Opinion of the Advocate-General
1 May one Member State (Germany) apply to a national of another Member State (Spain) who resides and works in the former Member State its domestic legislation permitting children's allowances to be refused where, firstly, the children of the migrant worker are resident in another Member State and, secondly, he takes unpaid leave exceeding a duration of four weeks? This essentially is the issue raised in two questions referred by the Bundessozialgericht concerning, in particular, the scope of application and compatibility with the Treaty of point I,C,(a) of Annex I 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 (hereinafter `the Regulation'). (1)
I - Legislative and factual background
A - Community legislation
2 The personal scope of the Regulation is defined, in Article 2, principally by reference to the concepts of employed and self-employed persons. In so far as is relevant in the present case, Article 2(1) refers to `employed persons ... who are or have been subject to the legislation of one or more of the Member States and who are nationals of one or more of the Member States ... as well as to the members of their families ...'. Article 1(a) defines the expressions `employed person' and `self-employed person' respectively as:
`(i) any person who is insured, compulsorily or on an optional continued basis, for one or more of the contingencies covered by the branches of a social security scheme for employed or self-employed persons;
(ii) any person who is compulsorily insured for one or more of the contingencies covered by the branches of social security dealt with in this Regulation, under a social security scheme for all residents or for the whole working population, if such person:
- can be identified as an employed or self-employed person by virtue of the manner in which such scheme is administered or financed, or,
- failing such criteria, is insured for some other contingency specified in Annex I under a scheme for employed or self-employed persons, or under a scheme referred to in (iii), either compulsorily or on an optional continued basis, or, where no such scheme exists in the Member State concerned, complies with the definition given in Annex I;
(iii) any person who is compulsorily insured for several of the contingencies covered by the branches dealt with in this Regulation, under a standard social security scheme for the whole rural population in accordance with the criteria laid down in Annex I;
(iv) any person who is voluntarily insured for one or more of the contingencies covered by the branches dealt with in this Regulation, under a social security scheme of a Member State for employed or self-employed persons or for all residents or for certain categories of residents:
- if such person carries out an activity as an employed or self-employed person, or
- if such person has previously been compulsorily insured for the same contingency under a scheme for employed or self-employed persons of the same Member State; ... .'
3 Article 13(1) provides that the persons to whom the Regulation applies are, in principle, subject only to the legislation of a single Member State. Article 13(2)(a), which concerns employed persons, provides that they shall be subject to the legislation of the State where they are employed.
4 Chapter 7 of Title III of the Regulation, comprising Articles 72 to 76, concerns family benefits. Article 73, in the version of the Regulation as amended by Article 1(1) of the 1989 Regulation, provides, under the heading `Employed or self-employed persons the members of whose families reside in a Member State other than the competent State', that:
`An employed or self-employed person subject to the legislation of a Member State shall be entitled, in respect of the members of his family who are residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State ... ' (emphasis added).
Pursuant to Article 3 of the 1989 Regulation, this amended version of Article 73 of the Regulation has been applicable `with effect from 15 January 1986'. (2)
5 Annex I to the Regulation also deals, as its title indicates, with `Persons Covered by the Regulation'. Point I concerns `Employed persons and/or self-employed persons [Article 1(a)(ii) and (iii) of the Regulation]'. At point I,C it provides that:
`If the competent institution for granting family benefits in accordance with Chapter 7 of Title III of the Regulation is a German institution, then within the meaning of Article 1(a)(ii) of the Regulation:
(a) "employed person" means any person compulsorily insured against unemployment or any person who, as a result of such insurance, obtains cash benefits under sickness insurance or comparable benefits; [emphasis added]
(b) "self-employed person" means any person pursuing self-employment who is bound:
- to join, or pay contributions in respect of, an old-age insurance within a scheme for self-employed persons, or
- to join a scheme within the framework of compulsory pension insurance.'
The italicized words in paragraph (a) are crucial to this case, because, if applicable, they allow a person to be treated as an employee only if he is insured compulsorily against unemployment.
B - German law
6 Paragraphs 1(1)(1) and 2(1) of the Bundeskindergeldgesetz (Federal Law on Child Allowance, hereinafter `the BKGG') of 14 April 1964 (3) provide that any person domiciled or normally resident in Germany is entitled to Kindergeld (dependent-child allowance) in respect of children who are similarly domiciled or resident. Under Paragraph 2(5) children who are not so domiciled or resident are not to be taken into account for child allowance purposes. However, since Paragraph 42(2) states that the BKGG does not affect Community-law provisions, the provisions of regulations adopted under the Treaty, including Article 73 of the Regulation, remain unaffected.
7 By virtue of the first sentence of Paragraph 104(1), in conjunction with the first sentence of Paragraph 168(1), of the Arbeitsförderungsgesetz (Law on the Promotion of Employment, hereinafter the `AFG') of 25 June 1969, (4) a person is compulsorily insured against unemployment if he is carrying on, in return for payment, an occupation in respect of which contributions are compulsorily due. According to the order for reference, that condition is not satisfied during a period of voluntary unpaid leave. Such periods of unpaid employment, thus, do not go towards satisfying the qualifying period. (5) However, an exception is made for periods not exceeding four weeks. (6) Furthermore, under Paragraph 311(1) of the Reichsversicherungsordnung (National Social Insurance Code, hereinafter `the RVO') of 19 July 1911 (as amended), (7) an employed person's membership, as a compulsorily insured person, of the German statutory sickness-insurance scheme is retained in the case of unpaid leave for a maximum of three weeks. (8)
8 Under Paragraph 9(1) of the BKGG, dependent-child allowance is payable until the end of the month in which the relevant conditions of entitlement cease to be satisfied. Moreover, it becomes payable again from the beginning of the month in which those conditions are once more satisfied. Hence, unpaid leave affects entitlement to child allowance only if it comprises at least a full calendar month.
