their pensions, based on the contributions they had been required to make throughout their employment. After the entry into force of paragraph 6(1) of the transitional and concluding provisions of the Social Security Code 1999, they had expected that the cap on the maximum amount of pension would be lifted on 31 December 2003 and that from that date on they would receive the full amount of their pensions. The ensuing postponement of the lifting of the cap had accordingly amounted to an interference with their possessions.

The applicants did not dispute that that interference was lawful, but argued that it lacked a reasonable foundation. It was true that the Constitutional Court had held that the introduction of a pensions cap was a matter for the legislature's discretion. However, the 2004 draft bill for the amendment of the Social Security Code 1999, which had permanently capped the pensions of all pensioners whose rights had accrued before 31 December 2009, had not been accompanied by any explanatory notes or by any debate in Parliament. The same went for the 2009 amendments to the Code. The assertions that the pensions ceiling was tied to the minimum amount of pension, helped to maintain it, and furthered social justice were not true. Even if it could be accepted that such a cap had been warranted to help the poorest pensioners scrape through the profound social and economic changes of the 1990s, it could not be maintained forever.

The real reasons for maintaining the cap could be gleaned from a number of interviews and public statements by officials, such as the director of the NSSI and several successive ministers of Labour and Social Policy. They were the perception that the public would not tolerate very high pensions and that the pension model existing under the Pensions Act 1957 had suffered from a number of defects. Neither of those reasons was a reasonable basis for the cap. The first was based on entirely populist considerations, which were moreover out of line with modern social attitudes. It was telling that a number of domestic institutions and organisations, plus five constitutional judges, were opposed to the cap. In that connection, it was also worth noting that the authorities were not doing enough to collect the social security contributions payable by those in active employment. The second reason was also unavailing. The applicants, like everyone else, had been bound by the provisions of the Pensions Act 1957 governing the basis for calculating the amount of social security contributions and retirement pensions.

Even if it could be accepted that the pensions cap pursued a legitimate aim, it was disproportionate, because, while failing to produce considerable savings for the pension system, it affected a very small minority of pensioners (about 2%) by significantly reducing the amount of their pensions. In that connection, sight should not be lost of the nature of the applicants' employment, which had entailed higher levels of responsibility, privation, stress and risk, and hence higher remuneration. In addition, when permanently capping the applicants' pensions with effect from 1 January 2004, the State had not offered them any form of compensation.

In their additional observations, the Government submitted that in as much as Article 1 of Protocol No. 1 did not guarantee a particular amount of pension the applicants' complaint was incompatible ratione materiae. It was in the legislature's discretion to choose a particular social security model. Faced with demographic and financial difficulties, Bulgaria had opted to limit the maximum amount of the first-tier pension. However, it had made provision for a voluntary third-tier pension, and there was no indication that the applicants had tried to avail themselves of that opportunity. It was also important to point out that the cap on their pensions had been increased several times, and that those of them who had served in the armed forces had not themselves paid pension contributions and had retired under very favourable conditions. The requisite fair balance had not therefore been upset to their detriment.

The principles which apply generally in cases under Article 1 of Protocol No. 1 are equally relevant when it comes to pensions (see Andrejeva v. Latvia [GC], no. 55707/00, § 77, 18 February 2009, and, more recently, Stummer v. Austria [GC], no. 37452/02, § 82, 7 July 2011). Thus, that provision does not guarantee the right to acquire property (see, among other authorities, Van der Mussele v. Belgium, 23 November 1983, § 48, Series A no. 70; Slivenko v. Latvia (dec.) [GC], no. 48321/99, § 121, ECHR 2002-II; and Kopecký v. Slovakia [GC], no. 44912/98, § 35 (b), ECHR 2004-IX). Nor does it guarantee, as such, any right to a pension of a particular amount (see, among other authorities, Müller v. Austria, no. 5849/72, Commission's report of 1 October 1975, Decisions and Reports (DR) 3, p. 25; T. v. Sweden, no. 10671/83, Commission decision of 4 March 1985, DR 42, p. 229; Janković v. Croatia (dec.), no. 43440/98, ECHR 2000-X; Kuna v. Germany (dec.), no. 52449/99, ECHR 2001-V (extracts); Lenz v. Germany (dec.), no. 40862/98, ECHR 2001-X; Kjartan Ásmundsson v. Iceland, no. 60669/00, § 39, ECHR 2004-IX; Apostolakis v. Greece, no. 39574/07, § 36, 22 October 2009; Wieczorek v. Poland, no. 18176/05, § 57, 8 December 2009; Poulain v. France (dec.), no. 52273/08, 8 February 2011; and Maggio and Others, cited above, § 55). However, where a Contracting State has in force legislation providing for the payment as of right of a pension — whether or not conditional on the prior payment of contributions — that legislation has to be regarded as generating a proprietary interest falling within the ambit of Article 1 of Protocol No. 1 for persons satisfying its requirements (see Carson and Others v. the United Kingdom [GC], no. 42184/05, § 64, ECHR 2010-…). The reduction or the discontinuance of a pension may therefore constitute interference with possessions that needs to be justified (see Kjartan Ásmundsson, cited above, § 40; Rasmussen v. Poland, no. 38886/05, § 71, 28 April 2009; and Wieczorek, cited above, § 57).

