Charlotte O’Brien, Senior Lecturer, York Law School 

The Court of Justice is increasingly distancing itself from the social welfare systems of Member States. Although the Court once suggested that citizenship is paramount and forms the basis for financial solidarity, guaranteeing some support from a host state for EU citizens facing temporary hardship, this stance is changing.

With the Court moving away from the concept of citizenship, the idea of a reasonable burden may be disappearing. After determining in the Brey case that EU migrants claiming social benefits could be subject to a right to reside test not applicable to citizens, the Court ruled in the Dano case that individual assessments were unnecessary if someone was deemed to have moved solely to claim benefits. This was further broadened in the Alimanovic and Garcia Nieto cases, suggesting that jobseekers were also not entitled to individual assessments. The Commission v UK case demonstrates how the CJEU’s willingness to accommodate the UK’s discriminatory practices overrides the applicable legal framework.

The judgment offers a limited analysis, glossing over key issues such as the discriminatory impact of the right to reside test and its application to family benefits. The principles established in the Brey and Dano cases are applied to Regulation 883/2004 (concerning cross-border social security coordination) and extended to family benefits. The burden of proof is reversed, allowing discriminatory Member States to justify their actions by citing “public finances.”

The ruling states that the UK can apply the ‘right to reside’ test to Child Benefit and Child Tax Credit claimants. While UK citizens automatically meet this requirement, EU nationals must demonstrate their compliance with Article 7 of Directive 2004/38 (outlining rules for EU citizens moving to another Member State). Essentially, they must be employed, retain worker status, or be family members of employed EU nationals. This analysis raises four important points: (i) the expansion of the ‘right to reside’ principle from Brey to supersede Article 4 in Regulation 883/2004 and its implications for other benefits; (ii) the distinction between direct and indirect discrimination and the reversal of the burden of proof concerning justification; (iii) the failure to differentiate between forms of economic inactivity, disregarding proportionality, undermining EU citizenship, and overlooking children’s rights; and (iv) the finding that the UK doesn’t systematically check the right to reside for EU nationals.

(i) Extending a key principle from Brey paragraph 44

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.”

The Court circumvented this equal treatment requirement in Brey by classifying the benefit in question as social assistance. This classification was crucial in determining the lawfulness of the right to reside test, as these issues are closely connected, and the benefit’s nature must be considered within the context of residency rights. The right to reside test was deemed a legal way to prevent excessive strain on the ‘social assistance system’.

While benefit classification was important in Brey, it is deemed irrelevant in Commission v UK. A single sentence from 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 used to justify subjecting all benefits to a discriminatory right to reside test, with Article 4 of Regulation 883/2004 only mentioned to assert that it hasn’t been violated. 

The Court determined that the Regulation focuses on competence, not benefit eligibility. However, this interpretation is overly simplistic. The Regulation does address aspects of eligibility, stating that residence cannot be the deciding factor in many instances, that insurance conditions should be fulfillable through insurance from other Member States, and so on. Additionally, Article 4 establishes an equal treatment principle for individuals covered by the Regulation. 

Family benefits are clearly social security, with no basis for classifying them under the ‘social assistance’ exceptions outlined in Directive 2004/38 or for claiming that the fundamental right to equal treatment under Article 18 TFEU shouldn’t apply. No specific provision in the Treaty or secondary legislation excludes EU citizens from equal treatment regarding family benefits. These benefits clearly fall under the scope of Regulation 883/2004 and are subject to its equal treatment provision. This offers some protection to children in migrant families, as they are usually not the ones choosing to migrate and shouldn’t face disadvantages due to changes in their parents’ employment status.

Therefore, multiple provisions could reasonably prevent applying a right to reside test to EU citizens claiming family benefits. However, the Court’s reasoning relies solely on a single statement from Brey. Without a Treaty provision or explicit secondary legislation provision, one sentence from a judgment dealing with a different category of benefits, where the relevant part of the decision isn’t being followed, lacks sufficient legal weight to outweigh a presumption of equal treatment.

