C-266/95

MERINO GARCÍA v BUNDESANSTALT FÜR ARBEIT

J U D G M E N T O F T H E C O U R T (Sixth Chamber) 12 June 1997"

In Case C-266/95,

R E F E R E N C E to the Court under Article 177 of the EC Treaty by the Bundes- sozialgericht (Germany) for a preliminary ruling in the proceedings pending before that court between

Pascual Merino Garcia

and

composed of: G. F. Mancini (Rapporteur), President of the Chamber, C. N . Kak- ouris, G. Hirsch, H . Ragnemalm and R. Schintgen, Judges,

Advocate General: N . Fennelly, Registrar: H . A. Rühi, Principal Administrator,

after considering the written observations submitted on behalf of:

— Mr Merino Garcia, by Angel Gonzalez Maeztu, Head of the Social Affairs Section of the Spanish Consulate-General, Stuttgart, acting as Agent,

— the German Government, by Ernst Röder, Ministerialrat in the Federal Min- istry of Economic Affairs, and Bernd Kloke, Oberregierungsrat in that Min- istry, acting as Agents,

— the Spanish Government, by Alberto José Navarro Gonzalez, Director Gen- eral for Community Legal Affairs, and Gloria Calvo Díaz, Abogado del Estado, of the State Legal Service, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 6 March 1997,

gives the following

Judgment

1 By order of 20 June 1995, received at the Court on 8 August 1995, the Bundes- sozialgericht (Federal Social Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty questions concerning the interpretation and validity of Point I C of Annex I to Council Regulation (EEC) N o 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Com- munity, as amended and updated by Council Regulation (EEC) N o 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6), as amended by Council Regulation (EEC) N o 3427/89 of 30 October 1989 (OJ 1989 L 331, p. 1; hereinafter 'the Regulation').

2 Those questions were raised in proceedings between Mr Merino Garcia and Bundesanstalt für Arbeit (Federal Labour Office) concerning its refusal to grant him family allowances in respect of February 1986 and February 1987 when he was on unpaid leave.

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or,

— failing such criteria, is insured for some other contingency specified in Annex I under a scheme for employed or self-employed persons, or under a scheme referred to in (iii), either compulsorily or on an optional contin- ued basis, or, where no such scheme exists in the Member State concerned, complies with the definition given in Annex I;

(iii) any person who is compulsorily insured for several of the contingencies cov- ered by the branches dealt with in this Regulation, under a standard social security scheme for the whole rural population in accordance with the criteria laid down in Annex I;

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MERINO GARCÍA v BUNDESANSTALT FÜR ARBEIT

(iv) any person who is voluntarily insured for one or more of the contingencies covered by the branches dealt with in this Regulation, under a social security scheme of a Member State for employed or self-employed persons or for all residents or for certain categories of residents:

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JUDGMENT OF 12. 6. 1997 — CASE C-266/95

7 Point I C of Annex I to the Regulation provides as follows:

' C . Germany

If the competent institution for granting family benefits in accordance with Chap- ter 7 of Title III of the Regulation is a German institution, then within the meaning of Article 1 (a)(ii) of the Regulation:

(a) "employed person" means any person compulsorily insured against unem- ployment or any person who, as a result of such insurance, obtains cash ben- efits under sickness insurance or comparable benefits;

MERINO GARCÍA v BUNDESANSTALT FÜR ARBEIT

that persons domiciled or habitually residing within the territory to which that law applies are entitled to family allowances in respect of their children and persons treated as such by virtue of Paragraph 2(1).

9 Paragraph 2(5) of the BKGG provides that children who are not domiciled or habitually resident within the territory to which that law applies are not taken into account for the purposes of payment of family allowances.

io By virtue of Paragraph 9 of the BKGG, family allowances are payable from the beginning of the month in which the conditions of entitlement are satisfied until the end of the month in which they cease to be satisfied.

1 1 Paragraph 42(2) provides that the BKGG is without prejudice to the provisions of Community regulations.

i2 Paragraph 311(1) of the Reichsversicherungsordnung (Social Insurance Code, BGBl. I, p. 799; hereinafter 'the RVO') provides that compulsory affiliation to the sickness insurance scheme is retained for a maximum of three weeks where the employment relationship remains in being but no pay is received.

ie Bundesanstalt für Arbeit granted Mr Merino Garcia the allowances sought for the period in question with the exception of the months of February 1986 and Febru- ary 1987 (hereinafter 'the calendar months at issue'). It maintained that, since both periods of unpaid leave exceeded four weeks, it followed from the combined pro- visions of Paragraph 104(1) of the AFG and Point I C(a) of Annex I (hereinafter 'the Annex') to the Regulation that, during those periods, Mr Merino Garcia could not be regarded as an employed person for the purposes of Article 73 of the Regu- lation.

i7 By application of 19 February 1990, M r Merino Garcia brought proceedings before the Sozialgericht (Social Court) Mannheim for payment by Bundesanstalt für Arbeit of family allowances for the two calendar months at issue. His application was dismissed by the Sozialgericht Mannheim on 14 October 1992 and by the Landessozialgericht (Higher Social Court) Baden-Württemberg on 21 September 1993.

