EU nationals - Habitual residence - Indirect discrimination - Justification

Galina Patmalniece v Secretary of State for Work and Pensions: SC (Lord Hope (deputy president), Justices of the Supreme Court Lord Rodger, Lord Walker, Lady Hale, Lord Brown): 16 March 2011

The appellant (P) appealed against a decision ([2009] EWCA Civ 621, [2010] PTSR 128) that the provisions of regulation 2(2) of the State Pension Credit Regulations 2002 were indirectly, as opposed to directly, discriminatory, and that the discrimination was justified.

P was a Latvian national living in the UK. She had worked in Latvia, though not in the UK, and she had no income other than a retirement pension from the Latvian social security authorities. She claimed state pension credit in the UK.

The general effect of regulation 2(2) of the 2002 regulations was to restrict entitlement to state pension credit to those who had a right to reside in the UK, the Channel Islands, the Isle of Man or the Republic of Ireland (the common travel area).

P had no such right and her application was therefore refused.

The question was whether the conditions of entitlement in regulation 2(2) were compatible with article 3(1) of regulation 1408/71, which provided for equality of treatment, among those to whom it applied, in the application of social security schemes.

The secretary of state conceded that regulation 2(2) was indirectly discriminatory.

The issues were: (i) whether regulation 2(2) gave rise to direct discrimination for the purposes of article 3(1) of regulation 1408/71; (ii) if it gave rise only to indirect discrimination, whether that discrimination was objectively justified on grounds independent of nationality;

and (iii) if the indirect discrimination would otherwise be objectively justified, whether that conclusion was undermined by the favourable treatment given by regulation 2(2) to Irish nationals.

Held: (Lord Walker dissenting on the issue of justification) (1) Had a right to reside in the common travel area been the sole condition of entitlement to state pension credit, it would undoubtedly have been directly discriminatory on grounds of nationality.

However, the effect of regulation 2(2) had to be viewed in the context of section 1(2)(a) of the State Pension Credit Act 2002 and regulation 2 as a whole.

In order to be entitled, all claimants had to be habitually resident in the common travel area, and while all UK nationals had a right to reside in the UK, not all of them would be able to meet the test of habitual residence.

The test was constructed in such a way that it was more likely to be satisfied by a UK national than by a national of another member state.

In terms of EU law, that meant that although it was not directly discriminatory on grounds of nationality, it was indirectly discriminatory and had to be justified, Bressol v Gouvernement de la Communaute Francaise (C-73/08) [2010] 3 CMLR 20 ECJ (Grand Chamber) applied (see paragraphs 26-28, 30, 35 of judgment).

(2) Indirect discrimination could be justified only if it was based on objective considerations independent of the nationality of the persons concerned and was proportionate to the legitimate aim of the national provisions, R (on the application of Bidar) v Ealing LBC (C-209/03) [2005] QB 812 ECJ considered.

Proportionality was not in issue.

The questions were therefore whether the reasons for the difference in treatment provided an objective justification for that difference, and whether that justification was based on considerations that were independent of nationality.

The purpose of the right-to-reside test was to safeguard the UK’s social security system from exploitation by people who wished to enter in order to live off income-related benefits rather than to work.

That was a legitimate reason for the imposition of the test. It was independent of nationality, arising from the principle that only those who were economically or socially integrated with the host member state should have access to its social assistance system.

There was, therefore, sufficient justification for the discrimination arising from regulation 2(2) (paragraphs 36-38, 46, 48, 51-53)

(3) Irish nationals met the requirements of regulation 2(2) even though they did not have a right to reside in the UK and were not habitually resident there.

Their position was protected by article 2 of the Protocol on the Common Travel Area and it was not discriminatory not to extend the same entitlement to the nationals of other member states (paragraphs 54-60).

Appeal dismissed.

Simon Cox, Simon Pickup (instructed by Tower Hamlets Law Centre) for the appellant; Clive Lewis QC, Jason Coppel (instructed by Treasury Solicitor) for the respondent; Richard Drabble QC, Charles Banner (instructed by Bates Wells & Braithwaite) for the intervener.