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Dano and the exclusion of inactive EU citizens from certain non-contributory social benefits

When the Grand Chamber handed down its judgment in Dano v Jobcenter Leipzig (C-333/13) on 11 November 2014, it was the subject of much media attention: Germany can deny benefits to jobless EU migrants, court rules (The Guardian), Landmark ECJ ruling boosts David Cameron’s bid to clamp down on EU benefit migrants (The Independent), EU court ruling backs curbs on ‘benefit tourism’ (BBC News) and The end for benefit tourism: European court rules unemployed EU migrants can be denied welfare payments (The Mirror).

Such media interest for a judgment of a Court of Justice of the European Union is unusual, and for cases on social security it is practically unheard of. But the reason for the interest is obvious. The restriction of benefits paid to migrants from the European Union has been a major issue on the Government’s political agenda for most of 2014: see The political row over benefits and EU migrants (Free Movement). Clearly the Grand Chamber judgment in Dano has legal significance, but are the newspaper headlines about its impact – ‘the end for benefit tourism’ etc – accurate? In order to answer that question, the best place to start is with the judgment.

Dano – the facts

The evidence showed that she did not enter Germany in order to look for work, nor was she actively seeking work in that country.

The case concerned Ms Dano, a Romanian national who entered Germany in November 2010. For several years, Ms Dano and her son (who was born in Germany) have been living in Leipzig in the apartment of one of Ms Dano’s sisters, who provides them with food and lodging. In July 2011, she was issued with a residence certificate of unlimited duration by the city of Leipzig. Ms Dano has no professional qualifications and has not pursued any professional activity, either in Germany or Romania. The evidence showed that she did not enter Germany in order to look for work, nor was she actively seeking work in that country. The proceedings arose out of a request for benefits under the German Social Code (SGB II) by way of basic provision. Ms Dano’s claim included subsistence benefits for herself and social allowances and a contribution to accommodation and heating costs for her son.

The basic provision for jobseekers under SGB II (set out at paragraphs 19 to 26 of the judgment) encompasses benefits which are: (i) intended to bring to an end or reduce need, in particular by integration into the labour market; and (ii) are intended to cover subsistence costs. The benefits result from the amalgamation of two previous schemes (namely, unemployment assistance and social assistance), and it was accepted by all the parties that these were ‘special non-contributory cash benefits’ within the meaning of Regulation No 883/2004 – i.e. that they contain elements of both social security and social assistance.

One of the conditions of entitlement to benefit under the Social Code SGB II is that the person concerned must be ‘capable of earning a living’. However, the provision of social assistance is said “to enable the beneficiaries to lead a life in keeping with human dignity”. The Social Code SGB II also contains an exclusion specifically aimed at ‘foreign nationals whose right of residence arises solely out of the search for employment and their family members’. It was by reference to this provision that Ms Dano’s claim for the grant of benefits by way of basic provision under SGB II was refused by the Jobcenter Leipzig in a decision dated 1 June 2012. It is the lawfulness of this criterion which became the subject of a reference to the CJEU.

The basis for Ms Dano’s challenge

Notwithstanding the fact that Ms Dano was claiming basic provision under SGB II despite not being a jobseeker, she sought to challenge the refusal of benefit to her and her son on the basis that EU law precludes a Member State from preventing recourse to a non-contributory social security benefit which guarantees a level of subsistence, when these are provided to their own nationals who are in the same situation. Ms Dano sought to rely on the following legal principles of EU law:

(1) The line of EU cases on citizenship of the Union which preclude entitlement to non-contributory social assistance from being made conditional on EU citizens from other Member States being ‘legally resident’, when no such condition applies to nationals of the host Member State (Martinez Sala (C-85/96), Grzelczyk (C‑456/02) and Trojani (C-456/02) and D’Hoop, (C‑224/98)).

(2) The principle that benefit that is intended to facilitate access to employment could not be regarded as constituting ‘social assistance’ which comes within the derogation on equal treatment in Article 24(2) of Directive 2004/38 (Vatsouras (C-22/08) paras 44-45).

(3) That following the decision in Brey (C-140/12), it was arguable that in cases involving inactive EU citizens who make a request for social assistance, the Member State can only refuse benefit after a thorough examination of the claimant’s personal circumstances (para 72).

(4) In the alternative, Ms Dano sought to rely on the Charter of Fundamental Rights of the EU on the need to respect human dignity (article 1) in order to require the host Member State to make payments of social assistance under the SGB II Code to enable her to gain a permanent right to reside.

