IG v Secretary of State for Work and Pensions

The Upper Tribunal is currently dealing with a number of difficult issues on the application of Regulation (EC) 883/2004. This is the lead case on the application of the decision of the Court of Justice of the European Union in Hudziński v Agentur für Arbeit Wesel-Familienkasse (Cases C-611 and 612/10) EU:C:2012:339, [2012] 3 CMLR 23. I have to decide whether section 65(7) of the Social Security Contributions and Benefits Act 1992 is effective to achieve its apparent purpose of preventing a claimant becoming entitled to attendance allowance when this country is not the competent State under the Regulation for the purpose of sickness benefits. My decision is that it is effective.

This case comes before me on reference from the First-tier Tribunal under section 9(5)(b) of the Tribunals, Courts and Enforcement Act 2007. That tribunal had allowed the claimant’s appeal against the Secretary of State’s decision, but it set that decision aside and referred the case to the Upper Tribunal for decision. The effect is that I do not have to decide whether the First-tier Tribunal’s decision was made in error of law, but whether the Secretary of State was right to refuse the claim.

As the case raised a complicated issue of EU law, I directed an oral hearing, which took place on 24 March 2016. Alistair Mills of counsel represented the claimant and Zoe Leventhal of counsel represented the Secretary of State. I wish to record my gratitude to the Free Representation Unit for arranging Mr Mills’ involvement. The Unit is one of the organisations that assists claimants and the Upper Tribunal by providing representation in complex cases. The Administrative Appeals Chamber very much appreciates that assistance.

These are not in dispute and few in number. The claimant is Lithuanian and was born on 12 June 1942. She first came to this country on 9 August 2011, following her husband’s death. She came to join her son who would care for her; I have been told that she has Alzheimer’s. She receives a pension from Lithuania of somewhere between £80 and £100 a month, but does not receive a retirement pension from Great Britain. She was awarded a state pension credit as a dependent relative of her son who has a right to reside here. She claimed an attendance allowance on 23 July 2012, but the Secretary of State refused her claim on 15 October 2012 on the ground that, being a sickness benefit, Lithuania was the competent State for the purposes of Regulation 883/2004. In those circumstances, the Secretary of State did not have to investigate and decide on the nature and extent of the claimant’s disablement.

Ms Leventhal provided me with a copy of a letter dated 4 February 2016 in which the Social Assistance Division of the Social Affairs Department of the Klaipeda City Municipal Administration certified that the claimant was receiving sickness benefits. That letter was, of course, written after the date of the Secretary of State’s decision that is under appeal before me and, I assume, refers to an award made after that date.

Attendance allowance is governed by the Social Security Contributions and Benefits Act 1992. Section 64 deals with the disability conditions that must be satisfied, whilst section 65 deals with the period and rate of the award.

The relevant provisions of section 64 read:

The relevant provisions of section 65 read:

As I explained in Secretary of State for Work and Pensions v AK [2015] UKUT 0110 (AAC), [2015] AACR 27 [15]:

The relevant provisions of this Treaty.

This case arises under this Regulation. Some of the case that I analyse were decided under its predecessor Regulation (EEC) 1408/71. The relevant provisions of each Regulation are not materially different. I now set out the relevant parts of Regulation 883/2004.

This case concerned Regulation 1408/71. Mrs Bosmann lived in Germany and worked in the Netherlands. As her place of employment, the Netherlands was the competent State for her family benefits. But in view of the age of her children, she was not entitled to child benefit there, although she might be in Germany.

The Court of Justice of the European Union reasoned as follows.

The Regulation determined the competent State for the payment of a particular benefit in order to ensure that, in principle, only one State’s legislation was applicable to that benefit. The overlapping provisions did not apply, as Mrs Bosmann had no entitlement in the Netherlands. Accordingly, EU law did not require Germany to make child benefit available to her.

The Regulation must be interpreted in the light of the right to freedom of movement, which entailed that migrant workers should not lose their social security benefits or have them reduced on account of exercising freedom of movement. And the Regulation should contribute to the improvement of standards of living and conditions of employment. So the State of residence could not be deprived of the right to award child benefit to persons in Mrs Bosmann’s position, since the purpose of the Regulation was not to prevent a State from doing so.

