C-247/20 VI v The Commissioners for Her Majesty’s Revenue & Customs and the implications of preliminary references during the transitional period: a case study in legal complexity

On 10 March 2022, the CJEU handed down its ruling in Case C-247/20 VI, concerning the status of the NHS as a provider of comprehensive sickness insurance for the purposes of Article 7 of Directive 2004/38. As already noted by Charlotte O’Brien, the case has significant implications in respect of the substantive rights of EU citizens in the UK, as it clarifies that the UK government’s interpretation of the Directive was incorrect, with important consequences for individuals seeking to assert residency rights begun before Brexit in the UK. In our view, the case also raises two important constitutional points from the perspective of EU relations law post-Brexit, which we attempt to explore in further detail in this post.

Factual and legal background

VI is a typical Zhu and Chen scenario. VI was a third-country national who was the parent and primary carer of a child with a right to reside in the UK as, having been born in Northern Ireland, he possessed Irish nationality. The case concerned the interpretation of the requirement of ‘comprehensive sickness insurance’ laid down in Articles 7(1)(b) and 7(1)(c) of Directive 2004/38 for EU citizens and their family members residing in a host Member State for more than three months. These provisions were implemented in the UK by Regulation 16 of the Immigration Regulations 2016. The Regulations rendered affiliation to a comprehensive insurance system conditional upon that system being privately funded (i.e. separate from the UK’s public health service, the NHS). VI challenged this requirement insofar as it prevented her from claiming benefits associated with lawful residency, including Child Tax Credit and Child Benefit, for periods during which neither she nor her child were affiliated with a private healthcare service. The Social Security Appeal Tribunal of Northern Ireland (United Kingdom) referred three questions to the Court of Justice. The first two concerned the compatibility of this requirement with Article 7 of Directive 2004/38 and Article 21 TFEU and its implications for residency rights for EU citizens. The final question was whether there was a duty of reciprocity between the UK (Northern Ireland) and Ireland on this issue.

The judgment

The Court followed the Opinion of the Advocate General on all three questions (which itself drew on academic research, notably by Sylvia de Mars, which has long flagged these shortcomings in the UK’s Immigration Regulations). The Court considered that the last question, on reciprocity, was inadmissible, as it was not a matter of EU law (paragraphs 73-77). In respect of the former two questions, though, the Court carefully asserted its jurisdiction in line with Article 86 of the Withdrawal Agreement, as the case was referred during the transitional period and thus concerned facts to which EU law was fully applicable (paragraph 36).

The Court then unequivocally found in VI’s favour on the two substantive questions. In respect of the first question, at paragraph 58 of the ruling, the Court re-stated its well-known position since Zhu and Chen:

‘[…] it is settled case-law that the right of permanent residence in the host Member State, conferred by EU law on a minor national of another Member State, must, for the purposes of ensuring the effectiveness of that right of residence, be considered as necessarily implying, under Article 21 TFEU, a right for the parent who is the primary carer of that minor Union citizen to reside with him or her in the host Member State, regardless of the nationality of that parent’.

Accordingly, the parent’s right to reside in the UK could not be made conditional upon comprehensive sickness insurance cover for any period following the establishment of the child’s permanent resident status (whereupon the requirement at Article 7(1)(b) of the Directive ceases to apply for that child) (paragraphs 59-60).

In relation to the second question, which concerned periods before the establishment of permanent residency for the child, the Court found that the requirement that comprehensive sickness insurance be private was incompatible with Article 7(1)(b) of Directive 2004/38 and Article 21 TFEU, at paragraphs 69-70 of the ruling:

’…[a]lthough the host Member State may, subject to compliance with the principle of proportionality, make affiliation to its public sickness insurance system of an economically inactive Union citizen, residing in its territory on the basis of Article 7(1)(b) of Directive 2004/38, subject to conditions intended to ensure that that citizen does not become an unreasonable burden on the public finances of that Member State, such as the conclusion or maintaining, by that citizen, of comprehensive private sickness insurance enabling the reimbursement to that Member State of the health expenses it has incurred for that citizen’s benefit, or the payment, by that citizen, of a contribution to that Member State’s public sickness insurance system (judgment of 15 July 2021, A (Public health care), C-535/19, EU:C:2021:595, paragraph 59), the fact remains that, once a Union citizen is affiliated to such a public sickness insurance system in the host Member State, he or she has comprehensive sickness insurance within the meaning of Article 7(1)(b).

