EHRM, 16-03-2010, nr. 42184/05

Ms Carson was born in 1931. She spent most of her working life in the United Kingdom, paying National Insurance Contributions in full, before emigrating to South Africa in 1989. From 1989 to 1999 she paid further National Insurance contributions on a voluntary basis (see paragraph 37 below).

In 2000 she became eligible for a basic State pension of GBP 67.50 per week. Her pension has remained fixed at this rate since 2000. Had her pension benefited from up-rating in line with inflation, it would now be worth GBP 95.25 per week (see paragraphs 41–42 below).

Ms Carson brought domestic proceedings challenging the refusal to up-rate her pension (see paragraphs 25–36 below).

Mr Jackson was born in 1922. He spent 50 years working in the United Kingdom, paying National Insurance contributions in full. He emigrated to Canada on his retirement in 1986 and became eligible for a State pension in 1987. His basic State pension was then GBP 39.50 a week, and it has remained fixed at that level since 1987. Had his State pension benefited from up-rating since 1987 it would now be worth GBP 95.25 a week.

Mrs Stewart was born in 1931. She spent 15 years working in the United Kingdom, paying National Insurance contributions in full, before emigrating to Canada in 1964. She became eligible for a reduced State pension in 1991. Her basic State pension was then GBP 15.48 per week, and it has remained fixed at that level since 1991.

Mrs Kendall was born in 1913. She spent 45 years working in the United Kingdom, paying National Insurance contributions in full, before retiring in 1976. She became eligible for a State pension in 1973, and emigrated to Canada in 1986, at which point her State pension had increased to GBP 38.70 per week. It has remained fixed at that level, whereas the current up-rated pension is worth GBP 92.25 (see paragraph 39 below).

Mr Dean was born in 1923. He spent 51 years working in the United Kingdom, paying National Insurance contributions in full, before retiring in 1991. He became eligible for a State pension in 1988, and emigrated to Canada in 1994, when his weekly State pension was GBP 57.60. It has remained fixed at that level since 1994. Had it benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mr Buchanan was born in 1924. He spent 47 years working in the United Kingdom, paying National Insurance contributions in full, before emigrating to Canada in 1985. He became eligible for a State pension in 1989. His basic State pension was then GBP 41.15 per week, and it has remained fixed at that level since 1989. Had his State pension benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mr Doyle was born in 1937. He spent 42 years working in the United Kingdom, paying National Insurance contributions in full, before retiring in 1995 and emigrating to Canada in 1998. He became eligible for a State pension in 2002. His basic State pension was then GBP 75.50 per week, and it has remained fixed at that level since then. Had it benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mr Gould was born in 1933. He spent 44 years working in the United Kingdom, paying National Insurance contributions in full, before retiring and emigrating to Canada in 1994. He became eligible for a State pension in 1998. His basic State pension was then GBP 64.70 per week, and it has remained fixed at that level since then. Had his State pension benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mr Dancer was born in 1921. He spent 44 years working in the United Kingdom, paying National Insurance contributions in full, before emigrating to Canada in 1981. He became eligible for a State pension in 1986. His basic State pension was then GBP 38.30 per week, and it has remained fixed at that level. Had it benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mrs Hill was born in Australia in 1940; it appears that she remains an Australian national. She lived and worked in the United Kingdom between 1963 and 1982, paying National Insurance contributions in full, before returning to Australia in 1982. She made further National Insurance contributions for the tax years 1992–1999, and became eligible for a British State pension in 2000. Her basic State pension was then GBP 38.05 per week. Between August 2002 and December 2004 she spent over half her time in London. During this period, her pension was increased to GBP 58.78, which included an up-rating of the basic State pension. When she returned to Australia, her pension returned to the previous level, that is a basic State pension of GBP 38.05. Her pension has remained at this level subsequently.

Mr Shrubshole was born in 1933. His contributions record in the United Kingdom qualified him for a full basic State pension in 1998. He emigrated to Australia in 2000, at which point his State pension had increased to GBP 67.40. Save for a period of seven weeks when he returned to the United Kingdom (during which time his pension was increased to take into account annual up-ratings), his State pension has remained fixed at that level since 2000. Had his State pension benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mr Markiewicz was born in 1924. He spent 51 years working in the United Kingdom, paying National Insurance contributions in full, and became eligible for a State pension in 1989. In 1993 he emigrated to Australia. His basic State pension was then worth GBP 56.10 a week, and it has remained fixed at that level. Had it benefited from up-rating, it would now be worth approximately GBP 95.25 per week.

