Source: https://www.juridicainternational.eu/index.php?id=12472
Timestamp: 2019-09-15 17:16:15
Document Index: 3559471

Matched Legal Cases: ['Art. 6', 'Art. 12', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 51', '§ 28', '§40', '§ 5', '§ 5', '§ 6']

In the process of becoming integrated with Europe, more precisely in becoming a member of the European Union, Estonia must take into account not only those European legal acts which must be harmonized with local law, but also rules of co-ordination. Rules regarding the co-ordination of the social security rights of migrant workers are an important element in the EU co-ordination rules. Whereas the dominant tendency in European labour law is towards harmonisation, the principle of co-ordination is predominant in social security law [8, p. 280]. Although the principle of co-ordination does not imply immediate changes in domestic law, it is all the same necessary to understand the content of the rules for the co-ordination of social security and their significance for the domestic legal system.
In this article, the foundations of European Community social security law will be analysed under the Maastricht Treaty, as will the changes which well result should the Amsterdam Treaty come into effect. Since the existence of social security rights is a prerequisite for the free movement of labour, in this article foremost attention will be paid to the branch of European Community social policy related to the safeguarding of migrant workers’ social security rights and the co-ordination of different social security plans. In addition to the above, the potential objective problems which may arise in Estonia from the application of the European Union’s social security principles will also be examined.
1. Development and Legal Foundations of European Union Social Policy
When speaking of the European Union in general, one must distinguish between three pillars: (1) European Community law as the law of three communities: the European Economic Community, the European Coal and Steel Community and EURATOM (the first pillar), (2) European Union law, which is connected with co-operation in foreign and security policy (the second pillar) and also in the fields of justice and internal affairs (the third pillar) [14, p. 140]. The foundations of European Union social policy have also been expressed in the Treaty Establishing the European Community (EC), as a result of which EC social policy and EC social security law will also be mentioned below.
Social security law regarding the free movement of labour is one component of EC social policy. As an overall term, social policy includes the collection of European Community legal measures for the improvement of labour and living conditions; social policy consists of both political and legal components and also includes both the labour law and social security systems. EC social policy includes both specific social security law regarding the free movement of labour, in accordance with Article 51 of the Treaty of Europe, and the foundations of social policy in general, in accordance with Articles 117–127 and 129 of the EC Treaty.
In accordance with its initial concept, the EC was to be not a social community, but first and foremost an economic community. In the 1960s, as a result of economic prosperity, the European Community (then the European Economic Community) was not very active in the fields of labour and social security law [8, p. 278]. At the end of the 1960s, social policy first emerged as a force independent of economic policy. An important stage in the development of social policy was ushered in by the Single European Act of 1986, which in turn led to the Charter of the Fundamental Social Rights of EC Workers and the EC Commission’s Action Programme for the fields of labour and social policy [8, p. 278]. The latter acts did not create an extensive foundation for an EC common social policy. Neither was particular social identity established with the EU Treaty, which left the social policy conditions set down in the EC Treaty without essentially unchanged [5, D II Rdnr. 12-13]. The signing of a protocol on social policy was, however, achieved in 1992, whereunder a social policy agreement was also concluded between the Member States. The United Kingdom of Great Britain and Northern Ireland did not participate in this agreement. Under the above-mentioned agreement, the Council, on the recommendation of the Commission, passes decisions in five fields by a unanimous vote: (1) social security and the social protection of workers, (2) the protection of workers in the event of termination of employment contract, (3) representation, and the collective consideration of workers’ and employers’ interests, including participation in the management of a establishment, (4) the working conditions of inhabitants of third countries and (5) financial resources for the advancement of employment [17, p. 181; 6, D II Rdnr. 29–37; 8, pp. 279–280].
In the preamble of the European Community Treaty, the objectives of EC social policy are described, with the intention of “ensuring the economic and social progress of Member States... and ...seeking the continuous improvement in the living and working conditions of the nationals of the Community”. As a result of that objective, the obligation “to provide for a high level of employment and social security, improve the quality of life and standard of living and promote solidarity between Member States and social cohesion” was established by Article 2 of the EC Treaty as tasks of the EC. These components of EC social policy acquired tangible assertion in Chapter VIII of the EC Treaty, which embodies Articles 117–127 of the EC Treaty. Articles 117, 118 an 119 are of greatest importance from the point of view of the regulation of the social protection of migrant workers.
