5.1 Economic Considerations Limiting Residence Rights

The regulation of residence and movement of EU migrants was subject to many changes during the period under examination. During the early 1990s, the Commission highlighted that the citizenship provisions shaped a political link between Member States nationals and the EU with the purpose of fostering a sense of identity with the EU.Footnote ¹ In this regard, the Commission emphasized that the rights EU migrants already enjoyed under Community law were now ‘fundamentally altered’.Footnote ² It suggested that Articles 8 and 8a EC Treaty combined could directly generate entry and residence rights for EU nationals, even though they were supplementary and could not replace the more specific legal bases for residence found in the Treaties.Footnote ³ The relevant Treaty bases, however, restricted residence to people engaged in economic activity.Footnote ⁴ As a result, during the first years after the introduction of the EU citizen status, residence rights for EU migrants continued to be regulated by sectoral Directives which predated the adoption of the citizenship status in primary law. This section analyses the relevant secondary law framework and different suggestions to amend it, before turning to the case-law of the period in Section 5.2. The analysis shows the tension behind the ambition to create a shared political identity and the economic unsustainability of extending social rights without limitations to all EU migrants.

The first time the Commission tried to disconnect residence rights under secondary law from economic activity was in 1979. The proposal was put forward under Article 3(c) of the EEC Treaty, which provided for the abolition of obstacles to free movement of persons, in the context of the first discussion on more political aspirations for the Union.Footnote ⁵ The attribution of residence rights under the relevant initiative would allow Member States to require proof of sufficient resources as a condition for residence.Footnote ⁶ This proposal was on the table for almost a decade, during which time the Council avoided discussing the matter.Footnote ⁷ From archival material, it appears that Member States could not reach an agreement on the parts of the proposal that could pose risks to their national economies. Among the points of contestation were the requirement of resources for students, the difference between insurance systems of Member States, and the legal basis and scope of application of the Directive.Footnote ⁸ The attribution of a general residence right to all EU migrants could pose risks to national economies, especially because of the various social rights such migrants would enjoy in the different social security and social assistance systems of the Member States. Such a generalization carried the risk of making the EU free movement system economically unsustainable.Footnote ⁹

In parallel, the case-law of the Court on Regulation 1612/68 substantially extended the categories of EU migrants falling under the scope of free movement as workers, as well as the rights they were to enjoy under secondary law.Footnote ¹⁰ Due to this, in 1988 the Commission proposed an amendment to Regulation 1612/68 and Directive 68/360 aimed at extending their provisions on equal treatment and family reunification, thereby promoting the social objectives of the Community.Footnote ¹¹ The Council could not reach an agreement on the matter.Footnote ¹² The Commission presented another proposal in 1998, framed in terms of promoting competitiveness and the economic objectives of the Union.Footnote ¹³ Still, the Council failed to discuss the relevant proposal.

With the impetus created by the Single European Act, the Commission presented three sectoral proposals in order to extend residence rights to students, retired persons, and others not engaged in economic activity. For the Commission, the extension of residence rights should be viewed in light of Article 8A EC Treaty, which established a general right of residence to the Member States nationals.Footnote ¹⁴ During the negotiation of these instruments, Member States were concerned that an unrestricted extension of residence rights would lead to migration flows solely driven by financial considerations due to the lack of harmonization of social security and social assistance systems.Footnote ¹⁵ To avoid the perceived negative economic impact of such type of migration, a principle was put forward, which still determines the residence rights of EU migrants – that is, that whoever wishes to reside in a country other than their own should not constitute an unreasonable burden on the public finances of the host country.Footnote ¹⁶ In line with this, the relevant Directives provided for the attribution of residence rights to EU migrants who could demonstrate sufficient resources and insurance, so as not to become a burden for the social security systems of the Member States.Footnote ¹⁷ These texts continued to regulate residence rights of EU migrants until the adoption of Directive 2004/38, while Regulation 1612/68 was not amended but rather codified to incorporate amendments caused to it by other instruments over the years.Footnote ¹⁸ At this stage, it should be noted that there was no single Community view on how to proceed with EU migrants’ rights even under the changed institutional setting, especially because of the need to safeguard the economic and social sustainability of the EU.

The political aspirations were reflected in Treaty changes and various soft-law instruments, but the Council was not able to agree on how migration rights could be generalized without risks to national economies. The overview of the proposals by the Commission and their deflection by the Council are indicative of the constant motivation to safeguard the economic objective of growth. The Council preferred to negotiate different instruments for different categories of movement while maintaining safeguard clauses in all of them. Contribution to the economy could no longer be set as the reason behind attribution of rights to EU migrants. The aspiration to shape a true political community would not justify that. However, this political aspiration was matched with the constant historical aspiration of the EU project to promote growth and progress. This growth and progress could be guaranteed by excluding from the attribution of rights those EU migrants who could negatively affect growth. Relatedly, we see the goal of economic sustainability as conveyed in the primary law objective of harmonious and balanced development of economic activities behind the limitation of the rights of EU migrants. In Section 5.2, we will see how the Court approached the relevant limitations in the case-law by extensive invocation of primary law.

