Opinion of the Advocate-General
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My Lords,
1. In this case the Hoge Raad has requested a preliminary ruling on the interpretation of point 2(a) of Part J of Annex VI to 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 amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983; OJ 1983 L 230, p. 6).
2. The respondent in the main proceedings, Mr A. de Wit, is a Dutch national who was born on 10 June 1920. He resided in the Netherlands until 20 November 1945, on which date he became a civil servant in the Netherlands War Ministry and was posted to Germany. On 27 October 1947 he was officially removed from the population register of the place at which he had previously resided in the Netherlands. At some point thereafter he was transferred to the Ministry of Foreign Affairs and in 1950 he was posted to South Africa. He remained in the diplomatic service of the Netherlands for the next 28 years and, as appears from a document in the Hoge Raad' s case file, served in a variety of foreign locations, namely: South Africa (1950-1959), the United States (1959-1963), Indonesia (1963-1965), Australia (1965-1969), Hong Kong (1969-1972), India (1972-1975) and Ecuador (1976-1977). He resigned on 1 August 1978 and went to live in Ireland. On 10 June 1985 he attained the age of 65 years and was awarded an old-age pension under the Algemene Ouderdomswet (Law on the general old-age pension scheme, hereafter "the AOW").
3. That Law, which came into force on 1 January 1957, provides that anyone who attains the age of 65 years is entitled to a full old-age pension if he has been insured for 50 years between his 15th and 65th birthdays. Insured persons are (a) residents and (b) non-residents who are subject to income tax as a result of a salaried activity performed in the Netherlands. The full pension is reduced by 2% for each year in which the person concerned was not insured (Article 13(1) of the AOW).
4. Article 6(1)(c) of the AOW originally provided that a Dutch national who resided abroad and received a salary from the State in respect of employment performed abroad was also an insured person. As from 1 January 1965 that provision was repealed and replaced by Article 3(4) of the AOW, which provided that:
"A Netherlands national who is in the service of a body corporate governed by Netherlands public law and who resides outside the Kingdom ... is also deemed to be resident in the Kingdom."
5. Article 3(4) was itself repealed with effect from 1 April 1985. As from that date a Dutch national who resides abroad and is an official of a body corporate governed by Netherlands public law is again considered as an insured person. The effect of those three successive provisions does not seem to differ and as a result of them Mr de Wit was insured under the AOW from 1 January 1957 until his resignation in 1978.
6. It is in relation to the period before the entry into force of the AOW on 1 January 1957 that Mr de Wit' s status is problematical. In order to make it possible for persons who had already attained the age of 15 on that date to obtain a full pension by their 65th birthday Articles 55 and 56 of the AOW contained transitional provisions. Those provisions allowed the years between such a person' s 15th birthday and 1 January 1957 to be treated as insured periods on condition that the person concerned resided in the Netherlands, the Netherlands Antilles or Aruba during a period of six years after attaining the age of 59 and that he resides in the Netherlands at the time when he claims the pension. Mr de Wit does not satisfy either of those conditions, having resided in Ireland since the age of 58.
7. Were it not for Community law, it appears that Mr de Wit would have no pension in respect of the period before 1 January 1957. The question then is whether Regulation No 1408/71 can avail him in respect of that period. Annex VI, Part J (Netherlands), point 2(a), of the regulation, as amended by Council Regulation (EEC) No 2332/89 of 18 July 1989 (OJ 1989 L 224, p. 1), provides:
"The reduction referred to in Article 13(1) of the AOW shall not be applied for calendar years or parts thereof before 1 January 1957 during which a recipient, not satisfying the conditions permitting him to have such years treated as periods of insurance, resided in the territory of the Netherlands between the ages of 15 years and 65 years, or during which, whilst residing in the territory of another Member State, he pursued an activity as an employed person in the Netherlands for an employer established in that country."
Point 2(e) provides:
"The provisions referred to in (a), (b), (c) and (d) shall be applied only if the person concerned has resided for six years in the territory of one or more Member States after the age of 59 years and for as long as that person is residing in the territory of one of these Member States."
