OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 15 July 2004 ( )

Case C-153/03

Caisse nationale des prestations familiales

v

Ursula Schwarz, née Weide

(Reference for a preliminary ruling from the Cour de Cassation, Grand Duchy of Luxembourg)

(Family benefits – Child-raising allowance – Suspension of entitlement in the State of employment – Entitlement to similar benefits in the State of residence)

I – Introduction

1. This case concerns a negative conflict of laws. Ursula Schwarz, née Weide, ( ) worked in Luxembourg, but lived with her family in Germany. She took a break from work in order to look after her children. Germany refused to grant her a child-raising allowance, whilst Luxembourg granted her only the difference between the German child-raising allowance and the higher Luxembourg child-raising allowance. The question raised is which State was obliged, as a matter of priority, to grant her the child-raising allowance under Regulation (EEC) No 1408/71 ( ) and Regulation (EEC) No 574/72. ( )

II – Facts of the case and reference for a preliminary ruling

2. Proceedings are pending before the Cour de Cassation (Court of Cassation) in Luxembourg in which Ms Weide is seeking the grant of the Luxembourg child-raising allowance.

3. Ms Weide is in dispute with the competent Luxembourg authority, the Caisse nationale des prestations familiales (Luxembourg national family benefits fund) (hereinafter: CNPF) over whether she is entitled to the full Luxembourg child-raising allowance. The CNPF grants her only the difference between the German child-raising allowance and the higher Luxembourg child-raising allowance. Two Luxembourg bodies have upheld Ms Weide’s position in this dispute. They take the view that Ms Weide’s entitlement stems from Articles 13 and 73 of Regulation No 1408/71. Article 76 of Regulation No 1408/71 does not permit the CNPF to suspend the benefit up to the amount of the equivalent German benefit, since two German courts have ruled, with binding effect, that Ms Weide cannot claim that German benefit.

4. However, the Cour de Cassation, acting as a tribunal of third instance, has doubts as to this interpretation of Article 76 of Regulation No 1408/71 and has therefore made a reference to the Court of Justice for a preliminary ruling on the following questions:

‘1. Must Article 76 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 be interpreted as applying only where a migrant worker is entitled to family benefits under the legislation of the State of employment and under the legislation of the State in which the members of his family are resident?

2. If so, may the bodies of the State of employment suspend entitlement to family benefits where they consider that a refusal to grant family benefits in the State of residence is incompatible with Community law?

3. If not, does Article 76 of Regulation No 1408/71 permit the State of employment to apply the rule against aggregation of benefits where, under the law of the State of residence of the family members, the worker’s spouse receives or is entitled to similar family benefits?’

5. However, the papers in the case transmitted by the Cour de Cassation and the parties’ submissions show that the order for reference needs to be supplemented.

6. As far as the factual background is concerned, it should be made clear that since 1993 Ms Weide has worked in Luxembourg, but lived in Germany, where her husband is also employed. Her son was born on 11 May 1998. After her maternity leave and a short period of unpaid leave had ended, Ms Weide suspended her employment relationship from 1 October 1998 to 15 May 2000 in order to look after her children. This period spent raising children was recognised as a period of contribution for pension insurance purposes under Article 171(7) of the Luxembourg Code des assurances sociales (Social Insurance Code).

7. It should further be stated that the competent authorities and two courts in Germany refused to grant Ms Weide the child-raising allowance, even though she satisfied all the requirements under German law. Those decisions were based on the belief that under the conflict of law rule laid down in Article 13(2)(a) of Regulation No 1408/71 Luxembourg law alone is applicable to Ms Weide. Even if German law were also applicable, the entitlement to the Luxembourg child-raising allowance would take priority on the basis of the rules against overlapping under Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72.

