Abstract
In this case report, five judgments will be discussed. In C-421/23 ONSS, the contentious issue of fraudulent A1 certificates for posting returned to the Court. In this case, the Court was essentially asked to determine whether the dialogue and conciliation procedure was applicable in the event that the A1 certificates were forged and never issued by the competent institution of the sending State. Case C-329/23 Sozialversicherungsanstalt concerns the determination of the applicable law in cases of activities in an EU Member State (Austria), an EEA Member State (Liechtenstein) and Switzerland. Another two judgments concern the interpretation of the equal treatment provision for third-country nationals lawfully residing in the EU. In case C-112/22 CU, the question was whether equal treatment as enshrined in Article 11(1)(d) of the Long-term Residence Directive, read in conjunction with Article 34 of the Charter, precludes a national rule which makes the grant of a basic income conditional on lawful residence of minimum 10 years. For the first time, the Court, in its Grand Chamber composition, was invited to assess a national rule that was indirectly discriminatory towards third-country nationals. In case C-664/23 Caisse d’allocations familiales des Hauts-de-Seine v TX, the Court was asked whether equal treatment under Article 12(1)(e) of the Single Permit Directive precludes refusal to take into account, for the purpose of calculation of family benefits, children born outside the Member State's territory and for whom there is no proof of lawful entry into the territory. Finally, the last case discussed is C-277/23 Ministarstvo financija (Bourse Erasmus+) concerning the loss of a tax advantage because the dependent child of an EU citizen received an Erasmus+ mobility allowance during the period of exchange in another EU Member State.
Keywords
The ONSS case concerns fraudulently obtained A1 (posting) certificates. A Belgian court found a Portuguese contractor (EX) guilty of social security fraud. The contractor had presented fraudulent A1 certificates in respect of workers who performed work in Belgium. These certificates attested that the workers in question were still subject to Portuguese social security legislation, and were allegedly issued by the responsible Portuguese institution. A Belgian court of first instance concluded that the A1 certificates were forgeries and were never issued by the Portuguese authorities. On appeal, the defendant, while not disputing the finding of fraud, asserted that the dialogue and conciliation procedure was not followed prior to the finding of forgery. 2 The referring court stayed the procedure and inquired whether: (a) the Portuguese contractor fell within the scope of Regulation 883/2004, despite the finding of fraud concerning the A1 certificates; and (b) whether prior to the finding of forgery, the dialogue and conciliation procedure should have been followed.
The Court of Justice found that Regulation 883/2004 was applicable, since the EU nationals employed by a Portuguese contractor fell within the personal scope of the Regulation (para. 26). Moreover, the possession of an A1 certificate is not a prerequisite for falling within the personal scope of Regulation 883/2004 (para. 30).
Subsequently, the Court turned to the scope of the dialogue and conciliation procedure and whether it should have been followed in the present case. It recognised that the present case did not concern a dispute about the validity of the factors which led to the issue of the certificate, but rather the authenticity of the certificate itself (para. 42). There was no dispute/conflict between the Member States involved. It was therefore questionable whether the dialogue and conciliation procedure should have been followed, given the difference of this situation from situations dealt with by previous case law (para. 42). The Court responded in the positive, requiring the dialogue and conciliation procedure to be followed. The procedure (in short) works as described in the following paragraph.
Initially, the Member State where the posting takes place (receiving State) must ask the Member State which issued the certificate to re-evaluate it and, if necessary, withdraw it. 3 However, in the event of disagreement between the Member States involved, the Administrative Commission for the Coordination of Social Security Systems may be asked to intervene and mediate a solution. If the Administrative Commission fails to reconcile the views of the Member States involved, the Member State (as a last resort) can initiate an infringement procedure pursuant to Article 259 TFEU. 4 Alternatively, there is also a mediation procedure through the European Labour Authority. 5 However, unless the strict conditions set out in the CRPNPAC and Vueling Airlines case are satisfied, the receiving Member State is still bound by the A1 certificate. 6
A finding excluding the present situation from the scope of this procedure would (according to the Court) undermine the binding effect of the A1 certificate and the principle of unity of applicable legislation, legal certainty and sincere cooperation (para. 44). Furthermore, there is nothing in the scheme of Regulation 987/2009 as a whole, or the wording of Article 5 of Regulation 987/2009 – which lays down the dialogue and conciliation procedure – which prohibits the application of this provision to cases of doubts of validity of A1 certificates (para. 43). The Court also noted that in this case the Belgian authorities had correctly followed this procedure, by contacting the Portuguese authorities prior to the finding of fraud (para. 59).
