Monday, 28 January 2019

The European Central Bank – judicial review of monetary policy and banking supervision




Introduction

The financial crisis has had broad political and economic effects across the European Union. It has had legal effects too – leading to the European Central Bank (ECB) not only developing controversial new means of intervention in monetary policy, but also being granted new powers of banking supervision and (with the ‘Troika’ of the Commission and the IMF) becoming involved in austerity policies in the Member States that needed financial assistance. 

The two blog posts below discuss recent developments in the case law on review of the monetary policy (Weiss: blog post by Annelieke Mooij) and banking supervision powers (La Banque Postale: blog post by Carlos Bosque and Alejandro Pizarroso) of the ECB. As for judicial review of austerity policy, the EU General Court recently followed up the CJEU ruling in Ledra Advertising (discussed here) with its judgments in Bourdovali and Chrysostomides.

While the recent judgments reaffirmed the limited judicial review of ECB measures on monetary and austerity policy, they suggest a contrary willingness to demand stricter judicial scrutiny of banking supervision. Whether this becomes a more general trend remains to be seen.


Judicial review of the ECB’s monetary and economic policy powers: the latest chapter

Annelieke Mooij, PhD student in EU law, Dublin City University

In June the last bail-out agreement was struck with Greece signalling the end (at least for now) of the Greek financial crisis. The Asset Purchasing Programme of the European Central Bank (ECB), also known as Quantitative Easing, has ended in December 2019. And the most recent case in the important euro-crisis case-law, the Weiss case, has been decided in December. This is not to say that the discussion surrounding the economic and monetary union is finalized, nor that no financial crisis will ever rise again. It is therefore important to reflect on the past crisis and prepare for the next.

During the euro-crisis several topics were an important point of discussion, but none was as prevalent as the question into the powers of the ECB. More precisely to what extend may monetary policy impact economic policy?  The Treaty on the Functioning of the European Union (TFEU) clearly splits economic and monetary policy. Whereby economic policy is left for the Member States to conduct and monetary policy is within the competence of the ECB. The euro-crisis, however, has shown that these two policies are not so easy to separate. Leading to separate cases where the Court had to decide upon the lawfulness of the OMT programme (Gauweiler, discussed here) and Public Asset Purchasing Programme (Weiss). With the crisis and the Decision of the Court behind us, it is time to add-up the scores and answer the question to what extent may the ECB enter the field of economic policy and what instruments has it gained?

Brief recap

In order to assess the impact of the crisis it is first necessary to make a brief overview of the state of the art before the crisis. The monetary goal of the ECB in the TFEU was described as price stability which is by the ECB defined as inflation close to but under 2%. In addition the ECB may support, without undermining monetary policy, general economic policy.

The instruments available to the Bank are listed in the Protocol of the ESCB, Article 18.1 defines two clear instruments. The first is the purchase and sale of marketable instruments, the second is to conduct credit operations. According to the Article 123 TFEU the ECB is prohibited from directly financing Member States and according to Article 125 TFEU the ECB may not bail-out Member States. Pre-crisis these formed the most important contours of ECB’s powers with regard to monetary policy. Then came the euro-crisis.

Crisis case law

The euro-crisis case law exists of three major cases Pringle, Gauweiler and Weiss. The Pringle case did not involve the ECB but concerned the ESM programme, in the form of a treaty between Eurozone Member States to assist those among them which were having economic difficulties. It is nevertheless an important case as the Court accepted that there can be overlap between economic and monetary policies. This approach abandons the strict separation that flows forth from the Treaties. From the perspective of the ECB this is not very unexpected as the ECB is allowed to conduct monetary policy and support economic policy. The problem however is the definition of “support”. The word support entails that it may not determine economic policy, but the line between the two seems vague.

In the Gauweiler decision the Court stated that in order to determine whether a measure is of monetary or economic policy the objectives and instruments have to be assessed. The OMT programme under discussion in the Gauweiler case had as objective to restore the monetary transmission channels and the singleness of monetary policy (paras. 46-49). This included counteraction against the speculation of a break-up of the Eurozone. Adding the objective of keeping the euro together may not have fallen within a strict adherence to the law. It is however not strange that the ECB chose to save the euro. The Eurozone falling apart may have led to further implications for the price stability goal.

The second criterion in determining whether a measure is of monetary or economic policy is that of the instruments used. In the Gauweiler case it became clear that these operations may have economic effects (para. 52).  They may however not be violating either directly or in spirit the no-bail out clause and the prohibition upon direct lending. The Court determined the main criterion to evaluate this was by asking the question whether the impetus to keep a sound budgetary policy is kept.

The Weiss case added that these so called “indirect effects” do not have to be unforeseen and can be knowingly accepted (para. 62). The Court furthermore states that in order to reach inflationary goals the ECB’s policy will impact interest rates and the real economy – thereby accepting that monetary policy, in order to be effective, will often impact economic policy (para. 63). This conclusion is neither unexpected, nor unwanted per se as the Treaty clearly provides the ECB the power to support economic policy. Yet in the Gauweiler case the Court also accepted the role of the ECB within the so-called Troika.

The Troika consists of the Commission, ECB and the IMF and has been given shape in the ESM Treaty. This Treaty provides the Commission, IMF and the ECB, when a Member applies for support, with the task to negotiate and monitor the Memorandum of Understanding (MoU) with the Member in need of assistance. This MoU contains many aspects arguably economic in nature. The negotiation and monitoring is considered by the Advocate General as one of economic policy. The Court does not go into this matter in its judgement. By not going into the role of the ECB within the Troika the Court arguably accepts – or at least allows this function. It therefore seems that during the crisis the ECB has gained the power to negotiate and implement certain economic goals. These instruments are difficult to view as monetary policy instruments. The remaining option is to classify them as in support of general economic policy.

Weiss – the last chapter?

Arguably the last chapter, at least for now, in crisis case law is that of the Weiss case. In the Weiss case the programme under discussion was that of the Public Sector Purchasing Programme (PSPP). Unlike the OMT programme the PSPP has actually been implemented. Legally, however, this makes little difference as the OMT programme was adjudicated as if it would be implemented. This programme is technically one of four programmes conducted under the Asset Purchasing Programmes. The word technically is used in this context because the PSPP purchases far outweigh the other programmes. In the last month of the programme the PSPP volume was a rough 81% of the total purchases.

This is interesting to note as one of the criticisms after the Gauweiler case was that the arguments of the ECB were taken at face value. This seems the case for the argument given by the Advocate General (para. 150.) that PSPP is “just one of the four-programmes”. Part of this might be because the Court only assesses whether the ECB has made a “manifest error of assessment” (para. 91). In the same paragraph the Court however also states that monetary policy decisions are usually controversial and “nothing more can be required of the ESCB apart from that it use its economic expertise and the necessary technical means at its disposal to carry out that analysis with all care and accuracy”. This almost creates a situation whereby technical assessment of the ESCB’s judgement is impossible, as it is difficult to find a body appropriate to “second-guess” the ECB’s decision-making.

Another main difference between the two programmes was that the OMT programme was only to be applied to countries that fulfilled certain conditionality requirements.  The PSPP on the other hand was a general programme, which is arguably closer to the ECB’s monetary goals. The Court considers that a general programme can still breach the monetary assistance prohibition of article 123 TFEU if the ESCB creates a de facto certainty of purchase for the primary actors (para. 110). 

Interestingly it also considers that due to the division key the more debt a Member State accumulates, the lower the proportion the national bank buys (para. 140). Therefore despite the general application of the programme the ESCB is still able to uphold the incentives for individual Member States to keep a sound budgetary policy. Unlike the referring court the ECJ does not go into the numeral specifics of the volume of purchases. Thereby indirectly confirming the budgetary independence the ESCB enjoys. This, however, also indicates there are few or no organs within the EU to check the details of ESCB decisions.

Conclusions

With the euro-crisis slowly becoming history (at least for now) it is time to assess its impact. The impact of the euro-crisis upon the European Central Bank has been serious. Case law has shown that monetary policy and economic policy are not strictly separated and one may influence the other (Gauweiler). This influence cannot be contrary to monetary policy but the effects can be foreseen and knowingly accepted (Weiss). Secondly the power of the ECB to support general economic policy is more clearly defined. This power may include the task to negotiate and monitor compliance of fiscal reforms. The legality and consequences of the latter caused debate amongst scholars and could form a cumulative process that should be carefully watched.  The Weiss case did not bring major reforms, nor does it seem out of place. It however further demonstrated that there are few organs to check the specific arguments put forward by the ECB. Though the ECB was designed as a highly independent bank it is difficult to imagine that this level of independence was desired.


