Free movement of persons 1591Common Market Law Review 46: 1591–1620, 2009.© 2009 Kluwer Law International. Printed in the Netherlands.

IN SEARCH OF THE AIM OF THE EC FREE MOVEMENT OF PERSONS PROVISIONS: HAS THE COURT OF JUSTICE MISSED THE POINT?

ALINA TRYFONIDOU*

1. Introduction

The Court of Justice has, over the years, often been vilified for exceeding the limits of its jurisdiction by interpreting the provisions of Community legislation (whether primary or secondary) in a way which does not seem to have originally been envisaged by its drafters. A quite recent example of this approach can be seen in a cluster of cases in the context of the free movement of workers and the freedom of establishment (Ritter-Coulais1 and its progeny), where the Court included within the scope of those provisions situations which, arguably, did not present a sufficient link with their (econom ic) aim. In particular, in that case law the Court accepted that the mere exercise of free movement for the purpose of taking up residence in the territory of another Member State whilst continuing to exercise an economic activity in the State of origin, suffices to bring a Member State national within the scope of Articles 39 and 43 EC. It appears that this overly open approach of the Court was not merely a fad, but is a new trend that is here to stay, as the number of cases confirming it is increasing day-by-day. The aim of this article is threefold: firstly, to provide an analysis of the Court’s recent case law where the above approach was followed; secondly, to conduct a quest as to the aim of the free movement of (economically active) persons provisions and, based on that, to question the appropriateness of the Court’s reasoning in this case law; and thirdly, to provide an explanation of the possible reasons behind the Court’s approach in these cases.

* Lecturer in Law, University of Leicester. I am very grateful to the anonymous reviewers of this Review for their comments on an earlier draft of this article.

1. Case C-152/03, Ritter-Coulais, [2006] ECR I-1711.

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2. Workers and establishment: The orthodox approach

It is undoubtedly trite to state that the dominant objective of the drafters of the E(E)C Treaty back in the 1950s was to build a common market. This was to be established, mainly, through the liberalization of the movement of products and factors of production between the Member States. For that purpose, since its birth, the Treaty has included a number of free movement rights, the so-called (economic) “fundamental freedoms”,2 on which economic actors can rely whenever the authorities of a Member State impede their inter-state move-ment. Since the reason for which those rights were granted was to enable a common market to be built, the interpretation of the provisions of the Treaty bestowing such rights has always had to be informed by that aim. Accordingly, it has always been considered that the focus of the economic fundamental freedoms, and in particular Articles 39 and 43 EC, is “predomi-nantly commercial”3 and their aim is to enable Member State nationals “to leave their State of origin to enter the territory of another Member State and reside there in order there to pursue an economic activity”.4 According to Advocate General Geelhoed, for Article 39 EC to be applicable “[t]he employ-ment relationship, and therefore the factor labour” must have “shifted to another Member State”.5 The same applies to Article 43 EC. Therefore, for a situation to fall within the scope of Article 39 or 43 EC, it must involve the exercise of inter-state movement for an economic purpose and the contested national measure must be capable of impeding that movement. Through its case law, the Court has established that what is important for bringing a situation within the scope of Articles 39 and 43 EC is not so much that a national of one Member State takes up an economic activity in the terri-tory of another, but that a Member State national has exercised inter-state movement for the purpose of taking up an economic activity.6 Thus, Articles 39 and 43 EC have been interpreted as including within their scope the situa-tion of a Member State national who leaves his State of nationality and moves

2. In this article, when reference is made to the economic fundamental freedoms (also referred to as the “market freedoms”) this should be taken to mean Arts. 39, 43 and 49 EC. The Art. 18 EC right to move and reside freely which is bestowed on all Union citizens has been con-sidered by the Court to be another fundamental freedom, albeit not an economic one – see e.g. Case C-544/07, Rüffler, judgment of 23 April 2009, nyr, para 63.

3. Craig and de Búrca, EU Law: Texts, Cases and Materials, 4th ed. (OUP, 2007), p. 806.4. Case C-212/06, Government of the French Community and Walloon Government v. Flem-

ish Government, [2008] ECR I-1683, para 44 (emphasis added). See, also, Barnard, The Sub-stantive Law of the EU: The Four Freedoms, 2nd ed. (OUP, 2007), p. 253.

5. Para 41 of the Opinion of A.G. Geelhoed in C-212/05, Hartmann, [2007] ECR I-6303.6. This is obvious from, inter alia, the Court’s judgment in Case C-419/92, Scholz, [1994]

ECR I-505, para 9.

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to another Member State to take up an economic activity there;7 as well as a person who returns from another Member State to his Member State of nation-ality in order to set up business or be employed there.8 The freedom of estab-lishment includes, in addition, the right of persons who are established in the territory of one Member State to set up and manage a company in another Member State.9

The market freedoms (and the supplementary secondary legislation10) have since the early days of the Community’s existence been interpreted as cover-ing, also, the situation of “frontier workers”.11 A (classic) frontier worker is a person who works in a Member State whilst she continues residing in the Member State where she used to reside before transferring her economic activ-ity to another Member State. The Court has mostly dealt with the situation of frontier workers in its Article 39 case law12 but, obviously, the same consider-ations can apply in Article 43 cases.13 It is important to underline that the Com-munity’s aim in including frontier workers within the scope of EC law has traditionally not been to protect the daily or weekly movements of workers from their State of residence to their State of work, but rather, to protect their original movement from their State of residence to another State to take up employment. In this way, it is ensured that persons who merely wish to take up employment in another Member State without also moving their residence there, are not hampered from doing so. The Court in its traditional case law imposed certain limits to the scope of application of Articles 39 and 43 EC. It thus held in the case of Werner14 that if the only cross-border element in a case is movement from one Member State to another for a non-economic purpose (e.g. residence), this does not suffice

7. See e.g. Case 53/81, Levin, [1982] ECR 1035 (workers) and Case 2/74, Reyners, [1974] ECR 63 (establishment).

8. Case 115/78, Knoors, [1979] ECR 399 (establishment) and Case C-234/97, De Bobadilla, [1999] ECR I-4773 (workers).

9. Case C-251/98. C. Baars v. Inspecteur der Belastingen Particulieren/Ondernemingen Gorinchem, [2000] ECR I-2787; Case 182/83, Fearon v. Irish Land Commission, [1985] ECR 3677.

10. See e.g. the fourth recital in the Preamble to Regulation 1612/68/EEC on freedom of movement for workers within the Community, O.J.1968, L 257/2; and Art. 1(b) of Regulation 1408/71 on the application of social security schemes to employed persons and their families moving within the Community, O.J. 1997, L 28/1.

11. See paras. 28–29 of the Opinion of A.G. Geelhoed in Hartmann, supra note 5. Another term used to describe such workers is “partial migrants” – see Roxan, “Assuring real freedom of movement in EU direct taxation”, 63 MLR (2000) 831, 847.

12. See, among others, Case C-57/96, Meints, [1997] ECR I-6689; Case C-336/96, Gilly, [1998] ECR I-2793; Case C-213/05, Geven, [2007] ECR I-6347; Case C-279/93, Schumacker, [1995] ECR I-225.

13. See e.g. Case C-80/94, Wielockx, [1995] ECR I-2493.14. Case C-112/91, Werner, [1993] ECR I-429.

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for bringing the situation within the scope of Articles 39 and 43 EC. A more recent Article 39 case – My15 – confirms this and further illustrates that even if a national of one Member State works in the territory of another Member State, this does not suffice to bring the situation within the scope of application of that provision, if there has been no exercise of cross-border movement for the purpose of taking up employment in the host State.16

In addition, the Court has made it clear that Articles 39 and 43 EC cannot apply if there has been no exercise of inter-State movement for an economic purpose. In other words, if a person has been economically active and the access to, or exercise of, that economic activity has been impeded as a result of a Member State measure, this does not suffice to bring the situation within the scope of the market freedoms if the case lacks a cross-border element.17 This is the “purely internal rule” which was firstly mentioned in the establish-ment case of Knoors18 and was soon after applied for the first time in the work-ers case of Saunders.19 The rule shares the same rationale with the home State principle and the principle of mutual recognition. In other words, it leaves it to the home State to regulate any economic activity taking place within its terri-tory and, provided that there is compliance with the rules of that State, the fruits of that activity or the activity itself should be free to move to any other Member State and the latter is obliged, by virtue of EC law, to accept them within its territory.20 Member States are, thus, free to make their choices regard-ing the regulatory regime with which an economic activity has to comply when it takes place within their territory, as long as this does not in any way impede the achievement of the economic aims of the Treaty. The application of the purely internal rule has often given rise to the emer-gence of reverse discrimination. This form of differential treatment is exer-cised by a Member State against its own nationals who are in a purely internal situation, when it applies to them its own rules because it is not obliged by EC law to apply the different, more beneficial, regime which it is obliged to apply

15. Case C-293/03, My, [2004] ECR I-12013.16. Contrast this with the older Case 235/87, Matteucci, [1988] ECR 5589 and Case 36/75,

Rutili, [1975] ECR 1219 and the more recent Case C-413/01, Ninni-Orasche, [2003] ECR I-13187 (especially para 29 of the judgment).

