The Supreme Court handed down its judgment in the case of Patmalniece v Secretary of State for Work and Pensions [2011 UKSC 11 on 16 March 2011. The issue in this case was whether the entitlement to a means tested non-contributory benefit, the state pension credit (“SPC”) was restricted to those who have a right to reside in the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland ("the Common Travel Area") by regulation 2 of the State Pension Credit Regulations 2002 (SI 2002/1792) ("the 2002 Regulations") was compatible with article 3(1) of Council Regulation (EC) No 1408/71 ("Regulation 1408/71").

Section 1(2)(a) of the State Pension Credit Act 2002 provides that a claimant is entitled to SPC if he or she is “in Great Britain”, and the 2002 Regulations provide that a person is to be treated as not in Great Britain if he or she is not “habitually resident”, or does not have the right to reside, in the Common Travel Area. Article 3(1) of Regulation 1408/71 (now succeeded by Regulation (EC) 883/2004), provides for the equality of treatment in the application of social security schemes by host Member States to certain employed or self-employed EU citizens and their families moving within the European Community. The category of “employed person” includes EU nationals who have retired from employment but who remain insured by the social security system of a Member State because of contributions paid during their working life. Article 3(1) prohibits both direct discrimination (where people are treated differently because of their nationality) and indirect discrimination (where an apparently neutral test is applied to nationals and non-nationals and places non-nationals at a particular disadvantage).

The appellant was a Latvian national who had come to the UK in June 2000. Her asylum claim was unsuccessful, but she was not removed from the UK. She claimed the SPC but her claim was refused on the ground that she did not have a right to reside in the UK. She appealed, arguing that this requirement was directly discriminatory on the grounds of her nationality, in breach of article 3(1). The appeal tribunal allowed her appeal but the Commissioner allowed the Secretary of State’s appeal and held the conditions to be indirectly discriminatory but justified, the Court of Appeal in turn upholding that decision. The appellant appealed to the Supreme Court.

Lord Hope, delivering the leading judgment, considered three issues: whether the conditions of entitlement for SPC gave rise to direct discrimination; whether, if that was the case, that discrimination was objectively justified on grounds independent of the appellant’s nationality; and finally whether that conclusion was undermined by the favourable treatment that the 2002 Regulations give to Irish nationals.

Hope LJ noted that all UK nationals would automatically satisfy the “right to reside” element of the test, but only some nationals of other Member States do. However, the “in Great Britain” test would only be satisfied by some UK nationals and nationals of other Member States, although it was more likely to be satisfied by nationals of the former than the latter. He held that the ‘right to reside’ test was indirect rather than direct discrimination.

Citing the test for indirect discrimination in R (Bidar) v Ealing London Borough Council and Another (Case C-209/03) [2005] QB 812, under which any difference in treatment amounting to indirect discrimination could be justified only if it was both based on objective considerations independent of the nationality of the persons concerned and was proportionate to a legitimate aim, the Court held that both tests had been satisfied. The aim of the “right to reside” test was to ensure that assistance be limited to those who were economically or socially integrated with the country whose social assistance they sought, for the purpose of protecting the finances of the country, and was independent of nationality. This discrimination was justified because the 2002 Regulations were a proportionate response to the legitimate aim of protecting the UK public purse and that this justification was independent of the claimant’s nationality. The Court declined to make a reference to the Court of Justice of the European Union, holding that the position was acte clair that the right to reside test was compatible with EU law. Lord Walker dissented on the issue of justification.

The Court rejected the argument that since the entitlement was extended to Irish nationals, it was discriminatory not to extend it to nationals of other Member States. The provision for Irish nationals was protected by article 2 of the protocol on certain aspects of article 14 EC (now article 26 TFEU) which provides that the UK and Ireland “may continue to make arrangements between themselves relating to the movement of persons between their territories”.

The appeal was thus dismissed.