III – Legal framework

8. Regulation No 1408/71 and Regulation No 574/72 were initially applicable in the present case in the version as amended by Council Regulation (EC) No 1223/98 of 4 June 1998. ( ) Since then, both regulations have been amended by Council Regulation (EC) No 1606/98 of 29 June 1998, ( ) Council Regulation (EC) No 307/1999 of 8 February 1999 ( ) and Council Regulation (EC) No 1399/1999 of 29 April 1999. ( ) However, neither these nor any subsequent amendments have any bearing on the present case.

A – Entitlement to the German child-raising allowance

9. In Germany the requirements governing entitlement to the child-raising allowance are laid down in Paragraph 1(1) of the Gesetz zum Erziehungsgeld und zur Elternzeit (Law on the grant of child-raising allowance and child-raising leave):

‘Any person who

(1) is permanently or ordinarily resident in Germany,

(2) has a dependent child in his household,

(3) looks after and raises that child himself, and

(4) has no, or no full-time, employment,

shall be entitled to child-raising allowance.’

10. With regard to frontier workers who are employed in one Member State, but live in another Member State, the conflict of law rule laid down in Article 13 of Regulation No 1408/71 states:

‘1. Subject to Articles 14c and 14f, persons to whom this Regulation applies shall be subject to the legislation of a single Member State only. That legislation shall be determined in accordance with the provisions of this Title.

2. Subject to Articles 14 to 17:

(a) a person employed in the territory of one Member State shall be subject to the legislation of that State even if he resides in the territory of another Member State …;’

B – Entitlement to the Luxembourg child-raising allowance

11. The Luxembourg child-raising allowance is paid to any person who is lawfully resident in Luxembourg, resides there currently and is raising one or more children at home, in respect of whom the applicant or his or her spouse is paid family benefits. The allowance is paid from the first day of the month following the end of maternity leave or from the termination of the mother’s entitlement to maternity benefit and ends on the first day of the month in which the child attains the age of two years. The allowance is a fixed amount and does not depend on the number of children being raised at home.

12. The condition of residence in Luxembourg is not applicable to frontier workers under Article 73 of Regulation No 1408/71. That provision states:

‘An employed or self-employed person subject to the legislation of a Member State shall be entitled, in respect of the members of his family who are residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State …’.

C – The rules against overlapping

13. The rules against overlapping laid down in Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72 are intended to prevent unjustified overlapping of family benefits.

14. Article 76 of Regulation No 1408/71 reads as follows:

‘1. Where, during the same period, for the same family member and by reason of carrying on an occupation, family benefits are provided for by the legislation of the Member State in whose territory the members of the family are residing, entitlement to the family benefits due in accordance with the legislation of another Member State, if appropriate under Article 73 or 74, shall be suspended up to the amount provided for in the legislation of the first Member State.

2. If an application for benefits is not made in the Member States in whose territory the members of the family are residing, the competent institution of the other Member State may apply the provisions of paragraph 1 as if benefits were granted in the first Member State.’

15. Article 10(1) of Regulation No 574/72 states:

‘(a) Entitlement to benefits or family allowances due under the legislation of a Member State, according to which acquisition of the right to those benefits or allowances is not subject to conditions of insurance, employment or self-employment, shall be suspended when, during the same period and for the same member of the family, benefits are due only in pursuance of the national legislation of another Member State or in application of Articles 73, 74, 77 or 78 of the Regulation, up to the sum of those benefits.

(b) However, where a professional or trade activity is carried out in the territory of the first Member State:

(i) in the case of benefits due either only under national legislation of another Member State or under Articles 73 or 74 of the Regulation to the person entitled to family benefits or to the person to whom they are to be paid, the right to family benefits due either only under national legislation of that other Member State or under these Articles shall be suspended up to the sum of family benefits provided for by the legislation of the Member State in whose territory the member of the family is residing. The cost of the benefits paid by the Member State in whose territory the member of the family is residing shall be borne by that Member State;

(ii) …’

D – Rules on dealing with differences of opinion in the application of Regulation No 1408/71

16. If there is disagreement between two Member States over competence to grant benefits, Article 114 of Regulation No 574/72 applies:

‘In the case of a dispute between the institutions or competent authorities of two or more Member States, either as to which legislation should apply under Title II of the Regulation, or as to which institution should provide the benefits, the person concerned who could claim benefits if there were no dispute shall provisionally receive the benefits provided for by the legislation administered by the institution of the place of residence or, if the person concerned does not reside in the territory of one of the Member States concerned, the benefits provided for by the legislation administered by the institution to which his claim was submitted in the first instance.’

