Overview of recent cases before the Court of Justice of the European Union (July 2019-September 2019)

Rules determining the applicable legislation and ‘mini-jobs’: van den Berg and others

Van den Berg and others ¹ is a follow-up of Franzen and others. ² The cases concerned Dutch nationals living in the Netherlands who had taken up ‘mini-jobs’ in Germany. Because of the low number of working hours, the appellants were not, on the basis of German legislation, entitled to cover under any social security scheme, with the exception of insurance against accidents. They applied for family benefits and old-age benefits, respectively, in the Netherlands, but their applications were rejected. The Dutch social security institution was of the view that, according to the lex loci laboris rule, ³ they were subject to German legislation. The Bosmann case law, according to which a non-competent State may, under certain circumstances, still be able to grant benefits to residents, ⁴ would not come into play as the persons concerned were not entitled to benefits under Dutch legislation, which specifically excludes persons working in other Member States from social insurance cover (‘exclusion clause’).

The highest Social Security Court in the Netherlands asked the Court of Justice whether Regulation 1408/71 ⁵ and the Treaty rules on freedom of movement apply to national legislation that excludes from its social security scheme a worker who, by virtue of the lex loci laboris rule, is subject to the legislation of another Member State under which he has no entitlement to family benefits or old-age benefits. In answering this question the Court in Franzen and others pointed out that the referring Dutch court had indicated that, if the Bosmann case law were applicable in the case under consideration, it would have to apply a hardship clause provided for in Dutch legislation in order to remedy any unacceptable unfairness that might arise from the Dutch exclusion rule. ⁶ The Court of Justice held that Bosmann was indeed applicable. It established that the rights to family benefits and old-age benefits are linked to residence under Dutch law, that no such rights exist in the competent State (Germany) and, hence, that there was no overlap of benefits. This led the Court to the conclusion that Regulation 1408/71 does not prevent a worker who fulfils the substantive conditions for entitlement to family benefits and old-age benefits in the State of residence, from receiving such benefits. ⁷ Hence, Bosmann being applicable and, given the existence of the hardship clause in Dutch law, the Court concluded in Franzen that the persons concerned could be awarded the family benefits and old-age benefits for which they had applied.

On receipt of the ruling in Franzen and others, the highest Dutch Social Security Court applied the hardship clause and concluded that the benefits concerned did indeed have to be granted. The competent social security institution, however, disagreed and referred the case to the Dutch Supreme Court. The social security institution argued that the exclusion clause mentioned above barred the application of the hardship clause. The Supreme Court agreed and concluded that the exclusion clause could not be interpreted as being in conformity with EU law, and the ruling in Franzen and others in particular. In the view of the Supreme Court, the competent social security institution would only have to grant the benefits in the cases in question if EU law would oblige the Netherlands to regard a person who is not insured in the competent State as an insured person under its own residence-based system. So, the Dutch court asked the Court of Justice whether EU law provides for such an obligation.

In her opinion, Advocate General Sharpston observed that EU law cannot guarantee to an insured person that moving to another Member State will be neutral in terms of social security. Such a person may become subject to legislation that is less favourable than that he or she was subject to prior to moving. Member States, however, are bound to respect the principle of proportionality when they exclude persons from their legislation. That principle, so the AG noted, helps to strike the right balance between the so-called single State rule and the protection afforded to migrant workers, through the option recognised in the Bosmann case law, for the non-competent State to grant benefits. In the cases in question, however, the application of the Dutch exclusion clauses does not merely create a disadvantage for the persons concerned. Rather, it deprives them of cover in the Member State of residence simply because they have worked in another Member State. At the same time, they are excluded, in the Member State of employment, from any social protection during the periods in question. Applying the exclusion clauses creates consequences which, in the view of the Advocate General, are clearly disproportionate, and has the effect of hindering or rendering less attractive the exercise of free movement rights. That situation is not merely a disadvantage resulting from a lack of harmonisation of social security legislations within the European Union but is the direct result of applying the Dutch exclusion clauses. The Advocate General concluded that the application of the exclusion clauses and the complete ejection of the persons concerned from the social security system in the Netherlands go beyond what is necessary to ensure a financial balance in the social security system. ⁸

