The European Court of Justice has decided that Dutch drivers employed by a Cypriot employer are not subject to Cypriot social security legislation. This appears to bring the ‘Cyprus route’ to an end.
Cyprus Route
Under the Cyprus route, drivers enter into an employment contract with a limited company based in Cyprus. This limited company enters into contracts with Dutch haulage firms, under which the drivers carry out their work for these firms in the context of international transport.
The Social Insurance Bank (SVB) takes the view that these drivers are insured in the Netherlands, with the consequence (naturally) that contributions are payable in the Netherlands. The haulage companies maintain that the contributions are payable in Cyprus. Contributions in Cyprus are considerably lower than those in the Netherlands.
Formal or substantive
The Court has ruled that it is not the formal employment relationship but the substantive one that is decisive for the obligation to take out insurance.
The formal employment relationship is with the Cypriot Ltd. The employment contract was entered into with the Ltd.
However, the decisive factor in determining who the driver’s employer is lies in the substantive employment relationship. This exists with the person who:
- exercises actual control over the driver;
- actually bears the labour costs;
- has the actual authority to dismiss the driver.
The facts are decisive
This ruling establishes that the concept of an employment relationship must be assessed on its merits. However, the ruling does not mean that the ‘Cyprus route’ is blocked in all cases. To determine this, it must be examined how the parties actually interact with one another. Following such an examination, it might be concluded that, in that situation, not only the formal but also the substantive employment relationship is situated in Cyprus.
A1 certificate
In addition, the obligation to be covered by social security schemes within the European Union is determined by means of so-called A1 certificates. These certificates are issued by Member States without extensive investigation. Once issued, a certificate must be recognised by other Member States. If an investigation reveals that an A1 certificate issued is inconsistent with the actual employment relationship, the Member State concerned must request the Member State that issued the A1 certificate to withdraw it.