The ultimate, contradictory outcome is that the limitations of Directive 2004/38 are treated as separate from Regulation 883/2004. This means the Directive can adopt a broader definition of social assistance, while the equal treatment provision in Regulation 883/2004 is bound by the limitations of Directive 2004/38, even though these were designed for different benefits. This judgment introduces the personal scope of Directive 2004/38 into Regulation 883/2004, despite the latter having a deliberately wider personal scope. The ECJ clarified in the Dodl and Oberhollenzer case that the Regulation’s predecessor, Regulation 1408/71, wasn’t limited to employed individuals. Regulation 883/2004, instead of narrowing the scope of Regulation 1408/71, was implemented to “replace and extend” it. Recital 42 explicitly mentions ’the new category of non-active persons, to whom this Regulation has been extended’. The Court’s assertion that such individuals will be assigned a competent state but denied benefit eligibility is simplistic. Following this logic, domestic regulations might entirely exclude such individuals (categorized under Article 11 (3)(e)) from the Regulation’s scope. This raises questions about the purpose of a competent state and the existence of a category 11(3)(e), except to indicate which exclusion rules apply.   

This ruling could have broad implications across the EU, affecting Member States that haven’t yet implemented such tests and those that have limited them to benefits with social assistance elements, potentially leading to wider application. It could exacerbate the welfare cliff edge for individuals transitioning from employment to unemployment (or those who were family members of workers and cease to be). It could result in the exclusion of workers unable to provide sufficient evidence of their activities meeting nationally-defined work criteria – such as meeting specific hours or earnings thresholds consistently over an extended period. It could also worsen child poverty for vulnerable children who might have otherwise received some protection under the coordination scheme. It promotes a form of citizenship where individuals are forced to live ‘hand-to-mouth’.

(ii) Differentiating between direct and indirect discrimination and shifting the burden of proof

The Commission argued that the rule resulted in direct discrimination, but the Court dismissed this claim. It simply reiterated the point from Brey that right to reside tests are permissible and then stated that implementing such tests constitutes ‘indirect discrimination’.

However, the condition is directly discriminatory. Only EU nationals are required to prove their right to reside and are excluded from benefits due to economic inactivity. The imposition of an additional condition on non-nationals was recognized as direct discrimination in the Grzelczyk case.

The Court creates confusion by stating that a ‘residence condition’ constitutes indirect discrimination. However, the right to reside test is not a residence condition but a requirement for economic activity applied solely to EU nationals.

Having determined that the case involved indirect discrimination, the Court then considered justification.

Generally, when a potential infringement is identified, the burden of proof lies with the infringing party to demonstrate justification (refer to O’Flynn and Groener cases). The Member State must establish a legitimate aim, demonstrate the proportionality and appropriateness of the means employed, and ensure that these measures don’t exceed what’s necessary.   

The Court quickly dismissed the justification requirement by avoiding any mention of public finances. Despite growing evidence challenging concerns about benefit tourism, the Court accepted the protection of public finances as a legitimate aim without demanding evidence of a genuine threat. Instead of evaluating the proportionality or appropriateness of the test itself, the Court focused on the checks conducted within the test.

Furthermore, the burden of proof is shifted to the Commission. The Court summarized the UK’s information, stating that claimants must provide a ‘set of data’ and that further checks are only conducted in ‘specific cases’ and ‘only in the event of doubt’.

However, the judgment provides no specifics on the amount of data required from claimants, the number of ‘specific’ cases requiring further checks, or the frequency of ‘doubt’. The repeated use of the word ‘only’ without supporting statistics offers no insight into the scale or proportionality of these checks. 

Instead, the responsibility falls upon the Commission to demonstrate 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) Disregarding elements of the Brey ruling: abandoning proportionality, undermining EU citizenship, and neglecting children’s rights

Given the significant weight placed upon paragraph 44 of the Brey ruling, the omission of paragraph 45 is striking. This paragraph stated: ‘However, it is important that the requirements for obtaining that right of residence… are themselves consistent with EU law’.

Furthermore, the Court determined in Brey that automatically excluding economically inactive individuals from benefit eligibility without considering their individual circumstances contradicted EU law. Relevant factors included the duration of residence, income level, amount and duration of benefits claimed, and other pertinent details.

This approach uses proportionality to determine entitlement, with EU citizenship theoretically offering a safety net for individuals who fall outside the categories defined in Directive 2004/38. It allows for some differentiation based on individual circumstances, acknowledging that ’economic inactivity’ can encompass a wide range of situations concerning residence history, economic background, integration levels, and benefit claims of varying degrees of reasonableness.

Recent cases reveal the Court’s departure from this approach, finding that individual assessments were unnecessary in cases potentially involving benefit tourism or job seeking. In this instance, this aspect of the Brey ruling is ignored, except when summarizing the Commission’s argument that the test serves as ‘an automatic mechanism that systematically and ineluctably bars claimants’ from accessing benefits.

