Important legal notice

61996C0057

European Court reports 1997 Page I-06689

Opinion of the Advocate-General

A - Introduction

This reference for a preliminary ruling concerns the scope ratione materiae of Regulation (EEC) No 1408/71 (1) or of Regulation (EEC) No 1612/68 (2) in relation to a benefit under Netherlands law, which takes the form of a single payment to agricultural workers made redundant following the setting-aside of land.

The Netherlands Raad van State has requested a preliminary ruling from the Court concerning the following situation. The plaintiff in the main proceedings is a German national who worked on a farm in the Netherlands. He had followed his employer there, but continued to reside in Germany. Following set-aside measures taken by his employer, he was made redundant and subsequently received unemployment benefit in Germany. He applied for a benefit in the form of a single payment on the basis of the `Compensation Rules for Workers Leaving Farming'. (3) His application was refused and he initiated proceedings. On appeal, the national court has referred the following questions to the Court:

`1. Does Regulation No 1408/71 apply to a benefit such as that provided for in the Vergoedingsregeling voor Uittreding van Werknemers in de Landbouw (Compensation Rules for Workers Leaving Farming) which does not depend on the duration of unemployment and forms part of a scheme of measures for the structural improvement of the agricultural sector which emphasizes the promotion of the complete or partial cessation of farming and the abandonment of farming by farmers? (4) What other circumstances may also be relevant?

In the reasoning of the order for reference, the national court observes that the grant of the benefit depends on various conditions, such as the age of the claimant, the minimum conditions under social insurance law, the duration of the preceding employment relationship, registration with the employment office and a right to unemployment benefits under the (new) Werkloosheidswet (Unemployment Law). (5) The application must be lodged within a certain period, which depends on the date of termination of the employment relationship. (6)

The requirement that there must be a right to unemployment benefit under Netherlands law is an obstacle to the grant of benefit under the Compensation Rules in so far as Article 19(1)(f) of the Werkloosheidswet provides that an employed person residing outside the Netherlands has no entitlement to unemployment benefit. Therefore the plaintiff in the main proceedings cannot obtain unemployment benefit under the Werkloosheidswet which, according to the express provisions of the Compensation Rules, precludes the grant of benefit under those Rules.

The national court shares the plaintiff's doubts as to whether this result is compatible with Community law. It states that strict application of the abovementioned provisions may be contrary to Regulations Nos 1408/71 and 1612/68.

Relying on the Scrivner judgment, (7) the national court addresses Regulation No 1408/71 first. It doubts seriously whether the benefit in question falls within the scope ratione materiae of the regulation. If it does, the plaintiff in the main proceedings, as a frontier worker who is wholly unemployed, is prevented by Article 71(1)(a)(ii) of Regulation No 1408/71 from receiving Netherlands unemployment benefit because, under that provision, in the event of unemployment he is covered by German legislation as the legislation of the place where he resides.

The national court was unable to accept the plaintiff's argument that he should be regarded as an `atypical' frontier worker of the kind referred to in Article 71(1)(b).

However, should the benefit in question not fall within the scope of Regulation No 1408/71, it would be necessary to consider whether Regulation No 1612/68 precludes adhering to the residence requirement laid down in the Rules by reference to the Werkloosheidswet. The national court considers that it is not unreasonable for the term `social advantage' in Article 7(2) of Regulation No 1612/68 to be interpreted to cover a benefit under the Compensation Rules. Then the residence requirement could be regarded as indirect discrimination by reason of nationality, which is prohibited by Article 7(1).

The Netherlands Government and the Commission have intervened in the written procedure. Written replies have been given by the Netherlands Government to questions from the Court concerning the rules of the body granting benefits and its power to adopt rules. The French Government has also intervened in the oral procedure. Reference will be made to their submissions in the course of the following analysis.

B - Analysis

The benefit which the national court is called upon to assess could potentially fall within the scope of both Regulation No 1408/71 and Regulation No 1612/68.

