Right to reside: Breytastic!

Issue 236 (October 2013)

Martin Williams discusses the implications of the recent judgment of the European Court of Justice in Brey, and whether it can be of assistance to European Union (EU) nationals who would otherwise fail to establish a right to reside in the UK.

On 19 September 2013, the European Court of Justice (ECJ) gave its judgment in Case C-140/12 Pensionsversicherungsanstalt v Peter Brey. As a result of this decision, some economically inactive EU migrants who have no other right to reside may be entitled to benefits to which the right to reside test applies, on the basis that granting them these benefits would not pose an unreasonable burden on the UK social assistance system. The ECJ’s decision also sheds some light on how the rules in the citizenship Directive (EU Directive 2004/38) interact with the rules for the co-ordination of social security systems (EU Regulation 883/2004).

Self-sufficient person: right to reside

Article 7(1)(b) of Directive 2004/38 provides a right of residence for longer than three months to EU nationals who:

(b) have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State.

The DWP (and the UK courts) have always taken the approach that when considering whether a person had ‘sufficient resources’ not to become a ‘burden on the social assistance system’, when a claim for benefit was made by someone with no other right to reside, any grant of a means-tested benefit to the claimant would constitute such a burden. The decision in Brey says that that is the wrong approach.

Brey: the factual background

Mr Brey’s case arose as follows:

  • Mr Brey and his wife, both German, moved to Austria in March 2011. Mr Brey was in receipt of a German invalidity pension of €862.74 and a care allowance of €225 per month. He and his wife had no other assets. Their rent in Austria was €532.29 per month (see paragraph [16]).
  • Mr Brey was refused a ‘compensatory supplement’ on 2 March 2011 with effect from 1 April 2011 (see para [17]). A compensatory supplement is effectively the Austrian equivalent of state pension credit (a means-tested top-up for pensioners which pays the difference between the resources a claimant has and a specific reference amount – see paragraph [14]).
  • The reason Mr Brey was refused this benefit was because Austrian residence law, in an attempt to implement Directive 2004/38, provided that a person would not have a right to reside as a self-sufficient person if s/he had recourse to the compensatory supplement during ‘his period of residence’ (see paragraph [15]).
  • The Austrian Supreme Court, in the litigation about whether Mr Brey should receive the compensatory supplement, referred a question to the ECJ effectively aimed at establishing whether the compensatory supplement, previously held1 by the latter Court to be a special non-contributory cash benefit (SNCB) under the predecessor to Regulation 883/2004, could count as ‘social assistance’ for the purposes of Directive 2004/38.

Austrian and UK right to reside tests

The effect of the Austrian rules at issue are strikingly similar to the effect of the UK right to reside test.

76. [...], it is clear from the explanation provided by the Austrian Government [...] that, although the amount of the compensatory supplement depends on the financial situation of the person concerned as measured against the reference amount fixed for granting that supplement, the mere fact that a national of another Member State who is not economically active has applied for that benefit is sufficient to preclude that national from receiving it, regardless of the duration of residence, the amount of the benefit and the period for which it is available, that is to say, regardless of the burden which that benefit places on the host Member State’s social assistance system as a whole.

At paragraph [29] the Court of Justice, explained the effect of the Austrian legislation:

29. [...] the granting of a compensatory supplement is made conditional upon the person in question meeting the requirements for obtaining that right of residence.

This description of the effect of the Austrian legislation shows that it is, in substance if not in form, identical to the effect of regulation 2 of the State Pension Credit Regulations 2002, SI No.1792 – ie, to the right to reside requirement (or indeed to the legislation that imposes the right to reside test for any of the other benefits in which it applies). The granting of pension credit is made conditional by that regulation on the claimant having a right of residence.

Regulation 883/2004

Mr Brey, and the European Commission, argued that because the compensatory supplement, was an SNCB, covered by Regulation 883/2004 and was therefore not ‘social assistance’ within the meaning of that regulation, it also could not be ‘social assistance’ as that term is used in Article 7(1)(b) and Article 24 of Directive 2004/38. If that argument had succeeded, Mr Brey could have argued that he had sufficient resources to avoid being a burden on the Austrian social assistance system, in as much as the compensatory supplement was not social assistance, and therefore he could rely on his entitlement to that benefit to show he was self-sufficient.

Unfortunately, the ECJ rejected this argument. It held that as the purposes of Directive 2004/38 and Regulation 883/2004 were different, one had to interpret the concept of ‘social assistance’ differently in the two sets of rules. For Directive 2004/38, the compensatory supplement clearly counted as social assistance (this means that so too do the means-tested UK benefits to which the right to reside test applies).

Furthermore, the ECJ held that nothing in Regulation 883/2004, or in the Directive, prevented a member state from making entitlement to an SNCB conditional upon the claimant having a legal right to reside (see paragraphs [39], [42] and [44]).

Economically inactive EU migrants

However, the ECJ also made clear the method by which a member state should consider whether or not a claimant has got sufficient resources to avoid becoming a burden on its social assistance system when a claim for a means-tested benefit is made.

The Court explained that the aim of the Directive is to facilitate and strengthen the exercise of the primary and individual right to move and reside freely within the EU, and to set the conditions governing the exercise of that right. This includes the condition in Article 7(1)(b) that economically inactive migrants must, after the first three months’ residence, have sufficient resources (paragraph [53]).

