The reference for a preliminary ruling brought by the Administrative Court of Luxembourg in the Elodie Giersch matter essentially concerns the question of whether a recent Luxembourg law that makes funding of higher education studies conditional upon residence in Luxembourg is compatible with European Union law, more specifically the requirement of non-discrimination on the basis of nationality. The aid can be received for studies undertaken within Luxembourg but also anywhere else.
The law is particularly controversial as it excludes from its benefit the children of frontier workers who travel every day from Belgium, Germany and France to the Grand Duchy to work. Currently, around 44% of those employed in Luxembourg are frontier workers. Over 600 applicants had brought proceedings before the national court after they had been refused financial aid. They argued that the fact that they were treated differently from the children of workers residing in Luxembourg constitutes an infringement of the principle of free movement of persons.
Advocate General Mengozzi’s opinion is now available (though it has not yet been translated into English). He suggests that the Court not declare the Luxembourg provisions contrary to EU law. In his view, the residence requirement can be justified if it increases the share of Luxembourg residents with a higher education degree.
The Advocate General first classified financial support for higher education as a social benefit, meaning that the attribution of the benefit must not discriminate between domestic and foreign workers. Given that this is however the effect of the measure, he qualifies it as constituting indirect discrimination. Still, he argues that such discrimination can be justified.
Indeed, the Advocate General accepts Luxembourg’s argument that the measure aims at significantly increasing the share of Luxembourg residents with higher education degrees. At present, only 28% of Luxembourg residents have such degrees, a number that is significantly lower than in ‘comparable’ countries. Luxembourg considers it necessary to bring this number up to 66% to enable the transition of the Luxembourg economy towards a knowledge-based economy. The financial aid is aimed at increasing this number.
Luxembourg argues that the residency requirement can be justified by the fact that aid should only be paid to those that have a close link to the Luxembourg society so that, after having pursued their studies, they are more likely to remain or return to Luxembourg so that the knowledge they acquire during their studies will be of benefit for its economy.
Advocate General Mengozzi accepts that this is an argument in the general interest that is in line with the objectives of the Union. Indeed, numerous projects at supranational level encourage young adults to undertake university level studies, such as the Europe 2020 project. The Advocate General further underlines that Member States have a high level of discretion in this area given that no harmonization measures have been initiated at EU level in this regard.
In addition, he recognizes that the instrument chosen by Luxembourg was informed by its atypical economic situation. In fact, the Luxembourg economy was largely based on the coal and steel industry until transiting towards the banking and finance sectors a couple of decades ago. Even before the current economic and financial crisis, Luxembourg had decided to diversify its economy in light of the dangers inherent in focusing on a single sector.
Advocate General Mengozzi considers this objective of diversifying the national economy to constitute a legitimate aim in the public interest. He suggests that rather than declaring such a requirement contrary to EU law, the Court should communicate to the national court criteria necessary to check whether the national measure constitutes an appropriate and proportionate tool to further Luxembourg’s development towards a knowledge-based society. More precisely, this criterion should provide for verification of whether those who benefit from the aid later join the national labour market and whether the residence requirement is indeed the only measure that can assure a reasonable probability that the beneficiaries of the aid later actively contribute to the development of Luxembourg’s knowledge-based society.
This opinion presents an interesting contrast to previous case law. Gravier established that EU law cannot tolerate discrimination between migrant and domestic students as regards higher education access. Commission v Austria confirmed that the conditions of access to universities falls under the ambit of the Treaties and that such access must not be discriminatory. Accordingly, an Austrian law affording detrimental treatment to nationals from other Member States was contrary the requirements of EU law. However, differential treatment might have been justified if the law had safeguarded the integrity of the Austrian educational system that would otherwise have been put into jeopardy. This was subsequently confirmed in Lyyski where it was held that the objective of preserving and improving the Swedish educational system could justify a measure making employment in a school in Sweden a preferential factor for enrolment in higher education course aimed at meeting the need for qualified teachers.
Advocate General Mengozzi’s reasoning significantly diverges from such educational reasons as his opinion is based on concerns for Luxembourg’s, and maybe even more so Luxembourgers, economic future. It is questionable how this can be reconciled with the idea of the single market.
Indeed, rather than driving its own residents to pursue higher education, it could be argued that employing highly qualified workers from other Member States could be considered a quicker and more efficient tool to achieve such economic transition.
Yet, if we read between the lines of the opinion, it could arguably be interpreted as seeking to accommodate Luxembourg’s very particular economic situation.
This might be placed in the context of the more general willingness of the Court to accommodate those circumstances that are particular to a Member State. Without a doubt, the Griesch case significantly differs from the recent case law on national identities that has, for instance, recognised that given its importance for Austria’s national identity, the principle of republican government could justify an Austrian measure limiting the free movement of workers. Nonetheless, the opinion recognises that there is something peculiar to Luxembourg that should be accommodated by EU law.
Indeed, there is no other Member State whose labour market is composed by almost 50% of non-residents. While this is an economic particularity its consequences extend beyond the mere labour market and significantly shape social realities. This is not per se a component of Luxembourg’s national identity. Yet, it can easily be argued that its atypical economic history and the high share of frontier workers shape Luxembourg to a far larger extend than, say, the fact that it is a constitutional monarchy, and that EU law should create space for these peculiarities.