In its judgment in Castelli, (8) which concerned a similar problem of classification of a minimum guaranteed income for aged persons, the Court gave an exhaustive assessment of Article 7(2) of Regulation No 1612/68. As the Court considered that its rulings in that regard enabled the national court to decide the dispute in the main proceedings, it found it unnecessary to examine the questions referred in the light of Regulation No 1408/71. (9)

Only eight months later, in Scrivner, (10) which also concerned a benefit of mixed character, the `minimum means of subsistence' under Belgian law, the Court found that it was necessary first to examine whether a benefit such as that in question fell within the scope ratione materiae of Regulation No 1408/71: `whether or not it should be described as a "social advantage" within the meaning of Article 7 of Regulation No 1612/68 falls to be considered only if it is established that the benefit is not a social security benefit for the purposes of Regulation No 1408/71'. (11)

This observation is particularly important in the present case because if the benefit in question is classified as a social security benefit the plaintiff in the main proceedings may be unable to obtain it because of the special provisions applying to frontier workers. (12)

However, in an action brought against the Grand Duchy of Luxembourg for failure to fulfil obligations, (13) the Court held that since Regulation No 1612/68 is of general application regarding the free movement of workers, Article 7(2) thereof may apply to social advantages which, at the same time, fall specifically within the ambit of Regulation No 1408/71, (14) so that classification of the benefit in question as a social security benefit does not necessarily mean that the plaintiff cannot obtain it. Therefore I shall consider first of all, in the sequence objectively laid down in the Scrivner judgment, (15) the national court's first question concerning the scope of Regulation No 1408/71.

II. The first question

To reply to the first question, it is necessary to ascertain whether a benefit such as the single payment under the Compensation Rules to workers who leave agriculture falls within the scope ratione materiae of Article 4 of Regulation No 1408/71.

The relevant provisions of Article 4 are as follows:

`1. This Regulation shall apply to all legislation concerning the following branches of social security:

(a) - (f) ...

(g) unemployment benefits;

(h) ...

2a. This Regulation shall also apply to special non-contributory benefits which are provided under a legislation or schemes other than those referred to in paragraph 1 or excluded by virtue of paragraph 4, where such benefits are intended:

(a) ... to provide supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in paragraph 1(a) to (h), ...

(b) ...

2b. - 3. ...

The parties which have submitted observations are of the unanimous opinion that the benefit in question is not a social security benefit within the meaning of Regulation No 1408/71.

In support of its view, the Netherlands Government first of all explains the nature and purpose of the benefit. The rules on which is it is based were adopted by a private-law body, the Foundation for Agricultural Development and Reform, whose funds originate from the budget of the Minister for Agriculture, Nature Conservancy and Fisheries. (17) The budget for benefits of the type in question totals HFL 1 million per year. Where farmers are given an incentive to reduce their production by aid schemes, the scheme in question offers compensation to workers who lose their job as a result. It is thus a benefit paid where the contract of employment is terminated in certain circumstances.

Referring to the Court's case-law, (18) the Netherlands Government observes that the scope of Regulation No 1408/71 is determined essentially by the constituent elements of the particular benefit, in particular its purposes and the conditions on which it is granted. The Netherlands Government doubts whether the Compensation Rules on which the benefit is based are `legislation' within the meaning of Article 4 of Regulation No 1408/71. It adds that the Raad van State correctly pointed out that, according to the customary Netherlands terminology, the Rules do not constitute a statutory provision, but a set of guiding principles.

Furthermore, as the funds available are inherently limited, it is doubtful whether the benefit is a social security benefit. When the funds have been used up, the president of the organization may decide that no further applications can be considered. Finally, what is involved is an aid scheme and not a social insurance benefit.

According to the Netherlands Government, only if this assessment were incorrect would it be necessary to ascertain whether the benefit relates directly to the risk of unemployment. It cannot be denied that there is a direct connection in so far as the receipt of unemployment benefit is a condition of entitlement to the benefit in question. However, in so far as the continuance of unemployment (19) is a constituent element of an unemployment benefit, it must be observed that the Compensation Rules do not lay down such a condition. It is also important to note that the Court has held that it is a characteristic of unemployment benefit that it is intended to replace the remuneration lost by reason of unemployment and thereby provide for the maintenance of the unemployed person. (20) Under the Compensation Rules, however, these elements are not decisive. The wages previously received, the duration of the employment relationship and the duration of unemployment are all irrelevant. The only decisive factor is the worker's age. The purpose of the Compensation Rules is a matter of agricultural policy. Therefore the compensation cannot be regarded as an unemployment benefit. The Netherlands Government observes that, should its views in this respect not be accepted, the plaintiff, as a wholly unemployed frontier worker for the purpose of Article 71(1)(a)(ii) of Regulation No 1408/71, would have to rely on German legislation.