Under Article 117, Member States are required to promote the improvement of the living and working conditions of workers; in accordance with Article 118, the EC Commission, in keeping with its general objectives, has the task of also promoting co-operation between Member States in the field of social security. Pursuant to Article 119, men and women must be guaranteed equal pay for equal work. The EC, accordingly, has the objective of only strengthening co-operation between Member States regarding social questions. Both social security law and social security policy are, to a significant degree, left to the discretion of the Member States [6, D II Rdnr. 5].
Outside the separate chapter on social policy, the EC Treaty also includes many other provisions which also have a significant social policy importance. Here one must above all mention the measures for guaranteeing the social security rights provided for in Articles 49–51 of the EC Treaty. The above-mentioned measures are to facilitate making the free movement of labour prescribed by the EC Treaty (Article 48) effectively available and accessible to every national of the EU Member States [6, D II Rdnr. 4]. Rules regarding workers’ social security constitute an indispensable addition to the principle of the free movement of labour.
With the Amsterdam Treaty, an important step has been taken towards the delineation and development of a common European social policy. What are the greatest changes to have been made by the Amsterdam Treaty in the field of social security?
First of all, the Amsterdam Treaty makes technical changes to the EC Treaty such as the renumbering of the text of the treaty. The following are the most important social security provisions contained in the Amsterdam Treaty:
EC Treaty (Maastricht) EC Treaty (Amsterdam)
Art. 6 Art. 12
Whereas the social policy provisions of the former EC Treaty were to be found in Chapter VIII, they are now contained in Chapter XI. In addition to technical changes, the modified EC Treaty also contains certain differences in terms of substance compared with the amendments made to the Maastricht Treaty.
Pursuant to Article 51 of the former version of the EC Treaty, the Council, on the recommendation of the Commission, unanimously decided on the mechanisms for safeguarding the social security guarantees for migrant workers. Pursuant to Article 51, no opportunity is foreseen for the European Parliament to take part in the passing of the relevant acts [9, § 51, comm. 34]. In accordance with a modification made by the Amsterdam Treaty, the Council indeed decides unanimously, although the European Parliament is involved in the process, pursuant to Article 251 of the modified EC Treaty. In other respects, however, Article 42 retains the principles formulated in the previous Article 51.
More significant changes have taken place in the separate chapter on social policy. The first significant change is that the previous appendix to the Maastricht Treaty, entitled “Agreement on Social Policy” has now been added in its entirety to the EC Treaty [7, p. 708] and thus social policy has also extensively become an operation field of EC policy. It was indeed possible to reformulate Regulations regarding social affairs, since the change of government in the United Kingdom of Great Britain made possible the integration of a social policy agreement into the EC Treaty [14, p. 144].
One must, however, consider the new version of Article 136 of the EC Treaty to be extraordinary. Under this Article, both the members of the Community and the Member States undertake the obligation to improve and equalise living and working conditions, taking into consideration the fundamental social rights established in the Charter of the Fundamental Social Rights of EC Workers and the European Social Charter passed by the Council of Europe. Pursuant to the above-mentioned Article of the EC Treaty, one must not only consider the relevant principles of the EC in the formation of social policy and social security law, but also the fundamental rights contained in the Social Charter passed by the Council of Europe. Most significant from the point of view of migrant workers’ social security protection are Article 12 of the Council of Europe Social Charter, which deals with social security systems, and Articles 13 and 14 of the same document, which regulate both medical and social care. One may essentially say that with this provision, the Council of Europe’s Social Charter has been acknowledged to be a part of European Union law.
2. Article 51 of European Community Treaty*1
Article 51, which has remained unchanged since the European Community (EC) Treaty took effect, is a central regulation in social security law on the free movement of labour and also part of international social security law [9, § 51, comm. 1]. If a worker who works in one Member State were to fear that he or the members of his family might lose their claims in the field of social security, the principle of the free movement of labour would be insufficiently protected. One must indeed consider this fact in relation to Article 51 of the EC Treaty.
