Overview of recent cases before the Court of Justice of the European Union (January–June 2023)

Abstract

In this casenote, the judgments in DRV Intertrans and Verbraeken (Joined Cases C-410/21 and C-661/21) and Thermalhotel Fontana (Case C-411/22) are discussed. DRV Intertrans and Verbraeken concerned a case of alleged fraudulent A1 certificates for posted workers. The issue was that those A1 certificates were only provisionally, as opposed to definitively, withdrawn by the issuing institution. As a result, the referring court in DRV Intertrans and Verbraken asked the Court of Justice whether the courts of the Member State where the work was carried out could consider the provisional withdrawal of the A1 certificates by the issuing institution as rendering those A1 certificate non-binding. Alternatively, the referring court asked whether it could disregard those A1 certificates following the Altun jurisprudence of the Court of Justice. Thermalhotel Fontana involved isolation measures being imposed on frontier workers by their Member State of residence, making them unable to work. The specific legal issue at hand in Thermalhotel Fontana concerned the fact that the employer of those frontier workers was not able to get compensation from Austria, the Member State of establishment, for his employees due to the fact that the isolation measures were not taken by Austria but by the Member States of residence of the frontier workers. Considering that this case did not fall within the scope of Regulation 883/2004, the Court examined it under the principle of equal treatment of EU workers.

Introduction

Between January and June 2023, the Court of Justice has been quite remarkably calm when it comes to issuing judgments on social security. Although there are only two judgments to report, both of them are interesting and important. The first judgment, DRV Intertrans and Verbraeken (Cases C-410/21 and C-661/21), ¹ issued on 2 March 2023 concerned the validity of A1 certificates for posted workers. In these joined cases, the Belgian Court of Cassation essentially wanted to know if the Belgian courts could consider A1 certificates issued by other Member States as non-binding in case the issuing Member State provisionally, but not definitively, withdrew them. Alternatively, the referring court enquired whether it could establish fraud and disregard the A1 certificates on that basis following the Altun jurisprudence of the Court of Justice. Ancillary to this, the referring court wanted to know whether a Community road transport licence constituted irrefutable evidence of that company's registered office for the purpose of determining which social security legislation was applicable. The judgment in DRV Intertrans and Verbraeken confirms the necessity to respect the rules on dialogue between the Member States when it comes to cases of fraud on A1 certificates. Only the definitive withdrawal and declaration of invalidity can render the A1 certificates non-binding.

The second judgment concerns some compensatory measures granted in the context of Covid-19. Thermalhotel Fontana (C-411/22) ² dealt with the situation of isolation measures being imposed on frontier workers by their Member State of residence, making them unable to work. The specific legal issue at hand Thermalhotel Fontana concerned the fact that the employer of the frontier workers was not able to get compensation from Austria, the Member State of establishment, for his employees due to the fact that the isolation measures were not taken by Austria but by the Member States of residence of the frontier workers. The first question related to whether that compensation must be considered a ‘sickness benefit’ under Regulation 883/2004. The Court found that, given the fact that the aim of the compensation related to the isolation measure was not the recovery of the person isolated but rather the protection of the population against the isolated person, it was not a ‘sickness benefit’ under the Regulation. The second question then became whether the principle of equal treatment of EU workers, as enshrined in Article 45(2) TFEU and 7(2) of Regulation 492/2011, precludes the refusal to take into account isolation measures ordered by other Member States. The Court considered that the refusal constituted indirect discrimination for which no justification was found.

Apart from these social security judgments, it is worth noting that there were three judgments in the field of social law that were handed down during the reporting period. Since those judgments are not strictly about social security, they will not be reported in this casenote. However, given the potential implications for social security, they will be briefly described here. The first case is JK v TP SA (C-356/21), ³ a preliminary ruling reference originating from a Polish court on the refusal to compensate a self-employed person whose contract was not renewed after he had published a music video online with his partner promoting tolerance for same-sex couples. The Court dedicated most of its judgment to the question of whether the contract of the self-employed worker and the lack of renewal of the contract fell within the scope of Article 3(1)(a) and (c) of Directive 2000/78 on equal treatment in employment and occupation. ⁴ After a positive answer to that question, the Court turned to the national legislation that allowed the exclusion of this type of situation from the principle of equal treatment enshrined in Directive 2000/78. The Court found that the freedom of contract relied upon by the Polish government could not be used as a justification for the exclusion in this case (paragraphs 75–78). Hence, Article 3(1)(a) and (c) of Directive 2000/78 precluded the national legislation which had the effect of excluding from the protection against discrimination the refusal, based on the sexual orientation of a person, to conclude or to renew with that person a contract concerning the performance of specific work by that person in the context of the pursuit of a self-employed activity.

