Report for the Hearing delivered in Case C-199/88
I — Legislative context of the dispute
Article 40(1) of Council Regulation (EEC) No 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 Community (as codified by Council Regulation (EEC) No 2001/83 of 2 June 1983, Official Journal L 230, p. 8) provides that a worker who has been subject to the legislation of two or more Member States, of which at least one makes the amount of invalidity benefits dependent on the length of periods of insurance completed, is to receive invalidity benefits in accordance with the provisions of inter alia Article 46.
Article 46 sets out the detailed rules for the award of benefits. Article 46(3) is, to quote the eighth recital of the preamble to the regulation, designed to avoid unjustified overlapping of benefits, which could result in particular from the duplication of insurance periods and other periods treated as such. To that end, the first paragraph of Article 46(3) sets the ceiling, subject to which the migrant worker is entitled to the sum of the benefits payable by the various Member States. This ceiling is equal to the highest of the theoretical amounts defined in Article 46(2)(a), which is to say the amount to which the worker would have been entitled if he had completed all the insurance periods in question, not in different Member States but in the Member State under whose legislation he would have been awarded the highest pension. The second paragraph of Article 46(3) provides for the application of a reducing coefficient when the total sum of the benefits payable by the various States exceeds that ceiling.
Article 51(1) of the same regulation provides: If, by reason of an increase in the cost of living or changes in the level of wages or salaries or other reasons for adjustment, the benefits of the States concerned are altered by a fixed percentage or amount, such percentage or amount must be applied directly to the benefits determined under the provisions of Article 46, without the need for a recalculation in accordance with the provisions of that article. On the other hand, pursuant to Article 51(2) a recalculation of that kind must be carried out if the method of determining or the rules for calculating benefits should be altered.
Lastly, for the purposes of the present dispute, it should be noted that Article 112 of Council Regulation (EEC) No 574/72 of 21 March 1972 laying down the procedure for implementing Regulation No 1408/71 (as codified by Council Regulation No 2001/83 of 2 June 1983, Official Journal L 230, p. 86), provides that: When an institution has made payments which are not due, either directly or through another institution, and when their recovery has become impossible, the amounts in question shall remain finally chargeable to the first institution, save where the payment which was not due is the result of fraud.
II — Facts and procedure
Mr Cabras, an Italian national, worked in Italy for 635 weeks and in Belgium for 506 weeks. He has been unfit for work since 19 September 1972 and, since 1 October 1973, has been in receipt of invalidity benefits from both countries.
Unlike Belgian legislation (known as Type A legislation), Italian legislation (Type B legislation) makes the amount of invalidity benefits dependent on the length of insurance periods completed. In accordance with Article 40(1) of Regulation No 1408/71, Article 46 thereof applies by analogy to the calculation of the invalidity benefits payable to Mr Cabras.
The Italian invalidity benefit was calculated in accordance with the system of aggregation and apportionment laid down by Article 46(2). The Belgian invalidity benefit was determined by the Institut national d'assurance maladie-invalidité (hereinafter referred to as the Institut national) by reference to Belgian legislation alone, including its provisions against overlapping benefits: it was therefore equal to the amount of the full Belgian benefit, less the amount of the apportioned Italian benefit.
Both benefits were subsequently increased independently of one another, pursuant to pension-indexation rules specific to each of the two countries; the Italian benefit in particular was greatly increased, until the Italian Constitutional Court held that the index-linking as practised in Italy was based on an error in the interpretation of national legislation that, as a result, the level of the Italian benefit crystallized with effect from 1 May 1981.
On 23 March and 17 June 1982, two Belgian Royal Decrees were introduced which amended, with effect from 1 July 1982, the conditions for defining dependants, for the purpose of determining the amount of invalidity benefits. Under the new legislation Mr Cabras was in future no longer to be considered a person with dependants but a person sans charges de famille. The consequence was a reduction of the invalidity benefit payable to him under Belgian legislation alone.