The finding is logical and entirely consistent with the objective of Article 76(6) of Regulation 883/2004, which confirms that the dialogue and conciliation procedure must be followed in cases concerning the determination of applicable legislation and the rights of the persons (para. 49). While the provisions have been mainly utilised in the past to reconcile conflicts between Member States, they are also to be used to ascertain the authenticity and validity of an A1 certificate. The guidance issued by the Administrative Commission, which is not legally binding but is authoritative, further supports this finding. 7 Despite the severe criticisms of the effectiveness of the dialogue and conciliation procedure, 8 it would have been surprising, in light of previous case law, if the Court had allowed the receiving Member State to withdraw A1 certificates unilaterally, even in cases of fraud.
The applicant was resident in Austria and was pursuing an activity as a self-employed person in Austria and Liechtenstein. He was subject to Austrian social security legislation. Subsequently, he also took up activity as a self-employed person in Switzerland. His share of activities in Austria, Liechtenstein and Switzerland was 19%, 78% and 3%, respectively. The applicant subsequently requested an A1 certificate from the competent Austrian institution to certify the (continued) applicability of the Austrian social security legislation to his situation; however this was refused. The reason given for the refusal was that there is no umbrella agreement covering the situation where a person simultaneously pursues activities in an EU Member State (Austria), an EEA state (Liechtenstein) and Switzerland. Accordingly, the Austrian institution took the view that the person was separately subject to the legislation of these three countries. The referring court was uncertain whether the situation of the applicant should be assessed under Regulation 883/2004, considering the activities in all three countries, and if its conflict rules should therefore be applied to determine the single applicable legislation, or whether there should be separate assessments of applicable legislation between Austria and Liechtenstein and between Austria and Switzerland. The risk with the latter approach would be that the applicant could be made subject to more than one legislation. It must be noted that according to both the EEA Agreement and the EU-Switzerland Agreement, 10 the applicable legislation must be determined on the basis of Regulation 883/2004 and Implementing Regulation 987/2009 (para. 35).
The Court opted for a separate determination of applicable legislation: (a) between Austria and Liechtenstein on the basis of the EEA Agreement; and (b) between Austria and Switzerland on the basis of the EU-Switzerland Agreement, since two separate legal bases were at stake here, meaning the two separate agreements (para 40).
The Court noted that prior to taking up activities in Switzerland, the person was clearly subject to Austrian legislation on the basis of Article 14(1)(a)(ii) of Regulation 1408/71, a provision which does not exist in a comparable form in Regulation 883/2004. However, under the rules of Regulation 883/2004, the competent Member State would be Liechtenstein (paras. 45–46). Despite this, the person could continue to be subject to Austrian legislation on the basis of a transitional rule in Regulation 883/2004. The applicability or not of the transitional rule depended on whether taking up self-employment in Switzerland constituted a change of circumstances. 11
The Court noted that taking up an activity as a self-employed person in Switzerland cannot be considered as a change of circumstances, since Switzerland is a third country when assessing competence on the basis of the EEA Agreement, which governs the situation between Austria and Liechtenstein (para. 49). Therefore, because of the transitional provision, the competent state remained unchanged (Austria), in the case of Austria and Liechtenstein.
On the competence between Austria and Switzerland, the Court noted that the small-scale activities in Switzerland (3%) were insufficient to establish Swiss competence. Therefore, the competent State under Article 13(2)(b) of Regulation 883/2004 was Austria (paras. 51–52).
Consequently, the competent State in both instances, examined separately, was Austria, which should issue a single A1 certificate to the applicant (para. 54).