C - The facts and proceedings before the national court
9 Mr Merino García (hereinafter `the plaintiff') is a Spanish national who resides and works as an employed person in Germany. His three children live in Spain. In the main proceedings, he is claiming the right to the payment in full of children's allowances for periods between January 1986 and December 1988 for which they were refused. During those years, with the approval of his employer, he took two separate intervals of unpaid leave, spanning the periods from 20 January 1986 until 2 March 1986 and from 13 January 1987 until 2 March 1987, which he spent in Spain. The Bundesanstalt für Arbeit, Kindergeldkasse (Federal Employment Office, Children's Allowance Section, hereinafter `the defendant') decided to grant the plaintiff children's allowances for the full period in question with the exception of those parts of his intervals of unpaid leave, corresponding to the months of February 1986 and 1987, during which he was not regarded as an employed person within the meaning of Article 73 of the Regulation. The plaintiff tried unsuccessfully to have that decision reversed before the Sozialgericht (Social Court) and, on appeal, the Landessozialgericht (Higher Social Court). In his subsequent appeal to the Bundessozialgericht (Federal Social Court, hereinafter `the national court'), the plaintiff argued that he was an employed person within the meaning of Article 73 of the Regulation and that the rule contained in point I,C of Annex I to the Regulation was inapplicable because it conflicted with the principle of the freedom of movement of Community nationals by affecting more migrant workers than German nationals. The defendant contended that the Regulation referred to national legal rules whose application was not discriminatory when compared with the situation of German workers, who, if they take extended unpaid leave, also lose the right to child allowance whenever their children are no longer normally resident in Germany.
10 The national court refers, in particular, to the Court's judgment in Pinna, (9) dealing also with the problem of children of migrant workers residing outside Germany. It notes that the definition of `employed person' in Article 73, in conjunction with point I,C,(a) of Annex I to the Regulation, could lead to an employed person with children resident abroad losing his right to child allowance whenever he takes lengthy unpaid leave, while that is not the case for an employed person whose children reside in Germany. It refers to the wide interpretation given to the notion of `worker' under Article 48(2) of the Treaty. (10) In so far as the definition of `employed person' in point I,C,(a) of Annex I to the Regulation is more restrictive, its compatibility with the Treaty would be open to question.
11 However, the national court doubts whether the rule at issue infringes Article 48(2) of the Treaty where the affected employed person could have retained his right to child allowance without undue difficulty. Thus, if paid and unpaid leave were combined, an absence from Germany of approximately three months would have no detrimental effect on the right to child allowance. Indeed, the right to child allowance could, for example, also be retained, if an agreement were made to `stretch' (eine `Streckung') the wages and extend the period of paid leave. Furthermore, the rules in question represent, in the view of the national court, a reasonable and practicable classification, being modelled not only on the AFG but also on similar time-limits found in German statutory-sickness and pensions-insurance law.
12 In the light of these considerations, the national court decided to refer the following questions to the Court:
`1. Is subsection I C of Annex I to Regulation (EEC) No 1408/71 compatible with the EC Treaty, in particular Article 48(2) thereof, in so far as it leads to a situation where workers on extended unpaid leave with children resident outside Germany have no right to child allowance in respect of full calendar months falling within that leave but such workers with children resident in Germany do have that right?
2. If subsection I C of Annex I to Regulation No 1408/71 is invalid, is the consequence thereof that an "employed person" within the meaning of Article 73 of Regulation 1408/71 covers any person who has been given unpaid leave of absence by his employer on the basis of a voluntary agreement, or are there restrictions in that respect (e.g. as regards the duration of the leave of absence)?'
II - Observations submitted to the Court
13 Written and oral observations were submitted on behalf of the plaintiff, the Federal Republic of Germany, the Kingdom of Spain, the Council and the Commission.
III - Analysis
14 The national court's first question essentially asks whether point I,C,(a) of Annex I to the Regulation is valid, by reference to Article 48(2) of the Treaty, in so far as applicants suffer the loss of dependent-child allowances where they take extended periods of unpaid leave from their employment and where their children are not domiciled or normally resident in Germany. The second question presupposes that the Court's answer to the first question is to the effect that the rule contained in the aforesaid provision of Annex I is invalid. However, in its reference, the national court also expressly questions the compatibility of the result obtained from applying the Annex I rule, whereby certain economically active persons are excluded from entitlement to child benefit, with the requirements of Article 48(2) of the Treaty. Thus, even if the validity of the rule as such were upheld, the issue of the compatibility with the Treaty of the application of the BKGG would nevertheless have to be addressed. In this respect, it is noteworthy that the rule in point I,C,(a) of Annex I merely defines, for the purposes of the grant of family benefits by a German institution, the meaning to be attributed to the expression `employed person', and, consequently, the scope of the fictional residence principle. Accordingly, I do not think that its validity may be regarded in isolation from the question of the compatibility of Paragraph 2(5) of the BKGG with Article 48 of the Treaty, because it is the BKGG provision that establishes the German domicile or normal residence requirement.
A - The scope and application of point I,C of Annex I
(i) Introduction
15 Article 51 of the Treaty empowers the Council to enact by unanimity:
`... such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependents:
(a) aggregation, for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries;
(b) payment of benefits to persons resident in the territories of Member States.'