8. On the basis of that provision the competent institution (the Sociale Verzekeringsbank, hereafter "the SVB") was willing to regard Mr de Wit as having been insured from 10 June 1935 (his 15th birthday) to 27 October 1947. But it refused to treat him as having been insured between 27 October 1947 and 1 January 1957 or between 1 August 1978 and 10 June 1985 on the ground that he was not resident in the Netherlands in those periods. Accordingly, his pension was fixed at 68% of the full pension (i.e. 100% minus 32% on account of the 16 years in which he was not insured).
9. It does not seem to be disputed that the SVB was entitled to reduce Mr de Wit' s pension in respect of the second period of non-insurance (i.e. the period from 1 August 1978 to 10 June 1985 when he was resident in Ireland following his retirement). The dispute between the parties concerns the question whether the SVB was entitled to reduce Mr de Wit' s pension in respect of the period from 27 October 1947 to 1 January 1957 when he was in the employ of the Netherlands Government in Germany and South Africa.
10. Mr de Wit challenged the SVB' s decision before the Raad van Beroep, which dismissed his claim. He appealed successfully to the Centrale Raad van Beroep. That court held that for the purposes of Annex VI, Part J, point 2(a), of Regulation No 1408/71 account must be taken of the notional residence provided for in Article 3(4) of the AOW (repealed with effect from 1 January 1985), which stipulated that a Netherlands national residing outside the Kingdom who was employed by a body governed by Netherlands public law was deemed to be resident in the Netherlands. Mr de Wit should therefore be treated as resident in the Netherlands in the period in question. The SVB appealed to the Hoge Raad, which has requested a preliminary ruling on the following question:
"Must the expression 'resided in the territory of the Netherlands' in point 2(a) of Part J of Annex VI to Council Regulation No 1408/71 of 14 June 1971 be interpreted as referring exclusively to actual residence in the territory of the Netherlands or does it also include the notional residence in Netherlands territory of a Netherlands national residing outside the Kingdom in the service of a body governed by Netherlands public law as provided for in (former) Article 3(4) of the AOW?"
11. At first sight it is perhaps surprising that Regulation No 1408/71 should have anything to say about the question whether Mr de Wit' s residence in a non-member State (South Africa) before the creation of the Community should affect his pension or not. The same may be said of Mr de Wit' s residence in Germany before the creation of the Community. This does not seem to have much to do with the free movement of workers provided for in Article 48 et seq. of the Treaty. It was, of course, in order to facilitate the free movement of workers that Regulation No 1408/71 was adopted, pursuant to Article 51 of the Treaty.
12. There is, however, a good reason why Regulation No 1408/71 should have something to say about such matters. If Mr de Wit had resided in the Netherlands during a six-year qualifying period after his 59th birthday, the years prior to 1 January 1957 would have been treated as insured periods under Article 55 of the AOW and he would have enjoyed a pension in respect of those years under national law alone, without recourse to Community law. He lost the benefit of the transitional provisions of Articles 55 and 56 of the AOW because he lived in Ireland after the age of 59. Thus the purpose of point 2(a) of Part J of Annex VI is to limit the extent to which a person may be deprived of the benefit of those provisions by reason of his having resided in a Member State other than the Netherlands after his 59th birthday. That is confirmed by point 2(e), according to which the provisions of point 2(a) apply only to persons who resided in one or more Member States after the age of 59 and for as long as they reside in a Member State. In Case 284/84 Spruyt [1986] ECR 685, the Court stated, in paragraph 22, that the purpose of point 2(a) was "to prevent the obstacles which might arise from Article 43 [now Article 55] of the Old-Age law [i.e. the AOW] from impeding the freedom of movement of those persons who, having resided or worked in the Netherlands, wish to move to another Member State".