In the instant case, the applicants' pensions were first calculated in line with the general rules of the Pensions Act 1957 and subsequently of the Social Security Code 1999 (in the cases of those applicants who retired after 1 January 2000, solely the latter). Because the amounts produced by those calculations were, in the case of each applicant, above the pensions cap set out in section 47c of the Act and later in paragraph 6(1) of the transitional and concluding provisions of the Code, their pensions were trimmed to the level allowed by the cap (see paragraphs 7, 8, 10–15, 17–19, 21, 27 and 31 above). The cap may thus be regarded either as a provision limiting the amount of pension after it has been calculated under the general rules, and thus amounting to an interference with a ‘possession’ of the applicants, or as part of the overall set of statutory rules governing the manner in which the amount of pension should be calculated, and thus amounting to a rule preventing the applicants from having any ‘possession’ in relation to the surplus.

It should in addition be noted that when it first came into force on 1 January 2000 paragraph 6(1) set a temporal limitation on the pensions cap — 31 December 2003 (see paragraph 31 above). That limitation was removed with the December 2003 amendment, with the result that the cap became permanently applicable to all pensions granted before a certain date: initially 31 December 2009 and, following further amendments, 31 December 2011 and then 31 December 2013 (see paragraphs 34, 38 and 39 above). From this vantage point, it could be argued that, regardless of the position before or after, between 1 January 2000 and 23 December 2003 the applicants could be regarded as having harboured a legitimate expectation that the cap on their pensions would come to an end on 31 December 2003, and that the legislative amendment which took that expectation away amounted in its own right to an interference with their ‘possessions’ (see, mutatis mutandis, Maurice v. France [GC], no. 11810/03, §§ 67–71 and 79, ECHR 2005-IX; Draon v. France [GC], no. 1513/03, §§ 70–72, 6 October 2005; and Hasani v. Croatia (dec.), no. 20844/09, 30 September 2010).

However, the Court does not consider it necessary to take a firm stance on those points, because it considers that there has been no breach of Article 1 of Protocol No. 1 for the reasons that follow (see Maggio and Others, cited above, § 59). It will therefore proceed on the assumption that Article 1 of Protocol No. 1 is applicable and that the pensions cap, in all its forms, can be regarded as an interference with the applicants' rights under that provision.

The Court does not consider that the cap amounted to a ‘deprivation of possessions’ within the meaning of the second sentence of the first paragraph of Article 1 of Protocol No. 1. It is rather to be regarded as an interference with the applicants' right to the peaceful enjoyment of their possessions, within the meaning of the first sentence of the first paragraph (see Kjartan Ásmundsson, § 40, and Wieczorek, § 61, both cited above).

It was not in dispute between the parties that the interference was lawful in terms of both domestic and Convention law. The Court, noting that it was based on the unambiguous wording of section 47c of the Pensions Act 1957 and subsequently paragraph 6(1) of the transitional and concluding provisions of the Social Security Code 1999, provisions whose constitutionality was upheld by the Constitutional Court (see paragraphs 29 and 46 above), sees no reason to hold otherwise.

It remains to be established whether the interference served a legitimate public interest and was reasonably proportionate to the aim sought to be realised.

