Bombshell from the Council of State: old debts of farmers for contributions to OGA are cancelled

No sooner or later, the CoE, in a bombshell decision in early November, ruled the provision of Article 95 para. 1 of the notorious Katrougalos Law (4387/2016), which stipulated a 20-year limitation period for debts to the social security funds.

According to legal circles, the decision paves the way for all debts to OGA (now EFKA) before 2010 to be time-barred, even those that have been established or regulated.

The decision brings another positive. From the point of view that is expected to shorten the time for the award of pension for insured persons of the former OGA with debts of more than 6,000 euros, which is the relevant threshold for receiving a pension, given that old debts are subject to the statute of limitations.

What does the CoE's decision on debts and write-offs provide for?

In particular, the Plenary Session of the Council of State (chairman Mary Sharp and rapporteur the State Counsel Constantina Koniditsiotou) in its decision No. 1833/2021 held that the law established by Article 95 para. 1 of Law 4387/2016, the general rule of the twenty-year limitation period for claims for payment of contributions by social security institutions affiliated to the EFKA, is contrary to the constitutional principles of proportionality and legal certainty.

The Plenary of the CoE (under the model trial procedure) by a majority, ruled, according to a court announcement, that the disputed article 95 of the 2016 law in question «is contrary to the principle of proportionality, since a limitation period of 20 years does not constitute a reasonable duration of the relevant period, which is required to be relatively short, given also the increasing speed and complexity of modern living relationships and transactions, which, in principle, require the rapid settlement of the current obligations of the governed’.

With regard to the organisation and operation of insurance institutions, the CoE notes that «the prescribed limitation period must be sufficient so that, with the assistance of modern technological possibilities, timely and effective, from the point of view of recoverability, controls are carried out, in the context of their rational organisation, with the aim of protecting the insurance capital and ensuring their viability, without extending to a long duration, which, due to the distance in time from the infringement, does not contribute to the protection of the insurance fund.

It is also noted that «with regard to debtors who are burdened with social security contributions, the limitation period is required to be the necessary one, in order, on the one hand, to ensure their right of defence against difficulties in proving facts relating to the distant past and, on the other hand, not to lead debtors to financial exhaustion due to the obligation to pay accumulated debts of several years at the same time, with further adverse effects on employment and the national economy in general.

The foregoing shall apply, bearing in mind, moreover, that the non-payment or incorrect payment of social security contributions is not necessarily linked to an intention to avoid them, but may be due to difficulties in interpreting the insurance legislation as a result of the constant amendments and fragmentation of its individual regulations.

On the contrary, it is necessary to ensure that they are aware of their obligations in a timely and relatively short time, so that they are not taken by surprise, but are able to plan their professional activity for the benefit of the national economy».

The CoE also ruled that «the formulation of the limitation period under the above conditions, which are also a manifestation of the peacemaking function of the law, contributes to the cultivation of the necessary relationship of trust of the governed towards the Administration, which is necessary in a state governed by the rule of law. Furthermore, that provision is contrary to the principle of legal certainty in so far as the 20-year limitation period, which was introduced at a time when the persons liable had already incurred various financial burdens in order to deal with the country's budgetary problem, applies retroactively to claims which arose before the entry into force of the new provision and which were not yet time-barred.

Such a long limitation period is not justified, nor is its retroactive application, for reasons connected with the difficulties encountered in the organisation of the new social security institution and the integration into it of all the social security institutions, nor is it justified by the possible inactivity of the social security institutions until the establishment of the E.F.K.A. to ensure the collection of their claims. Moreover, the provision of a relatively short limitation period does not itself entail any adverse consequences for insured persons when they retire.

This is because the issue of setting a relatively short limitation period for such claims, which, moreover, is found in the majority of modern European social security systems, is in no way related to the different issue of the possible provision in different legislation of conditions, temporal or otherwise related to the payment of contributions, for the recognition of time spent in insurance for the purpose of retirement, conditions which, in any case, are subject to the guarantees of Article 22 para. 5 of the Constitution and interpreted in the light of the general principles of social security law, including the principle of the strict interpretation of the provisions which impose time limits on the right to recognition of periods of insurance and the principle that the failure of the employer to fulfil its obligations to pay contributions to the insurance institution may not, in principle, be to the detriment of the insured person. The minority of this composition of the CoE expressed the view that the 20-year general limitation period, established by Article 95(1) of Law No. 4837/2016 is not contrary to any constitutional or supra-legislative provision and principle.