IN THE UPPER TRIBUNAL Case No  CIB/710/2011

ADMINISTRATIVE APPEALS CHAMBER

 

Before UPPER TRIBUNAL JUDGE WARD

 

Decision:  The appeal is allowed (although the extent to which that will in practice benefit the claimant remains to be determined).  The decision of the tribunal sitting at Newcastle-upon-Tyne on 25 January 2011 under reference 229/10/00336 was in error of law and is set aside.  Pursuant to section 12(2)(b) of the Tribunals, Courts and Enforcement Act 200, I remake the decision in the following terms:

 

The appeal against the decision dated 18 May 2010 by the Secretary of State is allowed to the following extent.

 

(a) In respect of the period from 20 December 2006 to 30 April 2008 (“the first period”), the claimant’s claim for long-term incapacity benefit fails.  This is because he does not fulfil the qualifying conditions under section 30A of the Social Security Contributions and Benefits Act 1992 (“the 1992 Act”) and in particular cannot, in respect of the first period, rely on regulation (EC)1408/71 (“the Regulation”), as the benefits he received in Germany during that period (Arbeitslosengeld II and Sozialhilfe) did not fall within the scope of article 40 of the Regulation as they are not “cash sickness benefits” nor were granted “in respect of invalidity”.

 

(b) In respect of the period on and from 1 May 2008 (“the second period”), the claimant’s claim for long term incapacity benefit is to be determined afresh by the Secretary of State on the following basis:

 

(i) the Secretary of State is to apply Article 40(3) of the Regulation;

 

(ii) the Secretary of State is to make his own findings of incapacity, as to which he is not bound by the decision of the German authorities

 

(iii) in assessing whether the qualifying period for long term incapacity benefit created by section 30A is met, the Secretary of State must take into account the period in respect of which the claimant has received an invalidity pension from Deutsche Rentenversicherung-Nord (“DRV-Nord”) pursuant to the decision communicated by DRV-Nord’s letter of 20 November 2012.

 

The Secretary of State’s decision will carry fresh appeal rights to the First-tier tribunal.

 

REASONS FOR DECISION

 

1. The claimant previously lived in the UK but has for some years lived in Germany.  It is not in dispute that he has not paid (nor, I think, been credited with) national insurance contributions in the UK at any time after the tax year 1997/98.  On the balance of probabilities it appears that he was living in Germany in 1998, as he registered as unemployed at the Kempten unemployment office in Germany in October of that year.  The claimant asserts that he paid national insurance contributions for as long as ten years before that, but in view of how the contributions conditions work (see [11] below), when the contributions were made is rather more important than the period for which they were made.

 

2. In Germany, the claimant was in receipt of Arbeitslosengeld II (Unemployment Benefit II) from 25 February 2005 to 31 August 2005.  The papers disclose an apparent one day break in his benefit entitlement on 1 September 2005.  He was once again entitled to Arbeitslosengeld II between 2 September 2005 and 30 September 2006.  There was then a one month gap.  Between 1 November 2006 and 6 March 2007 he was in receipt of Sozialhilfe (Social Assistance).  From 7 March 2007 onwards he was once again in receipt of Arbeitslosengeld II.  At the time of the First-tier Tribunal’s decision, he had at no time received any other form of social security payment in Germany.  There was, in particular, evidence from the authorities concerned with sickness benefit, the AOK Bayern, that he had no entitlement to sickness benefit from them.

 

3. The claimant has health problems and there was evidence from the German authorities that he was considered by them to be unfit for work fronm 25 February 2005.  On 20 December 2006 he claimed a German invalidity pension.  DRV-Nord, the relevant authority in Germany, dismissed his claim by a decision dated 8 March 2007.  This decision was challenged  and, though not particularly evident from the translated documents and in the absence of the parties,  the challenge remained pending at the time of the First-tier Tribunal’s decision.

 

4. DRV-Nord, some three years later, referred the claim to the DWP using the standardised form E204.  The claimant’s claim made on 20 December 2006 was also to be taken as a claim under UK law for long term incapacity benefit (LTIB).  A decision was taken on 18 May 2010 on behalf of the Secretary of State disallowing the claim.  The decision read:

 

“On 20/12/06 [the claimant] made a claim for incapacity benefit to the German Authority.  His illness started on 25/02/2005.  He has received unemployment benefit from 25/02/2005 but his claim to German invalidity benefit has been disallowed.

