Conversion in the Dutch Act on Future Pensions: sailing to safe harbour?

Conversion in the Dutch Act on Future Pensions: sailing to safe harbour?

Abstract

This article explores the transformation of rights and entitlements during the transition to a new Dutch pension system within the second pillar for occupational pension schemes. It provides an examination of various national legal challenges such as the contractual basis and retrospective nature of this conversion process, alongside relevant aspects of European law including property rights and touching upon effective legal protection under the European Convention on Human Rights (ECHR) and the Charter of Fundamental Rights of the EU (the Charter). The authors argue that additional legal safeguards are necessary to address these issues adequately. This is relevant as the Dutch State, along with Industry-wide pension funds, could be held liable for damages if the conversion process is deemed to contravene EU law or the Charter. Moreover, the Charter may allow for direct claims against pension funds, reflecting its potential horizontal effect. Additionally, Member States could face liability if their judiciary fails to refer preliminary questions to the EU court appropriately. Although primarily focused on the Dutch context, the analysis offers insights applicable to other EU Member States regarding the impact of European law on national pension reforms.

H. van Meerten & A. Pásztor (writes in a personal capacity)

1. Introduction

The Netherlands is in the middle of implementing its most significant pension reform since the Act on Pension- and Savings Funds (Psw) was established in 1952. The Psw and its successor, the Pension Act (Pw), aimed "to ensure that the pension expectations raised among workers employed by private companies are also realised."^[1] In contrast^[2], the new Dutch Act on Future Pensions^[3] (Wtp), effective from 1 July 2023, states as an objective to create "a new, more balanced, flexible, personal, and transparent pension system focused on the value of the paid pension premium at retirement,"^[4] rather than guaranteeing the previously promised pension benefit.

Although The Netherlands has long been a leader in global pension systems,the question remains whether this new system will allow the Dutch to maintain their preeminent position.^[5]

A highly unprecedented aspect of the pension reform in The Netherlands includes the 'conversion'^[6] of accumulated rights and entitlements from the old to the new pension system. Against a backdrop of financial challenges—marked inter alia by ageing, rising geopolitical tensions and an impending recession—pension funds will undertake this massive conversion. Collective assets amounting to €1,700 billion^[7] will transition into purportedly individual savings accounts^[8] over the coming years. This process, with its formidable legal hurdles, limited representativeness of social partners making decisions for entire participant populations,^[9] potential economic underperformance of the new scheme compared to the existing one, and substantial resources required for the transition, underscores the need for appropriate adjustments to the new system to avoid significant pitfalls.

Despite these challenges, it is not entirely unexpected that the conversion has proceeded with minimal opposition in the public debate. This may be attributed to inadequate media coverage, the complexity and less relatable nature of pensions as an asset, a general lack of pension awareness regarding the impact of this conversion, and the tendency for individuals to consider pensions only upon retirement. This is despite the gravity of this reform, which could have implications well beyond the Dutch context. If this imbalanced conversion is allowed to proceed unchecked, there is a risk that it could serve as a precedent for further governmental encroachments on fundamental rights.^[10]

This article is structured as follows: Section 2 provides a brief overview of the Dutch pension reform, with a focus on the conversion according to the Wtp. Section 3 examines the weak contractual foundation for this conversion. Section 4 outlines the key reasons why the retroactive forced conversion conflicts with the principles of legal certainty. Previous articles have already demonstrated how this forced conversion potentially violates the right to property and detailed the reasons this conversion seems to breach the right to effective legal protection and appears to be at odds with the reflex effect of consumer protection.^[11] Section 5 includes concluding remarks and additional considerations about the extra legal protections needed to ensure this conversion complies with national and EU standards.

2. Brief overview of Dutch Pension Reform including conversion

Several previous articles have already provided an extensive overview of the upcoming Dutch Pension Reform, and for the sake of conciseness, we refer to them.^[12] Here, we will offer a few general remarks necessary for understanding this article. The core of global pension reforms generally lies in the reduced financial capacity for higher pension benefits and diminished possibilities for collective risk sharing. There is a dwindling willingness to bear the rising costs of collective risk sharing, leaving individuals as the ultimate risk bearers.

To some extent, this has also served as the driving force behind the Dutch pension reform. What sets the Dutch transition apart internationally is its 'triple pension reform,'^[13] which can be challenging for outsiders to grasp. This involves a concurrent transition from two systems (pension contract and actuarial system), compounded by the conversion of pension rights and entitlements, making the reform intricate and opaque. The following is a brief explanation of these elements.

Currently, the Netherlands has two primary pension models: the defined benefit (DB) agreement and the defined contribution (DC) agreement. In a DB agreement, the pension benefit is legally set with an ambition for indexation and can only be reduced if fund assets are insufficient, while the contribution may fluctuate. In contrast, a DC agreement has a fixed contribution but offers no guarantee on the pension benefit. DC schemes come in two variants: individual and collective. The key distinction between these variants is that in individual schemes, each person has their own pension pot, whereas in collective schemes, all contributions and returns are pooled together as joint assets.

2.1 Move from an adaptable DB to individual DC with risk sharing

The Dutch are transitioning from an adaptable defined benefit system to individual defined contributions system with risk sharing. Under the Wtp, only certain pension contracts are legally and fiscally supported: I. Solidairy pension agreement II. Flexible pension agreement III. Defined benefit agreement Below, we briefly discuss the first two types of schemes that pension funds can offer in the new system.

2.2 Solidairy pension agreement

A solidairy pension agreement under Wtp is described as: ‘a premium arrangement where the premiums are collectively invested, the results are allocated by age cohorts, and the assets intended for pension payments are utilised to fund a variable payment during the payout phase.’

There is one collective investment policy with which the financial ups and downs are shared within the collective in both the accrual and benefit phase. Returns are distributed to members based on fixed allocation rules, highlighting the importance of social partners in this scheme. Participants and pensioners have administratively, but not legally, a personal pension capital and also partake in risk sharing via the ‘solidarity reserve’.^[14] The solidarity reserve, which can amount to up to 15% of the fund's assets, is an obligatory feature of this solidarity premium scheme.^[15] This implies that the collective capital of the pension administrator includes the combination of individual pension assets and the solidarity reserve. For instance, this reserve can be utilised to share risks with future participants. According to Article 123 Pw, when industry-wide pension funds, company pension funds, and occupational pension funds execute multiple pension schemes, these schemes must be financially integrated.^[16] This practice, known as the 'ringfencing ban,' remains unchanged for these funds as Article 123 Pw is still in effect.

