Recent Case Law: International Shipping & Trucking Management (E-1/21)
In a recent case relating to the coordination of social security systems within the European Economic Area (EEA) and the interpretation of Regulations No. 2004/883/EC and No. 2009/987/EC, the EFTA Court ruled that the mere presence of an undertaking's registered offices is not sufficient to establish that an employee pursues an activity as an employed person in two member states of the EEA.
An undertaking with a registered office in Liechtenstein had employed workers with residence in Germany, the Netherlands and the Czech Republic. The employees carried out their work usually in two or more EEA member states.
The Liechtenstein competent authority determined that Liechtenstein social security law was neither applicable to the company nor to its employees, based on the argument that the company did not carry out the core of its business operations at its registered office in Liechtenstein.
According to Art. 13 para. 1 lit. b No. I 2004/883/EC, individuals carrying out their work in two or more EEA member states are subject to the law of the state in which the employer's registered office resides. However, allowing employers to easily elect the applicable law by implementing artificial company law structures would contradict the purpose of the provisions and such an interpretation would set up a race to the bottom in terms of the level of protection provided by social security systems. Therefore, the court ruled that the mere existence of an undertaking's registered offices ("Briefkastenfirma" or "Strohfirma") is not sufficient to determine that an employee pursues an activity as an employed person in two member states of the EEA.
To determine the jurisdiction where core business operations are carried out and the essential decisions of an undertaking are made, a series of factors must be taken into account, such as the locations of the registered office, the central administration, director meetings, general meetings and the determination of general policies, as well as the residence of the main directors, administrative/accounting document keeping and execution of financial/banking transfers etc. (cf. CJEU, C‑73/06, EU:C:2007:397 para. 60). Further, the court ruled that, in the context of a provisional determination of competence according to Art. 16 para. 3 2009/987/EC, the competent authorities must inform each other directly. Art. 16 para. 3 2009/987/EC provides a resolution procedure for uncertainties regarding jurisdiction, the application of which, in the court's opinion, is not limited to a specific point in time. Therefore, the procedure may lead to a retroactive reversal of a preliminary determination.
To address a different perspective, it is also important to note that cross-border commuters who reside in neighboring countries but work in Liechtenstein are, in principle, subject to Liechtenstein social security provisions. If, however, more than 25% of the work is performed in the country of residence, this country becomes competent from a social security perspective. This rule has been suspended by mutual agreement between the relevant competent authorities until 30th June 2022. Employers should monitor developments and possibly adjust their "home office" policies for the second half of 2022.
For further information, please contact Sebastian Pribas.