A recent ruling from the European Court of Justice is impacting shipping companies from European member states, who operates ships flying third state flags.
A Latvian national, residing in Latvia, worked as a seafarer for an undertaking established in the Netherlands. The activity was carried out on board a vessel flying the flag of the Bahamas. The vessel sailed outside the territory of the EU.
The Netherland authorities declared that the individual was covered under their social security for the period in question (from August 2013 to December 2013). This was desputed by the Latvian national.
The Court considered that the employment relationship retains a sufficiently close link with EU territory. This was argued based on the fact that during the period the individual was residing in Latvia and his employer was established in the Netherlands. This was in spite that the work was carried out outside the territory of the European Union.
The question was then mainly, whether it should be the state of employment or state of residence, that should be the state in which the individual should be considered covered – this would in addition have the result that the employer would required to contribute to that state’s social security system.
After having considered all the exemptions to the main rule(s), the Court concluded that the situation would fall under EU-Act 883/2004 art. 11, sub. 3, litra e, in which the coverage points to the resident state of the individual.
Generally, a case like the above, would under the rules in the previous EU-Act on coordination of soical security (1408/71) would generally result in the state of the employer would become the state of coverage.
Now, employers residing in member state, who operate vessels under foreign flags (non-EU flags) will be required to contribute to the social security of the member states of their (EU-residing) employees. This can become a siginificant administrative task and is also likely to have an impact on the employee expenses since the contributions vary significantly from state to state.
Should you have any questions or comments, relating to the above, please reach out using the form below.