The Court did not follow its Advocate General. It held that Article 45 TFEU cannot be interpreted as conferring on a migrant worker an entitlement, in his Member State of residence, to the same social welfare coverage that he would have enjoyed had he been working in that Member State, when he is working in another Member State and does not enjoy such cover under the law of the competent Member State. Article 48 TFEU, the legal basis for EU coordination measures in the field of social security, provides for a system for coordinating, rather than harmonising, the legislation of the Member States. Substantive and procedural differences between the social security schemes of individual Member States remain. If Article 48 TFEU were interpreted to imply that it obliges a non-competent Member State to grant social security cover to a migrant worker employed in another Member State, it would undermine the coordination regime and the single State rule on which this regime rests. Such an interpretation could upset the balance struck by the TFEU as that obligation could result in the exclusive application of the law of the Member State with the most advantageous social security coverage. Furthermore, such an outcome could interfere with the financial balance of the social security system in the Member State with the most advantageous social welfare cover. In conclusion, Articles 45 and 48 TFEU do not oblige the Member State of residence, where no hardship clause can be applied, to grant benefits to a migrant worker who is not entitled to such benefits under the legislation of the competent Member State of employment. Problems faced by the persons concerned, the Court added, could be solved by using Article 17 of Regulation No 1408/71 (Article 16 Regulation 883/2004), which allows two Member States to agree on exceptions to the single State rule in the interests of certain (categories of) persons. ⁹

In one of the three cases, the exclusion clause mentioned above did not apply. This triggered a question about the precise reach of Bosmann. In that ruling the Court had held that the coordination regime does not prevent a non-competent State which has not made the entitlement to child benefit contingent on employment and insurance, from granting such a benefit to a person residing in its territory, if the possibility to grant such a benefit actually arises from its legislation. ¹⁰ In van den Berg and others, the question arose as to whether Bosmann implied that a person who had not been insured, and had not paid contributions, can nevertheless be said to be entitled to benefits under national legislation. In other words, can the Bosmann option of granting benefits to a resident be made conditional upon him or her having been insured and having paid contributions? The Court answered in the negative. Such an insurance obligation, entailing the payment of contributions by a non-competent Member State, could result in the migrant worker being obliged to contribute to social security systems in two different Member States, which would be contrary to the single State rule. ¹¹

Family benefits and equality of treatment under a bilateral social security convention concluded between a Member State and third country: EU

In EU, the Court was asked to apply and specify its Gottardo case law on the application of the principle of equal treatment regardless of nationality to bilateral social security conventions that Member States have concluded with third countries. The case involved a Portuguese national, Mr. EU, who resides in France and works in Luxembourg. He applied in Luxembourg for family allowances for his child, who lives with her mother in Brazil. In doing so, he relied on a social security convention concluded between Luxembourg and Brazil, which confers upon nationals of these two countries a right to equal treatment in relation to, inter alia, family allowances. Mr. EU’s application was rejected on the ground that he possessed neither Luxembourg nor Brazilian nationality. Mr. EU started legal proceedings, during which the competent court in Luxembourg decided to refer preliminary questions to the Court of Justice. Specifically, the Luxembourg court wished to ascertain whether Article 45 TFEU on free movement of workers precludes national authorities from refusing to pay to a frontier worker like Mr. EU family benefits when, all other things being equal, they would have granted such benefits pursuant to a bilateral social security convention to him had he been a Luxembourg national.

The Court did not have much difficulty in answering the question. ¹² It recalled Gottardo, ¹³ which concerned the entitlement of a French national, who had worked in Italy, Switzerland and France and who relied on a social security convention concluded between Italy and Switzerland to have periods of old-age insurance completed in Switzerland taken into account in Italy. The Court had held in Gottardo that, when a Member State concludes a bilateral international convention on social security with a third State, the fundamental principle of equal treatment requires that Member State to grant nationals of other Member States the same advantages as those which its own nationals enjoy under that convention unless it can provide objective justification for refusing to do so. The Court accepted that disturbing the balance and reciprocity of such a bilateral international convention may constitute an objective justification for not granting the same advantages to nationals of other Member States. The same does not hold true for avoiding financial burdens and administrative difficulties associated with collaborating with the competent Swiss authorities. Applying Gottardo to the case in question, the Court found that Mr. EU could claim equal treatment under Article 45 TFEU as Luxembourg nationals in relation to the Luxembourg-Brazil social security convention. ¹⁴ The Court repeated that refusing equal treatment may be justified by the need to protect the balance and reciprocity of that convention, but it did not see how granting a person like Mr. EU family benefits would thwart that aim. ¹⁵