 

The claimant has only been entitled to cash sickness benefit or equivalent benefit under German legislation from 25/02/2005.

 

The claimant is therefore not entitled to UK incapacity benefit from and including 25/02/2005.

…

The claimant has been receiving German unemployment benefit since 25/02/2005 but payment of this benefit would have to cease before UK Incapacity Benefit could be paid or he would have to be awarded a German Invalidity benefit.”

 

5. This decision:

 

(a)  was taken without the benefit of a letter from DRV-Nord setting out the dates and other details of benefit paid to the claimant in para 2 above, which was only received a short while afterwards; and

(b)  was predicated on an assumption that the payment of Arbeitslosengeld II did amount to a “cash sickness benefit”.

 

The position set out in it was subsequently re-stated in correspondence from the DWP on 16 June 2010.

 

6. The matter came before the First-tier Tribunal.  Neither the claimant nor the DWP attended.  The tribunal upheld the Secretary of State’s decision, observing that:

 

“There is evidence that although he receives German Unemployment Benefit, the German authorities have considered the claimant as unfit for work and do not require him to register for work.  He has not been awarded German Sickness Benefit and is therefore not entitled under Article 40 EC Regulations to UK Incapacity Benefit as German unemployment benefit is not a qualifying benefit under those regulations.”

 

This position was substantially restated in the tribunal's statement of reasons.

 

7. The claimant appealed to the Upper Tribunal, alleging that the tribunal had not applied the correct law or had wrongly interpreted the law.  He referred to the letter dated 16 June 2010 from the DWP which had indicated (as had the decision of 18 May 2010) that German unemployment benefit could be used as an equivalent benefit. He reiterated that he was not in receipt of sickness benefit.

 

The First-tier Tribunal’s decision – errors of law

 

8. In my view, there are at least two criticisms which may fairly be made of the tribunal’s decision on the basis of the evidence then before it.  Firstly, the claimant did not have reason to suppose that the issue of whether Arbeitslosengeld II could be treated as a sickness benefit was likely to be in issue at the hearing, given that the DWP had twice indicated that it did qualify.  Although it is not a point he has sought to take, it seems to me entirely possible that he was unfairly deprived of a chance to put a case addressing the point (and, as will be seen, it is not at all an easy one).  Since he was not attending, being in Germany, in my view the tribunal ought to have adjourned, indicated it was considering the point and given him the chance to respond.  As it was, he did not have the opportunity to marshal before the tribunal his arguments in respect of why Arbeitslosengeld II should be viewed as sufficient.  As foreign law is a matter to be proved by evidence, that was an important omission.  Secondly, I consider that the duty to give reasons required the tribunal to explain why it was reaching a different view from that taken, in the claimant’s favour, by the DWP.  To say, as the tribunal did, that “his appeal must, therefore, fail essentially from the technical nature of the actual benefit he has been receiving which does not bring him within the scope of entitlement under the EEC Regulations”, while accurate and concise, does not indicate why apparently differing views were being taken as to the “technical nature” of the benefit.  I therefore conclude that the tribunal was as a result in error of law.  I do not need to decide whether there was also an error in relation to the unascertained pending status of the appeal against the disallowance of the German invalidity pension.

 

Subsequent developments

 

9. In the course of the appeal’s time in the Upper Tribunal, by a letter dated 20 November 2012, DRV-Nord agreed to grant an invalidity pension on the ground of partial diminution in earning capacity from 1 May 2008 and full diminution of earning capacity  “aufgrund der Verschlossenheit des Arbeitsmarktes” (because the employment market is closed off to him) from1 November 2008.  The claimant subsequently emailed in March 2013 indicating that at a hearing before the Bavarian Regional Social Court of Appeal on 27 March 2013, his lawyer would be seeking a review as to the start date for the German pension seeking backdating to the date of claim or (it is said) earlier.  I have not been informed of the outcome of that hearing directly, but by a letter dated 25 April 2013 (thus four weeks after the hearing), DRV-Nord informed the DWP of the grant from 1 May 2008 (only).  I infer therefore that that continues to be the relevant date. 

