COMMISSION REGULATION (EC) No 311/2007 of 19 March 2007 amending Council Regulation (EEC) No 574/72 laying down the procedure for implementing 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.
Official Journal of EU L 82 Volume 50 23 March 2007 p.6
This amendment deals in particular with designating the authorities which are responsible for ensuring that social security legislation is implemented in accordance with Community Law.

Case C-50/05 Nikula

The reference for a preliminary ruling concerned the calculation of sickness insurance contributions. The national court asked whether Article 33(1) of Regulation No 1408/71 precludes the inclusion of pensions paid by the institutions of another Member State, when the basis for calculating sickness insurance contributions is determined by the Member State of residence, provided that the sickness insurance contributions do not exceed the amount of pensions awarded by the State of residence.

The Court observed that pursuant to Article 27 of Regulation No 1408/71, a pensioner who is entitled to draw pensions under the legislation of two or more Member States, including that of the Member State in whose territory he resides, is entitled to benefits in kind under the legislation of the Member State in whose territory he resides, as though he were a pensioner whose pension was payable solely under the legislation of the latter State. The Member State of residence is authorised, by virtue of Article 33(1) of the regulation, to make deductions of contributions in accordance with the rules laid down in its legislation. The Court observed that objective of Regulation No 1408/71 is to ensure free movement of employed and self-employed persons within the European Community, while respecting the special characteristics of national social security legislation. The system put in place by Regulation No 1408/71 is merely a system of coordination. In the absence of harmonisation at Community level it is for the legislation of the Member State concerned to determine the income to be taken into account when calculating social security contributions (See Case C-18/95 Terhoeve [1999] ECR I-345, paragraph 51).

However, when the Member State concerned exercises that power, it must comply with Community law (see, in particular, Terhoeve, paragraph 34, and Case C-227/03 Van Pommeren-Bourgondiën [2005] ECR I-6101, paragraph 39). In a case in which an institution of the Member State of residence pays a pension and an institution of the same Member State is responsible for payment of sickness insurance expenses, there is no provision of Regulation No 1408/71 which prohibits that State from calculating the amount of the social contributions of a resident on the basis of his total income, whether it comes from pensions paid by the Member State of residence or from pensions paid by another Member State. However, whatever the calculation method adopted, the amount of the contributions may not exceed that of the pensions paid by the institutions of the Member State of residence since, as by application of Article 33(1) of Regulation No 1408/71, the sickness insurance contributions may be deducted only from the pensions paid by the Member State of residence (see, Rundgren, paragraph 49).

Furthermore, it would be an obstacle to the free movement of persons for the Member State of residence to implement a system which did not take into account the sickness insurance contributions already paid by pensioners during their working years in a Member State other than the Member State of residence. Article 39 EC precludes the amount of pensions received from institutions of another Member State from being taken into account if contributions have already been paid in that other State out of income from work received in that State. The Member State responsible for benefits must deduct from the basis of calculation the amount of pensions for which contributions have already been paid by the pensioners in other States. This deduction must be made both when the contributions were paid by the persons concerned out of their income from work, or directly deducted from that income. It is for the persons concerned to prove that the earlier contributions were in fact paid.

The Court stated that its earlier ruling in the Case C389/99 Rundgren was not transposable to the proceedings in the Nikula case. In Rundgren the country of residence was not paying a pension. The Member State paying pensions assumed responsibility for payment of the benefits in kind. Therefore the country of residence could not, under Article 33(1) of Regulation 1408/71, "make ... deductions...from the pension or annuity payable by [it]" . A pensioner cannot be required, because he resides in the territory of a Member State, to pay compulsory insurance contributions to cover benefits payable by an institution of another Member State (see Case C-140/88 Noij [1991] ECR I-387, paragraph 14). Thus the Member State of residence which did not pay any pensions could not claim payment from Mr Rundgren of contributions, since he was entitled to benefits for which the Member State competent in respect of pensions assumed responsibility.

The referring national court, Korkein hallintooikeus, decided the case on 27 December 2006 (KHO:2006:99). It observed first that according to the Judgement of the Court of Justice Article 33 (1) of Regulation 1408/71 does not preclude calculating the amount of the contributions of a resident on the basis of his total income and to include in the basis of calculation both the pensions paid by the Member State of residence and pensions paid by another Member State. Secondly the national court observed that Article 39 EC precludes the amount of pensions received from another Member State from being taken into account if contributions have already been paid in that other State out of income from work received in that State. However, it is for the persons concerned to prove that the earlier contributions were in fact paid. The national court ruled that the applicant had not proven that he had paid contributions or that contributions were already deducted from the foreign pensions. Therefore pensions received from another Member State could be included in the basis of calculation of the contributions in the country of residence.

Case C-205/05 Nemec

In this preliminary ruling the question was whether the decision refusing to take account of the pay earned in another Member State constituted an infringement of Regulation 883/2004.

The Court answered this question by observing that the Regulation 883/2004 is to enter into force 20 day after its publication but it is to apply only from the date of entry into force of the Implementing Regulation. Since the implementing regulation has not yet been adopted, the Court stated that the provisions of Regulation 1408/71 remain applicable.