It has consistently been held that Article 51 provides for the coordination, rather than the harmonization, of the legislation of the Member States. (11) Thus, the `... substantive and procedural differences between the social security systems of individual Member States, and hence in the rights of persons working in the Member States, are unaffected by Article 51 of the Treaty'. (12) Nevertheless, although Member States are free to determine the conditions of eligibility for social security benefits, those conditions must respect `the principle of equal treatment [which] prohibits not only overt discrimination based on nationality but all covert forms of discrimination which, by applying other distinguishing criteria, in fact achieve the same result'. (13)
16 Article 1(a) of the Regulation contains four ostensibly distinct definitions of the expression `employed person', which together delineate the personal scope of the Regulation by reference to Article 2. (14) Article 1(a)(ii), second indent, alone makes specific reference to Annex I. This is one of two indents which, on their face, are expressly stated to be alternatives. (15) On a literal reading of the text, it is unclear whether a person who `can be identified as an employed ... person by virtue of the manner in which such a scheme is administered or financed' must also satisfy the requirements of the second indent. On a general level, it is noteworthy that the categories of persons covered by the definition of `employed person' contained in Article 1(a)(i) to (iv) are quite broad. Against this, there is specific provision contained in point I,C,(a) of Annex I, whereby, as regards family benefits granted by a German institution, the expression `employed person' `within the meaning of Article 1(a)(ii) of the Regulation' is restricted to someone who is `compulsorily insured against unemployment' or who, `as a result of such insurance, obtains cash benefits under sickness insurance or comparable benefits'. This presents a choice of intellectual approaches which is a paradigm of the contrast between the textual and the purposive approaches frequently found in Community law. In the event, a recent decision of the Court provides an unambiguous answer to the dilemma.
(ii) The autonomous application of Article 1(a)(i)
17 I shall, firstly, outline the textual approach. It is common ground that the benefit claimed by the plaintiff constitutes a family benefit within the meaning of Article 4(1)(h) of the Regulation. (16) At first sight, the applicant comes within the definition of `employed person' in Article 1(a)(i). Unfortunately, however, the relationship between the various indents of Article 1(a) is not self-evident. (17) Normally, Article 73 of the Regulation would be read in the light of Article 1(a), while bearing in mind the Court's consistent case-law to the effect that, `"employed person" is a term of Community rather than national law, and must be interpreted broadly, having regard to the objective of Article 51, which is to contribute towards the establishment of the greatest possible freedom of movement for migrant workers, an objective which is one of the foundations of the Community'. (18) Indeed, it has recently been stated that to interpret that expression restrictively `would undermine any attempt to coordinate the various systems and workers would be deprived of adequate protection'. (19)
18 This was the approach adopted by the Commission in its written observations. The Commission, supported by the Council, contended that, since the plaintiff remained compulsorily insured in Germany under the RVO for three weeks following the commencement of his unpaid leave in both of the relevant years, he fell within the definition of `employed person' in Article 1(a)(i) of the Regulation during those parts of the leave, since the definition of an `employed person' under Article 1(a)(i) is not subject to any qualification comparable to that contained in the second indent of Article 1(a)(ii). As the plaintiff's three weeks of additional RVO insurance extended until 9 February 1986 and 1 February 1987 respectively, he would, therefore, be regarded as having satisfied the requirements of Paragraph 9(1) of the BKGG, and hence would be entitled to the allowance for the entire duration of his unpaid leave. It is clear, however, as the Commission conceded at the hearing, that the correctness of this approach must now be open to question in the light of case-law developments since the submission of its written observations. (20)
(iii) The application and scope of point I,C,(a) of Annex I
19 The recent case-law of the Court demonstrates that the various alternative definitions of the expressions `employed person' and `self-employed person' contained in Article 1(a) of the Regulation may not - at least in so far as the application of Article 73 of the Regulation is concerned - be construed in isolation from the specific provisions of Annex I, which, it must be recalled, is entitled `Persons Covered by the Regulation'. In particular, the Court has stressed the need to ensure that the effet utile of the lex specialis found in Annex I calls for a combined reading of Article 1(a)(ii) and point I,C,(a) of that Annex, when applying Article 73.
20 In effect, the definition of `employed person' is arrived at by reference to the specific, possibly narrower, range of compulsory or other insurance to which an individual is subject in a particular case. In Hoever and Zachow (21) one of the questions referred concerned whether, `where an employed person is subject to the legislation of a Member State and lives with his or her family in another Member State, that person's spouse is entitled, under Article 73 [of the Regulation], to receive a benefit such as child-raising allowance in the State of employment'. (22) The plaintiffs in the main proceedings (Ms Hoever and Ms Zachow) maintained that, as a family benefit, child-raising allowance should be paid `to the spouse, residing abroad, of a person employed in Germany'. (23) In their appeal they had not, as was stated by the Court, disputed that `they [were] not persons covered by Regulation No 1408/71 ...'. (24) The Court based this finding on the fact that `they are not subject to social insurance within the meaning of Part I.C of Annex I to that regulation (relating to Germany), which defines the conditions to be fulfilled in order to qualify as an employed person for the purposes of the application of Article 73 in Germany'. (25) In the light of the Court's earlier statement that `Mr Hoever and Mr Zachow both have full-time employment in Germany', (26) its further finding that, `on the other hand, Mr Hoever and Mr Zachow do fulfil those criteria [and that] they are therefore covered by [the Regulation] and may consequently be regarded as employed persons within the meaning of Article 73 of that regulation' (27) is of particular significance for the present reference. Thus, the Court had no hesitation in holding that, before a worker may be regarded (in Germany) as an `employed person' under Article 73 of the Regulation, the criteria of point I,C of that Annex must be satisfied. (28)
21 Moreover, even prior to the judgment in Hoever and Zachow, the adoption of the approach subsequently established therein by the Court concerning Annex I to the Regulation had been recommended by Advocate General La Pergola in his Opinion in Stöber and Piosa Pereira. (29) Those joined cases, and particularly that of Mr Piosa Pereira, though concerned with self-employed rather than employed persons, raised issues identical to the present case. As the plaintiffs had taken out a voluntary pension insurance (Mr Piosa Pereira being also apparently insured voluntarily against sickness), they both satisfied the definition of a `self-employed person' for the purposes of Article 1(a)(i) of the Regulation. (30) The Court had to decide whether Article 73 of the Regulation should be interpreted as covering only those applicants falling within the definition of a `self-employed person' that results from a combined reading of Article 1(a)(ii) and Point I,C of Annex I to the Regulation.