Article 51 of the EC Treaty requires the Council to create a system to prevent migrant labour from being in an inferior situation compared with individuals who have always worked or operated in only one Member State. In implementing relevant provisions, both public administration and the courts must base their activities on the principle that, if possible, the right of migrant workers to move freely within the borders of the Community should not be hindered [6, § 51, comm. 1].
According to the view of the European Court, the primary aim of Article 51 of the EC Treaty is to create as favourable conditions as possible for the acquisition of employment and the free movement of labour [9, § 51, comm. 13]. Article 51 not only provides the Council with authority, it requires it to eliminate all social security-related obstacles to the free movement of labour which arise from movement from one Member State to another. Article 51 authorises the Council only to create a system which is not connected with a specific territory. This means, however, that the prerequisites for receiving benefits may be fulfilled in one Member State which is not the worker’s direct insuring state. In other respects, however, the domestic legal system is of decisive importance [9, § 51, comm. 15, 17, 19]. *2
In addition to special social security measures, Article 117 of the EC Treaty also prescribes the harmonisation of Member States’ laws. The basis of social security law regarding the free movement of labour (in the sense of Article 51), on the other hand, is to co-ordinate domestic legal systems. The principle of co-ordination leaves the legal systems of Member States intact in all their diversity. Neither classes of benefits, the prerequisites for issuing a claim or guaranteed benefits are synchronised in European Community law. Community law contains rules for situations which affect several Member States simultaneously, i. e. above all for cases where a worker exchanges the social security system of one Member State for that of another [9, § 51, comm. 4].
Pursuant to the Maastricht Treaty, it is not the task of the EC to create, through harmonisation, a functioning common social security system in the EC. In Article 118 of the EC Treaty, “co-operation between Member States in the field of social security” is mentioned, but the actual elaboration of the social security system in principle remains the concern of Member States.
Social security systems are closely linked to economic, social and cultural factors in respective Member States: for example the age structure of the population, the rate of unemployment, etc. These problems cannot be alleviated by simply harmonising the relevant provisions in social security law [7, p. 285]. One may indeed agree with the assertion that the complete harmonisation of the provisions of social security law in all Member States would be an unrealistic objective. This would not reduce the economic and social differences between Member States, but rather increase them, since similar social security provisions in different social and economic environments lead to different social and economic consequences [4, pp. 276-277].
Under Article 51 of the EC Treaty, the Council has introduced two Regulations – Nos. 1408/71 and 574/72 [18], with which the rules for the co-ordination of the social security systems of different Member States are regulated. *3 The above-mentioned Regulations are directly enforceable law in Member States and must be followed by the social security office of the Member State in the inspection of the prerequisites for receiving benefits, the size of benefits and the means for making the payment of those benefits possible. *4 The principle of the free movement of labour requires the co-ordination of the social security law regulations of Member States using collision rules. This co-ordination is made all the more important by the fact that the social security systems of Member States differ to a significant extent [4, p. 271; 8, p. 283].
3. Fundamental Principles of Regulation No. 1408/71
3. 1. Concept of Social Security
The concept of social security, which defines the scope of Article 51 of the EC Treaty, has not been defined in EC law [9, § 51, comm. 27-28], and neither has Article 1 of Regulation No. 1408/71 done so. European Court of Justice practice regarding this concept is inconsistent [9, § 51, comm. 27-28]. Article 4(1) of Regulation 1408/71 indeed specifies the classes of benefits to which the Regulation extends, although this does not include a precise definition of the concept of social security. The following benefits, mentioned in Article 4(1) of Regulation No. 1408/71 are among the social security benefits under EC law:
(d) survivor’s benefits;
(h) family benefits;
Welfare benefits and benefits for public servants and equivalent persons provided with separate social security schemes, as well as benefits for victims of war and the liquidation of the consequences of war are specifically excluded from the scope of the Regulation.
The list provided in Article 4 of Regulation No. 1408/71 is not final, and is in principle open to future expansion, although each Member State which introduces a new benefit must consider the fact that Regulation No. 1408/71 must be applied to that benefit [9, § 51, comm. 29].
