Secretary of State for Work and Pensions v Gubeladze

National measures adopted under a transitional derogation from EU free-movement rights remain subject to the EU principle of proportionality. The measure must be suitable and necessary for the permitted objective, and its burdens must not be excessive compared with its benefits.

Extending a worker-registration scheme to address serious labour-market disturbance was unlawful where its small and speculative mitigating effect was outweighed by substantial burdens on workers and employers.

For early acquisition of permanent residence under article 17(1)(a) of the Citizens Directive, continuous residence means factual residence. It does not require residence in exercise of a right conferred by that Directive.

The respondent, a Latvian national, claimed state pension credit on the basis that she had acquired permanent residence as a retired worker under regulation 5(2) of the Immigration (European Economic Area) Regulations 2006. Part of her employment had not been registered under the Worker Registration Scheme.

The Upper Tribunal allowed her appeal, holding that factual residence was sufficient and that the 2009 extension of the scheme was disproportionate. The Court of Appeal dismissed the Secretary of State’s appeal in [2017] EWCA Civ 1751, affirming the proportionality ruling but holding that article 17(1)(a) of the Citizens Directive required legal residence.

The Supreme Court considered whether transitional national measures were reviewable for proportionality, whether the extension was proportionate, and whether article 17(1)(a) required legal or merely factual residence.

1. The appeal was dismissed unanimously. National measures adopted under the transitional derogations in Annex VIII to the Act of Accession were subject to the general EU law principle of proportionality. Nationals of the A8 states acquired protectable interests as EU citizens upon accession, subject to temporary derogations. A measure relying on such a derogation had to be suitable and necessary for its authorised objective, and its burdens could not be excessive. There was no good reason to depart from Zalewska v Department for Social Development [2008] UKHL 67 (paras 32–44).

2. The 2009 extension of the Worker Registration Scheme was unlawful. The scheme was capable of producing a material, though small, reduction in the inflow of A8 workers and therefore satisfied the suitability limb. Given the binary choice permitted by Annex VIII, paragraph 5, there was no less onerous available measure. The Upper Tribunal had erred insofar as it held otherwise (paras 66–69).

   Nevertheless, the extension failed proportionality stricto sensu. Its labour-market benefit was small and speculative, while its burdens on employers and A8 workers were substantial and serious. Those burdens included registration fees, administrative obligations, exclusion from benefits and the inability to count unregistered work towards permanent residence. The Secretary of State had supplied no explanation showing why the limited benefits outweighed those detriments (paras 70–74).

3. A relatively demanding intensity of review was appropriate because the scheme was a national measure restricting the fundamental freedom of movement and relied on an EU derogation. The result did not, however, depend on precise calibration: the measure failed even under the more deferential “manifestly inappropriate” standard (paras 71–72).

4. Although unnecessary to dispose of the appeal, article 17(1)(a) of the Citizens Directive required factual rather than legal residence. Its language and purpose preserved the rights formerly conferred by Regulation 1251/70 and deliberately contrasted with the express requirement of legal residence in articles 16 and 18. The Court of Appeal’s contrary interpretation was wrong, while the Upper Tribunal’s interpretation was correct (paras 79–92).

5. Because residence under article 17(1)(a) meant factual residence, no separate question arose as to whether regulation 5(2)(c) of the Immigration (European Economic Area) Regulations 2006 had a wider meaning (paras 93–94).

1. United Kingdom Supreme Court: The Secretary of State’s appeal was dismissed unanimously in [2019] UKSC 31. The court affirmed that the extension of the Worker Registration Scheme was disproportionate, but held that the Court of Appeal had erred in construing article 17(1)(a) of the Citizens Directive.
2. Court of Appeal: The Secretary of State’s appeal was dismissed in [2017] EWCA Civ 1751; [2018] 1 WLR 3324. The court upheld the finding that the scheme’s extension was disproportionate, but held that continuous residence under article 17(1)(a) meant legal residence.
3. Upper Tribunal: The respondent’s appeal was allowed. The tribunal held that factual residence sufficed under article 17 and that the 2009 extension of the Worker Registration Scheme was disproportionate.
4. First-tier Tribunal: The respondent’s appeal was dismissed on jurisdictional grounds.