Don’t think of the children! CJEU approves automatic exclusions from family benefits in Case C-308/14 Commission v UK

Charlotte O'Brien, Senior Lecturer, York Law School 

The Court of Justice’s retreat from the zone of Member States’ welfare systems hastens. Having once suggested that citizenship is ‘destined to be our fundamental status’, and provides the basis for a ‘degree of financial solidarity’, the Court had established that EU nationals falling into temporary difficulties would be entitled to some amount of support from a host state, depending on how ‘deserving’ the claim seemed to be.

But the Court has shifted away from notions of citizenship, so there may never be such a thing as a reasonable burden. Having established that EU migrants claiming social benefits can in principle be subject to a right to reside test not applied to own nationals in Brey, the Court found in Dano that a case-by-case assessment where someone was deemed to have moved for the ‘sole’ purpose of claiming benefits was not necessary. This was expanded in Alimanovic and Garcia Nieto to suggest that jobseekers were not entitled to a case-by-case assessment either.  In Commission v UK we see the CJEU’s desires to accommodate the UK’s discriminatory tendencies rather usurp the applicable legal framework.

The key tensions at the heart of the case – the discriminatory effects of the right to reside test, and its application to family benefits – are glossed over in a brief judgment. The Brey and Dano principles are imported into Regulation 883/2004 (which concerns the coordination of social security in cross-border cases) and applied to family benefits, while the burden of proof is reversed so that a discriminating Member State is presumed to be acting lawfully if they brandish the ‘public finances’ trump card.  

The decision finds that the UK is entitled to apply the ‘right to reside’ test to claimants for Child Benefit and Child Tax Credit; UK nationals automatically fulfil the test, while EU national claimants must show that they fulfil the conditions of Article 7 of Directive 2004/38 (which sets out the main rules on EU citizens moving to another Member State). In short, they must be workers, or have retained worker status, or be the family members of EU national workers. This analysis addresses four issues that stand out in the judgment: (i) the extension of the ‘right to reside’ principle, in paragraph 44 of Brey, to override Article 4 in regulation 883/2004, and the implications for other benefits; (ii) the issue of direct versus indirect discrimination and the reversal of the burden of proof on the issue of justification; (iii) the failure to differentiate between different ‘types’ of economic inactivity, jettisoning proportionality, extinguishing EU citizenship, and ignoring the rights of the children; and (iv) the finding that the UK does not ‘systematically’ check EU nationals’ right to reside.    

(i) Distilling a fundamental principle from para 44 of Brey

 

Article 4 of Regulation 883/2004 states:

“Unless otherwise provided for by this Regulation, persons to whom this Regulation applies shall enjoy the same benefits and be subject to the same obligations under the legislation of any Member State as the nationals thereof.”

In Brey, the Court sidestepped this equal treatment requirement, by finding that the benefit at issue was social assistance. This was material to the lawfulness of the right to reside test – the questions were inextricably interlinked, and the nature of the benefit ‘must be examined in the context’ of the right to reside question. The right to reside test was a lawful means to avoid undue burdens on the ‘social assistance system’.

The classification of the benefit was important in Brey. But in Commission v UK classification is treated as irrelevant – and one sentence in Brey (there is ‘nothing to prevent, in principle, the granting of social benefits to Union citizens who are not economically active being made conditional upon those citizens meeting the necessary requirements for obtaining a legal right of residence in the host Member State’) is made to do a lot of legwork – finding that all benefits can be subject to a discriminatory right to reside test. Article 4 Regulation 883/2004 does not get a look in other than to state that it has not been infringed.   

 

The Court found that the Regulation deals with competence, not eligibility for benefits. But this is too simplistic. The Regulation does govern aspects of eligibility – stating that place of residence cannot be a deciding factor in many cases; stating that conditions as to insurance must be capable of being discharged by insurance in other Member States, and so on; and it provides in Article 4 a principle of equal treatment for persons subject to the Regulation. 

Family benefits are ‘pure’ social security. There is no basis for finding that they fall within the ‘social assistance’ exclusions of Directive 2004/38, or for finding that the primary law requirement of equal treatment in Article 18 TFEU should not apply. There is no specific provision in the Treaty or secondary law excluding Union citizens from equal treatment with regard to family benefits. They are squarely in the material scope of Regulation 883/2004, and so subject to the equal treatment provision therein. In this way the Regulation offers some protection to the children in migrating families, since they are typically subjects rather than agents of migration, and it has usually been accepted that they should not be penalised for changes in their parents’ work status.

Several provisions might therefore plausibly prevent the application of a right to reside test to Union citizens claiming a family benefit. But the Court’s reasoning is short and simple – it quotes the Brey statement. One sentence in a judgment that dealt with a different category of benefits, where the material part of that decision is not being followed, is arguably of insufficient legal weight to displace a presumption of equal treatment, in the absence of a Treaty provision or express secondary law provision to do the displacing.

