Hundreds of former Allied Steel and Wire workers in Cardiff who are facing a shortfall in their pension could still receive what they are owed thanks to a little known European directive, according to Plaid Cymru.

The party's trade and industry spokesman, Adam Price, said the 1982 ruling means the Westminster government is required to provide greater protection when a company becomes insolvent.

It does not seem that this government or the previous administration had enacted it

Adam Price, Plaid Cymru

A spokesman for the Department of Work and Pensions has confirmed their officials were not aware of the EU directive which says member states must take measures to protect the pension rights of employees of companies declared insolvent.

But Welsh Secretary Peter Hain has questioned whether the directive is appropriate in the ASW case.

More than 800 people lost their jobs at the steel manufacturer's Cardiff plant this summer after the firm went into receivership.

But workers were dealt a further, devastating blow when a massive shortfall in the pension funds meant their pensions could not be guaranteed.

A Spanish steel-making firm is now on the horizon as a possible buy for the site but politicians and unions are still pressuring the government to step in and help over the pensions issue.

Price: 'EU ruling allows for court action'

Plaid Cymru claims that the European legislation means that ASW workers could make a legal challenge to the government over their pensions crisis.

Carmarthen East and Dinefwr MP, Adam Price, Plaid Cymru's trade and industry spokesman, said the insolvency rights directive is part of European law, by which the government was bound, and an earlier test case in Italy has shown that responsibility.

"It does not seem that this government or the previous administration had enacted it.

"It's generally small companies and small groups of workers that have been affected by this kind of situation and in those circumstances they have not been aware that there could be a possible route through the European Court."

Lawyers

But Welsh Secretary Peter has Hain played down the relevance of the alleged European directive to the pensions plight of the former ASW workers.

Questioned during his weekly press briefing at the Welsh Office on Wednesday morning, he said the directive "may or may not apply".

Hain emphasised that the whole pensions issue should be dealt with in "a serious and considered" fashion.

He has previously rubbished Plaid Cymru's claim as a "gimmick".

The steelworkers' union, the ISTC, said its were lawyers checking the legislation to see how it relates to ASW workers.

The Department of Work and Pensions said its current Green Paper sets out the discussion of whether the level of pension protection is appropriate.

ASW's receivers, KPMG, revealed this month that it had entered into talks with the Spanish steelmaker, Celsa, over the possibility of buying the plant as a going concern.

Celsa said it hopes to employ around 600 if the plant reopens next year.