CJEC, February 3, 1982, No 62-81

THE COURT

1 By an order dated 26 february 1981 which was received at the court on 19 march 1981 the court de cassation (court of cassation) of the grand duchy of Luxembourg referred to the court for a preliminary ruling under article 177 of the eec treaty two questions as to the interpretation of the provisions of the treaty concerning the freedom to provide services, having regard to the Luxembourg legislation governing contributions to old-age and invalidity insurance.

2 Those questions have been raised in the context of proceedings between the etablissement d'assurance contre la vieillesse et l'invalidite (old-age and invalidity insurance institution, hereinafter referred to as'' the Luxembourg institution''), a Luxembourg social security institution, and two undertakings based in france specializing in construction work and the maintenance of the infrastructure of railway networks, Seco SA and Desquenne & Giral SA. In 1974 and 1977 those undertakings carried out work of various kinds in the grand duchy of Luxembourg . For that purpose they temporarily seconded workers who were neither nationals of a member state nor from a country linked to Luxembourg , during the period in question, by an international convention on social security. Those workers remained compulsorily affiliated to the french social security scheme during the entire duration of the work carried out in Luxembourg .

3 By virtue of the provisions of the Luxembourg code des assurances sociales (social insurance code) workers employed in Luxembourg are in principle compulsorily insured under the old-age and invalidity insurance scheme. Half of the contributions must be paid by the employer and half by the worker. However, by virtue of the second paragraph of article 174 of that code the Luxembourg government may exempt from insurance foreigners who are only temporarily resident in the grand duchy. In that case, by virtue of the third paragraph of article 174 of the code, the employer is nevertheless liable for the share of contributions for which he is personally responsible, although those contributions do not entitle the workers concerned to any social security benefit.

4 It appears from the papers placed before the court that the reason for the enactment of the provisions cited above was, on the one hand, that it would be unfair to collect contributions from workers residing in Luxembourg only temporarily, whilst, on the other hand, the temptation for employers to use foreign labour in order to alleviate the burden of paying their share of social security contributions must be avoided. Nevertheless, in practice the employer's share of contributions is no longer required to be paid by employers in respect of workers who are temporarily resident in Luxembourg if they are nationals of a member state or persons treated as such.

5 In this case the undertakings Seco and Desquenne & Giral obtained an exemption from the employee's share of insurance contributions pursuant to the second paragraph of article 174 of the code des assurances sociales but were held liable by the Luxembourg institution for the employer's share of those contributions pursuant to the third paragraph of that article. The two undertakings appealed against that decision, claiming that the Luxembourg legislation in question was not applicable to them because it was discriminatory and likely to impede the freedom to provide services within the community.

6 The cour de cassation of the grand duchy of Luxembourg considered that its decision turned on the question whether the national legislation in question was compatible with the rules of community law on the freedom to provide services and referred the following questions to the court:

''1. Must the provisions of article 60 of the treaty of rome be interpreted to mean that under its national law a member state of the european communities may require a foreign legal or natural person, who is a national of a member country of the communities temporarily undertaking work in the first-named state and employing in that state workers who are nationals of states which have no connection with the community, to pay the employer's share of contributions to old-age and invalidity insurance just as it requires its own nationals to do, or is that requirement contrary to the aforesaid community provisions, or to any other provisions, as constituting a discriminatory practice likely to prejudice the freedom to provide services, since the community employer providing the service is obliged to pay inter alia the employer's share of contributions in respect of his foreign workers first in his country of origin and establishment and then again in the state in which he is temporarily performing services using foreign labour?

2. If the answer to question 1 is to the effect that the practice described above in principle constitutes a prohibited discriminatory practice, will the outcome necessarily be the same, or may it be different, if the supplier of services in fact offsets the disadvantages of having to pay employer's contributions twice by other economic factors such as wages paid to his foreign labour force which are less than the minimum wage fixed in the country in which the services are provided or than the wages laid down by collective labour agreements in force in that country?

' '

7 In substance those questions seek to establish whether community law precludes a member state from requiring an employer who is established in another member state and temporarily carrying out work in the first-named member state, using workers who are nationals of non-member countries, to pay the employer's share of social security contributions in respect of those workers when that employer is already liable under the legislation of the state in which he is established for similar contributions in respect of the same workers and for the same periods of employment and the contributions paid in the state in which the work is performed do not entitle those workers to any social security benefits. In particular, it is asked whether such a requirement might be justified in so far as it offsets the economic advantages which the employer may have gained by not complying with the legislation on minimum wages in the state in which the work is performed.