In addition, by virtue of Article 51(2) of Regulation No 1408/71, a recalculation of the benefits was carried out, in accordance with the provisions of Article 46. In doing so, the Institut national took the view that, for the purpose of applying Article 46(3), the benefit arising under Belgian law alone (hereinafter referred to as the purely national Belgian benefit) had to be reduced by the amount of the apportioned Italian benefit, as ascertained on the date of the recalculation of the benefit entitlement— that is to say, taking account of the large increases mentioned above. The Institut national concluded that, as a result, the application of Community law was no more favourable to Mr Cabras than the application of Belgian law, including its rules against the overlapping of benefits. As it had done in its original calculation of 1 October 1973, it therefore calculated the new benefit due to Mr Cabras in accordance with national legislation alone, deducting from the full Belgian benefit the revised amount of the Italian benefit.
Nevertheless, owing to the time required for the new recalculation of the benefits, Mr Cabras continued to receive, after 1 July 1982, benefits of the same amount as those paid previously. The decision of the Institut national setting out his new entitlement to a reduced benefit was notified on 23 February 1984. Mr Cabras was then requested to refund the overpaid amount of the benefits received by him between 1 July 1982 and 30 June 1983 — the date on which he could once again be regarded as having dependants. A further decision setting out his entitlement as on that date was notified to him on 19 October 1984.
Mr Cabras challenged both those decisions in proceedings before the tribunal du travail de Bruxelles.
He argued as follows:
First, the application of Article 51(2) of Regulation No 1408/71 had resulted, in the circumstances of his case, in a twofold reduction of the Belgian benefits, the first under national law and the second under Community law, on account of the application of Article 46(3) of that regulation. Mr Cabras claims, however, that the reduction of the benefit payable under the legislation of one State by the full amount of the benefit granted under the legislation of another State leads to an outcome which conflicts with the aims of Article 51 of the Treaty, since the migrant worker thereby derives no advantage from the period of insurance completed in the territory of that other State;
Secondly, it is contrary to Community law that a recalculation of benefits on the basis of Article 51(2) of Regulation No 1408/71 should give rise to an overpayment which the migrant worker must refund, when (a) it is a single institution which recalculates the benefit, (b) the amount of that benefit is, in part, determined by the benefit paid by the institution of another Member State, and (c) that other institution holds no arrears which may be made available to the institution performing the recalculation. In such a case Article 112 precludes recovery from the migrant worker of the undue amount.
Those were the circumstances in which, by order of 30 June 1988, the tribunal du travail de Bruxelles decided to stay the proceedings in order to refer the following questions to the Court of Justice for a preliminary ruling:
The order of the tribunal du travail de Bruxelles was received at the Court Registry on 21 July 1988.
Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted by Mr Cabras, the plaintiff in the main proceedings, represented by D. Rossini, a trade union delegate, by the Institut national, the defendant in the main proceedings, represented by J.-J. Masquelin, of the Brussels Bar, by the Government of the Italian Republic, represented by P.-G. Ferri, avvocato dello Stato, and by the Commission of the European Communities, represented by its Legal Adviser, J.-C. Séché, acting as Agent.
Upon hearing the Repon of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure. It also put some questions to the Commission.
By decision of 4 October 1989 the Court assigned the case to the Third Chamber.
III — Summary of the written observations submitted to the Court
First question
1. The plaintiff in the main proceedings, Mr Cabras, points out that Article 51 of the EEC Treaty set up a system of insurance which provides for the aggregation of all the insurance periods taken into account under the laws of the several countries, and that this aggregation was intended to have a positive effect in the sense that each insurance period had to be matched by a benefit accruing to the migrant worker. The Court of Justice has declared on a number of occasions that the Community rules cannot in principle be applied in such a way as to deprive a migrant worker or his dependants of the benefit of a part of the legislation of a Member State or to lead to a reduction in the benefits payable by virtue of that legislation supplemented by Community law. Hence Regulation No 1408/71 should guarantee to workers moving within the Community all the benefits which have accrued to them in the various Member States whilst limiting them to the greatest amount of such benefits (judgment of 12 June 1980 in Case 733/79 CCAFv Laterza [1980] ECR 1915).