The end, contradictory, result, is that the limitations of Directive 2004/38 are independent of the provisions of Regulation 883/2004, so the Directive can adopt a wider definition of social assistance, but the equal treatment provision in Regulation 883/2004 is bound by limitations written into Directive 2004/38 – limitations intended for different benefits. This judgment imports the personal scope of Directive 2004/38 into Regulation 883/2004. But that Regulation has a deliberately wider personal scope. The ECJ made clear that the Regulation’s predecessor, Regulation 1408/71, was not confined to people in employment in Dodl and Oberhollenzer. Regulation 883/2004, far from narrowing the scope of Regulation 1408/71, was enacted to “replace and extend” that instrument. Recital 42 refers explicitly to ‘the new category of non-active persons, to whom this Regulation has been extended’. Here, the Court’s finding that such persons will not be left without a competent state, just without benefit eligibility, is a little simplistic. Extrapolating that logic, domestic rules may well exclude such people (falling into Article 11 (3)(e)) from the whole material scope of the Regulation – in which case, for what is that State competent, and why have a category 11(3)(e) at all, other than to point to whose rules of exclusion apply?  

The implications of the judgment could have ramifications throughout the EU, for States that have not yet adopted such tests, and for States that have so far limited them to benefits with an element of social assistance, who might conceivably roll them out further. It could steepen the welfare cliff edge for those who have been working but who fall out of work (or have been a family member of a worker and cease to be so). It could result in excluding a number of workers who cannot adduce sufficient evidence that their activities meet nationally-imposed definitions of work – e.g. meeting hours or earnings thresholds continually over a prolonged period of time. And it could result in deepening child poverty for vulnerable children, whose welfare might otherwise have received some protection from the coordination scheme. It endorses ‘hand-to-mouth’ citizenship.

(ii) Direct versus indirect discrimination and reversing the burden of proof

The Commission claimed that the rule created direct discrimination but the Court did not engage with that claim. It simply reiterated the Brey point, that there is nothing to prevent right to reside tests, then added that where such tests are adopted a Member State ‘commits indirect discrimination’.

But the condition is directly discriminatory. Only EU nationals must provide evidence of a right to reside. Only EU nationals can be excluded from entitlement due to economic inactivity. The application of an extra condition to non-nationals was recognised as being directly discriminatory in Grzelczyk.

The Court slightly confuses things by pointing out that a ‘residence condition’ is indirectly discriminatory. But the right to reside test is not a residence condition. It is a requirement to be economically active and is only applied to EU nationals.

On finding instead that indirect discrimination was at issue, the Court turned to the question of justification.

Typically, where a potential infringement has been made out, it is up to the infringer to demonstrate that their actions are justified (see O’Flynn and Groener). The Member State must show that they are pursuing a legitimate aim, that the means are proportionate and appropriate, and do not go beyond what is necessary.   

The justification requirement was rather swiftly dealt with, as the Court shied away from the judicial kryptonite that is the mention of public finances. In spite of mounting evidence that fears of benefit tourism are misplaced, no evidence of a threat to public finances was required for this aim to be accepted as legitimate. The Court did not ask whether the test itself was proportionate or appropriate. Instead it asked whether the checks conducted as part of the test were proportionate and appropriate.

And here it shifts the burden of proof to the Commission. The Court summarised the information provided by the UK noting that claimants must provide a ‘set of data’, and further checks are carried out ‘only in specific cases’ and ‘only in the event of doubt’.

But the judgment does not tell us how much data is required of claimants, how many ‘specific’ cases lead to further checks, or how many cases involve ‘doubt’; the repeated use of the word ‘only’ without these statistics tells us nothing about scale or proportionality. 

Instead it is up to the Commission to show that  ‘such checking does not satisfy the conditions of proportionality, that it is not appropriate for securing the attainment of the objective of protecting public finances or that it goes beyond what is necessary to attain that objective.’

(iv) Dismissing the rest of Brey: jettisoning proportionality, extinguishing EU citizenship, and ignoring the children

Given the reliance placed upon para 44 in Brey, para 45 is conspicuous by its absence; it added ‘However, it is important that the requirements for obtaining that right of residence… are themselves consistent with EU law’.

And in Brey the Court found that EU law precluded the automatic barring of economically inactive persons from entitlement to benefits without assessment of their individual circumstances. Relevant circumstances included the duration of residence, amount of income, amount and duration of benefit claimed, etc.

This is the proportionality route to entitlement – where Union citizenship in theory offers a safety net for those who fall between the categories in Directive 2004/38. It allows for some differentiation based on circumstances, recognising that the label of ‘economic inactivity’ can mask a wide range of residence, economic and integration histories, and benefit claims may represent a wide range of claims of varying degrees of reasonableness.

In recent cases we have seen the Court retreat from this approach, finding that a case-by-case assessment was not necessary where the claimant at issue might be a benefit tourist, or where she was a jobseeker. Here, this aspect of Brey goes unmentioned, other than when summarising the Commission’s argument that the test is ‘an automatic mechanism that systematically and ineluctably bars claimants’ from benefits.