Retention of status of self-employed person, residence and entitlement to residence-based benefits: Dakneviciute

Ms. Dakneviciute is a Lithuanian national who had been employed in the United Kingdom. After learning that she was pregnant, she decided to work as a self-employed beauty therapist. For the first three months after the birth of her son, Ms. Dakneviciute did not work, but thereafter she did, albeit on a marginal basis. A few months later, she had to stop working because her income had become insufficient. Another few months later, she found other employment. In the meantime, Ms. Dakneviciute had applied for child benefit. Her claim was rejected, however, on the ground that she lacked a sufficient right to reside to meet the qualifying conditions for that benefit. The court that had to rule in the case wondered whether Ms. Daknevicute could perhaps claim a right to reside as a self-employed person. In this regard, the court referred to the ruling of the Court of Justice in Saint Prix, ¹⁶ in which it was held that a woman who gives up work, or is seeking work, because of the physical constraints associated with the late stages of pregnancy and the aftermath of childbirth, can retain the status of ‘worker’ within the meaning of Article 45 TFEU, provided she returns to work or finds another job within a reasonable period after the birth of her child. Could, the national court asked the Court of Justice, the same principle be applied to self-employed persons? ¹⁷

The Court of Justice observed that the cases in which a Union citizen who is no longer working can retain the status of worker or self-employed person, and the correlate right of residency, are laid down in Article 7(3) of Directive 2004/38. ¹⁸ This provision does not cover the case of a woman who temporarily gives up work because of the late stages of her pregnancy and the aftermath of childbirth. However, Article 7(3) does not list exhaustively the circumstances in which a Union citizen retains the status of ‘worker’ and, consequently, the right of residence derived from that status. ¹⁹ In particular, as the Court found in Saint Prix, the fact that the physical constraints of the late stages of pregnancy and the aftermath of childbirth require a woman to give up work during the period needed for recovery does not, in principle, deprive her of the status of ‘worker’. The fact that she has not actually been available for employment in the host Member State for a few months does not mean that she has ceased to belong to the employment market during that period, provided she returns to work or finds another job within a reasonable period after confinement. ²⁰

The Court of Justice continued by observing that the Treaty rules on the free movement of workers and the right to establishment pursue the same aim, are based on the same principles and afford the same protection. ²¹ Therefore, a self-employed person in the situation that Ms. Daknevicute found herself in must also be able to retain her status as a self-employed person within the meaning of Article 49 TFEU. ²² The Court added that employees and the self-employed would be in a comparably vulnerable position if they were obliged to stop working, and therefore not be treated differently as regards retention of their right of residence in the host Member State. Pregnant women are in a comparably vulnerable situation, regardless of whether they are employed or self-employed. Hence, in conclusion, a woman who ceases to be self-employed because of the physical constraints associated with the late stages of pregnancy and the immediate aftermath of childbirth cannot be treated differently, as regards the retention of her right of residence in the host Member State, from a woman in employment in a comparable situation. ²³

Portability of student financial aid: Aubriet

Aubriet is the next in a series of cases concerning Luxembourg’s rules on student financial aid. Because of its small system of higher education, Luxembourg has, for many years, enabled own residents to study abroad by providing portable student financial aid. Initially, Luxembourg law made the grant of financial aid for higher education conditional on residence by the student (prior to commencement of the foreign study). In Giersch, however, the Court of Justice found that the residence criterion was at odds with Article 7(2) of Regulation 1612/68 ²⁴ (now Regulation 492/2011), ²⁵ which provides for a right to equal treatment as regards social advantages regardless of nationality. The Court found that such a residence requirement mainly affected students who were the children of frontier workers, and thus constituted indirect discrimination on the ground of nationality. ²⁶ The Court recognised that the aim of promoting higher education and of significantly increasing the proportion of Luxembourg residents who hold a degree could be a ground for justification. However, the Court concluded in Giersch that the residence requirement was not proportionally linked to this aim as it did not enable the taking into account of other elements that can demonstrate a link with Luxembourg’s society or its labour market, such as the fact that one of the parents has worked there for a significant period of time. ²⁷

