Inside the Commission: preparing a first substantial revision of the ‘new’ Regulations

Ms Miroslava Hajkova is Legal Officer in the Unit ‘Free movement of workers and coordination of social security systems’ of DG Employment, Social Affairs and Inclusion. She took up this responsibility in November 2009. Before, she worked at the Secretariat General and in DG Internal Market and Services of the European Commission. We found her prepared to give us in-depth information about the future plans of the Commission to substantively revise the current Regulations.

trESS: Ms Hajkova, thank you for your time. The new Regulations 883/2004 and 987/2009 are applicable since 1 May 2010 and have been amended very recently by Regulation 465/2012. Is there a need for further revision and why exactly?

Miroslava Hajkova (MH): The new rules started to apply in May 2010, so indeed at first sight their revision could seem premature. At a closer look, however, you can see that this is not the case. The Commission’s proposal for the modernised basic Regulation dates back to 1998. This means that the legislative process for the modernised coordination rules lasted over 10 years. During this period, the Court of Justice delivered a number of important rulings, two EU enlargements took place and the socio-economic situation both in the EU and in the Member States changed considerably. Both the Member States and the Commission, which has the right of initiative, have the obligation to make sure the Regulations are still fit to meet today’s needs and to reflect the developments in national and EU legislation, the case law of the Court of Justice and the socio-economic context. Possibilities for simplification should also be considered. Finally, in several areas, the last attempt for modernisation did not succeed and the same rules have applied for decades.

You mention Regulation 465/2012, which recently amended certain provisions and annexes of the modernised Regulations. These ‘Miscellaneous Amendments’ were technical or limited to very specific updates. Such technical amendments are periodically made to ensure legal certainty, especially where the wording of the EU provisions needs to be corrected or where certain annexes have to take account of specific changes in the national legislation. For example, a benefit ceases to exist and has to be deleted from an annex. Their purpose is therefore not to substantially revise the coordination rules.

There is also a procedural difference. Unlike in the case of substantial revisions or new legislative acts, miscellaneous amendments are not subject to the obligation to perform an impact assessment.

trESS: Can you give concrete examples of ‘room for improved coordination’ in the targeted social security branches, which could be subject to the upcoming substantial revision?

MH: At the moment, our ambition is to improve the rules in two areas of coordination: unemployment benefits and long-term care benefits. These are the areas where the previous modernisation process did not lead to the expected results – which does not exclude that other areas may be revised and updated in the future.

In the previous trESS Newsletter, my colleague Marzena Matyja described the challenges linked to the coordination of long-term care benefits under the current EU legal framework. Long-term care benefits were not explicitly mentioned in Regulation 1408/71, the predecessor of the new Regulations. Under Regulation 883/2004, this has remained unchanged, with the exception of one provision on the overlapping of benefits in Article 34. These benefits however do fall within the material scope of the Coordination Regulation. It was the Court of Justice that ruled that these benefits must be regarded as 'sickness benefits' within the meaning of the Regulation. What makes the application of the sickness chapter especially difficult is the classification of the long-term care benefits and finding the dividing line between long-term care benefits in kind and in cash. This is because the national schemes for long-term care are different and definitely more diverse than the classical sickness schemes. We can also see the increasing appearance of new mixed-type long-term care benefits.

Also the Court of Justice, in its most recent case law, makes a distinction between 'sickness benefits stricto sensu' on the one hand and long-term care benefits on the other hand. Although the Court insists that, in the absence of specific coordination rules, the long-term care benefits be considered as sickness benefits, it acknowledges that these benefits may display characteristics which in practice resemble benefits of other social security branches, especially of the invalidity and old-age branches. Regulation 883/2004 does not take the specific character of long-term care benefits into account. Their diverse nature makes their coordination a real challenge that leads to the need to better fit the long-term care benefits within the defined legal concepts.

The coordination of unemployment benefits faces different challenges. The unemployment chapter of the modernised Regulation 883/2004 largely remained similar as in the former Regulation 1408/71, apart from some minor adaptations. The attempt to modernise and simplify this chapter was not achieved in the modernisation process. On the contrary, it seems that the changes added to the complexity of these rules.

The main identified problems concern the rule for frontier workers who, when wholly unemployed, must apply for unemployment benefits in their country of residence, although they were subject to the legislation of the Member State of work and paid social security contributions there. This rule is not only questionable from the unemployed persons' point of view, but also from the view of the Member State of residence which has to bear the cost of the unemployment benefits and other social security benefits, without having received any contributions from these workers during their last employment. A limited reimbursement mechanism set up by Regulation 883/2004 partially addresses the issue of the fair sharing of costs between the countries, but adds to a further complexity of the rules and increases the administrative burden for the institutions. Other challenges that have been identified regarding the coordination of unemployment benefits are the uneven application of the rules on the export of unemployment benefits by Member States and different practices in the application of rules on aggregation of insurance, employment or self-employment periods. Many of these issues have also been identified and summarised in the 2012 trESS Think Tank report on the coordination of unemployment benefits.

trESS: We understand that these problems are not new. Why were these revision plans not included in the modernisation exercise of Regulation 1408/71? Maybe this way double work could have been avoided.

MH: These issues were indeed discussed during the legislative process for the modernised Regulation. However, despite the efforts made during the negotiations, it was not possible to address them at that time. Regulation 883/2004 strengthened the principles of coordination and brought improvements in many social security branches, but in the area of unemployment and long-term care the modernisation was simply not achieved.

Let’s remember that before the Lisbon Treaty, any changes to the EU rules had to be made with the unanimous approval by Member States. This meant that a number of important proposed changes were blocked, especially given the increased number of Member States in 2000 in comparison to 1971.

