CJEC, October 20, 2000, No C-242/99

THE COURT,

1. By order of 26 April 1999, received at the Court on 25 June 1999, the Sozialgericht Augsburg (Social Court, Augsburg) (Germany) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) a number of questions concerning the validity and interpretation of Articles 13(1) and 14a(2), and on the interpretation of Articles 13(2)(b), 14a(3) and 14c 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 amended and updated by Council Regulation (EC) No 118-97 of 2 December 1996 (OJ 1997 L 28, p. 1), as amended by Council Regulation (EC) No 307-1999 of 8 February 1999 (OJ 1999 L 38, p. 1, 'Regulation No 1408-71').

2. These questions have arisen in the context of proceedings between Mr Vogler and the Landwirtschaftliche Alterskasse Schwaben (Agricultural Pension Fund Schwaben, 'LAK') concerning his membership of the German old-age pension scheme for farmers.

Community law

3. The first sentence of Article 13(1) of Regulation No 1408-71 provides as follows:

'[S]ubject to Articles 14c and 14f, persons to whom this Regulation applies shall be subject to the legislation of a single Member State only.'

4. In that connection, Article 13(2)(b) of the Regulation provides as follows:

'a person who is self-employed in the territory of one Member State shall be subject to the legislation of that State even if he resides in the territory of another Member State.'

5. By way of exception, Article 14a(2) and (3) provide that:

'2. A person normally self-employed in the territory of two or more Member States shall be subject to the legislation of the Member State in whose territory he resides if he pursues any part of his activity in the territory of that Member State. ...

3. A person who is self-employed in an undertaking which has its registered office or place of business in the territory of one Member State and which straddles the common frontier of two Member States shall be subject to the legislation of the Member State in whose territory the undertaking has its registered office or place of business.'

6. In addition, with regard to a person who is simultaneously employed and self-employed in different Member States, Article 14c of the Regulation provides that such a person is to be subject:

'(a) save as otherwise provided in subparagraph (b), to the legislation of the Member State in the territory of which he is engaged in paid employment or, where he pursues such an activity in the territory of two or more Member States, to the legislation determined in accordance with Article 14(2) or (3);

(b) in the cases mentioned in Annex VII:

- to the legislation of the Member State in the territory of which he is engaged in paid employment or, that legislation having been determined in accordance with Article 14(2) or (3), where he pursues such an activity in the territory of two or more Member States

and

- to the legislation of the Member State in the territory of which he is self-employed or, that legislation having been determined in accordancewith Article 14a(2), (3) or (4), where he pursues such an activity in the territory of two or more Member States.'

7. In that connection, point 3 of Annex VII to Regulation No 1408-71 refers to the following case:

'[F]or the agricultural accident insurance scheme and the old-age insurance scheme for farmers: where he is self-employed in farming in Germany and gainfully employed in any other Member State.'

8. Finally, Article 14d(1) of Regulation No 1408-71 provides as follows:

'[T]he person referred to in ... Articles 14a(2), (3) and (4) [and] 14c(a) shall be treated, for the purposes of application of the legislation laid down in accordance with these provisions, as if he pursued all his professional activity or activities in the territory of the Member State concerned.'

The dispute in the main proceedings

9. Mr Vogler is an Austrian national residing in Austria, where he carries on the business of a self-employed hotelier. He is also a self-employed farmer in Germany.

10. In Austria, Mr Vogler is affiliated to the Sozialversicherung der gewerblichen Wirtschaft (Social Insurance for Trade and Industry) as regards sickness, old-age and accident insurance.

11. By decision of 20 March 1998, confirmed on 30 April 1998, the LAK found that, as a farmer, Mr Vogler was also required to be a member of and pay contributions under the German pension insurance scheme for farmers pursuant to the Gesetz über die Alterssicherung der Landwirte (Law on Farmers' Pension Insurance).

12. Mr Vogler brought an action against the LAK before the national court which has made this reference, claiming that, under Articles 13(1) and 14a(2) of Regulation No 1408-71, he had to pay social security contributions in Austria only.

13. The LAK, on the other hand, contended that, by adopting the abovementioned provisions, the Community legislature had exceeded its discretionary powers. Affiliation to an insurance scheme in Austria alone entailed the risk of no account being taken of the particular features of the German legislation on pension insurance for farmers, which aimed to anticipate the ageing of farmers by making the grant of a retirement pension conditional upon the transfer of the farm. However, according to the LAK, such particularities were taken into account, in the situation where a person in employment also worked on a self-employed basis, by Article 14c(b) of and Annex VII, point 3, to Regulation No 1408-71 because, under those provisions, a self-employed farmer in Germany who is also in paid employment in another MemberState is subject simultaneously to the legislation of both Member States. This is not the case where the person concerned is self-employed in two Member States, as here.