The Court did not engage with this argument. It appeared to consider automatic exclusion inherently lawful: ‘As the United Kingdom submitted at the hearing, legality of the claimant’s residence in its territory is a substantive condition which economically inactive persons must meet in order to be eligible for the social benefits at issue’.

The absence of an alternative ground for eligibility for those deemed economically inactive is striking in EU law terms, (even if it is rather old news in the UK), since it marks a departure from the ‘real link’ case law, whereby nearly-blanket rules had to have some proportionality-based exceptions. And it sends any Union citizenship-based right to equal treatment (Article 18 TFEU) up in smoke. It permits treating all ‘economically inactive’ migrants as equally worthless, regardless of their degree of integration into society, regardless of their, or their family’s employment history, and regardless of the circumstances that have led to a loss of worker status. And it permits the total erasure of children’s rights from the factors to be considered, even though it is their rights and their welfare being contested – Child Benefit and Child Tax Credit are specifically designed to address costs of protecting child welfare. In a report analysing recent welfare changes, the UN Committee on the Rights of the Child has already expressed ‘serious concerns’ about the UK’s imposition of cuts to tax credits ‘regardless of the needs of the households’ concerned. The right to reside test goes further, being not merely a cut but a disentitlement for affected children, even if they were born in the UK and have no significant links with their State of nationality.   

The Brey formulation treated as so pivotal, permitting right to reside tests, had itself rested on a series of EU citizenship cases, which established and developed the ‘real link’ concept. Para 44 cited Martinez Sala, Grzelczyk, Trojani, Bidar and Förster, all of which precluded the use of blanket rules, and all of which required some assessment of circumstances of the case.

So the reliance upon the Brey formulation becomes even less persuasive, in light of the departure from all of the authorities upon which that formulation rests. Cases establishing the rights attendant upon EU citizenship cannot credibly be used to make those rights and that status disappear.   

(v) The systematic verification obfuscation

Article 14(2) of Directive 2004/38 allows Member States to verify whether the residence conditions set out in that directive are met ‘in specific cases where there is a reasonable doubt’, adding that such verification ‘shall not be carried out systematically’.

As noted above, the Court found that the checking done by the UK did not amount to systematic verification. But this finding would have been helped by some analysis of Article 14(2) and the distinction between permitted checks and prohibited verification.

The government’s own announcements suggest there is something systematic going on. The government announced in 2014 that restrictions to benefits for EU nationals would be ‘augmented by additional HMRC compliance checks to improve detection of when EEA migrants cease to be entitled to these benefits. The checks will apply to all EEA migrant claims’. The Budget made clear that these checks would be applied to ‘new and existing awards’. In responding to a Freedom of Information request, the government confirmed that it had been carrying out ‘increased compliance checks’, issuing letters ‘targeted at EU/EEA Nationals’ requesting further information and/or evidence to check that claimants met entitlement conditions for Child benefit and Child Tax Credit.

Moreover, claimants face routine requirements for ‘documentary evidence’ of entitlement, and a ‘wide range of checks and an annual review’ in all cases of cross-border claims. It is difficult to know what would infringe Article 14(2).

To summarise, this judgment seems driven by the teleology noted in the Advocate General’s Opinion – to avoid offending the UK government at all costs. The difficulty is that the legal framework does not very easily bend to the desired outcome. The Court has seized upon one sentence in a previous judgment, and clung to it as providing all the necessary authority to override any conflicting legal principle. The Court avoids dwelling too much on the relative weight of legal principles, by simply skipping the analysis. Article 4 of Regulation 883/2004; Article 18 TFEU; the prohibition of direct, as opposed to indirect discrimination; the appropriateness of the right to reside test; the effects of Brey with regard to proportionality; EU citizenship; Article 14(2) of Directive 2004/38… they get little, if any, attention. Primary law and secondary law are presumptively displaced in the face of a fragment of a judgment that the Court is choosing not to follow – a fragment taken out of context, and pitted against the authorities upon which it is based.

The Court has missed an opportunity to engage in a principled and honest review of the directly discriminatory nature of tests that impose conditions of economic activity on EU nationals but not on own nationals. That in itself is not surprising, since the legal fiction that such tests are indirectly discriminatory seems to be the pragmatic acceptance of a politically necessity. But in allowing such tests to seep beyond protection of the ‘social assistance system’ and to govern eligibility for all benefits related to ‘public finances’, in dismissing the equal treatment provisions in primary and secondary law, in importing conditions to curb the personal scope of Regulation 883/2004, in reversing the burden of proof for justification, and deferring to the public finances trump card, the Court has divined from recent case law a higher, fundamental principle of exclusion, and a default of discrimination. The children of economically inactive EU nationals are now, in EU terms, officially irrelevant, since right to reside tests that exclude them wholesale from entitlement get the green light, with no requirements for citizenship, real links or proportionality to play a part. This may seem an inevitable result of the prevailing political wind, but a little more discipline would have been welcome, to address the legal bases that were engaged, and to keep the judgment more carefully confined. Instead what we have is light on authority, but sweeping in its potential reach and detrimental effects upon Union citizenship and on EU national children.     