2.3. Flexible pension agreement

A flexible pension agreement according to the Wtp is described as: ‘a premium agreement where individual contributions are invested, and the accumulated capital from these contributions is used from the retirement date to fund either a variable benefit or purchase a defined benefit.’

The scheme has distinct accumulation and benefit phases. During the accumulation phase, members invest based on the "life-cycle" principle, where their risk profile is influenced by their age; older members take on lower investment risks. Therefore, the investment risk rests with the participant. Typically, participants can choose between various investment profiles. The returns earned are generally credited directly to the individual's pension assets. Similar to the solidairy pension scheme, beneficiaries may engage in risk-sharing through the 'risk sharing reserve.' Upon reaching the retirement date, the individual pension capital is converted into either a fixed lifetime benefit or a variable pension benefit. If a variable payout is chosen, a portion of the accumulated pension capital is reinvested during the payout phase. Pension administrators other than the aforementioned pension funds, like general pension funds and IORP’s,^[17] which are largely able to ring-fence, will have a legally separated capital within the flexible premium scheme. Since these administrators often manage different pension schemes for various employers, they are likely to adopt this type of scheme tailored to individual needs.

2.4 Actuarial system transition

The second significant shift involves the change in the actuarial system. In the Netherlands, DB schemes operate on a fixed accrual percentage and a consistent premium, irrespective of age. This approach is not feasible for DC schemes.^[18] Hence, alongside the move from DB to DC, there is also an adoption of a new actuarial system, which presents its own allocation challenges. Such an actuarial transition is not observed in pension reforms in other countries.

2.5 Conversion

The third and most significant change is the so-called 'conversion.' Unlike other countries, where pension plans switch from a DB scheme to a DC scheme, the process in the Netherlands involves converting existing unconditional pension rights and entitlements from the old DB schemes into new conditional DC pension capital.

This type of conversion is not practiced abroad and is often legally restricted and sometimes even expressly prohibited by law.^[19] The Wtp does not define ‘conversion’ legally but outlines how it should be implemented contractually as detailed in section 3.4.

The conversion can be perceived as an interference with or even an infringement of ownership rights under the ECHR and the Charter.^{[20] [21]} Possibly due to this legal risk, the legislator has avoided making conversion mandatory. Instead, the legislator has shifted the risk to social partners and pension funds, presenting conversion as the default option that these groups are encouraged and expected to choose.^[22]

3. Issues legal validity amendment of pension agreement

The issue at hand here is – apart from the compatibility with European law - whether pension beneficiaries are legally bound by the changes in the pension agreement, the transition plan, the decision of the pension fund board based on this plan, and the collective value transfer that follows. Sections 3.1-5 outline the Dutch legal framework for modifying the pension agreement to enable the conversion, providing a general overview. Section 3.6 examines how binding these changes are legally and explores gaps therein.

3.1 Legal framework for amendment of pension agreement

The default conversion path is relevant only to pension funds. If the approximately 51,000 pension agreements held by insurers and IORPs are to be modified, it will occur through unilateral amendment clauses, allowing the pension beneficiary a right to veto as per Article 83 of the Dutch Pension Act, “Pw”. Around 75% of employees with pension agreements are covered by mandatory industry-wide pension funds. In such cases, the board of the pension fund makes the necessary decisions to change the articles of association and plans, which bind both the employer and the employees.^[23] Employers with pension agreements managed by a company or general pension fund must amend these agreements with their (former) employees. For this purpose, employers have access to several tools, as outlined below.

3.2 Principal rule: consent to amendment of pension agreement is required

It is crucial to highlight that the fundamental principle in contract law is the freedom of the parties involved. Thus, as a basic tenet, any modification to a pension agreement requires the employee's consent.^[24] Yet, the conversion process proceeds without individual consent. Typically, an employee will consent to changes in the pension scheme, including its conversion, provided they agree with the proposed transition plan.^[25]

3.3 Amendment of pension agreement to the future

Before we address this further, it must be said that in general an employee is only bound by the agreements made between social partners if they are a member of the contracting trade union and fall within the scope of the collective labour agreement (CLA). According to existing Dutch case law, a CLA under Article 9 of the Collective Labour Agreement Act (WCAO) cannot forcibly alter the legal position of retired trade union members as it applies solely to employees.^[26]

An unorganised employee, so not a member of a trade union, in terms of Article 14 WCAO, is only bound by social partners' agreements if this has been specified in the labour contract through a valid 'incorporation clause'. The range of the incorporation clause is defined by how far the parties intend to delegate their contractual freedom to the social partners negotiating the CLA. This intention is clarified based on the ‘Haviltex-standard’^[27] developed in Dutch case law, considering the circumstances apparent when entering into the employment contract. The issue arises concerning the extent to which this clause can be applied against former employees and retirees. Regardless of its wording, an acquirer cannot use this clause to bind an employee to a CLA different from the one effective at the time of the transfer of undertaking according to Article 7:663 of the Dutch Civil Code (BW).^[28] Employees not bound by union membership or incorporation fall outside the direct influence of the social partners and therefore are not subject to the CLA.

Additionally, an employee must agree to collective or individual changes to the pension agreement if the employer can invoke a ‘unilateral amendment clause’ under 7:613 BW or 19 Wtp and demonstrates a sufficient ‘compelling business interest’ in relation to the employee's interests in a specific situation. Article 19, section 2 of the Wtp stipulates that this clause can also be applied to retirees and former participants.

This discretionary power to amend the pension agreement pertains exclusively to future pension accrual.^[29] Previously accrued pension cannot be altered via this route.

If the amendment of the pension scheme does not involve social partners, the works council has the right to consent. The works council can consider the employer's request for conversion when deciding on changes to the future pension agreement.^[30] For employees, the works council’s approval can indicate the presence of a compelling business interest for the employer.^[31]

The approval of the works council does not replace the necessity for an employee's individual consent. This is because individual rights cannot be collectively exercised, and every employee should always be able to exercise their personal rights at all times. Similarly, collective consultation through the pension fund does not substitute this individual right of consent.^[32] The works council's approval should not affect the balance of interests between the employer and former participants or pensioners since they are not represented by the works council.