The Court held that article 58 of Regulation 1408/71, like all provisions of the regulation, must be interpreted in the light of Article 42 EC. That provision entails, that migrant workers must not lose their right to social security benefits or have the amount of those benefits reduced because they have exercised the right of freedom of movement. However, this does not mean that article 58 (1), by not allowing the pay earned in another Member State to be taken into account for the calculation of cash benefit, must be regarded as contrary to the objective of Article 42 EC. It means that the benefits must be the same for the migrant worker as they would have been if the had not availed of the right to free movement. The Court established that although account is to be taken only of the pay earned in the competent Member State, the amount of that pay must be updated and revalorised so as to correspond to the pay the applicant might reasonably have been able to earn if he had continued to work in the competent Member State.

Case C-265/05 Naranjo

The reference for a preliminary ruling concerned the interpretation of Article 4 (2a) of Regulation 1408/71. This article introduced a special coordination regime for the so-called "Special non-contributory benefits". According to Article 10a of the Regulation, these special non-contributory cash benefits are not exportable and shall be exclusively granted in the territory of the Member State in which the person concerned resides, in accordance with the legislation of that state and provided that such benefits are listed in Annex IIa.

Mr Naranjo is a Spanish national who has in the past worked in France and afterwards returned to Spain. He receives a French old-age pension and subsequently asked for a supplementary allowance from the national solidarity fund. This benefit was refused, as according to the French administration, this benefit is a special non-contributory benefit which is not exportable. The question is whether this allowance has a special character on the one hand and whether it is non-contributory on the other.

The Court confirmed its case law (see eg. Skalka, Case C-160/02 and Kersbergen-Lap, Case C-145/05) that a special benefit is defined by its purpose. It must either replace or supplement a social security benefit and be in the nature of social assistance justified on economic and social grounds and fixed by legislation, setting objective criteria. For the Court this supplementary allowance has a mixed character and must therefore be regarded as a special benefit. The above-mentioned case law also made clear that, as regards whether or not the supplementary allowance is contributory, the determining criterion is how the benefit concerned is actually financed. The Court must consider whether that financing comes directly or indirectly from social contributions or from public resources.

The supplementary allowance paid by the Health Insurance Fund is however reimbursed by the Fonds de solidarité de vieillesse (FSV), so that the burden of that allowance falls on the latter. The FSV is essentially deriving its income from the General Social Contribution and the Social Solidarity Contribution levied on companies. Therefore, in order to know whether we are dealing with a non-contributory benefit, it is appropriate to determine whether a contribution such as a General Social Contribution must be regarded as a social security contribution or as public resources, which do not have the characteristics of such contribution. According to the Court, a General Social Contribution shares certain similarities with general social security contributions, in particular as regards its basis of assessment and the procedure for its collection. However, the allocation of the General Social Contribution to the financing of social security is not sufficient to show that the supplementary allowance is as such a contributory benefit. Therefore, we have to see whether there is an identifiable link between the supplementary allowance on the one hand and the General Social Contribution on earned income on the other.

In the Court´s opinion, the relationship between the supplementary allowance and the General Social Contribution does not appear to fulfil that condition. The FSV obtains its revenue also from other contributions and levies, whose qualification as fiscal in nature were not challenged. The General Social Contribution not only serves to finance the FSV, but also other social schemes. The FSV has the task of assuming responsibility for non-contributory old-age benefits, covered by national solidarity of which the supplementary allowance is only a limited part. In the light of these observations, the Court ruled that the French supplementary old-age allowance, as listed in Annex IIa of Regulation 1408/71, does not constitute a special non-contributory benefit. The Court added, however, that it is for the national courts to confirm the accuracy of the factors it took into account, in order to determine conclusively whether the benefit is contributory or non-contributory.

Case C-332/05 Celozzi

The reference for preliminary ruling concerns the calculation of the daily sick pay of a migrant worker. Mr Celozzi is an Italian who works and resides in Germany, while his wife further continues to reside in Italy with their children. Mr Celozzi was paid a daily sick pay, which was based on the remuneration most recently received by him. These net wages are determined by the tax class which the worker concerned was in. According to the German legislation and as a matter of administrative practice, a migrant worker whose spouse continues to reside in the Member State of origin, is automatically placed in the (less favourable) tax class applicable to workers who are married, but permanently separated from their spouses, instead of, like national workers, being allocated the (more favourable) tax class which is applicable to married workers living with spouses who are not in paid employment.

A correction of the tax class is possible, but depends on an express application by the migrant worker and a certificate from the tax authorities. However, a correction of the tax class has no effect on the daily sick pay granted to the person concerned, as in most of the cases a retroactive amendment of the amount of that pay is not foreseen. The Court makes clear that the application of such a scheme places a migrant worker in a position which is clearly less favourable than that in which a national worker, in the same circumstances, would find himself. So there is clearly a discriminatory treatment of the migrant worker, contrary to Article 3 of Regulation 1408/71. The Court held that it is not necessary to examine to what extent the objectives invoked (administrative simplification, complexity of calculations) may constitute legitimate aims, and confined itself to stating that the measures in question go beyond that which is necessary to obtain those aims. Such aims do not preclude subsequent correction of the amount of sick pay, for instance by the introduction of a mechanism where the amount of that pay is retroactively adjusted to take account of the actual position of the migrant worker.

