C-817/79

APPLICATION in the terms set out in the pleadings,

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

composed of: G. Bosco, President of Chamber, A. O'Keeffe and T. Koopmans, Judges,

Advocate General: F. Capotorti Registrar: J. A. Pompe, Deputy Registrar

gives the following

BUYL v COMMISSION

After the collapse in 1971 of the inter- I — Facts and p r o c e d u r e national system of fixed exchange rates, which is at the heart of those provisions, the parities came to reflect less and less 1. Background provisions the purchasing power of the currencies involved and their value on the inter- national money market. Officials who This case should be seen against the had transfers made to countries the value background of the following provisions: of whose currency had increased in relation to above the parities notified to (a) In the version in force until 31 the International Monetary Fund were March 1979 Article 63 of the Staff Regu- thus able to realize gains on the lations of Officials provided that: exchange rate, as compared with transfers made in normal market conditions. "An official's remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in In accordance with the legal position which the official performs his duties. existing prior to 1 April 1979 the Remuneration paid in a currency other weighting provided for in Article 64 of than Belgian francs shall be calculated on the Staff Regulations to reflect the living the basis of the par values accepted by standards at the place where the official the International Monetary Fund, and in performed his duties had to be applied to force on 1 January 1965." the whole of the remuneration, including the part to be transferred to another country pursuant to Article 17 of Annex In accordance with Article 17 of Annex VII. This led to an increase in the VII to the Staff Regulations an official weighting for officials assigned to may have part of his emoluments countries such as Italy, the United transferred either regularly or on an Kingdom and Ireland, where the value exceptional basis to a country other than of the currency had decreased in relation that in which he performs his duties. to the parities notified to the Inter- Until 31 March 1979 Article 17(4) national Monetary Fund, and to a provided that such transfers were to be reduction in the weighting for officials made through the institution to which assigned to countries whose currency the official belonged "at the official had gained in value in relation to the ruling exchange rate on the date of parities of the Fund.

Pensioners were able to derive special weighting for the country in which the advantages from these provisions. If they official is employed." declared their domicile to be in a country whose currency had diminished in value, the weighting in respect of that On 1 April 1977 the Commission country was applied to their pension in submitted to the Council a proposal for a accordance with Article 82(1) of the Council regulation introducing the Staff Regulations. Article 45 of Annex European Unit of Account (EUA) into VIII to the Staff Regulations gave them the Staff Regulations (Official Journal the opportunity of having their pensions 1977 C 99, p. 5). That proposal was paid in the strong currency of their rejected by the Staff Regulations country of origin or of that of the seat of Committee, to which it had been the institution to which they belonged. referred. The Council obtained the This state of affairs was condemned by opinion of the European Parliament and Mr Advocate General Mayras in his of the Court of Justice. By resolution of opinion in Case 28/79 Gillet [1975] 7 July 1977 (Official Journal C 183, ECR 475. p. 55), the Parliament approved the proposal taking note of "the Com- mission's assurance that its proposal will in no way affect the real value of the payments made to officials in the form of In 1974 the Commission submitted remuneration, pension and allowances". proposals to the Council with a view to At the sitting, the Member of the abolishing the anomalies in the rules Commission responsible for adminis- governing the payment of remuneration tration, Mr Tugendhat, stated: "The and pensions brought about by the object of the Commission's system is break-down in the international system financial neutrality, and what we think of fixed exchange rates. that our system can achieve is an equality of purchasing power. What we want is that a Commission official of a given grade, whether he is working in Brussels or Luxembourg or London or any other The proposal for a Council regulation part of the Community, should be able amending the Staff Regulations of to buy exactly the same quantity of Officials, submitted to the Council by goods as his equal in another part of the the Commission on 13 June 1974 Community . . . The problem of transfers (Official Journal 1974 C 88, p. 25) is also one that has preoccupied the provided for an amended version of Commission. There is a proposal for an Article 17(4) of Annex VII to the Staff amendment of the Staff Regulations now Regulations: under consideration. In our view, that amendment must be adopted no later than the present draft regulation, and that, I think, covers another point about which there has been concern." "Transfers provided for in paragraphs (2) and (3) shall be made on the basis of the par values referred to in the last paragraph of Article 63 of the Staff The Council did not succeed in 1978 in Regulations; the amounts transferred adopting the regulation proposed by the shall be multiplied by a coefficient Commission on 6 October 1976 (Official representing the difference between the Journal C 271, p. 5) "on the procedure weighting for the country in whose for applying the European Unit of currency the transfer is made and the Account (EUA) to the legal acts adopted