This case concerned Regulation 1408/71. The claimant was Portuguese, but had spent his working life in Germany. He received pensions from both countries. On his return to Portugal, he retained optional affiliation to the German care allowance scheme. On the basis that Portugal had no equivalent scheme, the Court of Justice of the European Union decided that he could retain his entitlement under the German scheme, despite Germany not being the competent State. If that assumption was wrong and there was entitlement in Portugal, the Court said that he was entitled to the difference between the amounts awarded in each State. It reasoned that there was no guarantee that freedom of movement would be neutral in terms of entitlement, especially where sickness benefits were concerned, and that this was compatible in principle with the requirements of EU law on free movement. However, it was only compatible to the extent that the person was not put at a disadvantage compared to those who had not exercised their freedom of movement and did not result in the payment of benefits with no return.

This case concerned Regulation 1408/71. It involved two Polish men, one employed, the other self-employed. They both worked in Poland and had families there. For part of the year, they worked in Germany. Poland was the competent State under the Regulation for payment of their child benefit and both were entitled to benefit there. Under German domestic law, they were entitled to child benefit as they were subject to unlimited income tax liability. However, German law also provided that child benefit should not be paid to anyone who was entitled to child benefit in another State. As far as the report discloses, this applied to any other State, not just another member State. There was provision for paying the amount by which German benefit exceeded the benefit payable in another State, but this did not apply to child benefit.

The Court of Justice of the European Union reasoned as follows.

The Regulation determined the competent State for the payment of a particular benefit in order to ensure that, in principle, only one State’s legislation was applicable to that benefit. As it provided only for coordination, and not for harmonisation, each State retained power over its own legislation. There was no guarantee that moving from one State to another would be neutral in terms of social security entitlement. Nevertheless, the purpose of the Regulation was not to prevent a non-competent State conferring entitlement to a benefit, especially as the purpose of Article 48 was to contribute to the freedom of movement and to seek to contribute to the improvement of the standard of living and the conditions of employment for migrant workers. Accordingly, Germany had power to make provision for entitlement to child benefit in addition to that of Poland, the competent State. It was irrelevant that the men were not being disadvantaged by the loss of benefit in Poland, or that they were habitually resident in Poland and not in Germany and that the children were not in Germany with their fathers. There was a precise criterion connecting the men with Germany in that they were subject to unlimited income tax liability there and that the child benefit was financed from tax revenue. Accordingly, the additional right to child benefit in Germany would not affect disproportionately the predictability and effectiveness of the Regulation, which are requirements of legal certainty that protect the interests of migrant workers through the single competent State principle.

Although Germany had the power to provide for entitlement even if it was not the competent State, it was not under a duty to do so. It must also in principle have the right to decide how to take account of the fact that there is entitlement in the competent State, provided that it does not infringe EU law in doing so. The overlapping provisions of Article 76 did not apply, as Poland was both the State of residence and of employment. However, exclusion from benefit as German law provided, as opposed to its reduction to take account of entitlement elsewhere, constituted a substantial disadvantage for migrant, as opposed to settled, workers by depriving them of entitlement to benefit given under the law of a member State and by treating them less favourably than someone who had not exercised the freedom of movement.

This case concerned both Regulation 1408/71 and Regulation 883/2004. Mrs B was Czech. She and her husband lived and worked in France, although they had a home in the Czech Republic and were registered as being permanently resident there. The issue for the Court of Justice of the European Union was whether the Czech Republic was entitled to award her a child benefit when the benefit she was receiving in France ran out. The Court’s decision was the same under both Regulations. It decided that she was habitually resident in France and that the Czech Republic could only award her benefit if there were specific and particularly close connecting factors with its territory and if doing so would not disproportionately affect the predictability and effectiveness of the application of the Regulation. The latter was a matter for the national court, but the Court’s language at [29] suggests that the necessary close connecting factors were absent.

This case concerned Regulation 1408/71. The parties in this case were nationals of, and habitually resident in, the Netherlands. They worked in Germany under on-call contracts, which provided work for them on several days a month. Family benefits, wife’s allowance and old-age pension could not be paid under the Dutch legislation as it provided that it did not apply if the legislation of another State applied by virtue of a treaty or convention. Equivalent benefits could not be paid under the Germany legislation on account of the low wages.

The Court of Justice of the European Union first decided that German legislation applied as that was the State of employment both on working days and on non-working days. It then noted that, as there was no entitlement under German law, the overlapping provisions did not apply. Accordingly, the Regulation did not preclude the Netherlands from awarding benefits. That left it to the national court to decide whether the express exclusion of entitlement under Dutch law was effective.

There was no dispute that for the purposes of Regulation 883/2004 Lithuania is the competent State for the payment of sickness benefits to the claimant. She received a pension from Lithuania.

The claimant received a state pension credit in this country, but that is not a pension. It is a special non-contributory cash benefit and, as such, is only payable in the State of residence: see Article 70 of, and Annex X to, Regulation 883/2004 and EC v Secretary of State for Work and Pensions [2010] UKUT 95 (AAC), [2010] AACR 39.