 

Domestic legislation

 

10. In remaking the decision, I note that s.30A of the Social Security Contributions and Benefits Act 1992 (“the 1992 Act”) materially provided (the minor amendments during the period are irrelevant for present purposes):

 

“(1) Subject to the following provisions of this section a person who satisfies—

(a) either of the conditions mentioned in subsection (2) below; or

(b) if he satisfies neither of those conditions, each of the conditions mentioned in subsection (2A) below,

is entitled to short-term incapacity benefit in respect of any day of incapacity for work (“the relevant day”) which forms part of a period of   incapacity for work.

 

(2) The conditions mentioned in subsection (1)(a) above are that—

(a) he is under pensionable age on the relevant day and satisfies the contribution conditions specified for short-term incapacity benefit in Schedule 3, Part I, paragraph 2, or

(b) [not material]

 

(2A) –(3) [not material]

 

(4) In any period of incapacity for work a person is not entitled to short- term incapacity benefit for more than 364 days.

 

(5) Where a person ceases by virtue of subsection (4) above to be   entitled to short-term incapacity benefit, he is entitled to long-term incapacity benefit in respect of any subsequent day of incapacity for work in the same period of incapacity for work on which he is not over pensionable age.

 

(6) and (7) [not material] “

 

It was therefore a pre-condition of entitlement to LTIB that a period on short-term incapacity benefit (STIB) should have come to an end because the 364 day period had run out.  STIB was itself a contributory benefit.  The condition for LTIB was that a claimant should have been entitled to that specific (contributory) benefit.  Being incapable of work, of itself, was insufficient.  So was being in receipt of some other benefit payable by reference to a person’s incapacity, such as income support or (now) income–related employment and support allowance.

 

11. There were two conditions for STIB at the material time, both of which s30A(2)(a) required to be satisfied.  The second condition, set out in para 2(3) of schedule 3 to the 1992 Act, provided that:

 

“(3) The second condition is that—

(a) the claimant must in respect of the last two complete years before the beginning of the relevant benefit year have either paid or been credited with contributions of a relevant class or been credited (in the case of 1987-88 or any subsequent year) with earnings; and

(b) the earnings factor derived as mentioned in sub-paragraph (5) below must be not less in each of those years than the year's lower earnings limit multiplied by 50.”

 

For this purpose the “relevant benefit year” in respect of a claim for STIB commencing on 25 February 2005 was 2005-6 (see s21(6)).  “Year” (standing alone) meant a tax year (s 21(5)(d)) so the question was whether the claimant could fulfil the above condition in respect of the tax years 6 April 2002 to 5 April 2003 and 6 April 2003 to 5 April 2004.  In views of the matters set out at [1] above, it is clear that he could not do so as a matter of UK law alone.

 

Regulation (EC) 1408/71-Scheme of approach to invalidity benefits/invalidity pensions

 

12. Regulation (EC) 1408/71, in force at the material time, made complex provisions in relation to invalidity benefits where a person had worked in more than one Member State.  The Regulation distinguished between Type A schemes (described in Article 37) , where the amount of invalidity benefits was independent of the duration of periods of insurance and Type B schemes, which were any which did not meet the requirements for being a Type A scheme.  Type A schemes were listed in Annex IV, Part A of the Regulation and include what became LTIB in the UK.  It is common ground that Germany’s is a Part B scheme.  This brings into play the provisions of Article 40 which requires to be set out in full:

 

“1. An employed person or a self-employed person who has been successively or alternately subject to the legislation of two or more   Member States, of which at least one is of the type referred to in Article 37(1), shall receive benefits under the provisions of Chapter 3, which shall apply mutatis mutandis, taking into account the provisions of   paragraph 4.

 

2. However, an employed or self-employed person who suffers incapacity for work leading to invalidity while subject to a legislation listed in Annex IV, part A, shall receive benefits in accordance with the provisions of Article 37(1) on the following conditions:

 

-- that he satisfies the conditions of that legislation or other legislation of the same type, taking into account where appropriate of Article 38, but without having recourse to periods of insurance completed under legislations not listed in Annex IV, part A, and

 

-                  that he does not satisfy the conditions required for the acquisition of the right to invalidity benefits under a legislation not listed in Annex IV, part A, and

-                   

that he does not assert any claims to old-age benefits, account being taken of the second sentence of Article 44(2).