5.2 The Judicial Aspiration to Overcome the Economic Foundations

During the period under review, the Court consistently invoked the broad framing of primary law to consolidate the rights of EU migrants beyond the limits prescribed in secondary law analysed in Section 5.1. This was celebrated in scholarship as an indication of the potential of EU citizenship as an independent status, disconnected from statist limitations.Footnote ¹⁹ In the relevant case-law, the Court did not invalidate the limitations prescribed in secondary law. Rather, while acknowledging the economic considerations that preclude the unlimited enjoyment of rights by EU migrants, it tried to expand protection by focusing on how such limits should be reviewed in light of the social and political objectives of primary law that established the legal status of EU citizenship.

First, in Martínez Sala, the Court suggested that EU migrants lawfully residing in a Member State should enjoy equal treatment on access to family benefits. The Court could not establish if Martínez Sala fell under the category of worker or self-employed and, hence, whether she enjoyed an EU law residence right.Footnote ²⁰ Despite this, the Court held that when an EU migrant lawfully resided in another Member State, their situation fell within the scope of EU law by virtue of the provisions on EU citizenship.Footnote ²¹ This is regardless of whether the legal basis of their residence rights is from EU or national law. As a result, EU migrants lawfully resident in another Member State could rely on equal treatment under Article 6 of the EC Treaty in order to claim family benefits and were not limited to enjoying such rights only as social advantages under secondary law on free movement of workers.Footnote ²²

The Court went even further in Baumbast, where it held that EU migrants could rely directly on Article 18(1) EC Treaty as a basis for residence rights in a Member State. In that case, Baumbast did not satisfy the conditions of secondary law to claim a right of residence due to lack of comprehensive insurance,Footnote ²³ even though he did have sufficient resources. The Court suggested that residence rights under secondary law can be limited due to legitimate interests of Member States. Such a legitimate interest would be avoiding the negative economic effects of migration by not granting residence rights to EU migrants who became an unreasonable burden in light of Recital 4 of Directive 90/364.Footnote ²⁴ The Court further held that the limitations imposed due to such legitimate interests should comply with the principle of proportionality and should be subject to judicial review for compliance with the rights attributed to individuals under Article 18 EC.Footnote ²⁵

The Court evaluated the limitation to the residence rights of Baumbast as a limitation based on the legitimate interests of Member States. However, this limitation was based on the requirements of EU secondary law and should rather be perceived as a consideration of the EU legislature, in light of the attempt to minimize the effects of free movement to the project of growth. Since sufficiency of resources does not appear as an exception to the free movement rule, but rather as the condition behind the attribution of free movement rights under secondary law, it is problematic to suggest that judicial review refers to the compliance of state action and the legitimate interests of Member States with primary law. Rather, the Court could have considered whether such limitations, as expressed in the Directive conditioning the right to reside, are in compliance with primary law, and whether secondary law should be reviewed against primary law in light of the objectives it seeks to pursue.

In any case, at this stage of evolution of the case-law, scholars suggested that this approach was employed by the Court to consolidate the rights of EU migrants in line with the Maastricht Treaty and to limit the restrictions of the residence Directives adopted before the establishment of the citizenship status.Footnote ²⁶ The Court carried on with similar interpretations in Grzelczyk concerning the rights of residence of a student who claimed a subsistence benefit as a former worker.Footnote ²⁷ In this case, the Court developed a formula, which has been repeated in the case-law and quoted in literature with great hopes.Footnote ²⁸ Therein the Court held that

This quote has been seen as setting the backdrop against which the rights of EU migrants should be developed, in line with a new fundamental status, disentangled from economic considerations.Footnote ³⁰ This decoupling of economic considerations and migrant movement in the EU does not appear throughout the rest of the judgment, where the Court repeated that Member States could withdraw the residence permit of an EU migrant if they found that, in having recourse to social assistance, the said migrant no longer had sufficient resources, which is the precondition of their residence right.Footnote ³¹ The greater protection for EU migrants in this case actually lay in the fact that the Court suggested that expulsion measures could not be an automatic consequence of having recourse to social assistance.Footnote ³² By shaping a system in a way which limits the rights of residence to holders of sufficient resources, while also providing access to social assistance under equal treatment conditions, the economic and social objectives of primary law are channelled into secondary law. As the Court held,

Jesse and Carter have rightly suggested that, in this finding, the Court introduced a distinction between reasonable and unreasonable burden, with the latter capable of breaking the bond of financial solidarity between a host state and a migrant.Footnote ³⁴ Trojani and Bidar followed a similar inconsistent line.Footnote ³⁵

