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The Supreme Court has given judgment in Patmalniece v SSWP [2011] UKSC 11, a case which required consideration of what constitutes direct discrimination on nationality grounds under EU law and, in cases of indirect discrimination, whether a concern to prevent “ social tourism” is a justification which is independent of nationality. As to this latter question, the Court’s answer was “yes”, Lord Walker dissenting.

Mrs Patmalniece came to the UK in 2000 from Latvia, where she had worked for over 40 years and where she was receiving a state pension. Upon arrival she claimed asylum on the basis that her Russian origin would lead to persecution were she to return to Latvia. By January 2004 her attempts to obtain refugee status failed. She did not return to Latvia, however. She was destitute but for her £50 per month state pension.

Shortly after, in May 2004, Latvia acceded to the EU. Mrs Patmalniece, who had become an EU citizen, then applied for State Pension Credit. Her claim was refused on the basis that she was not “in Great Britain”, as that term was (at the material time) defined in regulation 2 of the State Pension Credit Regulations 2002 as amended (“the 2002 Regulations”). The wording of reg 2 is convoluted, containing several double negatives. According to reg 2(1), to be “in Great Britain”, a person needed to be habitually resident in the UK, the Channel Islands, the Isle of Man or Ireland. Those who are to be treated as habitually resident include “workers” under EU law and those with a right to reside under Directive 68/360 and 73/148. Mrs Patmalniece was neither of those things. By reg 2(2), no person was to be treated as habitually resident if (s)he did not have a right to reside in the UK, the Channel Islands, the Isle of Man or Ireland.

Given that all UK nationals have the right of abode in the UK under s 2(1) of the Immigration Act 1971, one question was whether Mrs Patmalniece was discriminated against directly on nationality grounds, contrary to Article 3 of Regulation 1408/71 (“the Regulation”), which coordinates national social security schemes insofar as they apply to workers and their families moving within the EU, or whether the discrimination was indirect, which although prima facie contrary to Article 3 would allow the Secretary of State to advance a justification based on the protection of the public finances of the host state, there being (in the Secretary of State’s submission) no duty to afford access to social assistance to those who have no right of residence.

It was common ground that Mrs Patmalniece fell within the personal and material scope of the Regulation and that Article 3 thereof prohibited direct and indirect discrimination on nationality grounds in relation to access to benefits covered by the Regulation. It was also agreed that indirect discrimination was capable of being justified by objective considerations independent of the nationality of the person concerned.

The first question for the Court, therefore, was whether the 2002 Regulations were directly discriminatory on nationality grounds. It was common ground that if they were, they could not be justified as a matter of EU law.

In the Court of Appeal Moses LJ, with whom Lord Clarke of Stone-cum-Ebony MR and Sullivan LJ agreed, concluded that the discrimination was indirect rather than direct. He said that the conditions for entitlement to State Pension Credit were not overtly based on the nationality of the claimant: the fact that nationals of other Member States may qualify precluded such a conclusion (para 24).

The Supreme Court agreed that the 2002 Regulations discriminated indirectly, although the reasoning of Court was rather different from that of Moses LJ. It was not because nationals other Member States may qualify for the Credit in question (Lord Hope, giving the main judgment, states in terms that “had a right to reside in the United Kingdom…been the sole condition of entitlement to state pension credit, it would without doubt have been directly discriminatory on grounds of nationality”: para 26); it was because not all UK nationals would be able to meet the test of habitual residence (“some UK nationals returning after a long period of absence may be held not to be habitually resident in the UK”: para 27). Whilst reg 2(2) was in itself directly discriminatory, it was in Lord Hope’s view important to look at reg 2 as a whole: it was clear that not all UK nationals would be entitled to State Pension Credit, so the 2002 Regulations did not discriminate directly on nationality grounds. In this way, the Court followed the judgment of the ECJ in Case C-73/08 Bressol [2010] 3 CMLR 559 rather than the Opinion of A-G Sharpston in that case, which concerned a similar two-part test, who had urged the Court to consider the conditions in isolation rather than as a whole. The Court did not accept her view that there can be direct discrimination even where some members of the disadvantaged group do fulfil the requirement which is satisfied automatically by members of the advantaged group. Although Lord Walker thought theCourt of Appeal was wrong to concentrate on the conditions for entitlement “as a whole” (para 65), he accepted that the ECJ’s judgment in Bressol must be followed, even though its reasons for disagreeing with the A-G were not explained (para 73). Lady Hale also agreed that the Court in Bressol did not accept the A-G’s reasoning.