17. See e.g. the factual background in Joined Cases C-29/94, C-30/94, C-31/94, C-32/94, C-33/94, C-34/94 & C-35/94, Aubertin, [1995] ECR I-301 and Case 175/78, Saunders, [1979] ECR 1129.

18. Knoors, supra note 8.19. Saunders, supra note 17. The rule has always been used as a filtering mechanism in the

context of all the fundamental freedoms as well as the customs duties provisions of the Treaty. For a detailed analysis of the rule see Tryfonidou, Reverse Discrimination in EC Law, 1st ed. (Kluwer, 2009), Chapters 1–3.

20. For a more detailed explanation of this see Tryfonidou, supra note 19, p. 9.

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to persons that fall within the scope of EC law.21 The Court has always expressly ruled that reverse discrimination is not problematic from the point of view of Community law since it does not conflict with any of its objectives and thus it is for the Member States to remedy it, if they so wish.22 From the above analysis, it can be deduced that the Court in its case law seems to have (implicitly) established a test (what we will call “the linking fac-tor test”) for determining whether a situation falls within the scope of the eco-nomic fundamental freedoms. Under this test, three criteria (“limbs”) have to be satisfied: a) the exercise of inter-state movement; b) the taking up of an eco-nomic activity; and c) the impediment to inter-state movement. It should be noted that, under the Court’s orthodox approach, not only are these require-ments cumulative, but there must also be a connection between them in that the exercise of inter-state movement must be for the purpose of taking up an economic activity in the host State, and the contested national measure must give rise to an impediment to that movement. Any situation which does not satisfy this (implicit) test falls outside the scope of the market freedoms due to a lack of a sufficient link with their economic aim.23

3. Workers and establishment: The new approach

Despite the well-established view that, for Articles 39 and 43 EC to apply, the facts of the case must involve an impediment to inter-state movement that was exercised for an economic purpose, the Court of Justice seems to have dis-pensed with that requirement in some of its latest case law. One recent group of cases where this approach was followed is the so-called “Ritter-Coulais saga”. In this line of cases which, in effect, reverses Werner,24 the Court

21. For a detailed study on reverse discrimination see Tryfonidou, ibid. For literature on reverse discrimination see, among others, Pickup, “Reverse Discrimination and Freedom of Movement for workers”, 23 CML Rev. (1986), 135; Cannizzaro, “Producing ‘Reverse discrimi-nation’ through the exercise of EC competences”, 17 YEL (1997), 29; Poiares Maduro, “The scope of European remedies: The case of purely internal situations and reverse discrimination” in Kilpatrick, Novitz and Skidmore (Eds.), The Future of European Remedies (Hart, 2000); d’Oliveira, “Is reverse discrimination still permissible under the Single European Act?” in Forty years on: The Evolution of Postwar Private International Law in Europe: symposium in celebra-tion of the 40th anniversary of the Centre of Foreign Law and Private International Law, Uni-versity of Amsterdam, on 27 October 1998 (Kluwer – Deventer, 1990); Nic Shuibhne, “Free movement of persons and the wholly internal rule: Time to move on?”, 39 CML Rev. (2002), 731.

22. Case C-64/96, Uecker and Jacquet, [1997] ECR I-3171, para 23; Case C-132/93, Steen (No. 2), [1994] ECR I-2715.

23. For an explanation of this “test” see Tryfonidou, supra note 19, 10–13.24. Supra note 14.

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included within the scope of application of the market freedoms, situations which involved the exercise of inter-state movement by economically active persons, however the movement that was exercised and was going to be impeded as a result of the contested national measure did not have an eco-nomic purpose; in other words, all three limbs of the “linking factor test” were satisfied on the facts of the case, however, they were not interconnected. As another commentator has put it, in that case law “[n]ationals who continue to work in the State of origin but move residence to another Member State are now, counter-intuitively, considered migrant workers”.25

3.1. The Ritter-Coulais line of case law

The origins of this new approach can be traced back to a number of social security cases and, in particular, cases the facts of which fell within the scope of application of Regulation 1408/71.26 For the purposes of our analysis, the 2005 Van Pommeren-Bourgondiën case27 has been chosen. The claimant was a Dutch national who was resident in Belgium but had spent her entire working life in the Netherlands. When she was no longer able to work, the Dutch authori ties terminated her compulsory insurance in respect of certain branches of social security, because she was not resident in the Netherlands. The Court found that the above action of the Dutch authorities placed non-residents in a less favourable position than residents and, therefore, undermined the princi-ple of free movement secured by Article 39 EC.28 In its judgment, the Court did not deal at all with the question of whether the facts of the case fell within the scope of Article 39 EC, despite the fact that the applicant had always worked in her State of nationality and the only relevant cross-border movement that was exercised was for the purpose of taking up residence in the territory of another Member State. However, one might have considered that this – broader – approach was confined to the specific context of the case which involved a social security claim. This is because the term “worker” has traditionally been interpreted more broadly in the context of

25. O’Brien, “Real links, abstract rights and false alarms: The relationship between the ECJ’s ‘real link’ case law and national solidarity”, 33 EL Rev. (2008), 643, 654.

26. Regulation 1408/71, supra note 10. This Regulation will soon be replaced by the new Regulation 883/2004, O.J. 2004, L 166/1. The 2004 Regulation has been in force since 2004 but will only become applicable once its Implementing Regulation comes into force. This is expected to happen sometime in 2010.

27. Case C-227/03, A. J. van Pommeren-Bourgondiën, [2005] ECR I-6101. A.G. Kokott in paras. 35–36 in her Opinion in Case C-287/05, Hendrix, [2007] ECR I-6909 made reference to this case suggesting that this was a precursor to the Ritter-Coulais line of cases. This case was cited by the Court in its judgment in Ritter-Coulais, supra note 1, para 31.

28.  A. J. van Pommeren-Bourgondiën, supra note 27, para 44.

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Regulation 1408/71.29 For the purposes of Article 39 EC and Regulation 1612/68, the term “worker” has been defined through the Court’s case law as requiring that a Member State national performs services for and under the direction of another person for which he receives remuneration and the situa-tion must involve a sufficient (economic) cross-border element.30 Conversely, in the context of social security, an “employed” or “self-employed” person is simply defined as any person who is insured, compulsorily or on an optional basis, for one or more of the contingencies covered by the branches of a social security scheme for employed or self-employed persons – no further require-ments are specified, such as the exercise of an economic activity in a cross-border context.31 In addition, the definition of “frontier worker” provided in Article 1(10)(15) of Regulation 1408/71, is sufficiently broad to include per-sons whose situation involves as its only cross-border element the transfer of residence to another Member State.32 Nonetheless, in 2006, this approach was transplanted into the context of the free movement provisions, and in particular Article 39 EC, in a case which did not involve social security claims: Ritter-Coulais.33 Mr and Mrs Ritter-Coulais were German nationals who were employed as teachers in a German State sec-ondary school whilst they resided in a house they owned in France. The issue was whether Article 39 EC precluded German legislation which did not permit the Ritter-Coulais, who were employed in Germany and assessable to tax on their total income there, to request that account be taken, for the purposes of determining the rate of taxation applicable to that income in that State, of rental income losses relating to their own use of a private dwelling in France. The Court held that Article 39 EC precludes national legislation such as that at issue, because it treats non-resident workers less favourably than workers who

29. Van Overmeiren, “General principles of coordination of social security: ruminating ad infini tum?”, paper presented at the EUSA Eleventh Biennial International Conference, Los Ange les, USA, April 2009, available at www.unc.edu/euce/eusa2009/papers/van%20overmeiren_02E.pdf (last accessed on 4 June 2009), at pp. 10–11, see in particular footnote 20. It should be noted that the new social security Regulation (Regulation 883/2004, supra note 26) goes even further by not including any reference to the pursuit of an economic activity when defining which persons are covered by its provisions – see Art. 2(1) of the Regulation.

30. Case 66/85, Lawrie-Blum, [1986] ECR 2121.31. Art. 1(10)(15) of Regulation 1408/71, supra note 10.32. For other cases in this context where such an approach was followed – though it should

be noted that unlike in van Pommeren in these cases the Court only examined the compatibility of a national measure with Regulation 1408/71 (and not, also, Art. 39 EC) – see, among others, Case C-275/96, Kuusijärvi, [1998] ECR I-3419 and Case 104/80, Beeck, [1981] ECR 503. Ref-erence to this approach was made by A.G. Jacobs in para 41 of his Opinion in Joined Cases C-245 & 312/94, Hoever and Zachow, [1996] ECR I-4895.