If there is no unilateral amendment clause, the employee may still need to consent to changes in their pension agreement if the employer makes a ‘reasonable proposal’ based on Article 7:611 BW and the Stoof/Mammoet case.^[33] The Stoof/Mammoet test is as stringent as that of the unilateral amendment clause, and case law demonstrates that employees are rarely obligated to agree. Furthermore, it remains unclear whether this article applies to former employees and retirees as it pertains to 'good employeeship.'

Another possible route is the ‘pension fund route,’ where the pension fund board can amend the pension agreement if this has been agreed upon between the employer and employee, for instance, in the pension agreement, CLA, or pension scheme.

If these measures do not legally bind a change in the pension agreement, only two other situations might permit it. Firstly, under Article 6:248 section 2 BW, the ‘derogatory effect of fairness and reasonableness’ might lift the unilateral amendment ban. This test is more rigorous than that of the unilateral amendment clause and is seldom successful in pension litigation. Employers must prove that continuing the current pension agreement would be unacceptable. In case of mandatory legal provisions, that already involve legislative interest balancing, an appeal to this effect will not be successful.^[34]

Secondly, Article 6:258 BW allows for amendments due to ‘unforeseen circumstances’ that could not have been predicted when entering into the pension agreement. The foreseeability depends on specific case circumstances. Courts may alter agreements at a party's request if unforeseen conditions make unaltered continuation untenable against fairness and reasonableness standards.

However, judges are hesitant to invoke unforeseen circumstances, given the importance of contractual freedom and party autonomy. Contracts generally must be upheld even if they become (very) disadvantageous for one party.

3.4 Amendment of pension agreement to the past

This is relevant to the Dutch conversion process, as the pension agreement must first be legally amended pursuant to Article 150l, section 1 of the Wtp before conversion can take place. This requirement applies to both active and post-active beneficiaries. The modified pension agreement serves as the foundation for conversion. Without a legally valid amendment, parties may revert to the original, unamended pension agreement and seek its enforcement.^[35] The Wtp does not mandate conversion, preserving the freedom of negotiation among contracting parties, but it supports this process via the 'default conversion path' outlined in Article 150l Wtp. Employers following this path will in principle convert, unless it is 'disproportionately unfavourable' for specific beneficiary groups. The decision to proceed with or forego conversion must be justified in the 'transition plan' under Article 150d Wtp.^[36]

If conversion is not chosen, the pension fund must manage two different pension contracts. In such scenarios, ring-fencing, which would have simplified the non-conversion process, is in principle prohibited by Article 150l, section 7 Wtp.^[37]

Employers opting for conversion must provide the amended pension agreement and transition plan to the pension fund as stipulated by Article 150c, section 1(a) Wtp. The pension fund must verify that beneficiaries agree to the proposed changes, as required by the 'conformity' clause in Article 35 Pw, ensuring the pension scheme aligns with the pension agreement.^[38] The fund can only proceed with conversion if there is a legally valid request from social partners in accordance with Article 150m, section 1 Wtp.

Conversion involves a request for collective value transfer from the employer under Article 83 Pw however without the right for an individual to veto the conversion. A legislative amendment^[39] to re-insert this right was rejected by the Dutch Parliament.^[40]

That said, the pension fund may reject this request based on exceptions, specifically if the proposed changes result in an 'unbalanced disadvantage' for beneficiaries as outlined in Article 150I, section 4 Wtp. This criterion is detailed further in Article 150n, section 6 Wtp. The right of beneficiaries to veto the collective value transfer of their pension rights, normally indispensable for the transfer, has been suspended to facilitate conversion per Article 150I, section 5 Wtp, replaced by certain collective procedural safeguards and consultation rights. The 'transitional Wtp measures' in Article 220i Wtp provide immediate effect (from 1 July 2023) for several provisions of the Wtp (as integrated into the Pw), including Articles 150l and 150m Wtp.

3.5 Compelling business interest

The legislative history of the Wtp primarily outlines general compelling interests that justify amending pension agreements concerning future accruals, as the mandatory nature of the pension reform exclusively pertains to future provisions. Consequently, employers may find it challenging to present arguments for a compelling business interest and might prefer to maintain the current pension agreements for retirees and former employees while limiting changes to future accruals for active participants.

Also, there is no fiscal justification for employers to amend pension agreements for former employees and retirees since their contracts pertain solely to vested pension rights and entitlements. The change in Wtp legislation regarding future accruals under the new premium contract does not trigger the default conversion path for these individuals.^[41] Thus, 'pension reform' alone does not provide employers or social partners at the collective level with a compelling business reason to alter benefit contracts retroactively for the conversion of vested rights and entitlements.

The legislative history notes that it might be conceivable for an employer's compelling business interest in relation to former participants and pensioners to lie in having one harmonised pension scheme instead of two separate ones.^[42] However, the judiciary has established stringent criteria for accepting such a compelling business interest.^[43] It is improbable that the 'affordability of the pension system' and 'administrative burdens' can convincingly substantiate a compelling business interest for supporting conversion.^[44] This situation reflects the cost associated with observance and upholding property rights under the existing pension contract. Implementing two pension schemes will naturally incur higher expenses due to the need for dual administration.

Nevertheless, many pension funds in the Netherlands already manage multiple schemes, which diminishes the validity of this argument,^[45] particularly for financially robust pension funds. Furthermore, numerous variations within a premium scheme will necessitate distinct administrations in the future.

Additionally, non-conversion, which involves retaining the old pension rights and entitlements in a closed pension scheme, does not inherently restrict the 'indexation prospects' of pension beneficiaries. Many industry-wide pension funds have implemented new pension schemes in the past while leaving accrued pensions untouched in the old schemes, often without restrictions.^[46] Also, the issue of complexity is relative, as only the new premium scheme will remain after a few decades. The fundamental decision about whether to convert should not be treated purely as a technological matter; it should focus on what best serves the pension beneficiaries. Our stance prioritises the preservation of vested rights and entitlements, so that beneficiaries face pension risks only in the new scheme for future accruals.

