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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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30 Reference is made to the Report for the Hearing for a fuller account of the facts, the procedure and the pleas and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

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31 The application is based on the plea that Liechtenstein has failed to fulfil its obligations pursuant to Articles 19(1) and (2), 25(1) and 28(1) of Regulation 1408/71 by maintaining in force a residence requirement for granting the helplessness allowance.

32 ESA argues that the listing of the helplessness allowance in Annex IIa to Regulation 1408/71 does not have constitutive effect. Reference is made to the ECJ’s judgments in Cases C-215/99 Jauch [2001] ECR I-1901 (hereinafter “Jauch”), at paragraphs 16–22; C-43/99 Leclere and Deaconescu [2001] ECR Iat paragraph 36; C-160/02 Skalka [2004] ECR I-5613 (hereinafter “Skalka”), at paragraphs 19–21; C-154/05 Kersbergen-Lap [2006] ECR I-6249 (hereinafter “Kersbergen-Lap”); and, concerning Annex II to Regulation 1408/71, C-286/03 Hosse [2006] ECR I-1771 (hereinafter “Hosse”), at paragraph 22.

33 Accordingly, ESA contends that despite the listing in Annex IIa, the Court must assess whether the allowance fulfils the criteria under Article 4(2a) or whether the allowance falls under Article 4(1), as these provisions are mutually exclusive.

34 ESA details how the ECJ has found German and Austrian care allowances not to fall under Article 4(2a) but rather under Article 4(1)(a) as sickness benefits in cash. It is maintained that the Liechtenstein helplessness allowance is the same kind of benefit as those care allowances. Particular reference is made to Case C-160/96 Molenaar [1998] ECR I-843 (hereinafter “Molenaar”), Jauch, Hosse and Joined Cases C-502/01 and C-31/02 Gaumain-Cerri and Barth [2004] ECR I-6483 (hereinafter “Gaumain-Cerri”).

35 ESA further emphasises how the ECJ has underlined that the provisions of Regulation 1408/71 must be interpreted in light of the objective of Article 42 EC, which is to contribute to the establishment of the greatest possible freedom of movement for migrant workers. The aims of Articles 39–42 EC would not be attained if, as a consequence of the exercise of their right to freedom of movement, workers were to lose the social security advantages guaranteed to them by the legislation of one Member State. Particular reference is made to Hosse, at paragraphs 24–25.

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the provisions of the Regulation itself is purely one of interpretation between different provisions in the same legal instrument.

37 While, according to ESA, the Defendant argued during the pre-litigation procedure that the inclusion of the Liechtenstein benefit should be treated in a manner different from the inclusion of benefits from other Contracting Parties, no statements by the Contracting Parties supporting that view have been adduced. Nor was any specific adaptation stipulating that the case law of the ECJ should not apply to Liechtenstein negotiated. Furthermore, referring to the Defendant’s argument during the pre-litigation procedure that the nonexportability of the benefit was of particular importance to Liechtenstein, ESA finds no reason to believe that the Defendant is the only State having attached importance to the non-exportability of a particular benefit. Both under EC law and in the EEA, a given benefit can only be included in the Annex if the other Member States/Contracting Parties agree thereto, and both in the EU and in the EEA, one must expect that the other States studied the benefit in question before giving that consent.

38 Turning to the application of Article 4(1) in the present case, ESA submits that according to the ECJ, a benefit may be regarded as a social security benefit within the meaning of Article 4(1) in so far as it is: first, granted without any individual or discretionary assessment of personal needs to recipients on the basis of a legally defined position, and second, provided that it concerns one of the risks expressly listed in Article 4(1) of Regulation 1408/71. Reference is made to Cases 249/83 Hoeckx [1985] ECR 973, at paragraphs 12–14, 122/84 Scrivner [1985] 1027, at paragraphs 19–21, and C-78/91 Hughes [1992] ECR I-4839 (hereinafter “Hughes”), at paragraph 15. Moreover, the ECJ has found that benefits to persons reliant on care “must be regarded as ‘sickness benefits’ within the meaning of Article 4(1)(a) of Regulation No 1408/71”. Reference is made to Hosse, at paragraph 38.