3.2. Fundamental Principles
The co-ordination system created by Regulation No. 1408/71 is based on the following principles:
(a) co-ordination of national social security systems. The social security system created under Article 51 of the EC Treaty does not create an independent system of benefits applicable only in the Community in the sense of the harmonisation of different domestic social security systems. The objective of the above-mentioned system is to guarantee the smooth co-functioning of domestic systems, in the interests of the efficient implementation of the principle of the free movement of labour. In general, Community Regulations do not create new classes of benefits or remove existing ones. Member States are still at liberty to regulate their social security system as they wish.
The principle of co-ordination is not clearly and precisely set out in the Regulation, yet is derived from the fact that the Regulation does not create a universal social security system applicable in the EC, but instead adds to domestic social security schemes [9, § 51, comm. 36]. European Community social security Regulations constitute a certain constraint for the national legislator only to the extent that, pursuant to Article 189(2) of the EC Treaty, they are directly applicable in all Member States and on the conditions established by relevant Regulations, have priority over domestic law. After the Community Regulations come into effect, domestic law will only be implemented to the extent that it does not conflict with the former [6, D II Rdnr. 79].
The fact that the Regulation does not create a claim to social security on its own, but always in conjunction with the domestic legal system of at least one Member State also derives from the co-ordination concept which is the basis of the Regulation itself. Domestic law regulates what constitute social security benefits and on which conditions and to what extent those benefits must be guaranteed. Member States may create, increase, decrease or eliminate social security benefits, or make qualifications for receiving social benefits either simpler or more complicated, without conflicting with EC law. The principle of co-ordination contained in Regulation No. 1408/71 makes conscious allowance for the fact the level of social security is different among Member States, and that migrant workers may not be able to claim the same extent of social security benefits in another Member State as in their home country. In addition to domestic law, EC law in the field of social security also regulates circumstances which affect several Member States. Through collision rules, it regulates which national legal order is applicable in a certain situation. The extent to which a domestic legal order must be taken into account in other Member States is also regulated by relevant provisions [9, § 51, comm. 41–43, 71, 72].
(b) Determination of applicable law. Individuals to whom this Regulation extends are in principle subject to the legislation of only one country. These are the regulations of the country, on the territory of which the focal point of the social security relationship is located, i. e. in general the regulations of the country where the individual works are applied [6, D II Rdnr. 80]. This principle is used to prevent above all the double payment of contributions, as well as the accumulation of benefits. Certain special rules are provide for those who operate in several different Member States as either workers or entrepreneurs, but also in the case of workers or seamen sent temporarily to other countries [6, D II Rdnr. 80].
(c) The principle of equal treatment is stated in Article 6 of the EC Treaty and Article 3 of Regulation No. 1408/71. The above-mentioned principle prohibits direct and indirect discrimination on the basis of citizenship. The principal concept of European social security is the safeguarding of the equal treatment of nationals of the Community. An individual living on the territory of a Member State and to whom EC social security Regulations apply has essentially the same rights and obligations under the regulations of the country of residence as nationals of the Member State where he or she resides. The principle of equal treatment also prohibits Member States from leaving in force social security regulations which make it almost impossible for migrant workers to utilise certain benefits to the same extent as inhabitants of the country of residence [6, D II Rdnr. 81].
(d) Aggregation of insured periods. The principle of the aggregation of insured periods allows a worker to also take advantage of those benefits which depend on the length of certain periods of insurance, work and residence. To this end, EC Regulations stipulate that if the possession or retention of a benefit requirement depends on certain periods of insurance, work or residence, the competent authority of the Member State in question will regard periods satisfied pursuant to the regulations of another Member State as if those periods had been satisfied in the country of residence in question [6, D II Rdnr. 85].
The principle of the aggregation of work and residence periods for receiving a certain benefit, but also for the calculation of a benefit, are stipulated by Article 51(a) of the EC Treaty. This principle is not reflected in the general part of Regulation No. 1408/71, but is reflected in different provisions of the Regulation, which regulate individual social security benefits.
(e) The principle of the export of benefits to other Member States is stipulated in Article 51(b) of the EC Treaty, and is repeatedly referred to in both the general part of Regulation No. 1408/71 and also in connection with specific classes of benefits. The above-mentioned principle precludes the suffering of damages related to the payment of social security benefits upon a change in place of residence [9, § 51, comm. 40]. According to this principle, social benefits must be guaranteed even when a worker’s place of residence is in a country other than the insuring state. The change in a worker’s place of residence, within the boundaries of the EC, shall not lead to the loss of benefits, even when the national of a country is guaranteed certain benefits only while he is a resident of that country [6, D II Rdnr. 89].
