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«JUDGMENT OF THE COURT 14 December 2007 (Failure by a Contracting Party to fulfil its obligations – Article 4(1) and (2a) of Regulation EEC 1408/71 ...»

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14 December 2007

(Failure by a Contracting Party to fulfil its obligations – Article 4(1) and (2a) of

Regulation EEC 1408/71 – social security benefits and special non-contributory benefits −

legal effect of Annex IIa to Regulation EEC 1408/71 listing special non-contributory

benefits − Decision 1/95 of the EEA Council on the entry into force of the EEA Agreement

for Liechtenstein)

In Case E-5/06, EFTA Surveillance Authority, represented by Niels Fenger, Director, and Arne Torsten Andersen, Senior Officer, Department of Legal & Executive Affairs, acting as Agents, Brussels, Belgium, Applicant, v The Principality of Liechtenstein, represented by Dr Andrea Entner-Koch, Director of the EEA Coordination Unit, acting as Agent, Vaduz, Liechtenstein, Defendant, APPLICATION for a declaration that the Principality of Liechtenstein has failed to fulfil its obligations pursuant to Articles 19(1) and (2), 25(1) and 28(1) of the Act referred to at point 1 of Annex VI to the EEA Agreement, i.e. Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as adapted to the EEA Agreement by Protocol 1 thereto.

THE COURT, composed of: Carl Baudenbacher, President, Thorgeir Örlygsson and Henrik Bull (Judge-Rapporteur), Judges, Registrar: Skúli Magnússon, –2– having regard to the written pleadings of the parties and the written observations of the United Kingdom, represented by Elizabeth O’Neill, Treasury Solicitors, acting as Agent, and Christopher Vajda QC; and of the Commission of the European Communities, represented by Viktor Kreuschitz, its Legal Advisor, and Nicola Yerrell, a member of its Legal Service, acting as Agents, having regard the Report for the Hearing, having heard oral argument of the Applicant, represented by its Agent Niels Fenger, the Defendant, represented by its Agent Dr Andrea Entner-Koch, the United Kingdom represented by Christopher Vajda QC and the Commission of the European Communities, represented by Nicola Yerrell, at the hearing on 3 October 2007, gives the following Judgment I The application 1 By application lodged at the Court Registry on 14 November 2006, the EFTA Surveillance Authority (hereinafter “ESA”) brought an action under the second paragraph of Article 31 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (hereinafter “SCA”). ESA is seeking an order from the EFTA Court that the Principality of Liechtenstein (hereinafter “Liechtenstein” or “the Defendant”) has failed to fulfil its obligations pursuant to Articles 19(1) and (2), 25(1) and 28(1) of the Act referred to at point 1 of Annex VI to the Agreement on the European Economic Area (hereinafter “EEA” or the “EEA Agreement”), i.e. Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community (hereinafter “Regulation 1408/71”), as adapted to the EEA Agreement by Protocol 1 thereto.

II Facts and pre-litigation procedure 2 On certain conditions laid down in Liechtenstein law, persons resident in Liechtenstein are entitled to the so-called helplessness allowance (Hilflosenentschädigung). This allowance takes the form of a monthly payment.

3 By letter of 18 November 2003, ESA informed the Liechtenstein Government that, on 10 November 2003, it had received a complaint alleging that the requirement of residence in Liechtenstein for entitlement to helplessness allowance was not in accordance with EEA law. In its reply of 22 December 2003, the Liechtenstein Government stated that, in a decision of 12 February 2003, the highest Liechtenstein Administrative Court (Verwaltungsgerichtshof, –3– formerly Verwaltungsbeschwerdeinstanz) had held the allowance to be a special non-contributory social security benefit that should be granted only to residents in Liechtenstein. Furthermore, the Government argued that the allowance had been qualified as a special non-contributory benefit when the Principality of Liechtenstein acceded to the EEA Agreement.

