Certain Member States were concerned about the so-called “welfare tourism”, i.e. the possibility of nationals of another Member State to enter their territory “solely” in order to claim benefits. Yesterday’s judgment in Case C-333/13 Dano comes to relieve those concerns.

In short the facts of the case can be summarised as follows. Ms Dano and her son, Romanian nationals, entered Germany and live in the city of Leipzig. Ms Dano receives child benefit for her son as well as another allowance paid out for a children, whose father’s identity is unknown (in total 317 Euro). In the background to the case, there is nothing to indicate that she has looked for a job in Germany. The case in the main proceedings was initiated when Ms Dano’s application for the grant of benefits by way of basic provision for jobseekers was rejected by the German administration (the child’s benefits are not at issue).

The national court referred questions in relation to the interpretation of the Social Security Regulation 883/2004 (“the Regulation”), the Citizenship Directive 2004/38 (“the Directive”) as well as the Charter of Fundamental Rights (“the Charter”).

First of all, the Court of Justice (“CoJ”) takes as a given that the benefits at issue are “non-contributory cash benefits”, as the referring court has concluded. It then states that the special non-contributory cash benefits (as mentioned in Article 3(3) and 70 of the Regulation) fall within the scope of Article 4 of the Regulation establishing the equality of treatment between persons falling under the Regulation as regards benefits and obligations under the legislation of a Member State on the one hand and the nationals of that State on the other. According to the Regulation, such benefits should be granted solely in accordance with the legislation of the Member State of residence of the person concerned or of the members of his or her family and without discrimination on grounds of nationality. Furthermore, such benefits are not exportable, the CoJ said.

Coming now to the main question: Do Articles 18 TFEU, Article 20(2) TFEU, Article 24(2) of the Directive and Article 4 of the Regulation preclude legislation of a Member State under which nationals of other Member States who are not economically active are excluded from entitlement to certain “special non-contributory cash benefits”, although those benefits are granted to nationals of the Member State concerned who are in the same situation?

The CoJ’s point of departure is from the notion of Union citizenship: Article 20(1) TFEU confers on any person holding the nationality of a Member State the fundamental status of citizen of the Union, enabling those persons who find themselves in the same situation to enjoy within the scope ratione materiae of the FEU Treaty the same treatment in law irrespective of their nationality (subject to the exceptions provided for). Furthermore, every Union citizen Every may rely on the prohibition of discrimination on grounds of nationality laid down in Article 18 TFEU in all situations falling within the scope ratione materiae of EU law. These situations include those relating to the exercise of the right to move and reside within the territory of the Member States.

The CoJ continues by stating that the principle of non-discrimination in Article 18 TFEU is given more specific expression in Article 24 of Directive 2004/38 in relation to Union citizens who exercise their right to move and reside within the territory of the Member States. That principle is also given more specific expression in Article 4 of Regulation No 883/2004 in relation to Union citizens who invoke in the host Member State the benefits referred to in Article 70(2) of the Regulation, i.e. the situation of Ms Dano and her son. Thus, the CoJ moves on to interpret Article 24 of the Directive and Article 4 of the Regulation.

Article 24(2) of the Directive is not applicable to Ms Dano who has been residing in Germany for more than three months, she is not seeking employment and she did not enter Germany in order to work there in the first place. She therefore does not fall within the scope of that article.

As regards Article 24(1) of the Directive, all Union citizens residing on the basis of the Directive in the territory of the host Member State are to enjoy equal treatment with the nationals of that Member State within the scope of the Treaty.

However, as concerns access to social benefits, a Union citizen can claim equal treatment with nationals of the host Member State only if his residence in the territory of the host Member State complies with the conditions of Directive. Then the CoJ very systematically sets out three cases:

“First, in the case of periods of residence of up to three months, Article 6 of Directive 2004/38 limits the conditions and formalities for the right of residence to the requirement to hold a valid identity card or passport and, under Article 14(1) of the directive, that right is retained as long as the Union citizen and his family members do not become an unreasonable burden on the social assistance system of the host Member State. In accordance with Article 24(2) of Directive 2004/38, the host Member State is thus not obliged to confer entitlement to social benefits to a national of another Member State or his family members during that period.

Second, for periods of residence longer than three months, the right of residence is subject to the conditions set out in Article 7(1) of Directive 2004/38 and, under Article 14(2), that right is retained only if the Union citizen and his family members satisfy those conditions. It is apparent from recital 10 in the preamble to the directive in particular that those conditions are intended, inter alia, to prevent such persons from becoming an unreasonable burden on the social assistance system of the host Member State.

Third, it is apparent from Article 16(1) of Directive 2004/38 that Union citizens acquire the right of permanent residence after residing legally for a continuous period of five years in the host Member State and that that right is not subject to the conditions referred to in the preceding paragraph. As stated in recital 18 in the preamble to the directive, once obtained, the right of permanent residence is not to be subject to any conditions, with the aim of it being a genuine vehicle for integration into the society of that State.

In order to determine whether economically inactive Union citizens, in the situation of the applicants in the main proceedings, whose period of residence in the host Member State has been longer than three months but shorter than five years, can claim equal treatment with nationals of that Member State so far as concerns entitlement to social benefits, it must therefore be examined whether the residence of those citizens complies with the conditions in Article 7(1)(b) of Directive 2004/38. Those conditions include the requirement that the economically inactive Union citizen must have sufficient resources for himself and his family members.”

Thus, the CoJ concludes that to accept that persons who do not have a right of residence under Directive 2004/38 may claim entitlement to social benefits under the same conditions as those applicable to nationals of the host Member State would run counter to an objective of the Directive, set out in recital 10 in its preamble, namely preventing Union citizens who are nationals of other Member States from becoming an unreasonable burden on the social assistance system of the host Member State.

Moreover, as regards the condition requiring possession of sufficient resources, Directive 2004/38 distinguishes between (i) persons who are working and (ii) those who are not. Under Article 7(1)(a) of the Directive, the first group of Union citizens in the host Member State have the right of residence without having to fulfil any other condition. On the other hand, persons who are economically inactive are required by Article 7(1)(b) of the directive to meet the condition that they have sufficient resources of their own.

Therefore, Article 7(1)(b) of the Directive seeks to prevent economically inactive Union citizens from using the host Member State’s welfare system to fund their means of subsistence.

And here comes the very clear statement from the CoJ: “A Member State must therefore have the possibility, pursuant to Article 7 of Directive 2004/38, of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State’s social assistance although they do not have sufficient resources to claim a right of residence.”

Finally, concerning the last question referred about the application of the Charter, the CoJ finds that when the Member States set out the conditions for the grant of special non-contributory cash benefits they are not implementing EU law. Thus the provisions of the Charter are not to be addressed. In particular, according to Article 6(1) TEU, the provisions of the Charter are not to extend in any way the competences of the European Union as defined in the Treaties. Likewise, the Charter, pursuant to Article 51(2) thereof, does not extend the field of application of EU law beyond the powers of the European Union or establish any new power or task for the European Union, or modify powers and tasks as defined in the Treaties.