14. The LAK added that it would be incompatible with the principles of subsidiarity and proportionality enshrined in Article 3b of the EC Treaty (now Article 5 EC) for persons covered by Regulation No 1408-71 to be subject, in principle, only to the social security legislation of a single Member State. The Member States alone are competent to determine their social policy and it fell to the Community legislature only to coordinate, but not harmonise, the social security systems of the Member States.

15. Furthermore, according to the LAK, membership of the social security scheme of only one Member State is not necessary in order to guarantee freedom of establishment and freedom to provide services. Unnecessary dual insurance cover could be avoided by less radical measures, for example, by restricting to the risk of illness the principle that the legislation of a single Member State should apply.

16. The Sozialgericht Augsburg agreed with the LAK's arguments and, being uncertain as to the validity and the interpretation of Articles 13(1) and 14a(2), and the interpretation of Articles 13(2)(b), 14a(3) and 14c of Regulation (EEC) No 1408-71, decided to stay proceedings and seek a preliminary ruling from the Court of Justice on the following questions:

'(1) Is Article 13(1) in conjunction with Article 14a(2) of Regulation (EEC) No 1408-71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, in the version of Council Regulation (EC) No 118-97 of 2 December 1996 (OJ 1997 L 28, p. 1), as last amended by Council Regulation (EC) No 307-1999 of 8 February 1999, invalid on the ground that, in order to provide freedom of establishment in accordance with Article 52 of the EC Treaty it is not necessary within the meaning of Articles 51 and 235 of the EC Treaty, each in conjunction with the second and third paragraphs of Article 3b of the EC Treaty, to provide that a person who has sickness, accident and pension insurance with the Sozialversicherung der gewerblichen Wirtschaft in Austria, as a self-employed hotelier, and in addition is covered in principle, as a self-employed farmer undertaking in Germany, by the German old-age insurance scheme for farmers, on account of being resident in Austria is subject exclusively to Austrian legislation not only with respect to the risk of "sickness", but also with respect to the risks of "old age" and "invalidity" or "accidents at work and occupational diseases"?

(2) If the answer to Question 1 is in the negative:

Is Article 13(2)(b) of Regulation No 1408-71 to be interpreted as meaning that a person who pursues several self-employed activities in the territory of several Member States is subject to the legislation of those States (in this case, Austriaand Germany), even if he lives in the territory of one Member State only (in this case, Austria)?

(3) Or is Article 14a(2) of Regulation No 1408-71 applicable only to persons who normally pursue a specific self-employed activity, but not two different self-employed activities, in the territory of two or more Member States? Or is Article 14a(2) of Regulation No 1408-71 applicable also to persons who normally pursue two or more self-employed activities not connected with each other in the territory of two or more Member States?

(4) What is the relationship between Article 14a(3) of Regulation No 1408-71 and Article 14a(2) of Regulation No 1408-71? Is Article 14a(3) to be interpreted as meaning that the social insurance obligation of the operator of an agricultural undertaking is always governed by the legislation of the State of the registered office or place of business, even if one or more self-employed activities are pursued in another Member State?

(5) Or does Article 14c of Regulation No 1408-71 in conjunction with Annex VII for the implementation of Article 14c(b), point 3, contain a legislative lacuna for the agricultural accident insurance scheme and the old-age insurance scheme for farmers, if the latter pursue a self-employed agricultural activity in Germany and are not gainfully employed in another Member State but pursue a self-employed activity there (in this case, as a hotelier in Austria)?

If so: may Article 14c(b) of Regulation No 1408-71 in conjunction with Annex VII (implementation of Article 14c(b)) be applied by analogy to the situation in this case of the pursuit of two different self-employed activities (hotelier in Austria and farmer in Germany)?'

17. By its first question the national court is asking, essentially, whether Articles 13(1) and 14a(2), read in conjunction, of Regulation No 1408-71 are consistent with the second and third paragraphs of Article 3b of the EC Treaty in so far as they provide that a person who is at one and the same time a self-employed farmer in Germany and also a self-employed hotelier in Austria, where he resides, is subject to the social security legislation of the latter State only.

18. On this point it must be found that the reply to this question leaves no room for reasonable doubt so that it is appropriate to give a decision by reasoned order in accordance with Article 104(3) of the Rules of Procedure of the Court of Justice.