 

3. (a) For the purpose of determining the right to benefits under the  legislation of a Member State, listed in Annex IV, part A, which makes the granting of invalidity benefits conditional upon the person concerned having received cash sickness benefits or having been incapable of work during a specified period, where an employed person or a self employed person who has been subject to that legislation

suffers incapacity for work leading to invalidity while subject to the legislation of another Member State, account shall be taken of the following, without prejudice to Article 37 (1):

 

(i) any period during which, in respect of that incapacity for work, he has, under the legislation of the second Member State, received cash sickness benefits, or, in lieu thereof, continued to receive a wage or salary;

 

(ii) any period during which, in respect of the invalidity which followed that incapacity for work, he has received benefits within the meaning of this Chapter 2 and of Chapter 3 that follows, of the Regulation granted in respect of invalidity under the legislation of the second Member State

 

as if it were a period during which cash sickness benefits were paid to him under the legislation of the first Member State during which he was incapable of working within the meaning of that legislation.

 

(b) The right to invalidity benefits under the legislation of the first Member State shall be acquired either upon expiry of the preliminary period of compensation for sickness, as required by that legislation, or upon expiry of the preliminary period of incapacity of work as required by that legislation, but not before:

 

(i) the date of acquisition of the right to invalidity benefits

referred to in subparagraph (a) (ii) under the legislation of

the second Member State,

or

(ii) the day following the last day on which the person

concerned is entitled to cash sickness benefits under

the legislation of the second Member State.

 

4. A decision taken by an institution of a Member State concerning the degree of invalidity of a claimant shall be binding on the institution of any other Member State concerned, provided that the concordance between the legislation of these States on conditions relating to the degree of invalidity is acknowledged in Annex V.”

 

There is no “acknowledgement” in Annex V that is relevant for present purposes.

 

Which part of the Regulation applies? Issues of applicable law.

 

13. Which path to follow through the maze therefore turns on whether the claimant “suffered incapacity for work leading to invalidity while subject to a legislation listed in Annex IV, part A” or not.  The condition would be met, and Article 40(2) would apply, if it was UK legislation which had applied at the time, otherwise it is Article 40(3) that would apply.

 

14.  While I dealt with the point of construction about whether a person “suffer[s] incapacity for work leading to invalidity” for these purposes when a person became incapable of work as opposed to when he became entitled to an incapacity benefit in ML v SSWP (IB) [2011] UKUT 390 (AAC), it is not necessary to rely on that for the purposes of this decision.  A letter dated 25 June 2002 records, as previously noted, that the claimant had registered at the Kempten unemployment office in October 1998.  Indeed, it confirms that he had remained registered there ever since, but that his health limitations had meant it had not subsequently proved possible to find a job for him.  The German authorities thus appeared to have considered him capable of work between 1998 and (at least) 2002.  The German authorities then concluded the claimant was incapable of work from 25 February 2005.  That points to the onset of incapacity (or invalidity) occurring while he was residing in Germany.  While (particularly given the potential for differing approaches to incapacity between member states, it is not impossible, that at some point in 1998 the claimant was subject to UK legislation and became incapable of work, the Secretary of State’s representative accepts there is no sufficient evidence to suggest that was indeed the case. I do not see that that conclusion is affected by the claimant’s assertion that “the heart condition started when insured in the UK”.  He has had the condition for a long time, including when he was working.  What matters is not the onset of a condition, but the onset of incapacity (or invalidity).

 

15. Determining the legislation to which a person is subject is dealt with in Article 13 of the Regulation.  The basic rules in that Article are subject to numerous exceptions.  In particular we have to consider those provided for by Article 89  and Annex VI.  If it is Article 13 itself which applies,  then Article 13(2)(a) or more probably Article 13(2)(f) would have made German law applicable.  

 

16. Annex VI is less straightforward.. Paragraph 20 of the Annex provides for the application of certain UK provisions notwithstanding that the person has become subject to the legislation of another Member State under Article 13(2)(f).  The provisions specified include Article 40(2) but not Article 40(3).  While I have not received argument on the point, I do not treat the failure to mention Article 40(3) in that paragraph as significant.  That is because it is the subject  of another provision , namely paragraph 14, which provides that:

 

 “In applying Article 40(3)(a)(ii), account shall only be taken of periods during which the employed person was incapable of work within the meaning of United Kingdom legislation.” 

