C-567/79

JUDGMENT OF 1.7. 1982 — CASE 567/79 A

beneficiary of the loan is an official, of the weighting in order to take into for the. exchange rate to be the rate account changes in the cost of living fixed as a reference parity in Article in those various places on the one 63 of the Staff Regulations and for hand and, on the other, by alteration the monthly transfers to be made in of the parities under Article 63 of the accordance with the provisions of Staff Regulations in order to take into Article 17 of Annex VII thereto. In account fluctuations of exchange the performance of a loan agreement rates. concluded before the entry into force of Regulations Nos 3085/78 and The fact that it is subsequently sought 3086/78 amending inter aita the to achieve that adaption, which was provisions of Article 63 of the Staff previously effected by means of Regulations and of Article 17 of adjustment of the weighting, by the Annex VII thereto, the Commission is updating ot the parities referred to in therefore correct to apply to the Article 63 of the Staff Regulations, monthly repayments falling due after does not justify cancellation of a the entry into force of the regulations building-loan agreement pursuant to in question the exchange rate which the official previously had the resulting from application of the benefit of an advantageous exchange updated parities and of the new rate, as a result of the procedure for version of Article 17. adjusting the weighting. In fact, the official suffers no loss in terms of exchange rates from the updating of 2. The Staff Regulations make provision the parities referred to in the Staff for the adaptation of the remun- Regulations which is not offset by an eration of officials in the various increase in his remuneration expressed places of employment by adjustment in national currency.

composed of: G. Bosco, President of Chamber, A. O'Keeffe and T . K o o p m a n s , Judges,

Advocate G e n e r a l : F. C a p o t o r t i Registrar: H . A . Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

The facts of the case and the conclusions "Article 9. and arguments of the parties put forward during the written procedure may be summarized as follows: Loans covered by this provision shall be expressed in Belgian francs. The payments in respect thereof shall be made in the currency of the country in which the property to be financed is I — Facts and written p r o c e d u r e situated, on the basis of the parity ruling at the time of the payment."

Until 31 March 1979, the monetary That decision to the Commission was parity applied for conversion between the notified to the applicant by letter of 21 Belgian franc and other currencies was August 1975 from the head of the the parity notified by the Member States Building Loans Division, offering him a to the International Monetary Fund in reduction of his principal debt and 1965 (BFR 1 = LIT 12.50 in the present concomitantly the adoption of the case). The sums lent were repaid Belgian franc as the only currency in (likewise on the basis of the exchange which subsequent repayments might be rate indicated above) by means of made. Mr Flamm refused the reduction deductions made by the Commission, in of the amount of the principal debt its capacity as lender, from the monthly offered him. remuneration of officials. In Staff Courier No 136 of 7 February The system operated as follows: the 1977, the Commission published the official's monthly salary, to which the following notice : weighting was applied (for example BFR 100 000 × Italian weighting of 157.8 in "On 27 July 1975 the Commission March 1979) was reduced by the amount decided that Commission building loans of the building loan instalment (for would in future be paid — and example BFR 5 000), the net remuner- deductions from salaries to repay the ation then becoming, in the example loans would be made — in Belgian given, BFR 152 800, which was francs rather than in the currency of the converted into Italian lire at the rate of country where the property covered by BFR 1 = LIT 12.50. the loan in question is situated. Hitherto, all deductions have been calculated, By decision of 25 July 1975, published in where necessary, on the basis of parities the Staff Courier of 15 September 1975 at 1 January 1965. Henceforth, by (Special inter-institutional issue), the decision of the Director-General for Commission amended Article 9 of the Personnel and Administration, con- implementing provisions of 17 June 1971 version will be based on 'updated' as follows: exchange rates. However, staff may request that the deductions be made at the parities communicated to the Inter- "Loans covered by this provision shall be national Monetary Fund, with reference expressed and paid in Belgian francs. to and within the scope of the provisions