19. It is clear from the wording of Article 13(1) of Regulation No 1408-71 that a person to whom that regulation applies is, subject to Article 14c thereof, subject to the legislation of a single Member State. Furthermore, according to the clear terms of Article 14a(2), where a person is 'normally self-employed in the territory of two or more Member States', he is 'subject to the legislation of the Member State in whoseterritory he resides if he pursues any part of his activity in the territory of that Member State'.

20. This means that, in the present case, Mr Vogler is, according to Regulation No 1408-71, exclusively subject to the social security scheme established by Austrian legislation.

21. As the German and United Kingdom Governments, and also the Council and the Commission, have observed, Articles 13(1) and 14a(2), read in conjunction, of Regulation No 1408-71, which are applicable to persons who are self-employed in two or more Member States, cannot be regarded as contrary to the principles of subsidiarity and proportionality.

22. It must be pointed out that the differences between national social security schemes give rise to restrictions on the freedom of movement laid down by Articles 8a, 48, 52 and 59 of the EC Treaty (now, after amendment Articles 18 EC, 39 EC, 43 EC and 49 EC). Moreover, Article 51 of the EC Treaty (now, after amendment, Article 42 EC) provides, with a view to guaranteeing the effective exercise by workers of the right to freedom of movement, that the Council is to adopt measures to that end in the field of social security.

23. As the Council found it that it was necessary to extend Regulation No 1408-71 to self-employed workers and members of their families so as to remove the obstacles to freedom of movement for that category of workers, the attainment of such an objective, in particular by the adoption of rules for determining the applicable legislation, necessarily presupposed action covering the entire Community, which was taken by the adoption of Regulation (EEC) No 1390-81 of 12 May 1981 (OJ 1981 L 143, p. 1). In those circumstances no impairment of the principle of subsidiarity is discernible in connection with the adoption of measures to coordinate national social security schemes in order to safeguard freedom of movement and the right of residence for persons within the Community.

24. With regard to the question whether the establishment, in Article 13(1) of Regulation No 1408-71, of the principle of application of the legislation of a single Member State, and the designation by Article 14a(2) of that regulation of the legislation of the worker's State of residence as the legislation to be applied where he is self-employed in the territory of two or more Member States, are consistent with the principle of proportionality, it is sufficient to observe that the Council has a wide discretion regarding the choice of the most appropriate measures for attaining the objective of Article 51 of the Treaty (judgment in Case C-443-93 Vougioukas [1995] ECR I-4033, paragraph 35). That must be the case where it is a question of taking, in the field of social security, measures intended to safeguard freedom of establishment. Judicial review of the exercise of such a power must therefore be limited to examining whether such exercise is vitiated by manifest error or misuse of powers, or whether the institution concerned has manifestly exceeded the limits of its discretion (see, to thateffect, judgment in Case C-84-94 United Kingdom v Council [1996] ECR I-5755, paragraph 58).

25. The considerations put forward by the LAK provide no ground for a finding that Articles 13(1) and 14a(2) of Regulation No 1408-71 are vitiated by manifest error or misuse of powers, or that the Council exceeded the limits of its discretion by adopting those provisions.

26. First, as the Court has stated on many occasions, the purpose of the principle of application of the legislation of a single Member State is to avoid the complications which might ensue from the simultaneous application of a number of national legislative systems (see, in particular judgment in Case C-2-89 Kits van Heijningen [1990] ECR I-1755, paragraph 12).

27. Second, the attachment of a worker to the legislation of the State where he resides, in a case where he pursues one or more self-employed activities in two or more Member States, is by no means unreasonable.

28. The reply to be given to the national court must therefore be, first, that examination of the first question has disclosed no factor of such a kind as to affect the validity of the combined Articles 13(1) and 14a(2) of Regulation No 1408-71 and, second, that it follows from those provisions that a person who is at one and the same time a self-employed farmer in Germany and a self-employed hotelier in Austria, where he resides, is subject to the social security legislation of the latter State only.

29. In view of the foregoing, it is unnecessary to reply to the remaining questions.

Costs

30. The costs incurred by the German and United Kingdom Governments and by the Council and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT

hereby orders:

Examination of the first question has disclosed no factor of such a kind as to affect the validity of the combined Articles 13(1) and 14a(2) of Council Regulation (EEC) No 1408-71 of 14 June 1971 on the application of social security schemes toemployed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118-97 of 2 December 1996, as amended by Council Regulation (EC) No 307-1999 of 8 February 1999. It follows from those provisions that a person who is at one and the same time a self-employed farmer in Germany and a self-employed hotelier in Austria, where he resides, is subject to the social security legislation of the latter State only.