Barnard & Peers: chapter 13

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An insubstantial pageant fading: a vision of EU citizenship under the AG’s Opinion in C-308/14 Commission v UK

Charlotte O'Brien, Senior Lecturer, York Law School

The political message being sent by irate governments to ‘back off’ from national welfare systems’ assumed prerogative to discriminate between home nationals and EU nationals is being received and applied with alacrity by the Court of Justice. The current direction of travel resiles from earlier progressive visions of EU citizenship, and in C-140/12 Brey, C-333/13 Dano and C-67/14 Alimanovic we see that which was once ‘destined to be [our] fundamental status’ receding ever further from view. Advocate General Cruz Villalón’s Opinion in Commission v UK continues the retreat, arguing that the Commission’s action challenging the UK right to reside test for family benefits should be dismissed. The result may, in the current environment, be unsurprising. But getting there with existing legal tools is problematic.

The Opinion contains a number of uncomfortable contortions to give undue deference to the national rules, and avoid tackling the underlying conflict of rules and approaches. It represents quite startling judicial activism in embroidering the legislation with unwritten limitations as to personal scope, tinkering with the subject matter, and asserting an unwritten licence to discriminate whenever something smells like a welfare benefit. The effect is as though the Court’s new teleological guiding principle should be that the legislature would have wanted at all costs to avoid offending the UK government.

The UK right to reside (RTR) test prevents any EU national who does not meet the criteria in Art 7 Directive 2004/38 from receiving Child Benefit or Child Tax Credit, both of which were accepted as being ‘family benefits’, so ‘pure social security’ (rather than special non-contributory benefits in Brey, Dano and Alimanovic) under Regulation 883/2004. The Commission challenged the test’s lawfulness on two grounds – that it imported extra conditions into the ‘habitual residence’ test, to undermine the effects of Regulation 883/2004, and that it is discriminatory since it only applies to non-UK citizens. The AG’s Opinion is remarkable, in its ability to reject both without engaging with either. This analysis deals with four key issues arising from the Opinion: (i) stitching, splicing and embroidering Reg 883/2004; (ii) the ‘inherent’, ‘inevitable’ and ex ante discrimination fudge; (iii) the parallel reality in which the UK does not presume unlawful residence; and (iv) the failure to notice that the UK automatically refuses social assistance to those reliant on ‘sufficient resources’.

(i) stitching, splicing and embroidering Regulation 883/2004

The AG is at some pains to determine whether the ‘right to reside’ test is part of the habitual residence test (HRT), or a separate test added on, suggesting that it is only if it is presented as the former, does the Commission have a case. As the UK government ‘distanced’ itself during proceedings from the combined test approach, and argued that it was a separate test of lawful residence, so the AG commented that the Commission’s case was ‘weakening over the course of the dispute’. Indeed, on the basis that the test was ‘independent’ of the HRT, the AG argued that the first ground should be dismissed. This is perplexing. It seems to be a matter of regulatory semantics whether the RTR is part of the HRT, or is applied as well as the HRT, if the effect – to undermine Regulation 883/2004 – is the same.

For the record, the conclusion that they are separate tests is unconvincing anyway. For all benefits with an official ‘habitual residence test’ the regulations provide that a claimant cannot be habitually resident unless she has the right to reside in the CTA (Income Support (General) Regulations 1987, reg 21AA; Jobseeker Allowance Regulations 1996, reg 85A; Employment and Support Allowance Regulations 2008, reg 70(2); State Pension Credit Regulations, reg 2; see DWP, DMG, 072771). For CB and CTC the terminology is slightly different – the words ‘habitually resident’ are not used, but a person must be treated as being in the UK. And to be treated as being in the UK, you have to have a right to reside (Child Benefit Regulations 2006, Reg 23(4)(a); Tax Credits (Residence) Regulations 2003, Reg. 3(5); CBTM10010 - Residence and immigration: residence – introduction).

However, whether we treat the RTR as part of habitual residence, or as an extra test, the effect in both cases is to add conditions onto the circumstances in which a person is treated as meeting the ‘residence’ criteria of Regulation 883/2004. That Regulation offers a clear, exhaustive list for allocating ‘competence’ of Member States for benefits, providing a residual category for the economically inactive, at Art 11(3)(e) in which the Member State of residence is competent. Once competence has been established, that State is then responsible for the payment of family benefits, subject to the non-discrimination provision.

The scheme of the Regulation is intentionally broader than that of Directive 2004/38 – applying a different personal scope for a start (covering all those who ‘are or have been subject to the legislation of one or more Member States’), and covering pensioners, those between jobs, those who might fall outside of the Dir 2004/38 Article 7(3) retention provisions – essentially, those who should be covered by social security provisions. To apply the right to reside test is to hack down the rationae personae of the Regulation to emulate that of Directive 2004/38 – an approach not endorsed, implied or merited in the Regulation. The AG’s assertion that law should not exist in ‘separate compartments’ as justification for splicing the instruments together and embroidering an extra condition into the Regulation rather too easily ignores the different purposes and scopes of the instruments. Similarly, the different material issues – the restriction of social assistance now embodied in Directive 2004/38, versus award of social security, are inappropriately assimilated. The AG notes, apparently approvingly, the UK’s assertion that ‘the two benefits at issue in the present case have some characteristics of social assistance’. This goes unexamined, and helps form the context in which the different nature of social security, and different subject matter of the Regulation, is effectively ignored. In sum, we have an approach in which if a benefit is a ‘bit like’ social assistance, and a legal instrument is in roughly the same area as Directive 2004/38, then unwritten restrictions kick in.

