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New legal blow to civil service pay cuts

2003 legislation behind a negotiated deal with unions is ruled unconstitutional

The government yesterday lost a second key legal battle on civil service pay cuts, with the Court of First Instance ruling that legislation enacted in 2003 to facilitate a negotiated deal with unions was unconstitutional.

In November last year, the Court of Appeal found that pay-cut legislation enacted in 2002 breached the Basic Law.

The 2003 law was enacted after the government dropped its annual pay-adjustment, based on a pay-trend survey, in favour of negotiating a package with staff unions. The deal set out a pay freeze for one year, followed by cuts averaging 3 per cent in 2004 and 2005.

In his judgment, Mr Justice Michael Hartmann said he was bound by the upper court's ruling to find that the 2003 legislation was also inconsistent with the 'no less favourable' clause on working conditions, in Article 100 of the Basic Law. The clause means pay scales cannot be reduced to below their levels at the 1997 handover.

But he dismissed a new argument that the decision to drop the pay-trend survey breached Article 103, which supports the continuity of public-service management.

'I do not find the conduct of a pay-trend survey to be so inherent to the established system of determining pay adjustments that a failure to conduct a survey will of itself, no matter what the circumstances, constitute a breach,' he said.

The government will appeal and continue with the pay cuts for the time being. The Court of Final Appeal will make a final ruling on the 2002 legislation in June.

Civil Service Secretary Joseph Wong Wing-ping yesterday said the latest defeat was not entirely surprising, given the earlier ruling. Asked if Beijing would ultimately intervene by interpreting the Basic Law, Mr Wong only said: 'Our lawyers and myself have full confidence in the appeal.'

Mr Wong has vowed to pay back the salary cuts in the event of a final defeat. The pay cuts are expected to save $10 billion over the three years of their implementation.

Liberal Party chairman James Tien Pei-chun expressed grave concern about the consequences for public finances if the government ultimately lost the court battles. 'It would be a big problem if the move to cut staff pay of some 3 per cent by legislation is not allowed. We must study what else should be done,' he said.

Anthony Cheung Bing-leung, professor of Public and Social Administration at City University, said the government should prepare for the worst. He said the government could consider laying off staff who refused the pay cut. 'The court has earlier ruled that it is lawful as long as the government allows individual employees to decide if they would accept the pay cut,' he said.

Eric Cheung Tat-ming, assistant professor with the department of professional legal education at the University of Hong Kong, said the government should seek consent to merge the two cases for a direct ruling by the Court of Final Appeal.

Felix Cheung Kwok-biu, chairman of the Civil Servants General Union, said the ruling showed the pay cut was only an expedient decision, without legal basis. However, he said staff should wait for the final ruling rather than immediately demand a freeze on the pay cut.

Michael Scott, the government lawyer who filed the latest challenge in a private capacity, said he was pleased with the result.

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