The Commission considers that the payment in question is not unemployment benefit within the meaning of Regulation No 1408/71. Although the applicant must be registered as unemployed at the date of the application and must be entitled to unemployment benefit under Netherlands law, the aim of the compensation is not to replace lost remuneration. Furthermore, the normal unemployment benefit is not suspended when compensation is received. The amount of compensation is not related to the previous remuneration, but depends entirely on the age of the applicant and is paid once only. It must be stressed that the recipient does not have to repay all or any of the compensation if he enters into another contract of employment and consequently ceases to be unemployed. The compensation would only have to be repaid if he were re-employed by his previous employer within 12 months of applying for compensation, which shows its true purpose, namely to make it easier for an agricultural employer to lay off employees on the complete or partial cessation of farming. According to the Commission, this direct connection with the objectives of agricultural policy is made clear by the terms in which the conditions of entitlement to compensation are formulated.

At the hearing the French Government supported the views of the Commission and the Netherlands Government.

As already mentioned in the summary of the observations submitted, it is clear from the Court's case-law that there are a number of constituent elements which enable a benefit to be classified as unemployment benefit. The Court has consistently held (21) that the distinction between benefits excluded from the scope of Regulation No 1408/71 and those which fall within its scope is based essentially on the constituent elements of the particular benefit, in particular its purposes and the conditions on which it is granted. In the final analysis, whether a benefit is classified as a social security benefit by national legislation is not the decisive factor. (22)

As the Court has held in numerous cases, `a benefit may be regarded as a social security benefit in so far as it is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position and provided that it concerns one of the risks expressly listed in Article 4(1) of Regulation No 1408/71'. (23)

Consequently the first question here is whether the benefit in the present case is `a legally defined right', (24) and the second is whether it relates to the risk of unemployment.

Whether it is a legally defined right may appear questionable in view of the fact that the Foundation derives its legal personality from civil law. However, any such doubt can be disposed of. The Foundation fulfils public tasks, its budget funds are provided by the State, most of the decision-makers in the Foundation are civil servants of the ministry responsible, and the Foundation is under the supervision of the Minister for Agriculture. Therefore the Foundation serves public, not private, purposes. Its power to adopt the Compensation Rules in question is based on public law.

It is also doubtful whether the nature of the legal measure regulating compensation meets the requirements of a `legally defined right'. In essence this question is to a large extent the same as the definition of `legislation' (25) within the meaning of Article 4 of Regulation No 1408/71.

The national court has described the legal basis of the compensation payments as a `set of guiding principles'. (26) It is common ground that the Compensation Rules do not constitute a formal statute. In reply to the Court's question concerning the legal nature of the Compensation Rules, the Netherlands Government explained that they constitute delegated legislation. Legal rules of this type are usually measures for implementing statutes. With regard to their binding effect, it must be observed that a right to compensation exists (subject to the funds being available) if the applicant fulfils the conditions laid down by the Compensation Rules. The Netherlands Government confirmed this when questioned at the hearing. According to the information supplied by the national court and the Netherlands Government, special circumstances may permit a decision such as that in the present case to be set aside in favour of the applicant if unreasonable hardship may be caused if the Compensation Rules are strictly applied.

In my view, therefore, a right with a legal basis may be presumed to exist.

However, it is not typical for the funds available for a social security benefit to be limited to a particular amount, so that it appears doubtful whether the legislation as such concerns `branches of social security' within the meaning of Article 4(1) of Regulation No 1408/71. This criterion could preclude classification of the Compensation Rules as `legislation concerning branches of social security'.