IEF Service GmbH (C-710/21) ⁵ is an interesting case considering the growing number of persons who telework in a Member State other than the one where they are employed. In the context of an insolvency claim, the Court was asked to give guidance on the interpretation of Article 9(1) of Directive 2008/94 on the protection of employees in case of insolvency. ⁶ The question was whether an employer carries out activities in the territories of at least two Member States, under Article 9(1) of Directive 2008/94, if their contract of employment provides them with the possibility of dividing their working time equally between two Member States (place of employment and place of residence). Article 9(1) of Directive 2008/94 provides that in transnational situations, the institution responsible for insolvency claims is the Member State where the worker works or habitually works. The Court considered that the employer was not carrying out activities in at least two Member States. The Court found that, although the employee had a social security certificate pursuant to Article 19(2) of Regulation 987/2009 attesting to his work in his Member State of residence, such a certificate had no consequence for insolvency claims under Directive 2008/94 (paragraph 45). For the purpose of Directive 2008/94, in order to consider that an employer is carrying out an activity in another Member State than the one where it is registered, that employer must have a stable economic presence in that latter State, featuring human resources which enable it to perform activities there (paragraph 41). In this case, the Court pointed out that the principal work, in terms of tasks, was carried out in the same Member State, the Member State where the employer was registered (paragraph 42).

Finally, BVAEB v BB (C-681/21) ⁷ concerned a case of a national measure aimed at correcting a discrimination based on age. That national measure provided for a retirement scheme for civil servants within a previously advantaged category to be treated, retroactively, in the same way as civil servants within a previously disadvantaged category. The question was whether the relevant provisions on equal treatment (Article 2(1), 2(a) and Article 6(1) of Directive 2000/78) precluded such national measure. The Court clarified that, once the Member State has adopted a measure reinstating equal treatment, EU law does not preclude that Member State from providing for the advantages of the persons previously favoured to be reduced to the level of the persons previously disadvantaged. The Court essentially confirmed that its Grand Chamber judgment in Safeway ⁸ on Article 119 EC Treaty (now Article 157 TFEU) also applies in the context of Directive 2000/78. However, the Court also stated that the retroactive effects of the measure were only allowed if there was an overriding reason in the public interest (paragraph 52).

Legal consequences of provisional withdrawal of A1 certificates: DRV Intertrans Bv and Verbraeken J. en Zonen BV

In DRV Intertrans and Verbraeken, the Court of Justice dealt with the prevalent issue of exploitation of cheap labour and the avoidance of higher social security contributions, that is common in the transport sector. In particular, this case was a follow-up of the famous Altun judgment ⁹ from the Court of Justice which allowed, for the first time, courts of Member State of employment to establish fraud and disregard A1 certificates.

In these joined cases, two road transport companies (DRV Intertrans BV and Verbraeken) based in Belgium had set up companies in Slovakia and Lithuania to carry out international transport activities. The companies established in Slovakia and Lithuania had a Community licence for road transport issued by the local authorities. In addition, several employees of those companies were sent to the Belgian companies in order to carry out work and were issued A1 certificates by the Slovakian and Lithuanian authorities respectively. After inspection checks, the Belgian Social Security Inspectorate brought criminal proceedings against the Belgian companies and their managing directors for social security fraud. During the proceedings related to the Slovakian case, the Belgian Social Security Inspectorate requested that the Slovakian authorities withdraw the A1 certificates but did not made such a request in the Lithuanian case. In view of the serious doubts as to the true place of registered office and in consideration of the pending legal proceedings in Belgium, the Slovakian authorities provisionally withdrew the A1 certificates, with the result that those certificates would no longer have binding force and that the proceedings could continue in Belgium. However, the Slovakian authorities emphasised that they were waiting for all the evidence collected by the Belgian Social Security Inspectorate and the outcome of the Belgian legal proceedings before making a final assessment concerning the definitive withdrawal of the certificates. After distinct appeals of the judgments finding the Belgian transport companies and their managing directors guilty of social security fraud, the cases ended up before the Hof van Cassatie (Belgian Court of Cassation), the referring court. The Court of Cassation referred two questions for a preliminary ruling to the Court of Justice. First, it essentially wanted confirmation from the Court of Justice as to whether the authorities of the Member State of employment could consider A1 certificates that are provisionally withdrawn from the issuing Member State as no longer binding upon them. Alternatively, the referring court wanted to know if the Belgian courts could disregard the A1 certificates on grounds of fraud. Ancillary to this, the referring court also asked whether the possession of a Community license for road transport constituted irrefutable evidence of the existence of an effective and stable establishment in the Member State which issued it, for the purposes of determining the applicable social security legislation.