The Court fails to address this argument and appears 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 lack of alternative eligibility criteria for individuals deemed economically inactive is notable within the context of EU law (though not surprising in the UK). This represents a shift from the ‘real link’ case law, where nearly all-encompassing rules had to include some exceptions based on proportionality. This approach effectively nullifies any right to equal treatment based on EU citizenship (Article 18 TFEU) and allows all ‘economically inactive’ migrants to be treated as equally insignificant. It disregards their level of social integration, their personal or familial employment history, and the circumstances leading to their loss of worker status. This approach also disregards children’s rights, even though the case revolves around their rights and well-being. Child Benefit and Child Tax Credit are specifically designed to address the costs associated with protecting child welfare. In a report examining recent welfare reforms, the UN Committee on the Rights of the Child has already raised ‘serious concerns’ regarding the UK’s implementation of tax credit cuts ‘regardless of the needs of the households’ affected. The right to reside test goes even further, representing not just a reduction but a complete denial of benefits for affected children, even those born in the UK with limited ties to their nationality state.   

The Brey formulation, deemed so crucial in justifying right to reside tests, was itself based on several EU citizenship cases that established and developed the ‘real link’ concept. Paragraph 44 cited Martinez Sala, Grzelczyk, Trojani, Bidar, and Förster, all of which opposed the use of blanket rules and mandated some consideration of individual circumstances.

Therefore, relying on the Brey formulation becomes even less convincing considering the deviation from the very precedents it relies upon. Cases affirming the rights associated with EU citizenship cannot be used to weaken those rights and diminish the significance of EU citizenship.   

(v) The lack of clarity surrounding systematic verification

Article 14(2) of Directive 2004/38 permits Member States to verify compliance with the Directive’s residence conditions ‘in specific cases where there is a reasonable doubt’. It adds that such verification ‘shall not be carried out systematically’.

As previously mentioned, the Court concluded that the UK’s checks didn’t constitute systematic verification. However, this finding would have benefited from a more thorough analysis of Article 14(2) and the distinction between permissible checks and prohibited systematic verification.

The government’s own statements suggest a degree of systematic action. In 2014, the government announced that benefit restrictions 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 clarified that these checks would apply to ’new and existing awards’. In response to a Freedom of Information request, the government confirmed conducting ‘increased compliance checks’, issuing letters ’targeted at EU/EEA Nationals’ demanding further information and/or evidence to ensure claimants met eligibility criteria for Child benefit and Child Tax Credit.

Moreover, claimants routinely face requests for ‘documentary evidence’ to prove their entitlement and are subject to a ‘wide range of checks and an annual review’ for all cross-border claims. This raises questions about what actions would actually be considered a violation of Article 14(2).

In summary, this ruling appears to prioritize the objective highlighted in the Advocate General’s Opinion – to appease the UK government at any cost. The challenge lies in aligning the legal framework with this desired outcome. The Court has latched onto a single sentence from a previous judgment, using it to override any conflicting legal principles. It avoids delving into the relative weight of legal principles by simply omitting 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 implications of Brey regarding proportionality; EU citizenship; Article 14(2) of Directive 2004/38… these are barely addressed, if at all. Primary and secondary legislation are seemingly disregarded based on a fragment of a judgment that the Court itself chooses not to follow – a fragment taken out of context and contrasted against the very precedents it’s based upon.

The Court has missed an opportunity to engage in a principled and transparent examination of the inherently discriminatory nature of tests that impose economic activity conditions on EU nationals but not on their own citizens. This is unsurprising, as the legal fiction portraying such tests as indirectly discriminatory appears to be a pragmatic acceptance of political necessity. However, by allowing such tests to extend beyond safeguarding the ‘social assistance system’ and govern eligibility for all benefits connected to ‘public finances’, by dismissing equal treatment provisions in primary and secondary legislation, by incorporating conditions that restrict the personal scope of Regulation 883/2004, by reversing the burden of proof for justification, and by yielding to the ‘public finances’ justification, the Court has derived a higher, fundamental principle of exclusion and a default of discrimination from recent case law. The children of economically inactive EU nationals are now officially irrelevant within the EU context, as right to reside tests that categorically exclude them from entitlement are given approval, with no consideration for citizenship, genuine links, or proportionality. While this might appear to be an inevitable consequence of the current political climate, a more disciplined approach would have been preferable, addressing the relevant legal bases and keeping the judgment’s scope appropriately limited. Instead, the judgment lacks strong legal grounding and has potentially far-reaching and harmful consequences for EU citizenship and the children of EU nationals.     

Barnard & Peers: chapter 13

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