Secretary of State for Work and Pensions v Gubeladze [2019] UKSC 31

A Latvian national in the UK claimed state pension credit, relying on permanent residence rights under the Citizens Directive. The Supreme Court dismissed the Secretary of State's appeal, holding the 2009 extension of the Worker Registration Scheme was disproportionate and unlawful under EU law.

Facts

Ms Tamara Gubeladze, a Latvian national, came to the United Kingdom in 2008 and worked for various employers between September 2009 and November 2012. She obtained a registration certificate under the Worker Registration Scheme (WRS) on 20 August 2010, but her employment before that date was not covered. On 24 October 2012, she claimed state pension credit, a means-tested benefit conditional on having a right to reside in the UK.

The Secretary of State refused her claim, contending that she had not satisfied the three-year continuous residence requirement under regulation 5(2) of the Immigration (European Economic Area) Regulations 2006 (implementing article 17(1)(a) of the Citizens Directive 2004/38/EC), because part of her residence had not been in accordance with the WRS, which was established pursuant to the transitional derogations in Annex VIII of the Act of Accession 2003 and extended by regulations made in 2009 for two further years.

The Upper Tribunal allowed her appeal, and the Court of Appeal dismissed the Secretary of State’s appeal. The Secretary of State appealed to the Supreme Court with permission to argue a new ground not raised below.

Issues

The Supreme Court identified four issues:

1. Whether the decision to extend the WRS was open to challenge on grounds of proportionality.
2. If so, whether the Upper Tribunal and Court of Appeal erred in their approach and conclusion.
3. Whether article 17(1)(a) of the Citizens Directive requires a person to show lawful residence throughout the period of continuous residence.
4. If lawful residence is required, whether actual residence suffices for the 2006 Regulations.

Arguments

Secretary of State

Mr Chamberlain QC submitted that A8 nationals had enjoyed no pre-existing rights under the EU Treaties at the point of accession; the effect of the transitional derogations was to place substantive limits on rights acquired by virtue of accession. Since there was no antecedent protected interest, the EU principle of proportionality had no application. He invited the Court to depart from Zalewska v Department for Social Development [2008] UKHL 67. He relied on Vicoplus and Valeško as indicating that once a measure fell within the scope of a transitional derogation, no question of proportionality arose. On article 17(1)(a), he submitted that “resided” must be read in light of article 16(1) as meaning legal residence, relying on Ziolkowski v Land Berlin.

Respondent

Ms Mountfield QC submitted that the decision to extend the WRS was a national measure limiting EU rights pursuant to a transitional provision and was subject to proportionality review under EU law. She further argued, in the alternative, that article 17(1)(a) required only factual residence, distinguishing it from the “legal residence” formulation in article 16(1).

Judgment

Issue 1: Proportionality applies

The Court held that the decision to extend the WRS was subject to proportionality review. The Act of Accession made A8 nationals EU citizens from 1 May 2004, subject only to derogations. Those derogations carved out exceptions to otherwise applicable rights, and thus national measures taken pursuant to them interfered with protectable interests. The Court found no good reason to depart from Zalewska, observing that Lord Hope’s reasoning there remained sound. The Court analysed Vicoplus and Valeško and concluded they did not support the Secretary of State’s position; rather, the CJEU’s use of the word “justified” indicated that the ordinary process of proportionality analysis applied. The position was acte clair.

Issue 2: The extension was disproportionate

Applying the principles in R (Lumsdon) v Legal Services Board [2015] UKSC 41, the Court assessed the Secretary of State’s decision by reference to the Migration Advisory Committee (MAC) report of April 2009, which the Secretary of State had adopted. While accepting that the extension was suitable and appropriate (stage one) because it would have a small but material effect in reducing inward flows of A8 workers and thus mitigating serious labour market disturbance, the Court agreed with Judge Ward and the Court of Appeal that the extension failed at the third stage (proportionality stricto sensu). The small and rather speculative benefits were substantially outweighed by the serious burdens on employers and A8 workers, including the £90 fee (around 1% of annual gross pay at the minimum wage), the criminal sanctions on employers, the significant non-registration rate (up to 33%), and the exclusion of unregistered workers from welfare benefits and from counting time towards permanent residence. The Secretary of State had provided no evidence of her own proportionality analysis balancing these factors. The extension would have failed even under the more generous “manifestly inappropriate” standard.

Issue 3: Interpretation of article 17(1)(a)

Although determination was unnecessary given the outcome on proportionality, the Court addressed the point because it may be important in other cases. The Court held that the Court of Appeal had erred: “residence” in article 17(1)(a) means factual residence, not “legal residence” as that term is interpreted under article 16(1) in Ziolkowski. The Court relied on: (i) recital (19), which links article 17 to rights preserved under Regulation 1251/70, which used “residence” in a factual sense; (ii) the textual contrast between “resided” in article 17 and “resided legally” in articles 16 and 18; (iii) the chronological impossibility, when the Directive came into force, of anyone having built up continuous legal residence under article 7; and (iv) recital (3) and recital (1) of Regulation 635/2006, indicating the Directive was intended to enhance, not restrict, pre-existing rights. The Court distinguished Alarape and FV (Italy) and declined to follow Advocate General Trstenjak’s opinion in Lassal on this point, noting a significant misquotation in her analysis.

Issue 4

Did not arise given the conclusion on Issue 3.

Implications

The decision confirms that national measures adopted by member states pursuant to transitional derogations in an Act of Accession are subject to the EU principle of proportionality, including proportionality stricto sensu. This reaffirms Zalewska and clarifies that derogating measures must be suitable, necessary, and not impose burdens disproportionate to the benefits secured, judged against the specific objective authorised by the derogation.

Practically, the judgment means that A8 nationals whose work in the UK between 1 May 2009 and 30 April 2011 was not covered by a WRS registration certificate may nonetheless be able to rely on that period for the purposes of establishing rights of residence, because the Extension Regulations were unlawful under EU law. This has significant consequences for claims to means-tested benefits and for permanent residence entitlements.

The Court’s interpretation of article 17(1)(a) is also important: workers or self-employed persons reaching retirement age need only demonstrate factual continuous residence of more than three years (together with the other conditions), not residence compliant with article 7 of the Citizens Directive. This provides a more generous route to permanent residence for retiring workers than under article 16(1).

The judgment illustrates the intensity of review applied to national measures restricting fundamental EU freedoms, particularly where the government has not adduced evidence of its own proportionality assessment balancing the relevant interests. It also demonstrates the Supreme Court’s willingness to review specialist tribunal decisions with respect where the tribunal has correctly applied the legal framework.

Verdict: The Supreme Court unanimously dismissed the Secretary of State’s appeal. The 2009 extension of the Worker Registration Scheme was subject to EU proportionality review, was disproportionate and therefore unlawful. The respondent was accordingly entitled to claim state pension credit.

Source: Secretary of State for Work and Pensions v Gubeladze [2019] UKSC 31