3.3. Specification of Scope of Regulation No. 1408/71
(a) Personal validity. Under Article 51 of the EC Treaty, the claims of immigrating and emigrating workers and their family members must be guaranteed. The scope of this Regulation is actually broader than that foreseen by Article 51, since as of 1982, entrepreneurs and their family members also come under the Regulation [9, Article 51, comm. 53]. Pursuant to Article 2 of Regulation 1408/71, the Regulation is at present applicable workers, entrepreneurs and their family members if they are the nationals of one Member State or live on the territory of a Member State as refugees or stateless persons and if the regulations of one or more Member States must be applied to their case as regards guaranteed benefits [9, Article 51, comm. 53].
According to the European Court of Justice case law, the concept of the worker extends to all individuals considered insured by different domestic social security systems. Pursuant to Regulation No. 1408/71, a worker is a person (1) insured by social security systems against the risks mentioned in the Regulation and (2) actually insured in compliance with the preconditions established in the system in question [6, D II Rdnr. 69]. Member States alone decide as to the preconditions for joining a social security system and when and how an individual’s membership in a certain system is to be terminated.
Public servants are included in the scope of the Regulation in question only to the extent that they are covered by the social security system to which the Regulation in question is applied. Regulation No. 1408/71 is only not applied to public servants when separate social security schemes have been introduced for them [6, D II Rdnr. 73].
(b) Material validity. Regulation No. 1408/71 is applicable to all classes of benefits regulated with social security provisions listed in Article 4(1) of the Regulation. In essence, the Regulation does not include benefits provided for by collective agreements. The Regulation also does not include other contractual benefits, since these are not founded in legal acts [9, Article 51, comm. 61]. As mentioned above, the Regulation does not extend to welfare benefits or to special schemes intended for public servants or equivalent individuals.
4. Bottlenecks in Regulation No. 1408/71
At present, the system of rules for the co-ordination of European Community social security is increasingly the target of criticism. The system elaborated in Regulation No. 1408/71 is aimed primarily at the co-ordination of the public social security system, without taking additional job-related benefits into consideration. The scope of the Regulation is limited exclusively to nationals of the European Union moving within the borders of the EU, whereas inhabitants of third countries are excluded from its scope [13, p. 19; cf. also 13, pp. 103–115].
In addition, the system introduced by the Regulation is founded on social and economic systems which are at a more or less similar stage of development. When Poland, the Czech Republic, Hungary and the Baltic States, for example, join the European Union, European social security co-ordination law must also integrate states which differ in their level of development and which have different social policy traditions [13, pp. 14–15]. Thus the different economic and social possibilities of the new Member States must inevitably be taken into consideration in the performance of the Regulation.
5. Estonian Social Security System and System of European Community Rules of co-ordination
The principal structure of the Estonian social security system has by now evolved. One may essentially say that workers are protected against the most significant risks, although a system of insurance for some fields of social protection is still lacking [15, p. 9]. Estonia lacks, for instance, insurance for occupational diseases and industrial accidents. Damages suffered as the result of industrial accidents are compensated solely on the basis of rules provided for in civil law and rules regulating non-contractual damages. Estonia also lacks an unemployment insurance mechanism. The existing law on the social protection of the unemployed prescribes how the state must assist the job seeker and how the state must guarantee the payment of benefits to the unemployed. The role of the worker and the employer in the above-mentioned system is, however, still unregulated.
The achievement of a European social standard necessitates, in addition to an increase in the standard of living, significant changes, especially in the organisation of social security, health and welfare, the level of labour and health protection and the preparation of public servants for European conduct [3, pp. 221–222]. In social and health insurance, the evolution of new classes of insurance (insurance against occupational diseases, industrial accidents and unemployment, for instance) presently lacking in Estonia must be anticipated. Upon joining the European Union, legislation must also be changed so that the principle of the aggregation of years of social insurance earned, as regards working in different European Union countries, and also the right to “export” pension and other social security benefits from Estonia to other European countries, take effect for Estonia also. The precondition for these changes, however, is the creation of social security funds operating on the savings principle [3, p. 222].