22 On the basis that children's allowances are paid in respect of all children resident in Germany, Advocate General La Pergola stated that the BKGG system `is thus the type of system described in Article 1(a)(ii)' and, furthermore, that the definition of an employed person must be established on the basis of the definitions contained therein. (31) He then outlined the reasons for the application of `the residual definition contained in the second sub-clause of the indent of the subparagraph', which refers to the Annex. (32) He recalled the independence of social security criteria from labour legislation, (33) and observed that the definition of a `self-employed person' could not be construed in ignorance of the definition set out in Annex I to the Regulation, since `it is those provisions, rather than any others, which allow a worker to enjoy his rights to such allowances under Community law'. (34) He rejected the possible alternative application of Article 1(a)(i), referring to, firstly, the specific nature of the definition contained in Annex I for German-granting institutions, and, secondly, the legislative history of point I,C,(b) of Annex I. (35) `The coherence of the legislation', he felt, precluded the specific scope ratione personae assigned by Annex I to the Regulation to the payment of family benefits by German authorities from being undermined by permitting `access to such rights by another route'. (36)
23 In its judgment in Stöber and Piosa Pereira, (37) the Court followed the same line of reasoning and ruled that the wording of point I,C,(b) of Annex I to the Regulation, to which Article 1(a)(ii) refers, covers only those `workers' who were `compulsorily insured within the framework of one of the schemes therein mentioned [as being] entitled to German family benefits in accordance with Chapter 7 of Title III of [the Regulation]'. (38) Furthermore, `in so far as [the 1989 Regulation] included self-employed persons among the persons covered by Article 73 of [the Regulation], the Community legislator was itself entitled to determine which of them it intended to qualify to benefit under its provisions'. (39) The Court held, in essence, that `if a worker in a situation of the kind before the national court were allowed to rely on one of the other definitions of "self-employed person" set out in Article 1(a) in order to qualify for German social security benefits, that would be tantamount to depriving the provision in the annex of all effectiveness'. (40)
24 Although the detailed terms of the special rule laid down in point I,C,(b) of Annex I for self-employed persons differ from those applicable to employed persons under point I,C,(a), the nature and purpose of the two sets of rules are the same; viz. to define the conditions which Community nationals like Messrs Stöber and Piosa Pereira and the plaintiff must satisfy to qualify for German family benefits on the basis of Article 73 of the Regulation. The purpose of the rule in point I,C,(a) of Annex I is clearly to limit the notion of an `employed person' for family benefit purposes in Germany to those migrant workers who are insured on a compulsory basis against unemployment. It is clear from the reference that, under the relevant provisions of the AFG, a claimant who takes unpaid leave exceeding four weeks no longer belongs to `the solidarity system' constituted by the German scheme of compulsory unemployment insurance. It follows, in my view, that a person on such extended unpaid leave from his employment in Germany cannot be classified as an `employed person' for the purpose of family benefit claims founded upon Article 73 of the Regulation.
B - The validity of the rule in point I,C,(a) of Annex I
25 If the Court decides, as I have just recommended, that workers who take extended unpaid leave may not rely on Article 73 of the Regulation against a German granting institution, I do not think that it follows that point I,C,(b) of Annex I to the Regulation must be regarded as being invalid. In Pinna the Court ruled that Article 73(2) of the former version of Article 73 of the Regulation was invalid `in so far as it precludes the award to employed persons subject to French legislation of French family benefits for members of their family residing in the territory of another Member State'. (41) In other words, a migrant worker employed and residing in France could not receive family benefits in respect of his children residing in other Member States. The application of this rule uniquely to France constituted an unjustified discrimination.
26 In the present case, the plaintiff is precluded from child benefit in Germany because he does not satisfy the criterion laid down expressly by the Council to govern qualification as an `employed person' for the purposes of family benefits paid by German institutions. In my opinion, it cannot be said that the rule adds `to the disparities stemming from the absence of harmonization of national legislation'. (42) The present case is, thus, readily distinguishable from Pinna. The applicant is fully entitled to benefit pursuant to the BKGG in respect of his children residing in Spain, while he lives and works in Germany. In so far as he lost that benefit for the two relevant periods of unpaid leave, this was the result of the BKGG, not Annex I to the Regulation.
27 I think that it is clear from the final recital in the preamble to the 1981 Regulation that Annex I was added to the Regulation in order to govern the meaning of the term `employed person' with respect to social security schemes applicable to all residents such as children's allowance in Germany. (43) The definition in Annex I is identical in all material respects to that originally set out in point B,(6) of Annex V to the original version of the Regulation. (44) This involved, for five of the original Member States, including Germany, the payment of the family benefits of the country of employment. However, this was subject to the rules concerning `special procedures for applying the legislation of certain Member States' set out in Annex V, and, more particularly, point B,(6) thereof in respect of Germany. (45) The Court recognized in Pinna that `substantive and procedural differences between the social security systems of the individual Member States, and hence in the rights of persons working in the Member States, are unaffected by Article 51 of the Treaty'. (46) Accordingly, I think that the current text of point I,C,(a) of Annex I to the Regulation, which obviously constitutes a genuine - though clearly not an especially comprehensive - coordination measure, comes within the scope of the measures envisaged by Article 51 of the Treaty, and is not, at least on that basis, incompatible with that Article.