33. Supra note 1.

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reside in Germany in their own home and thus gives rise to indirect discrimi-nation on the grounds of nationality.34

The important question for our purposes, and the one which was to some length examined by Advocate General Léger in his Opinion, was whether the facts of the case fell within the scope of Article 39 EC, since they involved German nationals who were working in Germany, and the only factor that took the situation out of a purely domestic context was their residence in France – in other words, it was a Werner -like scenario. The Court was particularly laconic when grappling with this issue. In paragraph 31 of its judgment, it recalled from its previous case law35 the principle that “any Community national who, irrespective of his place of residence and his nationality, has exercised the right to freedom of movement for workers and who has been employed in a Member State other than that of residence falls within the scope of Article 48 EC [now 39 EC]”.36 The Court then proceeded – based on that principle – to note that “[i]t follows that the situation of the appellants in the main proceedings, who worked in a Member State other than that of their actual place of residence, falls within the scope of Article 48 EC [now 39 EC]”.37 In our view, in its judgment in Ritter-Coulais the Court failed to interpret and apply the above principle correctly. The italicized “and” in the quote in the paragraph above illustrates that, in order for a situation which involves a per-son employed in a Member State other than the State of residence to fall within the scope of the market freedoms, it is necessary to show, in addition, that that situation emerged following the exercise of movement from one Member State to another for the purpose of taking up employment in the latter. In other words, it is only if a person is employed in a Member State different from his State of residence after (and as a result of) exercising his right to move to another Member State for the purpose of taking up employment there, that the situation should fall within the ambit of the market freedoms. If that movement (which is for an economic purpose) is hampered as a result of the fact that it causes the State of origin to apply a less favourable legal regime to the persons who have exercised it, then the situation rightly qualifies for protection under the market

34. National legislation that was similar to the one challenged in Ritter-Coulais was assessed, again, for its compatibility with Art. 39 EC in a more recent case (Case C-182/06, Lakebrink, [2007] ECR I-6705) which, however, involved persons who had moved to another Member State to work, whilst maintaining their residence in their State of origin, and thus the Court rightly accepted that the situation fell within the scope of Art. 39 EC.

35. See, among others, Case C-385/00, De Groot, [2002] ECR I-11819, para 76; Case C-209/01, Schilling, [2003] ECR I-13389, para 23; Scholz, supra note 6, para 9; Case C-18/95, Terhoeve, [1999] ECR I-345, para 27.

36. Ritter-Coulais, supra note 1, para 31 (emphasis added). 37. Ibid., para 32.

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freedoms since, in this way, the achievement of their (economic) aim is hin-dered.38 However, this is obviously not the case in a situation such as that in Ritter-Coulais where the exercise of free movement from Germany to France – the movement that could be impeded as a result of the application of the less favourable taxation regime – was not for an economic purpose. The Ritter-Coulais are German nationals who, as the Advocate General explained in his Opinion, “earn their livelihood in Germany and move only to return to their residence in France”.39 According to the Advocate General, they did not move to France “‘in order to pursue an economic activity there’ or to acquire a voca-tional qualification. It seems on the contrary that they chose to settle in France for reasons of a purely personal nature. They pursued their occupation as employees in the State of which they were nationals, namely Germany, and the only element external to that State was therefore the place of their residence, namely France”.40 Accordingly, the couple were merely, to borrow a term used by another commentator,41 “reverse frontier workers” as it was their movement back to their State of origin which had an economic nature since they travelled there daily to work, although such an economic element would not suffice, under the Court’s traditional approach, to bring them within the scope of the economic fundamental freedoms since the “factor labour” had not “shifted to another Member State”.42 Therefore, although all three limbs of the “linking factor test” were satisfied on the facts of the case, there was nonetheless no connection between them. The Court – contrary to its orthodox approach – treated the various limbs of the “test” as unconnected criteria which, once sat-isfied, brought the situation within the scope of EC law.43 In this case, the correct approach would have been for the Court to apply Article 18 EC since the contested measure was capable of impeding the exercise of inter-state movement for the purpose of taking-up residence. However, as the Advocate General in his Opinion in Ritter-Coulais explained, at the time that the facts

38. This was satisfied in the previous case law (see note 35 supra) where the Court made use of this principle.

39. Opinion of A.G. Léger in Ritter-Coulais, supra note 1, para 41.40. Ibid. para 49.41. O’Brien, Annotation of Hartmann, Geven and Hendrix, 45 CML Rev. (2008), 499. For a

criticism of the extension of the scope of application of Art. 39 EC so as to cover “reverse fron-tier workers” see pp. 504–507 of the same piece.

42. See note 5 supra.43. For a similar view see Spaventa, “Seeing the wood despite the trees? On the scope of

Union citizenship and its constitutional effects”, 45 CML Rev. (2008), 13, 15 (in particular, foot-note 4) – though she uses Hendrix (supra note 27) and Case C-470/04, N. v. Inspecteur van de Belastingdienst Oost/kantoor Almelo, [2006] ECR I-7409 as an example of this.

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took place, Article 18 EC was not yet in force and, thus, that provision was not applicable ratione temporis.44

The Ritter-Coulais reasoning was subsequently applied in the workers cases of Hartmann,45 Hendrix,46 and Renneberg.47 Hartmann involved a German national who had been employed in Germany and at some point, whilst maintaining his employment there, moved perma-nently to Austria where his Austrian wife lived. The latter applied for a child-raising allowance, which was refused by the German authorities because she and Mr Hartmann were not resident in Germany. The Court found that this amounted to a violation of Article 7(2) of Regulation 1612/6848 since Mr Hart-mann was, according to the Court, a frontier worker, and, thus, his wife should be granted the benefit. Conversely, Advocate General Geelhoed was of the view that the facts of the case fell within the scope of Article 18 EC and not Article 39 EC (and Regulation 1612/68). This was because the relevant cross-border element which brought the situation within the scope of EC law was the exercise by Mr Hartmann of inter-state movement from Germany to Austria for the purpose of transferring his residence to the latter. The problem with this, however, was that, like on the facts in Ritter-Coulais, in this case as well, at the time that Mr Hartmann exercised his right to move to Austria (i.e. in 1990), Article 18 EC was not yet in force.49 The Ritter-Coulais reasoning was subsequently followed in Hendrix. Mr Hendrix was a Dutch national who suffered from a slight mental disability. Whilst being employed and resident in the Netherlands, he was paid a Dutch disability benefit. When he moved his residence to Belgium, the Dutch author-ities discontinued payment of the benefit, since the relevant Dutch legislation provided that the benefit could not be paid to persons who were not resident in the Netherlands. The Court found that “[t]he fact that Mr Hendrix, after taking up residence in Belgium, continued to work in the Netherlands and then changed employer in that Member State gives him the status of a migrant

44. See paras. 61–64 of the Opinion of A.G. Léger in Ritter-Coulais, supra note 1. See, also, para 37 of the Opinion of A.G. Geelhoed in Hartmann, supra note 5. Art. 56 EC was also not applicable ratione temporis – see paras. 23–27 of the Court’s judgment in Ritter-Coulais and paras. 27–30 of the Opinion of A.G. Léger in that case.

45. Supra note 5.46. Supra note 27.47. Case C-527/06, Renneberg v. Staatssecretaris van Financiën, Judgment of 16 Oct. 2008,

nyr, paras. 35–37. The same approach was followed, also, by the Court implicitly and by the A.G. explicitly in Case C-152/05, Commission v. Germany, [2008] ECR I-39 which concerned the compatibility with, inter alia, Art. 43 EC of German legislation which granted tax advan-tages to natural persons for the construction of private dwellings, provided that the dwelling was to be situated in Germany.

48. Supra note 10.49. Paras. 79–80 of the Opinion of A.G. Geelhoed in Hartmann, supra note 5.

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worker and brings him, throughout the period at issue in the main proceedings, that is from June 1999 to 2001, within the scope of Community law and, in particular, within the scope of its provisions relating to freedom of movement for workers”.50 In this case, again, the movement that was capable of being impeded (i.e. the movement from the Netherlands to Belgium) was not for an economic purpose, but rather, for the purpose of taking up residence in the host State. Therefore, the Court should have applied Article 18 EC in order to find a violation of EC law especially since, unlike in Ritter-Coulais and Hartmann, the facts of the case took place after that provision came into force. In the most recent workers case where the same approach was followed – Renneberg – the facts were very similar to those in Ritter-Coulais. Mr Renne-berg was a Dutch national who worked in the Netherlands whilst residing in Belgium. He challenged the refusal of the Dutch tax authorities to take into account the rental loss on immovable property in Belgium which he owned and in which he resided, for the purposes of determining the basis of assess-ment of the income tax which he was liable to pay in the Netherlands. The question was whether the situation fell, inter alia, within the scope of Article 39 EC. In response to the argument of the Dutch Government and the Commis-sion that the situation was purely internal, the Court simply repeated its rea-soning in Ritter-Coulais and concluded that the situation was governed by the free movement of workers provisions.51 Furthermore, the contested measure amounted to a restriction of Article 39 EC since it was a measure “which might place Community citizens at a disadvantage when they wish to pursue an occu-pational activity in the territory of a Member State other than that of their res-idence. This includes, in particular, Community nationals wishing to continue to pursue an economic activity in a given Member State after having trans-ferred their residence to another Member State”.52 Therefore, the Court, once more, made it clear that “reverse frontier workers” fall within the scope of Article 39 EC. The Ritter-Coulais approach is not merely employed in the context of Arti-cle 39 EC. Shortly after delivering its judgment in Ritter-Coulais, the Court applied this same approach in the context of establishment and, in particular, that of ownership of a controlling shareholding in a company. This step was taken in the N case53 which involved Mr N, a Dutch national, who was resid-ing in the Netherlands and was the sole shareholder of three limited liability

50. Hendrix, supra note 27, para 46.51. Renneberg, supra note 47, paras. 35–37.52. Ibid., para 44.53. Supra note 43. It should be noted that in 2004, the Court delivered judgment in a case

which was very similar to N, however, it managed to avoid dealing head-on with the question of whether “reverse” frontier workers are included within the scope of Art. 43 EC, by pointing out