Pursuant to Article 4(2)(a), however, the Regulation also applies to special non-contributory benefits which are provided for under schemes other than those referred to in paragraph 1, where such benefits are intended to provide supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in paragraph 1. (30)

Therefore the question remains whether the compensation relates expressly to one of the risks listed in Article 4(1) of Regulation No 1408/71. At first sight, it seems to be an unemployment benefit because one of the conditions for entitlement to compensation is a right to benefit under the Werkloosheidswet.

According to the Court's case-law, one of the characteristics of unemployment benefit is that it provides substitute income. This is not so with regard to the compensation in question as it takes the form of a single payment which is not related to previous remuneration or to the duration of the employment relationship or of unemployment. It is this last factor which most strongly suggests that the compensation is not an unemployment benefit, in so far as the Court has stated that the continuance of unemployment (31) is the basis of benefit and is therefore a constituent element of an unemployment benefit.

If the applicant is subsequently employed by another employer, he is absolutely entitled to retain the compensation but, on the other hand, he must repay it if he is re-employed by his previous employer within one year. This shows that the basis of the benefit is the previous contract of employment, or rather, the termination thereof. The payment is made in respect of the termination of the specific contract of employment with the particular agricultural employer.

The benefit in question undoubtedly serves the purpose of making it easier for the farmer employer to limit or give up production entirely, in that he is partially relieved of the social responsibility to employees whom he has to lay off on economic grounds.

In the Mouthaan case (32) there was a similar close connection between the discontinued contract of employment and the benefits available in the event of unemployment. The Court found that the benefits claimed could not be regarded as unemployment benefits within the meaning of Regulation No 1408/71. In that case, the benefits were partly paid by a trade association as compensation for the loss of rights which had arisen during the period of employment as against the employer, who had subsequently become insolvent. Nevertheless, the Mouthaan case and the present case are similar in so far as the particular contract of employment, not the condition of unemployment in general, formed the basis of the benefit.

In my opinion, this conclusion is confirmed by the fact that compensation of the type in question here may be granted to an employee a second time. (33) Therefore support is provided for being made redundant on economic grounds by a second employer, and not for continued unemployment.

From this angle, the financing of redeployment measures, which may also take place on the basis of the Compensation Rules, (34) has the same aim in endeavouring to assist the agricultural sector. From the point of view of the objective of agricultural policy, the compensation in question is an incentive to set land aside. The unemployment of agricultural workers is to that extent only a consequence which must be mitigated by financial means.

In this context, the existence of a right to unemployment benefit has only a limited function. According to the Netherlands Government, in this way it is possible to ensure that it is the employer who takes the initiative in terminating the contract of employment. If the employee does so, he will not be entitled to unemployment benefit under the Werkloosheidswet. As this condition is only intended to ensure that the contract of employment is terminated in a certain way, it would be wrong to conclude from this link that the compensation claimed is an unemployment benefit within the meaning of Regulation No 1408/71.

If, therefore, it is not to be presumed that this is an unemployment benefit, it is unnecessary to consider the other conditions for applying Article 71 of Regulation No 1408/71. In any case, its provisions are clear in so far as a wholly unemployed frontier worker for the purpose of Article 71(1)(a)(ii) of Regulation No 1408/71 has to rely on the legislation of the State where he resides, in this case Germany, with regard to unemployment benefits. On factual grounds there is nothing to indicate that the plaintiff in the main proceedings is an `atypical frontier worker' of the kind referred to in Article 71(1)(b)(ii), who would then have the `option' (35) of making himself available either to the employment services of the State in which he was last employed or those of the State where he resides. It is for the national court alone to assess the situation, (36) although in the present case it has ruled out this possibility.

Therefore the reply to the first question must be that Regulation No 1408/71 does not apply to a benefit such as that provided for in the Compensation Rules for Workers Leaving Farming, which does not depend on the duration of unemployment and which forms part of a scheme of measures for the structural improvement of the agricultural sector emphasizing the promotion of the complete or partial cessation of farming or the abandonment of farming by farmers.

The second question

The national court asks whether a benefit granted under the Compensation Rules is to be regarded as a social advantage within the meaning of Article 7(2) of Regulation No 1612/68 and, if so, whether the indirect requirement of residence constitutes discrimination prohibited by Article 7(1) of the Regulation.