Following Giersch, Luxembourg amended its law so as to extend portable aid to non-resident students. The condition was imposed, however, that a student must be the child of a (self-) employed person who has worked in Luxembourg for a continuous period of at least five years. Following the same reasoning as in Giersch, the Court in Bragança Linares Verruga again found discrimination contrary to Article 7(2) as the five-year work requirement did not apply to resident students and did not permit other factors relevant for establishing a link with Luxembourg society or its labour market to be considered. ²⁸

In Aubriet the Court was asked, by the same Luxembourg court that referred the Giersch and Bragança Linares Verruga cases to it, to interpret another amended version of the Luxembourgish law. According to this version, student financial aid is reserved for resident students and non-residents students who have a parent who has been (self-)employed in Luxembourg for a period of at least five years in the course of a reference period of seven years. The student in question did not satisfy this requirement. Nicolas Aubriet is a French national who lives with his father in France, where he also studies. Since 1991, his father had worked in Luxembourg for more than 17 years, albeit with periods of interruption of varying length. Nicolas’s application in Luxembourg for student financial aid was rejected on the ground that his father had not worked for five years in the seven-year reference period.

The Court of Justice repeated that a law such as the one under review is likely to operate mainly to the detriment of nationals of other Member States, as non-residents are in the majority of cases foreign nationals. Such a law thus constitutes indirect discrimination on grounds of nationality, which can be accepted only if it is objectively justified. ²⁹ Once again, the Court recognised that the aim to significantly increase, in Luxembourg, the proportion of residents with a degree constitutes a ground for the possible justification of the law in question. As regards appropriateness, the Court held that the fact that migrant and frontier workers have participated in the labour market of a Member State creates, in principle, a sufficient link of integration with the society of that State, entitling them to equal treatment as regards social advantages such as student financial aid. Such a link arises, in particular, from the fact that migrant workers contribute to the financing of the social policies of the host Member State through the taxes and social contributions that they pay in that State by virtue of their employment there. They must, therefore, be able to benefit from them under the same conditions as national workers. ³⁰ The Court concluded that the requirement of a parent should have worked in Luxembourg for at least five years in a reference period of seven years is appropriate for attaining the objective of promoting higher education and significantly increasing the proportion of the holders of a degree who are resident in Luxembourg. ³¹

However, in the view of the Court of Justice, the law went beyond what was necessary to attain the objective pursued. In Bragança Linares Verruga and Others, the Court had held that the five-year work requirement was disproportionate as, in relation to parents who had worked for more than five years in Luxembourg, it did not permit short breaks – which would not sever the sufficient link with Luxembourg – to be taken into consideration. Now, in Aubriet, the Luxembourg government submitted that the introduction of a seven-year reference period for the calculation of the minimum period of employment of five years would make it possible to take account of short breaks in employment. However, unlike minor breaks, longer breaks could sever the connection of cross-border workers and their student children with Luxembourg and remove the interest of that Member State in granting aid to those students. Moreover, the Luxembourg government claimed that, in order to make possible the processing of applications for financial aid by an authority responsible for a standardised mass procedure, it would be necessary to apply an objective and neutral criterion such as a minimum period of employment in a specific reference period, excluding consideration of any other connecting factor that would make it possible to prove that the cross-border worker has a sufficient connection with Luxembourg society. Such a possibility would entail the authorities responsible for processing applications for financial aid to take into account the particular circumstances of each case and the assessment on a case-by-case basis of a ‘sufficient connection with Luxembourg society’ for any cross-border worker employed in Luxembourg for less than five years during the seven-year reference period. The principle of non-discrimination and the principle of proportionality, so Luxembourg asserted, cannot be interpreted as requiring such an assessment on a case-by-case basis by a public authority responsible for a standardised mass procedure.

The Court did not actually respond to these arguments. It simply pointed out that Nicolas Aubriet was denied any entitlement to financial aid from the State for higher education, although his father had, on a long-term basis, in the years preceding his son’s application for financial aid, been employed in Luxembourg for a significant period of time, far greater than the minimum period of five years. The father had paid taxes and social security contributions in Luxembourg for more than 17 years during a period of 23 years. By only taking into account the activity of the father during a reference period of seven years, Luxembourg did not make a sufficiently full assessment of the significance of that cross-border worker’s connections with the Luxembourg labour market. Consequently, the Luxembourg rule under consideration went beyond what was necessary for achieving the legitimate objective of increasing the number of residents who have received higher education. ³²