by the institutions of the European rangement, the regulation will apply only Communities". The Commission there- from 1 October 1979 . . ." fore set to work to bring up to date, in the light of the situation thereby created, the exchange rates in respect of re- (b) On 21 December 1978, the Council muneration for officials which was adopted Regulation No 3085/78 envisaged by the proposal of 1 April (Official Journal L 369, p. 6) amending, 1977. In an annex to its Report in 1978 with particular reference to the monetary on the yearly survey of the level of parities to be used, Regulation N o remuneration (Doc. C O M (78) 6735 259/68 laying down the Staff Regu- final of 29 November 1978), the lations of Officials of the European Commission sent the following com- Communities and the Conditions of munication to the Council on which Employment of Other Servants of the neither the Parliament, the Court of Communities, Regulation No 2530/72 Justice or the Staff Regulations and Regulation N o 1543/73 concerning Committee was consulted: certain special measures. The regulation embodies the wording of the communi- cation from the Commission of 29 November 1978 and also the formula contained in the proposal of 1 April 1977 " . . . The first two paragraphs of Article concerning the weighting to be applied 63 are replaced by the following: to amounts transferred. The Council added however: "From that date the difference between the net amounts resulting from the implementation of the 'Officials' remuneration shall be ex- regulation and those received in pressed in Belgian francs. It shall be paid September 1979 should be reduced by in the currency of the country in which 1/10per month." The regulation fixes 1 the official performs his duties. Re- July 1978 as the relevant date for calcu- muneration paid in a currency other than lating remuneration paid in a currency Belgian francs shall be calculated on the other than Belgian francs on the basis of basis of the exchange rates used for the the exchange rates used for the implementation of the general budget of implementation of the general budget of the European Communities on . . . the Communities and goes on to state that that date shall be changed at the time of the annual review of re- muneration. The Commission urges the Council to adopt the aforementioned article before the end of the year as well as Article 17 (c) Hand in hand with the bringing up of Annex VII which is the result of to date of the exchange rates, the the Council's studies relating to the Council adopted Regulation N o 3086/78 amendment of the Staff Regulations . . . of 21 December 1978 (Official Journal L 369, p. 8) adjusting the weightings applicable to the remuneration and pensions of Officials and Other Servants The . . . regulation should come into of the European Communities following effect on 1 January 1979, and should the amendment of the provisions of apply from 1 April 1979. However, for the Staff Regulations concerning the pensioners in respect of allowances monetary parities to be used in whose net financial benefits will be less implementing the Staff Regulations, than those under the existing ar- which amended the value of the

The applicants complain that as from II — C o n c l u s i o n s of t h e p a r t i e s April 1979 transfers made at their request through the institution, either in German marks or in guilders, in The applicants claim that the Court accordance with Article 17 of Annex should declare: VII, have become more expensive. According to the applicants, the That this application is admissible and increased cost is between 1.5% and 10.41 % . For the same transfer of DM was lodged in due time; 1 000 made on behalf of an official employed in Belgium, for which in That this application is justified and March 1979 the exchange rate at the old consequently declare: rates of exchange, was BFR 13 660, which was deducted from the re- That the decisions determining salaries muneration actually paid in March to the applicable to the month of April 1979 are person concerned in Belgium, in April illegal and therefore inapplicable for the the exchange value was BFR 15 968, on reasons set out in this application; annul the basis of the new rates of exchange the rejections of the complaints; provided for in Article 63 of the Staff Regulations (BFR 100 = D M 6.3452) Consequently declare that the decisions and of the adjustment resulting from are null and void and incapable of application of the weighting 0.987, having effect as regards the future; corresponding to the ratio between the new weighting for Germany (98.7) and Order the Commission to pay to the the new weighting for Belgium (100). applicants from and including the month Thus, for the same transfer of DM of April 1979 until the delivery of 1 000, a deduction of BFR 15 968 (BFR. judgment the difference between the

