Introduction

The case of Fratila & Anor v. Secretary of State for Works and Pensions & Anor ([2020] EWCA Civ 1741) presents a significant legal challenge concerning the amendment of social security rules following the United Kingdom's departure from the European Union (EU). The appellants, Ms. Geanina Fratila and Mr. Razvan Tanase, both Romanian nationals, contested the legality of the Social Security (Income Related Benefits) (Updating and Amendment) (EU exit) Regulations 2019 ("the Regulations"). Central to their appeal was the assertion that the Regulations unlawfully discriminated against them on the grounds of nationality, contrary to EU law, specifically Article 18 of the Treaty on the Functioning of the European Union ("TFEU").

The core issue revolved around the exclusion of individuals with "pre-settled status" (PSS) from relying on their residency for entitlement to certain social assistance benefits. This exclusion was framed within the broader context of the UK's transition period post-Brexit, aiming to safeguard the social security system from potential abuses.

Summary of the Judgment

The initial ruling by Swift J dismissed the appellants' application for judicial review, upholding the Regulations’ amendment to the Universal Credit Regulations 2013. The judge categorized the exclusion of pre-settled status from habitually resident requirements as indirect discrimination, justifying it on grounds of economic integration and protection of the social security system.

However, upon appeal, the panel of the Court of Appeal, chaired by Lord Justice McCombe, reversed the initial decision regarding discrimination. McCombe LJ, joined by Lord Justice Moylan and Lord Justice Dingemans, concluded that the exclusion constituted direct discrimination on the basis of nationality, thereby violating Article 18 TFEU. The majority held that such discrimination is unlawful without the need for further justification, overturning the lower court's findings on indirect discrimination and its justification.

Analysis

Precedents Cited

The judgment extensively referenced pivotal cases from the Court of Justice of the European Union (CJEU) to underpin its reasoning:

• Martinez-Sala v Freistaat Bayern [1998]: Established that requiring a formal residence permit for benefit entitlement to EU nationals, when nationals do not require such permits, constitutes discrimination.
• Grzelczyk v CPAS d'Ottignies Louvain la Neuve [2002]: Affirmed that EU citizens lawfully residing in a host member state should not be discriminated against in accessing social benefits.
• Trojani v CPAS de Bruxelles [2004]: Reinforced that the CJEU views discrimination based on nationality as directly unlawful when it affects entitlement to social assistance.
• Dano v Jobcenter Leipzig [2015] and JD C-181/19 (Krefeld) [2020]: Further clarified that distinctions in benefit entitlement based on nationality remain unlawful unless explicitly justified under EU law.
• Alimanovic v Jobcenter Berlin Neuk ll N [2016]: Confirmed that derogations under Directive 2004/38 are to be interpreted narrowly and do not override direct discrimination rules.

These precedents collectively underscore the protection EU law affords against nationality-based discrimination, particularly in the realm of social security benefits. The Court of Appeal's reliance on these cases affirmed the judiciary's commitment to upholding non-discrimination principles inherent within EU treaties.

Legal Reasoning

The Court of Appeal dissected the nature of the discrimination imposed by Regulation 9(3)(c)(i) of the amended Universal Credit Regulations. The key points in their reasoning include:

• Scope of Article 18 TFEU: The court affirmed that the appellants were within the scope of Article 18, allowing them to invoke it to challenge the Regulations.
• Direct vs. Indirect Discrimination: The majority concluded that the exclusion was direct discrimination because it explicitly targeted EU nationals based on their nationality, categorizing PSS holders uniquely compared to other residents.
• Justification of Discrimination: Given the classification as direct discrimination, the burden to justify such discrimination was untenable for the Secretary of State, as direct discrimination is inherently unlawful unless exceptional justifications under EU law exist.

The court rejected the Secretary of State's assertion that the discrimination was indirect and justified by economic integration concerns. Instead, it emphasized that direct discrimination on nationality grounds cannot be lawfully justified under EU law, rendering the amendment unlawful.

Impact

This landmark judgment has profound implications for post-Brexit legislation pertaining to EU nationals in the UK. Key impacts include:

• Affirmation of Non-Discrimination: Reinforces the principle that legislation cannot unlawfully discriminate against individuals based on nationality, especially within social security frameworks.
• Scrutiny of Transitional Measures: Enhances judicial oversight of transitional regulations post-Brexit, ensuring they align with both domestic and EU legal standards until the transition concludes.
• Guidance for Future Legislation: Provides a judicial blueprint for lawmakers to craft regulations that avoid unlawful discrimination, emphasizing the importance of compatibility with EU non-discrimination principles.
• Precedential Value: Sets a binding precedent for similar cases, ensuring consistency in the application of non-discrimination laws across different jurisdictions and scenarios.

Although the UK has exited the EU, the judgment remains a critical reference point for understanding the interplay between national legislation and EU non-discrimination norms during transitional periods.

Complex Concepts Simplified

Direct vs. Indirect Discrimination

Direct Discrimination: Occurs when a policy or rule explicitly distinguishes between people based on protected characteristics such as nationality. In this case, Regulation 9(3)(c)(i) directly targeted EU nationals with pre-settled status, categorizing them differently from other residents.

Indirect Discrimination: Happens when a seemingly neutral policy disproportionately affects a particular group. Initially, the lower court viewed the regulation as indirectly discriminatory, believing that it could be justified by economic integration objectives. However, the Court of Appeal found the discrimination to be direct.

Article 18 of the Treaty on the Functioning of the European Union (TFEU)

Article 18 TFEU: Prohibits discrimination on the grounds of nationality within the scope of EU law. It serves as a fundamental principle ensuring equal treatment among EU citizens across member states.

Pre-Settled Status (PSS)

Pre-Settled Status (PSS): A residency status granted to EU nationals residing in the UK before the end of the Brexit transition period. It allows individuals to reside in the UK until they qualify for settled status after completing five years of continuous residence.

Habitual Residence Test

Habitual Residence Test: A criterion used to determine eligibility for certain benefits based on an individual's regular and settled residence in a particular area. The Regulations amended the test to exclude reliance on PSS, thereby affecting entitlement to Universal Credit (UC) benefits.

Conclusion

The Court of Appeal's decision in Fratila & Tanase v. Secretary of State for Work and Pensions marks a pivotal affirmation of the non-discrimination principles enshrined in EU law, particularly Article 18 TFEU. By classifying Regulation 9(3)(c)(i) as a direct and unlawful discrimination on nationality grounds, the court underscored the imperatives of equitable treatment for EU nationals within the UK's social security system during the Brexit transitional period.

The judgment not only invalidates the specific regulatory amendment but also sets a broader precedent safeguarding against similar discriminatory practices in future legislation. It reinforces the judiciary's role in ensuring that national policies remain compliant with overarching legal standards of non-discrimination, thereby fostering an inclusive and fair social security framework for all eligible residents, irrespective of their nationality.

Ultimately, this case serves as a critical reference point for policymakers and legal practitioners alike, emphasizing the necessity of harmonizing national regulations with fundamental non-discrimination tenets to uphold justice and equality within diverse societal contexts.