17. Under Article 81(a) of Regulation No 1408/71, the Member States may also refer administrative questions and questions of interpretation arising from the provisions of that regulation and subsequent regulations, or from any agreement or arrangement concluded thereunder, to the Administrative Commission on Social Security for Migrant Workers set up within the Commission. This is without prejudice to the right of the authorities, institutions and persons concerned to have recourse to the procedures and tribunals provided for by the legislation of Member States, by that regulation or by the Treaty.

IV – Legal assessment

A – Admissibility and interpretation of the reference for a preliminary ruling

18. The information provided by the Cour de Cassation is sufficient for the purpose of recognising the admissibility of the reference for a preliminary ruling. ( ) The submissions made by the parties show that they were able to state their views with regard to the present proceedings on the basis of the order for reference. ( ) Furthermore, these submissions and the Report for the Hearing contain sufficient information to enable other potential parties under Article 23 of the Statute to state their positions on all relevant points in the hearing. ( )

19. As the CNPF, the Luxembourg Government and the Commission to some extent suggest, it is nevertheless necessary, in the light of the findings on the circumstances underlying the main action, which were made on the basis of the papers in the case and the submissions made by the parties, ( ) to reword the questions. In doing so, it should be borne in mind that the German child-raising allowance does not require an occupation to be held. The Commission thus rightly stresses that any overlapping of entitlements within the meaning of Article 73 of Regulation No 1408/71 in another Member State should be assessed not under Article 76 of that regulation, but under Article 10 of Regulation No 574/72.

20. This produces the following questions:

1. Does Article 13(2)(a) of Regulation No 1408/71 preclude entitlements to family benefits arising in respect of a frontier worker both in the State of employment and in the State of residence?

2. If not, which State is competent, on the basis of priority, under Article 10 of Regulation No 574/72 for the grant of family benefits where a frontier worker’s spouse is employed in the State of residence?

3. May the State of employment refuse to pay the full family benefit where the State of residence is competent, on the basis of priority, but refuses to pay the benefit?

B – The contested entitlements

21. It is common ground that both the Luxembourg child-raising allowance and the German child-raising allowance are family benefits within the meaning of Article 4(1)(h) of Regulation No 1408/71. It is also recognised that, as an employed person affiliated to the Luxembourg social security scheme within the terms of Article 1(1)(a) of Regulation No 1408/71, Ms Weide may claim entitlement to the Luxembourg child-raising allowance under Article 73 of that regulation, even though she lives with her family in Germany.

22. However, it is disputed whether a concurrent entitlement to the German child-raising allowance is precluded by Article 13 of Regulation No 1408/71. That conflict of law rule is intended to prevent the concurrent application of a number of national legislative systems and the complications which might ensue – including overlapping entitlements. ( ) In the event that, despite the conflict of law rule, entitlements exist under both legal systems, the parties are also in dispute as to which of the two States is obliged, as a matter of priority, to pay the allowance. This question must be decided on the basis of overlapping rules – in this case Article 10 of Regulation No 574/72. The overlapping rules are intended to prevent unjustified enrichment of migrant workers, ( ) where conflict of law rules fail to fulfil their objective, which is to prevent several similar entitlements from arising.