As a matter of interpretation of the British legislation, the claimant is not entitled to an attendance allowance. Section 65(7) could not be clearer. The fact that the provision is not included in section 64, which deals with entitlement, is no objection. The identification of a period is essential to an award and the location of the exclusion in section 65, which deals with periods, realistically reflects that the identity of the competent State may change from time to time, as for example when a person acquires a pension. See AK at [18].

Put shortly and broadly, Ms Leventhal emphasised the conditions laid down in the caselaw and the limited circumstances in which the Court of Justice of the European Union had not only allowed a State other than the competent State to give entitlement under its legislation, but had prevented it from depriving the claimant of entitlement that was otherwise available. Mr Mills, in contrast, emphasised the broad principles on which the Court had reasoned, especially its references to freedom of movement, and the need to ensure equal treatment.

The starting point for any analysis is the Treaty and, in particular, Articles 45 and 48. The former makes general provision for freedom of movement for workers. The latter makes specific provision for the impact of social security on freedom of movement of workers by requiring the European Parliament and the Council to adopt such measures are necessary to provide for freedom of movement.

Regulation 883/2004, like Regulation 1408/71, was made under that provision. It represents the legislation made in fulfilment of the duty under Article 48. As such, it should be treated with respect and not bypassed too readily. It must also be interpreted in accordance with general principles of law. In particular, this means in accordance with the principle of certainty. Both those features are present in the reasoning of the Court of Justice of the European Union. The former appears in the requirement that there must be no disproportionate effect on the predictability and effectiveness of the Regulation, with the latter rating an express mention: Hudziński at [67].

The cases show that it is also necessary to take account of the purpose of the Regulation. It is designed to provide generally for the law of a single State to govern entitlement to a particular class of benefits, subject to coordination to ensure that, for example, contributions paid in one State are not ignored in another. It follows that there is no guarantee that exercising the freedom of movement will be neutral in its effect: da Silva Martins at [72].

It is, however, not the purpose of the Regulation to harmonise social security legislation across the EU; the title of, and recital (4) to, Regulation 883/2004 emphasise that it is concerned only with coordination. This means that there is no obligation on States to make any particular level of provision for a given class of benefit.

Nor is its purpose to deprive a person (a) of any entitlement at all to a class of benefit or (b) of entitlement that has been paid for by contributions or taxation, as would have been the case in Bosmann, da Silva Martins and Franzen. See Hudziński at [46]. In this case, the claimant has not been deprived of sickness benefit, as we now know that Lithuania has accepted that it is the competent State and made an award. Nor has she been deprived of a benefit for which she has paid. Attendance allowance is not a contributory benefit and she has not, as far as I am aware, contributed indirectly through general taxation.

States may choose to make provision when they are not the competent State. The Court of Justice of the European Union has only approved this in cases ‘if there are specific and particularly close connecting factors between the territory of that State and the situation at issue’: B at [28]. Habitual residence has been accepted as a sufficient connection, as in Bosmann, although mere registration as being permanently resident is probably not sufficient (B at [29]). In this case, the claimant was habitually resident in this country by the time she made her claim for an attendance allowance. I accept that as a sufficient connection.

However, this is conditional on the additional provision not being ‘liable to affect disproportionately the predictability and effectiveness of the application of the coordination rules’ in Regulation 883/2004: Hudziński at [67]. I come back to this later.

The caselaw shows that the Court of Justice of the European Union has prevented States from making different provision for migrant and settled workers, at least when it takes the form of refusing all entitlement rather than limiting entitlement to a top-up payment. The Court reasoned in Hudziński at [76] that ‘the application of such a national law against overlapping … insofar as it appears to require … exclusion from that benefit, is such as to constitute a substantial disadvantage affecting in reality a greater number of migrant workers than settled workers who have worked exclusively in the Member State concerned, this being a matter for the national court to ascertain.’ In this way, the Court has balanced the improvement of standards of living and conditions of employment (recital (1) and Bosmann at [30]) with the coordinating effect of the Regulation.

In prohibiting exclusion of entitlement, the Court has, as Mr Mills pointed out, referred to the freedom of movement of workers. The flaw in his reliance on this general principle is that it proves too much by removing the statements that he cites from their context. It is beyond argument that freedom of movement is a fundamental principle of EU law and that it must not be restricted unduly. But that does not mean that it can be applied in every context and without regard to its effect on EU legislation. Mr Mills did not limit or qualify his argument by reference to any conditions other than to rely on the claimant being resident in this country as the dependent of her son who was exercising his freedom of movement as a worker. I reject that argument as presented.