 

17. This appears to suggest that Article 40(3) is to be applied but on the modified basis there set out.  Effectively each of the paragraphs in this hotch-potch of an Annex in my view falls to be construed independently.  The representative of the Secretary of State has not sought to argue that any of the provisions of Annex VI  would preclude the application of Article 40(3), were it otherwise to apply.

 

18. Consequently, for the reasons I have indicated of the law in [15] and [16], I proceed on the view of the facts set out in [14] that it is Article 40(3) of the Regulation which is relevant.

 

Giving effect to Article 40(3): which German benefits fall to be taken into account?

 

19. In applying Article 40(3), the Secretary of State will be entitled to rely on Annex VI, para 14 and on Article 40(4) and Annex V, which together have the effect that it is the United Kingdom’s test of incapacity for work which applies and that the United Kingdom is not in that regard bound by the determination of the German authorities leading to the award of the German invalidity pension.

 

20. Subject to [19], the effect of Article 40(3) is that in determining whether the conditions of section 30A of the 1992 Act were fulfilled, the DWP would be obliged to take into account (by (i)) any period in which the claimant received  in respect of that incapacity for work  “cash sickness benefits” (there is no suggestion that “in lieu thereof, [he] continued to receive a wage or salary”.)  It would also be necessary to take into account (by (ii)) periods during which he had received benefits granted in respect of ensuing invalidity under German law. The subsequent award by DRV-Nord of invalidity pension with effect from 1 May 2008 means that there may be a relevant distinction based on that date.  It is necessary to look at the benefits concerned  in some detail, in the light of the Regulation.

 

21. Regulation 1408/71 distinguishes between social security, which is within its scope, special non-contributory cash benefits, which are within its scope only to a limited extent, and social assistance, which is outside it: see Article 4.  Within the concept of social security, there are a number of “branches” listed in that Article: these include (a) sickness and maternity benefits, (b) invalidity benefits and (g) unemployment benefits.  Special non-contributory cash benefits are defined in Art 4(2a):

 

“Special non-contributory cash benefits” means those:

(a) which are intended to provide either:

(i) supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in paragraph 1 [i.e. this is the list referred to above], and which guarantee the persons concerned a minimum subsistence income having regard to the economic and social situation in the Member State concerned;

or

(ii) solely specific protection for the disabled, closely linked to the said person’s social environment in the Member State concerned,

and

 

(b) where the financing exclusively derives from compulsory taxation intended to cover general public expenditure and the conditions for providing and for calculating the benefits are not dependent on any contribution in respect of the beneficiary.  However, benefits provided to supplement a contributory benefit shall not be considered to be contributory benefits for this reason alone;

 and

 

(c) which are listed in Annex IIa.”

 

22. The list in Annex IIa has often been amended and, by regulation (EC) 629/2006, included in respect of Germany:

 

“Benefits to cover subsistence costs under the basic provision for jobseekers unless, with respect to these benefits, the eligibility requirements for a temporary supplement following receipt of unemployment benefit (Art 24(1) of Book II of the Social Code) are   fulfilled.”

 

The amendment was made from 28 April 2006.  There is no suggestion that the proviso applies in this case.  On the evidence before me the benefits there referred to are to those by way of Arbeitslosengeld II.  Inclusion in Annex IIa is a necessary pre-condition to being a special non-contributory cash benefit, thus it is equally possible to say that before 28 April 2006, Arbeitslosengeld II was not one.

 

23. The question therefore is whether, before 28 April 2006 when it came to be listed as a special non-contributory cash benefit, the claimant can rely on his period in receipt of Arbeitslosengeld II from 25 February 2005 to 31 August 2005 and from 2 September 2005 to 27 April 2006.  Assuming for present purposes (though without deciding) that the single day of non-entitlement on 1 September 2005 is either a mistake or a technicality and should be overlooked, the periods would amount to more than 364 days.  Therefore it is necessary to decide whether Arbeitslosengeld II did, prior to its listing as a “special non-contributory cash benefit” qualify as a “cash sickness benefit”.