Furthermore, in a situation, such as that in the main proceedings, in which the economically inactive Union citizen at issue is a child, one of whose parents, a third-country national, has worked and was subject to tax in the host State during the period at issue, it would be disproportionate to deny that child and the parent who is his or her primary carer a right of residence, under Article 7(1)(b) of Directive 2004/38, on the sole ground that, during that period, they were affiliated free of charge to the public sickness insurance system of that State. It cannot be considered that that affiliation free of charge constitutes, in such circumstances, an unreasonable burden on the public finances of that State.’

As a result of the VI ruling, it is evident that many EU citizens resident in the UK in recent decades have been wrongfully obliged under the UK’s Immigration Regulations 2006 to purchase private health insurance and/or were denied permanent residency and the associated entitlements, if they did not do so.

Implications for EU citizens in the UK

Post-Brexit, the implications of this ruling for ongoing immigration policy are limited, as the UK is no longer bound by the requirements of EU law with regard to new migrants. However, the situation is more complex with regard to EU citizens who were affected by this policy before the UK’s withdrawal from the European Union, as well as with regard to the ongoing EU law obligations in Northern Ireland under the Northern Ireland Protocol to the Withdrawal Agreement.

1. UK-wide considerations: the continued relevance of disapplication and state liability for pre-Brexit facts

From the perspective of EU law, the ruling means that the Immigration Regulations must be disapplied, so that private health insurance is no longer required for the establishment of permanent resident status. Any sufficiently serious material losses incurred because of reliance upon the UK’s misinterpretation of the Directive could also result in state liability in damages, in line with the rule in Francovich (paragraph 33). But while these consequences would have been clear if the UK had continued to be a Member State, it is essential to emphasise that they will also largely apply to pre-Brexit facts, albeit with some important qualifications.

• Disapplication

The impact of this decision would nonetheless, at first sight, appear to be severely constrained by the UK’s withdrawal legislation. As this judgment was handed down after the UK’s withdrawal from the EU, domestic courts are not obliged to follow it, under Section 6 of the EU (Withdrawal) Act 2018. In these circumstances, however, this provision is subject to the operation of Article 89 of the Withdrawal Agreement, which requires the UK to make good breaches of EU law stemming from preliminary references sent to the CJEU during the transitional period. This is also supported by domestic case law, such as TuneIn Inc v Warner Music UK Ltd & Anor [2021] EWCA Civ 441, which draws a distinction between the interpretation of retained EU law (i.e. EU law applicable to the UK post-Brexit) and the interpretation of EU law simpliciter (i.e. EU law applicable to pre-Brexit facts), with the courts treating CJEU precedent as binding in the latter scenario. Whereas the ruling in the present case was rendered after the end of the transitional period, the combined effect of the findings in TuneIn and of the direct effect and primacy of the Withdrawal Agreement strongly suggest that domestic courts would treat this case as if it were binding (although they are not strictly required to do so under the Withdrawal Act), thus disapplying the relevant requirement in the Immigration Regulations. This could mean that individuals are able to rely on the VI ruling to have their pre-Brexit entitlements to residency and residency-associated benefits reinterpreted before domestic courts and tribunals.

• State liability in damages

The rule in Francovich provides that ‘[t]he full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible’ (at paragraph 33). There is thus a clear potential relevance of Francovich damages for individuals having suffered measurable financial detriment from having to take out additional healthcare insurance to meet the incorrect standard set in the Immigration Regulations. However, Schedules 1 and 8 of the Withdrawal Act significantly limit this prospect. Schedule 1(4) of the EU (Withdrawal) Act provides that domestic courts are not bound by any decision of the CJEU following the end of the transitional period and that ‘[t]here is no right in domestic law on or after exit day to damages in accordance with the rule in Francovich’. Thus, even though the Withdrawal Agreement attributes binding force to the judgment in VI because it is a ruling relating to pre-Brexit facts and referred during the transitional period, it is unclear whether and how this could impact remedies otherwise excluded by Schedule 1.

More specifically, it should be noted that EU citizens resident in the UK prior to Brexit will still have a time-limited opportunity to use the VI ruling as the basis of a Francovich damages claim before domestic courts. Schedule 8 of the EU (Withdrawal) Act sets out a slightly more favourable rule for claims for damages relating to pre-Brexit facts, namely that such claims will be allowed to be brought before domestic courts within two years from the end of the transitional period, i.e. until 31 December 2022. This limitation nonetheless remains problematic. As the Withdrawal Agreement enjoys primacy over domestic law, decisions such as VI should arguably be wholly unaffected by the remedial limitations of the Withdrawal Act, particularly in light of the integral character of the right to effective judicial protection (including the right to an effective remedy) within EU law. Indeed, section 5(7) of the EU (Withdrawal) Act makes the limitations on retained EU law in Schedule 1 subject to the requirements of the Withdrawal Agreement.

