Repon for the Hearing delivered in Joined Cases 154 and 155/87
I — Facts and procedure
A — The national legislation applicable in the main proceedings
Royal Decree No 38 of 27 July 1967 establishing the social security scheme for self-employed persons (Belgisch Staatsblad of 29 July 1967) lays down the contributions to be paid by any natural person carrying on in Belgium an occupational activity in respect of which he is not bound by a contract of employment or fixed conditions of employment (Article 3, paragraph 1).
For the purposes of that definition an officer of a company is deemed to engage in such an occupational activity, unless it is demonstrated that he acts without remuneration (Article 2 of the Royal Decree of 19 December 1967 laying down general rules for the implementation of Royal Decree No 38 of 27 July 1967 (Belgisch Staatsblad of 28 December 1967)).
As regards the contributions to be paid, Article 12 (2) of Royal Decree No 38, as amended by the Law of 12 July 1972 amending certain provisions on social security for self-employed persons (Belgisch Staatsblad of 14 July 1972), provides that:
A person subject to the scheme who, in addition to the activities which make him subject to this decree, habitually pursues by way of principal occupation another occupational activity is not liable to pay any contributions if his income as a self-employed person does not reach a certain level.
A habitual and principal occupation within the meaning in Article 12 (2) is further defined in Article 35 of the Royal Decree of 19 December 1967, as amended by the Royal Decree of 15 July 1970. Under the terms of this provision:
B — Background to the main proceedings in Case 154/87
Mr Heinrich Wolf, a German national, has been employed since 1963 in the Federal Republic of Germany as a chemical engineer with Degussa in Frankfurt. On 15 May 1973 Mr Wolf was appointed for a period of six years as a director of NV Microtherm Europe, whose registered office is at Sint Niklaas in Belgium.
Although he received no remuneration as a director, except in respect of 1975, Mr Wolf was unable to prove that his directorship was unpaid and he was therefore required to pay contributions under the applicable Belgian legislation.
By a writ of summons of 21 December 1978, the Rijksinstituut voor de Sociale Verzekering der Zelfstandigen (Social Insurance Institution for Self-employed Persons) (RSVZ) called on Mr Wolf and Microtherm Europe, which was jointly liable, to pay contributions to the social security scheme for self-employed persons on account of the directorship held by him in the company. The demand related to the period from 1 April 1973 to 30 September 1977, which thus predated the entry into force of Council Regulation (EEC) No 1390/81 of 12 May 1981 extending to self-employed persons and members of their families Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community (Official Journal 1981, L 143, p. 1).
By a judgment of 28 November 1978, the Arbeidsrechtbank (Labour Tribunal), Dendermonde, ordered Mr Wolf and Microtherm Europe NV to pay contributions relating solely to the year during which he had received emoluments as a director, namely 1975.
RSVZ appealed against that judgment, but the Arbeidshof (Labour Court), Ghent, upheld the judgment of the lower court on 18 December 1981. RSVZ then appealed to the Hof van Cassatie against the decision of the Arbeidshof, Ghent, which was quashed on 11 April 1983 except in so far as it held the claim in respect of 1975 to be well-founded.
In its judgment of 4 April 1986 the Antwerp Arbeidshof, to which the case had been referred, nevertheless held that Mr Wolf was not liable to pay contributions for the period in question. In its view, his activity was as a self-employed person to be regarded as a secondary occupation inasmuch as he was employed in the Federal Republic of Germany. Consequently, in accordance with Article 12 (2) of Royal Decree No 38, there was no obligation to pay contributions.
RSVZ appealed against that judgment to the Hof van Cassatie.
C — Background to the main proceedings in Case 155/8 7
Mr Wilfried Dorchain has been employed since 1978 in the Federal Republic of Germany with Ford-Werke AG and in that capacity pays contributions to the German social security scheme for employees. Since 1978, Mr Dorchain has also been managing shareholder of PVBA Almare, whose registered office is in Antwerp, Belgium.
Although he received no remuneration as managing shareholder of Almare, Mr Dorchain was unable to prove, in accordance with the legislation in force at the time, that his work was unpaid, and he was therefore required to pay contributions under the applicable Belgian legislation.