2. The defendant in the main proceedings, the Institut national, contends that the first part of the question referred to the Court calls for an affirmative answer. It bases that conclusion on the wording of the provisions and on previous judgments. In the first place, it is quite apparent from the wording of Article 46(3) of Regulation No 1408/71 that the sum total of the benefits acquired in the different Member States cannot exceed the highest theoretical amount and, should it do so, that a reducing coefficient is applied to the national benefits. In the second place, the Collini judgment of 17 December 1987 in Case 323/86, cited above, confirms that the highest of the theoretical amounts is indeed an absolute limit which cannot be exceeded on any account. That conclusion is not called in question by the fact that, in cases where Type A legislation — such as the Belgian invalidity scheme — is applied, the theoretical amount is equal to the national amount.
3. The Italian Government observes that the limit set by Article 46(3) of Regulation No 1408/71 for the purpose of avoiding the unjustified overlapping of benefits was established on the basis of the assumption that the highest theoretical benefit would always guarantee the maintenance of rights which have been, or are being, acquired in the various countries, as is required by Article 51 of the Treaty.
4. According to the Commission, the rules for establishing an invalidity benefit pursuant to Article 46 of Regulation No 1408/71 are meaningless unless viewed in a broader perspective, in the light of the principles laid down by the Court, in particular in its judgment of 13 March 1986 in Case 296/84 Sinatra v FNROM [1986] ECR 1047, which relates to a dispute comparable to the present one. In this case, it is not sufficient to consider the application of Article 46, because the Community amount calculated pursuant to that article must be compared with the amount obtained under Belgian legislation, to which Mr Cabras is subject.
Second question
1. The plaintiff in the main proceedings claims that Article 112 of Regulation No 574/72 prevented the Belgian institution from recovering retroactively the undue payment which had come to light following the recalculation of the benefit pursuant to Article 51(2) of Regulation No 1408/71. He claims that Article 111 of Regulation No 574/72 settles the issue of the recovery of overpayments by social security institutions when they award or revise benefits in respect of invalidity or old age, if it appears that the recipient has been paid sums in excess of those to which he was entitled. The principles benefiting the migrant worker, set out by the Court in its Romano and Fanara judgments of 14 May 1981 (quoted above), are a fortiori applicable when there are no arrears available and when the overpayment has been made for reasons beyond the control of the insured person. Article 112, which affords legal certainty for migrant workers by protecting them against abusive recovery action, should be fully applicable in the present case.
2. The defendant in the main proceedings submits that the benefit payable to Mr Cabras had to be recalculated, pursuant to Article 51(2) of Regulation No 1408/71 and in accordance with the case-law of the Court (judgment of 2 February 1982 in Case 7/81 Sinatra v FNROM [1982] ECR 137). Once the recalculation disclosed that awards of benefit payable under Belgian legislation for incapacity for work had been wrongly paid, the insurance institution was obliged to recover the undue amounts. The Belgian sickness insurance scheme enshrines the principle that any undue amount must be refunded to the insurance institution, subject only to prescriptive time-limits.
3. The Italian Government notes that the revision of benefits, made pursuant to Article 51(2) of Regulation No 1408/71, may give rise to an overpayment in the pensioner's favour. If that occurs, the institution must, by virtue of Article 111 of Regulation No 574/72, request the institutions of the other Member States to deduct the overpaid amount from the sums which they pay to the beneficiary.
4. The Commission refers to the judgment of 2 February 1982 in Sinatra, quoted above, the facts of which are comparable to those of the present case; in Sinatra the Court defined the cases in which Article 51 of Regulation No 1408/71 requires the benefits to be recalculated. In that judgment the Court did not question the legality of recovering the undue amount, retroactively, from the worker in question when the competent Italian institution had no arrears to make available to its Belgian counterpart. The Commission further argues that a recalculation of the benefits entails a fresh comparison between the purely national benefit and the Community benefit.
IV — Replies to the questions asked by the Court
The Commission was requested by the Court to answer the following questions:
The Commission gave the following answers:
First question
1. The Commission observes first of all that, in view of the facts of Mr Cabras' case, the question can relate only to the first two paragraphs of Article 111 of Regulation No 574/72.
