Thursday

19th Sep 2019

Investigation

EU court entertained bogus case on welfare rights

  • Irish journalists reveal first known bogus case brought to the EU court - set to shape EU-wide social laws (Photo: Cedric Puisney)

At first glance, the case of Bogdan Chain v. Atlanco Ltd., heard on 12 March 2015 at the European Court of Justice, seemed like any other.

The case involved a Polish man, a Dublin-based international recruitment company, a Belgian legal firm, and two Cypriot-based lawyers.

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  • The case involved a Polish man, Bogdan Chain, a Dublin-based international recruitment company, a Belgian legal firm, and two Cypriot-based lawyers (Photo: RTE)

But this was no ordinary case.

Its outcome could potentially affect every EU citizen. It centred around social insurance payments for migrant workers within the EU.

We’re both employees of RTE, the Irish public broadcaster, and we began researching Chain v. Atlanco in late 2014. The case had come to our attention through an earlier RTE documentary, Jobs Abroad, on the treatment of foreign workers by Irish firms.

The TV programme was broadcast months before Chain v. Atlanco would be heard at the European Court. Details were very sketchy - all we knew was that Chain was at one time an employee of Atlanco and that the case arose from a dispute over social insurance.

In November 2014, we set about finding the man named as the applicant in the case. It took us several months to find him, eventually tracking him to his home in Stalowa Wola, an industrial city in southeast Poland. In January 2015, we first met and interviewed Bogdan Chain for our RTE Radio ‘Documentary On One’ production.

What case?

He was truly shocked when we told him of a European Court of Justice case in his name. He had no knowledge of this case, had not initiated any legal proceedings and had not engaged or instructed any legal representatives to act his behalf.

He was simply dumbfounded to learn of a case being taken in his name against his previous employer, Atlanco, at the highest court in the European Union.

We were also completely taken aback by Chain’s response. Had we just uncovered the first known bogus case at the European Court of Justice? As the following months would reveal, the short answer is Yes.

Just how did the case of Chain v. Atlanco make it all the way to the European Court of Justice when the applicant was never involved in the process?

The defendant in this case was Atlanco, an international recruitment company headquartered in Dublin, Ireland but registered in Nicosia, Cyprus. Atlanco was one of a myriad of subsidiary companies of the Dublin-based parent company, the Atlanco Rimec Group.

Founded in 1994 by Irish entrepreneur Michael O’Shea the Atlanco Rimec Group grew into one of the leading recruitment agencies in Europe and had, at its peak, over 50,000 workers on its books.

Atlanco’s business model was straightforward - bidding on Northern European contracts at Eastern European rates - and dispatching workers from lower-pay unemployment blackspots in eastern and southern Europe, particularly from Poland and, more recently, from Portugal.

The company has been described as “a significant, privately-owned international organisation that is a leading specialist in delivering labour and HR solutions to blue-chip clients throughout Europe.” A remarkable Irish success story in many ways - and its founder, 50-year-old Michael O’Shea, reaped the rewards by making vast profits from the Atlanco Rimec operation before moving into other investments.

Irish baron

The company’s last published accounts show gross profits at the Group of €23 million on turnover of €84 million in 2004, after which company accounts went offshore to Jersey. The Irishman now residing in Geneva has been described in Ireland’s rich list as a “low profile private equity baron,” with an estimated personal wealth in excess of €60 million. Notably, O’Shea was secretary and director of Atlanco when proceedings commenced in Chain v. Atlanco.

Through documentation we have seen, this case was in planning as far back as 2011. In fact, in its earliest form between legal representatives, the case was initially taken in the name of a Polish man named Fijalkowski. For reasons still unclear the Fijalkowski name was subsequently removed and simply replaced with the name of Chain.

Chain v. Atlanco first entered the judicial system when, in January 2012, proceedings were initiated at Eparkhiako Dikastirio Lefkosias (District Court, Nicosia, Cyprus). In April 2014, the Cypriot court then referred the case to the European Court of Justice for a preliminary ruling.

Chain v. Atlanco was seen by many as a “landmark” or “test case.” It centreed on social insurance payments for workers within the EU - with the critical question being asked of where an employer pays social insurance for employees who work in more than two EU states within any given year.

There are approximately 3 million EU workers who fall into this category annually and the rates of social insurance vary widely from country to country within the EU.

The defendant in this case, Atlanco Ltd., a subsidiary of the Atlanco Rimec Group, was registered in Cyprus in August 2007. The commercial advantages of locating in Cyprus were simple.

Back then, if a company registered in Cyprus and had employees working in two or more EU states, the company could apply for appropriate EU work permits from the ministry for labour and social insurance in Nicosia and pay its social insurance in Cyprus, which offered the cheapest rates within the EU.

If your company had tens of thousands of employees spread across the EU, the savings from cheaper rates of social insurance payments would convert into hugely increased company profits. And that’s the way it worked for Atlanco until 2011, when the Cypriot government queried the company’s use of EU work permits and suddenly ended that lucrative arrangement.

No official explanation was given - but the decision would force Atlanco to pay more expensive rates of social insurance around Europe for their employees, seriously cutting company profits. In response, Atlanco sued the state of Cyprus for loss of earnings.

