This short text aims to provide its readers with a simplified introduction into the theory of social security co-ordination and the co-ordination instruments of the European Union. It describes the basic philosophies behind social security co-ordination; especially the aims of social security co-ordination, why it is needed and how it is achieved. This paper provides as well an overview of the principles of co-ordination and basic co-ordination.
The rules, the European Court of Justice (ECJ) and selected national case law related to these coordination rules can be found under resources.
Why is co-ordination needed ? The territoriality of social security and migrants
Social security is essentially a creation of national law. The amounts of benefit, conditions of entitlement and duration of payment within social security schemes are determined by national law. These schemes are administered by national bodies governed by national rules and regulations. The scope of social security schemes is therefore traditionally confined to the nationals or the territory of that particular state.
The territorial nature and diversity of social security can cause problems when people migrate from one state to another.
The goals of the European Union
From the beginning of the European Economic Community (EEC) in 1957, the free movement of persons was considered to be one of the basic principles of the Treaty of Rome. Together with the free movement of capital, goods and services, it still forms the foundations of the European Union.
Free movement of persons implies that within an internal European market each citizen has the right to go and work or to look for work or to study or just go on holiday in another country of the European Union.
The free movement of persons knows however some impediments. Apart from some “natural" limitations, as cultural problems or linguistic problems, differences in standard of living, people can also be confronted with obstacles, which are the result of differences in national legislations, in particular in the field of social security.
When enacting the Treaty of Rome, one was pretty aware of the fact that social security systems in the Member States of the European Union not only differed to a big extent but also that the rules governing social security where only applicable on the territory of each Member State and that this situation was in order to lead to impediments for the free movement of persons. Mobility of persons should be encouraged.
This cannot be the case, when the worker, who leaves his country to go and work in another country of the European Union, loses – completely or partly – his social security rights of the State he is leaving or when he is not able to get benefits in the State where he arrives. In addition, one has also to take into account the recent developments where every EU citizen has the right to freely move and reside, under certain conditions, on the territory of other member states of the European Union.
The legal instruments available: the European co-ordination of social security rules
The European Treaty foresees for these reasons since its origins in 1958 that the Council of Minister, the legislative body of European union law, with unanimity of votes, takes those measures necessary in the field of social security for improvements of the free movement of persons. This was definitely one of first measures ever taken in the European Union.
Already on the first of January 1959 Regulations Nrs. 3 and 4 on social security for migrant workers entered into force.
On 1 October 1972 these regulations were completely revised and replaced by the actual Regulations Nrs. 1408/71 and 574/72 (hereafter "the Regulations"). The necessary administrative measures for the application of Regulation 1408/71 are dealt with in Regulation 574/72. Since 1971 this Regulation was the subject of several amendments in order to accommodate trends in national legislation and progress resulting from the rulings of the Court of Justice of the European Communities.
A new Regulation Nr. 883/2004 aiming at a simplification and rationalisation of these Regulations has also already been adopted by the European Council, but is not yet applicable as no implementing Regulation has been adopted.
The objectives of these regulations is to install a co-ordination of the various social security systems in the European Union. The final goal of these rules do not look for a harmonisation of the different national regulations, which would mean an uniform common European system of social security throughout the Union.
The intention is through regulations to allow a concerted action of different national legislations that are in conflict with each other. These regulations therefore leave intact the liberty of the national Member States to determine principals and rules of their own national social security systems. This means that the different national legislators remain competent to determine who is insured, which benefits they provide and under which conditions, how benefits are calculated, the duration of a benefit, the amount, as long as there is no discrimination between citizens of the European Union. This means that national rules will, in principle, not be substituted by the European rules in these domains. As an example the level of pensions and the formula to calculate it will remain of the competence of the national legislator.
These co-ordinating instruments only apply in situations where there is some cross border element. Through co-ordination one only wants to guarantee that someone, who wants to go to work in another Member State , does not lose his social security rights due to provisions valid in other social security systems. In addition one wants to take care that a migrant worker is not unfairly treated in the field of social security in comparison with a person, who has worked all his life in one Member State .
