§ 15(2) second sentence of the Contergan Foundation Act is compatible with the Basic Law

Press Release No. 4/2024 of 10 January 2024

Order of 21 November 2023
1 BvL 6/21

In an order published today, the First Senate of the Federal Constitutional Court held that § 15(2) second sentence of the Contergan Foundation Act (Conterganstiftungsgesetz – ContStifG) in the versions of 26 June 2013 and 21 February 2017 is compatible with the Basic Law (Grundgesetz – GG). The decision was rendered in judicial review proceedings following a referral from the Federal Administrative Court. Under the provision in question, which entered into force on 1 August 2013, payments by third parties, particularly by foreign states, made to persons affected by the use of drugs containing thalidomide (marketed as Contergan in Germany) as compensation for their impairments are deducted from the one-off payment and Contergan pension provided by the foundation.

Since 1972, the German Contergan Foundation has provided pensions and other payments to persons affected by the use of Contergan in Germany and abroad. The plaintiff in the initial proceedings, who resides in Ireland, receives both a German Contergan pension and payments from the Irish state for his impairments resulting from Contergan use. Since 2013, the Irish payments have been deducted from the plaintiff’s German Contergan pension on the basis of § 15(2) second sentence of the Contergan Foundation Act. His challenges of the deductions before the ordinary courts have so far been unsuccessful.

§ 15(2) second sentence of the Contergan Foundation Act is compatible with the fundamental right to property (Art. 14(1) of the Basic Law) of the recipients of Contergan pensions affected by the deductions; it is also compatible with the general guarantee of the right to equality (Art. 3(1) of the Basic Law). The Contergan pension as guaranteed by law falls within the scope of the guarantee of private property. § 15(2) second sentence of the Contergan Foundation Act, which governs deductions, constitutes a determination of the content and limits of property and interferes with the property rights of affected persons. However, this interference is justified. The provision prevents overlapping payments and thus serves to promote the equal treatment of recipients.

Facts of the case:

From 1958 to 1962, about 10,000 children worldwide were born with severe malformation of the limbs and other deformities after their mothers had used a sedative and sleeping pill containing thalidomide (marketed as Contergan in Germany) manufactured by the pharmaceutical company Chemie Grünenthal GmbH (hereinafter: Grünenthal) during pregnancy. In 1970, Grünenthal agreed to pay DM 100 million to children affected by Contergan use in a settlement, provided that they and their parents waived all claims against Grünenthal. The settlement was not implemented.

The Act on the Creation of a Foundation ‘Relief Organisation for Disabled Children’ (Foundation Act), which entered into force in 1972, provided for the creation of a foundation under public law with the purpose of providing support to Contergan survivors in Germany and abroad. The foundation, which was later renamed the Contergan Foundation, received DM 100 million from federal funds and DM 100 million from Grünenthal. The Foundation Act stipulated that those affected in Germany could no longer assert any claims against Grünenthal; affected persons living abroad only received payments under the Foundation Act if they relinquished any claims against Grünenthal. Since 1997, Contergan pensions have been fully financed by federal funds. In 2005, the Foundation Act was replaced by the Contergan Foundation Act.

Pursuant to § 13(1) first sentence of the Contergan Foundation Act, entitlements for Contergan survivors include a one-off payment and a lifelong Contergan pension. The amounts paid depend on the severity of the physical impairments and the resulting dysfunctions. The Third Act Amending the Contergan Foundation Act (Third Amendment Act), which entered into force on 1 August 2013, increased payments considerably in light of the changed needs of the ageing recipients. The maximum pension was increased to more than six times the previous amount, and additional entitlements to payments covering specific needs were recognised. In 2013, monthly Contergan pensions were between EUR 612 and EUR 6,912. The Third Amendment Act also inserted § 15(2) second sentence – the provision under review here – into the Act. According to this provision, payments by third parties, particularly by foreign states, made to persons affected by the use of drugs containing thalidomide as compensation for their impairments are deducted from the one-off payment and Contergan pension paid by the German foundation. The legislator enacted the provision because an international comparative study commissioned by the Contergan Foundation had revealed an overlap of payments made to survivors. In 2017, the Fourth Act to Amend the Contergan Foundation Act raised monthly Contergan pensions to a minimum of EUR 662 and a maximum of EUR 7,480.