23. The McMenamin judgment ( ) appears to clarify both points in dispute. According to that judgment, Article 13 of Regulation No 1408/71 does not preclude a claim for benefits in the State of residence. In addition, under Article 10(a)(i) of Regulation No 574/72, the State of residence of the family must, as a matter of priority, grant a family benefit if there is a concurrent entitlement in the State of employment of one parent and at least one parent having care of the child works in the State of residence. More specifically:

1. The conflict of law rule laid down in Article 13 of Regulation No 1408/71

24. Under Article 13(1) of Regulation No 1408/71, persons to whom that regulation applies are subject to the legislation of a single Member State only. Article 13(2)(a) of Regulation No 1408/71 provides that a person employed in the territory of one Member State is subject to the legislation of that State even if he resides in the territory of another Member State.

25. The German Government takes the view that, consequently, only Luxembourg’s rules are applicable to Ms Weide. The system laid down in the conflict of law rules prevents a person from being subject to the rules of more than one Member State. Therefore, as far as the present case is concerned, no overlapping entitlements could arise that would lead to the application of the overlapping rules, in particular Article 10 of Regulation No 574/72.

26. On the other hand, the other parties consider that, despite the application of the conflict of law rule laid down in Article 13 of Regulation No 1408/71, German and Luxembourg law are applicable, with the result that there is still scope for the application of the overlapping rules. The Austrian Government argues that in the family benefits sector Article 13 of Regulation No 1408/71 is overridden by the principle of unrestricted freedom of movement. In the view of the Commission, on the other hand, the law of two States of employment applies in the main proceedings, since one spouse works in Germany and the other in Luxembourg. The principle that the law of a single State is applicable to each employed person would not therefore be called into question.

27. The McMenamin judgment thus confirms this second view. In that case, it was necessary to clarify which State had to pay child benefit where the mother, who was eligible for benefits in the State of residence, could also claim entitlements from the State of employment as a frontier worker and her husband received a wage or salary in the family’s State of residence. The Court found that the rule that a person is subject only to the legislation of the Member State of employment laid down by Article 13(1) of Regulation No 1408/71 does not preclude certain benefits being governed by the more specific rules of that regulation. The McMenamin case therefore had to be assessed on the basis of the overlapping rules. ( )

28. The German Government contends that the overlapping rules could apply only where the entitlements enjoyed by a family arise in respect of different persons. This would appear to be possible particularly in the case of child benefit, where entitlements do not coincide in one person, but arise in respect of both parents, on the ground that they are employed in different Member States. At the hearing the German Government took the consistent view that the McMenamin judgment was based on a situation in which both parents could claim entitlements in different Member States. However, the entitlements in fact arose in respect of a single person – the mother.

29. A crucial factor is that it is settled case-law that Community law does not preclude more favourable rules under national law provided that such rules are compatible with Community law. ( ) In particular, no provision of Regulation No 1408/71 can deprive a person of a right which, independently of the application of Community law, the legislation of a Member State confers upon him. ( ) Article 13(1) of Regulation No 1408/71 therefore restricts the exclusive application of a legal system to benefits that require status as an employed person. Only the law of the State of employment is applicable to such benefits. If, however, Member States grant the resident population benefits that do not require status as an employed person, Article 13(1) of Regulation No 1408/71 does not have any prohibitive effect. ( )

30. The conflict of law rule laid down in Article 13 of Regulation No 1408/71 does not therefore preclude a frontier worker receiving family benefits in the State of residence where those benefits do not require status as an employed person.

2. The overlapping rule laid down in Article 10 of Regulation No 574/72

31. Article 10 of Regulation No 574/72 covers certain forms of overlapping of family benefit entitlements. The relevant case here is where benefits are due that are, on the one hand, based on the legislation of a Member State, according to which acquisition of the right to those benefits or allowances is not subject to conditions of insurance, employment or self-employment – which, in this case, would be the right to the German child-raising allowance – and, on the other hand, based on Article 73 of Regulation No 1408/71 – which, in this case, would be the right to the Luxembourg child-raising allowance.

32. Article 10(a) of Regulation No 574/72 provides that normally in this situation the entitlement under Article 73 of Regulation No 1408/71 vis-à-vis the State of employment has priority over the other entitlement vis-à-vis the State of residence. The entitlement vis-à-vis the State of residence is therefore suspended up to the sum of the entitlement vis-à-vis the State of employment.

