BREXIT Impact on free movement of people

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By 2017-11-17

(LL.B (Sri Lanka), LL.M (Aberdeen) Attorney-at-Law)

The Free Movement of People (FMP) is a principle which conveys the right to live and work within any European Union (EU) State and certain European Free Trade Association (EFTA) States which are members of the European Economic Area (EEA). According to Article 45 (1) of the Treaty on the Functioning of the European Union (TFEU), the freedom of movement of workers should be protected within the Union.

Any kind of discrimination relating to work, remuneration and other employment conditions on the grounds of nationality is prohibited. EU 'citizens' could accept job offers and move freely to occupy themselves within any of the 28 member countries and EFTA-EEA States like Iceland, Liechtenstein and Norway. They could stay in any member country not only during the employment but also after the completion of service.

Citizens' Rights & FMP

EU citizenship has been established by Article 20 (1) of the TFEU. Citizens have freedom of movement, residence, voting rights in EU elections, right to diplomatic protection and petition right (Art. 20 (2) (a)-(d)). It is prohibited to discriminate any citizen on the grounds of nationality (Art.18).

The Article 21 (1) of the TFEU says that 'Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect.' Therefore, even an economically inactive person is entitled to the right of free movement despite his nationality.

However, according to EU Directive 2004/38/EC, an economically inactive person should have enough resources to prevent him being a burden on the social security benefits. Hence, member States have a right to reject social benefit claims if the claimant cannot prove that he is a job seeker and there is a higher possibility of being engaged (Art. 24 (2) &14 (4) (b), Directive 2004).

Economically Inactive Citizens

There are many economically inactive EU citizens in Britain. Economic inactivity has a negative impact upon the social security system of Europe. Although moving and working in another EU country is a fundamental right of all citizens, it would be unfair to have free and unconditional access to social benefits of another country.

The concept of EU citizenship has been continuously strengthened by the judgments of the ECJ - 'the Court'. It has recognised the rights of economically inactive citizens while interpreting the Articles 18 and 21 (1) of the TFEU when deciding citizenship cases.

In 'Michel Trojani Vs. Centre Public d'AideSociale de Bruxelles (CPAS) 2004', the Court has interpreted Article 18 and held that even an economically inactive citizen has a freedom of residence like an economically active person.

In the matter of 'Horst Otto Bickel and Ulrich Franz 1998,' the Court held that an EU citizen has a right a to have criminal proceedings conducted in a language in which he is conversant, and such a right should not be discriminated on the grounds of his nationality.

In 'Maria Martinez Sala Vs. Freistaat Bayern 1998,' a Spanish lady was unemployed at the time she applied for child raising benefits in Germany. Her social benefit claim had been rejected on the basis that she was not a national of Germany. The Court held that though she was not a national she was a legal resident of Germany and therefore entitled to the benefits.

In 'Baumbast and R Vs. Secretary of State for the Home Department 2002', while interpreting Article 18, the Court held that even a person is economically inactive, he has a legal right to reside in any member country if he was an EU citizen.

Significant retreat by ECJ

Recent decisions of ECJ indicate a significant retreat from its past view in terms of FMP. In 'Peter Brey Vs.

Pensionsversicherungsanstalt 2013,' it was held that if an economically inactive person claims social security benefits, he should have satisfied the primary conditions required for legal residencies. In other words, if a citizen is unable to comply with the said conditions then he would not be entitled to social security benefits.

The Court further held that a citizen who does not have enough resources to maintain himself and family, is a burden and consequently it could have an impact upon the social benefits system of that country. Therefore, before granting social benefits, individual conditions of the person should be considered.

In the matter of 'Elisabeta Dano and Florin Dano Vs. Jobcenter Leipzig 2014,' it was held that a person who was not capable of being a legal resident could not be entitled to have equal treatment in terms of social assistance benefits.

In 'Jobcenter Berlin Neukolln Vs. Nazifa Alimanovic and Others 2015,' it was held that instead of individual condition test, an accumulative impact test should be followed. This means, instead of considering the burden placed upon individual claims, the overall impact by accumulation of such claims should be considered in determining the policies relating to social assistance benefits.

The said judgment indicates that the Court has left more discretion to the member countries to decide upon the policies relating to economically inactive persons, because only a member country could easily measure the accumulative impact of claims affecting the benefits schemes.