amounts to which they were entitled on on the rate applicable to the budget to the basis of the former provisions and the Council. the amounts actually paid on the basis of Regulation No 3085/78; The applicants also claim that there has been a failure to protect their legitimate Order it in addition to pay them interest expectations. As regards the Parliament, at 6% for the arrears due as from the it has been led into error since it took various dates on which they fell due; note of the assurances given by the Commission to the effect that the latter's proposals would in no way affect the real Order the Commission to pay the costs values of the payments made to officials. of the proceedings. The Parliament thus relied upon the formal undertaking given to it by an "authorized person". The Commission claims that the Court should: The applicants' view is that the institutions' discretion is itself subject to Dismiss the application as unfounded; certain restrictions by virtue of the principle of restricted authority. By de- creasing the "real values", despite the Order the applicants to pay the costs. fact that a formal undertaking had been given to maintain them, the institutions breached that principle. By deciding on new exchange rates for transfers, the III — Submissions and argu- Council moreover misused its powers. m e n t s of t h e p a r t i e s Rights validly acquired by the applicants under the former provisions of Article 16 1. In their application, the applicants of Annex VII have not been respected. state in the first place that essential pro- Moreover, there has been discrimination cedural requirements, as provided for in and unequal treatment as between Article 10 of the Staff Regulations, have serving officials and those in retirement. not been met. In fact, when it realized that the future system could not be based on the European Unit of Account but 2. In its defence, the Commission was to be linked to the updated rate observes with regard to the infringement adopted for the general budget of the of essential procedural requirements, that Communities, the appointing authority the applicants' view would be well should have reopened the matter and founded if, after a first proposal from the placed it before the authorities and Commission was put forward and before bodies which had to give their opinion. the Council adopted any decision on it, a This was not done and the Commission quite new proposal was submitted, that is itself acknowledges, in its reply to the to say one concerning other matters or complaints, that the amendment was making substantial amendments (cf. a made in a way which departed slightly contrario Case 41/69 ACF Chemiefarma from the prescribed procedures. The fact [1970] ECR 661). In the same way, the that the Council reached a unanimous consultation procedure provided for in decision makes no difference. The Article 10 of the Staff Regulations does Commission itself should in any case not have to be repeated every time a have submitted the new proposal based minor alteration is made. In this case, by

a communication of 30 November 1978 Regulations prior to the amendment the Commission informed the Council of decided upon by the Community its desire that Article 1 of the initial authority"). That ruling is the logical proposal of April 1977 be re-worded. A consequence of the view that the comparison with the last-mentioned text official's relationship is governed not by shows clearly that the new provisions do contract but by regulations (cf. opinion not amount to a substantial amendment. of M r Advocate General Gand in Case The nub of the amendment to the Staff 20/68 Pasetti-Bombardella [1969] ECR Regulations is merely the abandonment 235, at p. 250). It forms the corollary of of the old IMF parities and replacement the principle that administrative measures of them by updated parities whereby must not be retroactive. The "advantages every official is still entitled to the same lawfully acquired" by the applicants total remuneration in the currency of the are fully safeguarded as regards the place of his employment. They would favourable exchange conditions granted have been the result obtained if the rates in respect of transfers made on or before had been updated by application of the 1 April 1979.

3085/78. In fact, the exchange rates used for implementation of the general budget of the Communities as at 1 July 1978 were strictly related to the value of the currencies considered (Belgian franc on Before the rule of protection of the one hand, other currencies on the legitimate expectation may be relied other) with respect to the European Unit upon, the authority concerned must have of Account on the same date. entered into commitments, that is to say "assumed obligations which it has bound itself to observe" (cf.