giving effect to Article 17 of Annex VII 8). By means of those regulations the to the Staff Regulations (transfer of Council amended in particular Article 63 part of emoluments through the of the Staff Regulations of Officials and Commission)." updated the exchange rates. The reference to the IMF parity was abandoned and for transfers in a Confirmation of that notice was given to currency other than that in which the persons concerned by letter from the remuneration was paid the exchange rate Director-General for Personnel and used for implementation of the general Administration in June 1977. budget of the European Communities on 1 July 1978 (reviewable) was imposed (that is to say LIT 26.11 = BFR 1), a coefficient being applied pursuant to On 23 December 1971 Mr Flamm had entered into an agreement with the Article 17 of Annex VII to the Staff Commission for a loan of BFR 750 000, Regulations "representing the difference the exchange value of which in Italian between the weighting for the country in lire, namely LIT 9 375 000, was paid to whose currency the transfer is made and him pursuant to Article 9 of the the weighting for the country in which implementing provisions adopted on 17 the official is employed". The object of June 1971. the application of that coefficient was to ensure, as regards the part of the salary transferred to a country other than the official's place of employment, that every Mr Flamm's salary statement for March official should, as a result of the 1979 showed a loan repayment of BFR adjustment of that portion by means of 4 661, converted into LIT 58 262. In the weighting applied in the other respect of April 1979, the same amount country, enjoy exactly the same pur- in Belgian francs was converted into chasing power, for the corresponding LIT 85 561. portion of his salary, as an official employed in that country. For the IMF rate of BFR 1 = LIT 12.50 the rate of In fact on 21 December 1978 the BFR 1 = LIT 18.35 was therefore Council had adopted Regulation No substituted, remaining in force until 3085/78, amending, with particular 31 January 1980. As from 1 February reference to the monetary parities to be that rate was changed to BFR 1 = used, Regulation No 259/68 laying LIT 19.80. down the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the Communities, Regulation The persons concerned were informed of No 2530/72 and Regulation N o 1543/73 the new provisions by Circular N o 19/C concerning certain special measures — 2/79· of 1 March 1979 and by Administrative Notices No 230 of 9 (Official Journal 1978, L 369, p. 6) and April 1979 (which gave details of the Regulation No 3086/78 adjusting the new rates applicable to repayments in weightings applicable to the remuner- Belgian francs for Commission building ation and pensions of officials and other loans). servants of the European Communities following the amendment of the provisions of the Staff Regulations concerning the monetary parities to be On 27 March 1979 a complaint pursuant used in implementing the Staff Regu- to Article 90 of the Staff Regulations was lations (Official Journal 1978, L 369, p. lodged by the applicant against the

A fresh complaint dated 11 July 1979 The applicant claims that the Court was lodged by the applicant (cf. Cases should : 530 to 729 and 781/79 Al and Others) pursuant to Article 90 (2) of the Staff I. 10. Declare unlawful and annul the Regulations against the application of salary statement issued by the those regulations to the calculation of defendant for April 1979 and its the remuneration paid in respect of April decisions of 28 September 1979 1979. on the applicant's complaint in so far as they relate to The Commission rejected the second deductions for repayment of a complaint by letter of 28 September building loan granted by the 1979. defendant, which, if the amounts deducted by way of repayment By applications dated 17 December 1979 are converted at the rate applied received at the Court on 24 December for the advance of the loan, ex- 1979, 13 officials (in the group 530 to ceed the amounts in lire relating 729 and 781/79, one of whom was the thereto; applicant, lodged a supplementary application disputing the procedures for 11. In the alternative, in the case of repayment of the building loans granted the applicant, who in 1975 by the Commission, which the latter had "updated" the building loan changed as from April 1979 on the basis agreement concluded between of the contested Council regulations. him and the defendant, declare unlawful and annul the salary By memorandum dated 9 April 1980 statement issued by the the Commission contended that the defendant for April 1979 and its supplementary applications should be decisions of 28 September 1979 dismissed as inadmissible and that the on the applicant's complaint statements relating thereto be treated as likewise in so far as they relate separate applications. to deductions for repayment of a By letter of 14 January 1981 the building loan granted by the Registrar of the Court informed the defendant, which exceed the Commission that the Court (First amounts in lire paid for that Chamber) had decided to treat the sup- purpose until March 1979 plementary claims as new applications. inclusive on the basis of a higher rate of exchange applied to the On hearing the report of the Judge- advance of the loans at the time Rapporteur and the views of the of amendment of the contract Advocate General the Court (First ("updating"); Chamber) decided to open the oral procedure without any preparatory 12. Direct that, as regards the inquiry. amounts thereof in lire, the monthly repayments of the It should be noted that, by order of building loan are to remain the 14 October 1981, the Court (First same as the amount thereof as at Chamber) declared the application 1 April 1979;

