Documents considered by the committee on 10 November 2010, including the following recommendation for debate: Safety of offshore oil and gas activities - European Scrutiny Committee Contents

2   Co-ordination of social security within the European Economic Area



SEC(10) 1013

Proposed Council Decision on the position to be taken by the EU in the EEA Joint Committee concerning an amendment to Annex VI (Social Security) and Protocol 37 to the EEA Agreement

Legal baseArticles 48, 218(9) and 352 TFEU; unanimity; EP consent
Document originated9 September 2010
Deposited in Parliament8 October 2010
DepartmentWork and Pensions
Basis of considerationEM of 15 October 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentLegally important
Committee's decisionNot cleared; further information requested


2.1  The Agreement establishing the European Economic Area ("EEA") entered into force in 1994. Its purpose is to "promote a continuous and balanced strengthening of trade and economic relations" between EU Member States and the remaining EEA States (Iceland, Liechtenstein and Norway) by establishing the free movement of goods, persons services and capital within a homogeneous European Economic Area.[1] Article 4 of the EEA Agreement prohibits discrimination on grounds of nationality. Article 28 provides for the free movement of workers within the EEA, and Article 29 seeks to facilitate the exercise of free movement rights by providing certain social security entitlements for workers, the self-employed and their dependants. These include:

  • aggregation, for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account by the national legislation of the countries concerned; and
  • payment of benefits to persons resident in EEA States.

2.2  Annex VI of the EEA Agreement sets out the relevant EU instruments on social security which EU and EEA States are required to apply, as well as any necessary modifications to take account of social security legislation in Iceland, Liechtenstein and Norway. The Annex may be amended by a decision of the EEA Joint Committee which comprises representatives of all the States which are parties to the EEA Agreement.

2.3  On 1 May 2010, new EU Regulations on the co-ordination of social security systems took effect within the EU. A significant feature of the new Regulations is that they extend the personal scope of EU arrangements for the co-ordination of social security to include non-economically active EU citizens, for example those who have never worked because of sickness, disability, or caring responsibilities.

The draft Council Decision

2.4  The purpose of the draft Council Decision is to update Annex VI of the EEA Agreement to include the new EU Regulations, thereby simplifying the co-ordination of social security schemes across the EEA. The effect of the proposed changes to Annex VI would be to extend to nationals of Iceland, Liechtenstein and Norway the arrangements for social security co-ordination already applicable since 1 May 2010 to EU nationals. As the arrangements are reciprocal, the changes would also apply to EU nationals living and working in Iceland, Liechtenstein and Norway. The draft Decision would also amend Protocol 37 of the EEA Agreement, which lists the committees with which representatives of the EEA States may be associated, to include the Administrative Commission for the co-ordination of social security systems.

2.5  The draft Council Decision cites three Treaty Articles for its legal base. Article 48 of the Treaty on the Functioning of the European Union (TFEU) provides for the adoption of EU measures in the field of social security necessary to facilitate the free movement of migrant workers (including the self-employed) and their dependants. It provides specifically for the aggregation of benefits, to ensure that any entitlement to benefit acquired in one Member State is not lost if a worker moves to another Member State, and for the payment of benefits to be made wherever the worker is resident within the EU. Article 352 TFEU is a residual legal base. It gives the EU power to act where such action is needed to achieve a Treaty objective but where the Treaties have not expressly conferred the necessary powers. The Commission is required to notify any proposed use of Article 352 to national parliaments, and the Council must act by unanimity after obtaining the consent of the European Parliament. Article 218(9) TFEU is essentially a procedural provision which empowers the Council to establish the position to be taken by the EU within the EEA Joint Committee.

The Government's view

2.6  In his Explanatory Memorandum of 15 October 2010, the Minister for Employment (Chris Grayling) says that there are continuing discussions with the Commission and Presidency on the correct legal base. The Government believes that Article 48 TFEU is solely concerned with movement within the EU and therefore is not an appropriate legal base for a proposal concerning the social security rights of workers moving between the EU and third countries (Iceland, Liechtenstein and Norway). The Government considers that Article 79(2)(b) TFEU, which provides for the adoption of EU measures on the rights of legally resident third country nationals and the conditions governing their freedom of movement and residence within the EU, is the correct legal base and should be cited instead of, or in addition to, Article 48 TFEU. It follows, according to the Minister, that the UK's opt-in applies and the Government must determine by 10 December 2010 whether or not to opt into the draft Council Decision.