8 Under article 59 and the third paragraph of article 60 of the eec treaty a person providing a service may, in order to do so, temporarily pursue his activity in the state where the service is provided, under the same conditions as are imposed by that state on its own nationals. As the court has repeatedly emphasized, most recently in its judgment of 17 december 1981 in case 279-80 webb (1981) ecr 3305, those provisions entail the abolition of all discrimination against a person providing a service on the grounds of his nationality or the fact that he is established in a member state other than that in which the service must be provided. Thus they prohibit not only overt discrimination based on the nationality of the person providing a service but also all forms of covert discrimination which, although based on criteria which appear to be neutral, in practice lead to the same result.

9 Such is the case with national legislation of the kind in question when the obligation to pay the employer's share of social security contributions imposed on persons providing services within the national territory is extended to employers established in another member state who are already liable under the legislation of that state for similar contributions in respect of the same workers and the same periods of employment. In such a case the legislation of the state in which the service is provided proves in economic terms to be more onerous for employers established in another member state, who in fact have to bear a heavier burden than those established within the national territory.

10 Furthermore, legislation which requires employers to pay in respect of their workers social security contributions not related to any social security benefit for those workers, who are moreover exempt from insurance in the member state in which the service is provided and remain compulsorily affiliated, for the duration of the work carried out, to the social security scheme of the member state in which their employer is established, may not reasonably be considered justified on account of the general interest in providing workers with social security.

11 In this connection the Luxembourg institution submits that, since the member states may completely refuse to allow workers who are nationals of non-member countries to enter their territory or to undertake paid employment there, they may a fortiori attach to any work permit which they choose to grant conditions or restrictions such as the compulsory payment of the employer's share of social security contributions.

12 That argument cannot be accepted. A member state's power to control the employment of nationals from a non-member country may not be used in order to impose a discriminatory burden on an undertaking from another member sate enjoying the freedom under articles 59 and 60 of the treaty to provide services.

13 The Luxembourg institution further submits that the application of national legislation such as that at issue in this case to persons providing services established in another member state is in any event justified inasmuch as it in fact offsets the economic advantages which such persons may have gained by not complying with the legislation of the state in which their services are provided, in particular legislation on minimum wages. In this regard it refers to the particular difficulties which the state in which the services are provided would experience in enforcing compliance with such rules by employers established beyond its national territory.

14 It is well-established that community law does not preclude member states from applying their legislation, or collective labour agreements entered into by both sides of industry relating to minimum wages, to any person who is employed, even temporarily, within their territory, no matter in which country the employer is established, just as community law does not prohibit member states from enforcing those rules by appropriate means. However, it is not possible to describe as an appropriate means any rule or practice which imposes a general requirement to pay social security contributions, or other such charges affecting the freedom to provide services, on all persons providing services who are established in other member states and employ workers who are nationals of non-member countries, irrespective of whether those persons have complied with the legislation on minimum wages in the member state in which the services are provided, because such a general measure is by its nature unlikely to make employers comply with that legislation or to be of any benefit whatsoever to the workers in question.

15 The answer to the questions submitted by the cour de cassation of the grand duchy of Luxembourg must therefore be that community law precludes a member state from requiring an employer who is established in another member state and temporarily carrying out work in the first-named member state, using workers who are nationals of non-member countries, to pay the employer's share of social security contributions in respect of those workers when that employer is already liable under the legislation of the state in which he is established for similar contributions in respect of the same workers and the same periods of employment and the contributions paid in the state in which the work is performed do not entitle those workers to any social security benefits. Nor would such a requirement be justified if it were intended to offset the economic advantages which the employer might have gained by not complying with the legislation on minimum wages in the state in which the work is performed.

Costs

16 The costs incurred by the commission, which submitted observations to the court, are not recoverable. As this case is, in so far as the parties to the main action are concerned, in the nature of a step in the proceedings before the national court, the decision as to costs is a matter for that court.

On those grounds,

The court,

In answer to the questions referred to it by the cour de cassation of the grand duchy of Luxembourg by an order dated 26 february 1981, hereby rules:

Community law precludes a member state from requiring an employer who is established in another member state and temporarily carrying out work in the first-named member state, using workers who are nationals of non-member countries, to pay the employer's share of social security contributions in respect of those workers when that employer is already liable under the legislation of the state in which he is established for similar contributions in respect of the same workers and the same periods of employment and the contributions paid in the state in which the work is performed do not entitle those workers to any social security benefits. Nor would such a requirement be justified if it were intended to offset the economic advantages which the employer might have gained by not complying with the legislation on minimum wages in the state in which the work is performed.