Welfare fraud scandal – Universities neglected EU law

The Norwegian Labour and Welfare Administration, or NAV, hit media headlines after incorrectly interpreting European Union regulations, resulting in scores of people being wrongly convicted of benefit fraud. Universities are taking some of the blame – for not teaching EU law sufficiently.

At least 75 people were wrongly convicted for NOK24.8 million (US$2.7 million) in welfare provisions they were entitled to, and 36 served jail sentences – the longest incarceration for eight months. Some 2,400 other cases have to be re-examined for faulty decisions. All the cases might lead to repayment of funding illegally retracted.

The issue specifically affects people who received benefits while living in Norway but staying temporarily in another European Economic Area (EEA) country.

Rules for receiving sickness benefits, or support to get back into work, for people living in Norway but visiting another EEA country have been incorrectly applied by NAV since 2012, when EU regulations pertaining to the issue were introduced.

Since the case burst into the public domain last autumn, questions have been raised about how misinterpretation of EU law could carry on for eight years. Critics have delved into the roles of politicians, lawyers, the press – and, not least, universities.

Terje Klepp, a former auditing director of NAV who conducted an internal investigation for the welfare agency, summed up his report findings at a press conference on 12 December: “I call it the three Cs: a lack of competence, capacity and communication.”

European trump Norwegian laws

In a 16 December 2019 article in the Nordic Labour Journal, Lars Bevanger og Björn Lindahl wrote: “The scandal centres on the fact that EU rules trump Norwegian law. It upholds the free movement of people across national borders as a very important principle.”

It should be possible for citizens of the EEA – which is the EU plus Norway, Iceland and Lichtenstein – to take benefits with them to other countries without having to apply to do that.

Lindahl continued: “According to Norwegian benefit rules, however, you must be residing in Norway in order to receive a number of benefits. The courts have not questioned the authorities’ interpretation of the law. They have carried on using the Norwegian benefit legislation rather than EU benefit regulations.”

According to the Nordic Labour Journal: “The Ministry for Foreign Affairs is believed to have translated the EU benefit regulations incorrectly. Using the Danish version, it had changed the Danish wording for ‘temporary stay’ to ‘temporary place of residence’.

“Such mistakes led to a distinction between stay and place of residence that does not exist in the EU regulations. The right to receive benefits in a different EEA country was interpreted to mean only those who were residing abroad had that right.” People temporarily resident in an EEA country would be treated under more restrictive Norwegian legislation.

Lindahl pointed out in the journal article that not everybody who stayed in a different EEA country had been refused benefits from NAV, which processes some 22,000 applications to receive sick pay during foreign stays each year. “Only 2,000 were declined.”

A rule of law scandal

Professors of law at the University of Oslo, Malcolm Langford and Jon Christian Fløysvik Nordrum, wrote in the major Norwegian newspaper Aftenposten: “The mistake is found all through the system: The government has proposed laws that are violating the EEA agreement, Parliament has endorsed these and the Supreme Court has applied them.

“Along the road the cases have been treated by the NAV, the police, the prosecution authorities and the defence lawyers. It is incomprehensible to understand that the mistakes have not been discovered.”

This was not only an EEA or a NAV scandal but a scandal for ‘Law Norway’ and the rule of law, argued Langford and Nordrum. If lawyers are to promote rights and prevent mistreatment, they must be well educated, independent and critical.

“The problem is reinforced by having too little EEA law in Norwegian law degrees.” In Denmark the University of Copenhagen’s compulsory EU law had three times more course points than in Norway and the university offered 11 elective courses in EU law against an average of two in Norwegian universities.

‘Irrational collective defensive attitude’

Carl Baudenbacher, professor emeritus of law at the University of St Gallen in Switzerland, wrote in the constitutional law publication Verfassungsblog that it was not the extraordinary character of European law and its introduction into national law that destroyed the judgement of actors and legal institutions in Norway.

Rather, actors did not acquire the necessary knowledge and skills because of “an almost irrational collective defensive attitude of scholars, politicians, bureaucrats and judges against EEA law, which from the outset was perceived as foreign and threatening”.

Baudenbacher concluded: “EEA law education must be made mandatory for prospective lawyers and judges. It is incumbent on Norwegian universities and the Bar to require that new entrants to the profession are properly educated and equipped to identify, consider, and argue points of EEA law before all courts. This is a long-term solution.”

A desire not to know

University World News asked professor of law at the University of Bergen, Jørn Øyrehagen Sunde, how he would explain the NAV scandal.

An expert on the rule of law, he said: “We must separate the question of the causes of the NAV scandal, and what made the scandal possible. In both cases we are dealing with a serious rule of law problem.”

There were many causes of the scandal, but the main cause was the desire not to know.

The European Free Trade Association or EFTA Surveillance Authority had raised questions already in 2015 concerning the practice on residency when receiving social security benefits. “A proper investigation of the issue would have then revealed the problem,” he said.

“Early in 2017 the European Court of Justice passed a decision in a case against the United Kingdom, with Norway as an intervening party, which was concerning a similar question of residency when receiving social security benefits. As an intervening party, the Norwegian government had knowledge of the case and its outcome, but never took notice of it.”

Sunde continued: “The Social Security Court from 2017 again and again reversed the decisions of the Norwegian Labour and Welfare Administration. Still, the decisions of this first instance court were not appealed, as a way to avoid a more authoritative court ruling to be passed by a higher court that would create precedent.”

Thus there were “plenty of events and knowledge in the system that should have caused the Norwegian government to act”. But it did not – and not even when people were sent to jail. “This is a breakdown of rule of law mentality in the Norwegian administration that is worthy of any illiberal regime.”

However, said Sunde, the Norwegian government and administration are controlled by the courts. Every person sentenced to jail or to repay social benefits was accused by a state attorney, defended by a state-paid attorney and judged by independent justices.

“But judges and attorneys never checked whether Norwegian legislation was in compliance with the EU law in this issue. They hence totally failed as controllers of how state power is exercised. There is no reason to believe that they did so because of laziness or incompetence.

“Rather it is the overwhelming legal material of EU law that frightened them. They simply did not know what treaties, what directives and what court rulings to start with. It would not have been that hard if they had actually looked into the matter, but they feared that they would not be able to perform within their deadlines if they started. Instead they trusted that the government had done a decent job. The government had not,” Sunde argued.

“It is the vastness of EU law, held up against the deadlines courts have to operate within, that made the NAV scandal possible – because it reduced the desire to exercise the control that rule of law depends on.”