13. The effect of the relevant provisions of Part J of Annex VI is to allow the Netherlands to reduce a person' s pension in respect of periods prior to 1957, on the ground that he did not reside in the Netherlands for six years after his 59th birthday; but if that person resided in another Member State during that six-year period his pension may only be reduced in respect of periods before 1957 in which he did not have a sufficient link with the Netherlands. The chosen link is residence in the Netherlands or employment in the Netherlands while resident in another Member State. The legality of reducing a person' s pension in the absence of a sufficient link with the Netherlands was recognized by the Court in Case C-293/88 Winter-Lutzins [1990] ECR I-1623.
14. The SVB, the Netherlands Government and the Commission all reject the idea that the expression "residence" in the aforesaid point 2(a) should be interpreted in the light of national law. They concur that it should be construed as an independent concept of Community law, but do not agree as to the correct interpretation. The SVB and the Netherlands Government both contend that it is confined to actual residence on Netherlands territory and cannot be extended to notional residence, as in the case of a diplomat who is posted to serve in a foreign country; thus, since Mr de Wit was physically in Germany and South Africa between 1947 and 1957, he cannot have been resident in the Netherlands in that period, even though his presence in Germany and South Africa was due entirely to his having been posted there by the Netherlands Government, in whose service he remained throughout. The Commission, on the other hand, considers that a person should be deemed to have been resident in the Netherlands, under point 2(a), whenever there was a sufficiently strong link between him and the Netherlands; such would be the case if someone were employed abroad by the Netherlands Government and remained subject to Netherlands legislation, in particular in the field of social security.
15. Mr de Wit, when invited to submit written observations, replied that he was unable to do so because he understood nothing whatsoever about the interpretation of the laws and regulations cited in the order for reference. Those of us who have wrestled with the byzantine complexities of Regulation No 1408/71 will surely sympathize with him. Notwithstanding his incomprehension, Mr de Wit proceeded to put forward a number of cogent arguments in favour of treating him as resident in the Netherlands between 1947 and 1957:
° First, he did not go to Germany voluntarily, but was posted there by the Netherlands War Ministry.
° Secondly, he was always treated by the War Ministry and later the Ministry of Foreign Affairs as being resident in the Netherlands.
° Thirdly, he could not have acquired resident status in Germany in 1947 (and so could not have relinquished his status as a resident in the Netherlands), since no foreigner was allowed to take up residence in occupied Germany.
° Fourthly, under the Treaty of Vienna (presumably a reference to the 1961 Vienna Convention on Diplomatic Relations) he was at all times deemed to be resident and employed in the Netherlands.
16. It is plain in my view that the concept of residence in Annex VI, part J, point 2(a), should not be construed by reference to national law. Residence is one of the key concepts in Regulation No 1408/71 and should, in order to ensure uniformity of interpretation, be given an independent, Community meaning, the breadth of which should neither be curtailed nor extended by national law. That is confirmed by the fact that a partial definition of the term is given by Regulation No 1408/71 itself (see Article 1(h)), though the definition is unfortunately not helpful for the purposes of the present case. It is true that Annex VI seems to have a different function compared with the general scheme of the regulation, but there are none the less good reasons for interpreting the term "residence" in that annex independently. As the Commission has pointed out, if the term were interpreted by reference to national law, there is a danger that a person would be considered resident in more than one Member State or in no Member State at all.
17. As to the correct interpretation of the term, I strongly disagree with the view put forward by the Netherlands Government and the SVB to the effect that "residence" should be limited to physical presence in the Netherlands. That view seems to be based on a rather simplistic approach according to which words in legislative instruments can have only the literal meaning that they have in everyday speech. But there are many expressions that may and must be given a more extensive, less literal interpretation, depending on the legal context in which they are used. The term "residence" is an example. There are obviously circumstances in which a person should for legal purposes be deemed to be resident in one country when physically he spends most of his time in another country. One example that springs to mind is the soldier who is posted overseas, whether in war time or in peace time. Such a person may spend most of his time abroad and very little time in his own country. Yet for most legal purposes he is treated as resident in that country, not in some foreign land. He pays income tax and social security contributions in his native country; he votes in its elections; he owes allegiance to that country and it is responsible for his welfare; in the event of sickness or invalidity, the burden of caring for him is borne by its social security system; and of course when he retires he will be entitled to a pension in his own country, not in the foreign countries in which he served. Hence, residence is not necessarily synonymous with physical presence in a particular territory.