In Trojani, which concerned the claim of a French national to subsistence benefit in Belgium, the Court confirmed that EU migrants could claim a general residence right under the Treaty citizenship provisions. But at the same time, the Court found that such right to residence could not be established for Trojani, for want of sufficient resources under secondary law.Footnote ³⁶ Contrary to Baumbast, where the EU migrant had sufficient resources and family members with him in the UK, and only lacked comprehensive health insurance, Trojani had none of these. Thus, failure to recognize a residence right was not found to be disproportionate in light of the objective of the Directive to avoid EU migrants becoming a burden.Footnote ³⁷ The Court then repeated the approach of Martínez Sala, where it had held that residence under national law is sufficient to claim equal access to social benefits under Article 12 EC.Footnote ³⁸

Essentially, the Court made a differentiation between EU residence rights, which could be limited for economic reasons, and social rights stemming from EU citizenship, once a migrant finds themselves in a host state. Member States can deny residence to economically inactive EU migrants who do not possess sufficient resources, in order to protect their national welfare systems from collapse. However, if they recognize a right of residence under national law, by virtue of this lawfulness of residence, EU nationals need to be protected under equal treatment provisions, furthering the objectives of social cohesion in the Member States. In this balancing of economic considerations as a limit to residence and social considerations behind treatment in the host state, the Court acknowledged the discretion of Member States to remove EU migrants who had recourse to the social assistance system; however, such removal should not be the automatic consequence of having recourse to the social assistance system.Footnote ³⁹

Bidar continued down the path of this case-law. Bidar was a student, lawfully resident in the UK, where he completed his secondary education and claimed assistance for the tuition fees of his university education. The Court found that the student enjoyed a right of residence on the basis of Article 18 EC and Directive 90/364, even though he did not have sufficient resources and did not fulfil the conditions of secondary law.Footnote ⁴⁰ In order to qualify how the balancing act should take place between granting social assistance under equal treatment and preserving the public finances of Member States, the Court came up with the criterion of integration. Specifically, it stated that Member States can legitimately grant assistance covering maintenance costs to students who have demonstrated a certain degree of integration in the host state.Footnote ⁴¹ In so doing, the Court attempted to ground its expansionist protection of EU citizens’ right in the fact that they were already part of the host societies. It further tried to dissociate access to such benefits from market participation by differentiating from the criterion it applied to the case-law on jobseekers.Footnote ⁴²

Specifically, in cases regarding jobseekers who did not have residence rights under EU law and claimed benefits, the Court had suggested the existence of a genuine link between the applicant and the geographical market in question as a condition to be taken into account in order to examine whether the denial of access to such benefits would be discriminatory for EU migrants under primary law.Footnote ⁴³ In the relevant case-law, it is true, as Jesse and Carter have suggested, that

Looking at the legislative and case-law developments of the relevant period, the ambition to reshape the rights of migrants under EU law is clear. The Council was hesitant to operationalize a general residence right without safeguards for national economies, despite the Commission proposals on the table. At the same time, the Court went much further in consolidating the protection of EU migrants under primary law. Besides Baumbast, the Court did not go as far as accepting an EU residence right stemming directly from the Treaties without regard to the conditions of secondary law. Nevertheless, it did use primary law as a ground for review of Member State action, limiting the grounds that could allow removal of EU migrants from a Member State.

At the same time, it extended the application of equal treatment provisions to all EU migrants who had lawful residence in Member States, regardless of whether that residence stemmed from EU or national law. Next to the Court, the Commission had the ambition that ‘Union citizens should, mutatis mutandis, be able to move between Member States on similar terms as nationals of a Member State moving around or changing their place of residence or job in their own country’.Footnote ⁴⁵ While such an evolution of migrants’ rights eventually materialized as regards entry and residence, this is only the case for a short period of time.Footnote ⁴⁶ Security of residence and family reunification are not generally applicable to all EU migrants. Rather, economic considerations dictate their limitation only to those who have sufficient resources not to become a burden on the public finances of the host states.

In this way, the economic objectives of the Treaty are pursued by ensuring that free movement rights are not unlimited. Relatedly, economic sustainability dictates the limitation of EU migrants’ rights. The challenges in setting up a system of residence and social rights for EU migrants and the different views of institutional actors accurately reflect the development of a legal framework with due regard to a balance between different objectives of the EU project. In this framework, we see the intention to support the economy by promoting mobility of EU migrants who can positively affect growth (via their work). In parallel to this, the ambition of closer political integration and social cohesion necessitates rights for those who do not negatively impact economic growth (those not being unreasonable burden). Having shown in this chapter that the development of EU migrants’ rights is closely connected to a continuous balancing of the economic and social objectives of EU law, and thus to economic and social sustainability, Chapter 6 will investigate how similar objectives played out in relation to TCN migrants.