EU importance

That’s what makes Chain v. Atlanco so important - the outcome of Case C-189/14 at the European Court of Justice would set a precedent, which could facilitate a return to Atlanco’s previous system of applying for EU permits in Cyprus.

The EU Commission’s position clearly favours lighter regulation on the movement of workers within the EU. In practice, this would mean looser rules on social insurance for migrant workers within the EU. However, almost all member states want tighter controls - and for good reason.

If social insurance payments can be arbitrarily made through countries like Cyprus, simply because the rates are cheaper, contributions will drain from the social insurance fund within the claimant’s home country.

It’s like paying cheap car insurance in one country, driving your car in a different country and, when involved in an accident, claiming compensation at higher rates in a country where car premiums are far more expensive.

Under EU law the employer is legally responsible for the payment of social insurance. The principle is that the payment of social insurance for migrant workers, like Chain, will cover them wherever they work within the EU.

Migrant workers are then entitled to claim benefits in their own country when they return home, irrespective of where they paid their social insurance within the EU. Chain v. Atlanco raised a fundamental question - could an international recruitment company legally employ EU rules on social insurance to substantially increase its profit margin?

The question remains as to how Chain’s identity came to be used in Chain v. Atlanco. What we do know is that Chain began working with Atlanco Rimec in 2009 after the company set up offices in Krakow, Poland, and ran a TV and newspaper advertising campaign in south-eastern Poland.

In fact, large numbers of workers from Stalowa Wola signed up with Atlanco at that time - in a city blighted by mass unemployment, 16 of Chain’s immediate neighbours joined the Irish-based recruitment company.

Chain’s story

Chain was posted by Atlanco to a number of jobs between 2009 and 2013, taking up temporary work in Finland, France, Norway, Romania, Holland, and Belgium.

However, despite Chain’s payslips from Atlanco stating that social insurance had been deducted from his wages in Norway, Chain was pursued by the Norwegian tax authorities on the grounds that there was no evidence that his social insurance had been paid.

The Norwegian tax office told him the tax deductions displayed on his wage slips were not its concern and Chain was obliged to pay a tax bill of €4,000, meaning that in effect he paid the same tax twice. The heavy penalty arrived at a time when funds at the Chain home were in short supply.

Chain’s own social insurance problems came to light when he suffered a heart attack in early 2014. He is now unable to work and sought a disability payment, only to be told by ZUS, the Polish social welfare authority, that records of his Atlanco-related social insurance payments are incomplete.

Unable to work since his heart attack, Chain is now without any income, dependent solely on the salary of his wife, a local teacher.

What about the legal representatives involved in the Chain v. Atlanco case? Cypriot based lawyer Christophorous Christophi represented Chain - or at least the case being taken in his name. Similarly, another Cypriot lawyer Achilleas Demetriades, who chose not to participate in our radio documentary, represented Atlanco in the case.

Christophi agreed for us to interview him - and during the course of his January 2015 interview, he confirmed that he had never met or spoken with Chain. We found it odd that he had not met or had any communication with the man whom he had built a case around at the European Court of Justice. Christophi told us that he had taken legal instruction on the case in Chain’s name from the international law firm Lorenz, based in Brussels.

We pursued the matter with Lorenz in Brussels. Bert Theeuwes, managing partner at Lorenz, spoke briefly with us, acknowledging that his company had represented Atlanco Rimec but was no longer associated with the Irish-based company. Theeuwes denied that Lorenz had acted on behalf of Chain. Documentation produced by Christophi to the attorney-general in Cyprus suggests otherwise.

Following our interview with Chain, and the revelation of his non-involvement in the case, Chain wrote to the European Court of Justice outlining the fact that he had no hand, act, or part in this case. He asked for the case to be withdrawn. Whilst acknowledging his letter, the European Court of Justice ignored his request. They simply proceeded as normal.

Bogus hearing

At 9.30am on 12 March 2015, Chain v. Atlanco was heard at the European Court of Justice. It was presided over by five judges and the advocate general. Legal representatives from eight EU countries attended, declaring their opposition to any further loosening of social insurance payments within the EU. No legal representatives for either Chain or Atlanco Ltd. were in attendance.

Chain himself did not attend either - nor did the Court invite him after he made contact with them. However, we were there - and heard Chain’s name mentioned multiple times as the person behind the case. No reference was ever made to Chain’s correspondence where he advised the European Court of Justice that he had not taken this case.

The hearing took less than two hours and the judges retired to consider the legal arguments. Two months later, on 21 May 2015, Yves Bot, the EU Advocate General issued a detailed legal opinion on the case, noting that it “raises complex legal issues requiring careful consideration.”

However, the most complex legal issue in our minds is why the European Court of Justice would continue with a case, despite having been advised by the named applicant that he had not brought this case and despite his request for it to be withdrawn.

Why had the European Court of Justice become complicit in this bogus case? And in light of this, why did they not seek clarification and identification from both parties that they were in fact legitimately pursing this case?

Given that the European Court of Justice continued without his express permission, Chain had grave concerns as to what might result. He did not want his name associated with this or any case.