13. In the further alternative, in the Ill — Submissions and argu- case of the applicant, whose m e n t s of t h e p a r t i e s contractwas "updated" in 1975, direct that, as regards the amount thereof in lire, the The applicant alleges in the first place a monthly repayments of the breach of the law of contract. When the building loan are to be agreement was entered into the parties calculated on the basis of an stipulated for repayment of the loan at exchange rate which the rate at which it was advanced, corresponds to the exchange rate namely LIT 12.5 = BFR 1. The applied to the advance of the Commission is not entitled to amend the loans at the time of the agreement unilaterally and to the updating; detriment of the applicant. Had the applicant had notice of so onerous a 14. In the final alternative, declare >rovision he would not have signed the that during the two years after the Court's decision becomes res foan agreement since the long-term risk of depreciation of the lira was, as far judicata, the applicant is to be as he was concerned, incalculable. entitled to make early repayment Similarly, the applicant adds, he would of his building loan on the basis not have obtained in lire the real value at of the exchange rate applied to the material time of his loan expressed in the advance ofthe loan; Belgian francs, but rather an amount calculated according to the special rate 15. Order the defendant to amend applicable to internal dealings. the applicant's building-loan account, regard being had to the heads of claim in paragraphs Both the applicant's remuneration and 1.10 to 13; his loan have been and are determined in Belgian francs but paid in the currency 16. Order the defendant to pay to of his country of residence. If now the the applicant in Italian lire the loan were to be repaid in Belgian francs amount of the difference result- the Commission could make deductions ing from the calculation made in from the remuneration determined in accordance with the head of Belgian francs and subsequently con"ert claim in paragraph 1.15; the amount, still expressed in Belgian francs, into lire and pay that amount in III. 1. Order the defendant to lire to the applicant. But the Commission compensate the applicant for the wishes precisely to avoid that situation pecuniary damage suffered, because, from a formal point of view, it which the Court is requested to distinguishes between the loan and the determine to be'the amount of payment of remuneration and because interest, at the rate of 6%, subsequently, when the loan is repaid, accrued on the amount of the it achieves a very significant gain. arrears from the respective dates However, to regard the grant of the loan on which they fell due until the as the payment of remuneration is date of payment; contrary to Article 62 et seq. of the Staff Regulations. 2. Order the defendant to pay the costs. Moreover, the Commission's procedure is also at variance with the obligation to The defendant contends that the Court provide assistance which it must should: discharge with respect to the applicant. Had there been any intention to impose Dismiss the action as unfounded; upon the applicant a monetary risk for a Order the applicant to pay the costs. period which now, as a result of the