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MERINO GARCÍA v BUNDESANSTALT FÜR ARBEIT

is O n 27 May 1994 Mr Merino García appealed on a point of law against the Landes- sozialgericht's decision. In his appeal, he maintained that he was an employed per- son for the purposes of Article 73 of the Regulation and that the provisions of the Annex discriminated against Community workers whose children resided in another Member State.

The questions referred

20 By those questions, the national court essentially asks first whether, for the pur- poses of paying family benefits under German legislation in accordance with Article 73 of the Regulation, the expression 'employed persons' must be inter- preted as designating only employed persons who satisfy the definition resulting from the combined provisions of Article l(a)(ii) and the Annex. If so, the national court asks whether the Annex is valid having regard to Article 48(2) of the Treaty. Lastly, if the Annex is valid, the national court asks whether Article 48(2) of the Treaty precludes the application of national legislation which results in an employed person whose children are resident in another Member State being refused family allowances in respect of full calendar months falling within an extended period of unpaid leave, where employed persons whose children are resi- dent in the State concerned are entitled to such allowances. Those three aspects may conveniently be considered in turn.

The interpretation of the Annex

21 The persons covered by the Regulation are defined by Article 2, which forms part of Title I, entitled 'General provisions'. Article 2(1) provides that the Regulation is to apply in particular 'to employed or self-employed persons who are or have been subject to the legislation of one or more Member States and who are nationals of one of the Member States'.

22 The expression 'employed persons' used in Article 2(1) of the Regulation is defined in Article 1(a). It means any person who is insured under one of the social security schemes referred to in Article 1(a) for the contingencies and on the condi- tions mentioned in that provision (Case C-2/89 Kits van Heijningen [1990] ECR 1-1755, paragraph 9).

26 Consequently, for the purposes of paying family benefits under German legislation in accordance with Article 73 of the Regulation, the expression 'employed persons' must be construed as designating only employed persons who satisfy the definition resulting from the combined provisions of Article l(a)(ii) and the Annex.

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JUDGMENT OF 12. 6. 1997 — CASE C-266/95

Validity of the Annex

27 It should first be noted that Article 51 of the EC Treaty provides for coordination, not harmonization, of the social security legislation of the various Member States. Substantive and procedural differences between the social security schemes of indi- vidual Member States, and hence in the rights of persons working in those States, are unaffected by Article 51 of the Treaty (see, in particular, Case 41/84 Pinna v Caisse d'Allocations Familiales de L· Savoie [1986] ECR 1, paragraph 20).

28 Article 73 of the Regulation is intended in particular to prevent Member States from making entitlement to, and the amount of, family benefits dependent on resi- dence of the members of the worker's family in the Member State providing the benefits, so that Community workers are not deterred from exercising their right to freedom of movement {Hoever ana Zachów, cited above, paragraph 34).

32 According to Mr Merino Garcia, since, as a result of the second and third sen- tences of Paragraph 104(1) of the AFG, he is entitled to family benefits for his children residing in another Member State only in respect of the period during which he paid unemployment insurance contributions, that provision hinders the free movement of persons and gives rise to discrimination contrary to Article 48(2) of the Treaty.

33 The Court has pointed out on a number of occasions that the principle of equal treatment to which that provision gives expression prohibits not only overt dis- crimination based on nationality but also all covert forms of discrimination which, by applying other distinguishing criteria, achieve in practice the same result (Pinna, cited above, paragraph 23).

34 In the present case, Mr Merino Garcia has been refused entitlement to family allowances for his children residing in Spain, whereas the BKGG allows such ben- efits to be granted to anyone who has his domicile or habitual residence within the territory to which that law applies, provided that his dependent children are domi- ciled or habitually reside in that territory. Also, it is undisputed that Article 48(2) of the Treaty applies in this case since the person concerned continued to be insured in Germany against the risk of sickness, by reason of his employment rela- tionship, during a period covered by the calendar months at issue.

35 The German Government's argument that Paragraph 2(5) of the BKGG affects German nationals whose children do not satisfy the residence requirement, as well as foreigners, cannot be regarded as well founded. As the Court held in paragraph 24 of the judgment in Pinna, the problem of members of the family residing

38 The costs incurred by the German and Spanish Governments, by the Council of the European Union and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

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MERINO GARCÍA v BUNDESANSTALT FÜR ARBEIT

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Bundessozialgericht by order of 20 June 1995, hereby rules:

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