Therefore, although the rules of the EEA Agreement and the EU-Switzerland Agreement are identical in terms of determining competence, in accordance with the rules of Regulation 883/2004, the Court noted the need for two separate assessments. This is a logical finding, given that the EEA Agreement is binding on only Austria and Liechtenstein, with Switzerland being a third State to this Agreement (para. 49). The same holds true for the EU-Switzerland Agreement, which is binding only on Austria and Switzerland. In the present case, it is purely because of the factual circumstances resulting in the preliminary reference that Austria is designated as the sole competent State. However, the Court accepts that the situation of parallel competent States can arise when conducting separate examinations under the two different agreements. This is simply the result of having no umbrella agreement covering EU Member States, EEA States and Switzerland simultaneously.
At the heart of this case is a rule common to many Member States, 13 namely the requirement to be lawfully resident for a minimum of 10 years (of which the last two must be consecutive) before having access to ‘basic income’, a benefit qualifying as social assistance.
In this case, CU and ND are both third-country nationals with an EU long-term residence permit who were granted the basic income in Italy. After discovering that neither of them met the eligibility condition of residence, the Italian Public Prosecutor prosecuted them for committing an offence under Italian law, false declaration in relation to the length of the residence, and asked for reimbursement of the amounts unduly received. The question before the Court was whether the eligibility condition for the basic income, combined with the criminal penalty, complies with the principle of equal treatment enshrined in Article 11(1)(d) of the Long-term Residence Directive, 14 read in the light of Article 34 of the Charter of Fundamental Rights.
Article 11(1)(d) of the Long-term Residence Directive states that long-term residents enjoy equal treatment with nationals as regards social security, social assistance and social protection as defined by national law.
First, the Italian government disputed that the basic income fell within the scope of Article 11(1)(d). It referred to the fact that the definition of ‘social assistance’ was left to national law, and therefore it was not for the Court of Justice to define it. The Court indicated that the absence of an autonomous definition under EU law and the reference to national law do not mean that the Member States may undermine the effectiveness of EU law (para.35). Furthermore, the Court recalled that, when implementing an EU directive, Member States should comply with the rights and principles under the Charter of Fundamental Rights, and more specifically Article 34 (3) on the right to social and housing assistance, to ensure a decent existence for all those who lack sufficient resources (para.37). Finally, the Court observed that the Italian referring court itself considers that the basic income constitutes a social assistance benefit under national law (paras. 38–40). More specifically, the Court noted that the basic income is a ‘core benefit’ within the meaning of Article 11(4) of the Directive. As explained by the Court already in Kamberaj, 15 a ‘core benefit’ under Article 11(4) is a benefit which enables individuals to meet their basic needs such as food, accommodation and health (para.42).
Secondly, the Court highlighted that the acquisition of long-term resident status under the Directive already requires the third-country national to be lawfully resident for five continuous years, and puts in place requirements of sufficient resources and sickness insurance (para.44). Citing the AG Opinion, the Court emphasised that long-term resident status corresponds to the highest level of integration for third-country nationals, which in turn justifies their equal treatment with nationals of the Member States (paras 45–46).
Third, and this is the real novelty of this case, the Court ruled that the principle of equal treatment under Article 11(1)(d) prohibits not only direct discrimination (such as in Kamberaj 16 or in Istituto Nazionale della Previdenza Sociale (Prestations familiales pour les résidents de longue durée) 17 ) 18 but also indirect discrimination. Under Italian law, the eligibility condition of 10 years of lawful residence applies irrespective of the nationality of the person claiming the basic income. However, the Court considered that this rule affects primarily non-nationals, including third-country nationals (para.50). Concerning the fact that it also affects Italian nationals who have lived abroad, the Court cited its Giersch judgment, 19 a judgment rendered in the context of free movement of EU workers, whereby a measure may be regarded as indirectly discriminatory without there being any need for it to have the effect of placing all nationals at an advantage or placing only non-nationals at a disadvantage (para. 51).
Finally, the Court discussed the possible justifications and whether the measure could be seen as proportionate. On this point, the Court did not apply the justifications of indirect discrimination from its free movement case law by analogy. 20 Instead, it limited the derogations to equal treatment to those contained in the exhaustive list of Article 11(2) of the Long-term Residence Directive (para.55). Hence, the arguments of the Italian government, which did not concern the derogations of Article 11(2), were rejected.
Regarding the penalty, the Court found that, since the obligation of residence is not compatible with the Long-term Residents Directive, then the penalty is also incompatible with it (para.60).
