Watts, R (On the application of) v Secretary of State for Health

Medical and hospital treatment provided by a state-funded national health service falls within the freedom to provide services under Article 49 of the EC Treaty. A prior-authorisation system is a restriction, but may be justified where necessary to maintain an adequate, balanced and permanent supply of high-quality services or to protect financial stability, subject to proportionality. Increased cost alone is insufficient. Whether treatment is available without undue delay requires attention to the patient’s circumstances and the clinical effect of delay. Normal waiting times cannot automatically determine the issue. Because the interaction between Article 49 and Article 22 of Council Regulation 1408/71, NHS budgets and reimbursement remained uncertain, the Court referred questions to the Court of Justice and deferred final determination.

Mrs Watts, an NHS patient requiring hip replacement surgery, travelled to France and sought reimbursement. Her application for authorisation under Form E112 had been refused because treatment was regarded as available within NHS waiting-time targets. On judicial review, Munby J held that she was not entitled to reimbursement on the facts, but made declarations concerning Article 49 of the EC Treaty and Article 22 of Council Regulation 1408/71. The Secretary of State appealed the legal declarations. Mrs Watts cross-appealed on the relevance of waiting times and reimbursement. The central questions were whether the Article 49 principles applied to the NHS, how they related to Article 22, and how undue delay and reimbursement were to be assessed.

The Court, in a judgment delivered by May LJ for the Court, did not finally determine the appeal or cross-appeal. It referred eight questions to the Court of Justice under Article 234 of the Treaty and deferred further decision.

1. The Court rejected the Secretary of State’s principal submission that the Article 49 structure did not apply to the NHS. Having considered the United Kingdom’s submissions in Műller-Fauré and Van Riet, the Court concluded that medical and hospital services, including services provided by a national health service, fall within Article 49. A system making reimbursement for treatment abroad subject to prior authorisation creates a restriction on freedom to provide services. That restriction requires objective justification and must be proportionate. [2002] QB 409; Case C-385/99.
2. The Court understood the permitted justifications to include maintaining an adequate, balanced and permanent supply of high-quality medical and hospital services accessible to all, avoiding a serious risk to the financial balance of the system, and preventing logistical or financial wastage caused by hospital overcapacity. A purely economic increase in cost could not by itself justify the restriction. Any measure had to go no further than necessary.
3. Article 22 of Council Regulation 1408/71 was treated as a separate social-security route for authorising treatment abroad, although the Court considered that the Court of Justice had brought its timing requirement together with the Article 49 test. The Court was inclined to read Article 22.2 as asking whether treatment could be obtained in the state of residence within the time normally necessary for obtaining it, taking account of the patient’s current health and the probable course of the disease. The inquiry was essentially clinical, and the Court could see no sensible place for normal waiting times conditioned by economic considerations.
4. For Article 49, the Court considered it logical that undue delay should likewise depend on clinical necessity and the effect of delay on the individual patient, rather than on budgetary constraints alone. It nevertheless remained unclear what criterion would distinguish excessive delay from tolerable delay, how NHS planning and priorities were to be protected, and whether the obligation might require additional NHS resources or postpone more urgent treatment.
5. The Court also identified unresolved questions concerning whether reimbursement should be calculated under Article 22 by reference to the law of the treatment state or under Article 49 by reference to the law of the state of residence, and whether travel and accommodation costs were recoverable. Final determination, including reimbursement, was therefore deferred.

• Court of Appeal (Civil Division): Referred eight questions concerning Articles 49 and 50 of the EC Treaty, Article 22 of Council Regulation 1408/71, undue delay, NHS funding and reimbursement to the Court of Justice; final determination was deferred.
• High Court of Justice, Administrative Court: Munby J held that Mrs Watts was not entitled to reimbursement on the facts, but made declarations concerning the operation of Articles 49 and 22.