According to the Court's case-law, the national authorities, because of their direct knowledge of their society and its needs, are in principle better placed than the international judge to decide what is ‘in the public interest’. Under the Convention system, it is thus for those authorities to make the initial assessment as to the existence of a problem of public concern warranting measures interfering with the peaceful enjoyment of possessions. Moreover, the notion of ‘public interest’ is necessarily extensive. In particular, the decision to enact laws concerning pensions or welfare benefits involves consideration of various economic and social issues. The margin of appreciation available to the legislature in implementing such policies should therefore be a wide one, and its judgment as to what is ‘in the public interest’ should be respected unless that judgment is manifestly without reasonable foundation. However, any interference must also be reasonably proportionate to the aim sought to be realised. In other words, a ‘fair balance’ must be struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. That balance will be lacking where the person concerned has to bear an individual and excessive burden (see Wieczorek, cited above, §§ 59–60, with further references). In that regard, it would also be important to verify whether an applicant's right to derive benefits from the social security scheme in question has been infringed in a manner resulting in the impairment of the essence of his pension rights (see Domalewski v. Poland (dec.), no. 34610/97, ECHR 1999-V; Kjartan Ásmundsson, cited above, § 39 in fine; and Wieczorek, cited above, § 57 in fine). On the other hand, it must not be overlooked that Article 1 of Protocol No. 1 does not restrict a State's freedom to choose the type or amount of benefits that it provides under a social security scheme (see Stec and Others, cited above § 54; Stec and Others v. the United Kingdom [GC], no. 65731/01, § 53, ECHR 2006-VI; and Wieczorek, cited above, § 66 in limine).

In the instant case, the applicants called into question the purpose of the cap, saying that it was not, as contended by the Government, based on considerations having to do with the financial viability of the pension system. It was rather a result of the perceptions that the public would not tolerate very high pensions and that the Pensions Act 1957 had made possible retirement on overly generous terms. The Court, for its part, notes that the cap obviously results in savings for the pension system (see the statistics quoted in paragraph 65 above). However, it does not find it necessary to determine whether those savings are indeed necessary to ensure the system's financial viability. It observes that in upholding the cap the Constitutional Court took the view that it was based on the ‘requirements of social justice’ (see paragraph 29 above). Even assuming that the applicants' assertions as to the real purpose of the cap are correct, the Court does not consider that it was illegitimate for the Bulgarian legislature to have regard to social considerations, or that its judgment in that respect was manifestly without reasonable foundation. The pension systems of different countries vary in the relative emphasis that they place on redistributive vis-à-vis insurance elements. Comparative studies by the World Bank and the OECD show that while some Contracting States attach more importance to providing the same or very similar pension replacement rates to all workers, with a strong link between pensions and preretirement earnings, in others the accent is on pension adequacy, with little or no connection between pensions and preretirement earnings (see paragraphs 67 and 68 above). That is primarily a matter that falls to be decided by the national authorities, which have direct democratic legitimation and are better placed than an international court to evaluate local needs and conditions. According to the Court's case-law, in matters of general policy, on which opinions within a democratic society may reasonably differ widely, the determination of the domestic policymaker should be given special weight (see Hatton and Others v. the United Kingdom [GC], no. 36022/97, § 97, ECHR 2003-VIII). The Court is therefore satisfied that the cap pursued a legitimate aim in the public interest.

This, however, does not entirely settle the issue. It must also be established whether there was a reasonable relationship of proportionality between the means employed and the aim sought to be realised.

On this point, the Court starts by noting that the redistributive function of the pension system can be achieved in various ways, such as putting in place progressive benefit-calculation formulae, imposing ceilings on pension entitlements, or taxing high pensions. In Bulgaria, the legislature has chosen to exempt first- and second-tier pensions from taxation (see paragraphs 51 and 55 above), but has imposed a cap on the maximum amount of pension under the first tier. The Court is unable to find that this is in itself a disproportionate measure. It has in a number of cases accepted the possibility of reductions in social security entitlements (see Kjartan Ásmundsson, cited above, § 45; Hoogendijk v. the Netherlands (dec.), no. 58641/00, 6 January 2005; Goudswaard-Van der Lans v. the Netherlands (dec.), no. 75255/01, ECHR 2005-XI; and Wieczorek, cited above, § 67). It has even countenanced pension caps similar to the one at issue (see Blanco Callejas v. Spain (dec.), no. 64100/00, 18 June 2002, and Buchheit and Meinberg v. Germany (dec.), nos. 51466/99 and 70130/01, 2 February 2006). So has the former Commission (see Beging v. Germany, no. 15376/89, decision of the Commission of 27 May 1991, unreported, and Kuhlmann v. Germany, no. 21519/93, Commission decision of 30 June 1993, unreported). The above-mentioned comparative studies by the World Bank and the OECD show that ceilings on public pensions are far from being a uniquely Bulgarian phenomenon (see paragraph 66 above). In the present case, there are several factors that inform the Court's assessment.