 

24. Evidence as to the circumstances in which Arbeitslosengeld II came to be payable to the claimant was available in a letter from DRV-Nord.  In a letter of 25 March 2010, that institution wrote (using the DWP translation):

 

“…With our letter of 31.08.2006 we already informed your British insurer of your incapacity to work since 25.02.2005 and that you receive “Arbeitslosengeld II” (means-tested basic unemployment benefit) since you have no other income…”. 

 

This suggests that the relevant test is one of lack of means rather than sickness as such (and in that, it is entirely consistent with the requirement for a special non-contributory cash benefit set out in Article 4(2a)(a) of the Regulation. 

 

25. Evidence has been made available from a Mr Otting, who is deputy head of the division dealing with the co-ordination of social security schemes in the German Ministry of Labour and Social Affairs, in the following terms:

 

“I  will try my very best to assist you in clarifying all questions regarding our UBII (Arbeitslosengeld II).

 

We always considered this benefit as being a social assistance benefit which aims at ensuring a minimum subsistence income for persons in the active age bracket , i.e. between age 15 and the pensionable age.  One of the conditions for an entitlement is that the person is capable of   work.  Capable of work is anyone who is not unfit to work for at least three hours a day because of sickness or disablement for the foreseeable future.  This means that even a sick person may be regarded as being capable of work within the meaning of [para.] 8 of the Social Code Book II.

 

A sick recipient of UB II will normally continue  to receive UB II, whereas a sick employee will receive cash sickness benefits from the sickness insurance scheme.

 

When it comes to the general classification of UB II in the context of Regulation 1408/71, we never regarded it as a sickness benefit within the meaning of Regulation 1408/71, although - as outlined above – it may also be payable to persons who are objectively sick.  We claimed the inclusion of UB II in the Annex IIa of the Regulation 1408/71 already by Note CA.SS.TM. 113/04 of 3 March 2004 (attached by   permission).  Our wish was satisfied by Regulation (EC) 629/2006.

 

How did we classify this benefit before its inclusion in the Annex IIa?  It had not changed its main features just because of this inclusion, but its main features remained unchanged.  We considered it as being a social assistance benefit.”

 

26. I also note that in C-22/08 and C-23/08 Vatsouras and Koupatantze the ECJ summarised those who were entitled to Arbeitslosengeld II in the following terms (para 8 of the decision):

 

“Under this Book benefits shall be received by people who:

1. have attained the age of 15 and have not yet attained the age of 65,

2. are capable of earning a living,

3. are in need of assistance and

4. whose ordinary place of residence is in the Federal Republic of Germany” … .

 

27. I accept the evidence of, in particular, Mr Otting.  On the evidence it is still not totally clear on what basis Arbeitslosengeld II was paid to the claimant if, as the authorities confirm, he was incapable of work from 25 February 2005, but that is a matter of German law as to which it would be wrong for me to speculate.  It is clear on the evidence that the benefit is at any rate primarily payable to those who are capable of earning a living.  I appreciate that, as the claimant has said and is not disputed, there may not be out of work sickness benefits, as such, in Germany, but the fact remains on the evidence that, whatever features of the system were found to enable the claimant to receive the benefit, its stated purpose is not specifically to provide for those who are incapable of work through ill-heath: indeed, quite the opposite.

 

28. The Secretary of State’s representative has very properly drawn my attention to the case of C-3/08 Ketty Leyman.  Ms Leyman had moved from a state with a Type A scheme (Belgium) to one with a Type B scheme (Luxembourg).  Ms Leyman was entitled under both systems, but the Belgian authorities said that Belgian benefits would only be payable after a 12 month waiting period.  Had she been in Belgium, she would have received a different benefit during that 12 month period, but as she was living in Luxembourg, she could not. The court’s decision is principally in the following paragraphs:

 

“40. As regards freedom of movement for workers, Article 42 EC leaves in being differences between the Member States’ social security systems and, consequently, in the rights of persons working in the Member States. It follows that substantive and procedural differences between the social security systems of individual Member States are unaffected by Article 42 EC (see Case C‑227/89 Rönfeldt [1991] ECR I‑323, paragraph 12, and Case C‑165/91 van Munster [1994] ECR I‑4661, paragraph 18).

