For several years there has been considerable debate over reform of government employee pensions. On Sept. 3, thousands of military personnel, public servants and public-school teachers took to the streets of Taipei to protest against possible cuts to their pensions. Irrespective of how the reform might turn out, the issue of retroactive legislation must be addressed.
From the standpoint of legitimate expectation and legal stability, most countries do not allow laws to be retroactively applied to events that occurred prior to the laws’ enactment. However, this principle, known as non-retroactivity, is not absolute. If a new law is more beneficial to an individual than an old one, Article 18 of the Central Regulation Standard Act (中央法規標準法) stipulates that the new law must be applied. The Criminal Code, Article 2, Paragraph 1 also states that an offender should be punished according to the law at the time of the offense, unless a new law provides lighter punishment. The purpose of non-retroactivity is to prevent retroactive application of laws that would lead to less-favorable consequences.
Views on whether retroactive laws should always be banned if they bring less-favorable legal consequences vary depending on the field of law. Take the Criminal Code for instance. Since it involves extreme forms of punishment that encroach on human rights issues, any retroactive application of the code that would lead to more severe punishment for an offender is strictly prohibited.
However, an exception to this concept are the new rules on confiscation that took effect on July 1. Those rules extend both the scope and the targets of confiscation to include the property of natural persons, legal persons as well as unincorporated entities that have inherited illegally obtained assets, and they can be applied retroactively to events that occurred before its enactment. Whether these rules contravene the principle of nulla poena sine lege — “no penalty without a law” — is open to debate.
In areas of law apart from the Criminal Code, retroactive application bringing less-favorable legal consequences is in principle prohibited as per the Council of Grand Justices’ Constitutional Interpretation No. 714. The only exception is when important public interests are at stake and the individuals involved can be appropriately compensated for their loss resulting from the retroactive law. Based on that principle, regardless of how the pension system might change, it would seem that the new rules will not have a retroactive effect on those who have already retired.
Nonetheless, there is another problem. A retired government employee receives monthly payments and the highly controversial 18 percent preferential interest rate on part of their savings. If the legislature decides to cut those benefits, they would have to deal with the problem of transition from the old system to the new. Technically speaking, this would be what academics call secondary retroactivity, namely the retroactive application of a law that changes the legal status of events that are still ongoing rather than completely in the past. This will be problematic when it comes to the application of the law.
In fact, several government agencies, including the Examination Yuan, the Executive Yuan and the Ministry of Education, have for many years been trying to change the pension system — in particular the 18 percent preferential saving program — by issuing executive orders, prompting retired public-school teachers to protest and demand an interpretation of the Constitution. As a result, Constitutional Interpretation No. 717 was made in 2014. According to that interpretation, before a new law takes effect, any cuts to the pension schemes — which are a form of continual legal relationship between retirees and the government — should be prohibited to safeguard the interests of people based on the principle of legitimate expectation, unless the nation’s interests are at stake. Yet once a new law takes effect, the legal relationship would be changed accordingly and so would the payments. In other words, retroactivity would not be a problem.
However, the constitutional interpretation also mentioned that government employees are planning their own retirement based on the legitimate expectations created by the old legal framework, and that sudden legal changes would be certain to have a negative effect on their benefits. This means that even if pension reform must continue based on the public interest and fiscal considerations, such reform must not be sudden.
As legislators decrease pension payments, they should also consider whether the changes should be implemented in stages and whether there should be any stipulations regulating the ability of different groups of those affected to endure these changes. While this might seem easy to do in theory, the actual implementation will not be that simple.
Wu Ching-chin is an associate professor and chair of Aletheia University’s law department.
Translated by Tu Yu-an
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