The plaintiff in the initial proceedings, a Contergan survivor who is an Irish citizen and lives in Ireland, inter alia receives a Contergan pension from the Contergan Foundation. In addition, he receives monthly payments from the Irish Thalidomide Compensation Scheme provided by the Irish state for Irish Contergan survivors. With a notice issued in July 2013, the German Contergan Foundation declared that it would deduct the monthly payment of EUR 1,109 made by the Irish state from the monthly Contergan pension of EUR 3,686 made by the German Contergan Foundation from August 2013 onwards. The plaintiff’s challenge of the notice in the ordinary courts has so far been unsuccessful. He lodged an appeal on points of law with the Federal Administrative Court, which suspended the proceedings and referred to the Federal Constitutional Court the question of whether § 15(2) second sentence of the Contergan Foundation Act is compatible with the general guarantee of the right to equality (Art. 3(1) of the Basic Law) and the fundamental right to property (Art. 14(1) of the Basic Law).

Key considerations of the Senate:

§ 15(2) second sentence of the Contergan Foundation Act is compatible with Art. 14(1) of the Basic Law and Art. 3(1) of the Basic Law.

I. 1. The Contergan pension falls within the scope of the guarantee of private property under Art. 14(1) of the Basic Law.

a) Claims under social law only partake in the constitutional protection of property if they constitute legal positions of financial value that are allocated exclusively to the rights holder for private benefit, are based on significant input by the rights holder and serve to cover their basic needs.

The specific scope of protection of the guarantee of private property follows from the determination of the content and limits of property. If a legislative measure both extends and restricts a legal position protected by Art. 14(1) of the Basic Law (mixed redesign), the scope of the guarantee of private property is determined by the relationship between the granting of said legal position and the restriction thereof. It is decisive whether the granting measure creates an expanded legal position protected by Art. 14(1) of the Basic Law and the restriction interferes with this legal position, or whether a uniform determination of the content and limits of property is made, with the granting of the legal position being limited from the outset by the restriction. The relationship between the granting of the legal position and the restriction thereof must be determined on the basis of the overall legislative concept.

b) The statutory Contergan pension constitutes a legal position under social law and, as such, falls within the scope of the guarantee of private property.

The pension entitlement fits the elements that positions under social law must meet to constitute property: the entitlement is allocated to the recipients for private benefit, the recipients in principle have powers of disposal over it, it is based on significant input by the recipients and serves to cover their basic needs. In particular, the pension entitlement is based on significant input by the recipients. The expiry of claims against Grünenthal and the state’s appropriation of the DM 100 million settlement payment served to reorganise the legal situation, both at the expense of the survivors and in their favour – namely with the emergence of the social law position of § 14 of the Foundation Act.

The pension entitlement is protected by the guarantee of private property; it is therefore also protected from any deductions pursuant to § 15(2) second sentence of the Contergan Foundation Act. A different assessment is not merited by the fact that the provision on deductions was introduced with the Third Amendment Act, at the same time as the substantial increase in the pension entitlement. This mixed redesign does not constitute a determination of the content and limits of property given that the pension increase and the provision on deductions adopted at the same time are not inseparably linked under the legislative concept.

2. § 15(2) second sentence of the Contergan Foundation Act, which does not constitute expropriation, satisfies the constitutional requirements for a provision determining the content and limits of property following from Art. 14(1) second sentence of the Basic Law.

a) The argument that the legislator might have violated some alleged standard of legislative rationality does not demonstrate that the provision on deductions is unconstitutional. The Basic Law does not give rise to any general obligation to investigate the facts that is independent from the substantive constitutionality requirements of legislation. Nor does the present case involve any violation of a constitutional obligation to provide reasons for legislation, as no such obligation exists.

b) aa) The deductions imposed by § 15(2) second sentence of the Contergan Foundation Act pursue legitimate purposes.