While the Court cannot be criticised for respecting the legislator’s choice to limit the derogations to equal treatment under the Long-term Residence Directive, one may wonder about the relevance of this case for persons who do not possess an EU long-term residence permit, such as Member State nationals who have spent several years outside the EU and who return to their Member State, or third-country nationals who have a national long-term permit. Can Member States continue to apply residence conditions of 10 years or even five years in relation to the acquisition of basic income? With this case, the Court confirms that this would be indirectly discriminatory, even for third-country nationals who hold an EU long-term residence permit. However, aside from situations falling within the scope of the Long-term Residence Directive, is it still a matter covered by EU law? And if so, could it be justified?
TX is an Armenian national who holds a residence permit in France. In April 2014, he applied to the CAF (Caisse d’allocations familiales) for family benefits for his three children, two of whom were born outside France, with no proof that they had entered the French territory lawfully. Given their irregular arrival in France, the CAF refused to take those children into account when determining the amount of the family benefits. After a long series of appeals, the referring court sent a request for a preliminary ruling concerning the refusal by the French authorities to consider those two children for the purpose of calculating the family benefits, in light of the Court's case law in INPS 22 interpreting the equal treatment provision of the Single Permit Directive. 23
First, it must be clarified that the reference to the Single Permit Directive was triggered due to the fact that TX had a residence permit in France authorising him to work. According to Article 3(1)(c) of the Single Permit Directive, this instrument is applicable to third-country nationals who have been admitted to a Member State for the purpose of work in accordance with EU or national law. In this specific case, it was not clear from the file submitted to the Court of Justice whether TX had been admitted on the basis of EU or national law, but this does not matter for the purpose of applying the Single Permit Directive.
Under Article 12(1)(e) of the Single Permit Directive, third-country nationals enjoy equal treatment with nationals of the Member State where they reside, in respect of all branches of social security, as defined in Regulation 883/2004. 24 In the case at hand, it was not contested that TX fell within the scope of the Single Permit Directive, nor that the family benefits fell under Article (3)(1)(j) of Regulation 883/2004 (para.33). Consequently, TX could rely on the provision on equal treatment.
The Court noted that the requirement to prove lawful entry into French territory only applied to third-country nationals residing lawfully in France and who claim family benefit (para.35). Therefore, it was without doubt that this measure was discriminatory and thereby prohibited by Article 12(1)(e).
However, the referring court had doubts regarding Recitals 20 and 24 of the Directive. Firstly, Recital 20 mentions that family members of a third-country worker who have been admitted to a Member State for the purposes of family reunification benefit from equal treatment. The Court explained that this recital refers specifically to family members who would rely directly on the directive to claim equal treatment in their own capacity as workers (para.38). Accordingly, this recital was not applicable to the situation of TX, who is the one relying directly on equal treatment.
Secondly, Recital 24 states that the rights conferred by the directive should be granted only in relation to family members who join third-country workers to reside in a Member State on the basis of family reunification, or who already reside legally in that Member State. The Court however recalled that it has already held in INPS 25 that this recital has not been repeated in the authoritative parts of the Directive and therefore cannot be used to derogate from the equal treatment provision (para. 39). The main reason for this is that equal treatment is the general rule and that derogations must be interpreted strictly (para. 45). The derogations allowed under the Directive are listed exhaustively in Article 12(2)(b). None of those derogations correspond to the proof of lawful entrance for children of the third-country national (para.48). Furthermore, a Member State must state clearly its intention to rely on the derogations under Article 12(2)(b) (para. 49).
Overall, the conclusion of the Court is that Article 12(1)(e) of the Single Permit Directive precludes a Member State imposing a condition of proof of lawful entry into its territory for the children of a third-country national who himself fulfils the conditions of the Single Permit Directive and who is the one claiming equal treatment. That conclusion follows a well-established line of case law, as in INPS 26 or Martinez Silva, 27 on this equal treatment provision of the Single Permit Directive. Hopefully, in the future, this type of case will no longer be an issue, as a new version of the Single Permit Directive 28 was adopted on 24 April 2024, in which the content of Recitals 20 and 24 has been deleted.
