Professor Steve Peers, University of Essex

While it’s unlikely to grab sensationalist headlines, a recent Court of Justice of the European Union (CJEU) ruling on social security rules for Swiss citizens raises important questions about extending such rules to non-EU countries and the EU’s relationship with Switzerland.

Background

This ruling marks the second instance where the UK has challenged the legal basis of Council Decisions concerning the extension of revised EU social security coordination rules to specific non-EU countries. The first case, involving the European Economic Area (EEA), resulted in a loss for the UK in 2013. This particular case focuses on extending these rules to Switzerland under the EU’s free movement agreement. A third ongoing case involves similar issues with Turkey.

The Council argues that Article 48 TFEU, which covers social security coordination for workers within the EU, is the appropriate legal basis. This article allows for a qualified majority vote with an “emergency brake” option for Member States. Conversely, the UK proposes Article 79 TFEU, related to the EU’s common immigration policy, which grants opt-out rights to the UK, Ireland, and Denmark. The UK aimed to utilize this opt-out to lower foreign benefit costs, despite the relatively small amount.

It’s worth noting that the Council has employed Article 79 TFEU for similar decisions involving other associated countries, aligning with the UK’s stance. The Commission suggests using Article 48 for close associations like the EEA and Article 79 otherwise.

Judgment

In the prior EEA case, the Court favored Article 48 TFEU due to the close ties between the EU and EEA countries, the goal of extending the entire EU internal market, identical provisions in both treaties, the EEA’s specific rules on legal effects, its application to EU citizens in those countries, its update of previous commitments, and the difficulty of ensuring free movement with parallel systems. Using Article 79 TFEU was deemed “manifestly irreconcilable” with the EEA’s context and objectives.

While the UK had hoped the previous ruling wouldn’t apply broadly, the CJEU extended its application to the EU-Swiss case. It cited Switzerland’s numerous treaties with the EU for economic strengthening, the identical wording in the EU-Swiss treaty and Article 48 TFEU, and the decision’s role in updating existing rules.

The Court also determined that Article 48 TFEU applies to non-EU citizens when an association agreement (like the one underpinning the seven EU-Swiss agreements from 1999) has already extended EU social security rules, and the current decision simply updates them. It rejected the UK’s argument against applying Article 48 to economically inactive Swiss citizens, deeming it secondary to rules for employed and self-employed individuals.

Therefore, Article 48 TFEU applies even without a close association like the EEA, full internal market extension, specific legal effect rules, or concerns about parallel systems. The recent judgment omits the latter point and dismisses the UK’s strongest argument.

This suggests the UK will likely lose its challenge against the Council decision on social security for Turkish citizens. Additionally, Council decisions employing Article 79 for other associated countries might face legal scrutiny. This is because the recent ruling could imply that implementing any aspect of EU association agreements necessitates using the corresponding legal basis for internal EU law, given that all such agreements aim to extend elements of EU internal law to the involved country.

Broader implications

The CJEU avoids mentioning the recent Swiss referendum mandating their government to renegotiate the free movement treaty with the EU within three years to potentially establish quotas. While the judgment doesn’t concern terminating EU-Swiss treaties, it implicitly refutes the argument that provisions on association agreements (now Article 217 TFEU) must always be used for related decisions. The Advocate-General’s opinion in the EEA social security case, advocating for Article 217, was disregarded by the Court.

Therefore, the EU could potentially denounce one or more treaties within the 1999 package using the specific legal basis of each treaty, such as the transport legal basis for the aviation treaty. If this holds, most or all denunciation decisions could proceed with a qualified majority vote, bolstering the EU’s negotiating position with Switzerland during the renegotiation of the free movement of persons treaty. Notably, the 1999 agreement between the EU and Switzerland stipulated that the seven agreements formed a package, and denouncing one would mean denouncing all.

Barnard & Peers: chapter 24