Mrs Godfrey was born in 1934. She spent 10 years working in the United Kingdom between 1954 and 1965, paying National Insurance contributions in full, before emigrating to Australia in 1965. She became eligible for a State pension in 1994. Her basic State pension was then GBP 14.40 per week, and it has remained fixed at that level.

In a judgment dated 22 May 2002 (R (Carson) v Secretary of State for Work and Pensions [2002] EWHC 978 (Admin)), the first instance judge, Stanley Burnton J, dismissed Ms Carson's application for judicial review.

Applying the principles he drew from the case-law of the Court, the judge found that the pecuniary right that fell to be protected by Article 1 of Protocol No. 1 had to be defined by the domestic legislation that created it. He found that, by the operation of the domestic legislation, Ms Carson had never been entitled to an up-rated pension, so that there could be no breach of Article 1 of Protocol No. 1 taken in isolation.

The matter nonetheless fell within the ambit of Article 1 of Protocol No. 1 and the judge therefore had to consider whether Ms Carson had suffered discrimination contrary to the provisions of Article 14. The Government initially contended that country of residence was not a prohibited ground of discrimination under Article 14, but this objection was subsequently withdrawn. The judge, however, dismissed Ms Carson's claim on the ground that she was not in a comparable position to pensioners in countries attracting up-rating. The differing economic conditions in each country, including local social security provision and taxation, made it impossible simply to compare the amount in sterling received by pensioners. Moreover, even if the applicant could claim to be in an analogous position to a pensioner in the United Kingdom or a country where up-rating was paid subject to a bilateral agreement, the difference in treatment could be justified.

Ms Carson appealed to the Court of Appeal, which dismissed her appeal on 17 June 2003 (R (Carson and Reynolds) v Secretary of State for Work and Pensions [2003] EWCA Civ 797). For similar reasons to the High Court, the Court of Appeal (Simon Brown, Laws and Rix LJJ) found that, since Article 1 of Protocol No. 1 conferred no right to acquire property, the failure to up-rate Ms Carson's pension gave rise to no violation of that provision taken alone.

As to the complaint under Article 14 in conjunction with Article 1 of Protocol No. 1, the Court of Appeal noted that the Secretary of State accepted that place of residence constituted a ‘status’ for the purposes of the Article. However, it found that the applicant was in a materially different position to those whom she contended were her comparators. In this connection it was significant that ‘the scheme of the primary legislation is entirely geared to the impact on the pension of price inflation in the United Kingdom’. Laws LJ continued:

The Court of Appeal also considered, in the alternative, the question of justification and found that the ‘true’ justification of the refusal to pay the up-rate was that Ms Carson and those in her position ‘had chosen to live in societies, more pointedly economies, outside the United Kingdom where the specific rationale for the uplift may by no means necessarily apply.’ The Court of Appeal thus considered the decision to be objectively justified without reference to what they accepted would be the ‘daunting cost’ of extending the up-rate to those in Ms Carson's position. Moreover, the cost implications were ‘in the context of this case a legitimate factor going in justification for the Secretary of State's position,’ because to accept Ms Carson's arguments would be to lead to a judicial interference in the political decision as to the deployment of public funds which was not mandated by the Human Rights Act 1998, the jurisprudence of this Court or by a ‘legal imperative’ which was sufficiently pressing to justify confining and circumscribing the elected Government's macro-economic policies.

Ms Carson appealed to the House of Lords, relying on Article 1 of Protocol No. 1 read together with Article 14. Her appeal was dismissed on 26 May 2005 by a majority of four to one (R (Carson and Reynolds) v. Secretary of State for Work and Pensions [2005] UKHL 37).

The majority (Lords Nicholls of Birkenhead, Hoffmann, Rodger of Earlsferry and Walker of Gestinghope) accepted that a retirement pension fell within the scope of Article 1 of Protocol No. 1 and that Article 14 was thus applicable. They further assumed that a place of residence was a personal characteristic and amounted to ‘any other status’ within the meaning of Article 14, and was thus a prohibited ground of discrimination. However, because a person could choose where to live, less weighty grounds were required to justify a difference of treatment based on residence than one based on an inherent personal characteristic, such as race or sex.