With regard to long-term care, one of the famous ‘parameters’ through which Member States demonstrated their political commitment in the modernisation of the coordination rules, called on the legislator to accommodate the Regulation to societal changes, namely the problem of continuity of care. This objective was not reached. With the exception of Article 34, long-term care benefits remained without a specific coordination regime. Nowadays, we see stronger signals from Member States that there is indeed a will to enable a more transparent and effective coordination of long-term care benefits. This is a reaction not only to the constant developments of long-term care schemes in the countries, but also to the case law of the Court of Justice. In the absence of action by the EU legislator, the Court had to deal with the coordination of these benefits within the existing framework, which, as I mentioned, is not ideal given the specific character of these benefits.

The unemployment chapter was the last one discussed in the Council and at that point there was already a certain ‘legislative fatigue’. With the required unanimity in the Council, there was no room for an agreement on the Commission’s proposal to establish the principle of ‘lex loci laboris’ for the unemployment benefits of all categories of workers. The search for consensus lead to a very difficult compromise. The recent discussions in the Administrative Commission have demonstrated the extent to which this compromise is complex and subject to different interpretations and misunderstandings. Bearing the right objectives in mind, we believe the unemployment chapter can be rationalised and simplified.

trESS: Which are the concrete steps to be taken to achieve the planned revision?

MH: As you know, the legislative initiatives and even some important non-legislative initiatives of the Commission must be accompanied by an analysis of their impact, apart from rare exceptions. This process is part of the ‘Better Regulation Strategy’, which aims at simplifying and improving EU law, better designing new regulations and reinforcing the respect and the effectiveness of the EU rules. When existing EU legislation is revised, the current rules must also be evaluated.

The evaluation and the impact assessment are therefore the steps preceding the Commission’s legislative proposal for a revision of the current Coordination Regulations. It is interesting to underline that this is the first time that such an obligation applies to the social security coordination rules in their long legislative history.

trESS: What is an ‘impact assessment’ exactly? Is this really necessary to improve the coordination rules?

MH: Simply put, through impact assessment we should assess the potential economic, social and environmental consequences that our initiative may have. It is a set of the following logical steps: identification of problems, definition of objectives, developing of main policy options to achieve these objectives, analysis of impacts of these options, comparison of the options and defining policy for subsequent monitoring and evaluation.

The impact assessment does not necessarily lead to a preferred policy option. It is an objective analysis, which should prepare evidence for political decision-makers on the advantages and disadvantages of possible policy options. Obviously, if for a certain option the advantages outweigh the disadvantages, it is very likely that such option would be highlighted in the impact assessment as a preferred option for the legislative proposal. In reality, however, most options may imply certain negative impacts and then it is the political decision makers who have to assess which of the options better corresponds to the desired objectives.

Not all impact assessments have the same level of depth and detail. The guiding principle is that the analysis must be proportionate to the expected nature of the proposal and its likely impact.

Impact assessments are not only mandatory, but certainly also useful because they provide evidence-based analysis for decision makers. They should serve as a tool for making decisions based on facts and pertinent information. All impact assessments and all relative opinions of the Impact Assessment Board are published online on the Commission’s website once the Commission has adopted the relevant proposal.

trESS: How will all this pre-work take into account the interests of the mobile citizen as the first and most important addressee of the Coordination Regulations?

MH: Wide-ranging consultation with stakeholders, including the general public, is an integral part of the impact assessment process. We have just launched a public consultation on the revision of the EU rules coordinating unemployment and long-term care benefits. This public consultation is addressed to all EU and non-EU citizens who are insured for social security in an EU or EEA/EFTA Member State and to any public and private organisation with activities in an EU or EEA/EFTA Member State. So, we are not only asking for the views of mobile citizens, but even of people who have not yet moved within the EU.

Another good indicator of the interests and problems faced by mobile citizens are the letters and complaints that we have received from them over recent years. Finally, the interests of mobile citizens are also represented by Member States, trade unions and non-governmental organisations, which will also be consulted.

trESS: Is there any possibility that the outcome of the process will be that the coordination rules will remain as they are today?

MH: The impact assessment may of course indicate that no action at the EU level should be taken to address a specific problem. There could be various reasons for such a conclusion. For example, it could finally appear that the source of a particular problem are not the EU rules as such, but the insufficient information provided to the citizens or to the local administrations about these rules and their incorrect application. In such case, it may be more appropriate to go for non-legislative soft solutions, such as target information campaigns and implementing guidelines, rather than revising the rules.

The Commission services also have to bear in mind the principles of subsidiarity, proportionality and the EU added value of a certain initiative. In social security, the actions at EU level are justified by Article 48 of the Treaty on the functioning of the EU, which requires the European Parliament and the Council to adopt such measures that are necessary to secure that mobile workers and their dependants do not lose their social security rights. A solution to this cross-border issue cannot usually be found at national, regional or local level. For the free movement of persons within the EU to be effective, it is necessary that all Member States agree on common principles and procedures to follow when applying national rules to situations with a cross-border element. Since this is by definition a transnational issue, the coordination rules on social security must go beyond actions at a national level and create a common ground that should be equally applicable to all Member States.

trESS: How can people give their opinion about the possible changes of the coordination system?

MH: I would invite them to participate in the public consultation that I mentioned earlier. The online survey is open for responses between 5 December 2012 and 5 March 2013 and can be accessed via the following link:

In the upper right hand corner the respondents may view the questionnaire in other EU languages, in which they may also respond.

trESS: Then we can warmly invite our readers to participate in this exciting process. Thank you, Ms Hajkova!

MH: Thank you and thank you to the trESS newsletter readers for dedicating their time to respond to the public consultation.

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