Furthermore, it is implausible to argue that conversion is driven by a compelling business interest, such as the 'financial stability' of the new pension scheme, allegedly supported by the solidarity reserve for the solidarity premium scheme or the risk-sharing reserve for the flexible premium scheme. However, this approach is misguided. These reserves merely represent a collective capital pool to share financial gains or setbacks within a premium agreement. Proper allocation of protections and surplus returns leads to financial stability, not reliance on solidarity or risk-sharing reserves.^[47]

Similarly, the notion that conversion is necessary to 'finance the compensation depot'—wherein past pension assets are utilised to compensate active participants for diminished future accrual prospects following the abolition of the average premium system—is also flawed. Insofar this is a lawful use of power, such compensation can occur within the current financial assessment framework by granting extra entitlements to affected participants. Thus, funding remains constant, with or without conversion.^[48]

Another common argument advocating conversion is that pension beneficiaries do not comprehend the implications of their choices, making the required 'guidance to support opt-out decisions too complex'. However, whether individuals can grasp the consequences of their decisions is irrelevant, just as it has been in the past with collective value transfers, which have not mandated forced conversions. Communication complexities exist equally in conversion and non-conversion scenarios.

Complexity itself should not dictate conversion decisions. The remedy should not worsen the situation. Moreover, neither experts nor anyone else can predict the outcomes of conversion, as it is unprecedented. This is why the decision should rest with the owner of the individual pension rights and entitlements: the pension beneficiary.

This argument often includes claims that conversion serves the 'best interests' of pension beneficiaries. Setting aside whether this constitutes a sufficient business interest for conversion, an employer or pension fund could only successfully claim this if it can be definitively shown that conversion results in better or at least equivalent outcomes compared to non-conversion on an individual basis.

In reality, pension beneficiaries may experience up to a 5% decrease upon conversion, as permitted by Article 150m, section 6 Wtp, to facilitate a collectively balanced transition. Furthermore, after conversion, the pension beneficiaries will bear the pension risks rather than the pension fund. There is a potential lifelong disadvantage, as the value of old rights and entitlements will reflect stock market fluctuations. Additionally, the new premium system cannot ensure a pension with adequate purchasing power for former participants and retirees.^[49]

Considering all factors, there is no assurance that the Wtp objectives will be met, nor that the new premium scheme will outperform the existing defined benefit one. While past performance does not promise future outcomes, future projections offer even less certainty. Consequently, in our view, conversion is not in the best interest of pension beneficiaries. According to settled ECJ case law,^[50] economic motives alone do not suffice to justify a breach of a fundamental right.^[51]

3.6 Contractual change to facilitate conversion legally binding?

From a contract law perspective, several legal issues arise that may render changes to pension contracts non-binding for beneficiaries, particularly within company pension funds.

An in-depth review of the legal framework for employers or social partners to amend pension agreements with extensive retroactive effect essential for conversion is lacking in the legislative history of the Wtp. Such authority cannot be derived from Article 19 Pw, which mandatorily only applies to future changes,^[52] neither from Article 20 Pw, which merely stipulates the consequences of such changes, namely the ‘infringement ban’, nor from Article 150l Wtp in conjunction with 83 Pw, as these require a preceding amendment of the pension agreement extending into the past as exception to this ban.^[53]

This necessity for retrospective application is dictated by the conformity requirement stipulated in Article 35 Pw. Forced conversions, whether classified as expropriation or regulation (4.2), necessitate that amendments to the pension agreement be retroactive because vested pension rights and entitlements in defined benefit schemes are replaced with individual pension capital in considerably different investment products (4.1). If conversions occur without legally valid retrospective changes, pension beneficiaries could revert to the 'old' pension agreement concerning their vested pensions under the defined benefit scheme, essentially claiming adherence against the employer and conformity with the pension fund.^[54]

Given the absence of a legal foundation in pension law, the authority of social partners to amend must trace back to the individual employment relationship. The principal rule here is the employee's negative freedom of contract, allowing them not to bind themselves to a CLA or unilateral change in their labour conditions.^[55] A CLA cannot forcibly bind retired union workers. For unorganised employees, this means that social partners cannot exercise broader powers than those conferred by individual contracting parties through incorporation clauses in employment agreements. In this context it remains unclear to what extent such uncodified clauses are enforceable against past participants or retirees who no longer hold employee status.

Furthermore, incorporation clauses typically cater to future rather than lengthy retroactive changes. Referencing the Haviltex standard, the employee could not have reasonably anticipated that the incorporation clause would include a future amendment to the pension agreement transitioning from a defined benefit to a premium agreement with utmost retroactive effect. Such retroactive forced conversions are unprecedented and were legally inconceivable when the employment contract was signed, due to the pension beneficiary's codified veto right. This unforeseen change would likely be considered unreasonably burdensome, conflicting with principles of fairness and reasonableness and consumer protection.^[56] This would also violate the legal certainty requirements for written clauses known in scope when signing the contract.^[57]

The incorporation clause in the event of a transfer of undertaking, implies that the employee can not be automatically bound by a CLA they could not have foreseen and to the content of which they may never have wanted to agree in advance. This would constitute too great an infringement of the freedom of association, which also includes the employee's right not to associate.^[58]

Case law has not yet clarified the pension fund route. However, if employer and employee agree in advance that future changes by the pension fund board will automatically affect their legal relationship, this does not authorise the pension fund to modify vested rights without amending the pension agreement first. Doing so disrupts the legal relationships within the pension triangle and infringes on the beneficiaries' rights against the employer.^[59] If this effect was intended beyond mandatory industry-wide pension funds, the legislator should have opted for either a mandatory conversion or declared the decision of the social partners to convert universally binding in order to also bind unorganised employees.^[60] Ultimately, what this means is that employers and employees can delegate the authority to alter the pension agreement to pension fund boards via their contracts. This is an incorporation clause rooted in contractual freedom. To the extent that such a transfer of power can be established, the pension fund cannot possess greater authority than the employer to alter the pension agreement for non-unionised employees. Since the employer's authority is restricted by the incorporation clause and/or unilateral amendment clause, so is that of the pension fund.