It cited above in which it was held that "an is thus pointless for the applicant to official cannot in any case claim a vested maintain that the draftsmen of the Staff right unless the facts giving rise to that Regulations intended to introduce, by right arose under a particular set of Staff means of Article 17 of Annex VII, an

"exchange guarantee" for the benefit of only legal principle applicable is that officials so as to safeguard them for all there must be no arbitrary discrimi- time from the effects of such fluctuations nation, that is to say discrimination for as might occur in the monetary parities which there are no objective grounds, and from the increased cost to which and that the principle of equality is not such fluctuations might give rise with applicable. The situation of pensioners, regard to the financial obligations taken into account in Article 4 of Regu- assumed by the staff in any particular lation N o 3085/78, is not the same as or Member State (cf. Opinion of Mr even comparable with that of officials Advocate General Dutheillet de Lamothe who arrange for transfers to be made. In in Joined Cases 63 to 75/70 Bode [1971] the case of pensioners the new system ECR 549, at p. 557). The true reason for has entailed a sharp reduction, from one the transfer facilities regulated by that month to the next, which may be as provision must be seen in the light of the much as half the amount in lire pre- historical context of the preparatory viously obtained from resale of the work on the texts of the Staff Regu- amount paid in Belgian francs or lations in 1961 when exchange control German marks in respect of the pension. was often very strict and yet officials of On the other hand, in the case of serving different nationalities had to be freely officials, the increase in the amount of allowed to honour their financial funds required for the transfers is commitments in their countries of origin nowhere near that percentage since at or in the countries where their families the most only 3 5 % of remuneration may resided. be transferred. In extreme cases, those of transfers to Germany of 3 5 % of remun- eration for March of an official employed in Italy, the increased cost of the transfer might at the most be around 2 5 % of the total remuneration for April. In the applicants' case, the highest increase in the cost of the transfers did Subsequently, as a result of the new not exceed, in relative terms, 5.62% of situation in which currencies "float", it the total remuneration for April. became in practice easy to take improper advantage of the ratio legis of Article 17 of Annex VII, since transfers of a part of officials' remuneration, although within the limits laid down in a "code of good conduct" established in June 1974, became a means of obtaining "strong With regard to the Staff Regulations the currencies" at a rate much lower than Council has indeed a "discretionary the market rate, with consequent adverse power" and, where there is discretionary effects on the Community budget. power, there can be no question of restricted authority. Since it is clearly acknowledged that no superior rule of law requires the Council to maintain in perpetuity the IMF parities for transfers, it is easy to dispose of statements to the effect that the institutions exceeded their restricted authority when no restriction As regards the alleged discrimination in fact ever existed in this sphere. Having between officials and pensioners, the regard to the case-law of the Court, the Commission contends that in fact the Commission can find no grounds to

The Parliament was certainly not led into error but acted in full knowledge of As regards the concept of vested rights, the circumstances. It is in fact quite clear Mr Advocate General Mayras em- from its opinion that it was perfectly phasized in Gillet, cited above, that the aware that the proposal for updating of Community authority is entitled at any the rates related also to transfers and time to amend the provisions of the Staff that the consequence thereof would be Regulations in any way which it an increase in the cost of such considers to be in accordance with the transactions when the country of interests of the service. The applicants destination was one with a strong have been unable to identify any interest currency. Nevertheless, its opinion was of the service which might have that it was "appropriate . . . to abandon compelled the authorities to curtail what the exchange ratios introduced in 1965", the Commission described as unjustified since the proposed updating would not advantages. It its judgment in Case have the result of "affecting the rights of 54/77 Herpels 1978 ECR 585, the Court staff". It is wrong to claim that the stated that "an official cannot in any assurances given regarding the "financial case claim a vested right unless the facts neutrality" of the operation extended giving rise to that right arose under a also to the consequences of the updating particular set of Staff Regulations prior of the rates for transfers. No assurance to the amendment decided upon by the was ever given on behalf of the Community authority". The applicants Commission (through an "authorized person") to the effect that there would are in no doubt that they signed their contracts on terms wholly different from

The applicants are of the opinion that the Parliament did not understand the effect which the change of weighting As regards the assurances given by the would have on the cost of transfer Commission to the Parliament, they operations; if it had understood that related to "remuneration and other effect, it would have been unable to form payments". Accordingly, a guarantee was the view that the new system would in indeed given that the "residual" income no way affect officials with regard to also would not be diminished. remuneration and "other payments". The defendant asserts that the Par- liament "was perfectly aware that with regard to transfers there was no longer any question of financial neutrality and that an increase in the cost of such As regards the arguments relating to transfers might arise from the updating restricted authority and misuse of of the rates". The applicants, whilst

JUDGMENT OF 4. 2. 1982 — CASE 817/79

BUYL v COMMISSION

pearance of certain advantages now was to eliminate unjustified advantages available" with regard to transfers, and in the future. indicated that the transfers would ther- eafter be made on the basis of the value IV — Oral procedure of the European Unit of Account, giving an example of the results of the calcu- The parties presented oral argument at lations. It was therefore out of the the sitting on 2 April 1981. question to conclude that the operation would be absolutely neutral from the The Advocate General delivered his financial point of view, since the object opinion at the sitting on 14 May 1981.