As it has been concluded above that such a benefit does not fall within the scope ratione materiae of Regulation No 1408/71, it is now necessary to examine that of Regulation No 1612/68. (37) However, even if it had been concluded that the benefit is a social security benefit, that would not have been a reason for excluding the application of Regulation No 1612/68, as the judgment in Commission v Luxembourg shows. (38)

Article 7(1) and (2) of Regulation No 1612/68 provides as follows:

`1. A worker who is a national of a Member State may not, in the territory of another Member State, be treated differently from national workers, by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and should he become unemployed, reinstatement or re-employment.

The parties who submitted observations differ as to the reply to the second question. Whereas the national court considers that it is `not unreasonable' for the expression `social advantage' to be construed so as to cover a benefit under the Compensation Rules, although the indirect requirement of residence may constitute indirect discrimination by reason of nationality, which is prohibited, the Netherlands and French Governments take the view that the residence requirement is justified. The Commission, on the other hand, considers that the applicant in the main proceedings may successfully rely on Article 7(2) of Regulation No 1612/68.

The Netherlands Government considers that the compensation is a social advantage within the meaning of the Regulation as it fulfils the requirements laid down by case-law for such a benefit. However, it is clear from the Court's case-law that a worker can claim a social advantage within the meaning of the provision only if he also resides in the Member State where he claims the benefit, although a certain minimum period of residence cannot be required of a frontier worker. Entitlement to social advantages is only intended to make the worker's integration in the Member State where he is employed easier. A frontier worker who consciously chooses to reside in another Member State does not need special assistance of that kind.

If, furthermore, the residence requirement could not be invoked against a wholly unemployed frontier worker, the consequences could be very serious. The Netherlands Government illustrates this with the example of social assistance, which is excluded by Article 4(4) from the ambit of Regulation No 1408/71. It points out that this cannot be paid under Article 10 of the regulation to a worker residing in another Member State. Social assistance payments are, however, unquestionably social advantages within the meaning of Article 7(2) of Regulation No 1612/68. The Netherlands Government adds that there is a risk of blurring the differences between the two regulations.

Finally, the Netherlands Government observes that the reference to benefit under the Werkloosheidswet should not, strictly speaking, be construed as setting up a residence requirement for compensation. The purpose of the reference is to obtain proof that the termination of the contract of employment was not attributable to the worker. The Werkloosheidswet provides for machinery whereby an employee can resist dismissal. The reference to a right to benefit under that law aims to ensure that all those possibilities are exhausted. Consequently the receipt of unemployment benefit in another Member State cannot take the place of an entitlement to benefit under the Werkloosheidswet, because unemployment benefits paid in other Member States are subject to other conditions.

The French Government sees in the present case a fundamental problem concerning the exportability of social advantages within the meaning of Regulation No 1612/68. It contends that, firstly, there is no residence condition in the conventional sense and therefore the case-law on residence requirements (39) is not applicable to this case. More important, however, is the question of the extent to which a frontier worker can rely on Regulation No 1612/68, which makes no provision for the export of social advantages. There are good reasons for the view that frontier workers are covered by the State of residence in relation to unemployment benefits.

According to the French Government, the fact that frontier workers are mentioned in the preamble to Regulation No 1612/68 although there are no provisions concerning them in the operative part justifies the conclusion that the regulation does not lay down specific rules relating to them. In addition, the special rules of Regulation No 1408/71 cannot be called into question by Regulation No 1612/68.

The French Government adds that the export of social advantages within the meaning of the latter regulation may take place only in very rare exceptional cases, if at all. Any grant of benefit must be limited to cases where there is a direct connection with a contract of employment or a previous contract of employment in another Member State. In the present case, the connection could consist in the comparable nature of a situation existing under the legal systems of the Member States concerned. As we know, the plaintiff in the main proceedings is not subject to the Netherlands legislation on unemployment, but to that of Germany. This circumstance may, if necessary, be regarded as equivalent.

The Commission contends that, by reference to the Court's relevant case-law, (40) the compensation is a social advantage within the meaning of Article 7(2) of Regulation No 1612/68. The Commission also considers that the Netherlands Rules in question give rise to covert indirect discrimination, contrary to Article 7 of the said regulation. In the Commission's view, there appear to be no circumstances which would justify this unequal treatment.

