C-81/72

JUDGMENT OF 5. 6. 1973 — CASE 81/72

In Case 81/72

Commission of the European Communities , represented by Walter Much, Director-General of the Legal Service of the Commission, acting as agent, assisted by Louis de la Fontaine, principal adviser in the Legal Service of the Commission, having chosen its address for service in Luxembourg at the offices of its legal adviser Emil Reuter, 4 boulevard Royal,

applicant, v

Council of the European Communities , represented by its Jurisconsult, Ernest Wohlfart, having chosen its address for service in Luxembourg at the office of J. N. van den Houten, Director of the Legal Service of the European Investment Bank, 2 place de Metz,

defendant,

Issues of fact and of law

I — Statement of facts and By Article 65 (1) of the Staff procedure Regulations the Council shall each year review the remuneration of the officials The facts en which the case is based and and other servants of the Communities, the procedure may be summarized as in the light of a report by the follows: Commission and shall consider

COMMISSION v COUNCIL

indices.' cost of living, the Council shall decide, within two months what adjustments On 27 September 1972, at the same time should be made to the weightings and if as the Report which it had to submit by appropriate to apply them retrospectively. virtue of Article 65 (1), the Commission Since 1966 according to the Commission, forwarded to the Council a draft and indeed prior to it according to the regulation providing for an increase of Council, these annual reviews have taken 3.75 % throughout the table of salaries, account not only of the rise in the cost in respect of an increase in the cost of of living but also of the general increase living in application of the criteria laid in purchasing power within the down by the Decision of 20 and 21 Community, to ensure not only that they March 1972. receive an increase in salaries, in real However the Council was unable to terms, justified by and parallel to the arrive at a decision on that basis but general improvement in the standard of adopted, on 12 December 1972, the living in the Community. The lack of a disputed Regulation which, in respect of generally accepted means of measuring the increase in purchasing power, fixed the increase in purchasing power gave the increase in remuneration at 2.5 %: rise to debates and difficulties each year the Regulation also contains a number in fixing the criteria to be taken into of other points which are not in dispute. consideration, and the Council therefore invited the Commission to submit to it The Commission brought an action as soon as possible a document 'which against this Regulation on 15 December might be used as the starting point of a 1972 and it was registered at the Court thorough study, to be undertaken of Justice on the same day.

preparatory inquiries. arithmetical mean between two indices: The Council forwarded to the Court the one, a so-called "specific" index, derived from the alteration in salaries in the extracts of the draft minutes of the public service in the Member States, and 192nd and 217th sessions of the Council, the other from the total emoluments per held respectively on 20 and 21 March head in the public service of the same 1972 and 5, 6, and 8 December 1972. States.' The Advocate-General presented his In the course of its 192nd session, held Opinion at the hearing on 15 March on 20 and 21 March 1972, the Council, 1973.

The pleas and arguments of the parties (b) The interpretation followed by the may be summarized as follows: Council is further refuted by the fact that in the contested Regulation, the Council implemented all the essentials of its A — Pleas of the applicant Decision of 20 and 21 March 1972, except that relating to the increase in According to the Commission the purchasing power. contested Regulation infringes Article 65 (c) Finally, the very wording of the of the Staff Regulations, combined with the Decision of 20 and 21 March 1972. Decision argues in favour of the Commission's interpretation. It is stated This Decision binds the Council, in so there that there shall be an experiment far as the Council has not formally limited to a period of three years, at the repealed it. Not only has there been no end of which the agreed method of such repeal, but also, in the course of the calculation shall be reconsidered, and discussions occasioned by the remuner­ that this Decision shall not create 'vested ations problem, the Council proclaimed rights'. These precautions would have its intention to observe in their entirety been superfluous if the text only had the the contents of the Decision. It is, then, significance attributed to it by the the interpretation and scope of this Council. Decision which divides the parties. Regarding this, two issues must be clarified: the first relates to the scope of 2. On the second issue the Decision of 20 and 21 March 1972 combined with Article 65 of the Staff In the second place the Commission Regulations, the second relates to the disputes the thesis that the use of the interpretation of the words 'in the light words 'in the light of the two indices' in

the Decision of 20 and 21 March 1972 Turning then to the admissibility of the merely implies a recognition in principle action, the Council points out that the of the two indices as factors of appraisal contested act is a Regulation enacted in but does not mean that the norms which an 'area covered by the three they establish must be taken into Communities'. Whilst the action is account in decisions on salaries. unobjectionable in relation to Article 173 The term 'in the light of the two of the EEC Treaty and Article 146 of the indices' in fact originated in the proposal Euratom Treaty, it is per contra, inadmissible in so far as founded on which the Commission put forward as a compromise on 20 March 1972; as all Article 38 of the ECSC Treaty, as the Commission has not invoked lack of the interested parties had agreed that exclusive reliance on the alteration in competence on the part of the Council, salaries in the public services of the or infringement of an essential Member States furnished inadequate procedural requirement, the sole criteria, the Commission suggested, with grounds allowed by this provision. a view to verification, recourse to a At the hearing of 20 February 1973, the supplementary index derived from total Council stated that it waived this emoluments.