In the specific case of family benefits, the Regulation’s residual category should provide a guarantee that families do not fall through the cracks and find themselves disentitled to any family benefits, since many Child Benefits are tied to residence. This also serves the ‘bonus’ purpose of protecting children, who are not the agents of migration, and who the legislature and the Court have hitherto taken pains to protect from suffering the penalties of their parents’ choices and/or misfortunes – either out of an interest in child welfare, or as an instrumental way of avoiding disincentives (risks to their children’s welfare) for workers to migrate.

Here it is worth emphasising that when we speak of falling through the cracks, we mostly speak of people who have been working (rather than those who have never worked). The right to reside test results in a strict bifurcation between those ‘working’ and those not. The rules on retention of worker status are stringent and exclusionary, so that people can be working and contributing for many years and still fall over welfare cliff edges. Regulation 883/2004 should offer some protection to their pre-school children in such cases, even where Directive 2004/38 is (according to emerging case law) rather harsher to the parents.

However, in the AG’s approach we can see the Directive, having already been transformed from an instrument to promote free movement into a instrument to prevent benefit tourism (Dano); being promoted to the status of a fundamental principle of limitation, to be (retrospectively) mainstreamed into other (higher) legislative instruments – exerting restrictions that are not there written.

(ii) the ‘inherent’, ‘inevitable’ and ex ante discrimination fudge;

The AG avoided dealing with the question of whether the RTR test discriminates contrary to Regulation 883/2004, by finding that the RTR prevented the Regulation from being applicable at all – apparently treating ex ante discrimination as de facto lawful. This conceptual approach is deeply problematic – can Member States really avoid the non-discrimination obligations contained in legislation by applying discriminatory gateways to access that legislation?

As noted above, once competence of a Member State has been established for the purposes of Regulation 883/2004, it is then – according to that instrument, bound by non-discrimination duties (Article 4). However, under the proposed approach, there will be people for whom no Member State has competence, because competence is to be determined according to a set of restrictions in a completely different instrument which apply a different concept to a different set of people for a different set of benefits. And if they are in this way found not be within any State’s competence, the question of discrimination is avoided.

To the extent that the AG does engage with non-discrimination duties, it is part of an imprecise discussion about the likelihood of the lawfulness of curbing benefits from non-nationals (benefit restrictions are ‘traditionally associated’ with requirements of legal residence). In drawing upon Dano and Brey, the fact that those cases dealt with benefits therein defined as social assistance is swept aside somewhat as the AG finds ‘there is nothing in those judgments to indicate that such findings apply exclusively to the social assistance benefits or the special non-contributory cash benefits with which those cases were concerned and not to other social benefits’. But there is plenty to indicate that social security benefits should be treated differently in their coverage in a different piece of legislation. It is surely very odd to suggest that the Court should list those instruments on which it was not ruling.

Recognising that the rules do treat UK nationals and non nationals differently, the Opinion makes some rhetorical points about discrimination as part of the natural ecosystem of free movement – ‘one way of looking at it is that this difference in treatment as regards the right of residence is inherent in the system and, to a certain extent, inevitable… In other words, the difference in treatment between UK nationals and nationals of other Member States stems from the very nature of the system.’ None of this does anything to address the question of the problem of direct versus indirect discrimination – the latter being rather easier to justify. It almost suggests that some degree of direct discrimination has to be accepted as a matter of pragmatism. Indeed, the characterisation of the rules as indirectly discriminating on the grounds of nationality is one of the most contentious issues in the case. Much as in C-184/99 Grzelczyk, an extra condition is imposed only upon non-nationals. Hiding behind the banner of indirect discrimination seems unconvincing if we posit a brief thought experiment. Imagine all EU national men automatically had an RTR, but all EU national women had to pass the RTR test; that could not be described as indirectly discriminating on the grounds of sex. While it could be argued that nationality is a different type of ground to sex, and so different differences are acceptable, the fact that we are dealing with direct discrimination remains. And this is not explored. The only thing that needs justification, under this analysis, is not the test, but the procedural checking, which we look at next.

(iii) the parallel reality in which the UK does not presume unlawful residence

The AG states that it cannot be inferred that the UK presumes that claimants are unlawfully resident, adding that European citizenship would preclude such a presumption, and that claimants should not systematically be required to prove they are not unlawfully resident.