The Court has consistently held that social advantages are `all those which, whether or not linked to a contract of employment, are generally granted to national workers primarily because of their objective status as workers ... and whose extension to workers who are nationals of other Member States therefore seems likely to facilitate the mobility of such workers within the Community'. (41)

As we have already seen when considering whether the compensation is of the nature of unemployment benefit, this is a direct consequence of the previous contract of employment which has been terminated. In my view, therefore, it can readily be accepted that it is an advantage which is granted to the worker because of his objective status as a worker. If the applicant had not been a worker fulfilling certain conditions, there would have been absolutely no reason for granting the benefit. A worker residing in the State of employment and a frontier worker are objectively in the same situation in that respect. (42) In so far as the compensation may mitigate, at least partly, the economic consequences for a worker who has been made redundant involuntarily, it is also likely to facilitate mobility within the Community. The economic risk of impending unemployment may very well stand in the way of taking up employment in another Member State. Any measure which is capable of mitigating the consequences of unemployment therefore promotes mobility, in my view. The knowledge that one will not be faced with economic ruin even in the event of unemployment may certainly encourage a person to take up employment in another Member State.

As I see it, this reasoning is not affected by the fact that funds may be limited and compensation may therefore not be paid. Firstly, in practice the budget has never been fully used up in the past. Secondly, the Court has found that an advantage granted on the basis of a discretionary decision may be a social advantage within the meaning of the provision. (43) The justified hope of receiving the benefit if the insured event occurs appears to be a sufficient incentive for facilitating mobility. In the present case there is even a right, as I have shown above. Therefore it follows that the advantage linked to objective status as a worker is likely to facilitate the mobility of workers.

When the Netherlands Government claims that participation in social advantages only has the purpose of promoting integration in the Member State of employment (44) and cannot therefore be granted to a frontier worker who necessarily resides in another Member State, I consider this to be a one-sided and simplistic approach.

It may be presumed that the `average migrant worker', who could also be called the prototype migrant worker, will take up residence in the State of his employment. Consequently, facilitating his integration in his new place of residence also contributes to promoting his mobility.

The structure of Regulations Nos 1408/71 and 1612/68 shows that the Community legislature took as its starting point this `average type' of migrant worker. In this respect the frontier worker is an exception expressly taken into account by Regulation No 1408/71. (45) Regulation No 1612/68 does not make special exceptions of that kind for frontier workers. Nevertheless it must be presumed that the Community legislature had frontier workers in mind when Regulation No 1612/68 was adopted. The preamble to the Regulation expressly mentions frontier workers (46) as being entitled under the Regulation.

In my view, this can only lead to the conclusion that frontier workers are also to have all the rights conferred upon migrant workers by Regulation No 1612/68. This seems proper because a frontier worker is also unquestionably a migrant worker who travels to work in another Member State. In so far as there is no objective ground for giving him special treatment, such as provided for by Regulation No 1408/71, the rights conferred by Community law must be available to him in their entirety.

It seems to me that there is no justification for the fears of the Netherlands and the French Governments that, given this assessment of the position of frontier workers, social assistance benefits would become exportable, a result which Regulation No 1408/71 seeks to prevent expressly (47) and Regulation No 1612/68 implicitly.

The specific contract of employment must be the point of connection for the grant of a social advantage. In substance, at least, this requirement has already been taken into account by the Court in referring to objective status as a worker and to the contract of employment when defining social advantages. There is no question of having to pay in future all social assistance benefits across borders as a result of Article 7(2) of Regulation No 1612/68. It is precisely the link with status as a worker and the contract of employment which excludes conventional social assistance benefits.

Against this background it is necessary to ascertain whether the conditions prescribed for compensation are formulated in such a way as to result in covert discrimination on grounds of nationality.

The Compensation Rules do not contain an express residence condition, but it arises from the combination of the Rules with the Werkloosheidswet. Nevertheless, the residence requirement is mandatory. It is an indispensable condition for a subjective right under the Werkloosheidswet and without it a right to compensation under the Rules cannot be acquired. Because of this mandatory connection it is correct to regard the residence requirement as a condition of entitlement to compensation under the Rules.

