During the period governed by EU free movement law, did pre-settled status alone entitle an EU citizen to claim universal credit on the same terms as a UK national? Applying the Court of Justice’s ruling in CG, the Supreme Court held that it did not. The claimants had domestic permission to stay but did not satisfy the residence conditions in Directive 2004/38.
The benefit rule in dispute
The appeal concerned EU law only as it applied while the United Kingdom was a member state and during the transition period after withdrawal. The Social Security (Income-related Benefits) (Updating and Amendment) (EU Exit) Regulations 2019 amended the eligibility rules for various non-contributory benefits. In broad terms, they prevent leave to remain arising from pre-settled status under the EU Settlement Scheme from counting as a qualifying right of residence. The argument focused on the amendment to the Universal Credit Regulations 2013. Analogous amendments were made to six other sets of regulations.
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The respondents are Romanian nationals who were present in the United Kingdom. Each applied for universal credit and was refused. At that time, each person’s right to reside arose solely from pre-settled status: a right under domestic law, not an EU law right of residence.
The article 18 challenge
Article 18 of the Treaty on the Functioning of the European Union prohibits, within the scope of application of the EU Treaties, discrimination on grounds of nationality. The respondents said that an EU citizen who is lawfully resident, whether under EU law or under a purely domestic right such as pre-settled status, falls within article 18. Refusing social assistance by a criterion not applied to a UK national was, they argued, prohibited discrimination. They sought judicial review and asked for the 2019 Regulations to be quashed.
The Secretary of State said that article 18 was inapplicable and that there was in any event no breach. A person with no EU law right of residence could not rely on it to claim equal treatment in these benefits. Any nationality discrimination was indirect and justified.
The decisions below
On 27 April 2020 Swift J dismissed the claim. He held that the respondents could rely on article 18, but that the regulations did not breach it. Applying the Supreme Court decision in Patmalniece, which had itself applied the Court of Justice decision in Bressol, he held that the discrimination was indirect rather than direct. He also held that it was justified: the regulations maintained the position before pre-settled status was introduced and protected the social security system from claims by people who were not sufficiently economically integrated into, or insufficiently closely connected with, the United Kingdom.
The Court of Appeal allowed the respondents’ appeal, with Dingemans LJ dissenting on the discrimination issue. All three judges agreed that the respondents could rely on article 18, for Swift J’s reasons. McCombe LJ, with whom Moylan LJ agreed, held that Court of Justice case law prohibited discrimination of this type, so justification did not arise. He rejected the argument that any nationality discrimination was indirect and capable of justification. Dingemans LJ considered that there was only indirect discrimination, which the Secretary of State could justify. The Court of Appeal refused permission to appeal but stayed execution until 26 February 2021.
The Secretary of State appealed. If the claimants could invoke article 18, the Court would have to consider the character of the alleged discrimination and whether it could be justified.
The ruling in CG
On 21 December 2020 a Social Security Tribunal in Northern Ireland referred a materially similar universal credit question to the Court of Justice in CG v Department for Communities in Northern Ireland. The parties agreed that, under articles 86(2) and 89(1) of the Withdrawal Agreement, given domestic effect by section 7A of the European Union (Withdrawal) Act 2018, that judgment would bind the United Kingdom in its entirety. On 11 May 2021 Lord Reed vacated the Supreme Court hearing pending the decision.
The Court of Justice gave judgment on 15 July 2021. As Lord Lloyd-Jones explained, every EU citizen may rely on the article 18 prohibition, but its first paragraph applies independently only where EU law governs the situation and the Treaty lays down no specific non-discrimination rules. For citizens who move to or reside in another member state, non-discrimination is given specific expression in article 24 of Directive 2004/38/EC. Such a citizen falls within the Directive, so nationality discrimination is assessed under article 24 rather than by applying article 18 independently. An EU citizen can claim equal treatment in social assistance only if his or her residence complies with the conditions of the Directive.
That answer decided the first issue in the Secretary of State’s favour, and the second issue did not arise. It was common ground that the respondents were not residing in accordance with the Directive when they claimed universal credit. Lord Lloyd-Jones, with whom Lord Reed, Lord Hodge, Lord Sales and Lord Hamblen agreed, held that they could not rely on the EU principle of non-discrimination to claim equal treatment in entitlement to universal credit.
The new Charter argument
By a letter of 23 July 2021 the respondents sought to advance an entirely new case. They said that EU citizens lawfully resident on pre-settled status were within the scope of EU law and could rely on the Charter of Fundamental Rights, particularly article 1 on human dignity, article 7 on respect for private and family life, and article 24(2) on the rights of the child. They asked to challenge the regulations and the refusals on those grounds. They had never previously argued that the Charter entitled them to universal credit.
The court refused to permit the point. A new argument on appeal is approached with caution, and it would be inappropriate to allow one that would raise issues of fact which had not been determined. Although the Court of Justice in CG had noted the possible relevance of the Charter to the circumstances of that case, paragraph 92 of its judgment showed that CG’s situation was materially different. The Supreme Court did not describe those differences. There were no further issues for it to decide.
Verdict: The Supreme Court unanimously allowed the Secretary of State’s appeal. The challenge to the 2019 Regulations failed. The classification and justification of any discrimination did not arise. The Court declined to hear the new Charter argument and left its merits undecided.
Source: Fratila and another v Secretary of State for Work and Pensions [2021] UKSC 53