However, the whole claims process in the UK does systematically require proof of claimants that they are (not un)lawfully resident. The right to reside test takes the limitations of Directive 2004/38 and makes them a priori conditions of the existence of the right to move and reside. There is no general citizenship-based right to reside that can be modified by limitations, with some discretion. The conditions come first, and must be demonstrably met, in each and every case. The UK’s assertion that ‘In cases in which there is doubt as to whether the claimant has a right of residence, an individual assessment of the claimant’s personal circumstances is carried out’ rather masks the process of assessment that decision makers are required to undertake according to the decision maker guidance on establishing whether a claimant really is or was a worker - using the UK’s own definition. That definition is flawed in itself, requiring evidence to meet a higher threshold than set in EU law, and the evidential hurdles can be considerable. Even for the most straightforward cases of worker, proof is required that earnings have been at or above the Minimum Earnings Threshold for a continuous period of at least three months. Those with variable earnings are expected to provide considerable evidence if they wish to ‘prove’ their right to reside. In cases where HMRC have reason to doubt conditions continue to be met for tax credit awards, they issue further, penetrating compliance checks, and in the UK government’s Budget Policy costings document, the government announced that the restrictions on benefits ‘will be augmented by additional HMRC compliance checks to improve detection of when EEA migrants cease to be entitled to these benefits. The checks will apply to all EEA migrant claims’. The system is set up to make the conditions constitutive of the right to free movement, effectively requiring all claimants to prove that they are not unlawfully resident, notwithstanding the apparent ‘background’ of EU citizenship, and claims are subject to systematic checking, notwithstanding Article 14(2) of Directive 2004/38.

The AG however, took the position that such checks are not systematic, but may be indirectly discriminatory, but that they were lawful, with the briefest of nods to justification – as though the mere mention of the UK’s public finances is sufficient to provoke a reverential hush, genuflection and swift retreat from the subject: 

‘without any need to pursue the argument further, I consider that the necessity of protecting the host Member State’s public finances, (75) an argument relied on by the United Kingdom, (76) is in principle sufficient justification for a Member State to check the lawfulness of residence at that point.’

No data, it seems, is required.

Nor is any engagement with the question as to whether purely economic aims are legitimate aims for the purpose of justifying discrimination or restricting a fundamental freedom – on this, see AG Sharpston’s Opinion in C-73/08 Bressol.

(iv) the failure to notice that the UK automatically refuses social assistance to those reliant on ‘sufficient resources’.

The AG rounds up the Opinion by noting that in any case, the economically inactive are not completely hung out to dry – they should have their circumstances examined to determine whether they have sufficient resources not to become a burden on the public purse. Here, the AG emphasises that mere recourse to public funds should not bar a claimant from having a right to reside based on sufficient resources, and that their case should be assessed as to whether they are an ‘excessive’ burden. This is all very well, but speaks to a rather different reality to that experienced in the UK, in which the economically inactive are automatically barred from claiming social assistance because they are automatically treated as not having sufficient resources at the point of claim. Moreover, the Upper Tribunal has suggested that ‘sufficient resources’ means sufficient to provide for the migrant’s family for five years; a migrant cannot claim to have had sufficient resources for a short period of time between jobs if those resources would not have lasted for five years.

In short, the Court should be wary of following the AG’s lead in backing off from the apparently prohibited area of UK welfare benefits quite so hastily. The Regulation’s personal and material scope, and purpose, cannot simply be ignored or modified, nor can the Directive be transformed into an all-encompassing, higher principle, through pro-Member State judicial activism. The right to reside test adds conditions to the application of the Regulation’s provisions, and it does so in a directly discriminatory way. The Court must address these points honestly; if it is prevented from doing so by the political wind – or if it too conjures up a default forcefield around benefits regardless of type, and gives licence to ‘inevitable’ discrimination – the ramifications will tell not only upon claimants, their children, the vanishing strands of EU citizenship and the obstructed freedom to move, but also upon the Court’s credibility. 

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Barnard & Peers: chapter 9

EU citizens’ access to benefits: the CJEU clarifies the position of former workers

Steve Peers

Today’s CJEU judgment in Alimanovic clarifies again the meaning of the EU law rules on the thorny issue of EU citizens’ access to benefits in another Member State. Like last year’s judgment in Dano (discussed here), it takes a more restrictive approach than suggested by the Court’s prior case law. However, like that prior judgment, today’s ruling leaves some issues open. I will discuss in turn the judgment itself, the impact on EU citizens' access to benefits, and the UK government's plans to renegotiate the country's EU membership. 

As a starting point, on the issue of EU citizens’ access to benefits, it is important to make distinctions as regards three issues: (a) the status of the person applying for the benefit ((i) not economically active; (ii) first-time job-seeker in the host State; (iii) previously employed in the host State; (iv) currently in work; (v) permanent resident); (b) the type of benefit at issue (social assistance, or concerning access to the labour market); and (c) whether the dispute concerns access to benefits or expulsion of the person concerned.

The judgment

The Alimanovic case concerns a Swedish woman and her daughter who had worked in Germany briefly, then lost their jobs. They sought a particular benefit in Germany, and the national court asked the CJEU if they were entitled to it.

