Patmalniece v Secretary of State for Work and Pensions

The Supreme Court considered whether regulation 2 of the State Pension Credit Regulations 2002, which effectively requires a claimant to have a right to reside in the Common Travel Area as part of the habitual residence test, was compatible with article 3(1) of Council Regulation (EC) No 1408/71. The court held that the composite test in the 2002 Regulations operates as an indirect (covert) form of discrimination against nationals of other Member States because it is more likely to be satisfied by United Kingdom nationals, but that this difference in treatment is objectively justifiable. The justification accepted by the majority was the legitimate aim of protecting the public finances against 'benefit tourism' and ensuring that income-related benefits are focused on those with a genuine economic or sufficient social integration with the host state. The court also held that the special treatment of Irish nationals under the Protocol on the Common Travel Area did not undermine that justification.

Background and nature of the claim:

The appellant, a Latvian national resident in the United Kingdom, sought state pension credit in August 2005. Her claim was refused on the ground that she lacked the right to reside in the United Kingdom and so was not to be treated as habitually resident. She alleged that this refusal amounted to discrimination in breach of article 3(1) of Council Regulation (EC) No 1408/71.

Procedural history:

• Appeal tribunal allowed the appellant's appeal (12 December 2005).
• Commissioner Rowland allowed the Secretary of State's appeal (11 June 2008), finding any discrimination to be indirect and justified.
• The Court of Appeal dismissed the appellant's appeal: [2009] EWCA Civ 621.
• The appeal to the Supreme Court followed.

Issues framed by the Supreme Court:

1. Whether regulation 2 of the 2002 Regulations gives rise to direct discrimination for the purposes of article 3(1) of Regulation 1408/71.
2. If only indirect discrimination, whether that discrimination is objectively justified on grounds independent of nationality.
3. Whether the favourable treatment given to Irish nationals undermines any justification.

Court’s reasoning and disposition:

• The court analysed the personal and material scope of Regulation 1408/71 and held that state pension credit is a special non-contributory cash benefit within the material scope (Annex IIa).
• Applying the EU authorities (notably Borawitz, O'Flynn and the Grand Chamber's approach in Bressol), the court treated the composite habitual-residence/right-to-reside test as producing indirect discrimination because it is a neutral rule that in practice places nationals of other Member States at a particular disadvantage.
• On justification, the majority accepted the Secretary of State's legitimate aim of protecting public finances and preventing exploitation of income-related benefits (described as preventing 'benefit tourism'), and held that the justification was based on considerations independent of nationality: the requirement targets economic or sufficient social integration rather than nationality per se.
• The court concluded that the discrimination was therefore objectively justified and proportionate; the appeal was dismissed. The majority also held that the special treatment of Irish nationals is protected by the Protocol on the Common Travel Area and does not invalidate the justification.

Note: a dissenting opinion (Lord Walker) would have allowed the appeal on the ground that the right-to-reside requirement was in substance aimed at non-nationals and so not independent of nationality.

Appeal dismissed. The majority held that regulation 2 of the State Pension Credit Regulations 2002 imposes an indirectly discriminatory composite habitual-residence/right-to-reside test but that the difference in treatment is objectively justified by the legitimate aim of protecting the United Kingdom’s public finances and preventing exploitation of means-tested benefits; the justification is independent of nationality. The special treatment of Irish nationals is protected by the Protocol on the Common Travel Area and does not undermine the justification.

Appeal from the Court of Appeal: Patmalniece appealed a decision of the Court of Appeal dismissing her challenge to the Secretary of State’s refusal of state pension credit: [2009] EWCA Civ 621. Earlier, an appeal tribunal allowed the appellant (12 December 2005) but Commissioner Rowland allowed the Secretary of State’s appeal (11 June 2008). The Supreme Court heard the appeal and dismissed it on 16 March 2011 ([2011] UKSC 11).