Furthermore, due to the strict application of legal residence test in terms of social benefits, there were many complaints from non-British EU residents in Britain as their social benefits were refused because they had no legal right of residence. Consequently, commission filed a case against UK saying that UK authorities have discriminated against EU citizens.

In the said case 'European Commission Vs. United Kingdom of Great Britain and Northern Ireland 2016,' it was held that there was no discrimination perpetrated by UK in requiring legal residencies in order to provide social benefits and therefore Article 4 of Regulation No. 883/2004 had not been breached.

Death of FMP

On 29 March 2017, the British Government formally informed EU regarding its exit following Article 50 (2) of the Treaty on European Union (TEU). The scheduled departure is on 29 March 2019. Now the UK should renegotiate trade deals with other EU States and organise how the exit should be performed. A two year period is given under Article 50 (3) to organise such an exit.

If the UK is unable to organize a proper exit, it could request for an extension of another two-year period with the consent of Member States. Otherwise, it would be automatically out from all trade deals with the Union. Until a proper exit is organised, the UK should follow EU law as usual, which means FMP is still alive.

However, sometimes it would be impossible to conclude all negotiations with EU and its members within the period given in Article 50 (3). Additionally, as an internal exit solution, European Union (Withdrawal Bill) was introduced in July 2017 to repeal the 1972 European Communities Act. After the exit, the UK could anytime re-join the EU by following the procedure in Article 49 and enjoy FMP benefits (Art. 50 (5), TEU).

Hard Brexit - No FMP

A hard Brexit means the UK would leave both EU Single Market and the Customs Union. Consequently, there would be no FMP between the UK and the EU. The British Government does not have to pay any contributions to the EU. UK may adopt WTO and UNCITRAL Model Laws and trade with EU States based on them. In addition, British Parliament could prepare more national legislation governing trade, tariffs, borders and customs.

One of the main benefits of a hard Brexit would be, the UK could easily and freely engage in free trade contracts with any country in the world. However, WTO Regulations may limit the freedom of UK and therefore future trade deals with the EU would become more difficult. A soft Brexit means the UK would remain either in the EEA or Customs Union. A significant benefit of this is the possibility to continue FMP. For instance, though Norway has joined the EEA, they are not part of the Customs Union.

Norway is member of the EFTA which was founded in 1960 to allow European countries which are not EU members, to enjoy benefits of free trade among them. FMP is included in the objectives of EFTA Convention. An issue in the Norway Model is though it does not confer voting rights in theEU decision making process, it is bound to follow EU policies governing the EEA.

If the Norway Model could be followed by the UK, then the right of FMP would be protected, and the UK could remain part of the Schengen area. In addition, the UK would be able to follow any trade policies with non-EU countries because it would not be bounded by the EU Customs Union. However, the UK would be bound by EU laws in certain areas except in defence, agriculture and fisheries, although they leave the EU, and UK would have to continue paying contributions to the EU.

Medium Brexit with (out) FMP

A medium Brexit option such as the Swiss Model has certain benefits. Switzerland is neither a full member of the EEA nor of the Customs Union. They have a limited access to EEA. In addition, Switzerland is also a part of EFTA. There are separate bilateral agreements between them and the EU including recognition of FMP. Although the FMP was refused by a referendum due to migration issues in 2014, it was recognised again in a 2016 agreement with EU.

Another example is Turkey, which is a part of the Customs Union and adheres to a common tariff system when entering the EU and therefore movement of goods into EU have become much easier. However, FMP does not exist in this model. Although the objective of FMP was included in Turkey - EU agreement 1963, it is still under negotiations. In the Turkish Model, it is difficult to pursue separate isolated trade policies with non-EU countries.

Towards a better option

Since Article 50 has been almost invoked, it is high time the UK Government renegotiated its trade deals with the EU. In view of the recent citizenship cases, there is a significant retreat by the ECJ from its past view and suggests a more limited version of FMP.

To avoid complex trade issues, remaining in the EEA and the Customs Union with a limited form of FMP would be a better option.

Finally, such economic cooperation between UK and the EU would allow EU citizens to enjoy the benefits of FMP while delivering their services across the Europe.



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