increase in the amount to be repaid, paid in lire (Article 15). But it is also true extends beyond his retirement, an that the repayments in lire in respect of express provision to that effect should the debt expressed in Belgian francs are have been included in the agreement. not converted into Belgian francs at the rate ruling on the date of the advance of the various instalments of the loan. The conversion is made, in accordance with If, when in 1975 it brought pressure to the second paragraph of Article 15 of the bear on officials to apply for updating, contract, on the basis of the parity ruling the Commission was planning the on the date of the transfer of the present measures, it has laid itself open monthly amount payable in accordance to allegations of fraudulent conduct. with the repayment table. In view of the general scheme of the agreement, that provision necessarily means that the parity ruling for repayment of the loan If the changes decided upon by the must be distinguished from the parity or Commission should be found to be valid, parties applied for the advance of the the applicant considers that he should at loan and that it must be determined least be allowed the opportunity, by independently. virtue of transitional provisions, to terminate the existing agreement and repay his loan according to the original conditions of the agreement. A period of three years after the Court's decision has Adherence to the parity of LIT 12.50 per become res judicata would be appropriate Belgian franc never became an implied in this case, in view of the fact that the term of the contract which the defendant sums borrowed are very large and was not entitled unilaterally to delete. In arrangements were made for very long fact, the parties performed the agreement repayment periods, and repayment on the basis of the IMF parities,, but would become possible by means of new subject to the express provision that loans on a commercial basis. those parities might be changed (cf. in that regard the contractual provisions and the criterion of "parity ruling on the date of the payment or transfer"). The Commission thinks that the view put forward by the applicant presupposes that the loan agreement offered him a After convertibility of the dollar into legal guarantee that payment of the gold was discontinued (15 August 1971) monthly amounts expressed in Belgian nobody could seriously believe in fixed francs would be made at the same rate as parities. The Jamaica Agreements that used for the advance of the loan. (January 1976) officially abolished IMF That view of the legal position is not parities and as from March 1973 the de supported either by the provisions of the facto position was that currencies floated contract or by the general implementing freely. Consequently, redrafting of provisions of 17 June 1971 according to Article 63 of the Staff Regulations and which the loan and the monthly amounts Article 17 of Annex VII no later than payable by the applicant are expressed in 1 January 1978 became not only an Belgian francs. economic but also a legal requirement.

possibility of using the outdated IMF have to be made corresponding to the parity after 1 January 1978 resulted ratio between the part of the debt repaid solely from the lateness of the up to March 1979 at the IMF rate and amendment made to the Staff Regu- the amount of the loan. lations in order to eliminate the legal hiatus created by developments in the monetary situation. Moreover, the applicant is free to make early repayment of his debt in Italian lire, on the understanding that the The Commission considers that the amount is converted into Belgian francs principle of equality requires it to treat at the rate ruling on the date of the the monthly instalments payable by the transfer. applicant in the same way as a transfer in Belgian francs made by an official employed outside Belgium to a Belgian credit establishment. When transfers are Finally, since the Commission has made to a credit establishment in properly discharged its contractual accordance with Article 17 of Annex VII obligations, there can be no obligation, the amount transferred is adjusted on the contractual or otherwise, to pay basis of the weighting for Belgium and compensation. consequently a rate much more favourable than the market rate is applied (LIT 18.35 per Belgian franc instead of more than LIT 26 in April The applicant emphasizes that Article 9 1979). of the implementing provisions of 17 June 1971 provides that, as regards transactions outside Belgium, the loans in question are, as from the time of the In reply to the argument relating to the first advance, loans in the currency of duty of protection and of assistance, the the country in question, that is to say in Commission states that it is under no this case a loan in lire and not a loan in general obligation, by virtue of the Staff Belgian francs. The meaning of that Regulations, to safeguard officials provision goes even further: since there against risks of a monetary nature (cf. is no further mention elsewhere of Opinion of Advocate General Dutheillet parities and repayments, it may be de Lamothe in Joined Cases 63 to 65/70 regarded as self-evident that the Bode[\97l] ECR 549). For that reason it "corresponding payments" relate not is likewise under no obligation to bear only to the payments (made by the that risk within the context of a low-rate lender to the borrower) but also to the loan agreement of the kind involved in payments of interest and the repayments this case. of the loans (made by the borrower to the lender) according to the principle whereby the amount of the loan is due, as regards the principal and therefore the If the Court rejects the claim that the interest and repayments, in the currency fixed rate, of LIT 12.50 = BFR 1 should in which the loan was advanced. The be maintained for payment of the basic idea of granting loans in each of monthly amounts, the Commission is the countries of employment or origin of prepared to offer the applicant a further officals within the framework of an opportunity to adjust his debt in accommodation policy was subsequently accordance with the 1975 proposal. also included in the wording of the loan However, in order to ensure that the agreement, in Article 15. The expression system remains fair, an abatement will "parity ruling on the date of the

