People who lost their pensions after their employers went bust have received pension advice from the European Court of Justice to the effect that their call for compensation may soon be heeded.

The European Court of Justice said that under the European Union Insolvency Directive the UK’s Government pension protection system is “inadequate”.

Although the ruling did not specify that compensation should be paid, the case will now go back to the High Court and many people deprived of their pension fund feel that they may now be compensated.

The case was brought by unions representing former employees at Allied Steel and Wire (ASW) and United Engineering Forgings (UEF), which both closed in 2002 with staff deprived of their pensions.

Derek Simpson, general secretary of Amicus, one of the unions party to the court case, said: “We are confident that when this case returns to the UK High Court, our arguments will be upheld and our members who, through no fault of their own, lost all or substantial parts of their pension, will be fully reimbursed.”

The EU court, however, added that its ruling did not automatically mean that the UK Government had to compensate those who have lost out on their pension fund. “The court finds that the directive does not oblige the member states themselves to fund the rights to old age benefits.”