First, the applicants' principal argument against the cap was that, unlike modern-day workers, in respect of whom there exists a ceiling on pensionable earnings (see paragraph 54 above), they were bound to pay contributions on the full amount of their relatively high salaries; they were therefore entitled to pensions commensurate with those contributions. However, that argument does not stand up to examination. In the first place, it cannot be overlooked that until 1996, contributions were payable solely by employers, who were barred from deducting them from employees' remunerations; that continues to be the case for military personnel, civil servants, and some other categories of State employees (see paragraphs 49 and 52 above). More importantly, the argument misconceives the relationship between social security contributions and first-tier pensions in Bulgaria. Unlike the second- and the third-tier schemes, where contributions are directly linked to the expected benefit returns (see paragraph 52 above), first-tier contributions did not and still do not have an exclusive link to retirement pensions. That is due to the unfunded, pay-as-you-go character of the first pillar of the Bulgarian pension system, both under the Pension Act 1957 and under the Social Security Code 1999 (see paragraphs 49 and 53 above). That makes it impossible to regard the payment of higher social security contributions as a sufficient ground for entitlement to matching pension benefits (see, mutatis mutandis, Carson and Others, § 84, and Müller, at p. 31, §§ 29–30, both cited above). Indeed, in the cases of some of the applicants — and of others in a similar situation — the bulk of those contributions was paid under a different economic regime, when the pension fund was an inseparable part of the general State budget (see paragraph 49 above), and at a time when the real value of the Bulgarian lev and the general framework of the Bulgarian economy were very different from what they are today.

Secondly, the Court cannot lose sight of the fact that the pensions cap was put in place and, more importantly, maintained at a time when the Bulgarian pension system was undergoing a comprehensive reform, as part of the country's transition from a wholly State-owned and centrally planned economy to private property and a market economy (see, mutatis mutandis, Credit Bank and Others v. Bulgaria (dec.), no. 40064/98, 30 April 2002, and Velikovi and Others v. Bulgaria, nos. 43278/98, 45437/99, 48014/99, 48380/99, 51362/99, 53367/99, 60036/00, 73465/01 and 194/02, § 166, 15 March 2007). In view of the changes in the manner of calculating the amounts of social security contributions and retirement pensions — in particular, the introduction of a ceiling on pensionable earnings (see paragraph 54 above) — the first tier of that pension system can be regarded as moving towards a global levelling of the amount of benefits provided. It is apparent that the new pension model in Bulgaria envisages the provision of higher retirement incomes through the second- and third-tier pension schemes, which, unlike the first-tier scheme, are funded, defined-contribution schemes (see paragraphs 52 and 53 above). In that context, the cap, as well as its extensions until the end of 2009, and then the end of 2011 and of 2013 (see paragraphs 34, 38 and 39 above), can be seen as a transitional measure accompanying the overall transformation of the pension system. The Court has in the past recognised that Contracting States have a wide margin of appreciation when passing laws in the context of a change of political and economic regime (see Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 113, ECHR 2005-VI, with further references). It is true that the applicants, all of whom were born before 1 January 1960, are not eligible to be affiliated to the second-tier scheme (see paragraph 52 above) and cannot therefore top up their pension earnings in that way. However, the Court cannot attach decisive importance to that, because that scheme is a funded, defined-contribution one, with individual accounts; the amount of benefits it can provide is directly dependent on the amount and duration of the contributions of those affiliated to it. It is understandable that such a scheme should be open only to those who will be able to accumulate sufficient funds to finance their pensions.