In response to the demands made by RSVZ to Mr Dorchain and Almare, which was jointly liable, Mr Dorchain requested exemption from contributions under Article 12 (2) of the Royal Decree of 27 July 1967 on the ground that his habitual and principal occupation was his employment in the Federal Republic of Germany.
By a judgment of 15 October 1984 the Arbeidsrechtbank, Antwerp, before which proceedings were brought by RSVZ, held that the latter's claims were well-founded. That judgment was, however, reversed by a judgment of 21 February 1986 in which the Arbeidshof, Antwerp, held that the Belgian legislation does not make exemption from contributions dependent upon the employment being pursued in Belgium.
RSVZ appealed against that judgment to the Hof van Cassatie.
D — Preliminary questions re/erred to the Court by the Hof van Cassatie and procedure before the Court
The Hof van Cassatie considered that the argument put forward by RSVZ in support of the two appeals brought before it was contrary to the principle of freedom of establishment guaranteed by Article 52. It therefore decided to stay the proceedings and refer to the Court of Justice the following questions:
The orders making the references were received at the Court Registry on 15 May 1987.
Pursuant to Article 20 of the Protocol on the Statute of the Court of Jutice of the EEC, written observations were submitted by:
By an order of 26 November 1987 pursuant to Article 43 of the Rules of Procedure Cases 154/87 and 155/87 were joined for the purposes of the oral procedure and the judgment.
By an order of 26 November 1987 the cases were assigned to the Third Chamber pursuant to Article 95 (1) and (2) of the Rules of Procedure.
Upon hearing the Report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.
II — Summary of the written observations submitted to the Court
RSVZ points out, as regards the contested national legislation, that a person subject to the scheme for self-employed persons who has not paid contributions on account of his self-employed activity cannot claim any benefit under that social security scheme. It also points out that Article 35 (1) of the Royal Decree of 19 December 1967 withholds the exemption from contributions not only from workers in the position of Mr Wolf and Mr Dorchain, but also from persons whose pension scheme as a salaried employee is not one of the schemes enumerated in the legislation, or who do not satisfy the conditions laid down therein.
As regards the Community provisions, RSVZ claims that both Article 7 and Article 52 of the EEC Treaty refer solely to discrimination based on nationality, not on other considerations.
Article 35 of the Royal Decree of 19 December 1967 implies that only Belgian pension schemes are deemed to afford adequate social guarantees so as to eliminate the need for compulsory insurance under the scheme for self-employed persons, but this fact in no way discriminates against nationals of other Member States. If a Belgian national had, between 1973 and 1977, been in the same situation as Mr Wolf and Mr Dorchain, he would have been obliged to pay the same contributions.
Nor can it be maintained, says RSVZ, that the national legislation is indirectly discriminatory in content or effect on the ground that restrictive conditions laid down by national legislation are likely to be met more often in the case of nationals of other Member States than in that of nationals of the State concerned. In statistical terms there are as many Belgian nationals employed in other Member States as there are Community citizens working in a self-employed capacity in Belgium. The sole purpose of the contested national provisions was to ensure that all persons working in Belgium enjoy adequate social security, in the absence of coordinating rules such as those subsequently implemented under Council Regulation No 1390/81 of 12 May 1981.
According to RSVZ, it follows from the foregoing that the questions of the national court are incorrectly formulated in so far as they refer to nonexistent discrimination. RSVZ proposes that the reply to be given to the national court should be as follows:
Mr Wolf and Microtherm Europe argue that Article 52 of the Treaty guarantees nationals of a Member State freedom of establishment in the territory of another Member State. This provision has direct effect, so that Community citizens may rely on it before national courts.
The defendants in the main proceedings underline in particular that in its judgment of 28 January 1986 in Case 270/83 (Commission v France [1986] ECR 273), the Court held that:
Recalling that the prohibition of discrimination applies both to direct and indirect discrimination, the defendants in the main proceedings point out that, in accordance with paragraph 17 of the judgment of 28 June 1978 in Case 1/78 (Kenny v Insurance Officer [1978] ECR 1489), there is discrimination if the conditions for loss of suspension of the right were defined in such a way that they would in fact more easily be satisfied by nationals of other Member States than by those of the State of the competent institution.