The four basic principles of social security co-ordination
Four basic principles are used by co-ordination law in order to protect the social security situation of migrants and rectify the problems created by the territoriality and diversity of national social security systems.
These four basic principles are:
- Determination of the applicable legislation or unity of applicable
In cross-border situations it can indeed happen that a migrant person could be either simultaneously subject to two legislations, or that he is not subject to any legislation at all. This is a consequence of the fact that the national legislators remain competent to determine the criteria on which someone is insured or not. In some countries one has eg. to reside in order to be subject to the social security legislation. In other countries one has to work. With co-ordination the application of these different criteria would lead to legal conflicts. Imagine the case of somebody who lives in Belgium , where working is a criterion for being insured, but works in the Netherlands , where residing is the criterion. This person would be subject to no social security legislation at all and would therefore have no rights to any benefits. In Belgium he is not insured, because he is not working here and in the Netherlands he is not insured, because he is not living there. In this case one speaks of a negative legal conflict. At the contrary, if that person works in Belgium and resides in the Netherlands , he would fulfil the conditions of both legislations and he would simultaneously be insured in both countries. However, he should then also pay the contributions two times. In this case one speaks of a positive legal conflict. These legal conflicts are impeding the free movement of persons and can be avoided by stating that the law of only one state should apply at any time and then establishing a rule or system of rules to decide which law it should be. That is the reason why in the Regulation rules of conflict are adopted, which indicate the applicable legislation. A migrant person will therefore only be insured under one legislation and only under this legislation, excluding every other possible legislation. The free movement of persons may definitely not lead to a situation, where someone is simultaneously insured in two countries or not insured at all. In general, an employee or self-employed person is subject to the country of employment, even if he or she lives in another country. It is in this country that one has to pay contributions, just as it will be this country that in principle will also pay the benefits. But, like on every rule, some exceptions are provided for.
- Equal treatment or non-discrimination
A second important principle of European social security law is the prohibition of every discrimination between persons of different nationality. Migrant persons can indeed in the new country of employment be confronted with legislations that contain discriminatory provisions on the basis of nationality. Sometimes, national legislation will know stricter conditions of application for foreigners. This principle prevents states treating foreign nationals differently to their own nationals. The Regulation provides that all persons to which this legislation is applicable, will have the same rights and obligations in the field of social security as its own nationals. Nationality cannot be the sole criteria to lead to different rights or benefits.
- Maintenance of acquired rights or rights in course of acquisition also called totalisation
A third , in practice rather complicated, principle is the right to preserve rights in course of acquisition. In many legislations, the right to obtain a benefit is dependent on the condition of having fulfilled a certain period that one was insured or residing in the State. If someone wants to obtain a benefit, he should have paid contributions during a certain period in that country or have been working or residing for a certain period. Such waiting period conditions can be very detrimental for migrant workers. The danger is that when persons move from one state to another they will lose the credit they have gained for any periods of residence or employment in their former state. This could be very harsh indeed for those who wish to move to another country after they have already been employed in their home state for a long time. It can happen that someone, who has during his whole career worked in many Member States, would then not have fulfilled the waiting period in any of these states, which could lead to the fact that he has not any right to a benefit. The insurance period, which he has fulfilled in one of these countries, would only give right to benefits if he would have been insured there during the whole waiting period. This is especially the case for the acquisition of rights for a pension. To counter the negative consequences of such rules, the Regulation provides the totalisation of periods. For obtaining a right to a benefit, one has eventually to take into account periods of insurance, labour or residence fulfilled in another Member State . These periods fulfilled in another Member State are considered to be fictitiously fulfilled under the applicable legislation. Through this principle migrant workers can obtain certain benefits (eg. in case of pensions), regardless of changes or even interruptions in their international career.
