Assigning external personnel from one country to work in another country: ECJ judgment defines possibilities for withdrawing A1 certificates

In its judgment of 16 November 2023, the ECJ defined the possibilities for withdrawing A1 certificates. Employers who use these certificates in practice should take precautions, as a withdrawal will have far-reaching consequences.

Background

When personnel are assigned to work temporarily in a different country, questions often arise as to their correct classification under social security law and the related obligation to pay contributions. Where assignments within Europe are involved, the assessment is usually simple: if a person only works temporarily in another country (country of assignment) and can prove that they remain subject to the social security law of their home country (country of origin) during their assignment, then they are not required to pay contributions to the social security system of the country they are assigned to.

Proof that they are currently subject to the social security system in their country of origin is provided by what is known as an A1 certificate, which is issued by the social security institutions of the Member States.

In a 2018 judgment the ECJ commented on the binding effect of such an A1 certificate and stated that:

• The social insurance findings in an A1 certificate are binding both for other social insurance institutions and for the courts.
• As long as such an A1 certificate has not been withdrawn or declared invalid by the competent institution, it remains binding, even if the fulfilment of the condition on which it was issued is questionable or if circumstances subsequently arise that give rise to doubts.
• A certificate has binding effect even if issued retroactively.

Since just having an A1 certificate makes it possible to avoid any requests from social insurance institutions in the country of assignment, unsurprisingly, A1 certificates are widely used in practice and are frequently recommended as an effective means of creating more legal certainty for cross-border personnel assignments.

As explained, the ECJ stated that the certificate would remain binding as long as it had not been withdrawn by the competent social insurance institution. The ECJ has now ruled precisely on this topic, which is the reason for this update.

The Court’s decision

The ECJ now states that:

• The insurance institution issuing an A1 certificate is authorised to withdraw the certificate at any time.
• Withdrawal may take place without initiating a dialogue and conciliation procedure with the social insurance institution of another state.
• Withdrawal may be issued retroactively.

The Court justified its decision by stating that the binding nature of A1 certificates is based on the principle of sincere cooperation under Article 4(3) of the TEU, which in turn implies the principle of mutual trust. It pointed out that this requires the issuer of the certificate to carefully examine and properly assess the facts of the case. Moreover, the social security institutions of the other Member States are entitled to expect the issuer to fulfil its obligation to apply the law correctly. It stated that since a situation can change significantly over time, however, the aforementioned principles also imply that the issuer must check the accuracy of the information and findings throughout the entire period of assignment and, if necessary, withdraw the A1 certificate if it determines that the conditions for issuing it are not (or no longer) met.

The Court continued that Article 5 of Regulation (EC) No 987/2009, which is the central legal norm concerning A1 certificates, does not require a dialogue and conciliation procedure before withdrawal of an A1 certificate, which is why there is no obligation to adopt such a procedure. The Court explains that this also aligns with the purpose and intent of the procedure, which was created as a means of resolving disputes between social insurance institutions of different Member States: if there are no such disputes because the issuing social insurance institution withdraws the certificate of its own motion due to changed circumstances, there is no reason to conduct a dialogue and conciliation procedure.

Finally, although the withdrawing institution is not obliged to consult in advance, the principles of sincere cooperation impose an obligation on it to inform, as soon as possible, both the persons concerned and the other social insurance institutions involved of the withdrawal and to communicate to them all the information and data necessary for the further assessment of the facts under social insurance law.

Withdrawal has far-reaching practical consequences

This judgment should make practitioners sit up and take notice as it clearly demonstrates that an A1 certificate’s binding effect is not absolute and its withdrawal will have far-reaching consequences. The (subsequent) negation of an A1 certificate’s binding effect will often mean that the assigned persons are no longer subject to the social security system of their country of origin, but rather to that of the country of assignment.

It is certainly not difficult to imagine the practical difficulties associated with the retrospective processing of such status changes. In addition, substantial financial burdens may result from additional claims by the country of origin’s social insurance institution. In some cases, like in Germany, these burdens are paired with regulations that allow only limited recourse to employees, thus placing the burden of contributions entirely on the employer in cases of doubt. Although there will usually be a claim for reimbursement against the country of origin’s social insurance institution, the lack of offsetting options, differences in the contribution rates and the special requirements of the procedures to be followed in each case will often mean that this is unlikely to provide significant relief.

In spite of this, employers who use A1 certificates in practice should not be advised to discontinue their use. Nevertheless, they should be advised to always conduct detailed and well-substantiated preventive checks and maintain documentation to ensure, to the extent that they can, that the prerequisites for issuing an A1 certificate are actually met. This should be incorporated into future approval processes, if this has not already occurred. In addition, domestic employers should safeguard their legal interests in contractual arrangements by including notification obligations and rights to verify compliance. They should also protect themselves commercially by including appropriate remuneration provisions.