The questions referred to the CJEU

The specific question raised by Ms Dano’s case is concerned with whether EU law precludes nationals of other Member States from being refused entitlement to a ‘special non-contributory cash benefit’ where the criterion adopted by the relevant host Member State (Germany) excludes from benefit people who come to Germany solely in order to benefit from the German social assistance scheme, rather than seeking to integrate themselves into the labour market. The CJEU’s judgment discusses the question in broader terms, namely whether the equal treatment provisions in

Article 18 TFEU, Article 20(2) TFEU, Article 24(2) of Directive 2004/38 and Article 4 of Regulation No 883/2004 must be interpreted as precluding legislation of a Member State under which nationals of other Member States who are not economically active are excluded, in full or in part, from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Regulation No 883/2004 although those benefits are granted to nationals of the Member State concerned who are in the same situation”

The CJEU’s assessment

European Court of Justice by Cédric Puisney
European Court of Justice by Cédric Puisney

In summary, the CJEU concludes that economically inactive EU citizens have a general entitlement to non-contributory social benefits (either in the form of social assistance or a special non-contributory cash benefit) under EU law and that Member States can circumscribe the conditions under which such benefits are granted to economically inactive migrants to prevent them becoming an unreasonable burden on their social assistance system. Further, that the Charter has no application in this context. The CJEU reaches these conclusions by means of the following analysis.

  • While a Union citizen may in principle rely on the prohibition of discrimination on grounds of nationality laid down in Article 18 TFEU, as the provision is given more specific expression in Article 24 of Directive 2004/38 and Article 4 of Regulation No 883/2004 and are applicable to Ms Dano, as someone exercising free movement rights, it is these provisions that need to be examined (paras 61-62).
  • The Court’s next step is to hold that while the basic provision in SGB II is a ‘special non-contributory cash benefit’ under Regulation No 883/2004, it nevertheless falls within the concept of ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38 following the ruling in Brey (para 63).
  • The Court then points out that Article 24(2) of the Directive contains a derogation from the principle of non-discrimination and holds that so far as access to social benefits is concerned, a Union citizen can only claim equal treatment with nationals of the host Member State if his or her residence in the territory of the host Member State complies with the conditions of Directive 2004/38 (para 69).
  • Moreover, Article 7(1) of the Directive provides that for periods of residence longer than three months, the right can only be retained if the Union citizen and his/her family members satisfy the conditions set out in article 7(1)(a) on exercising free movement rights. However, for persons who are economically inactive, they are required by article 7(1)(b) not to become an unreasonable burden on the social assistance system of the host Member State (paras.73, 75).

Based on this analysis the Court holds:

“To accept that persons who do not have a right of residence under Directive 2004/38 may claim entitlement to social benefits under the same conditions as those applicable to nationals of the host Member State would run counter to an objective of the directive, set out in recital 10 in its preamble, namely preventing Union citizens who are nationals of other Member States from becoming an unreasonable burden on the social assistance system of the host Member State,” (para 74).

“Therefore Article 7(1)(b) seeks to prevent economically inactive Union citizens from using the host Member State’s welfare system to fund their means of subsistence,” (para 76).

Consequently, the answer to the question whether EU law precludes a Member State from excluding economically inactive EU migrants from entitlement to certain ‘special non-contributory cash benefits’ is a firm ‘no’.

“A Member State must therefore have the possibility, … of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State’s social assistance although they do not have sufficient resources to claim a right of residence.” (At para 78).

Given the fact that Ms Dano (and her son) do not have sufficient resources, and thus cannot claim a right of residence in Germany under the Directive, they cannot invoke the principle of non-discrimination laid down by article 24(1) the Directive (paras 69, 81). Applying Brey, the Court also holds that they cannot rely on the non-discrimination principle in article 4 of Regulation No 883/2004 either: 

“The same conclusion must be reached in respect of the interpretation of Article 4 of Regulation No 883/2004. The benefits at issue in the main proceedings, which constitute ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of the regulation, are, under Article 70(4), to be provided exclusively in the Member State in which the persons concerned reside, in accordance with its legislation. It follows that there is nothing to prevent the grant of such benefits to Union citizens who are not economically active from being made subject to the requirement that those citizens fulfil the conditions for obtaining a right of residence under Directive 2004/38 in the host Member State (see, to this effect, judgment in Brey,” (para 83).

Given the CJEU’s conclusions on the issues discussed above, the rest of the judgment deals very briefly with Ms Dano’s alternative argument – that she can invoke the Charter. The Court follows Brey in holding that Member States have the competence to determine the conditions for the grant of special non-contributory cash benefits such as those provided under SGB II and Member States also have the competence to “define the extent of the social cover provided by that type of benefit” (para 91). The CJEU therefore holds that as Germany was not implementing EU law when it laid down the condition in SGB II, excluding Ms Dano from benefits, the Court had no jurisdiction to consider this issue raised in question 4.