28 Furthermore, I do not think that it may reasonably be contended that the rule in point I,C,(a) of Annex I to the Regulation itself either discriminates indirectly against non-German Community nationals who are employed in Germany, or facilitates such discrimination. It may, thus, be distinguished from a provision like Point 15 of Section C in Annex VI to the Regulation, which the Court held in Roviello was capable of working, in combination with the relevant German legislation to which it referred, `to the disadvantage of certain migrant workers'. (47) As the Council aptly submitted in the present case, the fact that claimants like the plaintiff are not granted child benefits does not result - at least not directly - from the application of the impugned rule of Annex I but, rather, from the relevant provisions of the BKGG. Point I,C,(a) merely defines the employed persons subject to German legislation who may benefit from fictional residence, the conduit for whose application is provided by Article 73. It is not, therefore, in any way, causally connected with the BKGG residence requirement. The `disadvantage' affecting claimants like the plaintiff flows directly from the provisions of the BKGG.
C - The BKGG and Article 48 of the Treaty
29 Under the BKGG the right to children's allowances `is purely and simply based on a criterion of residence'. (48) I am satisfied that a residence requirement for children such as that contained in the BKGG, because of its inherent tendency to disadvantage migrant workers, is incompatible with Article 48 of the Treaty. The Court's judgment in Pinna stressed that the principle of equal treatment of national and non-national workers, which lies at the heart of Article 48, prohibits `not only overt discrimination based on nationality but all covert forms of discrimination which, by applying other distinguishing criteria, in fact achieve the same result'. (49) Germany submits that the relevant provisions of the BKGG affect adversely both Germans and non-nationals whose children fail to satisfy the residence requirement. Indeed, the denial of the benefit to Mr Stöber, a German national, in Stöber and Piosa Pereira illustrates that the contention is not purely hypothetical. However, I am satisfied that the BKGG gives rise to covert discrimination. The national court has itself recognized that `just as in the [Pinna] case, the problem of children residing outside Germany arises essentially for migrant workers'. (50) However, irrespective of the statistical evidence, the Court has already clearly recognized that the problem of family members living outside the Member State of employment essentially concerns migrant workers. (51)
30 In Stöber and Piosa Pereira, the Court stated that: (52)
`... the BKGG grants family benefits to any person habitually or normally resident in the territory to which that law applies, where his dependent children are habitually or normally resident in that territory.
Accordingly, that law treats nationals who have not exercised their right to free movement and migrant workers differently, to the detriment of the latter, since it is primarily the latter's children who do not reside in the territory of the Member State granting the benefits in question.'
It follows in my opinion that, in so far as a person who is no longer regarded in Germany, consequent upon unpaid leave, as an `employed person' for the purposes of claiming family benefits under the Regulation in respect of children resident abroad, but, none the less, remains a worker within the meaning of Article 48 of the Treaty, Paragraph 2(5) of the BKGG conflicts with the principle of equal treatment guaranteed by Article 48(2). Consequently, it may not be applied to such persons, unless its application can be justified.
31 However, I do not think that the BKGG residence requirement can be justified. The national court expressed the view that the German measures represented a reasonable and practical classification and, moreover, that their adverse consequences for workers taking unpaid leave could readily be avoided. I cannot accept this view. Indeed, it seems to me that, if a national rule can be avoided with relative ease, the justification, if any, for its application in the first place must, at least, be open to question. What is more, the mere fact that it may be avoided does not detract from the fact that, for the most part, it is non-nationals who will be required to attempt to negotiate avoidance measures, such as the artificial device of wage-stretching agreements, with their employers, while workers whose children are resident in Germany may take indefinite periods of unpaid leave without losing their entitlement to the allowance.
32 In his Opinion in Stöber and Piosa Pereira, Advocate General La Pergola stated that the discrimination inherent in the BKGG could not be justified by reference to the nature of the benefit. He took the view that: (53)
`The practical function of the family allowance, its raison d'être we might say, is to provide financial support to a worker for the expense he incurs in maintaining his own children. This function is, therefore, not, as such, logically connected in any way with the place of residence of those children, as it might be in the case of social security benefits granted in the territory or serving some other purpose, for which that factor might justifiably be taken into account. Indeed [...] it is when a worker's family is not living in the same country as he is that the expense he must incur to maintain them is, presumably, greater ... [and yet] it is in precisely that situation that the full amount of benefit due to the family unit is unjustifiably limited by German legislation.'
33 In so far as Germany, at the hearing, sought to justify the BKGG as a child benefit operating as a generalized social benefit that takes account of the living conditions and subsistence needs of children resident in Germany (i.e., that the cost of raising a child depends on the cost of living in the Member State of that child's habitual residence), I would adopt the views of Advocate General La Pergola. In Stöber and Piosa Pereira the Court confined itself to stating that `in so far as the case-files contain no material capable of providing objective justification for that difference in treatment, it must be regarded as discriminatory and hence as incompatible with Article 52 of the Treaty'. (54)
34 In the light of the above considerations, I am satisfied that there is no objective justification for applying a residence requirement, such as that contained in the BKGG, to child-benefit claims brought by Community nationals who, like the plaintiff, have exercised (and who are continuing to exercise) their Community-law rights under Article 48 of the Treaty to take up and pursue paid employment in Germany.