4 By letter of 2 November 2004, ESA informed the Liechtenstein Government of its preliminary conclusion that the helplessness allowance was a sickness benefit in cash that should be granted also to beneficiaries in other EEA States. In its reply of 3 January 2005, the Liechtenstein Government maintained the views expressed in its previous answer.

5 On 6 April 2005, ESA issued a letter of formal notice concluding that, by applying a requirement of residence in Liechtenstein for entitlement to helplessness allowance, the Principality of Liechtenstein was in breach of Articles 19(1) and (2), 25(1) and 28(1) of Regulation 1408/71. The conclusion applied to all employed or self-employed persons who were covered by the social security legislation of Liechtenstein pursuant to Regulation 1408/71, unemployed persons who received unemployment benefits from Liechtenstein while seeking work in another EEA State, and persons who were entitled to draw a Liechtenstein pension, but resided in another EEA State where they would not be entitled to similar sickness cash benefits, as well as members of these persons’ families.

6 In its reply of 17 June 2005, the Liechtenstein Government maintained that the helplessness allowance qualified as a ‘special’ benefit within the meaning of Article 4(2a) of the Regulation. The Government stressed that there were two

systems in place in Liechtenstein which covered the need for domiciliary care:

the basic system, on the one hand, of which the helplessness allowance was a part, and the sickness insurance system, on the other hand, of which domiciliary health care was a part. It was argued that these two benefits should be distinguished, and that only the latter benefit was a sickness insurance benefit in accordance with Article 4(1) of Regulation 1408/71. The helplessness allowance was a “mixed-type benefit”, with characteristics both of social security and social assistance, thereby rightfully belonging in Annex IIa to Regulation 1408/71.

7 Also in the reply, the importance for Liechtenstein of the listing of the helplessness allowance in Annex IIa to Regulation 1408/71 was emphasised.

Furthermore, it was argued that the other Contracting Parties to the EEA Agreement had made an assessment of the benefit against the conditions for listing it in Annex IIa, and that the Principality of Liechtenstein had adapted its scheme in order to fit those conditions. Therefore, the Principality of Liechtenstein could in good faith rely on the consensus and the result reached by the Contracting Parties.

–  –  –

had confirmed that the listing itself did not have constitutive effect. This interpretation was, according to ESA, equally valid in the EEA.

9 In its reasoned opinion, ESA further maintained that the helplessness allowance should be classified as a social security benefit according to Article 4(1) of Regulation 1408/71 since it was based on a legally defined position, without any individual and discretionary assessment of personal needs.

10 Also in its reasoned opinion, ESA alleged that the allowance did not, in any event, constitute a ‘special’ benefit within the meaning of Article 4(2a) of Regulation 1408/71. In this regard, ESA pointed out, in particular, that the allowance was not granted on a precondition of financial need. ESA maintained that the allowance should be classified as an exportable benefit in cash and not as a non-exportable benefit in kind.

11 In its reply of 30 June 2006, the Liechtenstein Government maintained the position set out in its reply to the letter of formal notice. As an alternative argument, it was put forward that, should the helplessness allowance be a sickness benefit, the allowance, in any event, constituted a benefit in kind and not a cash benefit.

–  –  –

12 Article 29 EEA reads:

In order to provide freedom of movement for workers and self-employed persons, the Contracting Parties shall, in the field of social security, secure, as provided for in Annex VI, for workers and self-employed persons and

their dependants, in particular:

(a) aggregation, for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries;

(b) payment of benefits to persons resident in the territories of Contracting Parties.

13 Regulation 1408/71 is referred to at point 1 of Annex VI to the EEA Agreement.

The Regulation is adapted to the EEA Agreement by way of Protocol 1 thereto

and the adaptations contained in Annex VI. Regulation 1408/71 states:

14 Under Title I General provisions:

–  –  –

15 Under Title I General provisions:

Article 10a Special non-contributory benefits, paragraph 1:

Notwithstanding the provisions of Article 10 and Title III, persons to whom this Regulation applies shall be granted the special noncontributory cash benefits referred to in Article 4 (2a) exclusively in the territory of the Member State in which they reside, in accordance with the legislation of that State, provided that such benefits are listed in Annex IIa.

