CELEX: 62010CJ0206
Failure of a Member State to fulfil obligations
Regulation (EEC) No 1408/71
Article 4(1)(a)
Regulation (EEC) No 1612/68
Article 7(2)
German Länder benefits for the blind, the deaf and the disabled
Residence qualification

By its application, the European Commission requests the Court to declare that, by making the grant of benefits for the blind,
the deaf and the disabled under Länder legislation (‘the contested legislation’) conditional, in respect of persons for whom
the Federal Republic of Germany is the competent Member State, upon the recipient being resident or habitually resident in
the German Land concerned, the Federal Republic of Germany has failed to fulfil its obligations under Article 7(2) of Council
Regulation (EEC) No 1612/68 of 15 October 1968 on freedom of movement for workers within the Community (OJ 1968 L 257, p.
2), and under Article 4(1)(a) of 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, as amended
and updated by Council Regulation (EC) No 118/97 of 2 December 1996 (OJ 1997 L 28, p. 1), as amended by Regulation (EC) No
647/2005 of the European Parliament and of the Council of 13 April 2005 (OJ 2005 L 117, p. 1; ‘Regulation No 1408/71’), in
conjunction with Title III, Chapter 1 of that regulation.

Legal context

European Union legislation
Under Article 7 of Regulation No 1612/68:
‘1.      A worker who is a national of a Member State may not, in the territory of another Member State, be treated differently from
national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards
remuneration, dismissal, and should he become unemployed, reinstatement or re-employment.
2.      He shall enjoy the same social and tax advantages as national workers.
…’
Article 4 of Regulation No 1408/71, entitled ‘Matters covered’, provides:
‘1.      This Regulation shall apply to all legislation concerning the following branches of social security:
(a)      sickness and maternity benefits;
…
2a. …
“Special non-contributory cash benefits” means those:
(a)      which are intended to provide either:
(i)      supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in paragraph
1, and which guarantee the persons concerned a minimum subsistence income having regard to the economic and social situation
in the Member State concerned;
or
(ii)      solely specific protection for the disabled, closely linked to the said person’s social environment in the Member State concerned
…
…
2b.      This Regulation shall not apply to the provisions in the legislation of a Member State concerning special non-contributory
benefits, referred to in Annex II, Section III, the validity of which is confined to part of its territory.
…’
Annex II, Part III, of Regulation No 1408/71, entitled ‘Special non-contributory benefits within the meaning of Article 4(2b)
which do not fall within the scope of the Regulation’, states, for Germany:
‘(a) Benefits granted under Länder legislation for the disabled, and in particular for the blind.’

National legislation
The contested legislation grants benefits for the blind, the deaf and the disabled which are intended to compensate for the
extra expenses connected with their disability. Those benefits are granted only to persons who have their residence or habitual
residence in the Land concerned.
That legislation provides that the benefits under the State social security system which pursue the same end as the benefits
granted by the Länder are to be deducted from the latter. The rate of set-off depends on the legislation of the Land concerned.
Where the disabled person moves into a home or an institution, the entitlement to benefits is maintained in certain Länder,
provided that the home is located in Federal territory and that, at the time of the move, the person concerned was resident
in the Land in question.

