Insurance Court decides on amount of parental allowance following recent ECJ ruling - International Law Office

The Insurance Court is an independent and impartial special court of law dealing with income security matters. In general, its decisions are not appealable, as in this case regarding parental benefits-related matters.

Under Finnish social security legislation, maternity and parental allowances are normally calculated on the basis of taxed earnings. However, there is a minimum rate to which everyone is entitled.

The Insurance Court issued its ruling in VakO 6882:2009, starting from the premise that under EU Regulation 1408/71 the applicant's earnings from the United Kingdom could not be taken into account when calculating the parental allowance, because the applicant was not subject to Finnish social security legislation while working abroad, and the applicant had no earnings from the period to be considered under the Finnish social security legislation.

The Insurance Court ruled on June 14 2012 - referring to Case C‑257/10 (Bergström) of the European Court of Justice (ECJ), December 15 2012 - that in order to fulfil the requirements of equal treatment imposed under Regulation 1408/71, parental allowance must be calculated by taking into account the income of an individual who is similarly employed in Finland and with comparable experience and qualifications.

The Insurance Court overruled the decisions of the Social Insurance Institution of Finland (Kela) and the Social Security Appeal Board, and returned the case to Kela. Kela had granted the parental allowance, but limited its amount to a minimum rate. The Social Security Appeal Board accepted Kela's decision as foreign earnings can be taken into account when calculating parental allowance only when an individual, while working abroad, is also insured in Finland. The applicant appealed to the Insurance Court, referring to equal treatment compared with similar employees in Finland, and claimed that Kela and the Social Security Appeal Board had not taken into account Regulation 1408/71 and the ECJ rulings in Cases C-50/05 and C-205/05.

The Insurance Court based its decision on Bergström, in which the ECJ, by rejecting the arguments of the Swedish government and the interpleading governments of the United Kingdom and Finland, ruled as follows:

"Article 8(a) of that Agreement, and Article 3(1), Article 23(1) and (2) and Article 72 of Regulation No 1408/71, as amended by Regulation No 1386/2001, and paragraph 1 of point N of Annex VI thereto must be interpreted as meaning that, where the amount of a family benefit, such as that at issue in the case before the referring court, falls to be determined in accordance with the rules governing sickness benefit, that amount – awarded to a person who has completed in full the necessary employment periods for acquiring that right in the territory of the other Contracting Party – must be calculated by taking into account the income of a person who has comparable experience and qualifications and who is similarly employed in the Member State in which that benefit is sought."

The Insurance Court found that in calculating the amount of benefit, Article 23 was relevant and therefore Bergström was also relevant, although Swedish and Finnish parental allowances are not similarly classified under Regulation 1408/71.

The Insurance Court has come under fire recently, with the president of the Supreme Court suggesting that its rulings are too often overturned by the Supreme Court. This latest decision demonstrates the Insurance Court's ability to integrate even the newest ECJ case law into its own rulings in a way that should, of course, be obvious to this kind of supreme appeals body which deals with income and social security matters. However, the decision, as well Bergström, introduces a method of calculation which may be difficult in practice.

For further information on this topic please contact Matti Komonen or Herman Ljungberg at Hammarström Puhakka Partners, Attorneys Ltd by telephone (+358 9 474 2207), fax (+358 9 474 2247) or email (matti.komonen@hpplaw.fi or herman.ljungberg@hpplaw.fi).