In this context, the role of trade unions and their legitimacy to represent and bind all workers, given their steadily declining membership,^[61] has been and will continue to be a topic of discussion for many years.^[62] This legitimacy may no longer be as evident, which pressures the institutional aspect of collective labour agreements law and the application of the incorporation clause, which is increasingly approached from a purely contractual perspective. This challenges the binding nature of CLAs, which after all is not solely dependent on the contractual interpretation of the incorporation clause.^[63]

While beyond the scope of this article, it is important to note another ongoing debate about whether mandatory participation in industry-wide pension funds remains justifiable in light of European competition law, the free movement of services, and the principle of non-discrimination. This includes questioning the added value of compulsory industry-wide pension funds with limited solidarity under the Wtp in the Netherlands regarding the ‘essential social function’ these funds are expected to fulfil moving forward.^[64]

4. Conversion is at odds with the principles of legality

The principles of legality^[65] upheld in European law and numerous democratic states assert that burdensome laws and decisions based on them cannot be applied retroactively. The doctrines of legal certainty, trust, respect for acquired rights and entitlements, as well as predictability, prevent retroactive interference.^[66] “The (criminal) principle of legality and the related principle of certainty, is the backbone of our rule of law. It is enshrined in our Constitution, various national laws and in European treaties, for example, ECHR and EU Charter.”“Nullum crimen nulla poena sine lege scripta, praevia, certa et stricta," is the adage in full. A fundamental tenet of our rule of law. Both along the path mapped out by national administrative law and through the nexus of European law. The crucial role of this principle in criminal law is undisputed and also frequently confirmed by the ECtHR.”“If EU fundamental rights can be curtailed on the basis of national legislation, that legislation must comply with the lex certa principle. Because the ECHR applies as a minimum guarantee, this principle also applies in EU law.”^[67]

The following is an explanation of these elements. In 4.1 we examine the substantive retroactive effect of conversion in conjunction with the distinction of regulation of ownership versus expropriation in 4.2. In 4.3 we examine the Dutch assessment framework for retroactive legislation. In 4.4 and 4.5 we zoom into the ECJ and ECtHR guidelines for retroactive assessment. Thereafter, we examine the implications of the retroactive frameworks for legal assessment of forced conversion in 4.6.

4.1 Forced conversion has a substantive retroactive effect

Contrary to the legislator's belief,^[68] there is indeed a change in the legal framework with retroactive effect. In the realm of social security and pension legislation, there is a retroactive effect when a measure impacts facts and legal relationships that existed before the date the legislation came into force.^[69]

The mechanics of this retroactive effect are best explained by De Witte, who states (translation): “The irrevocable nature of a statutory pension is ultimately not determined by the law itself, but by supralegal norms, such as fundamental rights to a pension, social security, or property, and general legal principles such as the principle of legitimate expectations and the principle of non-retroactivity of the law. The principle of non-retroactivity is a general legal principle — for example codified in Article 2 of the [Belgian] Civil Code — which provides that, in principle, the law applies only to the future and therefore may not have retroactive effect. Acquired pension rights are granted rights which, although not yet payable, can no longer be altered by the pension provider.”^[70]

Although de jure the forced conversion has an immediate effect pursuant to the transition measures in Article 220i Wtp, the temporal scope is panoptic^[71] as it intervenes in facts, rights, and legal relationships both postdating and predating the Wtp provisions taking legal effect. This undermines legitimate expectations established under the previous legislation (Pw). Therefore, the forced conversion has a substantive retroactive effect, with key points detailed in sections I to V below. It is important to note this because the immediate effect in the Wtp parallels the impact of formal retroactive effect, which occurs when the effective date precedes the date of entry into force. Granting retroactive effect to the forced conversion significantly increases pension risks and infringes on the pension rights and entitlements of beneficiaries, as evidenced by the following:

1. The Dutch State Attorney has legally determined that the conversion constitutes an infringement of individual property rights, as the absolute necessity for it is lacking.^[72] By nullifying previous rights and entitlements, pensions that have already been accrued and financed unconditionally are made conditional with retroactive effect.
2. The rights and benefits from an insurance scheme^[73] that transfers pension risks to a pension fund for a fee are retroactively expropriated and replaced with a premium scheme that transfers (investment) risks to individual participants.^[74]
3. The pension agreement is unilaterally changed so that participation in the benefit agreement is retroactively withdrawn and replaced by a premium agreement. This 'swap' is retroactive in the sense that premiums previously paid for a life insurance policy with guaranteed pensions are now considered contributions to a confiscated, fluctuating pension pot.^[75]
4. The collective value transfer in Article 83 Pw is the mechanism through which conversion is executed following the employer's decision and confirmation by the pension fund. It serves as an exception to the prohibition on infringing accrued pension rights and entitlements stipulated in Article 20 Pw and the legal protection of the individual pension participants ‘right of veto’ in former article is a prerequisite for this.^[76] Originally this veto right was implemented to safeguard the interests of pension beneficiaries against unilateral infringements.^[77] However, under the transitional measure set out in Article 220i Wtp, this veto right has been blocked immediately concerning the conversion described in Article 150l, section 5 Wtp. This blockage effectively enforces the conversion, giving the change in Pw a substantive retroactive effect. The legislator explicitly intended this consequence to facilitate pension reform, including conversion.^[78]
5. Similarly, Article XIIA Wtp excludes the individual right to object to and appeal against a conversion decision. According to Article 1, Appendix 2 of the General Administrative Law Act, only a pension fund is authorised to object to and appeal against the Dutch central bank's decision to permit or prohibit a conversion in a specific case.

4.2 Regulation of ownership versus expropriation

In brief, the enforced conversion and unilateral modification of the pension agreement, with retroactive effect, transfers the insured pension risks for unconditionally time-proportioned funded pension rights and entitlements accrued previously from the pension fund to the pension beneficiaries. This results in a significant impairment of their pensions prospects and an increase in their responsibilities, thus worsening their legal position as it was. This act seem to contradict the principles of legality.

The often-held view that a deterioration in legal position or damage can only occur if the pension becomes significantly lower following conversion to the new system is unfounded.^[79] This aligns with the legislators' additional belief that the forced conversion qualifies as 'regulation'^[80] of ownership rather than 'expropriation.'

Like their stance on retroactivity, this classification lacks justification in legislative history and appears legally unsustainable. Ultimately, this relates to the legal evaluation of the 'essence' of pension as property rights, which is thoroughly analysed.^[81]

Here, it suffices to note, simply put, that with a benefit agreement, the crucial commitment is a guaranteed right to a benefit. In contrast, a premium agreement does not offer such a right. Consequently, the nature of the property rights provided by both schemes varies.

The distinctions between a benefit and a premium agreement have been frequently highlighted by both the government^[82] and the Dutch Supreme Court^[83] in recent years. The fundamental differences in the type of property rights provided by these schemes are also evident from the compulsory pension legislation,^[84] which mandates pension agreements to specify the type of scheme and thus the type of ownership rights conferred by the agreement.

Moreover, the absence of immediate or measurable lifelong damage on the transition date does not change the understanding that losing a key performance obligation or pension guarantee within a benefit agreement holds its own inherent economic value.^[85]

The fact that the old benefit contract does not provide an absolute performance guarantee does not negate that a fully funded pension's performance obligation remains its primary commitment.

