EHRM, 15-09-2016, nr. 44818/11

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.

In the present case Gurkha soldiers were undoubtedly treated differently from other soldiers in the British Army in respect of their entitlement to a pension since, prior to 1997, they were governed by a different pension scheme from other soldiers in the British Army, with different terms and conditions. In addition, for those eligible for transfer to the AFPS, only accrued rights to a pension for years of service after 1 July 1997 were transferred on a year-for-year basis, while accrued rights in respect of years of service prior to that date were transferred at actuarial value (approximately twenty-three to thirty-six percent of the value of a year's service of a non-Gurkha soldier of equivalent rank — see paragraph 27 above). However, the notion of discrimination implies that the group in question was not only treated differently, but also less favourably (see, for example, Elsholz v. Germany [GC], no. 25735/94, §§ 60–61, ECHR 2000-VIII), and in the present case the Government contend that this criterion was not met as the vast majority of Gurkhas (both those who retired before 1 July 1997 and those who retired on or after that date) would not have been in a significantly better financial position if they had been treated as if they had always been in the AFPS.

This latter submission by the Government is based on the GAD's actuarial report, which is contested by the applicants who have submitted their own actuarial report challenging the data, methodology and assumptions employed in the GAD report (see paragraph 67 above). Whether or not the applicants' objections in this respect are justified, the Court notes that the GAD report expressly accepts that Gurkha soldiers of officer rank or above (roughly four per cent of the total) would have been in a significantly better financial position had they been able to transfer all years of service to the AFPS on a year-for-year basis. Furthermore, in the 2004 review conducted by the Secretary of State for Defence it was conceded that Gurkhas generally were ‘clearly’ wronged under the GPS in the changed context of a likely second career in the United Kingdom, in that the GPS paid ‘sums too small to be useful at a time when [the Gurkha] does not need them and an inadequate pension at retirement age’ (see paragraph 23 above). Therefore, even if the total sum of pension payments received by a Gurkha who was not of officer rank would not have been less than the total sum received by his non-Gurkha counterpart, the authorities have acknowledged that what the 2004 review called the different ‘pension benefit profiles’ of Gurkha soldiers were less advantageous. The Court is therefore satisfied that Gurkha soldiers can be regarded as having been treated less favourably in respect of their pension entitlement than other soldiers in the British Army.

Article 14 also requires that any difference in treatment be between persons in ‘relevantly similar situations’. In this regard, the Court notes that the historical situation of the Gurkhas was very different from that of other soldiers in the British Army as they were based in the Far East, had no ties to the United Kingdom, and no expectation of settling there following their discharge. However, their situation has significantly changed over time. Most importantly, on 1 July 1997 their home base moved to the United Kingdom (see paragraph 8 above); in 2004 the Immigration Rules were amended to allow Gurkhas with at least four years' service retiring on or after 1 July 1997 to apply for settlement in the United Kingdom after discharge (see paragraph 13 above); in 2006 the policy on Married Accompanied Service was changed, allowing the wives and children of Gurkha soldiers to also form ties to the United Kingdom (see paragraph 9 above); and finally, in 2009 the Immigration Rules were again amended to permit all Gurkha soldiers with at least four years' service to apply for settlement in the United Kingdom (see paragraph 14 above).

In view of these developments, the Court accepts that by the date of the GOTT, namely 2007 (see paragraph 25 above), Gurkha soldiers were in a ‘relevantly similar situation’ to other soldiers in the British Army.

It is common ground that where an alleged difference in treatment was on grounds of nationality (see paragraph 71 above), very weighty reasons have to be put forward before it can be regarded as compatible with the Convention (see Gaygusuz, cited above, § 42, and Andrejeva, cited above, § 87). However, in considering whether such ‘very weighty reasons’ exist, the Court must be mindful of the wide margin usually allowed to the State under the Convention when it comes to general measures of economic or social strategy. That is particularly so where an alleged difference in treatment resulted from a transitional measure forming part of a scheme for the enhancement of a benefit which was carried out in good faith in order to correct an inequality. For example, in Neill and Others v. the United Kingdom (dec.), no. 56721/00 of 29 January 2002, the Court recognised that, in making provision for the future payment of service pensions to servicemen and to their widows, national authorities were in principle permitted to restrict entitlement to such pensions to those who were still in service at the time of introduction of the new provisions, and to fix the level of entitlement by reference to the period of service completed following introduction of the relevant provisions.