As his correspondence with the European Court of Justice had been overlooked, he contacted Cypriot human rights lawyer Nicoletta Charalambidou, who specialises in European Union law, in the hope that something could be done in Cyprus, where the case had originated.

Charalambidou brought the case, on a pro bono basis, to the attention of the Cypriot attorney general, Costas Clerides, advising him that Chain had not brought any case and was entirely unaware as to why his identity was being used. Clerides immediately withdrew the case in Cyprus, which then resulted in the case falling at the European Court of Justice.

Case withdrawn

As a result, on 11 June 2015, a short order relating to Chain v. Atlanco was issued by the European Court of Justice - simply stating - “The president of the First Chamber has ordered that the case be removed from the register.”

Given the gravity of what was beginning to unravel, the Cypriot attorney general subsequently launched a criminal investigation into the case. That investigation is ongoing.

In early autumn 2015, the legal representatives involved in Chain v. Atlanco were summoned to a court hearing by the Cypriot attorney general. Demetriades, Atlanco’s legal representative, and Christophi, the legal representative taking the case in Chain’s name, both appeared in court. Christophi confirmed that he had taken his instruction from the Brussels based international legal firm, Lorenz, on behalf of Chain.

Astonishingly, documents were produced in the court which show that Lorenz was simultaneously reporting to the Atlanco Rimec Group whilst also instructing in the name of Chain.

Why was a single legal firm involved with opposing parties in a European Court of Justice case? No evidence was produced in court to show Chain ever authorised any legal action in his name.

The Atlanco Rimec Group, once the employer of over 50,000 workers, dissolved on 14 January 2015, shortly after we first interviewed Chain and Christophi. This multi-million euro business and its estimated 80 subsidiary companies suddenly ceased operations.

Door-stepping O’Shea

We door-stepped (sought an unannounced interview) the founder Atlanco Rimec Group, O’Shea, in June of this year, in the hope of some answers. He refused to answer any questions relating to the case. Instead, he told us to contact a public relations agency, Heneghan’s PR in Dublin.

Given the magnitude and seriousness of this case, we fully expected to be pointed in the direction of his legal counsel. In any event, after putting a series of questions to Heneghan’s PR, their immediate response was to inform us that they did not “have any information at all on these matters at this moment” and had to consult with O’Shea about matters raised.

A few days later, we received a further reply from Heneghan’s. Having consulted with O’Shea, they assured us that neither O’Shea nor the company had any knowledge of Chain v. Atlanco nor of the criminal proceedings in place. Moreover, Heneghan’s informed us that they had “made inquiries and Chain has confirmed that he was indeed aware of the case when it was filed.”

They went on to say that “our understanding is that the confusion on this matter may well have arisen from an incident that, apparently, occurred about a year ago.

Chain advised that some individuals questioned him about the case, without appointment, and he told them he knew nothing in order to close down the conversation.” We would question the veracity of this response as Chain told us he had no contact with Heneghan’s PR or anyone who claimed to be associated with them.

Had we not made this radio documentary, it is quite clear that the European Court of Justice would have ruled on Chain v. Atlanco - shaping important EU law on social insurance for millions of migrant workers around Europe.

Not only would that have opened a path to employers paying cheaper social insurance for migrant workers throughout the EU, it would also have meant a ruling favourable to Atlanco in the company’s Supreme Court action against the Cypriot state over the withdrawal of work permits. This could have paved the way for a multi-million euro settlement.

Myriad questions

Whilst this documentary opens up a myriad of questions, there are a number, which we hope, will be answered through the courts - namely, exactly who was behind this case - and how will they be held accountable? What protections will now be put in place for all EU citizens and the European Court of Justice itself to prevent the manipulation of EU law through a case like this? Who paid for the legal costs accumulated by this case at the European Court of Justice - and will anyone seek the return of costs that went into what was exposed as a bogus case?

Given Chain’s only association with this case was the use of his name and identity, he was never contacted in relation to costs incurred by this legal action. The questions remains as to who instructed this case to be taken in the name of Chain and, furthermore, who paid for it?

The wider question remains as to whether previous bogus cases have already been heard at the European Court of Justice - or whether any might be currently in train.

Whatever way you tell this story, Chain v. Atlanco has brought the European legal system into disrepute. Action will need to be taken to ensure something like this never happens again.

As for the man whose name almost made legal history, Chain is still wondering how this all happened. Sadly, he is still without any form of income, as Polish authorities are unable to find evidence of his social insurance contributions throughout the last years of his employment.

Following the documentary ZUS say they are now reviewing the matter.

Given that Chain was an unknowing and unwitting pawn in a much bigger story, we hope that his own personal case will get the necessary help it needs from the Polish authorities and put an end to what has been a frightening and disturbing period for a man nearing retirement. A man who worked all his life to support his family.

Documentary On One – The Case That Never Was can be listened to online.

Frank Shouldice and Liam O’Brien are co-producers of Documentary On One - The Case That Never Was. They are RTE employees. For media enquiries, contact Sheena Madden, RTE press officer, on +353.1.208 2452 or +353.872 458 046, and sheena.madden@rte.ie

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