39 ESA submits that the helplessness allowance is granted on the basis of legally defined criteria which, if met, confer entitlement to the benefit. The competent authority has no power to take account of other personal circumstances and thus no discretion to assess personal need on the basis of criteria other than those defined in the law.

40 As to the second condition for Article 4(1) to be applied, ESA acknowledges that there is, in medical terms, a difference between sickness (which is expressly listed in Article 4(1)) and reliance on care, as argued by the Defendant. However, to ESA this difference is immaterial for the classification of the allowance under Regulation 1408/71. According to ESA, the ECJ has held that the notion of sickness benefits has to be interpreted broadly and that it covers care benefits.

Reference is made to the opinion of Advocate General Kokott in Hosse, at point 53.

– 11 – 41 As regards the link between the allowance and health care, ESA maintains that the helplessness allowance constitutes the same kind of benefit as the care allowances at issue in Molenaar, Jauch, Gaumain-Cerri and Hosse.

42 As to Article 4(2a)(b), ESA points out that a benefit must not only be a “special non-contributory benefit” but also intended “solely” to provide “specific” protection for disabled persons, in order for this provision to apply. However, ESA submits, the helplessness allowance is a general benefit granted to all persons in need of care. Hence, although the allowance is surely of particular advantage to many disabled persons, it is not limited to that group. This is so, as some beneficiaries, in particular the elderly, cannot necessarily be considered as disabled persons. Reference is made to the opinion of Advocate General Kokott in Hosse, at point 79.

43 Presupposing that the helplessness allowance falls under Article 4(1), ESA finally addresses the question of whether the allowance is to be regarded as a benefit in cash or in kind. The ECJ has held, it is admitted, that the term ‘benefits in kind’ does not exclude the possibility that such benefits may comprise payments made by the debtor institution, in particular in the form of direct payments or the reimbursement of expenses. Reference is made to Case 61/65 Vaassen v Beambtenfonds Mijnbedrijf [1966] ECR English special edition 261, at page 278 and Molenaar, at paragraph 31. However, the ECJ has also held that a given benefit cannot be classified as a benefit in kind if it takes the form of financial aid which enables the standard of living of persons requiring care to be improved as a whole, in other words to compensate for the additional expense

brought about by their condition. ESA contends that this will e.g. be the case if:

(i) the benefit is periodical; (ii) the benefit is not subject either to certain expenditure, such as care expenditure, having already been incurred, or a fortiori to the production of receipts for the expenditure incurred; (iii) the allowance is fixed and independent of the costs actually incurred by the recipient in meeting his daily requirements; (iv) recipients are to a large extent unfettered in their use of the sums thus allocated to them, e.g. the allowance may be used by the recipients to remunerate a member of their family or entourage who is assisting them on a voluntary basis. This is so, ESA contends, even if the benefit in question is designed to cover certain costs entailed by reliance on care rather than to compensate for loss of earnings on the part of the recipient. Reference is made to Molenaar, at paragraphs 34–35, Gaumain-Cerri, at paragraphs 26–27, Hosse, at paragraph 48, Jauch, at paragraph 35 and Case C-466/04 Herrera [2006] ECR I-5341, at paragraphs 32–33.

44 ESA’s analysis of the case and its conclusions are shared by the Commission.

45 The Defendant, Liechtenstein, notes that in December 2006, Liechtenstein authorities received information that by decision of 6 February 2006, the complainant’s pension fund in his EEA State of residence had retroactively recognised his right to a pension there, with effect as of 1 October 2003. The complainant therefore was not only entitled to draw a pension under Liechtenstein legislation but also under the legislation of the EEA State where he – 12 – resided. In such a situation, Article 27 of Regulation 1408/71 determines that the pensioner shall receive the benefits in question in the country of residence.

Against this background, the Defendant points out that irrespective of the outcome of the present Application, the complainant’s request could not be satisfied by the Liechtenstein authorities, as under the rules of Regulation 1408/71 the Defendant was not the competent State for awarding the benefit in question. Therefore, it is contended, the case should not have been pursued further against the Defendant. It is added that it is up to the Court to decide whether it deems it necessary to deal with the Application or not.