41. It is not, however, in dispute that the aim of Article 39 EC would not be met if, through exercising their right to freedom of movement, migrant workers were to lose social security advantages guaranteed to them by the laws of a Member State. Such a consequence might discourage Community workers from exercising their right to freedom of movement and would therefore constitute an obstacle to that freedom (see Case C‑349/87 Paraschi [1991] ECR I‑4501, paragraph 22, and van Munster, paragraph 27).

42. In the present case, although Articles 87 and 93 of the Law of 1994 do not draw a distinction between workers who have exercised their right to freedom of movement and those who have not done so, application of those articles nevertheless causes a disadvantage for the first year for workers who are in a situation such as that of the applicant in the main proceedings compared with workers who are also definitively or permanently incapable of work but who have not exercised their right to freedom of movement.

43. Although the latter workers have the right to primary incapacity allowance in Belgium, Ms Leyman has the right neither to that allowance nor to another analogous allowance in Luxembourg, having regard to the fact that she already receives invalidity benefit in that Member State.

44. In addition, since payment of the invalidity allowance in respect of the periods of work completed and contributions paid in Belgium does not begin until the period of one year’s primary incapacity has elapsed, application of Articles 87 and 93 of the Law of 1994 as advocated by the Belgian competent authorities means that workers who are in a situation such as that of Ms Leyman have paid social contributions on which there is no return so far as the first year of incapacity is concerned.

45. The Court has already held, in this respect, that the EC Treaty offers no guarantee to a worker that extending his activities into more than one Member State or transferring them to another Member State will be neutral as regards social security. Given the disparities in the social security legislation of the Member States, such an extension or transfer may be to the worker’s advantage in terms of social security or not, according to circumstance. It follows that, even where its application is less favourable, such legislation is still compatible with Articles 39 EC and 43 EC if it does not place the worker at a disadvantage as compared with those who pursue all their activities in the Member State where it applies or as compared with those who were already subject to it and if it does not simply result in the payment of social security contributions on which there is no return (see Joined Cases C‑393/99 and C‑394/99 Hervein and Others [2002] ECR I‑2829, paragraph 51, and Case C‑493/04 Piatkowski [2006] ECR I‑2369, paragraph 34).

46. In a situation such as that in the main proceedings, if application of Articles 87 and 93 of the Law of 1994 as advocated by the competent authorities in Belgium leads to a refusal to grant, for the first year of incapacity, any benefit to a worker who has exercised his right to freedom of movement, it must be held that such an application is contrary to Community law, given that, firstly, it places that worker at a disadvantage in relation to those who are in the same situation of definitive incapacity to work but who have not exercised their right of freedom of movement and, secondly, it results in payment of social contributions on which there is no return.”

 

29. I do not consider that the same reasoning can be applied here so as to help the claimant in respect of the first period.   Ms Leyman had an accrued right under Belgian law to be paid invalidity benefit:  It was just that she had to wait a year for it, when a person who had not gone to work in Luxembourg would not.  Here, the claimant has no right to STIB because he could not meet the second contribution condition at the relevant time and this in turn prevented a successful claim for LTIB A person who, unlike the claimant, had not gone to work (or seek work) in Germany but who had an equally deficient contribution record in the UK would be similarly disadvantaged.  As to the second ground in Leyman, people quite frequently pay contributions on which there is no return.  Such is the case, for instance, with people whose contributions fall below the relevant earnings limits in any given year and who for whatever reason do not obtain credits to make up the shortfall.  A person who pays to insure against a particular risk obtains as a return the fact of being covered, but unless the risk materialises gets no return of substance at all.  What I think distinguishes Leyman is that she had paid contributions which, had she remained in Belgium, would have entitled her to a benefit, which she was then deprived of, specifically because of how the Belgian authorities applied the rules to someone who had moved to Luxembourg.

 

30. That a narrower rather than a broader interpretation of the effect of Leyman is to be applied is born out by paragraph 40 of that case, that substantive and procedural differences between the social security systems of individual Member States are unaffected by Article 42 EC (as it was).  If it is the case that Germany does not have a system of benefits specifically for those who are sick and who are not in work, with the result that there is increased reliance on special non-contributory cash benefits and/or social assistance by those who find themselves in such circumstances, that is how the system is.  If that makes it harder for people to be able to point to time which can be counted under Article 40(3) to assist them with a claim to UK LTIB, that is a reflection of the differing systems of the two member States which, as Leyman confirms, is unaffected by the Article of the Treaty in issue in that case.