Welcome to Hard Look Review, ECB

Carlos Bosque* and Alejandro Pizarroso**

* Legal Counsel at the European Investment Fund. Doctoral Candidate at the Universidad Carlos III de Madrid
** Legal Counsel at the Bank of Spain. LL.M. Graduate at the Columbia Law School

The views expressed herein are those of the authors, and not of the European Investment Fund or the Bank of Spain

Discretion, like the hole in a doughnut, does not exist except as an area left open by a surrounding belt of restriction. It is therefore a relative concept. It always makes sense to ask, “Discretion under which standards?” or “Discretion as to which authority?”

-          Richard Dworkin

Some European cases (and many recent ones, like the decision on the lawfulness of the public sector asset purchase program, discussed in the post above) seem to immediately draw the attention they deserve. Others, however, tend to go unnoticed. Among these, we may find La Banque Postale (T-733/16), a General Court case (sided by five identical rulings concerning other French credit institutions) dealing with the review of ECB supervisory decisions, which resulted in the annulment, for the very first time, of one such decision. The case revolved around the degree of discretion that the ECB should enjoy in its supervisory action. The message sent by the General Court was, however, quite clear. It effectively welcomed the ECB to a heightened standard of review —to hard look review.

We will analyse this question here, but first we turn to the case.

 The facts are quite simple. In the aftermath of the Financial Crisis, the European Union legislator introduced a leverage ratio in order to discourage financial institutions from taking on excessive leverage risk. This ratio assesses the capital of an institution in relation to its exposures. But it does so independently of the risks associated to the latter, so as to measure the overall exposure of an institution. Some exemptions are nevertheless permitted. In 2014, Article 429(14) of Regulation 575/2013 was passed, creating a derogation for exposures arising from the deposits that an institution may be forced to transfer to a public sector entity for the purposes of funding general interest investments. The ECB, says Article 429(14), “may permit” these exposures to be excluded from the calculation of the leverage ratio of an institution.

Pursuant to this provision, La Banque Postale requested the ECB to exclude from the calculation of its leverage ratio the amounts collected through certain regulated savings accounts that it was legally bound to transfer to a public entity. The ECB, however, rejected its request. It advanced three reasons for its decision. First, it argued that the institution remained globally liable for these exposures. Secondly, it noted that La Banque Postale was obliged to reimburse its depositors for the amounts transferred to the public entity, independently of whether the latter returned the funds to the institution, and even in the event of France’s default. Finally, the ECB contended that the inevitable delay when retrieving the funds from the public entity could lead to a fire sale in the case of a bank run. La Banque Postale, whose leverage ratio denominator was to raise by 50% from such refusal, challenged this decision.

The case presented two issues: (1) whether the ECB had discretion in the application of the exemption; and, if so, (2) whether the ECB had exercised its discretion in a permissible manner.

While the first issue was relatively easy to decide, given the clear language (“may permit”) of the provision, the second issue was rather more thorny. Having established that the ECB enjoys discretion in the application of the exemption provided that the conditions in Article 429(14) are met, the General Court turned to the second question. The answer was clear: the ECB did not exercise its discretion in a permissible manner. To reach this conclusion, the General Court relied on its traditional standard of review for discretionary decisions. EU courts —it noted— must not substitute the judgment of administrative bodies; their assessment is confined to determine whether an administrative decision is based on materially incorrect facts, or is vitiated by an error of law, manifest error of appraisal, or misuse of powers. But the application of this standard was quite interesting.

According to the General Court, the first two grounds put forward by the ECB were affected by an error of law, because the ECB denied the exemption on reasons that were inherent to the exposures referred to in the provision, thus rendering the exemption almost inapplicable. The possibility that France may default —the main basis for its decision, as the ECB admitted during the trial— was specifically dismissed. Since the derogation in Article 429(14) refers only to amounts deposited in a public entity, which are thus state backed, the possibility that the country in question may default cannot be grounds for denying the exemption.

But the opinion also found that the third reason advanced by the ECB was vitiated by a manifest error of appraisal. The General Court noted that, even if the liquidity risk identified by the supervisor may materialize in some cases, the ECB had previously admitted that small delays in retrieving the funds from the public entity were immaterial for the assessment of the institution's liquidity ratio. The ECB, in fact, had established such view in a previous decision concerning the liquidity ratio of La Banque Postale, and its analysis was backed by the EBA. This incoherence, the court found, runs counter to the principle of sound administration that applies to all EU institutions. The ECB’s decision denying the application of the exemption was therefore annulled.

In our view, this ruling should not go unnoticed. Certainly, it is the first time that a supervisory decision of the ECB has been annulled since the Single Supervisory Mechanism became operational in 2014. But how should we read this case? The little attention that the judgment has drawn appears striking if, as we are inclined to think, the General Court is sending a clear message to the ECB with respect to its discretionary powers in the field of banking supervision.

The General Court, in fact, seems to be welcoming supervisory decisions to hard look review, a term coined in the United States to refer to the rigorous standard of judicial review applied to agency's action since the 1970s (the phrase is usually associated with the US Supreme Court decision in State Farm). The General Court recites its usual standard of review for administrative discretion, but as Professor Craig has taught us, what really matters is how the test is used, the intensity of review that the court applies (Paul Craig, EU Administrative Law 445 (3rd ed. 2018)). It is true that the two specific rules that can be extracted from the case (i.e. discretion cannot be exercised in a way that runs counter to the objective of the provision being applied or its effet utile, and discretion does not allow an administrative body to be incoherent in its assessment over a given subject) appear to be reasonable.

But what matters is how scrupulous the assessment of the General Court was, as evidenced by the (at times, excruciating) lengthiness and complexity of the ruling. The court avoids substituting the ECB’s judgment. However, it carefully weighs each and every one of its arguments, despite the clear discretion afforded by the governing rule, and regardless of the issue’s technical nature. The court seems to be telling the ECB that, unlike monetary policy, where it “must be allowed … a broad discretion” (Gauweiler, C-62/14, ¶ 68), banking supervision is an area of the law where stringent review of discretionary administrative action applies.

The General Court, though, offers a way out for the ECB —sufficient justification. While the opinion does not specifically highlight this aspect, it suggests that by formulating clear reasons for its decision the ECB could have denied the application of the exemption. By carefully examining the plausibility of France's default or the liquidity risk incurred by La Banque Postale for the transfer of funds to a public entity, the General Court seems to say, the decision could have been upheld. But it is now clear that, in its supervisory role, the ECB is but another administrative body of the EU, whose action will be subject to intense scrutiny on the part of the General Court, and whose decisions will have to be carefully justified in order to survive this heightened standard of review.

Whether this development should be praised (enhanced judicial review?) or not (ossification of administrative action?) is a matter of opinion. This is an issue where reasonable minds can reasonably disagree, but its importance justifies giving it the attention it demands. The conclusions drawn here are tentative, as we need to see whether subsequent judgments (by the General Court or the Court of Justice) will conform to this case law. However, La Banque Postale should serve as a warning —welcome to hard look review, ECB.

Barnard & Peers: chapter 19
Photo credit: Flickr


Saturday, 26 January 2019

“You’re all individuals!” The CJEU rules on special status for minority religious groups




Ronan McCrea, Professor of Constitutional and European Law, University College London

After many years with no rulings on the interpretation of the provisions of Directive 2000/78 in relation to discrimination on grounds of religion or belief, the Court of Justice has now issued no fewer than five major decisions in the last two years, all five decided by the Grand Chamber.

The most recent case consisted of a reference to the Court of Justice from the Austrian Oberster Gerichtshof (Supreme Court). It involved a challenge to Austrian labour legislation which classified Good Friday as a public holiday for members of three small Christian minority churches (the Evangelical Churches of the Augsburg and Helvetic Confessions, the Old Catholic Church and the United Methodist Church).

The effect of this legislation was that members of these churches were entitled to a paid holiday on Good Friday or to additional holiday pay if they worked on that day. Good Friday was not considered to be a public holiday for those who are not members of these churches. 

Markus Achatzi, who is not a member of any of these churches, claimed that his employer (a private detective agency) discriminated against him by denying him additional holiday pay when he carried out work for them on Good Friday 2015. The sum involved (€109.09) is rather small, particularly in the light of the costs that must have accrued in the course of litigation all the way to the Austrian Supreme Court and a reference to the CJEU, but the case raised an interesting point. Can a measure intended to benefit adherents to a minority faith amount to illegal direct discrimination against those who are not members of that minority?