Even more, the Advocate General of the EU Court^[86] rightly stated that:“74. Equally, the right to property, which covers social security benefits assured by law, does not guarantee an entitlement to a pension of a particular amount, but can however also only be restricted in so far as that is justified and necessary for the general interest.”

Clearly, in our view, this pension guarantee in DB rights is significantly more valuable than the best-effort aspiration under the new individual premium contract. Therefore, it is evident that the 'essence' of pension ownership must at least include the type of ownership to ensure consistency so the owner receives what they paid for. This indicates that switching from an accrued benefit to a premium agreement irreversibly breaks this ownership. Any other conclusion seems to diminish the concept of property rights and conformity, ultimately losing the 'essence.' Peters, on the other hand seems to disagree, where he writes (translation): “In light of the foregoing, it is therefore likely that the mere fact that the nature and character of previously acquired claims and rights are, with retroactive effect, brought under different rules does not in itself constitute such an interference with property rights that it must be considered that the essential character of the accrued pension claims and rights is undermined.”^[87]

Yet, we believe that if property represents the most comprehensive right someone can possess does not include the right to the type of property it rests on, then ownership becomes meaningless.

In the context of forced conversion, this can be likened to the folk tale of 'Lucky Hans,'^[88] who after years of loyal service leaves with a nugget of gold only to eventually return home empty handed due to various exchanges along the way. The fact that conversion involves swapping one type of property—an insurance product—for another—an investment product—does not prevent this from being a loss of ownership. This characterisation is particularly relevant because, unlike the voluntary swaps in the folk tale, the exchange mandated by the Wtp is involuntary and lacks critical legal protections. If conversion could be enforced through this swap, then anyone could end up like Hans, and property protection based on contracts would become illusory.

4.3 Dutch assessment framework for retroactive legislation

As a fundamental principle, introducing burdensome legislation with any form of retroactive effect should be avoided, as it disrupts pre-existing rights and legal relationships established before the law came into force.

Legal certainty argues against such measures.^[89] Should compelling interests necessitate retroactive application, there is an increased obligation to justify these interests, balancing them against the need for legal certainty. If these interests are absent or inconsequential, the retroactive effect should be either neutralised or mitigated through transitional provisions.

Detailed guidance on this matter has been developed within tax law^{[90] [91]} and adapted for social security and pension law. It is relatively rare in Europe to have such a 'self-regulating' assessment framework.^[92] One explanation could be that the Netherlands prohibits constitutional review of retroactive effects by the courts, as stated in Article 120 of the Dutch constitution.^[93]

This guidance differentiates between two primary elements when determining whether retroactive effect (to the detriment) is permissible: 'the substantive element', which examines whether there is adequate justification for the retroactive effect, and 'the time element', which considers factors like the foreseeability of the new arrangement. The substantive elements include (1) preventing abuse or improper use, (2) addressing an obvious omission that leads to unintended consequences, (3) averting an announcement effect, and (4) major budgetary impacts and implementation aspects.

In considering the substantive retroactive effect of change, factors such as the time span of the anterior effect, whether individuals can adapt to the new situation by taking necessary actions, the degree of rights violations or increased obligations, and reasonable expectations for maintaining the current status are taken into account.^[94] Usually, transitional laws with deferred or observed effects should be provided for existing cases.

Special attention is needed for provisions acting as insurance against loss of income, like occupational pension schemes, because premiums have been paid into these schemes which are either in payment or not yet in payment solely due to the insured risk of old age not occurring. Thus, an alternative arrangement should be available if adaptation is not feasible.^[95]

The extent of formal retroactivity usually aligns with the time when affected individuals can reasonably be expected to account for the regulatory changes. Fundamentally, legislation should not have a retroactive impact beyond the point at which the public is officially notified by the government of its intent to amend the law—such as through submitting the bill to Parliament or issuing a press release that details the main aspects of the proposed legislation and mentions any potential retroactive effect.

4.4. European Court of Justice guidelines for retroactive assessment

Further guidance on legal certainty is provided in established case law of the European Court of Justice (ECJ). When implementing laws that create rights, it is essential to ensure specificity, accuracy, and clarity as part of the requirement of legal certainty so that beneficiaries can fully understand their rights.^[96] This 'effet utile' doctrine^[97] essentially means that EU fundamental rights cannot be easily overridden by national law.^[98] If EU legislation is applied retroactively, resulting in a worsening of the legal position of the affected parties, this is a contra indication for granting retroactive effect.^{[99] [100]}

When national law imposes restrictions on an EU fundamental right, which is the mirror image of that which occurs when directives are transposed into national legislation, those affected must be able to clearly understand when such restrictions might apply; otherwise, EU fundamental rights could be too readily negated.^[101] The Dutch Council for the Judiciary has repeatedly highlighted that the Wtp is ambiguous on several aspects related to conversion where deviations from prevailing law are involved, predicting this will lead to numerous legal disputes.^[102]

The EJC has established a specific framework for retroactive assessment, applied in various scenarios where retroactivity is relevant.^[103] As an exception to the general rule, retroactive effect is allowed under certain conditions: (a) it must be necessary and proportionate to achieve the intended purpose ('necessity condition'); and (b) it must not violate the legitimate expectations of legal subjects ('condition of non-violation of the principle of trust').

While the default approach for transitional law is that a new rule takes immediate effect,^[104] the principle against retroactivity also applies to 'protected legitimate interests' within these contexts.^[105] Although the concept of retroactive effect in transitional law may not always be explicitly defined, this does not pose an issue as the EJC evaluates the immediate effect of a rule, or the lack of a transitional arrangement, against the principle of trust.^[106] The element of 'foreseeability' often indicates whether the principle of trust is breached.^[107] When considering retroactive or immediate effect, the ECJ implicitly balances the principle of trust against the interest served by such effects.^[108] Therefore, there does not appear to be a substantial distinction between substantive and formal retroactivity concerning the conditions justifying retroactivity.

We also like to point at the following case:^[109]"Thus, in the event of an established infringement of the second subparagraph of Article 19(1) TEU, the principle of primacy of EU law requires national courts called upon, within the exercise of their jurisdiction, to apply EU law, to disapply, of their own motion, national provisions which are contrary to the second subparagraph of Article 19(1) TEU, whether they are of legislative or constitutional origin, and it is not necessary for those courts to request or await the prior setting aside of those provisions by legislative or other constitutional means (…).”

