Court of Justice rules on 'benefit tourism' - a green light for free movement reforms?

The CJEU held that, for the purposes of having access to certain social benefits, nationals of other member states can claim equal treatment with nationals of the host member state only if their residence complies with conditions of Directive 2004/38/EC on the right of citizens of the Union and their family members to move and reside freely within the territory of the member states (so-called ‘Citizenship Directive’).

The case centered around two Romanian nationals, Ms Dano and her son Florin, who brought proceedings before the Social Court in Leipzig, Germany, against Jobcenter Leipzig. The Jobcenter had refused to grant them benefits by way of basic provision as this was a benefit only available to jobseekers. Though Ms Dano was requesting such benefits, she had not entered Germany with the purpose of seeking work and was not currently seeking employment. Ms Dano complained that the refusal of certain social benefits (Ms Dano continued to receive child benefit and maintenance payments) was an act of discrimination by Jobcenter against an EU national from another member state. The German court made a request for preliminary ruling concerning the interpretation of EU Law including the provisions of the Citizenship Directive.

The court undertook an examination of the provisions of the Citizenship Directive. Article 6 of the Directive provides that the host member state is not obliged to grant social assistance during the first three months of residence. When the residence period is longer than three months but less than five months, the Directive provides, in Article 7, that economically inactive persons must have sufficient resources of their own in order to have a right of residence. The CJEU thus outlined that a member state must have the possibility of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement purely in order to obtain social assistance in another member state, even though they do not have sufficient resources to claim a right of residence. The CJEU concluded that each individual case must be examined without taking account of the social benefits claimed.

The court held that both the Citizenship Directive, as well as the regulation on the co-ordination of social security systems, do not prohibit domestic legislation that excludes nationals of other member states from entitlement to certain ‘special non-contributory cash benefits’, although they are granted to nationals of the host member state in the same situation. This can occur insofar as those nationals of other member states do not have a right of residence under the Directive in the host member state. The court also held that the Regulation on the coordination of social security systems does not govern the conditions for the grant of special non-contributory cash benefits. The competence for the grant of such benefits lies with the national legislatures of the host member states, who also have competence to define the extent of the social cover provided by that type of benefit.

The judgment has received wide attention, both in the UK and other member states. In the UK, the judgment has been seen by some as providing the government with a clear path to introduce reforms to their national system with a view to reducing the number of EU migrants. The ruling was welcomed by prime minister David Cameron, who stated that the CJEU’s decision was ‘simple common sense’. At EU level, the European Commission simply stated that the CJEU had reiterated that the freedom of movement, as provided in Directive 2004/38/EC, is about the right of circulation rather than providing unrestricted access to benefits.

The judgment is expected to have an impact as it appears to give a ‘green light’ to member states to exclude some EU migrants from specific benefits. However, it is clear that the case does not provide member states, including the UK government, with an opportunity to limit the number of EU citizens who have the right to exercise their free movement to another EU member state. The court in this ruling has re-emphasised the provisions already in place in EU legislation that are capable of combating so-called ‘benefit tourism’, and confirmed that member states do in fact have competence to regulate their own national systems regarding the grant of benefits.

As possible reforms to reduce EU migration are discussed in the UK, with deputy prime minister, Nick Clegg recently writing that freedom of movement must be returned to ‘its original intention: a right to work’, the government will need to ensure that all proposals are compliant with EU law. While the judgment certainly enables the UK to adjust, where necessary, the conditions for residence in ways that do not challenge EU law, possible proposals introducing quotas on the number of EU nationals exercising their right of free movement to the EU would rapidly turn the light from green to red as this would be contrary to the basic principles of EU law.