system adopted by the Council's 'of the arithmetical mean', but there was Decision of 20 and 21 March 1972, the never any doubt at the time of the defendant considers that it is for the discussions that both indices must be Court of its own motion, to determine taken into consideration. whether this system constitutes a rule of If, then, the Council has retained a law relating to the application of the margin of appraisal, this can only be Treaty, the noncompliance with which within the bounds of the two indices; it would found an action for annulment. cannot be considered to have retained a discretion to establish a coefficient of In this respect, it is impossible to rely on the case law of the Court to the effect increase below both indices. that a decision without particular legal As the two indices produced respective form is an act within the meaning of coefficients of 3.6 % and 3.9 %, the Article 173, as, the question at issue in contested Decision violates the rules of the present case is different, namely, calculation established as imperative by which decisions must lie deemed to the Decision of 20 and 21 March 1972, constitute a rule of law relating to the in that it lays down a rate of only 2.5 %. application of the Treaty. The same holds true for the combination B — Pleas of the defendant of Article 65 with the Decision of 21 March 1972, as it is doubtful 'whether a The Council points out in the first place Regulation and an informal Decision that since before 1966, an adjustment in taken by the Council constitute together salaries necessitated by the rise in the a rule of law which could be violated by cost of living did not follow an implementing provision of the automatically, and it retained a power of Regulation, the provision itself being appraisal, in particular to consider enacted as a Council Regulation'. whether an increase in salaries in real Rather, the question is one of the terms was appropriate. interpretation given to Article 65 by an

informal act, which according to the case Commission it can be exercised only law of the Court, however, (Case 74/69, within the bounds of the rates Hauptzollamt Bremen v Krohn, Rec. established by the indices adopted. 1970, p. 451) does not prossess the According to the defendant, on the binding force provided for in Article 189 contrary, the margin of appraisal is more of the Treaty. extensive, deriving from the use of the According to the Council, it is a question expression 'in the light of which was of a decision sui generis which preferred to the more restrictive constitutes an arrangement in implemen­ 'according to' or 'in accordance with'. tation of Article 65 of the Staff Article 65 (1) of the Staff Regulations Regulations. In any case, there can be moreover uses the same expression in no question of collective bargaining as, connection with the report by the by the same Article 65 and the principles Commission without the Council ever governing the civil service, the power of having considered itself bound by this decision pertains to the Council and report. cannot be shared with the staff. If, then, Finally, the fact that the contested act the Council wished to impose an expressly states that the system adopted obligation on itself, it none the less 'is within the framework of the retains complete freedom of interpreting provisions of the present Article 65 of and implementing its decision, without the Staff Regulations', indicates that the being subject to judicial control, in that principle of freedom of decision of the this voluntary undertaking is not cast in Council expressed in that provision was the form of a rule of law. maintained; consequently the defendant Should the Court hold that the contested preserves the power of reviewing Decision constitutes a rule of law whether, and to what extent, 'as part of relating to the application of the Treaty, the economic and social policy of the the defendant disputes that there has Communities, remunerations should be been an infringement of such a rule. adjusted'. The present trend of The defendant observes in the first place, Community economic policy is to refrain that the Commission itself admits that from generally inflationary measures, the contested act leaves the Council a such as unwarranted increases in wages discretionary power of appraisal. The and salaries, and this justifies the only differences of opinion concern the decision to remain slightly below the extent of this power. According to the specified indices.

For several years, the Council and the Commission, with the collaboration of the organizations representing the staff, have carried out the necessary adjustments.

It is admitted that these adjustments must seek not only to adjust salaries in relation to the increase in the cost of living, but equally, to give officials and servants the benefit of the increases in the level of incomes recorded in the Community.

As the calculation of the increase in incomes engendered difficulties each year between the organizations representing the staff and the institutions concerned, by a Decision of 14 December 1970 the Council invited the Commission to submit to it 'a document which might be used as the starting point for a thorough study, to be undertaken together, of the working methods to be used for the application of Article 65 of the Staff Regulations'.