4.5 European Court of Human Rights guidelines for retroactive assessment

Generally, the European Court of Human Rights (ECtHR) has determined that the 'principle of the rule of law' and the 'principle of legal certainty' are enshrined in the ECHR.^[110] The ECtHR does not distinctly separate formal from substantive retroactive effects of legislation within the context of Article 1 of Protocol No. 1 ECHR. The mere fact that legislation is applied retroactively does not inherently violate Article 1 of Protocol No. 1, as such retrospective application is not outright prohibited by this provision.^[111]

Additionally, neither the Convention nor its Protocols prevent the legislature from intervening with existing contracts,^[112] establishing new provisions affecting rights derived from laws previously in force,^[113] or modifying the existing legal position through immediately applicable laws in civil cases.^[114] The key question is whether, under the specific circumstances of a case, the retroactive application of the law imposes an ‘unreasonable burden’ on applicants, thereby failing to achieve a ‘fair balance’ among the various interests involved.^[115] In this context, the proportionality requirement is explicitly applied to the retroactive effect by the ECHR. Meeting the proportionality requirement involves assessing firstly the reasons for the retroactivity and secondly, weighing it against the impact of the retroactive law on the applicants' positions.^[116]

This measure necessitates reassessing the legitimate aim, particularly concerning the retroactive aspect rather than the pension reform itself. Within this retrospective test, foreseeability is viewed more as a restricted formal legality requirement, where the ECtHR verifies solely whether the relevant application has a basis in national law.^[117]

4.6 Considerations retroactive frameworks for legal assessment of forced conversion

Predicting the outcome of rulings by the EJC or ECtHR regarding the permissibility of substantive retroactive conversion, given the presumed infringement on property rights, is challenging.

One reason is that perspectives on the importance of legal principles vary significantly and are influenced by evolving societal values. Another reason pertains to the issue of 'incommensurability,' which means that comparing differing interests rationally is not feasible without a common scale for assessment. Additionally, permissibility must be evaluated on an individual basis.

However, from the outlined frameworks, we can extract the main factors relevant to determining whether substantive retroactive conversion will be considered acceptable.

1. According to the ECtHR, evidence that the proportionality requirement is met might include the existence of similar provisions in other Member States.^[118] Conversely, the absence of such provisions in other Member States could negatively impact the assessment.^[119] It is important to note that retroactive forced conversion has never been implemented globally,^[120] as it would undermine the inherent default position: the employee's ownership rights derived from the contract with the employer.
2. The Wtp has become established law and was formally deemed 'foreseeable' from the announcement date of the draft legislation in a press release,^[121] thus aligning with ECtHR standards. Whether formal foreseeability suffices for EJC depends on whether there are legitimate interests necessitating protection through transitional measures. Vested pension rights and entitlements are likely to be viewed as such by the EJC. Considering the extended anterior effect period, the degree of rights violation, and the inability of retirees and older participants to adapt by safeguarding their vested pension rights and entitlements, we express doubt that the retroactive measure would have been proposed by the Minister for Poverty Policy, Participation and Pensions or at least accepted by Parliament in the Netherlands, had the Dutch retroactive effect assessment framework been applied. It remains to be seen what significance this will hold in EJC and ECtHR proceedings.
3. In any legal proceedings concerning property rights, the nature of occupational defined benefit pension schemes is relevant as they act as insurance against loss of income where premiums have been paid and unconditional, time-proportionate financed pension rights and entitlements have been accrued, whether or not they are currently in payment. This remains true if the insured risk of old age has yet to occur. In EJC and ECtHR proceedings, if a forced retroactive conversion is deemed 'expropriation,' additional conditions, such as compensation, apply, although no such compensation is specified in the Wtp. For the Dutch retroactive framework, this is significant because the insurance nature of the defined benefit scheme strongly argues against retroactive conversion, and individuals should have the option to use an alternative arrangement, which the Wtp does not accommodate.
4. Regarding the retroactive necessity condition, the legislator, along with the employer and pension fund, must declare compelling reasons for any forced retroactive conversion. This is essential for citizens and courts to understand the justification for the retroactive effect. If this substantiation is not provided, the ECJ will reject the retroactive effect.^[122] Meanwhile, the ECtHR considers that the legislator has a 'wide margin of appreciation' in the retroactive 'fair balance' test, meaning the standard for justifying retroactivity is not stringent. Simultaneously, this margin should not be so broad that it lacks a reasonable basis.^[123] From the Dutch perspective, we can surmise that none of the substantive compelling reasons apply. The retroactive effect of forced conversion has not been acknowledged at the legislative level, leaving compelling reasons for its necessity absent in legislative records. Similarly, the classification of conversion as 'regulation' is unsubstantiated. The legislative history merely indicates that the public interest in a sustainable, future-proof, and functional pension system supports conversion.^[124] With conversion, expected enhancements to the pension system will be realised within a reasonable timeframe.^[125] The aim of conversion is to integrate the pensions financed under the old system with those in the new system into one unified pension scheme.^[126] Therefore, the ultimate goal of retroactive conversion is to ensure solidarity between the old and new pension systems, meaning risk sharing between existing and future pension accruals. Thus, the justification for retroactivity aligns closely with the rationale for pension reform itself, along with the preference for retroactively revising to include vested pension rights and entitlements. The question remains whether this constitutes a justified reason for retroactivity. It is improbable that the general interest reasons cited in the legislative history to justify changes in the pension system and future entitlements as such are sufficiently compelling to support the intrusive retroactive forced conversion. Hence, it becomes the responsibility of the employer opting for and the pension fund confirming the conversion to ensure they meet the stringent requirement of substantiating the compelling reasons for the retroactive necessity and to support the legislators' qualification of this conversion as ‘regulation.’ Both parties involved in implementing this legislation are accountable for their decisions and cannot shirk this responsibility.^[127] It is clear that simply referring to the legislative history, as seen in some initial transition plans, will not suffice. It is crucial to remember that although the Wtp has immediate effect, the objectives of the pension reform are not retroactive. The old pension system cannot be evaluated or invalidated based on the standards of the new system. The Wtp objectives cannot apply retroactively. Moreover, the broad solidarity characteristic of the old pension system cannot be equated with the limited solidarity of the new system. In the previous system, solidarity ensured that vested pensions were generally protected from reduction and included at least an ambition for indexation, where accrued pensions increased along with prices.^[128] In the new system, there are neither performance obligations nor indexation goals, and intergenerational solidarity is minimal.^[129] Thus, it is inaccurate to claim that retroactive conversion maintains solidarity.^[130] This substantiates the argument that vested pensions, accrued with contributions made under the promise of solidarity in the old pension system, should remain within that system framework. Such substantive adherence cannot be replaced by a procedurally balanced transition as intended by the legislator.^[131] Procedural safeguards, regardless of their content or appropriateness, can at most indicate that the retroactive conversion from fixed pension benefits to variable capital was conducted carefully. However, they cannot assure that the fundamental pension guarantees inherent in defined benefit ownership are being upheld and will continue to be honoured.
5. The ECtHR specifically considers the proportionality requirement in relation to retroactive effects. When evaluating retroactive or immediate effect, the ECJ implicitly balances the principle of trust against the benefits served by these effects. As mentioned, it is unlikely that the general interest reasons found in the legislative history to justify changes in the pension system and future entitlements alone are sufficiently compelling to support intrusive retroactive forced conversions. Without conversion, the goals of the pension reform will still be achieved, though a few decades later,^[132] which is typical for extensive pension reforms. The overarching interest of a sustainable pension system should not only be compared to individual interests but also weighed against the collective interest of maintaining established expectations. This comparison is pertinent since, for most people in the Netherlands, their occupational pension scheme constitutes their primary source of income. Adjustments in lifestyle are based on the guarantees promised by the benefit agreement. Retroactive forced conversion shifts the responsibility for pension risks associated with vested rights from the pension funds to the beneficiaries. Consequently, the uncertainty surrounding these vested rights is transferred to pension recipients, severely undermining their legitimate expectations. This conclusion is further supported by the fact that most individuals cannot afford the negative impacts of market fluctuations on their pension funds, especially since such adverse impacts are difficult, if not impossible, to mitigate for retirees and older participants. Consequently, considering the likelihood, we believe that in most instances, the significant effects of retroactively enforcing conversion on the addressees' status outlined in section 4.1 outweighs the unsupported need to harmonise pension schemes. Hence, the principle of trust will lean towards safeguarding the legitimate interests of pension beneficiaries.