33. Under Article 10(b)(i) of Regulation 574/72, however, the entitlement vis-à-vis the State of residence takes priority where the person entitled to family benefits or the person to whom they are to be paid carries out a professional or trade activity in that State. In that case, the entitlement vis-à-vis the State of employment is suspended up to the sum of the entitlement vis-à-vis the State of residence.

34. Adopting a literal interpretation, Article 10(a) of Regulation No 574/72 would apply in the present case, since Ms Weide, the person entitled to the family benefits and to whom they are to be paid, does not pursue a professional or trade activity in the State of residence, Germany.

35. However, that conclusion would run counter to the fundamental idea behind the overlapping rules, according to which the family’s State of residence is given priority if a professional or trade activity is pursued there. In this case, the family’s links to the State of residence are much stronger than its links to the frontier worker’s State of employment. ( ) This idea is consistent with the interpretation adopted by the Court in the McMenamin judgment. In that case, the Court applied Article 10(b)(i) of Regulation No 574/72, even though it was not the entitled frontier worker, but her husband, who pursued a professional or trade activity in the State of residence.

36. In the McMenamin judgment, the Court relied on the legislature’s reasons for introducing the wording ‘the person entitled to family benefits or the person to whom they are to be paid’. The wording was revised in order to extend the group of people covered compared with the old version, which applied solely to spouses. This was prompted by cases where the divorced spouse of a person entitled under Article 73 of Regulation No 1408/71 pursued a professional or trade activity in the State of residence. ( ) A restriction of the group of entitled persons was not intended, ( ) would lead to unreasonable results ( ) and cause inconsistencies between Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72. ( )

37. As a result, the Court developed the principle that entitlement to the benefits due from the State of employment under Article 73 of Regulation No 1408/71 is suspended where a person having the care of children exercises a professional or trade activity in the State of residence of those children. ( )

38. This principle still holds and is also consistent with the view taken by the CNPF, the Luxembourg and Austrian Governments and the Commission, which is based on more recent case-law, ( ) that the application of the overlapping rules should have regard not to the person entitled in isolation, but to the whole family.

39. It should be pointed out that Article 10 of Regulation No 574/72 was amended from the version interpreted in the McMenamin judgment, ( ) but these amendments do not lead to any other conclusion. This is shown in particular by the fact that the Court has already expressly taken note of these amendments in the McMenamin judgment without calling into question its conclusion in this regard. ( ) The minor linguistic adaptations made in the revision by Regulation (EC) No 118/97 ( ) do not lead to any other conclusion either.

40. In summary, it should therefore be stated that under the overlapping rule laid down in Article 10 of Regulation No 574/72 the State of residence is competent, on the basis of priority, for the grant of family benefits where the spouse of a frontier worker who is personally entitled to benefits is employed there.

C – The consequences of the unlawful refusal by the State of residence to grant a benefit

41. On the basis of the considerations set out above, Germany has responsibility, on the basis of priority, for granting the contested family benefit. Irrespective of this finding, as the Austrian Government and the Commission rightly stress, the German authorities would at least have been required under Article 114 of Regulation No 574/72 to grant that benefit provisionally. The CNPF and the Austrian Government conclude that the Luxembourg authorities may refuse to grant the benefit up to the amount of the German benefit. The Commission, on the other hand, rejects the unilateral refusal to grant social benefits.

42. It could be inferred from the wording of Article 10 of Regulation No 574/72, according to which the entitlement vis-à-vis the lower priority Member State is suspended, that that Member State is not required to pay the family benefit. However, this conclusion is not consistent with the Court’s interpretation of the overlapping rules. The Court has previously held that entitlement is suspended in the Member State with secondary responsibility only where all the conditions of substance and of form have been satisfied in the Member State with primary responsibility, including, where appropriate, the making of an application for a benefit. ( ) In practice, the entitled persons could choose the Member State from which they claimed a benefit, if necessary by refraining from making an application in the State with primary responsibility. This case-law was restricted by Article 76(2) of Regulation No 1408/71 to cases in which the entitled person had failed to make an application in the Member State with primary responsibility. In this case, the competent institution of the other Member State may apply Article 76(1) of Regulation No 1408/71 as if benefits were granted in the first Member State.