In answer to the first question, the Court held that A1 certificates retain their binding nature even if the issuing Member State has provisionally withdrawn them pending the outcome of the legal proceedings in the Member State of employment. The Court held that, under Regulation 987/2009, ¹⁰ the issuing institution has exclusive competence to assess the validity and binding nature of A1 certificates. The Court recalled that A1 certificates bind not only the institutions but also the courts of the Member State in which the activities are carried out. ¹¹ Article 76(6) of Regulation 883/2004 ¹² and the detailed rules found in Article 5(2) to (4) of Regulation 987/2009 provide for the procedure for resolving disputes between institutions of Member States where doubts are raised as to the validity of the documents and the accuracy of supporting evidence (paragraph 46). Under those rules, the Court clarified that only the withdrawal and declaration of invalidity of A1 certificates can remove their binding effects vis-à-vis the institutions and the courts of the Member States (paragraph 48). According to the Court, the wording of Article 5(1) of Regulation 987/2009 suggests that the decision by the issuing institution to provisionally suspend the A1 certificate does not entail the loss of their binding nature (paragraph 49). The decision to withdraw an A1 certificate under Article 5(1) of Regulation 987/2009 must be taken in relation to the procedure of dialogue and reconciliation between institutions set out in Article 76(6) of Regulation 883/2004 (paragraph 49). To accept that the issuing institution would even temporarily remove the binding effects of the certificate without first considering the grounds for its issue under this procedure would be, according to the Court, tantamount to disregarding both the rules for procedure of dialogue and reconciliation and would infringe the principle of sincere cooperation (paragraphs 53 and 55). Moreover, it could undermine the exclusive effect of Regulation 883/2004, the foreseeability of which system is applicable (principle of legal certainty), and the ultimate objectives pursued by A1 certificates to facilitate freedom of movement for workers and freedom to provide services (paragraphs 49–58).

The Court then turned to assess whether a court in the Member State of employment may nonetheless find that there has been fraud and disregard the A1 certificate on that ground. The Court recalled it had previously ruled, most notably in Altun, that the court of the Member State of employment may give a definitive ruling on the existence of a fraud and disregard A1 certificates (paragraph 61). However, this definitive ruling can only made if the procedure described in Article 76(6) of Regulation 883/2004 has been initiated promptly and if the issuing institution has failed to undertake a review of those certificates and to adopt a decision within a reasonable time (paragraph 61). The Court noted that in the Slovakian case, the procedure had been initiated. Notwithstanding this, the Slovakian institution had not followed the procedure of Article 76(6) of Regulation 883/2004 by provisionally suspending the A1 certificates and postponing its final decision pending the outcome of the criminal proceedings in Belgium (paragraphs 63–64). As a result, the Court considered that those elements must enable the courts of the Member State of employment to establish the existence of a fraud and disregard the A1 certificate following its Altun jurisprudence (paragraph 66), while having due regard to the right to fair trial (paragraph 67).

The Court examined the remaining question on whether a Community road transport licence constitutes irrefutable evidence of that company's registered office for the purpose of determining which social security legislation is applicable. Since such a Community license is subject to the condition that the undertaking is effective and a stable establishment under Article 3(1)(a) of Regulation 1071/2009, ¹³ the Court had to assess whether such condition corresponds to that of ‘registered office or place of business’ under Article 13(1)(b)(i) of Regulation 883/2004. The Court did not find this to be case. The Court explained that the meaning of these concepts varies whether applied for the purposes of social security or road transport licenses. While Article 13(1)(b)(i) of Regulation 883/2004 (on social security) states that ‘registered office or place of business’ is determined by the place from which an undertaking is in fact managed and organised, ‘effective and stable establishment’ within the meaning of Article 3(1)(a) of Regulation 1071/2009 (for road transport licences) refers essentially to the place where the undertaking's core business documents are held and where its equipment, as well as its technical and administrative facilities, are located. Therefore, the criteria for determining the place of establishment for the purposes of a Community licence for road transport are different from those used to determine the place of establishment for social security purposes. Thus the road transport licence does not constitute automatic nor irrefutable proof of the applicable social security legislation (paragraphs 72–81).

In DRV Intertrans and Verbraeken, the Court clarified the legal consequences of provisional withdrawal of A1 certificates under the rules of Regulation 883/2004 and Regulation 987/2009. Relying on the importance of the procedure set out in those regulations and thereby on the principle of sincere cooperation but also on the principle of legal certainty, the Court ruled that only withdrawal in the sense of definitive withdrawal can annul the binding effect of A1 certificates. However, the Court built on its balanced approach initiated in Altun whereby it held that national courts of Member State of employment can disregard A1 certificates if the procedure of Article 76(6) of Regulation 883/2004 has been followed.

