Today, Advocate General M Priit Pikamae, delivered its Opinion is AFMB Ltd and Others (C-610/18).
The case in the main proceedings
AFMB is a” flexible and internationally operating organization based in Cyprus”. AFMB assists “internationally operating road hauliers in improving their competitive position”, by means of ” working with them to see how European regulations can be applied as favourably as possible for their company” (http://www.afmb.eu).
- holds a transport operator license valid in Cyprus
- concludes fleet management agreements with transport companies
- is not a “letter box company”
Drivers are recruited in other EU countries, inter alia in the Netherlands.
- were living in the Netherlands
- were recruited in the latter country by a local transport company, or (in most of the cases), were in paid employment by the Dutch transport company, before being “transferred” to AFMB
- have concluded employment contracts with AFMB, or have had the employment contracts transferred to the latter company
- were under the Dutch company effective control, the latter was bearing even the wage cost
- were paid by AFMB (company paying social security contributions in Cyprus)
- carried out their activity in two or more Member States, no substantial activity was carried out in the Netherlands
The Svb (competent authority for social security in the Netherlands), declared the Netherlands social security legislation to be applicable to the drivers, and issued to them portable documents A1.
AFMB argues that pursuant to Article14(2) (a) Regulation 1408/71/EC and Article 13(1) (b) Regulation 883/2004, Cyprus social security legislation applies to the drivers.
Questions referred to the European Court of Justice
The questions referred to the ECJ by the Raad van bestuur van de Sociale verzekeringsbank, can be summarised as follows:
- who is the employer (AFMB, the Dutch transport company, or both)?
- provided that AFMB is the employer, can the applicability of Cyprus social security legislation, (determined on grounds of Article 14(2) (a) Regulation 1408/71/EC and Article 13(1) (b) Regulation 883/2004-multi-state activity), be challenged by invoking non-compliance with the conditions must be met pursuant to Article 14(1)(a) Regulation 1408/71 and Article 12 Regulation 883/2004, in particular the existence of an organic link to the employer?
- provided that AFMB is the employer, and the second question is answered in the negative, does the situation referred constitutes an abuse of EU law and/or EFTA law ,in the sense of the ECJ rulings in Halifax plc and Others (C-255/02) , Cussens and Others (C-251/16) , Altun and Others (C-359/16), or, does not constitute abuse, in the sense of the ECJ ruling in Polbud-Wykonawstwo (C-106/16) ?
The AFMB (and Cyprus) positions can be summarised as follows: the above-mentioned situation occurs “as a natural consequence of the single market”.
The AFMB invokes the following pleas in law:
- Article 45TFEU (freedom of movement of workers)-although, in certain cases, only employment contracts have “moved” to Cyprus
- Article 56TFEU (freedom to provide services)
- Regulations 883/2004 and 987/2009 coordinate, but not harmonise social security systems
- low social security contributions are not “equivalent” to low social protection
- a dual definition of the concept of employer under social security regulations and labour law, would generate legal uncertainty
The employer is AFMB.
Other common positions:
- the concept of employer must be given an autonomous definition under the social security coordination regulations
- such a definition must consider the actual and factual employment situation, notably the principle of “the closest link”
- regarding the interpretation of Article 13.1 (b) (i) Regulation 883/2004, the Commission recalls Part II point 7 Practical guide -The legislation that applies to workers in the EU, the EEA and Switzerland: “How to determine the registered office or place of business”
The employer is the transport company located in the Netherlands.
The UK written submission:
- the employer is AFMB
- AFMB’ place of business in the sense of Article 13.1(b) (i) Regulation 883/2004 is the Netherlands.
The ECJ raised the question whether the decision to establish the company in Cyprus was made for a particular reason.
The ECJ has also upheld that “a website has a factual value, if not a legal value”.
Opinion delivered by AG M Priit Pikamae
The AG observes that the concept of employer is not defined by the EU law, however, the social security coordination regulations do not contain reference to the law of the Member States. Pursuant to settled ECJ case law, the concept must be given an autonomous interpretation throughout the EU.
First, the AG recalls the general definition of employment relationship in the case law : “the essential feature of an employment relationship is that for a certain period of time one person performs services for and under the direction of another person in return for which he or she receives remuneration”.
Addressing ECJ case law on social security, employment relationship and private international law, the AG underlines the difference between formal and genuine employment relationship. Criteria such as “findings on the employed person’s actual situation”, “the party responsible for engaging the worker, paying the salary and sanctioning and dismissing the latter”, “the hierarchical relationship under which the worker is subject to supervision”, “in which State is situated the place from which the employee carries out his transport tasks, receives instructions concerning his tasks and organises his work, and the place where his work tools are situated”, are invoked in view of clarifying such a difference.
Although different areas of law are assessed, the judgment in Manpower (C-35/70) is particularly important: it concerns social security coordination and underlines the subordination as a decisive criterion in determining the applicable legislation.
Assessing the circumstances of the case at issue, the AG concludes that “the contractual relationship, under which AFMB is formally the drivers’ employer, is only indicative in nature”, and as a consequence, the employer is the company located in the Netherlands.
The AG observes that the case at issue is not a posting “in the strict sense” but making available of workers for an indefinite period. In such cases, the exception from the lex loci laboris principle, can be applied only if the following conditions are met : i) there is a direct link between the undertaking making the posting and the worker ii) the undertaking making the posting must carry out significant activities in the territory of the Member Sate of establishment.
The first condition is not met (see response to the first question), in regard to the second, such a criterion is not provided for by Article 13(1)(b)(i) Regulation 883/2004, its application would disregard the limits of the scope of the said article, In addition, a proposal for a legislative amendment to that effect, was recently rejected by the Council.
Having regard to the above considerations, Article 12 Regulation 883/2004, cannot be of relevance.
The AG assesses whether the objective and subjective elements would determine the existence of an abuse of law, can be established as the case at issue : “More specifically, the referring court has doubts as to the compatibility with EU law of a legal arrangement which allows a company to choose a particular registered office with the aim, in essence, of making its personnel legally subject to the social security legislation of a Member State of the European Union or EFTA in which the social security contributions payable are relatively low”
- objective element: AFMB “fulfils only in a formal manner the conditions attached to the status of ‘employer’”
- subjective element: “the clear intention of AFMB and its contractual partners to circumvent Netherlands social security legislation for the purpose of optimising their economic activities”
Having regard to the above considerations, the abuse of law can be established.