C-444/05 Stamatelaki

In our previous newsletter, we discussed the ruling in Watts (C-372/04), the long-awaited case on the application of the free movement of services to the National Health Service (NHS). Notwithstanding the abundant case law on cross-border medical treatment, some burning issues still remain. One of the pending questions was whether it is possible under the Treaty-based procedure on cross-border medical care to limit the range of health care providers whom insured persons can turn to, to public or contracted providers. While the procedure under Regulation 1408/71 is limited to providers who are operating in the context of a social security scheme, Article 49 EC in principle allows no restriction as to the choice of the foreign health care provider. This issue was further clarified in the very recent Stamatelaki-case of the Court of Justice.

Article 49 EC precludes legislation of a Member State, such as that at issue in the main proceedings, which excludes all reimbursement by a national social security institution of the costs occasioned by treatment of persons insured with it in private hospitals in another Member State, except those relating to treatment provided to children under 14 years of age.

This is the main statement made by the Court in the latest case on to the interpretation of Article 49 EC,.The person concerned was affiliated to the Greek system and asked for reimbursement of the costs incurred upon admission to a private hospital in the United Kingdom. His claim for reimbursement of the costs associated with treatment in the UK was dismissed by the Greek competent institution on the grounds that the relevant Greek rules do not provide for reimbursement of the cost of treatment in private hospitals abroad except in the case of children under 14 years of age.

An action challenging that decision was brought before the Athens Administrative Court of First Instance, which decided to stay proceedings and refer to the Court of Justice for a preliminary ruling. The Court was asked whether the Greek provisions constitute a restriction of of the fundamental freedom to provide services within the Community, enshrined in Article 49 et seq. of the EC Treaty.

The Court found that it followed from the Greek legislation that if a patient insured in Greece with a social body receives treatment in a public establishment, or in a private establishment which is located in that Member State and with which an agreement has been entered into, he does not have to pay out any sum. The situation is different, the Court noted, where that patient is admitted to a private hospital in another Member State; in that case, he must pay the costs of treatment himself and does not have the possibility of being reimbursed. The sole exception concerns children under 14 years of age.

The Court further observed that, while the existence of an emergency constitutes an exception to the rule of no reimbursement where a patient is admitted to a private hospital in Greece with which no agreement has been entered into, it does not constitute an exception in any case upon admission to a private hospital in another Member State.

For the Court, such legislation deters, or even prevents, persons with social security cover from seeking treatment from providers of hospital services who are established in Member States other than the Member State where they are insured and constitutes, both for them and for those providers, a restriction on the freedom to provide services (point 28).

The Court of Justice has recognised that certain overriding reasons in the general interest may justify a barrier to the freedom to provide hospital services, such as the risk of seriously undermining the social security system´s financial balance, the objective of maintaining a high quality balanced medical and hospital service open to all or the maintenance of treatment capacity or medical competence on national territory. In particular, it has acknowledged that the number of hospitals, their geographical distribution, the way in which they are organised and the facilities with which they are provided, and the nature of the medical services which they are able to offer are all matters for which planning must be possible. This planning meets a variety of concerns, including those of ensuring that there is sufficient and permanent access to a range of high-quality hospital treatment, and of controlling costs and preventing any wastage of scarce resources. The Court has added that, if patients were at liberty to use the services of any kind of hospital, including hospitals with which their health insurance fund had no agreement, this planning effort would be jeopardised In the present case, the Court considered that the Greek rules at issue were not capable of being justified by the abovementioned legitimate aims, as the rules were disproportionate. In the Court´ s words; the absolute terms, with the exception of the case of children under 14 years of age, of the prohibition laid down by the Greek legislation are not appropriate to the objective pursued, since measures which are less restrictive and more in keeping with the freedom to provide services could be adopted, such as a prior authorisation scheme which complies with the requirements imposed by Community law and, if appropriate, the determination of scales for reimbursement of the costs of treatment. (point 35).

The Court also rejected the Greek Government´ s argument relating to the fact that Greek social security institutions do not check the quality of treatment provided in private hospitals in another Member State and to the lack of verification as to whether hospitals with which an agreement has been entered into are able to provide appropriate identical or equivalent medical treatment. The fact remains , the Court said, that private hospitals located in other Member States are also subject, in those Member States, to quality controls and that doctors established in those States who operate in those establishments provide professional guarantees equivalent to those of doctors established in Greece, in particular since the adoption and implementation of Council Directive 93/16/EEC of 5 April 1993 to facilitate the free movement of doctors and the mutual recognition of their diplomas, certificates and other evidence of formal qualifications (points 36 &37).

This new case shows that it will be very difficult for the competent institution to find a valid justification for restricting the freedom to provide health services in private hospitals in other Community countries, over and above the restrictions already deemed justified in previous case law.