The pre-litigation procedure
By letter of 14 March 2002, the Commission drew the attention of the Federal Republic of Germany to the need to enable workers
who are in employment in Germany while residing in another Member State, and members of their families, to export the benefits
granted under the contested legislation. According to the Commission, the imposition of a residence requirement is contrary
to Article 39 EC and to Article 7(2) of Regulation No 1612/68.
By letter of 22 April 2002, the Federal Republic of Germany replied that those benefits constituted social advantages within
the meaning of Article 7 of Regulation No 1612/68, but that they should not be exported since they are granted independently
of the status of worker and are conditional only on the place of residence.
By letter of formal notice of 9 July 2004, the Commission informed the Federal Republic of Germany of its doubts as to the
compatibility of the disputed legislation with Regulations No 1612/68 and No 1408/71. With regard in particular to Regulation
No 1408/71, the Commission stated that the benefits in question did not constitute special non-contributory benefits within
the meaning of Article 4(2c) of that regulation, but sickness benefits within the meaning of Article 4(1)(a) of that regulation,
so that cross-border workers could not be refused the possibility of exporting those benefits.
By letter of 14 September 2004, the Federal Republic of Germany replied that it did not agree with the Commission’s analysis.
With regard to Regulation No 1408/71, it stated that the benefits in question were justified by the extra costs connected
with blindness or disability, whether or not the recipient was dependent on another person.
On 21 March 2005, the Commission sent the Federal Republic of Germany a reasoned opinion alleging only an infringement of
Article 7 of Regulation No 1612/68, while reserving the right to recommence the procedure as regards the compatibility of
the contested legislation with Regulation No 1408/71 following the judgment which the Court was to deliver in Case C‑286/03
Hosse
[2006] ECR I‑1771.
By letter of 25 May 2005, the Federal Republic of Germany confirmed its position.
Proceedings were then stayed pending the judgments which the Court was to deliver in that case and in Case C‑299/05
Commission
v
Parliament and Council
[2007] ECR I‑8695. In those judgments, the Court ruled that the benefits at issue in those cases were sickness benefits.
On 3 June 2008, the Permanent Representatives Committee of the Council of the European Union ‘Employment, Social Policy, Health
and Consumer Affairs’ reached an agreement on the content of Annexes X and XI to Regulation (EC) No 883/2004 of the European
Parliament and of the Council of 29 April 2004 on the coordination of social security systems (OJ 2004 L 166, p. 1), which
repealed Regulation No 1408/71 with effect from its date of application, 1 May 2010. Under that agreement, the German benefits
provided for in the contested legislation do not appear in those annexes.
On 1 December 2008, the Commission sent the Federal Republic of Germany a supplementary reasoned opinion alleging that the
contested legislation was incompatible with Regulation No 1408/71 since the case-law resulting from the judgments in
Hosse
and
Commission
v
Parliament and Council
called into question the special nature of the benefits in question.
In its reply of 1 April 2009, the Federal Republic of Germany referred to the entry into force during 2010 of Regulation No
883/2004. Since that Regulation was also applicable to the benefits in question, Germany requested that proceedings be stayed.
On 29 April 2010, the Commission brought the present action.
By order of the President of the Court of 27 September 2010, the Kingdom of the Netherlands was granted leave to intervene
in support of the form of order sought by the Federal Republic of Germany.
By letter of 19 October 2010, the Kingdom of the Netherlands waived its right to lodge a statement in intervention.

The action

The infringement of Regulation No 1408/71
Arguments of the parties
The Commission submits that, although the benefits in question are listed in Annex II, Part III, of Regulation No 1408/71,
they are not special non-contributory benefits within the meaning of Article 4(2c) of that regulation, but sickness benefits
within the meaning of Article 4(1)(a) of that regulation and therefore exportable.
In the Commission’s submission, the special nature of the benefits in question has not been established since, in accordance
with the Court’s case-law, a special benefit must either replace or supplement a social security benefit, while being distinguishable
from it, and be by its nature social assistance justified on economic and social grounds and fixed by legislation setting
objective criteria (
Commission
v
Parliament and Council
, paragraph 55). The benefits in question are granted on the basis of a statutorily defined position without any individual
assessment of personal needs, are intended to improve the state of health and living conditions of disabled persons and thus
have as their essential purpose supplementing sickness insurance benefits.
In addition, the Commission points out that, when Regulation No 883/2004 was adopted, the German delegation did not seek the
inclusion of the Länder benefits for the blind, the deaf and the disabled in Annexes X and XI to that regulation. In its submission,
accordingly, it would be contradictory for the Federal Republic of Germany to assert that those benefits must be classified
as ‘special non-contributory benefits’ within the meaning of Article 4(2b) of Regulation No 1408/71.
The Federal Republic of Germany, while contending that the Commission itself was doubtful as to the classification of the
benefits in question until delivery of the judgments in
Hosse
and
Commission
v
Parliament and Council
, states that the Länder took steps to bring the contested legislation into line with European Union law. The judicial amendments
necessary would probably be made in 2010 or at the latest in 2011.
Findings of the Court
It must be borne in mind that, according to settled case-law, the question whether a Member State has failed to fulfil its
obligations must be determined by reference to the situation obtaining in the Member State at the end of the period laid down
in the reasoned opinion and the Court cannot take account of any subsequent changes (see, in particular, Case C-9/07
Commission
v
France
[2007] ECR I-121, paragraph 8, and Case C‑48/10
Commission
v
Spain
[2010] ECR I‑0000, paragraph 30).
The Federal Republic of Germany does not dispute that, at the end of the period laid down in the supplementary reasoned opinion,
the contested legislation did not comply with Regulation No 1408/71.
The Court has repeatedly held that a benefit is regarded as a social security benefit where it is granted, without any individual
and discretionary assessment of personal needs, to recipients on the basis of a statutorily defined position and relates to
one of the risks expressly listed in Article 4(1) of Regulation No 1408/71 (see, inter alia,
Hosse
, paragraph 37, and
Commission
v
Parliament and Council
, paragraph 56).
It follows that benefits granted objectively on the basis of a statutorily defined position and intended to improve the state
of health and quality of life of persons reliant on care have as their essential purpose supplementing sickness insurance
benefits and must therefore be regarded as ‘sickness benefits’ for the purpose of Article 4(1)(a) of Regulation No 1408/71
(
Hosse
, paragraph 38, and
Commission
v
Parliament and Council
, paragraph 61).
Such is the position in the present case as regards the benefits paid by the Länder to the blind, the deaf and the disabled
since they are intended to compensate, in the form of a flat-rate contribution, for the additional everyday expenditure resulting
from the recipients’ disability.
Since those benefits are sickness benefits within the meaning of Article 4(1)(a) of Regulation No 1408/71, they must in consequence
be granted irrespective of the Member State in which the recipient is resident, in accordance with the provisions of Title
III, Chapter 1, of that regulation.
In those circumstances, the Commission’s complaint alleging infringement of Regulation No 1408/71 must be considered well
founded.