2.7  The Minister explains that, if the UK were to opt into the draft Council Decision, arrangements in the UK for the co-ordination of social security systems would be the same for cases involving EU and EEA States. As the scope of the new EU social security Regulations which would be incorporated in Annex VI of the EEA Agreement has been extended to include all migrants, including non-economically active migrants, there would be an increase in the number of migrants who would be entitled to benefit payments, but the Minister thinks that the number of potential beneficiaries is likely to be small.

2.8  If the UK decided against opting into the draft Council Decision, then the Minister says that benefit expenditure would remain at the current level as the UK would still be bound by EU rules on social security co-ordination in force up until 1 May 2010. The UK would have to run parallel systems of social security co-ordination based on two sets of rules, one for cases involving only EU Member States, the other for cases involving EEA States. However, any increase in administrative expenditure is likely to be negligible, as the UK already has arrangements in place to deal with co-ordination of social security for migrant workers moving to or from other (non-EEA) third countries.

2.9  The Minister says that, in deciding whether or not to opt into the draft Council Decision, the Government "will give very careful consideration to the acceptability in principle of extending social security rights to any migrants from outside the EU who have never worked". He adds that, "at a time when we are considering stringent measures to control public expenditure we also consider that if we accept the extension of social security rights to this small group now, it would set a precedent for extending them to much larger groups in the future".


2.10  It is unfortunate that the Commission's brief explanatory memorandum accompanying the draft Council Decision provides no explanation for the proposed choice of legal base. It seems that the substantive Articles cited — Articles 48 and 352 TFEU — reflect the choice of legal base for the principal Regulation (883/2004) which is to be incorporated into Annex VI of the EEA Agreement. As Article 48 appears only to apply to EU citizens (and their dependants) who are working in other EU Member States, we assume that Article 352 is needed because Regulation 883/2004 extends EU rules on the co-ordination of social security systems to EU citizens who have moved to other Member States and who are not economically active and have not worked.

2.11  We confess to some difficulty in understanding the Government's reasoning as regards the appropriate legal base for the draft Council Decision. The Government's objection to Article 48 TFEU appears to be based on its territorial scope which, the Government says, is limited to EU Member States and cannot be extended to encompass EEA States. However, Article 79(2)(b) also appears to have a limited territorial scope, as it concerns the rights of third country nationals who are legally resident within a Member State and the conditions governing their freedom of movement and residence in other Member States. We do not see how this Article could be used to extend social security entitlements to those exercising free movement rights within the wider European Economic Area. We should therefore be grateful if the Government would provide more detailed reasons to justify its preferred choice of legal base, explaining:

  • its views on the material scope of Article 48 TFEU;
  • its understanding of the Commission's reasons for including Article 352 as a legal base; and
  • whether Article 79(2)(b) TFEU alone provides the correct legal base, or should be cited in combination with Article 48 and/or Article 352.

2.12  It seems that, for the purposes of this draft Decision, the Government does not differentiate between EEA States and other third countries. We wonder whether this is justified in light of the obligations contained in the EEA Agreement, and in particular, Articles 1 and 4, which provide for the free movement of persons and prohibit discrimination on grounds of nationality. We therefore ask the Government to explain whether limiting the territorial scope of arrangements for the co-ordination of social security systems to the movement of migrants exclusively within the EU would be consistent with the EEA Agreement.

2.13  We note the Minister's assertion that the UK's Title V opt-in applies and that the Government will be required to notify whether or not it wishes to participate in the draft Council Decision by 10 December 2010. As we have explained elsewhere,[2] we think that this is at odds with the actual wording of Article 3 of the UK's opt-in Protocol which states clearly that the three-month period for notifying the UK's opt-in decision runs from the date on which "a proposal or initiative has been presented to the Council pursuant to Title V of Part Three of the TFEU". The inclusion of a Title V legal base — so far absent from the draft Council Decision — would seem to be the essential trigger for the notification procedure specified in Article 3 of the Protocol.

We ask the Minister to keep us informed of any further developments regarding the choice of legal base and to tell us the Government's eventual decision on whether or not to opt into the draft Council Decision. Pending further information from the Minister, the proposal remains under scrutiny.

1   Article 1, EEA Agreement, see OJ L1, 3.1.1994, p.1. Back

2   See chapter 9 of this Report. Back

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