The majority observed that in certain cases it was artificial to treat separately the questions, first, whether an individual complaining of discrimination was in an analogous position to a person treated more favourably and, secondly, whether the difference in treatment was reasonably and objectively justified. In the present case, the applicant was not in an analogous position to a pensioner resident in the United Kingdom or resident in a country with a bilateral agreement with the United Kingdom. The State pension was one element in an interconnected system of taxation and social security benefits, designed to provide a basic standard of living for the inhabitants of the United Kingdom. It was funded partly from the National Insurance contributions of those currently in employment and their employers, and partly out of general taxation. The pension was not means-tested, but pensioners with a high income from other sources paid some of it back to the State in income tax. Those with low incomes might receive other benefits, such as income support. The provision for index-linking was intended to preserve the value of the pension in the light of economic conditions, such as the cost of living and the rate of inflation, within the United Kingdom. Quite different economic conditions applied in other countries: for example, in South Africa, where Ms Carson lived, although there was virtually no social security, the cost of living was much lower, and the value of the rand had dropped in recent years compared to sterling.

Lord Hoffmann, who gave one of the majority opinions, put the arguments as follows:

Lord Carswell, dissenting, found that Ms Carson could properly be compared to other contributing pensioners living in the United Kingdom or other countries where their pensions were up-rated. He continued:

Lord Carswell therefore considered that the appeal turned on the question of justification. He accepted that the courts should be slow to intervene in questions of macro-economic policy. He further accepted that, had the Government put forward sufficient reasons of economic or State policy to justify the difference in treatment, he should have been properly ready to yield to its decision-making power in those fields. However, in the present case the difference in treatment was not justified: as the Department of Social Security itself accepted, the reason all pensions were not up-rated was simply to save money, and it was not fair to target the applicant and others in her position.

National Insurance contributions are payable by employees and the self-employed who earn income over a set limit and by employers in respect of employees earning over a set limit. It is also possible for individuals who are not liable to pay compulsory contributions, because for example they are resident outside the United Kingdom, to make voluntary contributions to protect the right to certain social security benefits. The amounts paid by employees and employers depend on income. In the current tax year (2009-10), employees earning between GBP 110 and GBP 844 per week pay 11% of their income, with an additional 12.8% paid by the employer. The basic rate for the self-employed is currently GBP 2.40 per week and the voluntary contributions rate is GBP 12.05 per week.

The social security benefits paid for from National Insurance contributions include contribution-based jobseekers allowance, incapacity benefit (now replaced by employment and support allowance), maternity allowance, widow's benefit, bereavement benefits, retirement pensions of certain categories, child's special allowance and guardian's allowance. These benefits are financed on a ‘pay as you go’ basis from National Insurance contributions paid in the current year. If necessary, additional funding can be provided from money received in income tax and other forms of taxation, but this has not been necessary since 1998. National Insurance contributions also partly pay for the cost of the National Health Service.

The basic State pension is, in the current financial year 2009/2010, GBP 95.25 per week. To qualify for a State pension, it is necessary to have reached State pension age and to have paid or been credited with (or have a husband, wife or civil partner who has been paid or been credited with) National Insurance contributions for a sufficient number of ‘qualifying years’. The State Pension age is currently 65 for men and 60 for women. It will increase gradually for women from 2010, so that by 2020 it will be 65 for both sexes. At present, men need 44 qualifying years by the age of 65 to get a full basic State pension and women who reach the age of 60 before 2010 need 39 qualifying years. The Pensions Act 2007 reduced the number of qualifying years needed for a full basic State Pension to 30 for people who reach State pension age on or after 6 April 2010. A percentage of the full basic State pension is payable to an individual without the full number of qualifying years. To get the minimum basic State pension (25%) it is normally necessary to have 10 or 11 qualifying years.

Individuals resident in the United Kingdom who do not have sufficient qualifying years to entitle them to a State pension may be entitled to non-contributory welfare benefits, such as means-tested income support and housing benefit.

Under section 150 of the Social Security Administration Act 1992, the Secretary of State is required to make an order each year to increase the basic State pension to maintain its value ‘in relation to the general level of prices obtaining in Great Britain’.

Although the basic State pension is payable to individuals resident outside the United Kingdom, non-residents are disqualified from receiving up-rated pensions. Instead, unless or until they return to live in the United Kingdom, they continue to receive the State pension at the weekly rate applicable in the year in which they emigrated or, if they emigrated before reaching retirement age, at the rate applicable in the year in which they attained retirement age. A non-resident who returns to the United Kingdom for a short period receives the up-rated pension while in the United Kingdom, but, when he returns to his country of residence, the pension reverts to its previous amount.

