Right to reside: the aftermath of Patmalniece

Issue 223 (August 2011)

Graham Tegg discusses the Patmalniece decision.

In mid-March 2011 the Supreme Court delivered its judgment in Patmalniece. The first impression is that Patmalniece is another in a long line of failed challenges to the right to reside test. The Supreme Court unanimously rejected the argument that the right to reside test for state pension credit constituted unlawful direct discrimination contrary to Article 3 of Regulation (EEC) No.1408/71 holding that the right to reside test indirectly discriminated against European Union (EU) nationals. By a majority of 4:1 (with Lord Walker dissenting) the Court held that the discrimination could be justified, the justification being that it was legitimate for the UK to seek to protect its financial resources against resort to social assistance ‘by persons who are not economically or social integrated with (the) country’.

The rationale of the Supreme Court’s judgment might have a profound impact on right to reside cases. It is arguable that the right to reside test cannot apply to child benefit or child tax credit at all. Further, the logic of the Supreme Court’s judgment could mean that persons who are socially and economically integrated into the UK might be able to claim ‘social assistance’ without having, as of the date of claim, a ‘right to reside’.

Direct and indirect discrimination

Direct (or overt) discrimination occurs where someone is treated less favourably because of (in this case) her/his nationality. Indirect (or covert) discrimination occurs where the application of seemingly universal criteria puts nationals of other member states at a disadvantage compared with nationals of the host state. Crucially, if a measure is found to directly discriminate, it is incapable of justification; it is simply unlawful. If it is found to be indirectly discriminatory, then the difference in treatment is capable of justification. It is only if the difference in treatment is based on objective considerations independent of the persons concerned, and was proportionate to a legitimate aim pursued, that the difference in treatment can be justified.

All five Supreme Court judges held that the habitual residence test resulted in indirect, as opposed to direct, discrimination. The judgments follow the European Court of Justice’s (ECJ) decision in Case C-73/08 Bressol v Gouvernement de la Communauté française.

Bressol raised the issue of a cumulative or two-stage residence test for entry into certain university courses in Belgium. One of the composite tests, a right of permanent residence in Belgium, could be automatically satisfied by all Belgian nationals. The other, addressed to residence in Belgium, could potentially be satisfied by all foreign nationals, including the French nationals who brought the case. The ECJ found this cumulative test to be indirectly, as opposed to directly, discriminatory.

Lord Hope, who gave the lead judgment, noted the obvious similarity between the residence requirement in Bressol and the habitual residence test taken as a whole. They are both composite two-stage tests. For state pension credit and other means-tested benefits, the first stage is whether the claimant is in fact habitually resident in the UK. This test is not automatically satisfied by UK or Irish nationals, but is nevertheless more favourable to them. The second stage in state pension credit, the right to reside test, is automatically satisfied by UK and Irish nationals. Closely following the ECJ’s judgment in Bressol, the Supreme Court felt bound to hold that, even though the second stage of the test constituted direct discrimination, taken as a whole, the habitual residence test constituted indirect discrimination, which was therefore capable of justification. In short, a UK national could fail the habitual residence test and be excluded from benefit.

But that is not the end of the matter. At paragraph 26 of the judgment, Lord Hope states that had

‘a right to reside in the United Kingdom or elsewhere in the Common Travel Area been the sole condition of entitlement to state pension credit, it would without doubt have been directly discriminatory on grounds of nationality’.

What saved regulation 2(2) of the State Pension Credit Regulations 2002 (the right to reside provision) was that it had to be read in the light of regulation 2(1), the overall habitual residence test which applied equally to UK nationals.

Child benefit and child tax credits

Neither child benefit nor child tax credits has an overall or cumulative habitual residence test. Regulation 23(1) of the Child Benefit (General) Regulations 2006 states that a person ‘shall be treated as not being in Great Britain for the purposes of s146(2) of SSCBA if he is not ordinarily resident in the United Kingdom’. Regulation 23(4) then imposes a right to reside test stipulating that a person shall be treated as not being in Great Britain ‘where he makes a claim for benefit on or after 1st May 2004 and does not have a right to reside in the United Kingdom’. The regime for child tax credits, contained in regulation 3 of the Tax Credits (Residence) Regulations 2003 is essentially identical.

This arguably is a very different test from the habitual residence test. ‘Ordinary’ residence is a question of fact, not law, and can be acquired on the date of arrival to the UK if the person arrives simply with the intention of staying in the UK (per IRC v Lysaght [1928] AC and Shah v Barnet LBC [1983] 2 AC HL). Actual lawful presence, combined with the intention of staying in the medium term, suffices. It applies equally to UK nationals and EU nationals. In reality, it is no bar to entitlement for either UK or EU nationals.