First of all, the Court reiterated and expanded on what it had said in Dano: the benefit in question was a ‘social assistance’ benefit, not a benefit relating to labour market access. This distinction is important because the EU citizens’ Directive states that access to ‘social assistance’ benefits can be denied to first-time job-seekers, for as long as they are seeking work, and to all EU citizens during their first three months of residence. Furthermore, the Court’s previous case law (interpreting the Treaty rules on free movement of workers) states that first time job-seekers were entitled to benefits relating to labour market access, but not to social assistance benefits. The Court references that case law obliquely in the Alimanovic judgment, but does not either reaffirm or denounce it; it should be noted that a case about job-seekers’ access to this same benefit is pending (Garcia-Nieto: see the Advocate-General’s opinion in that case here).

Secondly, the Court then turned to the question of whether EU citizens who were previously briefly employed in the host State could be denied social assistance benefits. The previously employed are not one of the two categories of people specifically excluded from equal treatment to social assistance benefits by the citizens’ Directive; but that does not necessarily mean that they have access to those benefits.

To determine whether they had access to those benefits, the Court interpreted the equal treatment rule in the Directive, which states that equal treatment applies to all those EU citizens ‘residing on the basis of this Directive’ and their family members (leaving aside the exclusions which were already mentioned, as well as other exclusions in the Treaties or other EU legislation). So were the two benefit claimants residing on the basis of the Directive?

The Court ruled that they were not still covered by the Directive as former workers, since the Directive says that those who work in the host State for less than one year (as in their case) retain ‘worker’ status for at least six months after becoming unemployed. After that point, a Member State can (as Germany did) terminate their worker status, which means (unless they have another basis to stay, which was not relevant in this case) they are no longer covered by the equal treatment rule, and lose access to social assistance benefits. The national court also took the view that they could be classified as first-time job-seekers, although the Court pointed out that in that case, the Directive expressly permits Germany to refuse access to social assistance benefits.

Next, the Court distinguished prior case law which requires an individual assessment of whether an EU citizen could be expelled or is an ‘unreasonable burden’ on the social assistance system of the host State. In this case, no such assessment was needed, because the citizens’ Directive already took account of the individual position of workers. The specific period of retaining worker status set out in the Directive and national law ensured legal certainty, while ‘while complying with the principle of proportionality’. Finally, when considering whether there was an ‘unreasonable burden’ on national systems, the individual claim did not count: rather the total of all claims would be ‘bound to’ constitute such a burden.

Comments

As in Dano, the CJEU does not expressly overturn prior case law, but makes it easier for Member States to justify refusal of benefits than might otherwise have been the case under prior case law. (See by analogy the comparison of Dano with prior case law here). It’s unsurprising that the benefit at issue is ‘social assistance’, as the Court previously assumed in Dano, although this postpones any further clarification of the questions of access to labour-market related benefits for the various categories of EU citizens.

However, it’s rather more surprising that the Court simply applies the Directive’s definition of former workers. As recently as last year, in its judgment in Saint-Prix (discussed here), the Court insisted that the concept of ‘worker’ was set out in the Treaties, not secondary legislation, and so it fell mainly to be defined by the Court. In that ruling, the Court asserted that a woman who gave up work just before giving birth retained ‘worker’ status (and so access to benefits) under certain conditions. Yet in today’s judgment, the Court simply follows the Directive’s definition of former worker, without overruling or distinguishing (or even mentioning) the prior judgment. Certainly, as the Court said, following the precise wording of the Directive on this point promotes legal certainty; but it hardly promotes legal certainty to simply ignore apparently conflicting lines of case law.

For the record, the other circumstances in which the Directive requires ‘worker’ status to be retained are where: the worker is ‘temporarily unable to work’ due to illness or accident (the words ‘temporarily unable’ are not further defined); the worker is unemployed after more than one year’s work, if he or she is ‘registered as a job-seeker with the relevant employment office’; or the worker has begun vocational training, although this must be linked to the worker’s prior employment unless the worker is involuntarily unemployed.

Equally, it’s surprising that the Court ruled out a requirement for an individual assessment of the former worker’s position, which the Advocate-General had advocated (see discussion here). The Court draws a distinction between the individual assessment which the Directive implicitly requires as regards expulsion (more on expulsion of the unemployed after the Dano judgment here) and the issue of access to benefits. And the protection of the right of residence which the EU legislature expressly set out for beneficiaries of social assistance in the Directive has effectively been removed by the Court’s interpretation in today’s judgment, which seems to set out an irrebuttable presumption that any individual application for social assistance constitutes an ‘unreasonable burden’ on national systems, due to the applications made by other people in the same situation.

EU citizens’ access to benefits and expulsion: where do we stand?

It’s useful to summarise where we stand after this judgment as regards various categories of EU citizens’ access to benefits and expulsion.

(i) not seeking work: not entitled to social assistance, or labour market benefits; no automatic expulsion;

(ii) first-time job-seeker in the host State: not entitled to social assistance, entitled to labour market benefits; no expulsion as long as they can show evidence of job-seeking and genuine chance of employment;

(iii) previously employed in the host State: retain worker status on conditions set out in the Directive, or during break from employment due to maternity on conditions set out in Saint-Prix; therefore still entitled to social assistance or labour market benefits; no expulsion; if they do not meet the conditions to retain worker status, Alimanovic assumes that the rules on first-time job-seekers apply by analogy;

(iv) currently in work: entitled to social assistance or labour market benefits; no expulsion.