The exception to this rule concerns individuals who move to States which have concluded a bi-lateral reciprocal social security agreement with the United Kingdom which provides for the pensions paid to qualifying individuals to be up-rated in line with United Kingdom inflation.

States enter into bi-lateral agreements to provide on a reciprocal basis for wider social security cover for workers and their families moving between the party countries than is available under national legislation alone. Each results from negotiations between the party States, taking into account the scope for reciprocity between the two social security schemes. In all cases the agreement establishes the social security scheme which is to be applied to persons moving from one country to work in the other. Generally, the scheme applicable is that of the country of employment. Whether a reciprocal social security agreement with another country is entered into depends on various factors, among them the numbers of people moving from one country to the other, the benefits available under the other country's scheme, how far reciprocity is possible and the extent to which the advantages to be gained by an agreement outweigh the additional expenditure likely to be incurred by each State. Where an agreement is in place, the flow of funds may differ depending on the level of each country's benefits and the number of people going in each direction.

Of the bilateral agreements entered into by the United Kingdom which cover more than liability for contributions, nearly all cover retirement pension and widows'/bereavement benefits. The majority also cover sickness, incapacity and maternity benefits. Some cover unemployment and child benefit. Where access to a benefit covered by the agreement is dependent on contributions, the agreement generally provides for aggregation of the contributions paid in each country. Each country then calculates a pro-rata pension based on contributions made in that country. Where access to a benefit depends on a period of residence, the agreement is likely to provide for residence in one country to count as residence in the other. Where benefit is paid in one country taking account of residence/contributions in the other, there is usually a provision for reimbursement of the former by the latter. Not all reciprocal agreements to which the United Kingdom is a party, therefore, involve the payment of pension up-rating to United Kingdom expatriates.

The United Kingdom has reciprocal social security agreements providing for pension up-rating with all European Economic Area States and with Barbados, Bermuda, Bosnia-Herzegovina, Croatia, the Federal Republic of Yugoslavia, Israel, Jamaica, Japan, Jersey and Guernsey, Korea, Mauritius, New Zealand, Philippines, Turkey, and the United States of America. Residents of the EEA countries and the countries listed above who qualify for a United Kingdom State Pension receive the same level of up-rating as United Kingdom residents; the up-rating is based on the rate of inflation in the United Kingdom and no regard is paid to inflation in the country of residence.

All the above agreements were concluded between 1948 and 1992, and from 1979 onwards the agreements were to fulfil earlier commitments made by the United Kingdom Government. Since June 1996, the Government's policy has been that future reciprocal agreements should normally be limited to resolving questions of liability for social security contributions. Agreements with Australia, New Zealand and Canada came into force in 1953, 1956 and 1959 respectively, but these did not require payment of up-rated pensions. The agreement with Australia was terminated by Australia as from 1 March 2001, because of the refusal of the United Kingdom to pay up-rated pensions to its pensioners living in Australia.

During the passage of the Pensions Bill through Parliament in 1995, amendments tabled in both Houses, calling for up-rating to be paid to all expatriate pensioners, were defeated by large majorities. According to the Government, it would cost approximately GBP 4 billion (4 thousand million) to pay the back-dated claims to up-rating of all United Kingdom pensioners resident abroad in ‘frozen’ countries together with an ongoing annual bill of over GBP 500 million (0.79 % of the GBP 62.7 billion spent in total by the United Kingdom in 2008/2009 on pensions).

The Chamber held that, in the circumstances of the case, ordinary residence, like domicile and nationality, was to be seen as an aspect of personal status and that place of residence, applied as a criterion for the differential treatment of citizens in the grant of State pensions, was a ground falling within the scope of Article 14.

The applicants submitted that the Chamber's conclusion on this point was manifestly correct, for the reasons it gave. Its treatment of residence as an aspect of personal status was also consistent with the approach of ‘other pre-eminent constitutional courts’, such as the Canadian Supreme Court, which, in Godbout v. Longueuil (City) [1997] SCR 844, characterised an individual's choice of place of residence as a ‘quintessentially private decision going to the very heart of personal or individual autonomy’. The applicants further submitted that it was artificial and inaccurate to treat an individual's country of residence as a matter of free choice, since it might be driven by the need or desire to be close to family members.