The legal significance of Dano

Social assistance benefits – Abdirahman

The CJEU’s conclusion that a Member State can pass legislation to protect itself against economically inactive EU citizens seeking to access its social assistance system has already been settled by Abdirahman and Ullusow v Secretary of State for Work and Pensions [2007] EWCA Civ 657, in which the Court of Appeal rejected a legal challenge to the right to reside test brought by two economically inactive EU citizens claiming Income Support and State Pension Credit respectively. The Court l held that the claimants could not rely on the prohibition on discrimination under article 12 (now article 18) of the Treaty as that provision did not extend to cases where the individual was economically inactive and had no right of residence under either the Treaty or the relevant domestic law (paras 43-45). The Court added that if there had been any discrimination, then the need to combat the risks of what the Advocate General in Trojani (C-456/02) described as ‘social tourism’ was sufficient justification.

Special non-contributory cash benefits – Patmalniece

Whether a different approach needs to be taken when the economically inactive EU citizen is seeking to access a special non-contributory cash benefit has been considered and rejected by the Supreme Court in Patmalniece v Secretary of State for Work and Pensions [2011] UKSC 11 Mrs Patmalniece, a Latvian pensioner, had been refused a claim for State Pension Credit under the right to reside test. It was argued that whereas Directive 2004/38/EC does allow Member States to restrict access to social assistance, EU rules on the coordination of social security do not allow restrictions on social security benefits for claimants who are habitually resident (as this is defined in the coordination rules) in the Member State in question. As State Pension Credit is a special non-contributory cash benefit (i.e. it contains elements of both social security and social assistance), she could rely on the anti-discrimination provision in article 3 of Regulation (EC) 1408/7 on the coordination of social security schemes (in force at the time). The Supreme Court rejected these submissions holding that the habitual residence test was a cumulative one, and as a UK national could fail the actual habitual residence element of the test, it was indirectly, as opposed to directly, discriminatory, and was therefore capable of justification (para 35). The Court went on to hold (Lord Walker dissenting) that the test was objectively justified because it was a proportionate response to the legitimate aim of seeking to protect the UK against social tourism (para 51).

The effect of Dano is to uphold the Supreme Court’s conclusion in Patmalniece, but the CJEU took a slightly different approach based on the ruling in Brey (C-140/12), which held that a special non-contributory cash benefit within the meaning of Regulation 883/2004 was also covered by the concept of ‘social assistance’ within the meaning of Directive 2004/38/EC, and that there was nothing objectionable, in principle, in making the granting of those benefits to EU citizens conditional on them having a right of residence in the host Member State.

The effect of this ruling in Brey can be seen in the way in which the European Commission’s proceedings against the UK Government’s use of the right to reside test has evolved and changed over time. When the EU Commission announced that it had commenced infraction proceedings against the UK in September 2011 – Social security coordination: Commission requests United Kingdom to end discrimination of EU nationals residing in the UK regarding their rights to specific social benefits (IP/11/1118) – at that stage the Commission was arguing that the criteria in the habitual residence test under the coordination rules were strict enough to ensure that certain UK social security benefits (i.e. State Pension Credit, income-based JSA, Child Benefit and Child Tax Credit) are only granted to those genuinely residing habitually within their territory. However, the Commission subsequently altered its position following the ruling in Brey (C-140/12). However, when the case was eventually issued in June 2014, the proceedings in European Commission v United Kingdom of Great Britain and Northern Ireland (Case C-308/14) have been confined to Child Benefit and Child Tax Credits (OJ, 2014/C 329/03).

The position of economically inactive EU citizens post-Dano

Ms Dano was economically inactive and her reason for moving from Romania to Germany appears to be to access its social assistance

Given the factual scenario in Dano the CJEU’s conclusion seems ‘inevitable’. For, in contrast to the situation in Vatsouras (C-22/08) where the applicants had retained the status of workers and were therefore entitled to access benefits payable under SGB II (para 32), Ms Dano was economically inactive and her reason for moving from Romania to Germany appears to be to access its social assistance. Ms Dano could not demonstrate that she had any link with the labour market and consequently there was a failure to ‘integrate’ into German society (as this term is understood in the Directive). The judgment in Dano does not, however, address the position of EU citizens who are not in the same position as Ms Dano but who nevertheless are excluded from accessing social benefits due to a right to reside condition contained in national legislation.