(v) permanent residents (those resident for more than five years legally): full equal treatment regarding benefits and their status is no longer dependent on not applying for social assistance; no expulsion.

   

Of course, any EU citizen can be expelled on grounds of public policy, public security or public health, subject to the detailed rules in the Directive; the references to expulsion above refer to expulsion on other grounds. Permanent residents have enhanced protection against expulsion on grounds of public policy, public security or public health.

Implications for the UK’s renegotiation of EU membership

Finally, this brings us to the elephant in the room: does today’s judgment have any implications for David Cameron’s renegotiation of the UK’s EU membership? Last year, Cameron outlined nine objectives specifically related to the free movement of EU citizens (he also has objectives on other issues, as discussed here).

I examined those nine objectives in detail at the time (see here). Let’s look at those nine objectives again, in light of today’s judgment. I have underlined the impact which the judgment might have on certain issues (I haven’t copied all of the prior analysis, but only those parts which might be affected by the judgment). As we can see, in general the judgment makes it easier to achieve the negotiation objectives of curtailing the benefits of former workers who are now unemployed, but it reaffirms the difficulty of changing rules relating to expulsion of job-seekers.

1. No access to tax credits, housing benefits and social housing for four years for EU citizens

For EU citizens who are not workers, work-seekers or former workers, this confirms the status quo, as set out in Dano.

For EU citizens who are work-seekers, the free movement of workers in the Treaties (as interpreted by the CJEU) requires Member States to give them access to benefits linked to labour-market participation. These benefits would probably not be covered by that rule. So this confirms the status quo.

For EU citizens who are workers (as defined by the Treaties and CJEU interpretation) or former workers (as defined by EU legislation, and the CJEU interpretation of the Treaties), there is a right to equal treatment.  As regards workers, changing this rule would require a Treaty amendment. However, as regards former workers, the Alimanovic judgment implicitly suggests that it is generally up the EU legislature to determine when they retain the status of ‘worker’. So potentially access to benefits could be curtailed for former workers by means of amending secondary law – although the CJEU did refer to the principle of proportionality in this context.

2. Removal if job-seekers do not find a job within six months

For EU job-seekers, the EU legislation states that they cannot be expelled as long as they ‘can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged’. This reflects the case law of the CJEU, interpreting the Treaties (Antonissen judgment). Therefore this change would require a Treaty amendment. The Alimanovic judgment reaffirms this rule in the legislation.

3. Ending the entry of non-EU family members without restrictions

Not relevant to the Alimanovic judgment.

4. Tougher and longer re-entry bans for foreign rough sleepers, beggars and fraudsters

Not relevant to the Alimanovic judgment. But note that re-entry bans are not possible at the moment for rough sleepers and beggars: Article 15(3) of the EU citizens’ Directive states unambiguously that a ban on entry cannot be imposed where a person was expelled for grounds other than public policy, public security and public health; and Article 27(1) states clearly that such grounds ‘cannot be invoked to service economic ends’. This rule could possibly be overturned by EU legislative amendment, but it is possible that the CJEU would find that this would constitute a disproportionate restriction on free movement for those who were entering to obtain work later. So a Treaty amendment might be needed.

5. Stronger measures to deport EU criminals

Not relevant to the Alimanovic judgment.

6. Longer waiting periods for free movement of persons from new Member States

Not relevant to the Alimanovic judgment.

7. EU citizens to have a job offer before entry

Not relevant to the Alimanovic judgment. But the CJEU reiterated the current rule in EU legislation that EU citizens can stay if they are a job-seeker, subject to the proviso that they have a genuine chance of getting work. So this proposal would require a legislative amendment and a Treaty amendment, since the CJEU has said (in Antonissen) that the Treaty right to free movement of workers also applies to job-seekers, giving them the right to enter and stay in a Member State to look for work.

8. No taxpayer support for job-seekers

The EU legislation already rules out social assistance for job-seekers, so this reflects the status quo. However, the CJEU has said that job-seekers have a right to access benefits linked to labour market participation, if they have a link already with the labour market in question. While David Cameron suggested that the UK’s future Universal Credit would not fall within the scope of the CJEU’s case law, that would likely be challenged in practice. So a Treaty amendment is likely necessary as regards current rules, and possibly necessary as regards universal credit. As regards job-seekers who are former workers, the Alimanovic judgment makes it easier to deny them social assistance, and to tighten the rules to this end by means of amending secondary EU law, as discussed above.

9. Payment of child benefit to children abroad

Not relevant to the Alimanovic judgment. But note that there is a case pending before the CJEU on the separate question of the UK’s restrictions on payment of child benefit to children of some EU citizens living in the UK (the ‘habitual residence’ test).

Barnard & Peers: chapter 13