The Court of Justice held that the Austrian legislation did violate the prohibition on discrimination on grounds of religion or belief in Directive 2000/78 which implements the general principle against discrimination seen in Article 21 of the EU Charter of Fundamental Rights.

In doing so it dismissed the preliminary argument of the Polish government which had argued that Court lacked jurisdiction to rule on the issue of the grant of a public holiday for the celebration of a religious festival because of the commitment in Article 17(1) TFEU that the Union ‘respects and does not prejudice the status under national law of churches and religious associations or communities in the Member States’.

The Court continued the narrow approach to Article 17 it took in Egenberger (discussed here) and IR (discussed here) the Court where it held that Article 17 merely expressed the neutrality of the Union in relation to the different ways in which the Member States organize their relations with churches and religious bodies and did not provide a wider exemption to all matters relating to religion or religious bodies from review for their compliance with EU norms. The Court therefore concluded that it had jurisdiction to rule in this case because ‘the national provisions at issue I the main proceedings do not seek to organize the relations between a Member State and churches, but seek only to give employees who are members of certain churches an additional public holiday to coincide with an important religious festival for those churches’.

On the substance, the Grand Chamber ruled that by granting a holiday only to members of certain churches, Austrian law did establish a difference of treatment on grounds of religion. It rejected the argument of the Austrian authorities that such a difference of treatment could be justified by the importance of Good Friday to those religious communities, noting that the privilege was not subject to any condition that the employee must carry out a religious duty on that day meaning that members of the privileged churches were no different from a non-religious employee who wanted to take the day off on Good Friday. Furthermore, the Austrian legislation provided a right to holiday pay which applied even if the member of the privileged churches worked on Good Friday without feeling any obligation to celebrate it as a religious festival. All of these factors led the court to conclude that the legislation in question was directly discriminatory on grounds of religion.

The Court then considered whether this direct discrimination could be justified either by Article 2(5) of the directive (which states that the directive is ‘without prejudice to measures laid down by national law which, in a democratic society are necessary [….]for the protection of the rights and freedoms of others’) or Article 7(1) of the directive which allows for measures which as the Court noted, ‘although discriminatory in appearance are in fact intended to eliminate or reduce actual instances of inequality which may exist in society’.

In relation to Article 2(5) the Court held that, as an exception to the principle of equal treatment, it must be interpreted strictly. It rejected the argument that the Austrian law could be seen as necessary to protect freedom of religion and belief, noting that under Austrian law, employees of other religions who seek time off to celebrate a religious festival are only entitled to the time off necessary to perform religious rites, and not to an entire day off as in the case of members of the privileged churches.

In relation to Article 7(1) the Court held that Article 7 permits only proportionate measures to be taken to compensate for actual inequality. The Austrian legislation it decided was disproportionate as it went beyond the need to allow members of the churches in question to carry out any religious obligations on Good Friday as it provides an entire twenty four hour rest period for such members while only giving adherents to other faiths the time necessary to carry out religious rites.

With the finding of fault with the Austrian legislation, two further issues then presented themselves to the Court. First, because the case consisted of a dispute between two private parties in an area of law governed by a directive, the Court had to address the question of horizontal direct effect of directives. It also had to decide whether, in circumstances where national law is found to have accorded a privilege to one religious group in a way that constitutes unjustified discrimination, the appropriate approach is to ‘level up’ (i.e. grant the relevant privilege to all) or to ‘level down’ (to remove the privilege from those who held it).

In relation to the direct effect issue the Court noted the Marleasing obligation on national courts to interpret national law, as far as possible, so as to achieve the objectives of EU law but appeared to accept that in this case it may not be possible to interpret Austrian law in a manner that is compatible with the directive. It went on to reiterate its holding in Egenberger and IR that Directive 2000/78 merely represents the codification of the general principle of law prohibiting discrimination that is reflected in Article 21 of the Charter of Fundamental Rights. As general principles of law and Charter rights are directly effective between individuals, the national court is obliged to give full effect to those rights in its ruling.

In relation to the issue of levelling up or down, the Court held that the national court ‘a national court must set aside any discriminatory provision of national law, without having to request or await its prior removal by the legislature, and must apply to members of the disadvantaged group the same arrangements as those enjoyed by the persons in the other category. That obligation persists regardless of whether or not the national court has been granted competence under national law to do so’

The Court noted that this approach applies ‘only if there is a valid point of reference’ but found that the provisions granting the right to an extra public holiday to members of selected churches did constitute such a valid point of reference and accordingly the national court should recognize Good Friday as a public holiday for all employees whether or not they are members of those churches. This right remains in force until such time as the Austrian legislature introduces legislation that complies with the principle of equal treatment. It is therefore open to the Austrian Parliament to decide to retain Good Friday as a public holiday for all employees or, indeed, to ‘level down’ and remove recognition of Good Friday as a public holiday altogether.

Conclusion

This ruling reinforces some patterns that had begun to emerge in earlier rulings in relation to the religion provisions of Directive 2000/78. First, the Court of Justice takes a narrow view of the scope of the ‘hands off’ provisions of Article 17 TEU which says that the Union respects the status of churches and religious bodies under national law. The Court has now found three times that this provision covers the narrower issue of how states organize their relations with religious bodies and does not provide a more general exemption from review for national laws that regulate activities of religious bodies, such as employment, that fall within the field of application of EU law.

Viewed in the light of the rulings of the Court in the cases about the prohibition of religious symbols in the workplace, the ruling in this case underlines the Court of Justice’s preference for an individualistic view of religion and its dislike of rules that provide in a blanket fashion advantages or disadvantages to categories of people identified by their religion. Thus, in Achbita (discussed here), the Court took an individualistic approach to religion in upholding a general prohibition on all symbols of religion or philosophical belief in the workplace, regarding an individual decision to display a symbol of one’s political or philosophical beliefs as equivalent to a decision to wear a symbol such as the Islamic headscarf that generally associated with a particular religion. The Court was accordingly, unwilling to recognize religious expression as being entitled to greater protection than non-religious expression. This approach has been criticized for neglecting the communal and non-belief based elements of religion but it is also in line with the consistent jurisprudence of the Strasbourg Court which has always seen religious freedom as primarily a matter of individual belief that applies equally to the religious and non-religious. This approach has also meant that the Court of Justice has been unwilling to accommodate rules or actions that appear to target a particular faith as in Bougnaoui (discussed here) where it found a request to an employee that she have ‘no headscarf next time’ was directly discriminatory.

These features of the Court’s approach are both on display in the Austrian case. The Court was unwilling to accommodate a law that conferred a blanket privilege on members of selected religions (and therefore a disadvantage on those not of the privileged faiths). The Court’s analysis stressed the need for individual equality, noting a concern that those who wanted to take Good Friday off for non-religious reasons would not be treated equally.

The fact that the Court found fault with the breadth of the privilege conferred (it allowed for the entire day to be taken off while members of other faiths could only get time off to attend religious ceremonies on their holy days) shows that privilege granted to religious individuals will need to be tailored to accommodate the specific additional burdens faced by religious people rather than conferring broader privileges that others not of the relevant faith could conceivably benefit from.

This narrow tailoring of accommodation will struggle to accommodate those who are culturally of a particular faith but not particularly devout. Given that the Court criticized the Austrian law for giving a day off to selected religious minorities without requiring that employees benefitting from the additional time off attend any religious ceremonies does that mean it would not be permissible to give extra time off to Muslim workers who, while not devout, would like to spend Eid with their families even though they never darken the door of a mosque?

Finally, this case raises interesting broader questions about the status of historically privileged religious minorities. It is not uncommon in Europe for long established and relatively small religious minorities, such as those benefitting from the Austrian legislation, to have had particular privileges recognized in national constitutions. This raises issues both because the same privileges are often not guaranteed to more numerous more recently arrived religious minorities (usually Islam) but also, as in the case of the Muslim community of Thrace, when the communal privilege granted clashes with the individual rights of members of the religious minority (as when the Strasbourg Court found a violation in respect of the imposition of discriminatory inheritance rules on Muslim women).

It would seem that although the EU is committed to respecting Member State autonomy in religious matters, the individualistic approach of the ECHR and EU law to religion, including a commitment to give non-religious individuals equal treatment, is progressively curtailing both blanket privilege for religious institutions including long established additional protections and rights for certain religious minorities.