Before the domestic courts, the Government conceded that Ms Carson's foreign residence was a ground protected under Article 14 as falling within the phrase ‘or other status (see paragraphs 28 and 30 above). In their observations before the Court, however, the Government contended that place of residence was not within the concept of ‘other status’, since it was a matter of choice, rather than an inherent personal characteristic or deeply held conviction or belief.

The third party, Age Concern and Help the Aged, emphasised the importance of family support in old age and referred to research indicating that the existence of family ties outside the United Kingdom could be an important factor in the decision to emigrate.

The Grand Chamber agrees with the Chamber's conclusions on this issue. It has established in its case-law that only differences in treatment based on a personal characteristic (or ‘status’) by which persons or groups of persons are distinguishable from each other are capable of amounting to discrimination within the meaning of Article 14 (Kjeldsen, Busk Madsen and Pedersen, cited above, § 56). However, the list set out in Article 14 is illustrative and not exhaustive, as is shown by the words ‘any ground such as’ (in French ‘notamment’) (see Engel and Others v. The Netherlands, judgment of 8 June 1976, Series A no. 22, § 72). It further recalls that the words ‘other status’ (and a fortiori the French ‘toute autre situation’) have been given a wide meaning so as to include, in certain circumstances, a distinction drawn on the basis of a place of residence. Thus, in previous cases the Court has examined under Article 14 the legitimacy of alleged discrimination based, inter alia, on domicile abroad (Johnston v. Ireland, judgment of 18 December 1986, Series A no. 112, §§ 59–61) and registration as a resident (Darby v. Sweden, judgment of 23 October 1990, Series A no. 187, §§ 31–34). In addition, the Commission examined complaints about discrepancies in the law applying in different areas of a single Contracting State (Lindsay and Others v. the United Kingdom, no. 8364/78, Commission decision of 8 March 1979, Decisions and Reports 15, p. 247; Gudmundsson v. Iceland, no. 23285/94, Commission decision of 17 January 1996, unreported). It is true that regional differences of treatment, resulting from the application of different legislation depending on the geographical location of an applicant, have been held not to be explained in terms of personal characteristics (see, for example, Magee v. the United Kingdom, judgment of 6 June 2000, no. 28135/95, § 50, ECHR 2000-I). However, as also pointed out by Stanley Burnton J (see paragraphs 26–28 above), these cases are not comparable to the present case, which involves the different application of the same pensions legislation to persons depending on their residence and presence abroad.

In conclusion, the Court considers that place of residence constitutes an aspect of personal status for the purposes of Article 14.

The Chamber held that, given that the United Kingdom's social security and pension system was primarily designed to provide a minimum standard of living for those resident within its territory, the applicants were not in a relevantly similar position to British pensioners who decided to remain in the country. It was ‘hesitant’ to find an analogy between the positions of pensioners such as the applicants who did not receive up-rating and pensioners resident in countries which had concluded bilateral agreements with the United Kingdom providing for up-rating. In this connection, it noted that National Insurance contributions were only one part of the United Kingdom's complex system of taxation and that the National Insurance Fund was one of a number of sources of revenue used to pay for the social security and National Health systems. It did not therefore consider the applicants' payment of National Insurance contributions during their working lives in the United Kingdom to be of any more significance than the fact that they might have paid income tax or other taxes while domiciled there. Moreover, even between States in close geographical proximity, such as the United States of America and Canada, South Africa and Mauritius, or Jamaica and Trinidad and Tobago, differences in social security provision, taxation, rates of inflation, interest and currency exchange made it difficult to compare the respective positions of residents.

As noted in paragraph 61 above, the Court has established in its case-law that, in order for an issue to arise under Article 14, the first condition is that there must be a difference in the treatment of persons in relevantly similar situations.