4.7 First court case on retroactive forced conversion

The initial legal test case^[133] on forced conversion has resulted in the claimant receiving no redress. Notably, the judge ruled that damages from the implementation of Wtp could only be claimed after completing all conversion procedures, thus finding the lawsuit premature.

This ruling seemingly incorrectly overlooks that preliminary decisions are also subject to contestation, and the principle of effective legal protection^[134] under Article 47 of the Charter, as well as consumer protection reflex effects^[135] in the collective pension sector, claimants are entitled to legal safeguards prior to final decision-making to prevent adverse outcomes^[136] or if waiting for a decision would undermine the legal protection of claimants.^[137]

Additionally, if the forced conversion breaches any legal norm, so do the preparatory actions, regardless of existing laws. It is unreasonable to require claimants to wait until a potentially illegal act occurs, which may be irreversible, before challenging its legality.

If this ruling stands, it implies that forced conversion can sail through without a preemptive legal challenge, compelling pension beneficiaries to seek damages rather than questioning the legality of the conversion itself through preventive or conditional claims, thereby stripping them of effective legal protection to uphold their fundamental right to property.

Regarding the legal challenge to the retroactive application of forced conversion, the judge ruled that 'prevailing law' is essentially a snapshot in time, influenced by current and future legislation. This dynamic nature allows for the evolution of the law, with some changes having retroactive effects.^[138] However, this ruling does not sufficiently justify the retroactive enforcement of forced conversion.

This judgment fits within a broader trend in Dutch case law, whereby the enforceability of property protection is linked exclusively to the existence of unconditional pension rights and entitlements.^[139] This approach fails to recognise that the broad European concept of property protects not only existing rights and entitlements, but also legitimate expectations and functional property interests. This trend towards adopting a narrow concept of property and failing to fully apply supranational EU property law underscores the importance of submitting well-formulated preliminary questions to the CJEU in order to clarify^[140] the scope of property rights in relation to the new legal construct of conversion.

It is anticipated^[141] that this lawsuit is just the beginning of many surrounding forced conversion. If this ambiguous ruling stands, allowing a new law permitting forced conversion to replace previous prohibitive law retroactively—without principal judicial relief—this could erode the rule of law, leading to legal arbitrariness and the potential disregard for fundamental human rights.

5. Concluding remarks and recommendations

“Het Polderen” or “Polder Model” is a unique Dutch method for political and economic decision-making based on consensus, addressing issues through dialogue, ideally where every party has an equal voice. This model worked for a long time. However, if we adhere strictly to the Wtp conversion, with its unilateral retroactive shift of the pension risks from the pension funds to the individual, pension beneficiaries might find themselves navigating rough waters with inadequate means.

In the preceding discussion, we have demonstrated that retroactive forced conversion, particularly without an individual's contractual right to consent or veto against the collective value transfer, conflicts with Dutch contract law and principles of legal certainty.

Plans to re-insert the right to veto in the Wtp were rejected by the Parliament. This seems to violate European property law and potentially effective legal protection under Article 47 of the EU Charter. To align with national and European law, conversion can not be imposed in the manner the Dutch government plans to do.

This implies that individual (former) pension participants and retirees must be given the option to either convert their existing pension rights and entitlements into a personal pension pot under the new system or retain them under the old system. Their veto rights under the Pw should be honoured. Alternatively, a balanced approach could involve establishing collective transitional legislative measures that respect existing pension rights and entitlements. We described as primary purpose of a DB scheme to protect the fruits of one's labour, allowing employees to build up security during their working years to enjoy the benefits of their hard work upon retirement. This protection ensures that individuals can plan and maintain a certain standard of living after they retire. Legally enforced solidarity between old and new pension system, undermines this principle. For that reason pension system reforms should be designed to enhance sustainability and fairness without compromising the rights and expectations of those who have contributed to it.

In conclusion, considering the concept of retroactivity within this context, we note that if such forced retroactive conversions are deemed legally valid, it would signify a departure from the long-standing principle of "Pacta sunt servanda" inter alia in contract law, undoubtedly influencing future related legislation.

To end, Hilpold wrote in Verfassungsblog about the Gondert case: “The ruling has been widely welcomed as a step towards strengthening the rule of law in Europe.”^[142]

Let us embrace his words.