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companies established and managed in that Member State. In 1997 (i.e. at some point after he became the sole shareholder in the three Dutch compa-nies), he decided to move his residence to the United Kingdom where he did not exercise any economic activity until 2002, when he started running a farm with an apple orchard. As a result of his move to the United Kingdom,54 Mr N was treated less favourably under the Dutch taxation system as regards the assessment and methods of enforcing income tax on profits from his holdings in the Dutch companies. One of the questions referred by the Dutch court to the ECJ asked, essentially, whether the situation of Mr N was governed by Article 43 EC, even though it was not “clear or plausible from the outset that he [i.e. Mr N] will be pursuing in the other Member State an economic activ-ity as referred to in that article”.55 Advocate General Kokott was of the view that Mr N’s situation fell outside the scope of Article 43 EC, but within the scope of Article 18 EC since “[i]f a natural person moves his residence to another Member State and in doing so takes property consisting of shares in companies with him he is exercising pri-marily his general right to free movement under Article 18 EC”.56 The Advo-cate General, however, found that Mr N’s agricultural activities from 2002 onwards in the UK were, actually, capable of bringing him within the scope of application of Article 43 EC and, thus, the contested Dutch legislation would, also, have to be assessed for its negative impact on the exercise by Mr N of that self-employed activity in the UK.57 The Court, however, did not share this view. It said that Mr N was a Com-munity national who “since the transfer of his residence, has been living in one Member State and holding all the shares of companies established in another. It follows that, since that transfer, N has fallen within the scope of Article 43 EC”.58 Hence, employing the Ritter-Coulais reasoning in the context of the freedom of establishment, the Court accepted that the exercise of free move-ment (for a non-economic purpose) which results in a situation whereby a Member State national holds shares in a company which is established in a Member State different from his State of residence, suffices for bringing a sit-uation within the scope of Article 43 EC. The Court in its judgment expressly acknowledged that the contested legislation would have as its effect to dis-

that there were no sufficient facts in front of it in order to establish whether Art. 43 EC was, indeed, applicable – see Case C-9/02, De Lasteyrie du Saillant, [2004] ECR I-2409.

54. N, supra note 43, para 16.55. Ibid., para 19.56. Para 39 of the Opinion of A.G. Kokott in N, ibid. See, more generally, paras. 58–73 of

the Opinion. 57. Paras. 43–56 of the Opinion in N, supra note 43.58. N, supra note 43, para 28.

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courage Mr N “from transferring his residence outside the Netherlands”,59 yet, it was also of the view that the mere transfer of residence from one Member State to another is an aspect of the right provided by Article 43 EC (“a taxpayer wishing to transfer his residence outside Netherlands territory, in exercise of the rights guaranteed to him by Article 43 EC”).60 The result in this case is, again, problematic. This is because, like in Ritter-Coulais, the movement that was to be impeded as a result of the application of the contested legislation (i.e. the movement from the Netherlands to the United Kingdom) was not, at least initially, connected with the taking up of an eco-nomic activity. Mr N was just taking his shares with him and he would con-tinue holding shares in the Dutch companies following the transfer of his residence to the United Kingdom. His economic activities in relation to the Dutch companies would, to borrow the words of Advocate General Kokott, be “affected only by way of reaction to the change of residence”.61 The reasoning in the N case was later affirmed in Geurts62 where again the Court and, in a change of heart, Advocate General Kokott, applied the Ritter-Coulais line of reasoning in a case involving a Dutch national (Mr Vogten) who was the sole shareholder in two Dutch companies and the only cross-bor-der element on the facts was his subsequent movement to Belgium for the pur-pose of taking-up residence there.63 At issue was the compatibility with Article 43 EC, of the refusal of the Belgian tax authorities to grant Mr Vogten’s heirs the benefit of an exemption provided under Belgian law, which required that the “family undertaking” in which shares are held has to employ at least five employees in the Flemish Region during the three years preceding the deceased’s death. The Court held that the contested legislation was contrary to Article 43 EC since the condition it imposed was capable of being more easily fulfilled by a company already established in Belgium.64 Therefore, the rule amounted to an obstacle to the exercise of the freedom of establishment. Obvi-ously, the rule could impede the establishment of a family company in another Member State. However, on the facts, such a negative impact could not be proved, since Mr Vogten was, already, holding the shares in the Dutch compa-nies at the time that he moved to Belgium. Moreover, in this case, unlike most of the cases mentioned above, Article 18 EC could not be applied since the contested legislation would not have been capable of impeding the exercise by

59. Ibid.60. Ibid. para 35 (emphasis added).61. Para 36 of the Opinion of A.G. Kokott in N, supra note 43. See, also, para 39 of the Opin-

ion.62. Case C-464/05, Geurts, [2007] ECR I-9325.63. Ibid. para 14. 64. Ibid. para 21.

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Mr Vogten of his right to free movement to Belgium for the purpose of taking-up residence there. One might rightly argue, however, that the legislation was capable of restricting Mr Vogten’s exercise of an economic activity in one Member State (the Netherlands) whilst he was resident in the territory of another (Belgium) – something which is equivalent to the daily/weekly move-ments of frontier (and reverse frontier) workers from their State of residence to their State of employment. In the above case law, the Court appears to be following a new – broader – approach towards the delimitation of the scope of Articles 39 and 43 EC. These provisions are now read as including within their scope situations which involve inter-state movement that was not exercised for the purpose of taking up an economic activity, the relevant cross-border element being, allegedly, the exercise of an economic activity in one Member State whilst residing in the territory of another.

4. Explaining the Court’s new approach: Re-reading the economic fundamental freedoms in the light of Union citizenship

Having analysed the relevant judgments where the Court seems to have aban-doned its traditional approach to the delimitation of the scope of Articles 39 and 43 EC, we now move on to consider the (two) possible explanations for the Court’s new approach in the Ritter-Coulais saga. The first (and less radical) way of explaining the Court’s reasoning in the case law under discussion is that the Court may now be of the view that the economic aims of Articles 43 and 39 EC are impeded whenever there is an obstacle to inter-state movement which is in some way related to an economic activity. In other words, what we are suggesting here is that in cases involving frontier workers, the Court may now be wishing to protect not only the work-ers’ original movement to the State of employment for the purpose of taking up an economic activity, but also, the daily or weekly movements of those work-ers from their State of residence to their State of employment; or, more broadly, the exercise of an economic activity in one Member State by persons who are resident in the territory of another. This added aim would be capable of includ-ing within the scope of Articles 39 and 43 EC the situation of “reverse frontier workers” as well since they, too, like classic frontier workers, move on a daily/weekly basis from their State of residence to their State of employment and they exercise an economic activity in the territory of a State other than that of their residence. Therefore, under this approach, Articles 39 and 43 EC would catch within their scope any situations involving an impediment to a worker’s daily movements to the State of employment, or to the exercise of an economic

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activity in a State other than their State of residence. Advocate General Kokott appears to be a proponent of such an approach as well as Advocate General Mengozzi.65 Such an approach would bring the scope (and aims) of Articles 39 and 43 EC closer to those of Article 49 EC, which protects not only the movement that is taken, originally, by a Member State national for the purpose of providing the first in a series of cross-border services, but rather, all instances of cross-border provision of services that take place at any time, even though they may have been agreed beforehand in a single contract the parties to which were originally established in the same Member State. An example of this is the old case of Koestler.66 On the facts of the case, both the provider and the recipient of the (banking) services in question were, originally, established in France. The Court found that the situation fell within the scope of Article 49 EC, from the moment that Mr Koestler (the recipient of the services) moved his resi-dence from France (his State of residence) to Germany (his State of national-ity) from where he continued receiving the same services from the French bank.67 From the Court’s judgment, it can be deduced that the cross-border ele-ment which brought the situation within the scope of Article 49 EC was not the original movement of Mr Koestler from the State of residence (France) to the State of nationality (Germany) for the purpose of transferring (permanently) his residence to the latter. Rather, the factor which brought the case within the scope of Article 49 EC was the receipt from a person residing in Germany of banking services provided by a French bank. In other words, it was the move-ment of the banking services “across borders” that was going to be impeded as a result of the application of the contested German legislation that triggered the application of Article 49 EC. The fact that when the economic activity that brought the situation within the scope of Article 49 EC, was first pursued (and, thus, “taken up”) in a purely national context, did not mean that the situation could not be brought subsequently within the scope of EC law as a result of a cross-border element being introduced.68

It should be highlighted, however, that if, indeed, this somewhat broader approach is followed in the context of Articles 43 and 39 EC, care should be taken to make sure that a national measure is caught by these provisions only

65. See paras.. 33–45 of the Opinion of A.G. Kokott in Hendrix, supra note 27; and paras. 31–35 of the Opinion of A.G. Mengozzi in Renneberg, supra note 47.

66. Case 15/78, Koestler, [1978] ECR 1971.67. Ibid., para 3.68. Another old services case – Case 39/75, Coenen, [1975] ECR 1555 – can be said to be an

example of a case where there was no movement for the purpose of exercising an economic activity and yet the situation was considered as falling within the scope of Art. 49 EC. For such a view see Arnull, Dashwood, Dougan, Ross, Spaventa and Wyatt, Wyatt & Dashwood’s Euro-pean Union Law (Sweet & Maxwell, 2006), p. 754 (footnote 22).