The legislative aim of preventing overlapping payments to recipients is legitimate under constitutional law. It is permissible for a legal provision to ensure that comparable German and foreign benefits are granted only once. It is sufficient that both payments are in fact comparable. The other aims pursued by the legislator – avoiding inequality among survivors, ensuring that solidarity within society remains financially viable and using public funds frugally – are also not objectionable under constitutional law.

bb) § 15(2) second sentence of the Contergan Foundation Act is suitable for pursuing these aims of the common good.

In particular, the foreign payments that result in deductions constitute overlapping payments that are to be avoided because they – just like the German Contergan pension – serve to specifically and exclusively compensate for impairments associated with Contergan use. The reason for creating these pension entitlements does not, under constitutional law, preclude German and foreign entitlements from being classified as serving a comparable function; the deductions are not rendered impermissible by any prohibition on deducting claims with a compensatory function from general social benefits, nor are they subject to any prohibition on compensating a benefit that might arise from the fact that the claims are connected with liability law. There is no constitutional requirement that would oblige the legislator, when identifying overlapping social benefits, to take into account the general level of all state benefits and all other benefits in an overall assessment and appraisal.

cc) The deductions imposed by § 15(2) second sentence of the Contergan Foundation Act are necessary to achieve the purposes pursued. The interference with the fundamental right to property of the pension recipients is also appropriate.

While Contergan pensions do merit special protection, this protection is not unlimited. Private property in the form of Contergan pensions merits a great degree of protection as a fundamental freedom of the individual; at the same time, Contergan pensions also have a social dimension because they are part of an overall context involving a community of Contergan survivors.

The weight of interference resulting from the provision on deductions is moderate: the interference with the guarantee of private property resulting from the reduction of the benefit claims is mitigated by the fact that the Third Amendment Act raised the Contergan pensions considerably and additionally created an entitlement to annual payments covering specific needs.

The legitimate aims pursued by § 15(2) second sentence of the Contergan Foundation Act serve significant public interests. In offsetting overlapping payments and thereby bringing about equality among all recipients of Contergan pensions, the legislator pursues the significant aim of ensuring that all survivors within the Contergan community receive equal support. This is backed both by the public interest in equitable distribution within the community of recipients and by the state interest in using limited public funds as coherently and effectively as possible to cover different social needs. In an overall assessment, the interference with the guarantee of private property is proportionate. The public interest outweighs the interest of pension recipients in receiving higher Contergan pensions without any deductions. Even considering the fact that Contergan pensions merit protection as they serve to compensate for deficits in quality of life, the moderate interference with the guarantee of private property resulting from the deductions is not inappropriate. The recipients not living in Germany agreed to the solution involving payments by a foundation. This solution pursues the aim of providing equal support to those with the same impairments resulting from Contergan use; by contrast, it does not serve to contribute to an equivalent level of general social security benefits for all members of the community. Based on the aim of alleviating the damage caused, the amounts paid depend only on the severity of the physical impairments and the resulting dysfunctions. Criteria that are unrelated to the level of impairment are not taken into account. The legislator designed the Contergan pension entitlements without taking into account general criteria unrelated to the level of impairment; it was thus not constitutionally required to take into account such general criteria when limiting the payment claims pursuant to § 15(2) second sentence of the Contergan Foundation Act.

III. § 15(2) second sentence of the Contergan Foundation Act also satisfies the requirements arising from the general guarantee of the right to equality (Art. 3(1) of the Basic Law).

The provision does not result in unequal treatment of recipients of payments made by foreign states vis-à-vis recipients of non-state payments or unequal treatment of recipients of ongoing payments vis-à-vis recipients of one-off payments. While § 15(2) second sentence of the Contergan Foundation Act results in de facto unequal treatment of recipients whose claims to payment are reduced vis-à-vis recipients who receive their full Contergan pensions, this unequal treatment is justified.