The social reforms which have taken place in the past years in Estonia have been essentially in conformity with European Union social standards. The most significant reforms are presently taking place in the field of retirement insurance. Under the Pension Funds Act, which entered into force on 1 August 1998, people now have alternatives to state pensions to save additional pension money on a voluntary basis [10].
Estonia’s present domestic social security legislation is directed primarily at Estonian nationals and permanent residents. Regulation regarding migrant workers (entrepreneurs) is not very accommodating. At the centre of the system is not the worker or entrepreneur as payer of state social taxes, but the resident, who has the right to social security.
§ 28 of the Constitution of the Republic of Estonia refers to the national of Estonia as a legitimate subject for receiving old age, disability and loss or lack of provider benefits. The classes of benefits and the conditions and rules for receiving them are prescribed by law. Unless otherwise prescribed by law, Estonian nationals, nationals of other countries residing in Estonia and stateless persons all possess this right equally.
The social rights of migrant workers are regulated by international legal acts, which upon ratification become an inalienable part of Estonian legislation. Estonia now recognises the social security rights of only the nationals or residents of those countries with whom Estonia has concluded bilateral social security agreements. According to such agreements, the legal acts of the other Party to the agreement extend to the residents of both Parties when they work in the other country party to the agreement. Both the principle of equal treatment and the systems of the aggregation of qualifying periods and the transfer of funds are also applicable.
As regards existing social security legislation, one may not speak of the equal treatment of migrant workers in the field of social security, although there is a tendency towards the gradual improvement of the situation through the conclusion of bilateral and multilateral agreements. The coming into effect of the European Treaty is of particular importance.
The observation and application of European social security principles of co-ordination are not new for the Estonian social security system. Estonia has already concluded social security agreements with different countries, which also provide for the aggregation of periods of residence, work and insurance satisfied in other countries and the recognition of such periods by the Parties to the agreement. Estonia has signed such agreements with Latvia, Lithuania, Ukraine and Finland.
In addition to the above, the Treaty of Association between the European Communities and the Republic of Estonia – the European Treaty – took effect as of the 1 February 1998. The European Treaty recognises the equal social rights of migrant workers, more specifically it introduces the principles of the aggregation of periods of insurance, work and residence and of the transfer of yearly pension or pension fund payments [5, Article 37].
According to the White Paper, level I measures for the introduction of Regulations No. 1408/71 and 574/72 are lacking, since it will not initially be possible to extend the effect of Regulations 1408/71 and 574/72 to an insured individual or a certain branch of social security. The extension of the above-mentioned Regulations must be done in one step, which must be taken after joining the EU [16, p. 87].
Regardless of the fact that the application of rules of European Union social security co-ordination is not new for Estonia, one may distinguish certain problems in the assessment of migrant workers’ status in individual areas of social security. There are some problems with the assessment of the condition of migrant workers as regards retirement insurance. Estonia’s existing national pension system dates from 1993 and is founded on the principle of the importance of guaranteeing individuals a subsistence allowance in the event of loss of income. This social security system also has social welfare attributes, since the size of the pension does not depend on the individual’s previous income or payment of contributions; in some cases a pension does not even depend on the degree of an individual’s previous economic activity (invalidity pension, conditionally survivor’s pension).
At present, the size of pensions depends on the size of the national pension, which is the basis for the calculation of old-age pensions and an the years an individual has earned towards a pension (more precisely the annual coefficient of pension years), according to which the size of a pension increased proportionally and progressively. There is only one additional condition for migrant workers, namely that the individual does not receive a pension from another country. Pursuant to the National Subsistence Allowance Act, a pension is paid on the basis of the validity of a temporary residence permit, and pensionable years must have been earned in Estonia. The only exception is for an Estonian national or an alien of Estonian nationality and his spouse, parents or children who came to live with him or her in Estonia after 20 August 1991. They obtain the right to an old-age pension upon reaching retirement age if they have worked for 15 years towards a pension, regardless of where the individual has worked during those years. From the point of view of European social security policy, the granting of advantages on the basis of citizenship and especially ethnic origin is discriminatory and thus unacceptable, although there is an historical explanation for this. The use of such a principle is an attempt to promote the return of ethnic Estonians to Estonia without their having to change their citizenship, and at the same time avoid extensive immigration from the former republics of the Soviet Union.