 

31. I conclude that payments of Arbeitslosengeld II paid to the claimant were not a “cash sickness benefit” within Article 40(3) because they were not paid in respect of sickness but rather because of the claimant’s shortage of resources. (I should mention that there are references in the papers to an “equivalent” benefit in this context.  So far as I can see, there is no such thing – the only alternative to “cash sickness benefits” is receipt of a wage or salary in lieu.)

 

32. The claimant seeks to argue that the designating of Arbeitslosengeld II from 28 April 2006 as a special non-contributory cash benefit is incorrect as the legislation requires, as he disputes that “the financing exclusively derives from compulsory taxation intended to cover general public expenditure.”  This is contrary to the evidence in the form of the Note to the European Commission enclosed with Mr Otting’s evidence, which I prefer as being likely to be a better informed source than the rather non-specific internet material provided by the claimant.  Further, the position of the German State as set out in the Note forming part of Mr Otting’s evidence was evidently accepted by the European legislator when Regulation (EC) 629/2006 was made.  The effect of it being, from 28 April 2006, a special non-contributory cash benefit is to place an extra obstacle in the claimant’s path, but in any event, in respect of the period before 1 May 2008 his appeal fails for the reasons in [24]-[27].

 

33. The claimant also asked if the fact that he has for many years been in receipt of a UK war pension would help him in respect of the first period.  It does not, because (a) there is no necessary link that I am aware of between entitlement to a war pension and incapacity benefit under UK law: they are separate benefits, each with their own rules; and (b) Regulation 1408/71 deals with the coordination of benefits between Member States, thus it does not have any application to whether it is possible to claim one benefit in a member State (UK) relying on another benefit in the same Member State.

 

34. The claimant has also raised an argument based on an extract from the Decision-Maker’s Guide about the reciprocal agreement between the UK and Germany.  Even if that agreement still had any validity after the coming into force of Regulation 1408/71 (which seems unlikely given the terms of article 6, though see also article 8) it does not do what the claimant argues.  There are two conditions under the Family Allowances, National Insurance and Industrial Injuries (Germany) Order 1961, Schedule 1, Article 13.  The first is that a  person is an invalid under German legislation but not entitled to German invalidity pension (it appears that the claimant met this condition in respect of the period up to 30 April 2008) but the second is that a person is entitled to LTIB under UK legislation without relying on the reciprocal agreement.  The claimant does not meet the second, because he fails to meet the second contribution condition.

 

35. For the sake of completeness, I can see no circumstances in which the claimant could rely upon his receipt of Sozialhilfe between 1 November 2006 and 6 March 2007, as that is on any view social assistance and not a sickness benefit.

 

36. While the claimant’s appeal thus fails in respect of the first period, in the light of the subsequent award by DRV-Nord of a German invalidity pension falling to be taken into account under article 40(3) for the purposes of the 364 day period under section 30A of the 1992 Act, the Secretary of State accepts that for the second period (i.e. as from 1 May 2008) the claimant is to that extent entitled to rely upon it.  In particular, the Secretary of State accepts that section 12(8)(b) of the Social Security Act 1998, under which

 

“(8) In deciding an appeal under this section, the First-tier Tribunal —

(a) need not consider any issue that is not raised by the appeal; and

(b) shall not take into account any circumstances not obtaining at the time when the decision appealed against was made.”

 

does not preclude such reliance, in that the “circumstances obtaining” at the date of the decision under appeal (18 May 2010) included the entitlement to the pension, even if DRV-Nord were yet to recognise it (as they have now retrospectively done.)  In support of this view of section 12(8)(b), the Secretary of State relies on R(DLA)2/01 and on Secretary of State for Work and Pensions v HR (AA) [2013] UKUT 066 (AAC) where Judge White reached a similar view at paras. 58-60.

 

37. I referred in [19] to the question of incapacity, which remains one for the Secretary of State.  My decision therefore remits this question to the Secretary of State. If it goes against the claimant and he disagrees, he will have fresh appeal rights. It is preferable that those should be to the First-tier Tribunal, where there is the possibility of involving a medically qualified panel member, rather than permitting the matter to be restored to the Upper Tribunal in the event of disagreement.

 

 

 

 

 

CG Ward

Judge of the Upper Tribunal

20 September 2013