In the present case, following a number of the developments set out at paragraph 79 above, the authorities accepted (in 2004) that the situation of Gurkhas had changed, so that differences in the majority of their terms and conditions of service (including their pension entitlement) could no longer be justified on legal and moral grounds (see paragraph 22 above). As a consequence, the 2007 GOTT was formulated in order to bring Gurkhas' pensions into line with those of other soldiers in the British Army. However, having decided to allow the Gurkhas to transfer to the AFPS, the authorities were faced with a decision: whether to allow the transfer to the AFPS of pension rights accrued in respect of all years of service on a year-for-year basis; whether to allow only the transfer of pension rights accrued in respect of all years of service on an actuarial basis; or to find a middle ground.

It would appear that the first option was rejected for financial reasons: in this respect, the Government have estimated the cost of equalising all years of service prior to 1997 for all Gurkhas serving on that date to be in the region of GBP 320 million, and the cost of extending the GOTT to those Gurkhas who retired before that date (with accrued pension rights valued on a year-for-year basis) to be GBP 1.5 billion over twenty years. The second option was also rejected, because it would have undervalued those years of service acquired at a time when the historical assumption that the Gurkhas would retire to Nepal no longer held good. Consequently, the authorities opted for the third approach, allowing only the transfer of pension rights accrued after 1 July 1997 on a year-for-year basis, and, in doing so, made an exception to their general policy of not enhancing pension schemes retrospectively.

The selection of 1 July 1997 as a ‘cut-off point’ was not arbitrary. This date represented the transfer of the Gurkhas' home base to the United Kingdom and was therefore the date from which the Gurkhas starting forming ties with that country. Those who retired before that date had no ties to the United Kingdom and, at the date of the GOTT (2007), had no right to settle there. Although this changed following the 2009 amendment to the Immigration Rules, the applicants agreed before the domestic courts that this development — which post-dated both the GOTT and the commencement of the domestic proceedings in the present case — was irrelevant (see paragraph 34 above). Consequently, the Court finds no cause to doubt the conclusion of the 2004 review that the GPS continued to be the best scheme to meet the needs of these Gurkhas, since the payments under that scheme, which were available immediately upon retirement, were more than adequate to provide for their retirement in Nepal (see paragraph 23 above).

For those Gurkhas who retired after 1 July 1997, any pension entitlement accrued prior to that date was accrued at a time when they had no ties to the United Kingdom and no expectation of settling there following their discharge from the Army. It is true that the majority of Gurkhas falling into this category did subsequently settle in the United Kingdom (see paragraph 13 above). Nevertheless, in considering the impact of the GOTT on their financial situation, it must be borne in mind that the purpose of an armed forces pension scheme (either under the AFPS or GPS) was not to enable the soldier to live without other sources of income following retirement from the Army. Given that most Gurkhas retired after fifteen years, and the majority of other soldiers in the British Army retired before they had served for twenty-two years, it was fully expected that they would continue to be economically active and have other sources of income once they left the armed forces. In fact, the evidence submitted by the Government indicates that many of those Gurkhas who retired after 1 July 1997 and who remained in the United Kingdom have gone on to find other gainful employment there (see paragraph 74 above).

Unlike the situation in Neill (cited above), the Gurkhas' pensions under the GPS were index-linked to their expected country of retirement. However, the Court finds no support for the applicants' argument that pensions should not be index-linked in this way. In Carson (cited above, § 86) the Court expressly recognised that it was difficult to draw any genuine comparison between the position of pensioners living in different countries on account of the range of economic and social variables applying from country to country. Moreover, in their submissions to the Court, the parties have agreed that pensions are a form of deferred salary, and many employers — both at the domestic and international level — regularly adjust salaries to reflect the cost of living in the city or country of employment.

In light of the aforementioned findings, the Court considers that insofar as the applicants have complained of discrimination on grounds of nationality, any difference in treatment was objectively and reasonably justified. Consequently, no violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No. 1 can be found on the facts of the present case.