The new National Retirement Insurance Act [11] does not extend the rights of foreigners, but represents a transition to a more modern insurance system, which would provide not only the possibility of elementary subsistence but also adequate compensation for lost waged. The size of a pension depends directly on the payment of contributions, the number of years worked and former salary. Formulae for the calculation of pensions allow one to easily calculate the part of the pension that the Estonian state must pay a worker who has worked his years earned towards his pension in several countries. Whereas the size of an individual’s pension, under the existing National Subsistence Allowance Act, depends on the base amount of the pension and the total of years worked, under the new National Retirement Insurance Act, an individual’s retirement insurance coefficient, i. e. the social payments made by or for an individual are taken into account. Thus in the determination and payment of pensions, the insurance principle is used increasingly often.
The exportability of pensions is indirectly recognised in the National Retirement Insurance Act, since it is stated that the delivery of pensions within the Republic of Estonia takes place at the payer’s expense, but outside Estonia at the receiver’s expense [11, §40(3)]. Here one cannot speak of the discrimination of foreign pensioners, since the distribution of delivery expenses does not depend on citizenship, but rather the location of the bank, and EU Council Regulation No. 1408/71 permits the deduction of postal and banking fees from a pension.
The implementation of the European Union system of co-ordination regarding employment and the social protection of the unemployed may also prove very problematic for Estonia. There is practically no unemployment insurance system in Estonia. Measures have indeed been taken for the protection of the unemployed, but these function as state benefits rather than social security. In Estonia, the social protection of the unemployed is understood as firstly the provision of labour market services of an informative nature, secondly the improvement of competitiveness through training and retraining, thirdly the provision of state unemployment benefits and fourthly labour market benefits. These are unemployment benefits in the sense of EU Regulation 1408/71 and thus must also be provided to nationals of the EU Member States.
The fact that Estonia will have to compensate unemployment benefits granted outside Estonia to those who became unemployed in Estonia and also search for work in other Member States will become a serious problem. As is widely known, the sizes of unemployment benefits in Estonia and elsewhere differ greatly, and since there is no unemployment insurance system, all compensation must come from the state’s own resources. It is doubtful whether Estonia will be able to fulfil such a requirement. States may, under a mutual agreement, introduce other means of compensation, or create a system for the settlement of accounts. The only conceivable option for Estonia is to conduct negotiations on this topic, since otherwise the implementation of European social legislation would be very costly.
One may conclude from the above that it is necessary to modify and improve the Estonian system for the social protection of the unemployed. The most practical option would be to introduce separate unemployment insurance and a subsidiary social benefit for the unemployed, which should still be the duty of the state and which should be directed at the promotion of individuals’ ability to manage and the increase of workers’ activity.
Since the system of European Community rules is at present of a co-ordinative nature, modifications need not generally be made to Estonian legislation in that respect, and thus there is no direct conflict between European rules and Estonian domestic law [1, p. 72].
The expansion of Estonian social security is, however, somewhat problematic. In addition to the above, there are two main types of problems Estonia will have to deal with in the near future:
(1) the existence of the territoriality principle [2, p. 581] in social security legislation, and
(2) the shortage of financial resources.
Estonian social security legislation is generally based on the fact that social benefits are guaranteed to either permanent residents of Estonia, or those who can demonstrate that they have worked for a certain number of years in Estonia. Thus an individual generally qualifies to receive an old-age pension when he has worked in Estonia for 15 years [20, § 5]. According to EC rules of co-ordination, all periods of work or insurance that an individual fulfilled in other Member States in order to receive a benefit, must be taken into account. For that reason, and under the relevant EC rules of co-ordination, it may no longer be firmly required that a person have worked for at least 15 years in Estonia to receive an old-age pension, but periods of work or social insurance fulfilled in other EU Member States must also be taken into consideration. The territoriality principle may also create difficulties regarding the registration of an individual as unemployed. In accordance with § 5 of the Social Protection of the Unemployed Act [21], to register someone as unemployed, it is also required that the individual have been engaged in work or an activity equivalent to work for at least 180 days of the 12 months prior to having applied to the employment office, except for special cases stipulated by law. Pursuant to § 6 of the same Act, work and activities equivalent to work are defined as, among other things: 1) work on the basis of an employment, service or civil law contract or membership in Estonia or as a worker dispatched to a foreign country and 2) operation as an entrepreneur in Estonia. Under the principles of the EU rules of co-ordination, periods of time worked in different EU Member States must begin to be considered in Estonia too, if it proves necessary for registering an individual as unemployed.