In the light of those judgments, the defendants in the main proceedings consider that the Belgian Hof van Cassatie was justified in holding that although Article 35 of the Royal Decree of 19 December 1967 does not draw any distinction between Belgians and citizens of other States that provision may in practice bring about such a distinction since it is essentially nationals of the other Member States who are subject to the heavier contribution obligation.
That conclusion is not affected by the fact that a Belgian in the same position as Mr Wolf would be subject to the same contribution obligation, since he is entitled to be treated in the same way as a national of the host State, as is made clear in Case 270/83.
The defendants in the main proceedings propose that the reply to be given to the national court should be as follows:
Mr Dorchain and Almare did not formulate any written observations.
The Belgian Government states that it shares the point of view expressed by RSVZ. It wishes nevertheless to point out that in light of the jurisdiction retained by the Member States until the adoption of the aforementioned Community legislation only provisions of national law which contravene the fundamental objectives of the Treaty, such as the principle of nondiscrimination as between nationals of the host State and citizens of other Member States, can be called in question.
The contested Belgian legislation applies without distinction to Belgian nationals and to Community citizens and does not contain or give rise to any indirect discrimination against nationals of other Member States.
The Belgian Government is thus of the opinion that the national regulations comply with the principles laid down by the Court in paragraph 18 of it judgment in the Kenny case, cited above, to the effect that the prohibition of discrimination on grounds of nationality is
The Belgian Government proposes that the reply to be given to the questions asked should be as follows:
The Commission of the European Communities notes that in both cases the questions asked by the Belgian Hof van Cassatie relate to the interpretation of Article 52 of the EEC Treaty with regard to the heavier obligation to pay contributions imposed on persons pursuing a self-employed activity in Belgium whose principal occupation is employment in another Member State.
The Commission points out, however, that in Case 154/87 the national court also raises a question concerning the interpretation of Article 7 of the Treaty when it states that although it is true that the rule relied on by the appellant before the Hof van Cassatie does not distinguish between Belgians and non-Belgians, it can in practice lead to such a distinction since it is nationals of other Member States rather than Belgian nationals who in practice have the greater liability to pay contributions (order of the national court, p. 8 in fine).
The Commission notes that the argument put forward by RSVZ is based on the principle of the territoriality of social security systems, which is applicable until Community regulations coordinating the various national systems in this field are adopted. By virtue of Article 2 of Council Regulation No 1390/81 of 12 May 1981, that regulation does not grant any rights in respect of the period prior to 1 July 1982.
It is, however, clear from the judgment of 9 July 1975 in Case 20/75 (D'Amico v Landesversicherungsanstalt Rheinland-Pfalz [1975] ECR 891), and the judgment of 28 June 1975 in the Kenny case, cited above, that the Member States are required, even in fields which are not, or not yet, governed by Community legislation and remain a matter exclusively for national law, to observe the fundmental principles of Community law, in particular the prohibition on discrimination.
As the Court has consistently held, in particular in the judgment of 12 December 1974 in Case 36/74 (Walrave v Union cycliste [1974] ECR 1405 (workers)), the judgment of 21 June 1974 in Case 2/74 (Reyners v Belgium [1974] ECR 631 (establishment)), and the judgment of 3 December 1974 in the Van Binsbergen case, cited above (provision of services), Articles 48, 52 and 59 of the Treaty constitute the specific implementation, in the context of the free movement of workers, the right of establishment and the provision of services, of the general prohibition of discrimination on grounds of nationality provided for in Article 7 of the Treaty.
In the context of freedom of establishment the prohibition of discrimination is of central and direct importance (judgment of 12 February 1987 in Case 221/85 Commission v Belgium [1987] ECR 719), whereas in the context of the freedom to provide services the Court also makes reference to restrictions which may prevent or otherwise obstruct the activities of the person providing the service (judgment in Van Binsbergen, cited above). This difference may be explained by the specific purposes of these two freedoms guaranteed by the Treaty and, more particularly, by the fact that freedom of establishment is directed towards optimum integration of the person concerned in the host Member State, which presupposes the thoroughest possible assimilation of Community citizens in that Member State.
