- Created: 18 January 2016
By Stephen Gardner. An extraordinary tale of a dodgy legal dossier filed at the EU Court of Justice has a lot to say about how the European Union works.
In 2014, a Cypriot court, which wanted clarification on where companies that farm out workers to other European countries should make social security payments, referred a case to the ECJ. The case was originally filed in Cyprus by a Polish worker who claimed that Cyprus should be liable for his social security benefits, because he had been a contract worker for a Cyprus-registered company.
The case progressed through the stages at the ECJ, and in May 2015, the court’s advocate general duly delivered his opinion – a preliminary step ahead of a judgement in ECJ cases. The opinion supported the Polish worker’s case. ECJ rulings usually follow what the advocate general says, so it looked like a David versus Goliath type victory was in the offing.
Except it wasn’t. By coincidence, Ireland’s public broadcaster, RTE, was investigating the Polish worker’s employer – Irish-owned, but Cyprus-registered, Atlanco Rimec. RTE found that the Polish worker knew nothing about the case. It had been initiated without his consent by a Belgian law firm that also represented… Atlanco Rimec. It seemed that the case might be a bid to change EU law in a way that would have favoured the company.
Atlanco Rimec had form. It was one of Europe’s largest suppliers of contract workers for projects such as bridges and nuclear power plants. It had been in court in various EU countries for dodging tax and social security obligations. It was accused of blacklisting workers in the UK. It was registered in Cyprus and wanted to pay social security there because Cyprus has among the EU’s lowest social security charges. For jobs in countries like France and Sweden, companies that hire out contract workers are able to charge high rates per worker and swell their profits by taking advantage of the differences in social security rates.
Atlanco Rimec had already lost a legal challenge against Cyprus, after the country stopped issuing it with the necessary paperwork for making social security payments in Cyprus. The fake case of the Polish worker popped up soon after. The RTE investigation has triggered a criminal investigation in Cyprus, but it is unclear if it will get anywhere. Atlanco Rimec dissolved itself soon after RTE started asking questions.
As well as costing EU taxpayers an untold amount, the apparent "fake" case came close to forcing a change in EU law that could have had implications running into the millions of euros for social security systems – essentially by diverting money that should have been paid in social security into the profits of less-than-reputable companies. The ECJ has said, however, that it plans no new checks on cases – it relies on courts in member states to do the due diligence.
The case also exposes what unions and some governments say is a structural problem in EU law. Companies that supply contract workers set up in low-tax, low-social security countries, some of which have a reputation for turning a blind eye so that social security payments that should be going to the higher-cost countries can be hijacked. The European Commission has taken up the issue but is moving slowly. Don’t expect any changes before the end of the decade.
The RTE investigation can be accessed at http://www.rte.ie/radio1/doconone/2015/1204/751206-the-case-that-never-was/