Thirdly, particular emphasis needs to be placed on the fact that the applicants were obliged to endure a reasonable and commensurate reduction rather than a total loss of their pension entitlements. Indeed, they did not suffer an actual decrease in the monthly payments they received, but simply did not see the announced lifting of the pensions cap materialise — it appears that since retirement they have never received the uncapped amount of their pensions. Moreover, the cap, while sometimes — but not always — resulting in considerable reductions of the nominal amount of their monthly pensions, did not totally divest the applicants of their only means of subsistence. The applicants are, in the nature of things, the top earners among the more than two million persons in Bulgaria who are currently in receipt of a retirement pension. They can therefore hardly be regarded as being made to bear an excessive and disproportionate burden, or as having suffered an impairment of the essence of their pension rights (see, mutatis mutandis, M.V. and U-M.S. v. Finland (dec.), no. 43189/98, 28 January 2003; Saarinen v. Finland (dec.), no. 69136/01, 28 January 2003; Banfield v. the United Kingdom (dec.), no. 6223/04, ECHR 2005-XI; Laloyaux v. Belgium (dec.), no. 73511/01, 9 March 2006; and Wieczorek, § 71; Hasani; and Maggio and Others, § 62, all cited above; and contrast Kjartan Ásmundsson, §§ 43–45, and Apostolakis, §§ 39–42, both cited above).

Fourthly, it cannot be overlooked that public pension schemes are based on the principle of solidarity between contributors and beneficiaries (see Ackermann and Fuhrmann v. Germany (dec.), no. 71477/01, 8 September 2005). Just like other social security schemes, they are an expression of a society's solidarity with its vulnerable members (see Goudswaard-Van der Lans, and Wieczorek, § 64, both cited above), and cannot be likened to private insurance schemes (see Müller, cited above, at p. 32, § 31). Indeed, as already noted (see paragraph 92 above), the pension systems of different countries vary in the relative emphasis that they place on redistributive vis-à-vis insurance elements.

Lastly, it cannot be overlooked that the amount of the cap and the manner in which it is calculated have evolved over the years. Initially, the maximum pension was tied to the social pension, not being able to exceed it by more than three times (see paragraph 27 above). In 2000, that ceiling was raised to four times the social pension for old age (see paragraph 31 above). In 2003, the cap was tied to the ceiling on pensionable earnings and the average estimated pension replacement rate (see paragraph 34 above). It has thus been gradually increased throughout the years, with the result that, as a general trend, considerably fewer pensioners are affected by it (see paragraphs 28, 32, 37 and 65 above).

In view of those considerations, the Court concludes that the impugned cap on the maximum amount of pension falls within Bulgaria's margin of appreciation in regulating its social security policy.

There has therefore been no violation of Article 1 of Protocol No. 1.

The Government submitted that the exemption of persons who have held high office from the pensions cap did not amount to discrimination, for the reasons set out in the decision of the Commission for Protection Against Discrimination of 17 September 2009 (see paragraph 60 above). In any event, that exemption did not directly affect the applicants because they would not benefit from its cancellation. The different treatment accorded to persons who have held high office was justified by the nature of their duties, which were closely related to the country's government. Only persons who had held one of a small number of very high posts were exempted from the cap; all of them had been barred by law from taking up additional employment. Nor could it be said that the cap was discriminatory vis-à-vis other pensioners whose pensions fell below it.

The applicants submitted that they were being treated differently both from pensioners who had had lower salaries and whose pensions thus fell below the cap, and from the high officials to whose pensions the cap did not apply. That difference in treatment concerned rights protected under Article 1 of Protocol No. 1, and could therefore be examined under Article 14. There were no grounds to treat the applicants differently from pensioners whose pensions fell below the cap, for the same reasons as those set out in relation to the complaint under Article 1 of Protocol No. 1. That differential treatment did not pursue a legitimate aim. However, even if it were to be accepted that the money saved as a result of the cap could be used to make payments to other pensioners, the effects of the measure were disproportionate. The interference with the applicants' pension rights, which had become permanent, was quite serious, because they received only a fraction of their full pensions; at the same time, capping the pensions of only 2% of all pensioners could not have a significant effect on the pensions of others. In 2009 those arguments had led the Commission for Protection Against Discrimination to find that the cap amounted to indirect discrimination. Lastly, the applicants submitted that it was not justified to treat them differently from persons who had held high office. Like them the applicants had been subjected to restrictions regarding the taking up of new employment.