46 The Defendant acknowledges the dynamic character of the EEA Agreement as well as the principle of homogeneity in the EEA. However, it is contended that the entry of the Liechtenstein helplessness allowance into Annex IIa was a matter of great concern when the Principality of Liechtenstein negotiated accession to the EEA Agreement. At that time, Annex IIa was considered as having constitutive effect, meaning that benefits listed therein were recognised as being non-exportable. According to the Defendant, this can be derived from the fact that until 2001 the ECJ did not question whether the listing of a benefit in Annex IIa was compatible with Community law. Reference is made to Cases C-20/96 Snares [1997] ECR I-6057 (hereinafter “Snares”), at paragraph 32, C-297/96 Partridge [1998] ECR I-3467 (hereinafter “Partridge”), at paragraph 33 and C-90/97 Swaddling [1999] ECR I-1075 (hereinafter “Swaddling”), at paragraph

24. In view of Liechtenstein’s accession to the EEA, the helplessness allowance was taken out of the contribution-based system and entered into the tax-financed system. On the basis of these changes, the Contracting Parties agreed to enter the helplessness allowance as a non-exportable benefit into Annex IIa to Regulation 1408/71, by EEA Council Decision No 1/95 of 10 March 1995 on the entry into force of the Agreement on the European Economic Area for the Principality of Liechtenstein (hereinafter “EEA Council Decision 1/95”).

47 According to the Defendant, the non-exportability of the helplessness allowance was a condition sine qua non when acceding to the EEA. The entry in Annex IIa was the result of the accession negotiations and has thus to be considered as the result of a consent amongst the Contracting Parties that the Liechtenstein helplessness allowance does not have to be exported to residents in other EEA States. The fact that the Liechtenstein entry into Annex IIa formed part of EEA Council Decision 1/95 is vital, as this Decision follows the rules of public international law. Hence, the Defendant submits, the Decision is binding upon the parties to it and must be performed by them in good faith. When applying a residence requirement, Liechtenstein is thus relying in good faith on this agreement.

48 It is also noted that in order to vitiate the argument that the Liechtenstein entry into Annex IIa has constitutive effect, ESA refers to judgments of the ECJ which were rendered after the date of signature of the EEA Agreement. According to the Defendant, it goes without saying that under Article 6 EEA such judgments are not binding in EEA law (although pursuant to Article 3(2) SCA “due – 13 – account” has to be paid to relevant developments in the case law of the ECJ after the date of signature of the EEA Agreement).

49 The Defendant and ESA concur that the helplessness allowance qualifies as a non-contributory benefit, as its financing derives solely from compulsory taxation. As opposed to ESA, however, the Defendant contends that the helplessness allowance is a special benefit intended as specific protection for the disabled within the meaning of Article 4(2a)(b) of Regulation 1408/71.

50 The Defendant further submits that the essential criterion for a “sickness benefit”, on the other hand, is the need of a sick person for medical care. However, in Liechtenstein this is provided under the sickness insurance system, while the helplessness allowance is received regardless of any sickness and regardless of any need for medical care.

51 It is admitted that there is a certain link between the two systems. The amount of the domiciliary care benefits awarded by the Sickness Insurance can be reduced if the recipient also draws helplessness allowance. The Defendant notes, however, that domiciliary care benefits do not have to be reduced if the recipient of a helplessness allowance also draws means-tested supplementary benefits or if the allowance has been awarded solely for the purpose of helping the recipient maintain social intercourse. This illustrates the “special” nature of the helplessness allowance as a “mixed” benefit between social security and social assistance.

52 The Defendant stresses that the helplessness allowance differs from the German and Austrian care allowances at issue in Molenaar and Jauch. Those benefits were contribution-based and had a purpose more closely linked to health care.

The Liechtenstein system is not comparable to this.

53 Furthermore, the Defendant contends that the British attendance allowance and the British disability living allowance at issue in Snares and Partridge bear a greater resemblance to the Liechtenstein helplessness allowance.

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