18. It seems to me that broadly similar considerations apply to a civilian employee of the Netherlands War Ministry who was posted to Germany as part of the occupying forces at the end of the Second World War. Such a person presumably continued to pay Netherlands income tax and remained subject to whatever system of social security existed in the Netherlands at the time. He retained most of the rights and obligations attaching to residence in the Netherlands and acquired few of the rights and obligations attaching to residence in Germany. He, like the soldier, must have remained resident de jure in the Netherlands, even though de facto he lived in Germany and perhaps spent only short periods of leave in the Netherlands. In my view, Mr de Wit was right in contending in effect that he could not and should not be treated as resident in Germany in that period.
19. It is likely that similar considerations also apply to Mr de Wit' s period of service in South Africa. The answer might, it is true, depend on his precise status during that period. However, whether he enjoyed full diplomatic status or whether (subject to certain conditions) he was a member of the administrative, technical or service staff, he was presumably exempt from South African social security contributions and South African income tax. That, at any rate, is the position under Articles 33, 34 and 37 of the 1961 Vienna Convention on Diplomatic Relations, which was not in force at the material time but which in these respects broadly reflects the position under customary international law. If Mr de Wit was exempt from such charges in South Africa and if he paid Netherlands income tax and social security contributions, then it would be illogical ° and extremely unjust ° to pretend that he was not resident in the Netherlands for the purposes of social security and should have his Dutch old-age pension reduced as a result. If on the other hand he had a different status in South Africa and was treated, not as a member of the diplomatic community, but as an ordinary resident of South Africa for the purposes of tax and social security, then there would clearly be less of an argument for treating him as resident in the Netherlands.
20. It is of course for the national courts to make the necessary findings of fact as regards Mr de Wit' s status in South Africa in the period ending on 1 January 1957. Two points may, however, be noted. First, in his 28-year career in the Netherlands diplomatic service Mr de Wit served in seven countries on five different continents. It seems extremely unlikely that he ever acquired the status of a permanent resident in any of those countries. Secondly, the national court' s case file contains a letter dated 16 August 1979 in which the Netherlands Ministry of Foreign Affairs informed the SVB that from 1 September 1950 to 31 July 1978 Mr de Wit was an official in the foreign service employed at various diplomatic missions abroad and that throughout that period he was compulsorily insured under the relevant Netherlands legislation, in particular the AOW. At the hearing counsel for the Netherlands Government questioned the accuracy of that information, pointing out that Mr de Wit could not have been insured for old-age benefits under the AOW prior to its entry into force in 1957. But the issue is not whether Mr de Wit was paying pension contributions before 1957. The issue is whether the Netherlands Government was treating him as if he were resident in the Netherlands, in particular for the purpose of income tax and social security. The issue, in other words, is whether the Netherlands Government, by taxing his salary and including him within its social security scheme, claimed privileges over him and accepted responsibilities towards him that countries normally exercise only in relation to their own residents. If it did so, then he should be deemed to have been resident in the Netherlands for the purposes of the provision in question.
21. Indeed any other interpretation might lead to arbitrary results: thus it would seem arbitrary if the pension entitlement of a foreign ministry employee depended on whether he was posted abroad or remained in the Netherlands at particular periods in his career.
Conclusion
22. Accordingly, I am of the opinion that the question referred to the Court by the Hoge Raad should be answered as follows:
Point 2(a) of Part J of Annex VI to Council Regulation No 1408/71 (both in the version in force up to 1 April 1985 and in the version in force since 1 April 1985) must be interpreted as meaning that the reduction referred to should not be applied for calendar years or parts thereof before 1 January 1957 during which the claimant was employed in the Government service outside the territory of the Netherlands and during which he remained in principle subject to Netherlands legislation on social security.
(*) Original language: English.
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