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if it is capable of impeding the daily/weekly movements from the State of resi-dence to the State where the economic activity is exercised (or, more broadly, the exercise of an economic activity in a Member State by a person who resides in another).69 This appears to be creating problems for the plausibility of this explanation for the Ritter-Coulais saga (apart from Geurts), since in those cases it is not the daily/weekly movements back to the State of nationality and employment that would primarily be negatively affected as a result of the application of the contested measure, but rather, the initial movement to another Member State for the purpose of taking up residence. It is because they were no longer resident in their State of origin, that the applicants were treated less beneficially. Therefore, in our view, the most plausible explanation behind the Court’s approach in this line of case law is that the Court has taken an even broader view than the one set out in the preceding paragraphs, and has decided to extend the scope of the market freedoms so as to cover the situation of all eco-nomically active Union citizens, even if their economic activity takes place wholly within their State of origin, provided that the situation involves a cross-border element of some kind; and this is irrespective of whether the restriction that they suffer is in any way related to the economic activity they pursue. In other words, as long as a Member State national exercises an economic activ-ity and as long as her situation is not confined within the territory of a single Member State, there is a link with the economic fundamental freedoms not-withstanding the fact that the contested measure does not have any sort of a negative effect on the exercise of that economic activity.70 According to this explanation, the Court is, in effect, saying that the (now broader) aim of the economic fundamental freedoms is to protect the rights of all economically active persons whose situation has a cross-border dimension (e.g. transfer of residence to another Member State),71 rather than merely to protect their right to move between Member States for the purpose of taking up (or, even, simply pursuing) an economic activity.72 Therefore, the main division that is, now,

69. See para 45 of the Opinion of A.G. Kokott in Hendrix, supra note 27.70. Another commentator has noted that the introduction of Art.18 into the EC Treaty has led

to a re-evaluation of the right of free movement which “for economically active persons, it is now protected per se and not as an aspect of one’s being engaged in a transnational economic activity” – see Wollenschläger, “Union citizenship and its dynamics for integration beyond the market”, paper presented at the EUSA Eleventh Biennial International Conference, Los Angeles, USA, April 2009, available at www.unc.edu/euce/eusa2009/papers/wollenschläger_05E.pdf, p. 11 (last accessed on 2 May 2009).

71. This is obvious, for example, in para 18 of the Court’s judgment in Hartmann, supra note 5.

72. Such an approach seems to have been suggested by A.G. Saggio in para 25 of his Opin-ion in Case C-135/99, Elsen, [2000] ECR I-10409 and A.G. Bot in paras. 74–78 of his Opinion

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drawn by the Court is between, on the one hand, economically active Union citizens who are entitled to rely on the market freedoms if their situation involves a cross-border element and, on the other, economically inactive Union citizens who can rely on Article 18 EC if their situation is not purely internal to a Member State.73 The move to such a broader interpretation of the scope of the market free-doms does not appear to be without its proponents. One of them was Advocate General Geelhoed who put forward a very similar suggestion in his Opinion in Baumbast74 – the Court, however, did not appear ready to embrace it, at the time. It should be recalled that Mr Baumbast was a German national who had moved to the United Kingdom to take up employment. After spending some time as a worker there, he lost his employment and whilst maintaining his res-idence in that State he was then employed by German companies in China and Lesotho. As is well known, the Court found that the situation fell within the scope of Article 18 EC and, thus, Mr Baumbast maintained his right to reside in the United Kingdom, even when he was no longer working in that State. Like the Court, Advocate General Geelhoed was of the view that Mr Baumbast was entitled under EC law to continue residing in the United Kingdom, even after he was no longer employed there; however, in the Advocate General’s view, this right derived from Article 18 EC read in conjunction with Article 39 EC, and not merely Article 18 EC, which, in practical terms, meant that Mr Baumbast did not have to satisfy the self-sufficiency requirements of second-ary legislation governing the right of residence of economically inactive per-sons.75 Moreover, signs of such a broader reading of the scope of the market free-doms appear scattered in other opinions of Advocates General as well as in some judgments of the Court. More specifically, this approach seems to be a reflection of the Court’s previous calls in cases such as Collins, for re-reading the economic fundamental freedoms in a way which takes into account the

in Commission v. Germany, supra note 47. It, also, seems to be the approach followed by the Court in Commission v. Germany, ibid., see paras. 24–25 and 30 of the judgment. Another com-mentator has put forward a somewhat similar explanation for other internal market cases of the Court where there was no sufficient link with the exercise of an economic activity in an inter-state context – see Spaventa, “From Gebhard to Carpenter: Towards a (non)-economic Euro-pean Constitution”, 41 CML Rev. (2004), 743, 768.

73. This approach can be seen, e.g., in Commission v. Germany, supra note 47, para 30.74. Case C-413/99, Baumbast, [2002] ECR I-7091.75. At the time, the applicable legislation was Directive 90/364 on the right of residence,

O.J. 1990, L 180/26. This has now been replaced by Directive 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Mem-ber States, O.J. 2004, L 158/77, which lays down the same economic self-sufficiency require-ments in Art. 7.

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creation of the status of Union citizenship and the development of that status through the Court’s case law.76 Furthermore, it seems to be closely echoing the approach suggested even earlier by Advocate General Jacobs in the Konstantinidis case, according to which any Member State national who moves between Member States in the exercise of one of the (economic) fundamental freedoms, is not just entitled “to pursue his trade or profession and to enjoy the same living and working conditions as nationals of the host State; he is in addition entitled to assume that ... he will be treated in accordance with a common code of fundamental values .... In other words, he is entitled to say ‘civis europeus sum’ and to invoke that status in order to oppose any violation of his fundamental rights”.77 In the current context, of course, the Court does not appear to be merely requiring the human rights of migrant economic actors to be protected and respected,78 but rather, it would seem that the Court expects Member States to respect all the rights that have been granted through the Court’s case law (and secondary legislation) to persons who fall within the scope of Articles 39 and 43 EC (as traditionally interpreted). Finally, if the reasoning in Ritter-Coulais and its progeny is explained in this way, it can be seen as a further example of an (over-)extension of the scope of EC law and, in particular, the market free-doms, in line with the approach followed by the Court in its case law in the context of Article 7(2) of Regulation 1612/68.79 A very recent judgment which does not form part of the Ritter-Coulais saga, can be seen as bolstering this explanation for the Court’s new approach. This is the judgment in Rüffler80 which involved a German national, Mr Rüffler, who in 2005 moved to Poland in order to take up residence there as a retired person. Until that time, he was resident in Germany where he had, also, spent his entire working life. Mr Rüffler did not plan to exercise any economic activ-ity in Poland and his only income came from two pensions both of which were received in Germany. Under Polish tax legislation, he was subject to unlimited (income) tax liability in Poland. In 2006, he applied to the Polish tax authori-

76. Case C-138/02, Collins, [2004] ECR I-2703, para 63.77. Para 46 of the Opinion of A.G. Jacobs in Case C-168/91, Konstantinidis, [1993] ECR

I-1191.78. As argued elsewhere, it seems that in some of its recent case law in the context of family

reunification rights, the Court has taken up the suggestion of A.G. Jacobs in Konstantinidis, ibid – see, Tryfonidou, “Family reunification rights of (migrant) Union citizens: Towards a more lib-eral approach”, 15 ELJ (2009), 634.

79. See, among others, Case 32/75, Fiorini (neé Cristini), [1975] ECR 1085; Case 65/81, Reina, [1982] ECR 33; Case 59/85, Reed, [1986] ECR 1283; Case 137/84, Mutsch, [1985] ECR 2681. For an excellent analysis of this case law see O’Keeffe, “Equal rights for migrants: The concept of social advantages in Art. 7(2), Regulation 1612/68”, 5 YEL (1985), 93.

80.  Supra note 2.

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ties for the income tax to which he was liable in Poland on his German pen-sions to be reduced by the amount of the health insurance contributions which he paid in Germany. The Polish tax authorities rejected his application, on the ground that his health insurance contributions were paid in Germany – the reduction could only be made if the contributions were made to a Polish insur-ance institution. The question which emerged was whether this amounted to a violation of EC law. When a reference for a preliminary ruling was made to the ECJ, the latter held that taxpayers who were resident in Poland and paid con-tributions to the Polish health insurance scheme were in an objectively compa-rable situation (from the point of view of Polish taxation principles) with residents who paid contributions to health insurance schemes in other Member States: both were subject to unlimited taxation in Poland. Therefore, the Court found that the said refusal of the tax reduction amounted to discrimination since it placed at a disadvantage taxpayers who had exercised their freedom of movement by leaving the Member State in which they had carried out all their occupational activity in order to take up residence in Poland.81 The ECJ then held that the contested rule constituted a violation of Article 18 EC which was not objectively justified. The case is important for our purposes, because it reinforces our view that the Court, now, includes within the scope of the market freedoms all cross-bor-der situations which involve an economically active Union citizen. The Court found that the situation of Mr Rüffler fell within the scope of Article 18 EC, and not Article 39 EC.82 This, according to the Court, is because “persons who have carried out all their occupational activity in the Member State of which they are nationals and who have exercised the right to reside in another Mem-ber State only after their retirement, without any intention of working in that other State, cannot rely on freedom of movement as a worker”.83 When this is read carefully it could be taken to mean that for Article 39 EC (or, we would add, Art. 43 EC) to apply, there must be some exercise of an economic activity (either in the State of origin or the host State) at the moment the movement takes place, even if the movement is not related to that activity; alternatively, if an economic activity is not performed at the moment the movement takes place, it is required that the movement must have as its purpose the taking up of an economic activity in the host State. In other words, the market freedoms can (still) only apply to the situation of economically active persons. However, they now apply irrespective of where the economic activity takes place and

81. Ibid. paras. 60–73.82. Ibid. paras. 55–56.83. Ibid. para 52 (emphasis added). See, also, paras. 50–51 of the same judgment. See to the

same effect the previous judgment in Case C-520/04, Turpeinen, [2006] ECR I-10685, in partic-ular, para 16.

