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Cite as: [2009] UKUT 209 (AAC)

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Secretary of State for Work and Pensions v RK [2009] UKUT 209 (AAC) (23 March 2009)
Residence and presence conditions
right to reside

IN THE UPPER TRIBUNAL Appeal No. CJSA/2687/2007

ADMINISTRATIVE APPEALS CHAMBER

Before: UPPER TRIBUNAL JUDGE ROWLAND

Decision: The Secretary of State's appeal is allowed. The decision of the Fox Court appeal tribunal dated 13 February 2007 is set aside and there is substituted a decision to the effect that the claimant was not entitled to jobseeker's allowance from 15 February 2006.

REASONS FOR DECISION

The claimant is a Lithuanian national, who therefore became a citizen of the European Union when Lithuania acceded to the Union on 1 May 2004. He had already been living in the United Kingdom for six and a half years, having originally arrived on 10 October 1997. It appears he claimed asylum in 1998 but the claim was never determined. He worked for most of the time from 1998 to 2004, first in a take-away sandwich outlet and then in the building industry. While working in the building industry, it appears he was an independent contractor and did not pay Class 1 National Insurance contributions as he was self-employed. On 22 February 2006, he claimed jobseeker's allowance, with effect from 15 February 2006. For much of the intervening period between 2004 and February 2006, he appears to have been without work and destitute. His claim was disallowed on 15 May 2006, on the ground that he had no right of residence in the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland so that he was a "person from abroad" and his applicable amount for income-based jobseeker's allowance was nil. The lack of contributions meant he did not qualify for contribution-based jobseeker's allowance.

The claimant appealed. The tribunal allowed his appeal on grounds that are obscure. In part, it appears to have based its decision on the simple fact that the claimant was already installed in the United Kingdom before the legislation inserting the "right to reside test" came into force on 1 May 2004. The tribunal also referred to a submission made on behalf of the claimant, relying on the claimant's past residence and also claiming that the "right to reside test" was incompatible with EC legislation. The Secretary of State now appeals against the tribunal's decision with my leave.

The claimant's representative has conceded that the claimant's pre-accession residence is not relevant to his right to reside under Community law or under either the Immigration (European Economic Area) Regulations 2000 (S.I. 2000/2326) or the Immigration (European Economic Area) Regulations 2000 (S.I. 2006/1003) which replaced the 2000 Regulations with effect from 30 April 2006. The claimant did not then have a right of residence under domestic law. I have considered this aspect of the position of those in circumstances similar to the claimant's in R(IS) 3/08 and CIS/1833/2006. To the extent that the tribunal took a different view, it erred in law.

Moreover, the other arguments advanced before the tribunal and apparently accepted by it have now been shown to be wrong in the light of the decisions of the Court of Appeal in Abdirahman v. Secretary of State for Work and Pensions [2007] EWCA Civ 657; [2008] 1 WLR 254 (also reported as R(IS) 8/07) and Kaczmarek v Secretary of State for Work and Pensions [2008] EWCA Civ 1310 (to be reported as R(IS) 5/09) and of the House of Lords in Zalewska v Department for Social Development [2008] UKHL 67; [2008] 1 WLR 2602 (to be reported as an appendix to R 1/09 (IS)).

The last of those cases confirmed the validity of the Accession (Immigration and Worker Registration) Regulations 2004 (S.I. 2004/1219). From 1 May 2004, the claimant in the present case was an "accession State worker requiring registration" under those Regulations, or would have been had he worked as an employed earner, because he did not have leave to enter or remain in the United Kingdom under the Immigration Act 1971 at the date of Lithuania's accession and had not worked for 12 months in registered employment since that date. The consequence was that he was not entitled to a right of residence based on the fact that he was looking for employment (see regulations 4(2) and 5(2) and (3)).