A second serious problem may be posed by the insufficiency of financial resources for the fulfilment of the obligations resulting from Regulation No. 1408/71. In addition to unemployment benefits, this fact may also create problems in the field of sickness benefits. For example, the EC rules of co-ordination distinguish between benefits in kind and financial benefits. The list of benefits provided in kind includes ambulatory and in-patient care, the compensation of the costs of a medical examination, etc. Financial benefits, however, are only those benefits guaranteed in money which are not benefits in kind.
The insuring state (the state where the individual works) (regardless of where the insured individual resides) is generally required to guarantee financial benefits, taking into consideration the requirements existing in that country. If the worker does not reside in the insuring state, however, then he is guaranteed sickness benefits in kind (e.g. necessary medical treatment, etc. ) according to the regulations of the country where the individual is located and conditions provided for there. The insuring state is required to compensate the services rendered to the state which provided the services. Thus in the case of an Estonian worker, for example, related expenses must be paid by the Estonian state. This operation is not difficult to perform, but the financial resources involved may play a significant role.
Therefore there are still many problems in Estonian social security legislation which may become an obstacle to the application of the system of rules for the co-ordination of EU social security. The reforms recently set in motion and planned in the field of social security provide evidence that increased attention has begun to be paid to the situation of migrant workers. This in turn helps towards a more effective application of EU social security principles.
The EC Treaty regulates four freedoms connected with the protection of an individual’s economic freedom to act. These are: the free movement of labour, services, capital and goods. To effectively implement the free movement of labour at the Community level, rules co-ordinating the social security systems of different countries have been introduced on the Community level.
The rules co-ordinating social security rights for the consolidation of the free movement of labour are constantly being modified and added to, in order to take into account the processes taking place in European social policy. Although such rules of co-ordination have been in force in the EC for approximately 30 years, it is precisely the processes which have taken, and been taking place in the past years which have raised the question whether changes should also be made to the rules of co-ordination themselves [8, pp. 275–277].
At the same time, it is not at present clear what effect and what kind of an effect the Amsterdam Treaty and the upcoming expansion of the EU will have on the rules of co-ordination introduced by Regulation No. 1408/71.
Time will answer the question as to the effect of the Amsterdam Treaty on overall European social policy.
The implementation of the system of EU rules of co-ordination in Estonia is not complicated in purely legal terms, but financially certain problems may arise. At the same time, it will be necessary to also amend domestic legislation to guarantee the principle of the equal treatment of migrant workers in the social security system.
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18. OJC L 28, p. 1 (1997).
19. OJ L 257/1 (1968).
20. Riiklike elatusrahade seadus (National Subsistence Allowance Act). – RT I 1993, 15, 256, with subsequent amendments.
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*1 At the time of completion of this article, the Amsterdam Treaty had not yet come into force. As a result, the version of the EC Treaty introduced by the Maastricht Treaty is referred to herein.
*2 According to such a principle, Council Regulation No. 1408/71 cannot provide for the claim to social security. Social security instead derives solely from domestic law.
*3 Regulation No. 1408/71 essentially regulates which rules must be followed in the payment or safeguarding of a certain benefit and according to which principles different benefit should be guaranteed. Regulation No. 574/72, however, is intended for the implementation of the above-mentioned regulation and contains mainly procedural rules [12, p. 357].
*4 In addition to this, Regulation No. 1612/68, which deals with the free movement of workers within the EC is also important to social security law relating to the free movement of migrant labour [19]. Regulations 1408/71 and 1612/68 have together been referred to as the Magna Charta of European social security law [8, p. 278, cf. also 4, p. 271].