Compensation for frontier workers due to isolation period during Covid-19: Thermalhotel Fontana

Thermalhotel Fontana is a hotel established in Austria and employs several frontier workers residing in Slovenia and Hungary. At the end of 2020, several employees tested positive for Covid-19. Given the fact that they were not resident in Austria, isolation measures were not imposed on them by the Austria authorities, but instead by their Member State of residence. Thermalhotel continued to pay those employees during the isolation period. Thermalhotel applied to the Austrian authorities for compensation for loss of earnings suffered by those employees due to their isolation periods. That compensation was refused on the main ground that the isolation measures were not taken by the Austrian authorities. Thermalhotel brought an extraordinary appeal in front of the Verwaltungsgerichtshof (Austrian Supreme Administrative Court) claiming that the decision to refuse the grant of compensation was contrary to the Regulation 883/2004 as well as the principle of equal treatment under free movement law. Two questions were sent to the Court of Justice by the referring court.

With its first question, the referring court wanted to know whether that compensation could fall within the scope of Regulation 883/2004 and be classified as a sickness benefit under Article 3(1). The referring court considered that if the Regulation applied, then, pursuant to Article 5(b) of Regulation 883/2004, the Austrian authorities would have to consider the decisions by the Slovenian and Hungarian authorities to isolate as if they had been adopted by the Austrian authorities. The Court recalled its established jurisprudence on the distinction between benefits within and outside the scope of Regulation 883/2004. There are two cumulative conditions. First, that the benefit is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position falling under the scope of the Regulation (paragraph 23). Second, the benefit must correspond to one of the risks listed in Article 3(1) of Regulation 883/2004 (paragraph 23). While the first condition was not really a matter of controversy, the Court considered that the second condition was not fulfilled in this case. The Court recalled that a sickness benefit under Article 3(1)(a) of Regulation 883/2004 is about the risk related to a state of ill health and aims at the patient's recovery (paragraph 27). In this case, compensation was granted when an isolation measure was imposed in the context of Covid-19. The isolation measure was ordered if the person was suspected of being infected with or being contagious with Covid-19, and there was no requirement that the person actually be infected with or suffering from Covid-19. Furthermore, the Court highlighted that the isolation and the compensation attached to it were not meant for the purpose of the recovery of the person but rather to protect the population from being infected by that person (paragraph 29). For those reasons, such compensation financed by the State for the loss of revenue due to an isolation order in the context of Covid-19 is not regarded as a sickness benefit within the meaning of Article 3(1)(a) of Regulation 883/2004.

The second question of the referring court concerned whether the principle of equal treatment, as enshrined by Article 45 TFEU and Article 7(2) of Regulation 492/2011, precludes legislation of a Member State under which the granting of compensation for loss of earnings as a result of an isolation measure is subject to the condition that the imposition of isolation measure be ordered by that Member State. The Court considered that the compensation was a social advantage within the meaning of Article 7(2) of Regulation 492/2011. The Court noted that eligibility for the compensation was indirectly linked with a condition of residence in Austria since the isolation measures conditional upon compensation were dependent on the Member State of residence (paragraph 39). This constitutes indirect discrimination unless justified. In response to the justification of public health put forward by the Austrian government, the Court considered that the exclusion of persons from the scheme of compensation, albeit those persons were covered by an isolation measure from another Member State, was not appropriate for achieving the objective of public health (paragraph 44). Finally, the Austrian government also argued that the frontier workers could also turn to their Member State of residence for compensation for loss of earnings caused by isolation measures, thereby leading to unjust enrichment of those frontier workers who could benefit from compensation from two States. The Court found that such a concern was a budgetary one rather than a public health justification (paragraph 46). Furthermore, the Court agreed with the Commission that, even if it were to accept such a justification, the refusal to grant compensation went beyond what was necessary. The Austrian authorities could have taken into account the amount of compensation already paid in the Member State of residence in order to determine the amount of compensation that they would grant (paragraph 47). In conclusion, the Court found that the principle of equal treatment as enshrined in Article 45 TFEU and Article 7(2) of Regulation 492/2011 precludes legislation of a Member State under which compensation for the loss of earnings resulting from an isolation measure in the context of Covid-19 can only be granted if that isolation measure is ordered by the authority of that same Member State.

This case is the first of a potential series of cases dealing with the aftermath of Covid-19 for frontier workers. It is an important case for social security since it clarifies that compensatory measures that are not linked with an actual infection with Covid-19 are not ‘sickness benefits’ under Regulation 883/2004. Furthermore, the Court has upheld the principle of equal treatment for EU workers and does not accept financial difficulties faced by Member States in the aftermath of Covid-19 as potential justification for discriminatory treatment.