The infringement of Regulation No 1612/68
Arguments of the parties
The Commission submits that the grant of the benefits in question on the basis of the sole criterion of residence in the Land
concerned is not justified. In the Commission’s submission, any advantage awarded by a Member State to its citizens because
of their objective status as workers or by virtue of the mere fact of their residence on the national territory falls within
the scope of Article 7 of Regulation No 1612/68, with the result that cross-border workers must also benefit from those advantages
on the same basis as any other worker resident in the Member State of employment.
The Federal Republic of Germany merely points out that Regulations No 1612/68 and No 1408/71 have different fields of application
and thus apply independently of each other.
Findings of the Court
It is common ground that the benefits granted by the Länder for the blind, the deaf and the disabled constitute a social advantage
within the meaning of Article 7(2) of Regulation No 1612/68.
The Federal Republic of Germany does not dispute, in that regard, that the grant of those benefits is conditional on the recipient
having his residence or habitual residence in the Land concerned.
According to the Court’s settled case-law, the equal treatment rule which appears in Article 7 of Regulation No 1612/68 prohibits
not only overt discrimination on grounds of nationality but also all covert forms of discrimination which, by the application
of other criteria of differentiation, lead in fact to the same result (see, inter alia, Case C‑57/96
Meints
[1997] ECR I‑6689, paragraph 44, and Case C‑269/07
Commission
v
Germany
[2009] ECR I‑7811, paragraph 53).
Unless it is objectively justified and proportionate to the aim pursued, a provision of national law must be regarded as indirectly
discriminatory if it is intrinsically liable to affect migrant workers more than national workers and if there is a consequent
risk that it will place the former at a particular disadvantage (
Meints
, paragraph 44, and
Commission
v
Germany
, paragraph 54).
That is the case of the residence condition laid down in the contested legislation for the grant of benefits for the blind,
the deaf and the disabled, which can be more easily satisfied by German workers than by those from Member States other than
the Federal Republic of Germany.
With regard to the argument put forward by the Federal Republic of Germany concerning the different fields of application
of Regulations No 1612/68 and No 1408/71, it is sufficient to note that, although those two regulations do not have the same
scope
ratione personae
, the fact remains that, since Regulation No 1612/68 is of general application as regards the free movement of workers, Article
7(2) thereof may apply to social advantages which, at the same time, fall specifically within the scope of Regulation No 1408/71
(Case C‑111/91
Commission
v
Luxembourg
[1993] ECR I‑817, paragraphs 20 and 21, and Case C‑85/96
Martínez Sala
[1998] ECR I‑2691, paragraph 27).
In those circumstances, the Commission’s complaint alleging infringement of Regulation No 1612/68 must be considered well
founded.
It follows from all the foregoing considerations that, by making the grant of benefits for the blind, the deaf and the disabled
under the contested legislation conditional, in respect of persons for whom the Federal Republic of Germany is the competent
Member State, upon a condition of residence or habitual residence in the Land concerned, the Federal Republic of Germany has
failed to fulfil its obligations under Article 4(1)(a) of Regulation No 1408/71, in conjunction with Title III, Chapter 1
of that regulation, and under Article 7(2) of Regulation No 1612/68.

Costs
Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Federal Republic of Germany
has been unsuccessful, the Federal Republic of Germany must be ordered to pay the costs. In accordance with the first subparagraph
of Article 69(4) thereof, the Kingdom of the Netherlands, which has intervened in this dispute, must bear its own costs.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Declares that, by making the grant of benefits for the blind, the deaf and the disabled under Länder legislation conditional,
in respect of persons for whom the Federal Republic of Germany is the competent Member State, upon a condition of residence
or habitual residence in the Land concerned, the Federal Republic of Germany has failed to fulfil its obligations under Article
4(1)(a) of 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, as amended and updated by Council Regulation
(EC) No 118/97 of 2 December 1996, as amended by Regulation (EC) No 647/2005 of the European Parliament and of the Council
of 13 April 2005, in conjunction with Title III, Chapter 1 of that regulation, and under Article 7(2) of Council Regulation
(EEC) No 1612/68 of 15 October 1968 on freedom of movement for workers within the Community;
2.
Orders the Federal Republic of Germany to pay the costs;
3.
Orders the Kingdom of the Netherlands to bear its own costs.
[Signatures]
*
Language of the case: German.