The applicant (resident in Croatia) complained that she did not receive the ‘basic personal allowance’ for the year 2014 in respect of her dependent child who was studying at a university in Finland. The basic personal allowance is a tax allowance which reduces income tax in Croatia. While she had received the basic personal allowance in respect of her child in the past, this was not the case in 2014, due to her child receiving mobility support under the Erasmus + programme. The mobility support was included in her income calculations for 2014, leading to her total income exceeding the ceiling provided by Croatian legislation, resulting in the loss of entitlement to the basic personal allowance.
Following a series of appeals, the Court of Justice was asked whether the loss of the basic personal allowance was compatible with Regulation 883/2004, the principle of non-discrimination, EU citizenship and free movement provisions of the Treaty (Articles 18, 20, 21 TFEU) and the Treaty provision on student mobility (Article 165(2) TFEU).
In its order for reference, the referring court expressed its doubts on whether Regulation 883/2004 applies and whether the basic personal allowance can be regarded as a ‘family benefit’ within the meaning of Article 1(z) of Regulation 883/2004. The Court had previously ruled that benefits governed by tax legislation can be regarded as family benefits, as long as they contribute towards family expenses. 30 The criterion of contributing towards family benefits is found in the definition of family benefits in Regulation 883/2004 and is arguably a broad one. 31 However, the Court concluded that Regulation 883/2004 is not applicable since the basic personal allowance is not intended to contribute towards family expenses but to reduce the amount of income tax (para. 31).
The Court asserted its jurisdiction over the subject matter of the preliminary reference by stating that while direct taxation falls within the competence of Member States, national rules must respect the free movement rights guaranteed by the Treaty, namely Article 21 TFEU (para. 34). In addition to this, the Court cited its well-known case law, that EU citizenship is a ‘fundamental status’ of all nationals of Member States, according to Article 20 TFEU (para. 36). Free movement rights are particularly important in the field of education, to promote the mobility of students and teachers, in line with Article 165(2) TFEU (para. 40).
The Court noted that the law does not guarantee that the exercise of free movement will be neutral when it comes to matters of taxation (para. 43). However, the loss of entitlement to the component relating to dependent children in the basic personal allowance was determined to be a restriction on free movement rights (para. 47). The fact that it was not the child (who exercised the free movement right) but the parent (who did not exercise any free movement rights) who suffered the unfavourable tax consequences, did not have an impact on the finding regarding restriction of free movement rights. It is not just the citizen who has exercised the free movement rights who can rely on Article 21 TFEU, but also the person(s) on whom the child is dependent (paras. 48–50).
Turning to possible justifications of the restriction of free movement, the Court accepted that it is an appropriate objective in the public interest for the Croatian law to consider the ‘real capacity of the taxpayer parents to pay income tax’ (para. 56). However, the Court found that the justification could only be accepted if the legitimate objective of the national legislation could be achieved in a consistent and systematic manner and if a genuine concern to attain it could be ascertained (para. 58). The Court found that the mobility support in question was not reducing the expenditure of parents on maintaining their children, but merely contributed towards the ‘additional costs which would not have arisen in the absence of that mobility’ (para. 60). In fact, the Court noted that the reduction in the basic allowance could lead to a situation where a parent pays more income tax, while the burden of maintaining the child has not decreased, since the mobility support contributes solely towards extra costs which can arise because of the Erasmus + mobility (para. 62). Therefore, the loss of the basic personal allowance because of the calculation of the mobility support in the income, could lead to the contrary result to the objective pursued (para. 62).
Therefore, the Court found that the Croatian legislation providing for a loss of the basic personal allowance because of the receipt of a mobility allowance for the Erasmus + programme is incompatible with Articles 20 and 21 TFEU, read in the light of Article 165(2) TFEU.
The Court drew a logical limit to the broad category of ‘family benefits’ under Regulation 883/2004, when there is no link with a contribution towards family expenses. As has been noted, ‘not all benefits payable to a member of the family are family benefits’. 32 However, the Court utilised the Treaty provisions on free movement of persons and EU citizenship, finding a restriction of free movement rights, although the person who suffered the disadvantage was not the person who had made use of their free movement rights.
Footnotes
Declaration of conflicting interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.