Referring to the judgment of 12 March 1974 in Case 152/73 (Sotgiu v Deutsche Bundespost [1974] ECR 153), the judgment of 3 February 1982 in Case 62/81 (Seco v EVI [1982] ECR 223), the judgment of 15 January 1986 in Case 41/84 (Pinna v Caisse d'allocations familiales [1986] ECR 1), and the judgment of 27 March 1985 in Case 249/83 (Hoeckx v Openbaar Centrum voor Maatschappelijk Welzijn [1985] ECR 973), the Commission stresses that the prohibition of discrimination covers both direct discrimination and indirect or disguised discrimination, that is to say all forms of covert discrimination which, although based on criteria which appear to be neutral, in practice lead to the same result (paragraph 8 of the Seco judgment, cited above).
The Commission considers that the disputed national legislation contains no direct discrimination based on the nationality of the persons concerned and that it is therefore necessary to examine whether it gives rise to indirect discrimination.
To this end it is necessary to compare not the situation of Belgian nationals and that of Community citizens who pursue all their occupational activies in Belgium, as both employed and self-employed persons, but the situation of persons who work as self-employed persons in Belgium and are either exempted from contributions or excluded from that exemption on the ground that their principal occupation as employees is not carried on in Belgium.
In the Commissions's view, covert discrimination exists if investigation reveals that the exclusion from the exemption from contributions affects Community citizens more than nationals of the host State and this difference of treatment is not justified on objective grounds.
In this respect the Commission wishes to emphasize that RSVZ's argument implies that a person who decides to give his activities a Community dimension is made to bear an additional financial burden. That is to say, both a salaried employee from another Member State who is considering pursuing a supplementary activity as a self-employed person in Belgium and a self-employed person working in Belgium who wishes to take up employment in another State suffer a financial disadvantage in comparison with a Belgian national who focuses his activities in Belgium.
Referring to the judgment of 28 November 1978 in Case 16/78 Choquet [1978] ECR 2293, the judgment of 12 July 1984 in Case 107/83 Ordre des avocats v Klopp [1984] ECR 2971, and the judgment of 10 July 1986 in Case 79/85 Segers v Bedrijfsvereniging [1986] ECR 2375, the Commission states that in such circumstances the Court has held that where the national regulations in issue do not in themselves constitute an impediment to the free movement of persons they may nevertheless be deemed to be contrary to Community law if their application obstructs the persons concerned to such an extent that in practice they interfere with the free exercise of the rights guaranteed by Articles 48, 52 and 59 of the Treaty.
It is significant that in those judgments the Court took account of the fact that the obstacles to the free movement of persons stemmed in fact, in the absence of specific Community rules, from the need to protect certain aspects of the national public interest, namely road safety in the Choquet case and the proper administration of justice in the Klopp case. The Court nevertheless considered that such measures could not result in the right to freedom of movement being robbed of its very substance, namely the freedom to set up and maintain ... more than one place of work within the Community (paragraph 19 of the Klopp judgment).
The Commission considers that this principle must apply a fortiori when the obstacle to free movement results not from an impediment to access to or the pursuit of an activity but from the imposition of a disproportionate financial burden where that does not provide additional protection for the person concerned. In this respect the Commission refers to the judgment of 9 June 1964 in Case 92/63 (Nonnenmacher v Sociale Verzekeringsbank [1964] ECR 281), and the judgment of 5 December 1967 in Case 19/67 (Sociale Verzekeringsbank v Van Vecht [1967] ECR 345).
As regards more particularly the freedom to provide services, the Commission, referring to paragraph 10 of the judgment in the Van Binsbergen case, cited above, and to paragraphs 14 and 17 of the judgment in the Webb case ([1981] ECR 3305) argues that the refusal to grant exemption from contributions, contested in the main proceedings, is justified not by specific requirements [which] have as their purpose the application of rules governing such activities in Belgium but by the wish to confer benefits only on persons providing services who are established in Belgium.
The Commission proposes that the reply to be given to the questions of the national court should be as follows:
1 Language of the Case: Dutch.