D - The second question
35 The second question takes as its starting point an answer to the first question that point I,C,(a) is invalid. For the reasons expressed above (see paragraphs 25 to 28), I do not think that the subparagraph in question is invalid. Nevertheless, it does not follow that the right of migrant workers residing in Germany to claim child benefit is unlimited. The Court recognized in Stöber and Piosa Pereira that Germany was entitled to apply the rules which `are essential for the purpose, in particular, of ensuring that benefits are in fact used for the upkeep of dependent children and avoiding overlapping payments [and which] have been adopted by the Community legislator as regards the periods in question'. (55) It is clear that the Court had particularly in mind the provisions of Articles 73 and 75 of the Regulation. The reference does not provide any information in respect of whether family benefits are paid in Spain in respect of the plaintiff's children. It is clear from Article 75 of the Regulation that, if child benefit is paid (Article 75(1)), or payable but not yet claimed (Article 75(2)), in Spain, a claimant like the plaintiff is only entitled to claim from the relevant German institution any excess of the amount of the German over the comparable Spanish benefit. In view of the obvious difficulties faced by a granting institution, such as the German Kindergeldkasse in the present case, in recovering benefits paid but not in fact due, I think that the claimant must bear the prima facie onus of establishing that he is not in receipt of nor entitled to receive child benefit in the Member State where his children are resident. However, in view particularly of the obligation of cooperation between competent authorities imposed by Article 84 of the Regulation, it follows that the appropriate authorities in the Member State of residence of the worker may not make excessive demands of the claimant. Accordingly, I think that they must bear in mind that most claimants will not necessarily be familiar with the relevant legislative provisions of either the Member State of their employment or that of the residence of their children. In sum, the exercise by a claimant of rights granted directly under Article 48 of the Treaty must not be rendered ineffective by unreasonable administrative or evidential demands.
36 Finally, the right of a migrant worker claiming the right to equal treatment in respect of family benefits paid in his Member State of employment cannot be regarded as unlimited in the case of unpaid leave. No mere indefinite understanding with an employer should be allowed to have the effect of obliging the taxpayers of the Member State of employment to bear the cost of providing family benefits to persons whose connection with that Member State may be little more than a fiction. The Council in its written observations refers to the acceptability of short periods of unpaid leave. At the hearing, counsel for the plaintiff cited by analogy Article 6 of Council Directive 68/360/EEC. (56) The plaintiff contended that, since interruptions in residence for up to six months can have no effect on the residence permit granted under that directive, unpaid leave for up to a similar period should likewise have no effect on the right of the worker to benefit from the equal treatment guaranteed by Article 48 of the Treaty.
37 I am not convinced that there is a useful analogy between the exercise of rights of residence guaranteed by Articles 48 and 52 of the Treaty, on the one hand, and the right to receive a social welfare benefit from a host Member State on the other. The latter implies potential financial liability for the host Member State, not associated with the former. In Antonissen, where the Treaty basis of the right of residence enjoyed by Community nationals seeking employment in other Member States was confirmed, (57) the Court agreed with Advocate General Darmon that `there is no necessary link between the right to employment benefit in the Member State of origin and the right to stay in the host Member State'. (58) A migrant worker, seeking employment, is in a different position from one, like the plaintiff, who is in employment but seeking family benefit for his children resident in another Member State. In the first case, the facts are placed under review at any particular moment when the right to continued residence is challenged. In the second, there is a need for a transparent and objective set of rules known in advance. On the other hand, as regards a child-benefit applicant in the plaintiff's situation, I think it is appropriate to take as the point of reference the German rules applied in this case and to say that such an applicant should not be deprived of benefit for a period during which he remained insured, albeit only for health benefit, in Germany. In my opinion, as long as a Community national, who has exercised his right to take up employment in another Member State, maintains a genuine and continuous employment relationship in the Member State where that employment was obtained, he remains protected by Article 48. The onus of establishing the continued subsistence of a genuine and continuous employment relationship should be borne by the worker taking unpaid leave. However, in the final analysis, it must be for the national court, which alone can be apprised of all the relevant facts, finally to determine in each individual case whether such a relationship subsists.
IV - Conclusion
38 Accordingly, I recommend that the Court answer the questions referred by the Bundessozialgericht as follows:
Point I,C,(a) of Annex I to Council Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community is not incompatible with Articles 48 and 51 of the Treaty. However, a national rule requiring, as a prerequisite to entitlement to child allowance, that the claimant's children be domiciled or normally resident in the Member State where the allowance is claimed, may not be applied in respect of workers who come within the scope of Article 48 of the Treaty and who, though on unpaid leave, maintain a genuine and continuous employment relationship in that Member State, in so far as its application leads to a situation where such workers have no right to child allowance in respect of full calendar months included within extended periods of unpaid leave in circumstances where other workers whose children are resident in that Member State do have such a right. The competent authorities of the Member State where the claim is made are entitled to apply by analogy the Community-law rules that are essential to ensure, in particular, that the allowance claimed is in fact used for the upkeep of dependent children and to avoid the occurrence of overlapping payments.
(1) - OJ, English Special Edition 1971 (II), p. 416. This preliminary reference concerns the version of the Regulation in force following the amendments effected by Council Regulation (EEC) No 3427/89 of 30 October 1989 amending Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community and Regulation (EEC) No 574/72 laying down the procedure for implementing Regulation (EEC) No 1408/71, OJ 1989 L 331, p. 1 (hereinafter `the 1989 Regulation'). An amended and updated consolidated version of this much-amended legislation has recently been adopted; see Council Regulation (EC) No 118/97 of 2 December 1996 amending and updating Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community and Regulation (EEC) No 574/72 laying down the procedure for implementing Regulation (EEC) No 1408/71, OJ 1997 L 28, p. 1. However, none of the provisions concerned by the reference in the present case was amended by Regulation No 118/97.