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irrespective of whether the movement that is exercised and is sought to be pro-tected, has an economic purpose. Hence, our conclusion is that the Court’s reasoning in its Ritter-Coulais saga conceals a desire to re-read the economic fundamental freedoms in the light of the status of Union citizenship. The Court is of the view that the mar-ket freedoms should govern the situation, not only of Union citizens whose sit-uation is closely linked with the internal market aims of the Community, but rather, all Union citizens whose situation involves a cross-border element and who exercise an economic activity of some sort, irrespective of whether this contributes in any way to the establishment and completion of the internal market. There is one final point that should be mentioned here. As explained above, in the majority of these cases, Article 18 EC would be a more appropriate legal basis for bringing the situation within the scope of EC law. And yet, the Court has shown a strong preference for using, where possible, the market freedoms as opposed to the citizenship provisions. One may immediately ask: what is the reason behind this? If the approach was only followed in Ritter-Coulais and Hartmann, it might have been suggested that the Court was merely trying to fill in the gap created by the limits to the scope ratione temporis of the citizenship provisions, since the facts of those cases took place before Article 18 EC came into force. There-fore, if the market freedoms were not held to apply the applicants would not have any remedy under EC law just because their situation happened to take place before 1993. However, this cannot provide an explanation for the Court’s strong preference for using the market freedoms since the same preference was shown, also, in cases the facts of which could, appropriately, fall within the scope of Article 18 EC ratione temporis (e.g. Hendrix, Renneberg and N). In our view, and having in mind the Opinion of Advocate General Geelhoed in Baumbast,84 the most likely reason behind the Court’s preference for using the market freedoms in these cases, is that under the market freedoms persons enjoy certain rights, and in particular the right of residence, with very little limits being imposed on them, whereas under the citizenship provisions, Mem-ber States can limit the grant of rights – in particular the right of residence – to persons who are economically self-sufficient and, thus, do not need to have recourse to the social assistance system of the host State. This, in effect, trans lates into a situation whereby when a Member State national who comes within the scope of the economic fundamental freedoms falls on hard times, the State of residence is obliged to provide for him and this does not put into danger his right of residence in that State, as long as he con-

84. Paras. 115–118 of the Opinion in Baumbast, supra note 74.

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tinues to be economically active within its territory; whereas an economically inactive Union citizen who falls on hard times can only maintain his right of residence in the host State for a limited period of time (until he becomes an “unreasonable burden on its social assistance system”),85 unless, of course, he has recourse to social assistance after he has acquired the right of permanent residence there86 or if he is considered “integrated” into the society of the host State.87 Therefore, since economically active Union citizens will, in the vast majority of cases, not be imposing an unreasonable burden on the social assis-tance system of the State of residence since they will have a source of income from their economic activities, the Court is probably considering it dispropor-tionate to require them to prove that they are economically self-sufficient in order to maintain the right of residence in the host State which they derive from EC law; in other words, they are likely to pose as little danger to the social assistance system of their State of residence as is posed by persons who reside and work in that Member State and, therefore, should not be treated dif-ferently.88 The question that, now, arises is whether the new approach followed by the Court and described in this piece, is a legally sound interpretation of the mar-ket freedoms. Should – and could – these provisions be interpreted as now including all economically active Union citizens, irrespective of whether their situation involves a contribution to the establishment of the internal market? Has there been such a dramatic change in circumstances, which would warrant a complete change of the rationale behind these provisions?

5. The appropriateness of the Court’s new approach

5.1. (Inappropriately) broadening the scope of the market freedoms to include situations that are unrelated to their economic aim

Before the 1990s, only economic actors fell within the scope of EC law and any rights of free movement that were enjoyed by Member State nationals,

85. See Recitals 10 and 16 and Art. 14(1) of Directive 2004/38, supra note 75. This was repeated in many judgments of the Court – see, among others, Case C-184/99, Grzelczyk, [2001] ECR I-6193, para 44; Case C-209/03, Bidar, [2005] ECR I-2119, para 56.

86. The right of permanent residence is acquired by Union citizens who have resided in the host State for five years – see Art. 16 of Directive 2004/38, supra note 75.

87. See, e.g., Bidar, supra note 85, paras. 56–57; Joined Cases C-11/06 and 12/06, Morgan and Bucher, [2007] ECR I-9161, para 43; Case C-158/07, Förster, judgment of 18 Nov. 2008, nyr, paras. 49–52.

88. For a discussion explaining the reasons behind the Court’s preference for using the mar-ket freedoms as opposed to Art. 18 EC see O’Brien, supra note 41, 506–507.

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derived from the economic fundamental freedoms. Nevertheless, with the coming into force of the Residence Directives89 and, shortly afterwards, of the citizenship provisions which were inserted into the EC Treaty by the Treaty of Maastricht, some of the Community rights that were traditionally granted only to economic actors, broke free from their economic mooring and were extended to Union citizens who were not participating in any way to the economic aims of the Community.90 This, however, should not lead us to lose sight of the fact that the introduction of this new status has not changed the economic basis of the market freedoms.91 The wording used in the economic fundamental free-doms has remained unaltered since the original EEC Treaty, despite numerous amendments to that Treaty. This should be taken as a reflection of the fact that the aim of these provisions continues to be what it originally was, i.e. to enable Member State nationals to move between Member States for an economic pur-pose. This, after all, is reflected in the importance (still) attached by the Court to the notion of “market access” or “access to the employment market” when determining whether there is a violation of one of the free movement of (eco-nomically active) persons provisions.92 Obviously, the aim of establishing an internal market in labour is not furthered by protecting the rights of Member State nationals who are economically active but in a purely domestic context. Accordingly, Member State nationals who seek to exercise an economic activ-ity in their State of nationality and whose situation does not present a cross-border element (e.g. prior employment or studies in another Member State) cannot, under the Court’s orthodox approach, benefit from the rights granted to persons falling within the scope of the economic fundamental freedoms. Sim-ilarly, under the Court’s orthodox approach, a situation involving a Member State national who is economically active in a cross-border context, albeit one not involving two or more Member States (e.g. the Baumbast scenario) falls outside the scope of the market freedoms since it in no way furthers the aim of establishing an internal market in labour.

89. Directive 90/364, supra note 75; Directive 90/365 on the right of residence for employ-ees and self-employed persons who have ceased their occupational activity, O.J. 1990, L 180/28; Directive 93/96 on the right of residence for students, O.J. 1993, L 317/59.

90. See para 54 of the Opinion of A.G. Mazák in Förster, supra note 87.91. This can be seen, for example, in Uecker & Jacquet, supra note 22, para 23 where the

Court held that the introduction of the status of Union citizenship did not affect the application and validity of the purely internal rule the rationale of which, of course, is to include within the scope of the (economic) fundamental freedoms only situations which are sufficiently connected with their (economic) aims.

92. See, e.g., Case C-384/93, Alpine Investments, [1995] ECR I-1141; Case C-415/93, Bos-man, [1995] ECR I-4921. For an excellent analysis of the notion of “market access” see Barnard, supra note 4, pp. 262–282.

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This, of course, does not mean that persons whose situation escapes the (tra-ditionally drawn) scope of the market freedoms, remain without any remedy under EC law. Member State nationals, whether economically active or inac-tive, whose situation involves a cross-border element (albeit one which does not bring them within the ambit of the market freedoms), may be able to rely on the citizenship provisions of the Treaty. In fact, this can also be seen in the cases under discussion since the applicants in most93of these cases could have had recourse to Article 18 EC since the less favourable legal regime which was contested in all these cases was activated as a result of the exercise of inter-state movement for the purpose of taking up residence in the territory of another Member State. In this case law, the legally sound approach would be for the Court to employ its well-established reasoning developed in its Article 18 EC case law,94 according to which discrimination against free movers is contrary to that provision, especially since some of the questions referred in the cases analysed in this article specifically asked whether there was a viola-tion of Article 18 EC.95 In fact, in 2000, in a case in the area of social security, the Court, to a cer-tain extent, adopted such an approach. This is the Elsen96 case where the appli-cant, Mrs Elsen, was a German national who had always been employed in Germany, but at some point moved her residence to France, whilst continuing to work in Germany. German legislation provided that child-rearing periods should be taken into account as periods of insurance for the purpose of an old-age pension if the child-rearing had taken place in Germany (or the child was “deemed” to have been raised there). The Court in its judgment concluded that the legislation in question was contrary to Articles 18, 39 and 42 EC and thus, in effect, those provisions required Germany to take into account the child-rearing periods completed in France by Mrs Elsen. The main part of the judg-ment begins with a straightforward application of the discrimination against free movers principle as applied in the context of Article 18 EC.97 In the sub-sequent part of its judgment the Court makes reference to Regulation 1408/71 and Article 39 EC which, in its view, were also applicable on the facts. How-

93. All apart from Ritter-Coulais (supra note 1), Hartmann (supra note 5) and Geurts (supra note 62).

94. See, among others Case C-224/02, Pusa, [2004] ECR I-5763; Case C-192/05, Tas-Hagen and Tas, [2006] ECR I-10451, paras. 30–32; Case C-499/06, Nerkowska [2008] ECR I-3993, paras. 31–33; Case C-76/05, Schwarz, [2007] ECR I-6849, paras. 88–93; Case C-353/06, Grunkin and Paul, judgment of 14 Oct. 2008, nyr, para 21; Rüffler, supra note 2, paras. 64–65. For another commentator advocating this view see O’Brien, supra note 41, 505.

