European briefing | Balancing act: how will the ECJ resolve grant shopping?

In a world where higher education is more and more important, and where students are highly mobile, the ECJ has frequently had to consider questions concerning access to it - and, even more so, access to financial support for it - and its approach has gradually changed over time. Two recent decisions break no new ground but state the underlying principles with commendable clarity.

Prinz (Third Chamber, 18 July 2013) concerned German nationals who wished to receive grants from Germany for study at foreign universities. In each case the applicant only qualified for a one year grant because, when their course started, they had not been permanently resident in Germany for at least three years. Each challenged the legality of the three-year residence requirement as an interference with their rights of free movement, arguing that it was apt to dissuade an EU citizen from commencing studies in another member state, and the national court referred the question to the ECJ.

In Giersch (Fifth Chamber, 20 June 2013) the applicants lived with their parents, on whom they depended, in Belgium or Germany. The parents were long-time migrant workers in Luxembourg. Each applicant asked Luxembourg for financial assistance to attend university outside Luxembourg, which was refused because neither they nor their parents were permanently resident in Luxembourg. They alleged that this involved a breach of Article 7(2) of Regulation 1612/68 (now 492/2011) which guarantees social advantages for migrant workers.

Although the precise legal framework ?was different in each case, the essential question was the same: how far does EU law permit residence requirements to prevent 'grant shopping'?

Financial burden

Not surprisingly, therefore, the essential structure of the argument was the same in both cases. In Giersch the court identified the rule as one which carried a risk of indirect discrimination on ground of nationality, because non-nationals were more likely to be non-resident than nationals. In Prinz it identified the rule as one which might dissuade those who wished to study outside Germany, for fear of losing the training grant. Although these starting points (suspected indirect discrimination vs 'chilling' the exercise of free movement rights) are different, each ends up requiring the same question to be answered: does the measure pursue a legitimate objective in a proportionate way.

The government advanced similar justifications. Germany said that it was legitimate to avoid an 'unnecessary financial burden' by restricting grants to those who are able to demonstrate a 'sufficient degree of integration' into German society. The Luxembourg government put the argument in a more instrumental way: they wanted value for money by giving grants to people who were likely to make use of their expensive education for the benefit of Luxembourg. In both cases, the court accepted the justification as potentially valid - member states are allowed to restrict their grants to those who 'belong', and to prevent 'grant shopping'.

At this point, the reasoning of the cases diverges in a way that students of proportionality may find interesting. In Prinz the court simply proceeded directly to some case law which, in its view, showed that "the proof required to demonstrate a genuine link must not be too exclusive in nature or unduly favour one element". If the aim is to focus largesse on those who are 'integrated', the member state must be willing to consider all the many possible dimensions of 'integration', and not just residence. A three-year residence requirement could not, therefore, be accepted as such, and it was left to the national court to decide whether these applicants should qualify as 'integrated'.

Close connections

In Giersch, the court took a more rigorous approach, asking first whether the residence requirement was an appropriate way to achieve the objective (it was) but then whether it was necessary, or whether less restrictive means could have been used. However, referring to the same case law deployed in Prinz, the court reached essentially the same conclusion: if you want to restrict grants to those with close connections to the country, you can do so - but you must look at all the relevant connections, and not give undue weight to residence. So, for instance, it might be acceptable to look at things like the length of time the parents had worked in Luxembourg. In the particular cases, that was at least 20 years in each case, and the ECJ had no difficulty in regarding that ?as sufficient.

As it happens the later judgment (Prinz) makes no reference to the earlier, although they were decided a month apart. Although the decisions are broadly consistent, there are slight differences of emphasis. For instance, Prinz seems to lay more stress on the need to consider all factors connecting the student with the member state concerned, whereas Giersch concentrates more insistently on the length of time the parents had worked in that member state. But these differences are more the result of different facts than of any fundamental difference in approach. More striking, at first sight, is the difference in technique, in that Giersch follows a more elaborate (and formally correct) consideration of each factor in the proportionality test, while Prinz takes a short cut to the central point. But in the end the route taken makes no difference to the destination. The message is that the ECJ will tolerate rules which restrict public educational funding to those who have close connections with the paying state, but that such rules must be willing to look at more than residence alone.