Benefits tourism in the EU – Analysis

25 March 2011 by

The case of Patmainiece  v Secretary of State for Work and Pensions was reported in an earlier post.  Here we discuss the underlying rationale for the decision and ask whether the finding that the nationality requirement amounted to mere indirect discrimination was a correct “fit” with EU principles of free movement.

Article 18 (now article 21 TFEU) provides:

1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States

However a different regime applies to non-economic actors as opposed to workers.  Free movement of workers is one of the fundamental underpinnings of the internal market on which the EU is based. The main EU Directives and Regulations giving effect to the right to free movement of workers are Regulation No 1612/68 on freedom of movement for workers within the Community (as amended by Directive 2004/38/EC) and Directive 2004/38/EC on the right of EU citizens and their family members to move and reside freely within the territory of the member states.  But the rights of those who are economically inactive to reside for more than three months in other member states is subject to certain conditions, set out in the 2004 Directive; they must

have sufficient resources and sickness insurance to ensure that they do not become a burden on the social services of the host Member State during their stay….or be following vocational training as a student and have sufficient resources and sickness insurance to ensure that they do not become a burden on the social services of the host Member State during their stay; or be a family member of a Union citizen who falls into one of the above categories.

So the the right to reside in the UK does not automatically extend to nationals of other EU member states.  Despite Schengen (which of course does not apply to the UK and Ireland) and a range of other rights given to EU citizens generally, the differential treatment of economic and non-economic migrants still remains an important factor, since it was based on the need to remove obstacles to inter-state trade. So a citizen of the Union in a situation such as that of the claimant in the instant case does not derive from article 18 EC the right to reside in the territory of a Member State of which he or she is not a national.

Social Security

The labyrinthine regime governing movement and residence in the EU makes for mind-boggling complexity when viewed through the prism of Regulation 1408/71 on the application of social security schemes to employed persons and their families moving within the Community. The Regulation essentially excludes from its ambit those persons who would be defined as a “worker” for the purposes of EU law, or who otherwise fulfils the conditions for residence (see above). The confusion is compounded by the definition given by the Regulation to the sort of person to which its conditions does apply, i.e. an “employed person” under article 1(a), which means that the Regulation applies to persons who have retired from employment in the EU but who remain insured because of contributions paid during their working life. The appellant fell squarely within these parameters.

Discrimination

Even though the appellant could not lay claim to the “higher” freedom of movement and residence rights available to economic actors, there remains the question of discrimination on grounds of nationality. Somewhat surprisingly, there is no straightforward single definition of “direct discrimination” in the case law of the European Court of Justice (ECJ), although some guidance can be derived from the directives on race and sex discrimination:

  • direct discrimination occurs where one person is treated less favourably on any of the prohibited grounds than another person is, has been or would be treated in a comparable situation (a discriminatory purpose is not necessary for direct discrimination)
  • indirect discrimination occurs where an apparently neutral provision, criterion or practice would put persons with a characteristic that may not serve to draw distinctions at a particular disadvantage compared with other persons (a discriminatory purpose does not prevent unequal treatment being regarded as no more than indirect discrimination)
  • it is well established that indirect discrimination is, in principle, capable of justification.

These definitions however tend to merge in to each other when applied to situations such as that obtaining in the Patmainiece case. A similar issue arose in   Bressol v Gouvernement de la Communauté Française [2010] 3 CMLR 559.  This time the question of discrimination turned on the criteria that students had to fulfil in order to enrol in certain programmes of undergraduate studies in Belgium.  A resident student for the purposes of the relevant decree was defined as a student who, at the time of registration, proved that his principal place of residence was in Belgium. This was the first of two cumulative conditions which a prospective student had to satisfy, and it was not discriminatory since any EU national could fulfil this requirement. However the student had also to fulfil one of eight other conditions, one of which was that he had the right to remain permanently in Belgium. Belgians have that right by virtue of their Belgian nationality. Citizens of other Member States have the right to remain permanently in Belgium only if they have a right to do so which is recognised by EU law.Belgian students had that right by virtue of their Belgian nationality. They therefore satisfied the conditions in the relevant decree. Non-Belgians, on the other hand, had to fulfil additional criteria to acquire a right permanently to remain in Belgium.

Advocate General Sharpston  found this to be a case of direct discrimination (by way of coincidence her opinion was delivered on the same day as judgment of the Court of Appeal in the Patmainiece case.)  But the ECJ thought that the analysis could be telescoped so that looking at the cumulative conditions as a whole, the test had been constructed in a way that was more likely to be satisfied by a Belgian national than by a national of another member state.  It put nationals of other Member States at a particular disadvantage, so it was indirectly discriminatory on grounds of  nationality, and therefore capable of being justified. This is directly analogous to the requirement in the Patmainiece case that the claimant had to be “in Great Britain” to qualify for pension credit.

Lord Walker reluctantly recognised that  the Supreme Court was bound to follow the judgment of the ECJ in Bressol, even though the reasoning was less comprehensible than that of the AG’s opinion. Nevertheless he was not convinced that the reside condition was not simply British nationality by another name, and therefore the issue of justification had to be scrutinised “with some rigour”:

The right to reside condition is not a sufficient condition for entitlement, but it is a necessary condition, and it is one that is automatically satisfied by every British national. The fact that there is another cumulative condition (actual or deemed habitual residence) is irrelevant (Gravier v City of Liège (Case 293/83) [1985] ECR 593, para 14). It might be different if there were alternative conditions, because neither condition would then be necessary (although one would be sufficient).

This is something of a warning to  legislators and government lawyers that the courts are all too aware that there is “an obvious temptation” for governments, in the face of  “understandable” popular hostility to “benefits tourism” to try to draft  their way out of direct into indirect discrimination, with a view to avoiding having to distribute large sums out of public funds

to beneficiaries whom their electors would not regard as deserving. Bressol and other cases concerned with the Belgian social security and education systems may be examples of this.

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