2. According to the Commission, it may happen that the pension is paid in one Member State (for example, Belgium) some weeks or months after presentation of the application, whereas in another Member State (for example, Italy) payment of the pension is considerably delayed (a delay of two or three years in the payment of an Italian pension is not unusual).
3. The Commission points out that Article 111(2) of Regulation No 574/72 deals with the general question of recovering overpaid benefits. It provides that the institution which has made overpayments may recover the undue amount within the conditions and limits laid down by the legislation which it administers, through any institution of another Member State which provides benefits (whether equivalent or not) for the same beneficiary. It further provides that deduction by that second institution is subject only to the conditions and limits laid down by the legislation which it administers (for example, subject to the limits of the proportion available for distraint under the legislation governing the institution which performs the deduction).
4. Article 111 of Regulation No 574/72 is, in the context of recovering an undue sum, a specific instance of the general principle of mutual administrative assistance laid down by Article 84(2) of Regulation No 1408/71. The procedure under Article 111 of Regulation No 574/72 is not, therefore, the only means of redress open to an institution wishing to recover overpayments which it has made. Under the conditions and within the limits provided by the legislation which it administers, such an institution may seek to recover the undue amount from the beneficiary direct. That procedure is not conditional on its having first used Article 111 to no avail. The very wording of that article suggests that its provisions offer an option to the institution which has made overpayments, rather than placing it under an obligation.
Second, third, fourth and fifth questions
According to the Commission, the travaux préparatoires relating to the adoption of Regulation No 574/72 show that the decision to insert Article 112 thereof was not taken until the final stage of the discussions.
The insertion of that article was first proposed within the Audit Board. The Audit Board, which, pursuant to Article 101(3) of Regulation No 574/72, assists the Administrative Commission for the Social Security of Migrant Workers, is responsible for implementing the financial provisions of the regulations. It is the Audit Board which draws up the accounts between the Member States for every calendar year.
At the 46th sitting of the Audit Board, on 8 December 1970, the Italian delegation proposed the insertion in the relevant regulation of the following provision:
After that meeting the Italian delegation submitted an amended text, as follows:
At its 114th sitting held on 22 December 1970, the Administrative Commission for the Social Security of Migrant Workers gave its consent to that proposal.
According to the Commission, the authors of Regulation No 574/72, by inserting Article 112, intended explicitly to prevent a Member State from setting off undue sums which had become irrecoverable for any reason other than fraud, against credits to be remitted to another Member State.
That aim explains in particular the wording of Article 112: ... the amounts in question shall remain finally chargeable to ... .
In the light of the answers given by the Commission, Mr Cabras submitted the following observations.
He claims that the procedure for recovery described by the Commission is quite correct and does not in principle raise any problems where a benefit is first paid.
It is the revision of an invalidity benefit already calculated and paid which causes problems in the proceedings before the national court. Mr Cabras points out that:
That being so, Mr Cabras doubts whether it is legitimate to regard that part of the Belgian benefit which ceased to be payable owing to the adjustment of the Italian benefit as a benefit paid on a provisional basis and hence recoverable.
The system of aggregating the insurance periods and calculating the benefits, based on Article 51 of the Treaty, by no means implies that the index-linking of a benefit granted by the institution of one Member State operates in favour of the institution of another State rather than benefiting the migrant worker himself.
Mr Cabras points out that, according to the seventh recital in the preamble to Regulation No 1408/71, the provisions for coordination adopted for the implementation of Article 51 of the Treaty must guarantee to migrant workers their accrued rights and advantages whilst not giving rise to the unjustified overlapping of benefits.
In his view, there is no unjustified overlapping when an apportioned benefit (in this case, the Italian benefit) cumulates with another benefit already reduced pursuant to national rules against overlapping (the Belgian benefit).
Mr Cabras concludes that it cannot be inferred from Article 111 of Regulation No 574/72 that paragraph 2 thereof authorizes the institution of one Member State to commence administrative or coercive procedures to recover from a migrant worker — and with retroactive effect — the benefits accruing under an earlier decision and paid by the institution of another State. If that were so, Article 112 would never be applicable and the migrant worker would enjoy no legal certainty.
1 Language of the case: French.