The grant of building loans to officials at a favourable rate of interest (4%) would be completely deprived of its social Regulation No 3085/78 amends only the objective if, seven years after the provisions of the Staff Regulations agreement was entered into, the concerning the monetary parities "used conditions for repayment were amended in application of the Staff Regulations unilaterally, exposing borrowers to the and the detailed arrangements for the problem of variable monetary parities. transfer of part of an official's Commercial usage alone should prevent emoluments to a country other than the the Commission from making speculative country of employment of the persons monetary gains to the detriment of its concerned". Regulation No 3085/78 has officials. A change of parity is therefore in no way changed the "parity tantamount to a de facto change in the ruling on the date of the transfer", and interest rate or of the principal debt, therefore of the payment, referred to in which is prohibited by Article 4 (6) of the loan agreement. In its unilateral the implementing provisions. action, the administration failed even to inform the applicant of the detailed arrangements for securing repayment applied as from 1 April 1979, not to mention the fact that no reasons were In 1971, it was clear that the fixed given to him and his consent was not exchange rates could not remain even sought. It should also be made clear permanently fixed. Both parties were that the "parity ruling on the date of the therefore aware of the risk and, for the transfer" was not the same as the parity advance of the loan and repayment of 1 January 1965 referred to in Article thereof, the parities which were used at 63 of the Staff Regulations in the version the time of the advance were, firmly prior to Regulation No 3085/78. agreed upon. In reply to Mr Bermani's question, the Commission stated that "the correct application of Article 9 of the implementing provisions for the grant of building loans to officials requires fixed official parities", from which it is The request for early repayment on the clear that in the absence of such parities basis of the rate ruling on the date of the Article 9 cannot be correctly applied. It advance, within a period of three years added that "for repayment of the loans, from the date on which the judgment the opportunity to choose the currency becomes effective, is justified from the ensures that tne borrower is protected legal point of view by the possibility that against possible fluctuations of exchange such a judgment might detract from the rates from time to time", which clearly balance between the duties of each party means that the borrower may repay in on which the agreement is based. Should

the Court be of the opinion that the The contractual right of repayment duties of the parties which constitute the referred to by the Commission is of little basis for the contract no longer display use to the applicant if the parties the equivalence provided for by the disagree on precisely that point, namely previous contractual terms, it may direct the question of repayment. that the legal relationship be altered and require compliance with the earlier agreement. In that respect, the applicant refers to the provisions of the agreement which bar the use of the loan for specu- The defendant states by way of rejoinder lative purposes. that the applicant's interpretation of the expression "parity ruling on the date of the transfer" is contrary to the letter, system and logical terms of Article 15 of It is untrue that continuance of the IMF the agreement in which it appears.

That group of to explicitly as such. It is untrue to say words could not relate to the funds used that those parities might be amended and for the advance of the loan, since they that contractual provisions to that effect were already denominated in Belgian had been adopted. Contrary to its affir- francs and did not therefore need to be mations the Commission favoured fixed converted. If on the other hand "the parities long after they were disposed of, parity on the date of the transfer" was since it used them for the payment of deemed to relate to the transfer of remuneration until 1 April 1979. amounts other than the payments referred to in the first paragraph of that article, the draftsman of the agreement would not have failed to make that fact particularly clear. Article 5 of the loan The deduction from remuneration within agreement, dealing with the advance of the framework of the transfers made the loan, refers specifically to the sums pursuant to Article 17 of Annex VII to mentioned in Article 1.