The residence requirement, for its part, expressly makes no distinction according to the applicant's nationality. However, as the Court has consistently held, covert discrimination which leads to the same result is also prohibited. (48) The condition of residence in the Member State concerned may have precisely that effect because such a requirement is in practice more easily met by Netherlands nationals, (49) whereas migrant workers are obliged first to move their residence (50) or must retain their residence in another country, as in the case of frontier workers.

However, to make a distinction according to whether the potential recipient of the benefit resides in the country concerned or another country must not be deemed prohibited discrimination if it is necessary on objective grounds. The condition may very well be justified in the context of the Werkloosheidswet and only lead to results incompatible with Community law because of the reference in the Compensation Rules.

When the Netherlands Government states that the reference to the Werkloosheidswet does not, in the final analysis, allude to the place where the worker resides, but that it is explained by the need to ensure that certain substantive conditions relating to the method of termination of the contract of employment are fulfilled, reasons of that kind may very well be regarded as a justified concern.

However, if the requirements are formulated in such a way that the applicant is disqualified from compensation even before the relevant circumstances are examined, the distinction is in any event disproportionate. In the case of a frontier worker, it is sufficient to require him to prove that the contract of employment was terminated by the employer and not the worker himself.

65 The requirement of entitlement under the Werkloosheidswet, which results in excluding compensation if the worker does not reside in the Netherlands, must therefore be disregarded in the case of a frontier worker.

66 The answer to be given to the second question is, therefore, that a benefit based on the Compensation Rules must be classified as a social advantage within the meaning of Article 7(2) of Regulation No 1612/68. In this connection, the condition that the worker concerned must reside in the Netherlands is to be regarded as a distinction by reason of nationality, which is prohibited under Article 7 of that Regulation.

C - Conclusion

67 On those grounds, I propose that Court reply as follows to the questions from the national court:

(1) 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 does not apply to a benefit, such as that provided for in the Compensation Rules for Workers Leaving Farming, which does not depend on the duration of unemployment and which forms part of a scheme of measures for the structural improvement of the agricultural sector emphasizing the promotion of the complete or partial cessation of farming or the abandonment of farming by farmers.

(2) A benefit based on the Compensation Rules must be classified as a social advantage within the meaning of Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community. In this connection, the condition that the worker concerned must reside in the Netherlands is to be regarded as a distinction by reason of nationality, which is prohibited under Article 7 of that Regulation.

(1) -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 (OJ 1992 C 325 p. 1), last amended by Council Regulation (EEC) No 1290/97 of 27 June 1997 (OJ 1997 L 176, p. 1).

(2) -Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475), last amended by Regulation (EEC) No 2434/92 of 27 July 1992 (OJ 1992 L 245, p. 1).

(3) -Vergoedingsregeling voor Uittreding van Werknemers in de Landbouw; Bestuurbesluit - Administrative Decision - No 403 of the Stichting Ontwikkelings- en Sanieringsfonds voor de Landbouw - Foundation for the Agricultural Development and Reform Fund - Staatscourant No 114, 1988, with later amendments, hereinafter `the Compensation Rules'.

(4) -This appears to mean self-employed farmers (note added).

(5) -Article 4(a) to (e) of the Compensation Rules.

(6) -Article 4(f) in conjunction with Article 3 of the Compensation Rules.

(7) -Case 122/84 Scrivner v Centre Public d'Aide Sociale de Chastre [1985] ECR 1027.

(8) -Case 261/83 Castelli v ONPTS [1984] ECR 3199.

(9) -Ibid., paragraph 13.

(10) -Case 122/84, cited in footnote 7.

(11) -Ibid., paragraph 16.

(12) -See Article 71(1)(a) of Regulation No 1408/71.

(13) -Case C-111/91 Commission v Luxembourg [1993] ECR I-817.

(14) -Ibid., paragraph 21.

(15) -Case 122/84, cited in footnote 7.

(16) -Emphasis added.

(17) -The main task of the fund is to implement structural measures provided for by Community law, although the benefit in question must be regarded as a domestic-law measure.