The real barrier to entitlement is contained in the right to reside test, which is automatically satisfied by UK nationals. Lord Hope declares that using a right to reside test as the sole criteria for eligibility would constitute direct discrimination, which we know is unlawful.

The residence tests for child benefit and child tax credit are analogous to the residence tests for the Belgium basic subsistence allowance rules, known as the minimex, examined by the ECJ in Case C-184/99 Grzelczyk. Eligibility for the minimex as a matter of national law required that the claimant be ‘actually resident’ in Belgium. Thus all Belgian nationals actually resident were eligible for assistance. But for an EU national, actual residence was not in and of itself sufficient. An EU national had to be a worker as defined by EC Regulation 1612/68.

Mr Grzelczyk was, and had been, actually resident in Belgium for more than three years. He had been a worker but had given up his job to focus on the last year of his studies in Belgium. It was agreed in the terms of the reference to the ECJ that Mr Grzelczyk, as of the date of his claim, was not a worker and did not retain worker status.

The ECJ found in Mr Grzelczyk’s favour. At paragraph 29 of the judgment, the Court held that a ‘student of Belgian nationality though not a worker within the meaning of Regulation No.1612/68 who found himself in the exactly the same circumstances as Mr Grzelczyk would satisfy the conditions for obtaining the minimex. The fact that Mr Grzelczyk is not of Belgian nationality is the only bar to its being granted to him. It is therefore not in dispute that the case is one of discrimination solely on the grounds of nationality.’

It is strongly arguable that, following Patmalniece, the above argument is equally applicable to child benefit and child tax credits. What needs to be shown in any challenge for an EU national or family member is that the claimant is ordinarily resident, and but for her/his nationality, child benefit and child tax credits would be awarded.

The Supreme Court’s reasons for justifying the indirect discrimination

The justification provided by the Secretary of State, and accepted by the Court in Patmalniece, is at odds with the substantial caselaw that has arisen around the right to reside test. At paragraph 42 of the judgment, Lord Hope records that counsel for the Secretary of State qualifies his central proposition that there is a requirement to have a right to reside in the UK to access income-related benefits. The Secretary of State makes the important concession that a ‘person would be eligible to receive state pension credit if he could show economic integration in the United Kingdom or a sufficient degree of social integration. Where there was social integration, the person would be eligible’.

In no previous right to reside case has the DWP ever suggested that anything other than a positive right to reside as of the date of claim would suffice.

More importantly still, the concession informs the foundation of Lord Hope’s judgment. Lord Hope finds that the principle of the requirement for economic and/or social integration before a EU citizen can access social assistance is a principle of EU law founded in the Advocate General’s opinion and the ECJ’s judgment in Case C-456/02 Trojani v Centre Public d’Aide Sociale de Bruxelles [2004] 3 CMLR 820. At paragraph 52 to the judgment, Lord Hope concludes that the Secretary of State’s:

"purpose was to protect the resources of the United Kingdom against resort to benefit, or social tourism by persons who are not economically or socially integrated with this country. This is not because of their nationality or because of where they have come from. It is because of the principle that only those who are economically or socially integrated with the host Member State should have access to its social assistance system. The principle, which I take from the decision in Trojani, is that it is open to Member States to say that economical or social integration is required. A person’s nationality does, of course, have a bearing on whether that test can be satisfied. But the justification itself is blind to the person’s nationality."

What constitutes economic or social integration?

The simple truth is that nobody yet knows. Economic and/or social integration is clearly not the same thing as a claimant’s being able to identify a positive and subsisting right to reside under either EU or domestic law as of the date of a claim for benefit.

Lord Hope’s reasoning in Patmalniece casts a question mark over the voluminous caselaw that has grown up around the right to reside test. Apart from the decision of the Upper Tribunal in R(IS) 4/09, there is no case in which a claimant has succeeded before the higher courts where s/he could not point to a subsisting right of residence under either EC Directive 2004/38 or under the UK’s Immigration (EEA) Regulations 2006.

When analysed, in many of the negatively decided cases, the claimants quite clearly could argue they had become economically or socially integrated into UK society and that they could not be described as benefit tourists. It is arguable that the whole of the caselaw that has developed around the right to reside test needs revisiting after Patmalniece.

It is unlikely that this is a view shared by the DWP, and the chances of its granting claims or allowing appeals on the basis that the claimant is economically or socially integrated appear remote. However, until further clarification is provided by the courts, the impact of Lord Hope’s reasoning remains unclear. So in any right to reside appeal, claimants may wish to argue on their particular facts that they have attained either economic or social integration in the UK and, though unable to identify a positive subsisting right to reside, nevertheless must be granted the benefits claimed.

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