Barnard & Peers: chapter 20
Photo credit: The Friendly Atheist

Thursday, 24 January 2019

Brexit, asylum and the rights of the child: clarification from the CJEU




Professor Steve Peers, University of Essex

What effect does Brexit have on asylum issues? That was one of the issues in a recent judgment of the CJEU, responding to a request from the Irish High Court which apparently affected a number of cases pending in Ireland. The judgment further addressed issues relating to the rights of child asylum-seekers, and the degree of discretion a Member State has under the EU’s Dublin rules on allocation of responsibility for considering asylum applications.

Judgment

The case concerned a family of three asylum-seekers. Two had previously held visas in the UK, and the third was their child, born in the UK. When the UK visas expired, they travelled to Ireland, and applied for asylum there.  The Irish authorities decided that the UK was responsible for the claim, and requested the UK to take charge of the asylum seekers; the UK accepted.

Also the Irish authorities refused to apply the ‘sovereignty’ clause in the EU Dublin rules, which gives every Member State the option to decide whether to take responsibility for an asylum application even if that Member State would not normally be responsible for it. The asylum seekers objected to this due to health issues with two family members and the imminence of Brexit, and appealed to the High Court, which asked the CJEU several questions about applying the Dublin III Regulation in these circumstances.

First, the CJEU ruled that it was irrelevant that Brexit is pending, applying its previous judgment (discussed here) in the context of the European Arrest Warrant, that EU law remains fully applicable to the UK until Brexit Day. Equally, the CJEU repeated its prior case law (see, for instance, Halaf) that the ‘sovereignty’ clause left ‘absolute discretion’ to each Member State to decide when to implement it. It followed that the Member State was not obliged to apply this clause purely because Brexit is pending.

Second, the CJEU ruled that it did not breach EU law for the decision on responsibility under the Dublin rules to be made by one part of the Irish government (the Refugee Applications Commissioner), while the decision on the sovereignty clause was left to another part of the government (the Minister for Justice and Equality). In the Court’s view, there was nothing in the Dublin III Regulation to require these decisions to be made by the same part of the national administration, or require any specific part of the administration to make those decisions. Indeed, the Regulation refers to ‘authorities’ in the plural at several points.

Third, the CJEU ruled that the general reference in the Dublin III Regulation to the ‘best interests of the child’ did not limit Member States’ discretion as to whether or not to apply the sovereignty clause.

Fourth, in the Court’s view there was no right to a separate appeal against the decision not to apply the sovereignty clause. Rather, the Dublin III Regulation only required an ‘appeal against a transfer decision, or a review, in fact and in law, of that decision, before a court or tribunal’. This did not ‘expressly’ extend to an appeal against the refusal not to apply the sovereignty clause, and the Court refused to find an implied right of appeal in such cases, because ‘the objective of the rapid processing of applications for international protection and, in particular, the determination of the Member State responsible, underlying the procedure established by the Dublin III Regulation…discourages multiple remedies’. The EU Charter principle of effective judicial protection was not infringed, because the refusal to use the sovereignty clause could always ‘be challenged at the time of an appeal against a transfer decision’.

The Court added more on Brexit in this context, noting that ‘the mutual confidence and presumption of respect, by the Member States, for fundamental rights, continues in full force and effect in [the UK] until the time of its actual withdrawal from the European Union.’ While an asylum transfer under the Dublin rules, following the Court’s case law, cannot take place if ‘there are substantial grounds for believing that that notification would result in a real risk of that applicant suffering inhuman or degrading treatment in that Member State, within the meaning of Article 4 of the Charter’, the notification of leaving the EU ‘cannot, in itself, be regarded as leading to the person concerned being exposed to such a risk’.

Explaining its reasoning, the Court referred to the previous case law on the assumption that States part of the Dublin system – including non-EU States (Norway, Iceland, Switzerland and Liechtenstein) – ‘observe fundamental rights, including the rights based on the Geneva [Refugee] Convention and the 1967 Protocol, namely the principle of non-refoulement, and on the ECHR, and, therefore, that those Member States can have confidence in each other as regards respect for those fundamental rights’, given that all these States are parties to the two Conventions and the 1967 Protocol to the Refugee Convention. In fact:

the continuing participation of a Member State in those conventions and that protocol is not linked to its being a member of the European Union. It follows that a Member State’s decision to withdraw from the European Union has no bearing on its obligations to respect the Geneva Convention and the 1967 Protocol, including the principle of non-refoulement, and Article 3 ECHR.

Finally, the CJEU ruled that the Dublin III Regulation creates an assumption that the best interests of the child mean that the child’s situation is indissociable from that of its parents. Indeed, this is explicitly set out in the Regulation. The Court set out the consequence that ‘it is only where it is established that such an examination carried out in conjunction with that of the child’s parents is not in the best interests of that child that it will be necessary to treat the child’s situation separately from that of its parents.’

Comments

The Court’s ruling on Brexit is unsurprising in light of its previous ruling on the UK remaining covered by EU law until Brexit day. There are no direct implications of this judgment for what happens after Brexit day as regards the UK and EU asylum law, particularly the Dublin rules – an issue which I discussed recently here. However, the Court’s reference to non-EU countries participating in the Dublin rules on the condition that they are parties to the ECHR and the Refugee Convention reaffirms that there is no EU law requirement for non-EU countries to participate in the rest of EU asylum law in order to participate in the Dublin system. On the other hand, UK withdrawal from the ECHR and/or the Refugee Convention might make cooperation with the EU in this field (and, as regards the ECHR, other fields) more difficult. 

Of course, the EU and UK might nevertheless be unable to reach agreement on the UK’s post-Brexit (or post-withdrawal agreement transition period) connection with the Dublin rules for political reasons.  As I have pointed out already, the EU/UK political declaration on their future relationship says nothing about asylum.

As for the sovereignty clause issue, the Court’s ruling leaves intact the Irish government’s arrangements for dealing with that clause separately from determination of responsibility for asylum claims, and also leaves that government free to refuse to apply the sovereignty clause without facing an immediate appeal. While that refusal could still be challenged subsequently, as part of a challenge to a transfer decision, it is not clear what substantive challenge could be made to such a refusal, as a matter of EU law – given that the Court re-emphasised the total discretion of a Member State when applying the clause, and added that even the obligation to consider the best interests of the child has no impact upon that discretion.

However, presumably it should be possible in this challenge to raise issues of national law as regards the exercise of that discretion – to argue whether any national law procedural or substantive rules governing the exercise of the discretion were correctly applied, and in particular whether the decision was in compliance with the national constitution.  

Finally, it should be recalled that the 2016 proposal to redraft the Dublin rules in light of the perceived ‘refugee crisis’ (discussed here) would drastically curtail use of the sovereignty clause, in order to prevent further decisions to take responsibility for large numbers of asylum-seekers (such as the German government’s decision in 2015), due to the consequential impact of such decisions on other Member States. It remains to be seen whether that proposal can be agreed at all – and if so, whether Member States would be willing to give up the considerable freedom of action which the clause gives them.

JHA4: chapter I:5
Barnard & Peers: chapter 26, chapter 27
Photo credit: www.kingsinn.ie

Thursday, 3 January 2019

Manufacturing Discontent: Q and A on the legal issues of asylum-seekers crossing the Channel




Professor Steve Peers, University of Essex*

*Supported by an ESRC Priority Brexit Grant on 'Brexit and UK and EU Immigration Policy'.

Cynical politicians, aided by an uncritical media, aim to manufacture a moral panic from a modest number of people crossing the Channel. Be that as it may, these crossings raise a number of legal issues. There’s already a good discussion of many of them in the Free Movement blog, but I think it might also be useful to address some legal issues here, in a question and answer format.

Where are the international law rules on asylum?

They are scattered all over the place incoherently. International lawyers like to describe their subject as ‘fragmented’, and that’s particularly true of asylum law. There are three main sources of law on asylum in Europe, and although they are legally separate, their rules overlap and interact. I won’t discuss every way in which this happens in this blog post – just those most relevant to the Channel crossings.

The UN Refugee Convention

The starting point is the United Nations (Geneva) Convention on the status of refugees, which defines what a refugee is and lists the rights of refugees. But that Convention does not deal with issues like asylum procedure, and has an uneasy and uncertain relationship with immigration law.