JUDGMENT OF I. 7. 1982 — CASE 567/79 A

Commission decision of 25 July 1975. It is not, however, possible to infer therefrom that the Commission considered that the loan was still to be As regards the procedure followed for repaid on the basis of the same rate as performance of the contract, the that used when it was advanced. As deduction made from the applicant's regards the proposed updating on the remuneration until March 1979 for the basis of the decision of July 1975, it is monthly repayments of his debt on the meaningless otherwise than in the basis of an exchange value calculated at context of the expectation of a the rate of LIT 12.50 = BFR 1 bears no forthcoming departure from the parity legal relationship with the rate applied declared to the IMF in 1965 for when the loan was advanced. In fact, repayment of the loan.

FLAMM v COMMISSION

concern of both parties to perform the account the monthly repayment required agreement on as solid a basis as possible, from the applicant in calculating the in view of the instability prevailing in the upper limit of 35% of salary which must international monetary system since 1971 be observed in the case of the transfers and particularly with the applicant's referred to in Article 17 of Annex VII to concern to be able to have the the Staff Regulations. Also, the repayments of his debt converted into Commission is not "pocketing" profits Belgian francs at a rate at least equal to gained from the exchange rates. It is that at which his monthly remuneration simply entitled, like any lender, to in Belgian francs is converted into lire. ensure, in strict compliance with the Thus the Commission was able to provisions of the contract, that the sum continue until 1 April 1979 to charge which it receives as repayment of the against the applicant's remuneration a loan corresponds as closely as possible to monthly repayment calculated on the the value of the amount disbursed, basis of a parity, which was favourable to expressed in Belgian francs. There could the applicant, of LIT 12.50 = BFR 1, only be a sacrifice on the part of the whilst at least since 1 January 1978 an applicant if his remuneration, instead of IMF official rate no longer existed. being expressed in Belgian francs, like Consequently, the agreement was the loan, had been ab initio expressed in performed on the basis of the parity laid lire and if the amounts to be paid by way down in the Staff Regulations for the of repayment had not been subjected to transfer of remuneration. If, following an the weighting for Belgium. amendment to the Staff Regulations, that parity changed then, pursuant to the second paragraph of Article 15 of the agreement the new parity had auto- matically to be applied for performance of the agreement. There was no question IV — Oral procedure therefore of any unilateral change of that parity by the Commission. The parties presented oral argument at the sitting on 17 December 1981. There are no grounds for the view that The Advocate General delivered his the officers of the Commission took into opinion at the sitting on 18 March 1982.

5 By virtue of Article 4 of the agreement, the borrower undertakes to repay the amount of the loan in monthly instalments due on the 15th day of each month in accordance with the table attached to the agreement. The table, drawn up in duplicate and signed by both parties, constitutes an integral part of the agreement.

6 By virtue of Article 5 of the agreement the borrower irrevocably instructs the Commission to deduct or cause to be deducted for transfer to the Commission by the Community institution by which he is or may be employed in the future, on the 15th day of each month, from his monthly salary or any other emolument, the monthly instalment shown in the repayment table referred to in Article 4.

7 Article 15 of the agreement provides that any transfers made by the borrower to the lender by way of early repayment or in payment of monthly instalments is to be made in Belgian francs or in the currency of the country in which the property to be financed is situated and in which the loan was advanced. The currency of the loan is to be converted into Belgian francs on the basis of the parity ruling on the date of the transfer.

FL\MM v COMMISSION

8 In the table referred to in Article 4 of the agreement the amount of the loan, the monthly instalment, the monthly interest, the monthly repayment of principal and the principal outstanding are expressed in Belgian francs.

9 The amount of the loan was converted into Italian lire on the basis of BFR 1 = LIT 12.50, the parity notified to the International Monetary Fund on 1 January 1965 which at that time was used as the basis for calculation of the remuneration of officials in accordance with Article 63 of the Staff Regu- lations. Correspondingly, the sums lent were repaid (likewise on the basis of the above-mentioned exchange rate) by means of deductions made by the Commission as lender from the monthly remuneration of the official.