95. See, e.g., the first question referred by the national court in N, supra note 43 and the fourth question referred in Hendrix, supra note 27.

96. Elsen, supra note 72.97. Ibid. para 34.

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ever, for the purposes of our analysis the importance of the case lies in the fact that the Court acknowledged that the situation could also (and, perhaps mainly) be covered by Article 18 EC. Accordingly, following the introduction of the citizenship provisions, the orthodox approach would have required the Court to continue treating Articles 39 and 43 EC as only applying in situations which involve a sufficient connec-tion with their aim of enabling economic actors to move between Member States for the purpose of taking up an economic activity; and Article 18 EC should be applied in all other instances where there is an impediment to inter-state movement which has not been exercised for an economic purpose. This, after all, is reflected in the fact that the Treaty still maintains different provi-sions that are applicable to Union citizens, depending on the (economic) activ-ity they pursue98 and it appears that in the near future, this distinction will not be abolished in primary legislation, since the drafters of the Lisbon Treaty99 have maintained the current position under which the free movement (and adjunct) rights of Union citizens are governed by different provisions, depend-ing on the purpose for which the relevant movement was exercised.100 Nonetheless, as we have already seen, the orthodox approach seems to have been abandoned by the Court, at least in its Ritter-Coulais-line of cases. As has been explained, in this group of cases, the application of the contested national measures to the specific facts before the Court could not, in any way, impede the achievement of the aim of Articles 39 and 43 EC, which is to enable Mem-ber State nationals to move between Member States for the purpose of taking up an economic activity; or, in the words of Advocate General Geelhoed, for the “factor labour” to shift to the host State. Therefore, this broader approach to the delimitation of the scope of Articles 39 and 43 EC is problematic because it goes against the well-established principle that the provisions of the EC Treaty include within their scope only situations that are sufficiently connected to their aim(s).101

98.  See para 9 of the Opinion of A.G. Ruiz-Jarabo Colomer in Joined Cases C-22 & 23/08, Vatsouras and Koupatantze, judgment of 4 June 2009, nyr.

99. Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, O.J. 2007, C 306/1.

100. Art. 21 TFEU (free movement of Union citizens); Art. 49 TFEU (freedom of establish-ment); Art. 46 TFEU (free movement of workers) and Art. 56 TFEU (free movement of serv-ices).

101. This is, in effect, the principle of teleological interpretation that has always been fol-lowed by the Court of Justice. It should be noted that this new approach of the Court had been expressly rejected, two days after the judgment in Ritter-Coulais was delivered, in a free move-ment of capital case: Case C-513/03, Van Hilten-van der Heijden, [2006] ECR I-1957, paras. 49–50.

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5.2. Aggravating the problem of reverse discrimination

Another problematic aspect of the Court’s approach in the Ritter-Coulais line of cases is that the extension of the scope of application of the economic fun-damental freedoms to all cross-border situations involving economically active Member State nationals, leads to the further question of whether it makes any sense to limit the application of those provisions to migrant eco-nomic actors and, in effect, (reversely) discriminate against static ones. The question of what particular kind of link with EC law is acceptable and is thus an appropriate criterion for separating situations that qualify for EC protection from those that do not, has emerged from time to time over the years, but it has gained momentum in the last decade or so. This is due to the fact that the ease with which the Court has accepted in many of its judgments in recent years that a situation presents a link with EC law, has made the line between situa-tions falling within the scope of EC law and those that escape its ambit peril-ously thin. In addition, it has made it all the more difficult to justify the difference in treatment that often emerges between situations that fall within the scope of EC law and those that fall outside it and thus do not qualify for EC protection (in most cases this being “reverse discrimination”).102

In the context of the market freedoms, the requirement of a contribution to the establishment of the internal market can be considered as an appropriate – reasonable103 – criterion of differentiation between Member State nationals, and an apt way for determining whether they should be entitled to the (often more extensive) protection afforded by the economic fundamental freedoms. This is because this requirement ensures that it is only persons who contribute to the achievement of the aim of those provisions that can rely on them. How-ever, if the market freedoms can, now, also include Union citizens who do not contribute to the internal market or whose situation only presents an indirect, or even purely artificial, link with the aim of those provisions,104 then why can those provisions not apply, also, to economically active Union citizens whose situation does not involve any kind of a cross-border element; or, simply, to any other Union citizen who is not economically active, even in a purely domestic context?105 In other words, why should such Union citizens be

102. For a similar view see Nic Shuibhne, supra note 21, 738. 103. Cannizzaro, supra note 21, 42.104. See e.g. Case C-60/00, Carpenter, [2002] ECR 6279; Case C-281/98, Angonese, [2000]

ECR I-4139; Case C-1/05, Jia, [2007] ECR I-1; Case C-291/05, Eind, [2007] ECR I-10719; Case C-151/07, Khatzithanasis, judgment of 4 Dec. 2008, nyr.

105. See Tryfonidou, supra note 19, 116–117; paras. 74–75 of the Opinion of A.G. Geelhoed in Jia, supra note 104.

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reversely discriminated against just because they happen not to be able to point to any kind (however artificial) of a cross-border element? The injustice of the situation can be seen if we use as an example the Hart-mann case.106 The contested German law provided that child-raising allowance was available to persons who were residing in Germany, provided that they exercised no or no full-time economic activity in that State; and to nationals of other Member States who were engaged in full-time employment in Germany, even though they were not resident in that State. The Court found that Mr Hart-mann was entitled to the allowance since he was in effect in the same position as nationals of other Member States working (full-time) in Germany. There-fore, the Court’s ruling in this case had as a consequence that the category of persons who would suffer reverse discrimination as a result of being excluded from the right to claim the child-raising allowance had shrunk, since an addi-tional category of German nationals was now brought within the scope of pro-tection of Article 39 EC (i.e. German nationals working full-time in Germany whilst residing in another Member State). What this means, in essence, is that the only persons who are not able to claim the child-raising allowance in Ger-many are German nationals who, unlike Mr Hartmann, are residing in Ger-many but, like Mr Hartmann, are working full-time in Germany. Therefore, the only difference between the situation of Mr Hartmann (who falls within the scope of Art. 39 EC) and the situation of German nationals who cannot rely on Article 39 EC for the purpose of obtaining the child- raising allowance is that the latter are residing in Germany whereas the former is residing in another Member State. However, is the ground of this differentiation (a cross-border element in the form of residence in another Member State) sufficient to war-rant the exclusion of one category (residents) from the scope of Article 39 EC and the inclusion of the other category (non-residents) within the scope of that provision? It seems that both situations involve the same lack of a sufficient cross-border economic element in that there is no cross-border movement for an economic purpose. Hence, it does not seem to make any sense to include one category within the scope of Article 39 EC whilst excluding the other from the ambit of that provision since both categories are equally unrelated to the aim of that provision. In the context of the citizenship provisions a fresh impetus regarding the question of the actual link that must be satisfied for the citizenship provisions to apply, has emerged in recent years, especially in the light of cases such as

106. Supra note 5.

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Garcia Avello,107 Chen,108 Grunkin and Paul109 and Schempp.110 In the three former cases, the Court accepted that the citizenship provisions of the Treaty, and in particular Articles 18 (Chen and Grunkin and Paul) and 17 EC (Garcia Avello), can cover the situation of a Union citizen who holds the nationality of one Member State whilst residing in another Member State (where (s)he was born). Going even further, the Court in Schempp accepted that the situation of a German national who was resident in Germany and had never exercised inter-state movement fell within the scope of Article 18 EC, by virtue of the fact that his former wife had moved her residence to another Member State and, as a result of that, he could not deduce the maintenance payments he made to her from his taxable income in Germany.111 Hence, it seems that the require-ment of the exercise of (and impediment to) physical inter-state movement seems to have lost all importance since those provisions can now apply even in the absence of such movement, provided that the facts of a case involve some kind of cross-border element, however incidental to the Community’s aims that may be.112 Therefore, in this context as well, the following question emerges: why should only migrant Union citizens be entitled to rights under EC law, this meaning that the status of Union citizenship only becomes acti-vated once a cross-border element (however meagre) is established?113 Article 18 EC provides “the right to move and reside freely within the terri-tory of the Member States”. The Court has traditionally interpreted this as being a single right of movement to another Member State where the Union citizen takes up residence; or, of pure free movement between Member States (without taking up residence) as was the case in Wijsenbeek.114 Surely, if the aim of Article 18 EC is, solely, to enable Union citizens to move freely between

107. Case C-148/02, Garcia Avello, [2003] ECR I-11613, para 27.108. Case C-200/02, Kunqian Catherine Zhu and Man Lavette Chen v. Secretary of State for

the Home Department, [2004] ECR I-9925, para 19. 109. Grunkin and Paul, supra note 94, para 17.110. Case C-403/03, Schempp, [2005] ECR I-6421, paras. 22–25.111. Ibid. paras. 22–26. 112. There is evidence that the same approach (i.e. of dispensing with the requirement of

physical inter-state movement) may be applicable in the context of the market freedoms – see Collins, supra note 76, which involved an Irish national who had moved directly from the US to the UK to seek work; and the older cases of Matteucci and Rutili, supra note 16.