Secondly the Court hold explicitly, by reference to recital 10, that the purpose of Article 7(1)(b) is to prevent such persons from becoming an unreasonable burden on the social assistance system (this directly overrules what is said in SG v Tameside MBC [2009] UKUT 243 (AAC) at paragraph [49]) – see paragraph [54].

The Court went on to hold that the fact that an economically inactive migrant may be entitled to a means-tested benefit could be an indication that s/he does not have sufficient resources to avoid becoming such an unreasonable burden (paragraph [63]).

However, that conclusion cannot be arrived at automatically. The Court held that there must be an individual examination of the burden:

64. However, the competent national authorities cannot draw such conclusions [eg that the claimant does not have sufficient resources] without first carrying out an overall assessment of the specific burden which granting that benefit would place on the national social assistance system as a whole, by reference to the personal circumstances characterising the individual situation of the person concerned.

The Court of Justice went on to comment (at paragraph [70]) that the requirement for sufficient resources, as a restriction on a fundamental right, should be construed narrowly.

At paragraph 77 the Court was clear that an automatic decision that a claimant who meets the means test for a benefit such as the compensatory supplement (or we would say pension credit) does not have a right to reside is unlawful as it precludes the necessary inquiry into the individual circumstances of the claimant:

77. Such a mechanism, whereby nationals of other Member States who are not economically active are automatically barred by the host Member State from receiving a particular social security benefit, [...], does not enable the competent authorities of the host Member State, where the resources of the person concerned fall short of the reference amount for the grant of that benefit, to carry out – in accordance with the requirements under, inter alia, Articles 7(1)(b) and 8(4) of that directive and the principle of proportionality – an overall assessment of the specific burden which granting that benefit would place on the social assistance system as a whole by reference to the personal circumstances characterising the individual situation of the person concerned.

In paragraph [78] the Court listed the factors that must be taken into account in this individual enquiry:

78 [....] the amount and the regularity of the income which he receives; the fact that those factors have led those authorities to issue him with a certificate of residence; and the period during which the benefit applied for is likely to be granted to him.

The Court went on to suggest that it may be relevant in undertaking the assessment of whether awarding benefit would constitute a burden on the social assistance system to consider the proportion of claimants of a particular benefit who would be economically inactive EU migrants.

Comprehensive sickness insurance?

This still leaves the issue that Article 7(1)(b) imposes a requirement not just that the economically inactive EU migrant has sufficient resources to avoid becoming a burden on social assistance, but also that s/he has comprehensive sickness insurance. There is no mention in the Brey judgment (or the opinion of the Advocate General) as to whether or not Mr Brey met that second condition. However, it is now much more likely that this provision too must be considered in a similar way to the question of resources (ie, in hard cases one should waive the condition when it is not met) – as indeed was done in the case of Case C413/99 Baumbast [2002] ECR I-07091.

Arguing Brey in the UK

Following Brey, the correct question to ask when an economically inactive EU national claims benefits, is whether taking account of:

  • whether the claimant was experiencing temporary difficulties;
  • the duration of residence of the claimant;
  • her/his personal circumstances;
  • the amount of aid which would be granted to her/him if the claim was successful (depends on the period for which the award is likely to last as well as any housing benefit, etc.); and
  • the amount of other EU claimants in a similar position who are obtaining the benefit in similar circumstances

it can be said that an award of the benefit to the claimant would constitute an unreasonable burden on the UK’s social assistance system. No automatic decision can be made that the mere fact that the claimant is seeking a social assistance benefit means s/he does not have sufficient resources. Furthermore, the UK decisions which suggest the correct approach to considering whether a claimant who does not meet the letter of the limitations on the right to reside set out in Directive is to engage in a (usually fruitless) search for an unintended lacuna in that law should no longer be followed – eg Kaczmarek v Secretary of State for Work and Pensions [2008] EWCA Civ 1310; R(IS)5/09.

The decision in Brey is likely to assist claimants who have no other right to reside but who have something particular about their case that means any award of benefit should not be regarded as an unreasonable burden. Exactly when the scales, weighing on the one hand the particular circumstances of the claimant and the need for the UK to show some ‘financial solidarity’ with the claimant and on the other the need for the UK to protect its social assistance system, will tip in favour of awarding benefit to the claimant is likely to now become the battleground over which claimant representatives and the DWP struggle.

Some examples may assist in demonstrating the principles:

Example 1

Ms Proudhon is a French national; she came to the UK in 2009 and worked for two years. She then stopped work and lived with a British man for a further two years and had a child with him (now aged one). She has now separated from him and is living in a women’s refuge because of domestic violence. She suffers from depression but it is hoped will be better within six months. She has claimed employment and support allowance (ESA). In these circumstances, in particular because the period on benefits is likely to be short and because of the compelling facts (domestic violence, child with a British man, previous work history even though not retained worker status), Ms Proudhon could argue awarding her ESA (and housing benefit) would not constitute an unreasonable burden, and therefore she meets the test.

Example 2

Mr Rand is a Latvian national. He is aged 67. He came to the UK four months ago. He has no other income and has claimed pension credit (PC). He has never worked in the UK. There is nothing particular about these facts which suggests that Mr Rand would not be an unreasonable burden if PC were granted to him.

Advisers should therefore be prepared to assist claimants who have failed the right to reside test but whose circumstances are such that they could argue it was not unreasonable to award them benefits, on the test set out above, in appealing those decisions.


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