ECHR

Secondly, the European Convention on Human Rights (ECHR) says nothing about asylum explicitly, but the case law of the European Court of Human Rights has addressed a number of asylum-related issues, in particular arising from Article 3 ECHR, the ban on torture or other inhuman or degrading treatment. According to that case law, removal to another country to face a sufficiently serious risk of Article 3 treatment in that other country infringes Article 3 in the country removing the person concerned. A series of procedural obligations then follow from that.  (There are other international human rights treaties which take a broadly similar approach, but I focus here on the ECHR as its court rulings are binding and have a greater impact in practice).

EU asylum law

Thirdly, EU law has aimed to create a Common European Asylum System (CEAS) in several phases.  A first phase of EU asylum law was adopted from 2003 to 2005, and a second phase was adopted between 2010 and 2013. A (de facto) third phase of laws, responding to the perceived European refugee crisis of 2015, was proposed in 2016, but negotiations on those laws are still continuing. The CEAS consists of:

a) legislation on responsibility of asylum applications (the Dublin rules: currently the Dublin III Regulation);
b) the Eurodac system of taking fingerprints of asylum-seekers and ‘illegal’ migrants;
c) laws on the definition of ‘refugee’ and parallel ‘subsidiary protection’ status, and the rights of beneficiaries of either status;
d) asylum procedure;
e) reception conditions for asylum-seekers, ie rules on benefits, detention and childrens’ education; and
f) an EU asylum agency, which supplements Member States’ administrations applying asylum law, but does not replace them.  

While some in the 2016 referendum campaign falsely claimed or implied that the UK has no control over its borders as an EU Member State, in fact the UK has an opt out from the EU’s Schengen system of (in principle) open internal borders, as well as an opt out on EU law on asylum, immigration and criminal law. In practice, the UK only opted in to some EU asylum laws: all of the first phase laws, but only some of the second phase laws (Dublin, Eurodac and the asylum agency).

Overall, the international asylum law rules are fragmented in various ways: the UN Refugee Convention only applies to certain issues, and has no enforcement mechanism; the ECHR case law is ad hoc and indirect; and while the EU asylum laws are potentially more coherent than the other two sources, only some of those EU laws apply to the UK. There’s also divergent national application of the laws, some of which is built in, as the various sources mostly set only minimum standards.

Can ‘illegal’ migrants be refugees?

The notion that ‘illegal’ migrants – ie those people who entered the country or arrived at the borders without authorisation – cannot be ‘genuine’ refugees is utter nonsense: morally, factually and legally. It’s inherent in the notion of fleeing a dangerous country that one might not have the documents to leave and/or the documents to enter another country – because the persecuting country might want to keep its dissidents where it can mistreat them, or because of moral panic in the country they might flee to.

This is recognised not just in popular culture – think of the plot underlying the romance of Casablanca – but also (for example) by the efforts of Raoul Wallenberg and others, who hardly felt constrained by the finer legal details in their efforts to save Hungarian Jews.

Legally, there’s no reference to immigration status in the definition of ‘refugee’ in the Refugee Convention (Article 1.A). Nor is there an exclusion from refugee status on the grounds of being an ‘illegal’ migrant in Article 1.F. Some refugee rights in the Convention are explicitly dependent on having lawful migration status, but some are not – most importantly the fundamental rule, in Article 33, that a refugee should not be sent to an unsafe country.

Furthermore, there’s an explicit provision on the position of refugees who entered a country illegally – which would be irrelevant if they were not eligible to be refugees at all. In fact, Article 31 of the Convention restricts States from penalising refugees for irregular entry, subject to certain conditions. If the refugee doesn’t satisfy those conditions, a penalty for irregular entry could be imposed – but that does not mean that the person concerned is disqualified from being a refugee. For that matter, the ECHR and EU law don’t disqualify ‘illegal’ migrants from refugee status either.

On the other hand, not all those who enter illegally are refugees: they must still meet the relevant criteria (fleeing their country of origin due to a well-founded fear of persecution due to race, religion, nationality, political opinion or particular social group). Moreover, it is still possible for States to argue that even though a person is (or might be) a refugee, their refugee status (or responsibility for considering their asylum claim) is the responsibility of another country. Let’s now turn to that issue.

Don’t refugees have to apply in the first ‘safe country’ they enter – otherwise they are not genuine?

While it is often strongly asserted that 'international law requires refugees to apply for asylum in the first safe country they enter', in fact the position is rather vaguer than that. The Refugee Convention doesn’t contain any express rule to that effect in the rules on the definition of refugee, or on the cessation (loss) or exclusion from being a refugee, as set out in Articles 1.A to 1.F of that Convention.

However, there are some indirect suggestions in the Convention that the number of countries which a refugee has crossed through might be relevant. Article 31 of the Convention, which deals with ‘illegal’ entry (as discussed above), includes the condition that a refugee had to be 'coming directly' from the country which they had to flee, in order to avoid penalties for illegal entry. While the 'non-refoulement' rule in Article 33 of the Convention prevents States removing refugees to an unsafe State, it does not prevent refugees from being removed to a safe State. Furthermore, as noted already, some of benefits which the Convention gives to refugees (such as welfare and access to employment) are reserved for those who are lawfully resident or present in the territory; and the Convention does not require States to give refugees a lawful status under national immigration law.

So overall, the Refugee Convention gives States a degree of flexibility to insist upon a 'safe third country' requirement, but there is no absolute rule that refugees must always apply in a ‘safe’ third country. If the Convention had intended to impose a firm rule in that regard, it would surely have said so expressly, defined the conditions for such a rule to apply, and provided for obligations for the first ‘safe’ country to readmit the refugee – for without such obligations the rule would not easily be workable. Moreover, the preamble to the Convention refers to the heavy burden which the grant of asylum may place upon some countries, and the need for international cooperation to avoid refugees becoming a source of tension between States. Taken as a whole, then, the drafters of the Convention recognized that a strict safe third country rule could impose undue burdens on countries neighbouring a conflict in some cases, but left it to States to work out the details of how to address such burdens when they occur. 

The EU’s Dublin rules are an example of a group of States working out such rules, and we’ll now look at them in more detail. But note that they don’t create obligations for asylum-seekers to apply in certain countries; they create obligations for States to admit those asylum-seekers if they are responsible for the application. Asylum-seekers can still apply in a State which isn’t responsible for them under the EU rules; but they might face the consequence that their application is deemed inadmissible (not unfounded on the merits) and they are transferred to the country responsible for their application, where they can apply for asylum (or pick up where they left off, if they had applied for asylum there already). This will make it de facto impractical for an asylum seeker to apply in a particular country, and one might describe the Dublin rules as setting out where asylum seekers should apply for asylum; but that’s not the same as a legal requirement to apply in a certain country.

Travelling through one or more safe countries to apply in a particular country doesn’t mean that the asylum-seekers don’t have a genuine refugee claim; it just means that they prefer some countries to others, due to language or family links, for example. That doesn’t mean that they have a legal right to have their preference accepted; but nor does it mean that they are lying when they say that they faced persecution.

(Note: part of this answer is adapted from my previous discussion of this issue in a 2015 blog post on the supposed EU refugee crisis).

What do the Dublin rules say about which country has to consider an asylum application?

It’s often claimed that the Dublin rules say that an asylum-seeker has to claim asylum in the first EU country they reach. Apart from the fact that the rules don’t regulate asylum seekers directly – as discussed above – the ‘first country they enter’ point is oversimplified. That’s not a rule as such, although in practice the Dublin rules will often – but not always – amount to assigning responsibility to the first country of entry.

The Dublin rules include a special rule for responsibility for unaccompanied minors, and then rules about responsibility for family members of someone who already has refugee or subsidiary protection status, or who has applied for it. (In fact, some asylum seekers come to the UK under the Dublin rules on the basis of such family member links). They also assign responsibility to a State which first issued an asylum seeker with a visa or residence permit, or which waived the visa requirement for them to enter. It also assigns responsibility to a State which they first entered illegally, or where they stay without authorisation.

These criteria are often hard to prove, and the Dublin rules set out details about how States must cooperate applying them. It’s easier to apply them where the asylum-seeker has been fingerprinted already as an asylum-seeker or irregular entrant, because the Eurodac database then contains a record of this. Also, States have the option to consider an asylum application if they are not obliged to do so under the rules.

What’s the impact of Brexit?

The UK will still be bound by the UN Refugee Convention and the ECHR, because (as noted above) these are separate sources from EU law. In contrast, the impact of Brexit on the UK and EU asylum law is a rather different kettle of fish.