The next issue, then, was whether the indirectly discriminatory rule was justified. The question was whether the aim of preventing social tourism was “[an objective consideration] independent of the nationality of the persons concerned” (Case C-209/03 Bidar [2005] QB 812, para 54). The majority held that it was. Lord Hope had no difficulty in concluding that the wish to prevent exploitation of welfare benefits by people coming to the UK simply to live off benefits without working here was a legitimate reason for imposing a right of residence test (para 46); the “more difficult question” was whether this justification was independent of the nationality of the persons concerned: the correct approach was to examine the justification on its own merits without regard to its indirectly discriminatory consequences (para 47).

Although Lord Hope saw force in Mrs Patmalniece’s point that the persons about whom the Secretary of State had expressed concern were persons who were not nationals of the UK, he took the view that the justification itself, which is that only those who are economically or socially integrated with the host Member State should have access to its social assistance system, was blind to the person’s nationality. Lady Hale put the point another way: “if [people] do not have the right under [EU] law to move to reside [in the host Member State], then it is logical that that State should not have responsibility for ensuring their minimum level of subsistence” (para 103).

Lord Walker, dissenting, considered the point a simple one: reg 2(2) was in his view probably aimed at discriminating against economically inactive foreign nationals on the grounds of nationality: “[the] difference in treatment is something to which the appellant’s nationality was central, intrinsic or…direct. Even though classified as indirect discrimination, it is not capable of justification because the proposed justification, once examined, is founded on nationality” (para 79).

Comment

One can readily see that the result arrived at is intuitively correct: those who do not have a right under EU law to reside in a Member State, due to the fact that they are economically inactive and do not have sufficient resources to support themselves, should not be able to rely on EU law to claim benefits entitling them to support themselves (and therefore claim a right to reside under EU law). The legal reasoning is not as obviously correct, however.

On the question whether the 2002 Regulations directly discriminate against non-UK EU nationals, Lord Hope is forced to rely on the fact that certain UK nationals may not qualify as “habitually resident”, so that this is not a case of all UK nationals passing the test by virtue of nationality. No statistics are referred to in the judgments, but the likelihood is that the overwhelming majority of UK nationals who satisfy the other elements of the test will qualify; the number of UK nationals not qualifying will be extremely small (possibly de minimis). Does that affect the analysis?

As for the justification, the majority do not seem to consider that the aim of the legislation is relevant to an analysis of whether it is based on objective considerations independent of nationality. Whilst it might be right that intention is irrelevant to the question of whether the 2002 Regulations are directly or indirectly discriminatory, it does not follow that it has nothing to do with the justification. Lord Walker points out that the 2002 Regulations were clearly aimed at catching foreign nationals seeking to take advantage of the UK benefit system (a point acknowledged by Lord Hope at para 49). In reality, therefore, the rules were nationality-related: again, the number of UK nationals not habitually resident who might seek to take similar advantage is likely to be extremely small, which undermines Lord Hope’s attempt to reason away objections to his approach (in his view, protecting the UK’s resources from social tourism was based “on the principle that only those who are economical [sic] or socially integrated with the host Member State should have access to its social assistance system”: para 52).

So: is this another hard case applying bad law set out in ECJ precedent (but coming to the ‘correct’ conclusion)? Perhaps it is time for the ECJ’s insistence that direct discrimination on nationality grounds can never be justified to be revisited.