- The export of benefits or exportability of benefits
- A fourth important principle is the right to preserve its social security rights that one has acquired within the European Union. Another way to describe this right is the possibility to export social security benefits. Many national legislations know as condition for the payment of benefits that one resides on the territory of that State. Such national provisions can, in particular for migrant workers, be very detrimental. Imagine the case of a migrant worker, who has worked all his live abroad, acquired the right to a pension and decides at the end of his active life to return to his country of origin. In that case he might lose his acquired rights. This would imply that citizens of the European Union would, as a matter of fact, be compelled to stay all their life in one and the same country if they want to get social security benefits .This is clearly an impediment to the free movement of persons. This is the reason why the Regulation provides that benefits in case of "invalidity, old-age or survivors' cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated". The case law of the Court of Justice has widened the scope of this provision, by determining that the free movement of persons not only requires that benefits can be "exported", but also that one may not be refused to obtain the right to a benefit, because one is living in another state. In that sense, residents' conditions are in principle always forbidden. This is the case when they are a condition for the payment of the benefit, as well as when they are a condition for obtaining the right to a benefit.
These co-ordinating instruments are only concerned with migrants. Originally, Regulation 1408/71 only covered workers but with effect from 1 July 1982 its scope was extended to cover the self-employed too. The Regulation also covers members of workers' and self-employed persons' families and their dependents, as well as stateless persons and refugees. In 1998, the Council extended the scope of Regulation 1408/71 so that also special schemes for civil servants would fall under the field of application of the Regulation. In 1999, the scope of the Regulation was extended to include all insured persons, particularly students and others not in gainful employment. Since, 1 June 2003 third country nationals as well as the members of their families and their survivors can rely on the EU provisions on co-ordination of social security, provided they are legally resident in the territory of a Member State and are in a situation which is not confined in all respects within a single Member State.
Nationals from Iceland, Liechtenstein and Norway are also covered via the European Economic Area (EEA) Agreement. On 1 June 2002, the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons was signed, so that in general the provisions of Regulations 1408/71 and 574/72 apply also in relation to Switzerland.
Regulation 1408/71 lists the social security benefits covered by the Regulation. These are the general traditional risks of social security:
- sickness and maternity benefits;
- invalidity benefits, including those intended for the maintenance or improvement of earning capacity;
- old-age benefits;
- survivors benefits;
- benefits in respect of accidents at work and occupational diseases;
- unemployment benefits;
- family benefits.
- Regulation 1408/71 only covers basic social security schemes and no complementary schemes.
- Regulation 1408/71 applies whether or not the benefits are contributory or non-contributory;
- Regulation 1408/71 applies whether or not the benefits are provided generally or only in certain sectors or for certain employed/self-employed persons.
- Regulation 1408/71 only in principle applies to legislation and not to collective labour agreements.
In general, social
assistance does not fall within the scope of Regulation 1408/71. What should be understood under social assistance is not very clear. One could however conclude that a benefit is social assistance and therefore excluded from the application of the Regulation if:
• it is discretionary; or
• it is a benefit which is general in nature, which implies that it covers a general need and grants a minimum income to all citizens.
Specific co-ordination rules
Apart from these four big principles Regulation 1408/71 also knows an important number of provisions that take into account the specific needs of certain categories of persons, as seasonal workers, frontier workers, seafarers or international transport drivers. They also contain an important number of provisions taking into account the different characteristics and peculiarities of national legislation.
Some provisions are also dealing with particular rules for certain sectors of social security. Think about the yearly by millions of people used rights on the basis of which persons, who are insured in a certain country, can obtain medical care in another country, when they are on holiday and need necessary care. This seems “natural” today, but it is a direct consequence of the application of coordination rules.
The co-ordination is a difficult and technical matter and will remain as such. The basic reason is in particular the important number of differences between the national legislations and the complexity of these national rules to be taken in account each time there is an international situation. However, the Regulation managed to take away the most important impediments for migrant persons in the field of social security and as such to help guaranteeing the free movement of persons. As such, they improve those aspects of national legislation that could impede cross-border movement. In this sense they guarantee to the migrant workers a continuous social protection on its trip throughout Europe.