If the proposed withdrawal agreement (discussed here) is ratified, it will keep in place the Dublin rules and other EU asylum legislation which binds the UK until the end of the transition period (discussed here), which is the end of 2020, or one or two years later if the two sides decide. (Note to those people freaking out that the withdrawal agreement provides for a ‘Joint Committee’: this sort of body is normal in international treaties, and the Joint Committee can only take decisions if the UK government and EU side have jointly agreed). The UK will retain its opt out over new EU asylum laws (and its capacity to opt in to those laws, if they amend existing EU laws which apply to the UK).

After that point a new treaty between the EU and UK, perhaps keeping in force the Dublin rules or some version of them, could be agreed. However, there is no reference to this possibility in the declaration on the future relationship between the UK and EU (which I annotated here) – although that declaration is not binding, so can’t prevent such a treaty being negotiated if the two sides wish. Although the EU has signed Dublin ‘association agreements’ with some non-EU countries – Norway, Iceland, Switzerland and Liechtenstein – the rationale for this is that those countries are also associated with the EU’s Schengen system.

Alternatively the UK could arguably sign treaties or reach informal arrangements with individual Member States. (It’s not clear to what extent EU asylum laws confer external competence on the EU on asylum issues, which might limit Member States from doing this). Failing that (or in addition to it), the UK might try to make greater efforts than it does now to return asylum-seekers to non-EU countries – although the basic international law obligations (in the Refugee Convention, the ECHR, and under other international law) not to return a refugee to an unsafe country will still apply.

The notion that those intercepted in the Channel or detected after crossing the Channel could be forcibly returned to France without that country’s consent is a non-starter (as is patrolling French territorial waters without consent). The referendum result is not a mandate to ‘take back control’ of a different country – least of all a country which English forces were booted out of in 1453.

The end result of this is that for one category of non-EU citizens – asylum-seekers whose application would be the responsibility of another country under the Dublin rules – the effect of Brexit may be ultimately to reduce UK control of migration, not increase it. What a tangled web some people weave, when first they practice to deceive.

Barnard & Peers: chapter 27, chapter 26
JHA4: chapter I:5
Photo credit: whitecliffsofdover.co.uk

Thursday, 27 December 2018

UK citizens as non-EU citizens in the EU after Brexit: applying the EU Directive on non-EU long-term residents




Professor Steve Peers, University of Essex*

*Supported by an ESRC Priority Brexit Grant on 'Brexit and UK and EU Immigration Policy'. This blog post is based on part of chapter 6 of the 4th edition of my book on EU Justice and Home Affairs Law; I have updated it, abridged it, and added a discussion of the issues unique to UK citizens.

Introduction

What happens to UK citizens in the EU27 after Brexit, if they have been living in an EU27 country for some time? If the proposed withdrawal agreement is ratified, they will retain most of their current rights under EU free movement law in the country they live in, although without the right to move freely between Member States any longer. (There will also be a transition period during which UK citizens could still enjoy free movement rights to the EU27, and vice versa). EU27 citizens in the UK will equally retain current rights (for a detailed annotation of an earlier version of the citizens’ rights provisions in the agreement, which do not differ much from the final version, see my blog post).

If the withdrawal agreement is not ratified, there is apparently no intention on the part of the Commission to propose an EU-wide law to protect UK citizens’ acquired rights (as I suggested here). So, as the Commission pointed out in its most recent communication, it will be up to each Member State to regulate the position of UK citizens' acquired rights under its national law, subject to partial EU-wide harmonisation of some aspects of immigration law concerning non-EU nationals. (It’s a myth that the EU has no power to regulate the immigration status of non-EU citizens, as I discussed in a recent tweet thread. Note that the UK, Ireland and Denmark have generally opted out of these EU laws, including those discussed in this blog post. This will not stop UK citizens being covered by these laws as non-EU citizens after Brexit).

One of the more important such EU measures, as the Commission noted, could be the EU Directive long-term residence for non-EU citizens.  It will obviously be relevant if there’s no deal, but it could even be relevant for some UK citizens if the withdrawal agreement is ratified, because it includes limited provisions on movement to other Member States. These fall short of the free movement rights that UK citizens are losing, but are better than nothing at at all.

For those reasons, it’s useful to take a look at the Directive, from the particular perspective of UK citizens in the EU on Brexit day. Much of what I say here is, however, equally relevant to any UK citizens moving to the EU afterward, or to citizens of any other non-EU countries (besides those which have free movement treaties with the EU: Norway, Iceland, Switzerland and Liechtenstein).

Summary

In case the more detailed legal comments below are too daunting, here’s a short summary. The EU Directive on long-term resident non-EU citizens could apply to UK citizens living in an EU Member State after Brexit. They have to have lived there legally for five years, and it’s unclear if residing there as an EU citizen before Brexit counts, although there’s a good argument it does. There are also parallel national laws on securing long-term residence for non-EU citizens, which might be more appealing in practice for UK citizens, particular if it’s easier to apply under those laws. The EU rules will be more relevant to those UK citizens who would want to move to another Member State in future.  Anyone uncertain about their legal status should research the national law where they are living further, and if necessary obtain legal advice.

Overview

The long-term residents’ Directive, which dates back to 2003, has been amended once, in 2011, to extend its scope to cover refugees and persons who have subsidiary protection status. A pending proposal would amend it again, also as regards specific issues relating to people with international protection. I won’t discuss these amendments further, as UK citizens could not in principle apply for refugee status in the EU before Brexit, and I doubt that many UK citizens applied for subsidiary protection status either, given that they could enjoy free movement rights. (There may be some cases, however, where UK citizens are married to a refugee or person with subsidiary protection; the Directive might be relevant to those spouses).

(Note that some UK citizens will retain secondary free movement rights after Brexit – ie as the family member of an EU citizen who has moved to another Member State, such as an Irish citizen in Germany).

The long-term residence (LTR) Directive is not the only EU law which allows non-EU citizens to move between Member States. There are special rules on this issue set out in the Blue Card Directive on highly-skilled workers (which is being amended: see discussion here); the Directive on researchers and students (see discussion here), and the Directive on intra-corporate transferees (see discussion here), even before such persons have attained long-term residence status. The Blue Card directive also contains special rules on obtaining long-term residence status, but I won’t discuss them further here, since they won’t concern UK citizens resident in EU States before Brexit day.

There have been several references to the CJEU on the interpretation of the Directive, namely: Kamberaj, Commission v Netherlands, Singh; Tahir; P and S, discussed here; CGIL and IMCA; and López Pastuzano, discussed here. The Court also discussed the Directive in its judgments in Case C-40/11 Iida and Ziebell, and the pending cases of YZ and X have asked the Court to interpret the Directive again. The Commission also presented a report on the implementation of the Directive in 2011 (the ‘2011 report’).

Basic issues

The principal purpose of the Directive, according to its preamble and CJEU case law (Kamberaj, among other judgments), is to integrate third-country nationals who are long-term residents. It also aims to approximate their legal status to EU citizens (mentioned in the Singh judgment). Furthermore, the provisions on movement between Member States aim ‘to contribute to the effective attainment of an internal market as an area in which the free movement of persons is ensured’ (mentioned in Commission v Netherlands).

The LTR Directive creates enforceable rights: third-country nationals who satisfy the conditions ‘have the right to obtain long-term resident status as well as the other rights which stem from the grant of that status’ (Commission v Netherlands). According to the Court, the equal treatment rules in the Directive are the general rule, and exceptions from that rule must be interpreted strictly (Kamberaj). In light of the objective of the Directive, the same approach should arguably apply to all of the conditions and derogations from the Directive, along with exclusions from its scope (see the Opinion in Commission v Netherlands, which argues that the conditions for obtaining LTR status must be interpreted strictly).

The EU rules on LTR status co-exist with national rules dealing with the same issue. The Directive states that Member States may create or maintain national systems that are more favourable than the rules in Chapter II, but acquisition of status under such more favourable rules will not confer the right of residence in other Member States. According to the CJEU, it follows that a residence permit obtained on the basis of such more favourable rules cannot constitute an EU LTR permit at all (Tahir).

According to the 2011 report, 13 Member States have maintained national rules, and 14 of them force a choice between a national permit and an EU permit. The report argues (correctly, in my view) that this is a breach of the Directive, since it does not provide for Member States to impose such a condition. However, if some Member States are still insisting on this, it would create a dilemma for a UK citizen living in one of those countries in practice (unless he or she wants to litigate the point), as it forces them to choose which to apply for. It might be easier to obtain a national permanent residence status, but an EU LTR status will be more appealing for any UK citizen who contemplates moving to another Member State.