The claimant's representative has, however, highlighted the fact that the claimant was in self-employment after the date of accession. It is not in dispute that the claimant had had a right of residence while he remained self-employed (see regulations 5(1)(b) and 14 of the 2000 Regulations). What the claimant's representative points to is Article 7(3) of Council Directive 2004/38/EC which provides that, for the purpose of the right of residence guaranteed under Article 7(1)(a) –

"…, a Union citizen who is no longer a worker or self-employed person shall retain the status of worker or self-employed person in the following circumstances:

(a) he/she is temporarily unable to work as the result of an illness or accident;

(b) he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with the relevant employment office;

(c) he/she is in duly recorded involuntary unemployment after completing a fixed-term employment contract of less than a year or after having become involuntarily unemployed during the first twelve months and has registered as a job-seeker with the relevant employment office. In this case, the status of worker shall be retained for no less than six months;

(d) he/she embarks on vocational training. Unless he/she is involuntarily unemployed, the retention of the status of worker shall require the training to be related to the previous employment."

In relation to a worker, Article 7(3)(a) to (c) largely reproduces the effect of Article 7(1) of Council Directive 68/360/EEC, save insofar as it restricts the guaranteed right of residence to a period of six months in cases falling within subparagraph (c). In relation to a self-employed person, subparagraph (a) reproduces the effect of part of Article 4(1) of Council Directive 73/148/EEC but subparagraphs (b) and (c) would, if they apply to a self-employed person, be new. The new Directive came into force on 30 April 2006, which was during the period between the date of claim in this case and the date the claim was disallowed.

The claimant's representative goes on to point out that, although regulation 5(2) and (3) of the 2000 Regulations gave effect to Article 7(1) of Council Directive 68/360/EEC and Article 4(1) of Council Directive 73/148/EEC, regulation 6(2) and (3) of the 2006 Regulations gives effect to Article 7(3) of Council Directive insofar as it applies to workers and to subparagraph (a) insofar as it applies to self-employed persons, but does not give effect to subparagraphs (b) and (c) insofar as they apply to self-employed persons. Moreover, the derogation in regulation 5(3) of the 2004 Regulations applies only to regulation 5(2) of the 2000 Regulations and, as amended by paragraph 7 of Schedule 5 to the 2006 Regulations, to regulation 6(2) of the 2006 Regulations and so does not apply to self-employed persons at all. Accordingly, he submits, the derogation does not prevent the claimant from relying upon the direct effect of Article 7(3)(c) of Council Directive 2004/38/EC, at least from the date that that Directive came into force.

The draftsman of the 2006 Regulations evidently considered that subparagraphs (b) to (d) of Article 7(3) of Council Directive 2004/38/EC do not apply to self-employed persons who have become involuntarily unemployed. However, the Secretary of State appears to agree with the claimant's representative that that is not the correct construction of Article 7(3), given its opening words. Nonetheless, he appears to submit that the 2006 Regulations give full effect to the Directive but merely approach the issue in a different way. He submits that a person who ceases to be self-employed and seeks employment is adequately covered by the Regulations as a "jobseeker" and therefore falls within the derogation in regulation 5(2) of the 2004 Regulations, as amended.

There are difficulties with the Secretary of State's approach. First, if the draftsman had taken the view that former self-employed persons in duly recorded involuntary unemployment were adequately covered as jobseekers, it is difficult to see why he or she did not take the same approach to former workers. Secondly, the definition of "jobseeker" in regulation 6(4) is confined to a person who "enters the United Kingdom in order to seek employment" (my emphasis), which does not necessarily cover all former self-employed persons (or, indeed, all former workers) and it also requires a person to provide evidence that he or she "has a reasonable chance of being engaged", which may be an additional condition not permissible where Article 7(3)(b) or (c) of the Directive applies. Thirdly, the draftsman still did not make any provision for former self-employed persons falling within Article 7(3)(d).

An alternative approach would be that a person in duly recorded involuntary unemployment or vocational training always has the status of worker, rather than the status of a self-employed person, even if formerly a self-employed person. That would make sense in relation to those seeking work, given that unemployment benefits, such as jobseeker's allowance, are usually available only to those seeking employment as an employee (even if they are also seeking self-employment) and would explain why the last sentence in subparagraph (c) of the Directive refers only to a worker, although it would not explain the use of the word "retained". If that were the correct approach, it would be necessary for the claimant to rely on the direct effect of the Directive to gain the status of worker, because regulation 6(2) is confined to former workers, but he would then fall squarely within the terms of the derogation in regulation 5(2) of the 2004 Regulations, as amended.