The applicants' principal argument in support of their claim to be in a relevantly similar situation to pensioners who receive up-rating is that they also have worked in the United Kingdom and paid compulsory contributions to the National Insurance Fund. However, in common with the national courts and the Chamber, the Grand Chamber considers that the applicants' argument misconceives the relationship between National Insurance contributions and the State pension. Unlike private pension schemes, where premiums are paid into a specific fund and where those premiums are directly linked to the expected benefit returns, National Insurance contributions have no exclusive link to retirement pensions. Instead, they form a source of part of the revenue which pays for a whole range of social security benefits, including incapacity benefits, maternity allowances, widow's benefits, bereavement benefits and the National Health Service. Where necessary, the National Insurance fund can be topped-up with money derived from the ordinary taxation of those resident in the United Kingdom, including pensioners (see paragraph 38 above). The variety of funding methods of welfare benefits and the interlocking nature of the benefits and taxation systems have already been recognised by the Court (see Stec and Others (dec), cited above, § 50). This complex and interlocking system makes it impossible to isolate the payment of National Insurance contributions as a sufficient ground for equating the position of pensioners who receive up-rating and those, like the applicants, who do not. As Lord Hoffmann observed (see paragraph 35 above):

The Court does not, therefore, consider that the payment of National Insurance contributions is alone sufficient to place the applicants in a relevantly similar position to all other pensioners, regardless of their country of residence. Moreover, in relation to the comparison with pensioners living in the United Kingdom, it cannot be ignored that social security benefits, including State pensions, are part of a system of social welfare which exist to ensure certain minimum standards of living for residents of the United Kingdom. The duty imposed on the Secretary of State in the Social Security Administration Act 1992 to review the sums specified for the various benefits covered by the Act, including the State pension, is to determine ‘whether they have retained their value in relation to the general level of prices obtaining in Great Britain’ (see paragraph 41 above). The scheme of the primary legislation is, as the Court of Appeal said, ‘entirely geared to the impact on the pension of price inflation in the United Kingdom’ (see paragraph 30 above). The essentially national character of the social security system is itself recognised in the relevant international instruments, the 1952 ILO Convention and the 1964 European Code of Social Security, which empower the suspension of benefits to which a person would otherwise be entitled for as long as the person concerned is absent from the territory of the State concerned (see paragraph 49 above).

Given that the pension system is, therefore, primarily designed to serve the needs of those resident in the United Kingdom, it is hard to draw any genuine comparison with the position of pensioners living elsewhere, because of the range of economic and social variables which apply from country to country. Thus, the value of the pension may be affected by any one or a combination of differences in, for example, rates of inflation, comparative costs of living, interest rates, rates of economic growth, exchange rates between the local currency and sterling (in which the pension is universally paid), social security arrangements and taxation systems. As the Court of Appeal noted, it is inescapable that the grant of the up-rate to all pensioners, wherever they might have chosen to live, would have random effects (see paragraph 30 above). Furthermore, as noted by the domestic courts, as non-residents the applicants do not contribute to the United Kingdom's economy; in particular, they pay no United Kingdom tax to offset the cost of any increase in the pension (see, for example, paragraph 35 above).

Nor does the Court consider that the applicants are in a relevantly similar position to pensioners living in countries with which the United Kingdom has concluded a bilateral agreement providing for up-rating. Those living in reciprocal agreement countries are treated differently from those living elsewhere because an agreement has been entered into; and an agreement has been entered into because the United Kingdom considered it to be in its interests.

States clearly have a right under international law to conclude bilateral social security treaties and indeed this is the preferred method used by the Member States of the Council of Europe to secure reciprocity of welfare benefits (see paragraphs 50–51 above). Such treaties are entered into on the basis of judgments by both parties as to their respective interests and may depend on various factors, among them the numbers of people moving from one country to the other, the benefits available under the other country's welfare scheme, how far reciprocity is possible and the extent to which the advantages to be gained by an agreement outweigh the additional expenditure likely to be incurred by each State in negotiating and implementing it (see paragraph 44 above). Where an agreement is in place, the flow of funds may differ depending on the level of each country's benefits and the number of people going in each direction. It is the inevitable result of such a process that different conditions apply in each country depending on whether or not a treaty has been concluded and on what terms.

The Court agrees with Lord Hoffmann that it would be extraordinary if the fact of entering into bilateral arrangements in the social security sphere had the consequence of creating an obligation to confer the same advantages on all others living in all other countries. Such a conclusion would effectively undermine the right of States to enter into reciprocal agreements and their interest in so doing.

In summary, therefore, the Court does not consider that the applicants, who live outside the United Kingdom in countries which are not party to reciprocal social security agreements with the United Kingdom providing for pension up-rating, are in a relevantly similar position to residents of the United Kingdom or of countries which are party to such agreements. It follows that there has been no discrimination and, therefore, no violation of Article 14 taken in conjunction with Article 1 of Protocol No.1.