Ms Tamara Gubeladze, a Latvian national, was refused state pension credit because some of her work in the United Kingdom had not been registered under the Worker Registration Scheme. The Supreme Court held that extending that scheme in 2009 was a disproportionate, and therefore unlawful, limit on rights arising from the 2004 enlargement of the European Union, and that the three years’ residence required of a retired worker means residence in fact rather than residence under an EU right. The Secretary of State’s appeal was dismissed.
Ms Gubeladze worked in the UK during the transitional period following Latvia’s accession to the European Union. Some of this work was unregistered. After she stopped working, the treatment of that period determined whether she qualified for state pension credit.
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The registration scheme
Latvia was one of eight states whose nationals could, for a transitional period after accession on 1 May 2004, be made subject to national controls on access to existing member states’ labour markets. The United Kingdom’s control was the Worker Registration Scheme. An accession-state national had to register before starting employment and before taking new employment, pay a £90 fee, and keep registering until 12 months’ work had been completed. Work that was not registered did not give a right to reside.
The scheme ran from 1 May 2004 to 30 April 2009. In Zalewska the House of Lords held unanimously that these controls, being a derogation from EU rights, had to be proportionate, and by a majority that the original scheme was lawful. In 2009, after advice from the Migration Advisory Committee and notification to the Commission, the Government extended it to 30 April 2011. The permitted ground for that further two years was serious disturbance of the labour market, or a threat of it. It was common ground that the financial crisis supplied that disturbance.
Ms Gubeladze was issued with a registration certificate on 20 August 2010. Her earlier employment was not covered. The Secretary of State refused the claim on the basis that the three years had to be continuous lawful residence under the Citizens Directive, and that unregistered work did not count. The Upper Tribunal allowed her appeal, holding both that actual residence was enough and that the 2009 extension was disproportionate. The Court of Appeal agreed on proportionality but held that “reside” in article 17(1)(a) meant lawful residence under the Directive. A seven-justice Supreme Court was convened because the Secretary of State was now permitted to argue, contrary to Zalewska, that proportionality did not apply at all.
Proportionality still applied
Lord Lloyd-Jones and Lord Sales, with whom Lady Hale, Lord Kerr, Lord Carnwath, Lord Hodge and Lady Black agreed, rejected that new argument. They accepted that proportionality is concerned with interference with a protected interest, and that the extension could not be attacked simply as a breach of the ordinary free-movement rules. But accession made nationals of the new states EU citizens at once. The Treaties applied from 1 May 2004, subject to transitional derogations. The word “derogation”, the scheme of the Accession Treaty and the Citizens Directive all showed that those nationals had protectable interests, which member states could limit only in the usual way.
The transitional provisions were meant to protect labour markets from a large inflow, not to give member states an unlimited discretion. A measure adopted under them still had to be suitable and necessary for that particular objective, and not excessive. Later cases relied on by the Secretary of State did not decide otherwise. The Court treated this as clear enough to require no reference to the Court of Justice, and did not need to consider an alternative argument under the Human Rights Act 1998.
The extension was disproportionate
In April 2009 the choice under the accession arrangements was binary: keep the existing scheme for two more years, or drop it. Its original purposes, monitoring migration and protecting the benefits system, were no longer the relevant justification. The question was whether it still had a small deterrent effect on workers arriving from the accession states and whether keeping it was proportionate to the labour-market objective.
The Secretary of State relied entirely on the Committee’s report and filed no separate explanation. The Committee had not been asked about proportionality. It thought that ending the scheme would be unlikely to produce a substantial increase in arrivals, but that a small increase was plausible and could slightly worsen the disturbance. It also recognised burdens on employers and workers, including the fee, and said that the Government would have to weigh the slight reduction in arrivals against free movement. The Court accepted that this small deterrent effect was a legitimate finding, so the extension was capable of pursuing the permitted objective and, given the binary choice, was the only available measure. On that first stage, the Upper Tribunal had been wrong to treat the scheme as unsuitable.
The extension nevertheless failed the further question whether the burden was disproportionate to the benefit. The advantage was small and speculative. The detriments were substantial: a registration fee, burdens and potential criminal liability for employers, and, for workers who did not register, exclusion from benefits and an inability to count that work towards permanent residence. The Committee had indicated that non-registration might be as high as one third. Neither the Secretary of State nor the Committee had weighed these burdens against the slight benefit. The Upper Tribunal and the Court of Appeal were entitled to find the extension disproportionate even on the less demanding approach sometimes used in EU law. Zalewska did not point the other way: there the scheme was defended as a monitoring measure during the initial period, whereas here it had to be justified as a barrier aimed at labour-market disturbance. The 2009 extension was therefore unlawful. Again, no reference was required.
Residence in fact was enough
That conclusion was enough to dismiss the appeal, but the Court also corrected the Court of Appeal on article 17 because the point mattered more widely. Article 16 requires five years’ legal residence. Article 17 uses “resided” without “legally”, and is a more generous route to permanent residence for certain workers who stop work sooner. It reflects earlier rights under Regulation 1251/70, which treated both work and continuous residence as matters of fact and allowed residence to be proved by any means used in the host country. The Directive was intended to simplify and strengthen those rights, not to add a new condition. When it was implemented, nobody could yet have accumulated three years of residence under its own article 7, but article 17 rights could arise immediately. Its meaning could not change later.
The opening words, describing article 17 as a derogation from article 16, did not silently import a requirement of lawful residence. Other Court of Justice decisions concerned different provisions, and an Advocate General’s suggestion of a shared meaning had not been adopted and had misquoted article 16. Judge Ward had been right: the three years are years of actual residence. Because article 17 has that meaning, no separate question arose about whether the 2006 Regulations might mean something wider.
Verdict: The Court unanimously dismissed the Secretary of State’s appeal. The extension of the registration scheme from 2009 to 2011 was disproportionate. The residence requirement in article 17(1)(a) referred to actual residence. The Upper Tribunal’s decision in Ms Gubeladze’s favour stood.
Source: Secretary of State for Work and Pensions v Gubeladze [2019] UKSC 31