These provisions intertwine in such a way as to obscure their legal significance and make it particularly challenging for individuals to understand how the protections in the Withdrawal Agreement work without resorting to litigation. Indeed, this obscuring effect is arguably one of the main purposes of these convoluted arrangements. If the limitations are enforced by domestic courts and individuals are thereby prevented from having violations of their rights premised upon the Immigration Regulations for any facts pre-dating the end of the transitional period, this may be seen as undermining the obligation to comply with CJEU judgments and, as such, could constitute a violation of the Withdrawal Agreement itself.

2. The Special Position of Northern Ireland under Article 2 of the Northern Ireland Protocol to the Withdrawal Agreement

The above concerns also apply, and are significantly heightened, in the context of Northern Ireland. Beyond the considerations detailed above, there is a strong case that rights regarding health care and benefits such as those at stake in VI (Child Tax Credit and Child Benefit) fall within the Belfast/Good Friday Agreement’s concept of a right to ‘equal opportunity in all social and economic activity’. The wrongful requirement of comprehensive sickness insurance arguably prevented EU migrants living in Northern Ireland from being able to enjoy the full benefit of public health provision and the aforementioned social security benefits to which their status should have entitled them. Any operative limitations on the ability to remedy this breach within the UK’s withdrawal legislation must thus not only be considered in light of the main body of the Withdrawal Agreement, but also in the context of the Northern Ireland Protocol. Article 2 of the Protocol prevents diminution of protections of personal interests in Northern Ireland law as a result of Brexit, provided that EU law provided some underpinning for the provisions set out in the 1998 Agreement’s provisions on “Rights, Safeguards and Equality of Opportunity”. This section of the 1998 Agreement is not a closed list of rights; it was a set of general aspirations that now forms the basis of legal rights under Article 2. The emphasis on safeguards is particularly significant; breaches to health rights under this element of the 1998 Agreement need to be connected to meaningful protections. EU citizens should have been able to rely on public health care and their ability to access a remedy for the wrongful imposition of private health insurance requirements could potentially be a diminution of remedial rights falling within the scope of Article 2.

The right to effective judicial protection is particularly significant for exploring the limits of Article 2. Although it is not one of the rights explicitly listed in the Rights, Safeguards and Equality of Opportunity section of the 1998 Agreement, for those rights to be meaningful (as Article 2 requires) there must be scope for them to be vindicated in the event of disputes. Since the CJEU views effective judicial protection as a procedural right that is integral to EU law, both in the field of equal treatment but also in respect of other directly effective EU rights (see, e.g., Egenberger, at paragraphs 78-81 and Bauer, at paragraph 91), it should be construed as inherent in the concept of “safeguards” within this section of the Protocol.

In light of the primacy of the Withdrawal Agreement, therefore, it may be argued that courts in Northern Ireland should not be subject to the limitations enshrined in Schedule 1 of the EU (Withdrawal) Act in relation to rights with Article 2 relevance. Most importantly, though, the non-diminution obligation is a complex one: while it only captures the interpretation of EU law that existed before the end of the transitional period, the Courts in Northern Ireland are obliged under Article 13(2) of the Protocol to interpret the provisions of the Protocol in conformity with the case law of the CJEU as it develops. Notwithstanding all the difficulties facing claims in the rest of the UK following VI, therefore, Northern Ireland should be regarded as under an obligation to allow EU citizens not only to obtain compensation for pre-transitional period failures to recognise an entitlement to the relevant benefits. In addition to this, the VI case could be read as supporting prospective obligations to provide settled and pre-settled EU citizens in Northern Ireland and their family members with a right to public comprehensive healthcare, as well as a right to claim certain tax deductions, such as Child Tax Credit, and social security benefits, such as Child Benefit, on the same terms as UK and Irish citizens, as to deny such claims would constitute a diminution in the application of EU law rights resultant from Brexit.

Conclusion

VI exemplifies both the adverse consequences of Brexit for EU migrants in the UK and the constitutional complexity of the legal framework of the UK’s withdrawal from the EU. That framework gives rise to important remedial and jurisdictional challenges, as well as to obvious contradictions between national and international law (under the EU (Withdrawal) Act and Withdrawal Agreement, respectively). Much remains up in the air, and the interpretive choices of the courts could have a considerable impact on the operation of EU citizens’ rights under the general Withdrawal Agreement and the specific protections under the Northern Ireland Protocol. While it is to be hoped that domestic courts will, in time, be able to absorb and resolve these challenges, the absence of a prospective right to refer questions to the CJEU and the emphasis within the Withdrawal Act on the interpretive role of domestic higher courts, suggest that this is unlikely to happen without significant – and potentially prohibitive – costs and delays for litigants.