However, I am not persuaded that the draftsman of the 2006 Regulations did misconstrue the Directive. It seems to me that sub paragraphs (b), (c) and (d) do apply only to former workers and not to those formerly self-employed. It would be surprising if the rights of self-employed persons had been aligned to those of workers without any indication of an intention to do so being included in the lengthy preamble to the Directive. That makes sense of the use of the words "retained" and "retention" in subparagraphs (c) and (d). Moreover, it is plain that job-seeking for the purposes of subparagraphs (b) and (c) must relate to a preparedness to take up offers of employment as a worker made through an employment office and not merely opportunities for establishment as a self-employed person with which such offices do not generally deal. It is difficult to see why a self-employed person should retain that status while looking for employment as a worker. There is no right of residence for the purpose of becoming established as a provider of services.

It is also, of course, difficult to see why a person who ceases to be self-employed but who seeks employment as a worker should not retain a right of residence. I am quite satisfied that such a person does ordinarily retain a right of residence because it would be quite inconsistent with Article 15(4)(b) of the Directive not to do recognise such a right. There is no reason why a person who was formerly self-employed in a member State should have fewer rights than a person who has never worked in that State at all. Whether the word "entered" in Article 15(4)(b) must be read as "is in" or whether it is necessary to recognise the right of residence as existing under Article 18 of the EC Treaty outside the Directive does not matter. What, however, is clear is that the right of residence is held by virtue of the person's current status as a person seeking employment as a worker, rather than his or her former status as a self-employed person.

The claimant in the present case would fall within the definition of "jobseeker" in regulation 6(4) of the 2006 Regulations and therefore falls within the derogation in regulation 5(2) of the 2004 Regulations as amended. In my judgment it is clear that the derogation was intended to apply to anyone seeking employment as a worker.

The Secretary of State's appeal must therefore be allowed.

I would, however, draw attention to two anomalies, one of which I suggest is unintentional. First, a self-employed person retains a right of residence under regulation 6(3) of the 2006 Regulations while temporarily incapable of work whereas a worker does not retain such a right under regulation 6(2)(a) due to the derogation in regulation 5(3) of the 2004 Regulations, as amended. This may be explicable on the basis that a worker will often be entitled to sick leave and will retain a right of residence while on such leave without the need to rely on regulation 6(2)(a) of the 2006 Regulations and without therefore falling foul of the derogation (see CIS/4237/2007). The second anomaly, which may be unintentional, is that a person who has been self-employed for over 12 months cannot thereby avoid being an accession State worker requiring registration if he or she ceases trading and becomes a jobseeker, even if the self-employment was registered with the Inland Revenue for tax and national Insurance purposes. That seems unsatisfactory but I need not consider whether a claimant who is deprived of income-based jobseeker's allowance because he or she was formerly self-employed, rather than employed, has any remedy because there is no evidence that the claimant in the present case was self-employed for a continuous period of 12 months after Lithuania's accession to the European Union. The claimant is seeking to be treated more favourably than a person who had formerly been employed. He does not seek equal treatment.

Finally, I observe that this is yet another case where the immigration authorities appear to have discontinued action on the claimant's asylum claim merely because he had become a citizen of the European Union when mere citizenship was not enough to confer on him a right of residence. Whether or not he would have been successful, it seems to me that he was entitled to have his claim for leave to remain in the United Kingdom determined, because the question whether or not he should be given such leave was still of practical importance. While it may be true that for immigration purposes a right to enter the United Kingdom under the 2006 Regulations (and formerly the 2000 Regulations) is as effective as leave to enter or remain under the 1971 Act, that is not true for social security purposes. If social security entitlement is to be linked to immigration status, it is necessary for the immigration authorities to make the necessary decisions when they have been requested to do so.

MARK ROWLAND

23 March 2009