CJEU rules that transitional measures of Regulation 883/2004 were not applicable to dual subjection
10 Sep 2019
In a recent judgment, the Court of Justice of the European Union (CJEU) ruled in case no. C-33/18. In its judgment, the CJEU for the first time analysed the 10-year transitional period that was included in Regulation 883/2004 and found that this transitional period is not applicable to situations where - on the basis of Regulation 1408/71, the predecessor to Regulation 883/2004 - an individual was subject to the legislation of two Member States (referred to as “dual subjection”).
Background - Regulation 1408/71 vs Regulation 883/2004
On 1 May 2010, Regulation 883/2010 on the coordination of social security systems entered into force, thereby replacing its predecessor, Regulation 1408/71. Regulation 883/2004 updated and modernised the coordination of social security systems within the EEA and Switzerland. One of the changes it included was the applicable legislation for a situation in which an individual simultaneously exercises employee activities in one Member State and self-employed activities in another Member State.
On the basis of article 13 of Regulation 883/2004, such an individual will only be subject to the legislation of the Member State in which the employed activities are performed. However, before the entry into force of Regulation 883/2004 and on the basis of article 14 quater of Regulation 1408/71, an individual who simultaneously performed employed activities in one Member State and self-employed activities in another Member State was simultaneously subject to the legislation of both States if the Member State where the self-employed activity took place was mentioned in Annex VII of Regulation 1408/71, which was the case for - among others - Belgium, Italy and France.
Regulation 883/2004 included several measures that were aimed at smoothing the transition from Regulation 1408/71 to Regulation 883/2004. One of these transitional measures - and the one that is being questioned in the case at hand - is its article 87(8). This article states that, if - as a result of Regulation 883/2004 - a person would be subject to the legislation of a Member State other than the one he was subject to on the basis of Regulation 1408/71, the latter legislation can continue to apply as long as the relevant situation remains unchanged but in any case for no longer than 10 years following the entry into force of Regulation 883/2004.
Up until the present judgment, this article was widely interpreted as meaning that for any situation that existed on 1 May 2010 and for which the application of Regulation 883/2004 would result in a change in applicable social security scheme(s), the provisions of Regulation 1408/71 could continue to apply as long as the situation didn’t change and for a maximum period of 10 years, including for the situations of dual subjection mentioned above.
CJEU judgment - no transitional measure for dual subjection
As the above 10-year transitional period is set to end on 1 May 2020, Regulation 883/2004 will at that point in time become applicable to all situations that are still governed by Regulation 1408/71. According to the earlier interpretation of article 87(8) of Regulation 883/2004, the Regulation would thus have to be made applicable to situations of dual subjection as from 1 May 2020 at the latest.
However, in its recent judgment, the CJEU does away with this widely held interpretation and rules that, in fact, article 87(8) of Regulation 883/2004 is not applicable to a situation where an individual - on the date of the entry into force of Regulation 883/2004 - was simultaneously subject to the legislation of two Member States on the basis of the provisions of Regulation 1408/71.
What the Court in essence states is that individuals who - pursuant to Regulation 1408/71 - were subject to the legislation of two Member States at the same time could not apply the transitional measure of article 87(8) of Regulation 883/2004 to have this dual subjection continue after the entry into force of Regulation 883/2004. Rather, the CJEU states, Regulation 883/2004 was immediately applicable to those situations, meaning that - on the basis of article 13 of Regulation 883/2004 (see above) - these individuals should in principle have been solely subject to the legislation of the Member State where they exercised their employed activity as from 1 May 2010.
Impact
It's the first time the CJEU examines article 87(8) of Regulation 883/2004 and, as mentioned above, the result differs from the way this article was widely interpreted up until now.
For individuals who continued their situation of dual subjection after the entry into force of Regulation 883/2004 up until today, the CJEU’s judgment can have a significant impact. This is because, according to this judgment, they will have to take steps to end such a dual subjection and will in principle have to regularise their situation. Such a regularisation would mean retroactively terminating their subjection as a self-employed individual in one Member State and having this self-employed activity subjected to the social security scheme of the other Member State, i.e. the Member State that is competent for the employed activities, on the basis of the provisions of Regulation 883/2004. In order to do so, individuals and companies will likely face some administrative hurdles and could be confronted with prescription periods that differ between the Member States involved. In addition, such a regularisation could also have a financial impact.
However, taking into account the fact that the earlier interpretation of article 87(8) was widely followed - including by social security authorities in several Member States -, it is to be seen if Member States can and might be willing to cover the past by applying article 16 of Regulation 883/2004. This would mean that no regularisation would be due for the past, and that the subjection to a single legislation would only apply going forward. Such an article 16 exception, however, requires the consent of both Member States involved, and it is currently not clear how the social security authorities of the various Member States will apply the CJEU’s judgment.
The impact of the CJEU judgment will most likely be limited for individuals who continued their situation of dual subjection after the entry into force of Regulation 883/2004 but already ended it some time ago, e.g. because their employment situation changed. However, the actual materialisation of a risk in this respect will depend on the prescription periods that are applicable in the two Member States involved and, as mentioned above, on how the relevant social security authorities will deal with the situation.
Action points
In order to assess the possible impact of the CJEU’s judgment within your company, it will first of all be important to identify whether you work with individuals who found themselves in a situation of dual subjection before 1 May 2010 (e.g. a board member of the Belgian company who also exercised an employed activity in another Member State) and continued this dual subjection after the entry into force of Regulation 883/2004. Next, their situation should be analysed in order to determine what further steps have to be taken and whether a regularisation of periods of insurance is required.
If you’d like to find out more about the CJEU’s judgment or require assistance to assess its impact, don’t hesitate to reach out to your Employment Law contact.
Contact us