(c) All repayments to be made after the decision to reduce the debt shall be made in Belgian francs."

n That decision was notified to the applicant, who did not, however, apply for a reduction of his principal debt.

M Following the entry into force of Council Regulations Nos 3085/78 and 3086/78 of 21 December 1978 (Official Journal L 369, pp. 6 and 8) which amended inter alia the provisions of Article 63 of the Staff Regulations concerning monetary parities and of Article 17 of Annex VII concerning transfers, the Commission applied, for conversion into Belgian francs of the Italian lire deducted in respect of the monthly repayment, the rate resulting from application of the "updated parities" and from the new version of Article 17 of Annex VII. The applicant's salary statement for March 1979 showed a repayment of BFR 4 661 converted into LIT 58 262. In respect of April, the same amount in Belgian francs was converted into LIT 85 561.

is On 27 March 1979 the applicant lodged a complaint pursuant to Article 90 of the Staff Regulations against the application of Regulations Nos 3085/78 and 3086/78 to the repayment of loans. That complaint was rejected on 12 July. By a second complaint dated 11 July 1979 the applicant contested his salary statement for April. That complaint was rejected by letter of 28 September 1979.

i6 The applicant advances various arguments in support of his action. In his view, it appears from the agreement that, for the conversion into Belgian francs of amounts in lire intended for repayment of the loan, the exchange rate to be applied should be that adopted for the conversion into lire of the

"The problem raised by the honourable Member has been considered by the Commission.

The correct application of Article 9 of the implementing provisions for the grant of building loans to officials of the European Communities requires fixed official parities. Moreover, the determination of new official parities, which must be expected soon, would bring to an end the difficulties referred to by the honourable Member.

JUDGMENT OF 1. 7. 1982 — CASE 567/79 A

For repayment of the loans, the opportunity to choose the currency ensures that the borrower is protected against possible fluctuations of exchange rates from time to time.

The Commission is, however, considering the special problems which have arisen during the transitional period through which international monetary relations are at present passing."

20 It appears from the file on the case that the exchange rate used for the conversion of the amount of the loan into Italian lire was the parity notified to the International Monetary Fund in 1965 which, at the time of the loan, was the reference parity determined in Article 63 of the Staff Regulations. In essence the applicant's view is that that same rate must be used throughout the duration of the agreement for the conversion into Belgian francs of the funds transferred to the Commission to repay the loan by means of the monthly instalments provided for in the agreement.

24 It should be recalled that all the recipients of loans were officials of the European Communities and that the agreement provided that repayments were to be made to the Commission by the institution in which they were employed. It was consonant with that situation that the parity to which the agreement referred should be the parity adopted for calculation of the borrower's remuneration, that is to say the parity provided for in Article 63 of the Staff Regulations.

25 In consequence of the events in the money markets which occurred in and after 1971, the parity notified to the International Monetary Fund for the lira ceased to be valid. For a time, the lira floated freely. Finally, with the introduction of the European Monetary System, a new exchange rate, which might fluctuate within certain limits, was determined for the currencies of the Member States which participated in the system.

26 The practice adopted by the Commission, namely the application to the transfers made to repay the loans in question of the provisions of Article 17 of Annex VII to the Staff Regulations as newly worded, entails the result that the conversion rate is more favourable to the applicant than mere application of the parity for the lira within the European Monetary System.

2; As regards the letter of 21 March 1977 from the Director-General of Personnel and Administration, it should be pointed out that it was written in reply to a question from Mr Lubek concerning conduct on the part of the Commission which he regarded as constituting a unilateral change of the agreement. In any case, several months later, the same Director-General sent the applicants a communication in the following terms, which left no room for any error as to maintenance of the exchange rate in force at that time:

Monthly payments pursuant to Anicie 6 of the agreement (first and third paragraphs).