Such benefits shall be granted by and at the expense of the institution of the place of residence.

–  –  –

1. An employed or self-employed person residing in the territory of a Member State other than the competent State, who satisfies the conditions of the legislation of the competent State for entitlement to benefits […]

shall receive in the State in which he is resident:

(a) benefits in kind provided on behalf of the competent institution by the institution of the place of residence in accordance with the provisions of the legislation administered by that institution as though he were insured with it;

(b) cash benefits provided by the competent institution in accordance with the legislation which it administers. […]

2. The provisions of paragraph 1 shall apply by analogy to members of the family who reside in the territory of a Member State other than the competent State in so far as they are not entitled to such benefits under the legislation of the State in whose territory they reside. […] 18 Under Title III Special provisions relating to the various categories of benefits,

Chapter I Sickness and maternity:

Section 3 Unemployed persons and members of their families:

–  –  –

19 Under Title III Special provisions relating to the various categories of benefits,

Chapter I Sickness and maternity:

Section 5 Pensioners and members of their families:

–  –  –

20 Pursuant to Article 3bis(1) of the Liechtenstein Act of 10 December 1965 on Supplementary Benefits to Old-age, Survivors’ and Invalidity Insurance (hereinafter “the Supplementary Benefits Act”):

–  –  –

having completed their 65th year are entitled to the helplessness allowance if they are helpless at least in the medium degree and elderly within the meaning of Article 1bis.

21 Persons who are at least 64 years of age, or who draw an old-age pension, are considered elderly under Article 1bis of the Supplementary Benefits Act.

22 According to Article 3bis(3) of the Supplementary Benefits Act, a person is considered to be helpless if he or she permanently requires a degree of help from third persons or personal surveillance in order to carry out daily tasks. The Defendant has listed getting up, getting dressed and undressed, nutrition, personal hygiene and social interaction as examples of daily tasks. For persons over the age of 65, “permanently” means that the state of helplessness has been present without substantial interruption during the previous three months, for persons under this age the relevant period is one year.

23 The helplessness allowance is awarded irrespective of whether the recipient is entitled to a sickness insurance benefit or a pension on any other basis.

24 In 2006, the allowance amounted to between CHF 430 and CHF 860 per month depending on the degree of helplessness. As of 1 January 2007, the amounts awarded per month are CHF 442, CHF 663 and CHF 884 in cases of helplessness of a low, medium and high degree, respectively.

25 The allowance is granted without reference to the recipient’s income and the size of his property. It is, in other words, not means-tested. Nor is it a condition that the recipient lives in his or her own home, as also persons residing in special homes for the elderly or the disabled are entitled to the allowance.

26 Where the recipient resides in a special home for the elderly or the disabled, an additional charge, equivalent to the amount paid out in helplessness allowance, is added to the monthly fee paid to the institution.

27 The helplessness allowance is financed from the State budget and is not linked to past contributions.

28 The recipient of the allowance does not have to be sick in the strict sense of the word, so for instance an elderly person would qualify for the allowance. Nor is the allowance contingent upon the need for medical care. Rather, health care costs are met according to the provisions of the Sickness Insurance Act of 24 November 1971 (hereinafter “the Sickness Insurance Act”).

29 A separate benefit, domiciliary health care (Leistungen bei häuslicher Pflege) is provided for under the Sickness Insurance Act up to an amount of CHF 100 per day. According to Article 62(3) of the Sickness Insurance Regulation of 14 March 2000, the amount is reduced if the recipient also draws helplessness allowance. However, an exemption from this curtailment is provided for if the recipient of a helplessness allowance is also entitled to means-tested –9– supplementary benefits or if the allowance has been awarded solely for the purpose of helping the recipient to maintain social interaction.

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