Scope of the Directive

Chapter I of the Directive sets out its purpose, definitions, and scope. It applies to all lawful residents of a Member State who are third-country nationals (‘legal residence’ is defined by national law: Singh), except for: diplomats; persons who are seeking refugee, temporary protection, or subsidiary protection status, or who have received temporary protection; students; and those who ‘reside solely on temporary grounds such as’ au pairs, seasonal workers, cross-border service providers, workers posted by a cross-border service providers, or persons whose ‘residence permit has been formally limited’.

In light of the objective of the Directive, the list of exclusions from its scope is arguably exhaustive. If that is correct, the Directive therefore applies, for instance, to citizens of a former Member State, to family members of third-country nationals (ie a non-UK family member of a UK citizen), and third-country national family members of EU citizens, whether those persons have moved within the EU with their sponsors (and are therefore covered by EU free movement law) or not (ie either a UK citizen married to a German citizen in Germany, or a UK citizen married to a German citizen in Austria). As noted above, the latter group of UK citizens will have secondary free movement rights anyway; the LTR Directive would be relevant if they wanted to secure their legal status separately from their family member.

But what about the express exclusions: are they relevant to UK citizens? In the discussion below on the five-year waiting period, I discuss two alternative possibilities: a) prior residence on the basis of EU free movement law is sufficient to be covered by the Directive; or b) prior residence on the basis of national law is required to be covered by it. I argue that the former interpretation is more convincing, but if the latter interpretation applies, then the exclusions from the scope of the directive are also relevant for UK citizens. The asylum-seeker exclusion is irrelevant, but the exclusions for diplomats, students, and those with ‘formally limited’ residence permits or who ‘reside solely on temporary grounds’ could be relevant. (They would also be relevant to UK citizens who have not got five years’ residence yet, because they will affect whether they could get LTR status in future).

A UK citizen could still get LTR status if they had switched to another type of activity – a diplomat who became a worker, for instance – but when it comes to qualifying for LTR status, prior residence as a diplomat or on a temporary permit does not count at all, while prior residence as a student must be discounted 50%.

The CJEU interpreted the ‘formally limited’ and ‘temporary grounds’ exceptions in Singh, noting that they were two different things, and that ‘formally limited’ should have a uniform EU interpretation  -meaning a type of permit that prevented long-term residence in practice. Furthermore, the list of ‘temporary grounds’ exceptions was not an exhaustive list of activities which are ‘per se of a temporary nature’.

The 2011 report indicates that five Member States are in breach of this provision (as subsequently interpreted by the CJEU), excluding migrants from LTR status ‘even though their residence permit may be renewed for a potentially indefinite period, without any definite time limit’. This affects, for instance, ‘artists, athletes, ministers of religion, social workers, researchers, family members of permanent third-country nationals, and low skilled migrant workers’.

The Directive is without prejudice to more favourable provisions of EU or mixed agreements with third states, pre-existing treaties of Member States, and certain Council of Europe migration treaties and treaties relating to refugees. So a treaty between the UK and EU could set higher standards, but there seems no prospect of that at the moment.  

Acquiring long-term residence status

The basic rule is that third-country nationals are entitled to such status after residing ‘legally and continuously for five years in the territory of the Member State concerned’ before their application for status. Being the family member of a long-term resident does not exempt a migrant from this rule (Tahir). This definition does not limit itself to lawful stays on the basis of a residence permit, and so the 2011 report criticizes five Member States (in my view rightly) for not counting stays on the basis of (for instance) long-stay visas. By analogy, it should follow that UK citizens, who were entitled to live in a Member State on the basis of free movement law, are covered as long as they were there lawfully and continuously for five years.

But how can we apply this test to people who were resident on such a different legal basis? Of course, there is no precedent for this issue in CJEU case law, since no Member State has left the EU before. Fortunately, there is a precedent the other way around: in Ziolkowski, the Court ruled on the position of an EU citizen who had lived in a Member State before their country joined the EU, and then continued living there afterward. In the Court’s view, such persons could potentially obtain the right to permanent residence under EU free movement law, counting their pre-accession period of residence to that end, but that pre-accession residence would have to match the conditions on which an EU citizen could stay in another Member State. In Alarape and Tijani, the CJEU added that permanent residence was only possible for EU citizens meeting the criteria of the EU citizens’ Directive, not other EU free movement law legislation.

Applying Ziolkowski by analogy, time spent by UK citizens in a Member State before Brexit should count towards the acquisition of long-term residence by a non-EU citizen, whether that means the UK citizen would therefore already qualify for long-term residence status or can use that time toward qualifying for it in future. But how precisely should we apply this analogy? Should all the time spent on the basis of EU free movement law count? In that case, should only time spent on the basis of the citizens’ Directive count? Or should the Member State be able to argue that only time spent on the basis of national law on non-EU citizens, taking account of the exclusions from the long-term residence Directive, should count?

In my view, the most generous approach – taking account of all time spent on the basis of any type of free movement law, for as long as free movement law was applicable – should apply. All of that period meets the basic test of being lawful residence, and it is egregious to retroactively erase time spent as a diplomat or student, or on some other legal basis, from counting toward long-term residence status. If the EU institutions cannot make the effort to pass an EU-wide law uniformly guaranteeing UK citizens’ legal status, the very least EU law could offer is full recognition of periods spent on the territory on the basis of free movement law.   

Next, absences from the host Member State of up to six months at a time, totalling no more than ten months during the five-year period, must be taken into account in calculating that period. Member States may permit longer periods of absence for ‘specific or exceptional reasons of a temporary nature and in accordance with their national law’, but such absences will not count toward the qualifying period (in other words, the clock will be stopped). But Member States may allow the clock to keep ticking if a person is detached for employment purposes. As noted above, prior residence as a diplomat or on a temporary permit does not count at all, while prior residence as a student must be discounted 50%. The 2011 report states that all except six Member States use these optional rules. These rules are more restrictive than EU free movement law rules on obtaining permanent residence: but if my interpretation of how Ziolkowski applies by analogy to UK citizens is correct, the EU free movement rules on absence should apply instead, for as long as free movement law was applicable.

Long-term resident status shall be denied on grounds of insufficient resources, or lack of sickness insurance (see by analogy the CJEU interpretation of the equivalent provisions in the Directive on family reunion for non-EU citizens, in Chakroun and Khachab). Note that this is more restrictive than EU free movement law, which only applies those requirements for EU citizens present on non-economic grounds. The pending case of Z raises the important question of whether the resources can be provided by another person besides the would-be LTR, such as a family member (EU free movement law permits this). This issue is particularly relevant for stay-at-home parents or disabled people. Again, my interpretation of Ziolkowski would apply the EU free movement rules instead to UK citizens, for as long as free movement law was applicable.

Member States may require applicants to fulfill integration conditions, or refuse to grant status on grounds of public policy or public security. In light of the objectives of the Directive, the list of conditions to obtain LTR status should be regarded as exhaustive (see the opinion in Commission v Netherlands; the 2011 report is critical of Member States which impose a housing requirement or require a settlement permit). Although the Directive, unlike some other EU migration Directives, does not expressly regulate the issue of fees for applications, the CJEU has ruled that excessively high fees for LTR applications can diminish the effectiveness of the Directive, and so amount to a breach of Member States’ obligations (Commission v Netherlands and CGIL and INCA). Integration conditions do not apply under free movement law, and the CJEU has interpreted them in the context of equal treatment (see below). Again, my interpretation of Ziolkowski would mean that when UK citizens were subject to EU free movement law, those rules would apply instead to UK citizens, for as long as free movement law was applicable, which would exempt them from fulfilling integration requirements. As noted below, the public policy and public security rules are interpreted consistently with EU free movement law anyway.

The Directive also sets out detailed rules on the procedure for acquisition and withdrawal of long-term residence status. According to the CJEU, a third-country national does not obtain LTR status automatically, but has to apply for it (Iida). This is more restrictive than free movement law. There is a right to ‘mount a legal challenge’ if LTR status is rejected or withdrawn; it is again arguable that given Strasbourg jurisprudence, the general principles of EU law, and the EU Charter of Fundamental Rights, this must, inter alia, include the right to argue the merits of any issue falling within the scope of the Directive before a court or tribunal (see by analogy EP v Council and El-Hassani).