It should however be noted that any conversion into Belgian francs will be made on each occasion on the basis of the parity ruling on the date of each transfer, which at the present time is as follows : BFR 1 = LIT 12.50, FF 1 = BFR 9.00, UKL 1 = BFR 120.00.

As regards repayment by deductions from salary (see Anicie 5 of the agreement) it is in all cases made in Belgian francs, the salary also being expressed in Belgian francs.

(3) For borrowers who did not take the benefit of the reduction in 1975 (as in your case), those deductions are not to be regarded as transfers of a pan of your remuneration.

However, the exchange rate adopted is the same as that used for the advance of the loan (see paragraph (2) above) ;

(4) No guarantee can be given regarding maintenance of the exchange rate at present adopted by the Commission for the conversion into Belgian francs of the payments referred to in paragraph (2) above or of the deductions from remuneration referred to in paragraph (3)."

33 That complaint cannot be accepted. The applicant has put forward no argument capable of proving that the procedure proposed by him, if capable of implementation by the Commission, would have been more favourable for him. On the contrary, deduction in Belgian francs of the amount of the monthly payments would have exposed the applicant to the risk of his being deprived of the benefit now accruing to him from the fact that the transfers made in accordance with the procedure under Article 17 of Annex VII to the

JUDGMENT OF 1. 7. 1982 — CASE 567/79 A

Staff Regulations are subjected to a multiplier in the form of a weighting for the country of transfer (in April 1979, 100) divided by that of the country in which the official is employed (in April 1979, 70.3). As a result of that operation in April 1979 a transfer of BFR 1 cost only LIT 18.35 instead of more than LIT 26 at the market rate.

34 T h e applicant maintains finally that t h e Commission should have adopted, transitional provisions in his favour w h e n the parity resulting from R e g u - lations N o s 3 0 8 5 / 7 8 a n d 3086/78 w a s applied. H e asserts that, in the absence of such provisions, the disadvantage suffered by him as a result of the c h a n g e of parity is so great that he should be allowed t h e option of repudiating the existing contract and repaying the money received at the rate applied for t h e advance of the loan, within a period of three years following the decision of the Court.

35 It is understandable that the applicant, having had the benefit for many years of a favourable exchange rate, considers himself prejudiced by the application as from 1979 of the updated rates. However, the advantageous rate of which the applicant had the benefit until 1979 is merely the cqnsequence of the fact that the Council, instead of adapting the parities under the Staff Regulations to the market rates, used weightings in order to compensate for the fluctuation of certain currencies.

39 It appears from all the foregoing considerations that the view put forward by the applicant in support of his claims cannot be upheld and that accordingly the application must be dismissed.

Costs

40 Under Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs.

4i However, under Article 70 of the Rules of Procedure costs incurred by the institutions in proceedings by servants of the Communities are to be borne by those institutions.

On those grounds,

T H E C O U R T (First Chamber)

J. A. Pompe G. Bosco Deputy Registrar President of the First Chamber

O P I N I O N OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED O N 18 MARCH 1982 «

Mr President, policy for the benefit of officials. On that Members of the Court, basis the Commission adopted on 17 June 1971 implementing provisions 1. The cases on which I deliver my which were published in Staff Courier opinion today concern the conditions for No 170 A of 8 July 1971. The provision the repayment of building loans made by with which this case is principally the Commission to Community officials concerned is Article 9 which deals with and, more particularly, the effects the currency aspects of the payment of produced on the system of repayments the sums paid. In the original version of by Council Regulations Nos 3085 and the provision it was stated that: "Loans 3086/78 of 21 December 1978. covered by this provision shall be expressed in Belgian francs. The It should be recalled that, by decision of corresponding payments shall be made in 2 March 1970 concerning the use of the the currency of the country where the available sums entered in the budget of property being financed is located, at the the ECSC under the head "Pension parity at the time of payment." By a Funds", the Council inter alia reserved decision of 25 July 1975 the Commission 40% of those sums for making loans amended the first part of that provision, within the framework of a housing providing that the loans should not only 1 — Translated from the Iulian.