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Whether the right to reside test complies with EU law when applied to ‘family benefits’
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Desmond Rutledge considers the Advocate General’s Opinion (C-308/14) on the EU Commission’s action against the United Kingdom’s use of the right to reside test. This post was originally published on the Garden Court Chambers Blog.
The origins of the Commission’s action against the UK
In European Commission v United Kingdom of Great Britain and Northern Ireland (Case C‑308/14), Advocate General Cruz Villalon (“AG”) was asked to consider an action brought by the European Commission against the United Kingdom.
The Commission had received many complaints from nationals of other Member States who were resident in the United Kingdom (“UK”), stating that the competent UK authorities had refused their claims for certain social benefits because they had no right of residence in that Member State.
In September 2011, the Commission announced that it had commenced infraction proceedings against the UK, arguing that the criteria in the habitual residence test under Article 11(3)(e) of Regulation No. 883/2004 on the coordination of social security systems (‘the Coordination Regulation’) rules were strict enough to ensure that certain UK social security benefits (State Pension Credit, income-based JSA, income-related Employment and Support Allowance, Child Benefit and Child Tax Credit) are only granted to those genuinely residing habitually within their territory. By the time proceedings were issued in the CJEU in June 2014, the Commission had confined the action to Child Benefit and Child Tax Credits, which the Commission argued are ‘family benefits’ under Article 1(z) of the Coordination Regulation.
The issue referred to the CJEU was twofold:
(i) Whether by requiring a claimant to have a right to reside as a condition of claim Child Benefit and Child Tax Credit is to impose a condition that the Coordination Regulation does not permit.
(ii) In the alternative, whether by imposing a condition of entitlement to those benefits that is automatically met by its own nationals, the UK had created a situation of direct discrimination against nationals of other Member States and thus breached article 4 of the Coordination Regulation.
The legal backdrop
The action took place against a backdrop of significant developments in EU case-law on the scope for Member States to refuse to grant benefits to EU citizens who are not nationals of the host State, namely:
- Bray (C-140/12): which held that a ‘special non-contributory cash benefit’ within the meaning of the Coordination Regulation is also covered by the concept of ‘social assistance’ within the meaning of the Citizens’ Directive, and that it is lawful to make the granting of those benefits conditional on an EU citizen having a right of residence in the host Member State.
- Dano (C-333/12): which held that so far as access to social benefits is concerned, a Union citizen can only claim equal treatment with nationals of the host Member State if his or her residence in the territory of the host Member State complies with the conditions of the Citizens’ Directive. It is therefore lawful for Member States to refuse to grant social assistance to Union citizens who enter their territory without intending to find a job and without being able to support themselves by their own means, notwithstanding that nationals of the host State can access those benefits.
- Alimanovic (C-67/14): which held that a Member State may refuse to pay benefit after six months have elapsed since an EU citizen became unemployed where the EU citizen has worked in the Member State of which s/he is not a national for less than a year.
The Commission argued that this action could be distinguished as the benefits at issue were family benefits rather than a special non-contributory cash benefit (which had been at issue in the three cases cited above). In essence, the Commission argued that in those circumstances the anti-discrimination provision (Article 4(1) and the habitual residence test in the Coordination Regulation applies and thereby places the provisions of the Citizens’ Directive which were applied in the earlier cases in abeyance.
The AG’s conclusions
The AG’s Opinion rejects Commission’s arguments and proposes that the CJEU should dismiss the action against the UK. The AG’s reasoning is as follows:
- The AG agrees that the benefits at issue are ‘family benefits’ under the Coordination Regulation and not social assistance.
- Notwithstanding, the right of EU citizens to move and reside freely within the territory of other Member States is subject to certain limitations and conditions laid down in EU law. Those limitations and conditions are embodied in the Citizens’ Directive, which, according to recital (4), was adopted with a view to remedying the piecemeal approach previously taken to those rights.
- This view is confirmed by the case-law of the Court, which has traditionally associated entitlement to social benefits on an equal basis with nationals of the host Member State with the requirement that the claimant must be ‘legally’ resident in the territory of that State (see Trojani (C‑456/02).
- The AG therefore rejects the Commission’s contention that Child Benefit and Child Tax Credit, being ‘family benefits under the Coordination Regulation, are not subject to the legal preconditions contained in the Citizens’ Directive.
- Moreover, any difference in treatment between UK nationals and nationals of other Member States based on a right of residence stems from the very nature of the system, as, by definition, a national of a Member State cannot be denied a right of residence in that State.
- In the light of the above, the Member State (the UK) is entitled to ensure that a Union citizen is not unlawfully present in its territory, i.e. that they satisfy the requirements of the Citizens’ Directive – at the time they claim these family allowances as this does not give rise to any discrimination prohibited by Article 4 of the Coordination Regulation.
- While this could give rise to indirect discrimination – as non-UK citizens are more likely to suffer the inconvenience of undergoing the checks carried out by the UK authorities, when compared to UK citizens, the AG nevertheless concludes that this difference in treatment is nevertheless justified by the need to protect the host Member State’s public finances.
The AG’s analysis is consistent with recent EU case-law (i.e. Dano) which has found that Member States retain the competence to refuse to grant social assistance benefits to EU migrants who are not exercising Treaty rights within a host Member State, save that the AG extends this approach to family benefits. However, the narrow interpretation given to Trojani (and the line of cases of citizenship of the Union) by the AG at footnote 69, is reminiscent of the approach taken by the domestic courts in Abdirahman v Secretary of State for Work and Pensions  EWCA Civ 657, in an early test-case on the use of the right to reside test for welfare benefits in the UK.
As for the allegation that the application of a right to reside test in respect of Child Benefit and Child Tax Credit amounts to indirect discrimination against EU citizens, the AG relies on essentially the same reasoning as that given by the Supreme Court in Patmalniece v Secretary of State for Work and Pensions  UKSC 11, namely, that any differential treatment caused by the verification process was justified by the need to protect the UK against benefit tourism. In short, EU law has nothing to add to what the Supreme Court has said on the question of denying mainstream benefits to EU citizens who are economically inactive and who do not satisfy the right to reside test for those benefits.