113. A similar question was posed by Eeckhout, albeit in the context of the protection of fun-damental rights as general principles of EC law – see Eeckhout, “The EU Charter of Fundamen-tal Rights and the Federal Question”, 39 CML Rev. (2002), 945, 972. See, also, Tryfonidou, “Kunqian Catherine Zhu and Man Lavette Chen v. Secretary of State for the Home Department: Further cracks in the ‘Great Wall’ of the European Union?””, 11 EPL (2005), 527, 536–541; Hof-stotter, “A cascade of rights, or who shall care for little Catherine? Some reflections on the Chen case”, 30 EL Rev. (2005), 548, 551–553. Epiney, “The Scope of Art. 12 EC: Some remarks on the influence of European citizenship”, 13 ELJ (2007), 611, 616–617.

114. Case C-378/97, Wijsenbeek, [1999] ECR I-6207.

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Member States and, if they so wish, take up residence in the host State (after exercising inter-State movement), then in cases such as Chen or Schempp, there is no sufficient link with the aim of that provision. Some, however, might argue that Article 18 EC should, instead, be read as comprising two separate rights, i.e. the right to move and the right to reside in the territory of the Mem-ber States, and thus should be amended to read “[e]very citizen of the Union shall have the right to move and the right to reside freely within the territory of the Member States”. In fact, a similar suggestion was made, quite recently, by Advocate General Sharpston, in her Opinion in the Flemish care insurance scheme case,115 where she invited the Court “to reflect on the nature and ratio-nale behind its doctrine in respect of purely internal situations”.116 The Court in its judgment in that case, however, did not follow her suggestion and rather insisted on a cross-border element and, in particular, movement between Mem-ber States, before a situation can fall within the scope of EC law.117 Therefore, the main question that should now be asked is whether it makes any sense, in light of the ease with which situations are nowadays accepted within the scope of the free movement of persons provisions (both, the market freedoms and the citizenship provisions), to actually insist on establishing a link with EC law in the first place, if the link currently required does not relate, in any way, to the aims of those provisions. In other words, if the link that is now required to be established, is not such as to make sure that only persons who contribute to the achievement of the aims of a provision can benefit from it, then it is merely an arbitrary way of excluding some persons from its scope. What is more, since this exclusion is no longer justified by the aim of includ-ing within the scope of the Treaty provisions only situations that are suffi-ciently connected to their aims, it turns the difference in treatment which has always emerged between persons that enjoy EC law protection and persons that do not – i.e. reverse discrimination – into blatant discrimination. And, if

115. Supra note 4. See para 144 of the Opinion.116. Para 121 of the Opinion of the A.G. in the Flemish care insurance scheme case, supra

note 4. It should be noted that the A.G. drew a parallelism with the customs duties case law where the Court included within the scope of Art. 25 EC even situations which involved goods that have moved between regions of the same Member State – see paras. 122–132 of the Opin-ion. For such case law see, Joined Cases C-363/93, C-407/93, C-409/93 and C-411/93, Lancry, [1994] ECR I-3957; Joined Cases C-485/93 and C-486/93, Simitzi, [1995] ECR I-2655 and Case C-72/03, Carbonati Apuani, [2004] ECR I-8027.

117. See paras. 37–40 of the judgment in the Flemish care insurance scheme case, supra note 4. It seems that the Court will not be able to avoid this question in the future. In actual fact, in January 2009, the Tribunal du travail (Brussels) asked the Court whether Arts. 12, 17 and 18 EC “or one or more of them when read separately or in conjunction, confer a right of residence upon a citizen of the Union in the territory of the Member State of which that citizen is a national, irre-spective of whether he has previously exercised his right to move within the territory of the Member States?” – see Case C-34/09, Zambrano, pending.

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we follow the suggestion of Advocate General Poiares Maduro in the Car-bonati Apuani case, this discrimination can fall within the scope of EC law since it emerges as a result of the (limited scope of) application of EC law – it is a “residual” situation from the point of view of Community law.118 We are not, of course, suggesting here that the Community should become omnipotent and thus, in effect, that the notion of the purely internal situation should be abolished. Rather, what we are advocating is that the Court should redefine the boundaries between the scope of application of the market free-doms, on the one hand, and the ambit of the national legal systems, on the other. This should be done in a way which will reflect the aims of the Commu-nity and each of its provisions should be held applicable only in situations that are sufficiently related to its objectives. Only in this way will it make sense for the Community to allege that certain Union citizens are – justifiably – excluded from the protection afforded by EC law. Otherwise, any distinction merely appears arbitrary.

6. Conclusion

This article has as its aim to present another, recently developed, group of cases in the area of the free movement of (economically active) persons, for which the Court can fairly be accused of following an overly open approach towards the scope of application of the market freedoms. In its Ritter-Coulais jurisprudence, the Court seems to have reversed its well-established precedent laid down by the case of Werner,119 according to which the exercise (and impediment) of inter-state movement for a non-economic purpose, does not suffice for bringing a situation within the scope of the economic fundamental freedoms.120 Contrary to this well-established rule the Court has, in the case law under discussion, accepted that situations which involve the exercise (and impediment) of inter-state movement merely for the purpose of taking up res-idence in the territory of another Member State, whilst continuing to work in

118. Paras. 60–64 of the Opinion of A.G. Poiares Maduro in Carbonati Apuani, supra note 116. For a similar view see the Opinion of A.G. Sharpston in the Flemish Care Insurance Scheme case, supra note 4, para 140. For commentators who are of the view that reverse discrimination is no longer an acceptable difference in treatment and, thus, the EC should provide a remedy, see Kochenov, “Ius tractum of many faces: European citizenship and the difficult relationship between status and rights”, 15 CJEL (2009), 169, 212–213; Nic Shuibhne, supra note 21; Poiares Maduro, supra note 21; d’Oliveira, supra note 21; Tryfonidou, “Reverse discrimination in purely internal situations: An incongruity in a Citizens’ Europe” 35 LIEI (2008), 43.

119. Supra note 14.120. See para 70 of the Opinion of A.G. Bot in Commission v. Germany, supra note 47.

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the State of origin, can, now, fall within the scope of the economic fundamen-tal freedoms. The article has provided an analysis of the possible reasons behind this new approach of the Court. It appears that the main explanation for the Court’s rea-soning in this case law is that the Court may now be wishing to re-read the market freedoms in the light of the status of Union citizenship and expand their scope so as to include all economically active Union citizens, irrespective of whether their situation involves any contribution to the internal market. How-ever, this creates problems in terms of legal coherence since the aim of the market freedoms has always been – and still is – to create an internal market. This aim is not in any way furthered by the extension of the scope of the mar-ket freedoms in the way described above and, therefore, it conflicts with the well-established principle that it is only situations that are sufficiently con-nected with the aim of a provision that should be included within its scope. In addition, the fact that the economic fundamental freedoms are held to apply, also, to Union citizens whose situation does not present any link with the aim of those provisions, leads to the question of whether it makes any sense to exclude from the ambit of those provisions all other Union citizens whose sit-uation is equally unrelated to that aim, but who are economically inactive; or are unable to establish any kind of cross-border element. It, thus, transforms reverse discrimination from a form of differential treatment that was justified by the need to confine the scope of application of the market freedoms to situ-ations that were sufficiently connected to their aim, to blatant discrimination. Accordingly, the foundations of the case law under discussion remain frag-ile and the Court should revert to its orthodox – and legally sound – approach, according to which it is only situations that involve the application of a national measure that impedes inter-state movement that was exercised for an eco-nomic purpose, that can fall within the scope of the economic fundamental freedoms provisions of the Treaty. Therefore, until (if ever) the distinction between the various Treaty provisions governing the free movement of per-sons – depending on the purpose for which the movement was exercised – is abolished, it only makes sense that the scope of each of the free movement of persons provisions is delimited in a way which reflects its aims. This task would be facilitated if the starting point of the Court’s analysis in all cases would be to identify which is the relevant inter-state movement that will be hindered as a result of the application of the contested national measure. Once the relevant movement is identified, the next question should be what has been the purpose for exercising that movement.121 This will determine which Treaty provision is relevant on the facts and the Court will then be able to engage in an examination of whether there is a violation of that provision.

121.  See paras. 33–34 of the Opinion of A.G. Geelhoed in Hartmann, supra note 5.