Thursday 16 June 2016

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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  1. Until very recently, the Commission was touting Citizenship of the Union and all of its benefits (including access to child support for all) as the great achievement of the EU. This is now unravelling, at the behest of rather right wing austerity-prone governments. History will be the judge -- but this could turn out to be just one more step towards institutional suicide. If the EU has nothing to offer its citizens -- and increasingly this is already becoming a mainstream view -- then it can continue to exist only by virtue of being imposed from the top. Forget the democratic deficit: this could end up as some authoritarian, not to say fascist, political structure.

    Not much help for the Bremain campaign, really.

    1. The contrary view is that EU citizenship - certainly social citizenship - was too much for a large swathe of public opinion to accept, particularly in light of increased numbers and a desire to blame someone else for economic problems, and so contributed to jeopardising the very existence of the EU.

    2. Yes, although it's not really a contradiction. Any public policy -- such as free movement rights -- which has a significant impact can be criticised by those who dislike the impact. It boils down to a democratically accountable set of policies: do EU citizens want to be able to move, live and work freely across Europe or not? The idiots in the UK want to have the right at least to travel freely (and maybe retire abroad) but not to allow others the same rights. It's called wanting to have your cake and eat it.

  2. Thank you very much for a truly informative analysis of the judgment. I have a question regarding the reversal of the burden of proof. Could it be that the Court ruled in this manner because it wishes to overrule the Baumbast rule (i.e. the fact that national rules implementing limitations and conditions within the meaning of Article 21(1) TFEU must be in line with the proportionality principle)? In other words, could this symbolise that now Member States can justify their national measures by simply proving that they are acting in line with Directive 2004/38 (paras 82-84), in which case it then falls to the Commission to show that the relevant national provisions are disproportionate?

    1. Possibly, that is consistent with other recent benefits judgments plus the latest ruling in NA.