Job Centre Plus sign
By Andrew_Writer, on Flickr

(i) EEA jobseekers

The CJEU’s ruling in Dano does not affect the principle established in Vatsouras (which was concerned with the same German Social Code SGB II) that benefits of a financial nature which, irrespective of their status under national law, are intended to facilitate access to the labour market cannot be regarded as constituting ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38 and that jobseekers with retained worker status can therefore rely on EU principles of free movement when challenging decisions to refuse such benefits. If the Government goes ahead with its threat to exclude unemployed EU migrants entirely from receiving Universal Credit (Telegraph 22/11/14), then the courts will need to determine whether Universal Credit (or an element of it) should be regarded as a benefit to facilitate access to the labour market according to its results rather than its ‘formal structure’ (para 42).

(ii) Zambrano Carers

The CJEU’s ruling in Dano did not have to consider the position of ‘Zambrano carers’ who have a derived right to reside where to deny that right would mean that their dependent EU citizen (normally a child) would be deprived of their rights as an EU citizen under the Treaty to move and reside freely within the territory of the EU (Ruiz Zambrano v Office National de L’Emploi (C-34/09)). The question of whether primary carers of EU citizens who are UK nationals can rely on the anti-discrimination provisions contained in the TFEU and/or the Charter (given that their position is not regulated by the Directive) is an issue that is currently before the Court of Appeal (hearing on 4 to 7 November, before Arden, Elias and Burnett LJJ; judgment is reserved) in an appeal from the decision of Supperstone J in R(HC) v Secretary of State for Work and Pensions & Ors [2013] EWHC 3874 (Admin).

(iii) EU Citizens integrated into UK society

The term ‘social tourism’ was used in paragraph 18 of the Advocate General’s opinion in Trojani, which was delivered on 19 February 2004:

“So long as social security systems have not been harmonised in terms of the level of benefits, there remains a risk of social tourism, ie moving to a Member State with a more congenial social security environment. And that is certainly not the intention of the EC Treaty, which to a considerable extent leaves responsibility for social policy in the hands of the Member States.”

In Dano the evidence of ‘social tourism’ is fairly blatant.

In Dano the evidence of ‘social tourism’ is fairly blatant. This means the CJEU was not required to consider the position of an EU citizen who had been living in a host Member State for a substantial period (but less than the time needed to acquire a permanent right to reside based on five years residence), who might have a right to reside despite being inactive at the time they claim benefit or deal with a case which would not normally be regarded examples of ‘social tourism. For example, an EU citizen who has come to the UK and has been in and out of low-paid work who needs to access benefits on a temporary basis, or an EU citizen who came to the UK as a minor with his/her migrant parents, who on completing his/her education needs to access social assistance, either on a temporary basis as a jobseeker or on a long-term basis as someone who is unable to earn their living due to a long-term disability.

When it comes to determining whether the refusal of social benefits to an EU citizen in this type of case is lawful, EU law still has a role to play. First, EU law recognises a certain degree of financial solidarity between nationals of a host Member State and nationals of other Member States, particularly if the difficulties encountered are temporary (Grzelczyk (C-184/99), para 44; Bidar (C-209/03), para 56). Secondly, there have been developments in recent EU law: (i) the ruling that Directive 38/2004/EC does not represent an exhaustive codification of the existing law (Saint Prix (C-507/12), para 38); and (ii) the need for Member States to avoid using the right to reside condition as a blanket rule which automatically refuses benefit to an EU citizen who is economically inactive (Brey (C-140/12), para 72). The Supreme Court has granted permission in two cases to consider whether the denial of benefit is disproportionate in the light of recent CJEU case law – Mirga v Secretary of State for Work and Pensions (UKSC 22013/0161) and Samin v Westminster City Council (UKSC 2013/0225). Therefore the impact of Dano is likely to be considered when those cases come on to be heard, sometime in March 2015.


EU law continues to provide protection for genuine work seekers who have established a genuine link with the UK.

Were the news stories right to describe Dano as a landmark case curbing ‘benefit abuse’ by EU migrants? That would be an oversimplification as the ability of Member States to protect themselves from ‘benefit tourism’ was already settled law for the reasons discussed above. Are government minsters right to regard the ruling in Dano as supporting its programme of restricting benefits to EU migrants who come to the UK to take up low paid work? For the reasons discussed above, no. EU law continues to provide protection for genuine work seekers who have established a genuine link with the UK. Moreover, the issue of whether benefit should be refused to EU citizens based on a right to reside condition despite being integrated into UK society is a matter that still needs to be resolved by the courts.

Desmond Rutledge
Desmond Rutledge Desmond Rutledge is a barrister at Garden Court Chambers where he is a member of the public law and the welfare benefits team. He has in-depth experience in cases where there is a cross over with immigration and community care issues. He writes and provides training on welfare benefits issues and contributed the section on welfare benefits for migrants in Chapter 14 of Macdonald’s Immigration Law and Practice (9th edn) published February 2015.

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