Losing long-term residence status

LTR status ‘shall’ be lost due to its fraudulent acquisition, the adoption of an expulsion measure, or following absence from the EU (not just the particular Member State which granted the status) ‘for a period of 12 consecutive months’, although Member States may provide that absences for longer periods or for ‘specific and exceptional reasons’ will not lead to loss of the status. Where status is lost due to departure from the EU or a lengthy stay in another Member State, Member States must establish a procedure to ‘facilitate’ re-acquisition of the status. The 2011 report states (correctly in my view) that the list of grounds for loss or withdrawal of LTR status is exhaustive – ie, Member States can’t remove long-term residence status for any reason besides those listed in the Directive. The pending YZ case asks the CJEU to clarify the provision on loss due to fraud. This is more restrictive than under free movement law (loss after two years’ absence) or the withdrawal agreement (loss after five years’ absence), although fraud is also an exception under free movement law.

Equal treatment

Substantively, long-term residence status entitles its holders to equal treatment with nationals in a number of areas: employment and self-employment; education and vocational training; recognition of diplomas; social security, social assistance, and social protection ‘as defined in national law’; tax benefits; access to goods and services; freedom of association; and free access to the territory. The 2011 report suggested that some Member States were applying unjustified restrictions as regards university fees, equal treatment, and movement on the territory. However, there are exceptions: Member States can impose residence requirements in most cases (according to the 2011 report, 12 Member States apply residence conditions), limit access to employment and education, and ‘limit equal treatment in respect of social assistance and social protection to core benefits’.

The CJEU clarified the latter provision in Kamberaj, ruling that housing benefit restrictions in the Italian province of Bolzano breached the equal treatment rule because they were calculated on a different basis for third-country nationals. While the reference to national law in principle meant that it was up to each Member State to define the meaning of ‘social assistance and social protection’, the national court also had to take account of Article 34 of the EU Charter of Fundamental Rights, which referred to a right to ‘social and housing assistance’ as regards combatting poverty and social exclusion. As to whether housing assistance was a ‘core benefit’, the CJEU ruled that this exception had to be interpreted strictly, and that the list of such benefits in the preamble to the Directive (which does not mention housing benefit) was non-exhaustive. There was an implied procedural obligation to announce that a Member State was invoking the derogation (which Italy had not done), and the Court, again taking account of the Charter, defined core benefits as those ‘which enable individuals to meet their basic needs such as food, accommodation and health’. The Court also noted that there is no possibility to restrict equality to ‘core benefits’ as regards social security. While it was up to the national court to apply the Court’s reasoning to the case, on the whole the Court strongly supported equal treatment rights in this case.

In contrast, the Court seemed less concerned by the equal treatment of long-term residents in the P and S judgment. This case concerned third-country nationals who had already obtained long-term resident status, but were still subjected to an integration requirement. The Court ruled that this obligation did not fall within the scope of the equal treatment rule because Dutch citizens could be presumed to have knowledge of Dutch society and the Dutch language, whereas non-EU citizens could not. But it went on to assess whether the requirement compromised the effectiveness of the Directive. In principle it did not, because the main objective of the Directive is the integration of long-term residents, and learning the national language and about the host State could facilitate communication with Dutch citizens. Acquiring a knowledge of Dutch also ‘makes it less difficult’ to find work and take up training courses. The integration requirement therefore contributed to the aims of the Directive. 

However, the Court did place some limits upon what Member States can do, as regards ‘the level of knowledge required to pass the civic integration examination’, ‘accessibility of the courses and the material necessary to prepare’ for the exams, the level of registration fees, and ‘specific individual circumstances, such as age, illiteracy or level of education’. In particular, the Court ruled that the fines for failing the exam were too high and were imposed too often (for every failure, or even where the long-term resident had not sat the exam within the required time), on top of the high fees to sit the exam. As the opinion in P and S noted, some Member States exempt citizens of some non-EU countries from an integration test; it remains to be seen whether the UK will be one of them.

Next, long-term residents are also entitled to enhanced, although not absolute, protection against expulsion, which is clearly based on ECHR jurisprudence on the right to family and private life, which requires States to balance the seriousness of any criminal conviction of a migrant with the degree of that migrant’s integration into society and family links when deciding on whether to expel them. The CJEU has linked this protection to the safeguards accorded to EU citizens before the advent of the EU citizens’ Directive (Ziebell), which suggests that for long-term resident non-EU citizens, the protection against expulsion may not be vastly different than for EU citizens. Moreover, in López Pastuzano the CJEU emphasised that (as with EU free movement law), expulsion of a long-term residence following a conviction could not be automatic, but could only be on the basis of a case-by-case assessment.

Moving between Member States

Chapter III concerns the exercise of the right of residence for periods above three months in other Member States, other than as a posted worker or provider of services; Member States can also set out national rules on seasonal workers or frontier workers. There are a number of restrictions compared to EU free movement law: Member States can impose labour market tests limiting movement on economic grounds, or an overall quota on the numbers of third-country nationals (if that quota existed at the time of adoption of the Directive), along with special rules restricting movement of seasonal workers or cross-border workers.

The right of residence can be exercised if the long-term resident is pursuing an economic activity or a non-economic activity, but the ‘second’ Member State can insist that the long-term resident has sufficient resources and sickness insurance and comply with integration measures, provided that such measures were not already complied with in the first Member State. Long-term residents can bring with them their ‘core’ family members as defined by the EU’s family reunion Directive (which is more restrictive than the family reunion rules in EU free movement law), but the second Member State retains the option to decide whether to admit other family members. Again, sickness insurance and sufficient resources tests can apply. Admission of long-term residents and their family members can also be refused not only on grounds of public policy and public security, but also public health.

The potential ‘second’ Member State must process the application within four months, with a potential three-month extension. The CJEU has ruled that the fees for the LTR’s application to move, along with his or her family members to join them, cannot be excessive (Commission v Netherlands). If the various conditions are met, the second Member State must issue the long-term resident and his/her family members with a renewable residence permit. Reasons must be given if the application is rejected, and there is a ‘right to mount a legal challenge’ where an application is rejected or a permit is withdrawn or not renewed.

Once they have received their residence permit, long-term residents have the right to equal treatment in the second Member State in the same way as the first Member State, ‘with the exception of social assistance and study grants’, and subject to a possible one-year delay in full labour market access (again more restrictive than EU free movement law). Family members have the same status as family members under the family reunion Directive as regards access to employment and education, once they have received their long-term residence permit.

Before the long-term resident gains long-term resident status in the second Member State, that Member State can remove or withdraw his or her residence permit and expel the long-term resident and family in accordance with national procedures on grounds of public policy or public security, where the conditions for admission are no longer met and where the third-country national ‘is not lawfully residing’ there. The first Member State must readmit such persons, although if there are ‘serious grounds of public policy or public security’, the person concerned can be expelled outside the EU. Once the conditions for obtaining long-term resident status are satisfied in the second Member State, the long-term resident can apply for long-term resident status there, subject to the same procedural rules that apply to initial applications for long-term resident status. According to the 2011 report, there were a number of legal and practical problems applying the various rules on movement to a second Member State.

Conclusions

On the whole, this Directive is an accomplishment simply because it facilitates the security of residence, equal treatment, and free movement of third-country nationals more than EU law previously provided for. Nevertheless, the 2011 report indicates that only about half a million third-country nationals had qualified as LTRs, despite a far higher eligibility. The numbers are lower than they would otherwise be in large part because of breaches in national implementation of the Directive (notably the forced choice between the national and EU LTR systems). The defective implementation of the conditions for obtaining LTR status (notably as regards housing) is also problematic. Unfortunately the Commission has not brought any further infringement proceedings besides its earlier challenge to the fees charged to LTR applicants by the Netherlands.

As for movement to a second Member State, since there are many express possibilities for Member States to limit movement of long-term residents, it should follow that unless one of these express exceptions applies, long-term residents enjoy equal treatment as regards the initial take-up of employment, self-employment, or non-economic activities in the second Member State. Also, it appears that the Directive can be used where a long-term resident wishes to move between Member States to join a sponsoring family member in another Member State. This means that such persons will only have to satisfy the criteria for obtaining long-term residents’ status, and may therefore avoid the limitations and conditions set out in the family reunion Directive, or the exclusion from EU free movement law of EU citizens who have not left their own Member State. For example, a UK citizen with long-term resident status in France could rely on that status to move to Austria to join a family member there. 

For UK citizens in particular, the Directive could be useful if national law on long-term residence is harder to qualify under, or if they are particularly keen to move to another Member State, taking account of the stricter conditions of doing so as compared to EU free movement law.

Photo credit: Europe Street News
Barnard & Peers: chapter 26, chapter 27
JHA4: chapter I:6