3 In implementation of this Decision the Commission, in collaboration with the organizations representing the staff, submitted proposals to the Council substituting, in connection with the increase in purchasing power in real terms, for the 'joint index' referred to in Article 65 (1), sub-paragraph 1, and the so-called 'specific' index derived from the alteration in salaries of the national public services previously used a single index derived from 'the total emoluments per head'.

It concluded by pointing out that these proposals might well entail the adjustment of Articles 64 and 65 of the Staff Regulations.

On the rejection of these proposals by the Council, chiefly because they departed from the framework of Article 65, the Commission proposed a means of adjustment in the light of the arithmetical mean between two indices, the one derived from the alteration in salaries in the public services in the Member States in the course of the preceding year and the other from the total emoluments per head in the public services in the same Member States.

Whilst declaring that in adopting the disputed Regulation it felt bound 'by the system adopted on 21 March 1972', the Council, without itself formally raising the plea, suggests that the Court should decide of its own motion 'whether this system constitutes a rule of law'.

A — On the nature and effect of the Decision of 21 March 1972

6 The nature and effect of the Decision of 21 March 1972 must be appraised within the framework of the Council's implementation of the task assigned to it by Article 65 of the Staff Regulations.

COMMISSION v COUNCIL

By that provision, the Council shall each year review the remunerations paid by the Communities, in the light of a report drawn up by the Commission.

Furnished with this report, the Council is called upon to 'consider' the question of a possible adjustment of remuneration within the context of the economic and social policies of the Communities, of which the policy with regard to the emolument of the Community services forms part.

Both the antecedents and the terms of the Decision taken make it clear that the Council intended to bind itself to observe fixed criteria, in the working out of subsequent measures relative to the periodic determination of remunerations.

This intention shows itself particularly in the provisions whereby the system established by the Decision 'shall be applied' as an experiment and for a period of three years, from the affirmation that 'it is within the framework of the provisions of the present Article 65 of the Staff Regulations', from the

JUDGMENT OF 5. 6. 1973 — CASE 81/72

statement of an 'operative date' and finally from the insertion of an express reservation by which the application of the new method for an experimental period 'cannot give rise to vested rights'.

In the course of the oral procedure, moreover, the Council repeatedly emphasized that it acknowledged itself to be bound by this act, that it still intended to respect it, and that the disagreement turned exclusively on the interpretation of the Decision.

9 It appears, therefore, that by its Decision of 21 March 1972, the Council, acting within the framework of the powers relating to the remunerations of the staff conferred on it by Article 65 of the Staff Regulations, assumed obligations which it has bound itself to observe for the period it has defined.

Furthermore, it appears that all the relevant factors had already been considered, both in the course of the preparatory studies and in the proceedings prior to the Decision of 21 March 1972.

Further, neither the minutes of the Council's proceedings of 5, 6 and 8 December 1970 nor the recitals of the contested Regulation, establish circumstances sufficient to justify the abandonment, after nine months, of the system which the Council had bound itself to respect.

There is reason to consider that this system, by its very nature has a slowing-down effect, since it provides for the adjustment of the remuneration of the officials and other servants of the Community only after a finding that national remunerations have already increased, and since, within the framework of Article 65 this adjustment is only made once a year, at a fixed interval.

In the circumstances, the Council has failed to found the contested Regulation on grounds sufficient to justify it in departing from its prior undertakings.

B — On the scope of the Decision of 21 March 1972

12 The defendant claims that the Decision of 21 March 1972 does not have the scope attributed to it by the applicant with regard to the limits which it imposes on the excercise of the discretionary power which Article 65 confers on the Council.

It follows that in fixing the increases provided for in Articles 1 to 4 of the contested Regulation below the level established by the lower index calculated in conformity with the Decision of 21 March 1972, viz. 3.6 %, the Council has violated the rule relating to the protection of legitimate confidence in the implementation of Article 65 of the Staff Regulations.

14 These Articles 1 to 4 must therefore be declared void.

15 However, to avoid discontinuity in the system of remuneration, the second paragraph of Article 174 of the Treaty should be applied so that the Articles declared void shall continue to have effect until the Council passes a new Regulation in consequence of the present judgment.

Costs

16 By Article 69 (2) of the Rules of Procedure, the unsuccessful party shall be ordered to pay the costs, if there is a submission to that effect.

Neither of the parties has presented submissions regarding the costs.

hereby:

1. Annuls Articles 1 to 4 of Council Regulation of 12 December, No 2647/72;

2. Declares that these Articles shall continue to have effect until the Regulation to be made in consequence of the present judgment comes into operation.

Lecourt Monaco Pescatore Donner Mertens de Wilmars

Kutscher Ó Dálaigh Sørensen Mackenzie Stuart

Delivered in open court in Luxembourg on 5 June 1973.