(18) -Case C-78/91 Hughes v Chief Adjudication Officer [1992] ECR I-4839 and Case C-111/91, cited in footnote 13.

(19) -As referred to in Case C-66/92 Acciardi v Commissie Beroepszaken Administratieve Geschillen in de Provincie Noord-Holland [1993] ECR I-4567, paragraph 17.

(20) -See Case C-102/91 Knoch v Bundesanstalt für Arbeit [1992] ECR I-4341, paragraph 44.

(21) -See Case C-111/91, cited in footnote 13, paragraph 28, and Case C-78/91, cited in footnote 18, paragraph 14.

(22) -See, for example, the judgments referred to in the previous footnote.

(23) -See Case C-111/91, cited in footnote 13, paragraph 29, with further references.

(24) -See Case C-111/91, cited in footnote 13, paragraph 30, and Case C-78/91, cited in footnote 18, paragraph 15 et seq.

(25) -See Article 1(j) of Regulation No 1408/71. In principle, this term must be construed widely (see Joined Cases 82/86 and 103/86 Laborero and Sabato v OSSOM [1987] ECR 3401, paragraph 23 et seq.).

(26) -Beleidsregeling.

(27) -This conforms with the definition of `legislation' in Article 1(j) of Regulation No 1408/71: `legislation' means in respect of each Member State statutes, regulations and other provisions and all other implementing measures, present or future, relating to the branches and schemes of social security covered by Article 4(1) and (2) (emphasis added).

(28) -OJ 1988 L 106, p. 28.

(29) -OJ 1988 L 121, p. 36.

(30) -However, Article 10a of the Regulation indicates that the Member State of residence is responsible for granting special non-contributory cash benefits in accordance with its legislation.

(31) -See Case C-66/92, cited in footnote 19.

(32) -See Case 39/76 Metaalnijverheid v Mouthaan [1976] ECR 1901.

(33) -Article 5(a) of the Compensation Rules.

(34) -Article 7(2) of the Compensation Rules.

(35) -Case 1/85 Miethe v Bundesanstalt für Arbeit [1986] 1837, paragraph 9.

(36) -Ibid., paragraph 19.

(37) -See Case 122/84, cited in footnote 7.

(38) -Case C-111/91, cited in footnote 13, paragraph 21.

(39) -See Case 152/73 Sotgiu v Deutsche Bundespost [1974] ECR 153; Case C-279/89 Commission v United Kingdom [1992] ECR I-5785, and Case C-111/91, cited in footnote 13.

(40) -Case 39/86 Lair v Universität Hannover [1988] ECR 3161; Case 44/72 Marsman v Rosskamp [1972] ECR 1243; and Case 65/81 Reina v Landeskreditbank Baden-Württemberg [1982] ECR 33.

(41) -Case 65/81, cited in footnote 40, paragraph 12; Case 249/83 Hoeckx v Openbaar Centrum voor Maatschappelijk Welzijn Kalmthout [1985] ECR 973, paragraph 20; Case 157/84 Frascogna v Caisse des Dépôts et Consignations [1985] ECR 1739, paragraph 20; Case 39/86, cited in footnote 40, paragraph 21; and Case C-310/91 Schmid v Belgian State [1993] ECR I-3011, paragraph 18.

(42) -See Case C-80/94 Wielockx v Inspecteur der Directe Belastingen [1995] ECR I-2493, paragraph 20.

(43) -See Case 65/81, cited in footnote 40.

(44) -Case C-3/90 Bernini v Minister voor Onderwijs en Wetenschappen [1992] ECR I-1071.

(45) -See, for example, Article 71 of Regulation No 1408/71.

(46) -This footnote relates only to the German text of the legislation.

(47) -See Articles 4(4) and 10a of Regulation No 1408/71.

(48) -See Case 152/73, cited in footnote 39, paragraph 11; also, to the same effect, Case C-175/88 Biehl v Administration des Contributions [1990] ECR I-1779, paragraph 13.

(49) -See Case C-111/91, cited in footnote 13, paragraph 10.

(50) -See in that regard Case C-279/89, cited in footnote 39, paragraph 42.