Unlimited resort to general principles of freedom of movement, non-discrimination and equal treatment would allow the Court of Justice of the European Union and any national court applying EU law to rewrite any EU subordinate legislation to the extent that it might hamper freedom of movement. Mr Mills argued that in this case it would be an impediment to the claimant’s son exercising that freedom if the claimant could not, when she joined him in her retirement, obtain social security for her care needs at a rate appropriate to the living conditions in this country. But where would this argument end? Resort to this basic principle could rewrite vast tracts of Directive 2004/38 and undermine the principle of coordination that is the stated purpose of Regulation 883/2004. The ultimate logic of the argument is to lead to increasing harmonisation of social security benefits across the EU. That is not the purpose of the Regulation, as the Court has regularly stated. It would also allow, or even encourage, forum shopping when claimants or their families have connections with a number of States. That would be inconsistent with the coordination principle on which the Regulation is based.

Mr Mills argued by reference to the structure of the questions referred in Hudziński that the Court relied on general principles only when considering whether a State could limit entitlement to cases in which it was competent for that benefit. That cannot be right. The Court’s reasoning on that issue builds on and assumes that the State has the power to make different provision. If the conditions that apply for the existence of that power do not apply, no question of different treatment arises. The Court’s reasoning cannot be split as Mr Mills sought; it is cumulative. It follows that payments by States other than the competent State must not disproportionately affect the predictability and effectiveness of the coordination rules before any possibility of overriding a provision like section 65(7) arises.

Moreover, Mr Mills’ argument is contrary to the structure of the Court’s analysis. It repeats that there is no guarantee of neutrality of effect and has said that this is so ‘in particular where sickness benefits are concerned’: da Silva Martins at [72]. If repeats that the State must have the power to provide for entitlement before coming to consider whether a duty is imposed to avoid different treatment. These stages would be redundant if the Court was merely concerned to apply basic principles of freedom of movement and equality of treatment.

Although I have rejected Mr Mills’ argument as present, it is still necessary to decide in what circumstances and subject to what limitations the approach in cases like Hudziński applies. I broadly accept Ms Leventhal’s approach, which emphasised the circumstances of the cases in which a State had been prevented from limiting entitlement if another State was competent for that class of benefit.

It is wise to tread carefully in this area, as it depends on the interrelation of basic principles of EU law and specific legislation, and I cannot be sure that the caselaw has reached its final stage of development. The cases fall into two categories. One category consists of those cases in which the application of Regulation 883/2004 would deprive the claimant of any entitlement or of entitlement that has been bought by contributions or taxes. In terms of the purpose of the Regulation, these cases are outside the scope of its coordination function. In terms of general principles, the effect of applying the Regulation would clearly constitute a significant impediment to freedom of movement and, being outside its scope, an illegitimate one. The case before me is not in this category. The other category consists of those cases in which there is potentially dual entitlement under the competent State and another State. The case before me is in this category. Dual entitlement is in principle consistent with the purpose of the Regulation, subject to sufficient connecting factors and not affecting its operation disproportionately. In terms of general principles, these come into consideration to ensure that migrant workers are not treated differently from settled workers, most of whom will be nationals. So far, these principles have only operated in cases in this category in respect of types of benefit where the Regulation envisages overlapping. In Bosmann, Hudziński and Franzen, the Court noted that the cases were outside the overlapping provisions. No doubt, that was part of showing that the predictability and effectiveness of the coordination rules would not be affected disproportionately. But it also serves to emphasise that the cases involved benefits where overlapping of benefits was generally anticipated. It is in that context that the Court has relied on basic principles to prevent States restricting their responsibility to cases where they are competent.

On the basis that attendance allowance is a sickness benefit, it is generally subject to the rule against overlapping in Article 10: see Article 54. I was not referred to any case in the second category of dual entitlement that involved sickness benefit. Da Silva Martins involved sickness benefit, but that was in the first category of no entitlement. Moreover, the Court emphasised in that case that neutrality of effect cannot in particular be guaranteed for this type of benefit. Limiting the application of the Hudziński approach to cases in which Regulation 883/2004 anticipates that overlapping may be appropriate reflects the current state of the caselaw, it provides a rational basis to distinguish the cases where it applies from those where it does not, it respects the scope and structure of the Regulation, and it prevents a drift into harmonisation. In those circumstances, I do not consider that this country is precluded from making provision in the form of section 65(7). Accordingly, I confirm the Secretary of State’s decision that the claimant is precluded from entitlement by virtue of section 65(7).