43. The Court has found that Article 76 of Regulation No 1408/71 cannot be interpreted as an overriding rule of priority, since this would have the effect of restricting the range of facilities enjoyed by migrant workers under Article 73 of Regulation No 1408/71. However, Article 76 is not intended to restrict this range of facilities, but only to prevent the possibility of a de facto overlapping of allowances. ( )

44. These considerations should be applied mutatis mutandis in connection with Article 10 of Regulation No 574/72. In the view of the Court, it follows from the fundamental principle of freedom of movement for workers and the objective of Article 42 EC that a rule designed to prevent the overlapping of family allowances is applicable only to the extent to which it does not, without cause, deprive the persons concerned of an entitlement to a benefit existing under the legislation of a Member State. ( )

45. In the present case, Ms Weide has made the necessary applications in Germany and has even – going beyond her obligation under Article 76(2) of Regulation No 1408/71 – referred the matter to two judicial bodies.

46. It should also be taken into consideration that Ms Weide might not be able to assert her claim for benefits in Germany any longer, since a final decision has been taken on the subject. It cannot be automatically ruled out that this legal finality could be overcome in accordance with the Kühne & Heitz judgment ( ) or that a claim for reparation should be granted up to the amount of the forfeited benefits (including legal costs) in accordance with the Köbler judgment. ( ) According to the information available, however, it is not certain that one of these methods would produce an outcome in the case that is compatible with Community law.

47. It would therefore go beyond the objective of the overlapping rules to allow the Luxembourg authorities to disregard the decisions taken by the German authorities in relation to Ms Weide and to set off German benefits that are not granted in practice.

48. Luxembourg would not therefore be required, ultimately, to bear the burden that should be borne by Germany under the overlapping rules. Rather, as the Commission rightly points out, the Member States may not resolve conflicts at the expense of migrant workers, but are required to cooperate under Article 10 EC and Article 84 of Regulation No 1408/71. This is also underlined by Article 114 of Regulation No 574/72, which provides for the provisional payment of social benefits pending the resolution of such conflicts between States.

49. The resolution of conflicts between States is not limited to bilateral contacts – something which the Luxembourg authorities sought to do in vain, according to the Luxembourg Government and the CNPF. As the Commission argues, they could also have referred the matter to the Administrative Commission under Article 81(a) of Regulation No 1408/71. In addition, reference is also made to the possibility of Treaty infringement proceedings under Article 227 EC in order to bring about a final resolution of the matter. ( ) Possible overpayments would have to be compensated in accordance with the principle of genuine cooperation or at least as a consequence of Treaty infringement proceedings under Article 228(1) of the Treaty.

50. In summary, it must therefore be held that the State of employment may not refuse to pay the full family benefit where the State of residence is competent, on the basis of priority, but refuses to pay the benefit.

V – Conclusion

51. I therefore propose that the Court answer the questions referred for a preliminary ruling as follows:

(1) The conflict of law rule laid down in Article 13 of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community does not preclude a frontier worker receiving family benefits in the State of residence where those benefits do not require status as an employed person.

(2) Under the overlapping rule laid down in Article 10 of Council Regulation (EEC) No 574/72 of 21 March 1972 laying down the procedure for implementing Regulation (EEC) No 1408/71 the State of residence is competent, on the basis of priority, for the grant of family benefits where the spouse of a frontier worker who is personally entitled to benefits is employed there.

(3) The State of employment may not refuse to pay the full family benefit where the State of residence is competent, on the basis of priority, but refuses to pay the benefit.