(2) - Council Regulation (EEC) No 1390/81 of 12 May 1981 extending to self-employed persons and members of their families Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community, OJ 1981 L 143, p. 1 (hereinafter `the 1981 Regulation'), which extended the regime established for employed persons by the original text of the Regulation to self-employed persons, had initially excluded Article 73.
(3) - BGBl I, p. 265.
(4) - BGBl I, p. 582.
(5) - See Paragraph 104(1), second sentence, No 1, AFG.
(6) - See Paragraph 104(1), third sentence, AFG.
(7) - RGBl I, p. 509, in the version published on 15 December 1924 (RGBl I, p. 799).
(8) - This provision was replaced - but only after the periods in dispute in the main proceedings arose - by Paragraph 192 of the Socialgesetzbuch (Code of Social Law) of 20 December 1988 (BGBl I, p. 2477), which provides for the maintenance of compulsory insurance during unpaid leave for one month.
(9) - Case 41/84 Pinna v Caisse d'Allocations Familiales de la Savoie [1986] ECR 1.
(10) - Reference is made to the judgment in Case 39/86 Lair v Universität Hannover [1988] ECR 3161 where, at paragraph 31 et seq., the Court held that it includes migrant workers, even if they are no longer in an employment relationship, who have taken up university studies related to their previous occupational activity.
(11) - See, for example, Pinna, paragraph 20 of the judgment and, most recently, Case C-340/94 E.J.M. de Jaeck v Staatssecretaris van Financiën [1997] ECR I-0000, paragraph 18 of the judgment.
(12) - Pinna, paragraph 20 of the judgment.
(13) - Pinna, paragraph 23 of the judgment.
(14) - It is quoted in paragraph 2 above.
(15) - In the English text the word `or' separates the two indents. The German text (German being the language of procedure in the present case) is equally clear since the word `oder' is used. Moreover, similar words are used in other language versions of the text.
(16) - The meaning of the expression `family benefits' is defined in Article 1(u)(i) of the Regulation as meaning `... all benefits in kind or in cash intended to meet family expenses under the legislation provided for in Article 4(1)(h), excluding special childbirth allowances mentioned in Annex II'. This has consistently been interpreted as covering a benefit `if it is granted to recipients without any individual and discretionary assessment of personal needs on the basis of a legally defined position and if it concerns one of the risks expressly listed in Article 4(1) of [the Regulation]'; see, for example, Joined Cases C-245/94 and C-312/94 Hoever and Zachow v Land Nordrhein-Westfalen [1996] ECR I-0000 (hereinafter `Hoever and Zachow'), paragraph 18 of the judgment.
(17) - It has been observed that `the length and complexity of [Article 1(a)] derive from the need, for the purposes of the application of [the Regulation], to use a single concept of "worker" for a large number of social security systems'; see paragraph 6 of the Opinion of Advocate General Van Gerven in Case 388/87 Bestuur van de Nieuwe Algemene Bedrijfsvereniging v Warmerdam-Steggerda [1989] ECR 1203.
(18) - Case 300/84 Van Roosmalen v Bestuur van de Bedrijfsvereniging voor de Gezondheid [1986] ECR 3097, paragraph 18 of the judgment.
(19) - See paragraph 20 of the Opinion of Advocate General La Pergola of 6 June 1996 in Joined Cases C-4/95 and C-5/95 Stöber and Piosa Pereira v Bundesanstalt für Arbeit [1997] ECR I-0000 (hereinafter `Stöber and Piosa Pereira').
(20) - The Commission's observations were lodged with the Registry of the Court on 1 December 1995. The agent for the Commission at the hearing expressly maintained the result of applying the reasoning advanced in its written observations.
(21) - Judgment was given on 10 October 1996 prior to the oral hearing in the present case.
(22) - See paragraph 28 of the judgment.
(23) - Hoever and Zachow, paragraph 9 of the judgment.
(24) - See paragraph 29 of the judgment. At paragraph 54 of his Opinion, Advocate General Jacobs referred to `a possible argument that Mrs Hoever, who at the material time was herself employed part-time in Germany, is entitled to invoke Article 73 in her own right'. This argument was rejected by the first instance court in the main proceedings and was not raised by the referring court in the questions referred.
(25) - Hoever and Zachow, paragraph 29 of the judgment (emphasis added).
(26) - Ibid., paragraph 7 of the judgment.
(27) - Hoever and Zachow, paragraph 29 of the judgment.
(28) - Advocate General Jacobs did not adopt a definite view of the relationship between Article 1(i) and Annex I; loc. cit., paragraph 54 of his Opinion.
(29) - Cited in footnote 19 above.
(30) - See paragraph 12 of the Opinion.
(31) - See paragraph 22 of the Opinion. In paragraph 23, he justified the application of Article 1(a)(ii), primarily, because the system at issue is applicable to all residents irrespective of their employment status and, secondly, because workers cannot be insured whether on a compulsory or optional basis for purposes of the payment of family allowances.
(32) - See paragraph 24 of the Opinion.
(33) - He refers to the Opinion of Advocate General Gand in Case 19/68 De Cicco v Landesversicherungsanstalt Schwaben [1968] ECR 473, describing the sphere of application of (what was then) the basic regulation, namely Regulation No 3 (Council Regulation No 3 of 16 December 1958 on social security for migrant workers, JO 1958 No 30, p. 561/58), as being `determined by a criterion of social security and not of labour legislation; this reflects the ever-growing independence given to the first of these concepts as against the second'; [1968] ECR 473, p. 484.
(34) - See paragraph 25 of his Opinion.
(35) - It was inserted by Article 56 of the 1981 Regulation and, as the final recital in the preamble to that Regulation demonstrates, `the legislature, felt it "necessary to stipulate (...) what the terms `employed person' and `self-employed person', introduced in [the Regulation], mean when the person concerned is insured under a social security scheme which applies to all residents" ... '; see paragraph 28 of the Opinion.
(36) - See paragraph 31 of the Opinion.
(37) - It was delivered, subsequent to the hearing in the present case, on 30 January 1997.
(38) - See Stöber and Piosa Pereira, paragraph 29 of the judgment.
(39) - Ibid., paragraph 31 of the judgment.
(40) - Ibid., paragraph 32 of the judgment (emphasis added).
(41) - See paragraph 25 of the judgment.
(42) - See paragraph 21 of the judgment.
(43) - That this was also the view of Advocate General La Pergola is evident from the quotation from his Opinion in Stöber and Piosa Pereira, cited in footnote 34 above.
(44) - Point B,(6) of Annex V provided: `If the competent institution for granting family benefits in accordance with Title III Chapter 7 of the Regulation is a German institution, a person compulsorily insured against the risk of unemployment or a person who, as a result of such insurance, obtains cash benefits under sickness insurance or comparable benefits shall be considered as a worker (Article 1(a) of the Regulation)'. The 12th recital in the preamble to the original Regulation had recognized that, although `it would be preferable to lay down rules common to all Member States and efforts should continue to this end', the `great variations between national legislations' necessitated the adoption of a solution that took `this situation into account'.
(45) - This was moved to a new Annex I by Article 56 of the 1981 Regulation; the original Annex V became Annex VI, while subparagraph (6) thereafter dealt with an entirely different matter which is not relevant to the present case. The 1989 Regulation did not effect any amendments to the respective annexes to the Regulation.
(46) - Paragraph 20 of the judgment.
(47) - Case 20/85 Roviello v Landesversicherungsanstalt Schwaben [1988] ECR 2805, paragraph 16 of the judgment. Point 15 permitted the German authorities only to take account, for the purposes of determining occupational invalidity pensions, of activities carried out that were subject to compulsory insurance under German legislation. Thus, migrant workers, like Mr Roviello, who possessed a higher qualification from activities effected in another Member State (to wit, work as a tiler where such work could have led to a trade qualification in Italy) than that which he was able to claim based on his German activities (he had also worked as a tiler in Germany, but this did not entitle him to be regarded as a skilled worker under German law), were disadvantaged.
(48) - Stöber and Piosa Pereira, paragraph 37 of the Opinion. At the hearing, counsel for Germany referred briefly to new national rules which came into effect at the beginning of 1996. As regards the new regime, see footnote 32 to my Opinion of 24 October 1996 in Case C-59/95 Bastos Moriana v Bundesanstalt für Arbeit [1997] ECR I-0000.
(49) - Paragraph 23 of the judgment. The Court has recently formulated this principle in a case concerning a territorially restricted `funeral payment' as follows: `... conditions imposed by national law must be regarded as indirectly discriminatory where, although applicable irrespective of nationality, they affect especially migrant workers'; see Case C-237/94 O'Flynn v Adjudication Officer [1996] ECR I-2617, paragraph 18 of the judgment (emphasis added).
(50) - Indeed, in Stöber and Piosa Pereira, Advocate General La Pergola referred (see footnote 30 to his Opinion) to certain statistics regarding family allowances, which were reproduced in the report for the hearing in Case C-228/88 Bronzino [1990] ECR I-531, at p. I-536. They tended to show that more than 17% of children of nationals of other Member States residing in Germany and entitled to German family allowances lived abroad, whereas German citizens whose children lived abroad accounted for only 0.3% of those entitled to the allowance. In O'Flynn v Adjudication Officer, the Court held that it is not necessary to find that the impugned provision affects in practice `a substantially higher proportion of migrant workers'; loc. cit., paragraph 21 of the judgment.
(51) - See the Opinion of Advocate General La Pergola in Stöber and Piosa Pereira, paragraph 44, and paragraph 38 of the judgment in that case. The rationale, though sometimes explained by the Court in terms of obstacles to the exercise of freedom of movement (see, for example, Bronzino, paragraph 12 of the judgment), remains essentially that expressed by Advocate General Mancini in his Opinion in Pinna: `the operation of the "residence" parameter differs according to the worker's nationality. In other words, the family unit of a person working in his country of origin is generally united whereas the migrant worker's family is generally separated'; loc. cit., [1986] ECR 1, at p. 11. See also paragraph 24 of the judgment in that case.
(52) - Paragraphs 37 and 38 of the judgment.
(53) - Paragraph 47 of the Opinion.
(54) - Paragraph 39 of the judgment.
(55) - Paragraph 40 of the judgment.
(56) - Council Directive 68/360/EEC of 15 October 1968 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families, OJ, English Special Edition 1968 (II), p. 485.
(57) - Case C-292/89 Antonissen [1991] ECR I-745. The Court held that, in general, they could stay for up to six months, but also longer `if after the expiry of that period the person concerned provides evidence that he is continuing to seek employment and that he has genuine chances of being engaged ... '; paragraph 21 of the judgment. For a recent application of the Antonissen principle, see Case C-344/95 Commission v Belgium [1997] ECR I-0000.
(58) - Paragraph 20 of the judgment; see also paragraph 32 of the Opinion. An unemployed person in receipt of benefits who moves to another Member State seeking work continues, under Article 69(1) of the Regulation, to enjoy the right to those benefits in the host State for at least three months.
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