Decision

1 By an application lodged at the Court Registry on 17 December 1979, the applicants, officials of the Commission employed at Geel in Belgium, brought an action pursuant to Article 91 of the Staff Regulation of Officials (hereinafter referred to as "the Staff Regulations") for annulment of the Commission's decisions fixing their remuneration for April 1979 and of the rejection of the complaints lodged by them against those decisions.

2 Articles 63 and 64 of the Staff Regulations in the version in force until the end of 1978 provided: "An official's remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in which the official performs his duties. Remuneration paid in a currency other than Belgian francs shall be calculated on the basis of the par values accepted by the International Monetary Fund . . . on 1 January 1965. An official's re- muneration expressed in Belgian francs shall . . . be weighted at a rate above, below or equal to 100%, depending on living conditions in the various places of employment. . . . The weighting applicable to the remuneration of officials employed at the provisional seats of the Communities shall be equal to 100% as at 1 January 1962".

This date shall be changed, at the time of the annual review of remuneration provided for in Article 65, by the Council acting by a qualified majority upon a proposal from the Commission as provided in the first indent of the second subparagraph of Articles 148(2) of the EEC Treaty and of 118(2) of the Euratom Treaty.

Without prejudice to the application of Articles 64 and 65, the weightings fixed pursuant to these articles shall whenever the above date is changed, be adjusted by the Council, which, acting in accordance with the procedure mentioned in the third paragraph, shall correct the effect of the variation in the Belgian franc with respect to the rates referred to in the second paragraph".

5 Article 2 of the regulation provides:

"Article 17 of Annex VII shall be replaced by the following:

BUYL v COMMISSION

'Article 17

6 Article 4 of the regulation provides that it is to enter into force on 1 January 1979 and is to apply from 1 April 1979.

JUDGMENT OF 4. 2. 1982 — CASE 817/79

7 On 21 December 1978 the Council also adopted Regulation (Euratom, ECSC, EEC) N o 3086/78 adjusting the weightings applicable to the re- muneration and pensions of officials and Other Servants of the European Communities following the amendment of the provisions of the Staff Regu- lations concerning the monetary parities to be used in implementing the Staff Regulations. Article 1(1) of the regulation fixes inter alia the weighting applicable to remuneration as 98.7 for the Federal Republic of Germany and 97.8 for the Netherlands.

8 As from 1 April 1979 the cost in Belgian francs of the transfers which the applicants made regularly to their countries of origin or to the Federal Republic of Germany increased considerably and consequently the balance of their remuneration, after the transfers, was reduced.

9 On 25 and 27 June 1979 the applicants filed complaints under Article 90(2) of the Staff Regulations regarding the increase in the cost of transfers made by them as from April 1979. On 28 September 1979 the Commission replied to the effect that, on the one hand, it could not without exceeding its authority fail to apply Council regulations which had properly entered into force and, on the other hand, that in substance it approved the amendments made to the Staff Regulations.

10 The applicants therefore brought this action asking the Court to declare that the decisions determining their remuneration for April 1979 are illegal and inapplicable and to order the Commission to pay the applicants as from April 1979 and the difference between the amounts to which they were entitled on the basis of the former provisions and the amounts actually received on the basis of Regulation N o 3085/78, together with interest at 6% as from the various dates on which the amounts fell due.

13 The applicants also complain of the discrimination which, according to them, is inherent in the transitional provisions applicable to pensions in view of the fact that no transitional provisions are applicable to the transfers made by the applicants in accordance with Article 17 of Annex VII to the Staff Regu- lations. The Commission should, in the discharge of its duty to assist officials, of which Article 24 of the Staff Regulations constitutes an illus- tration, have laid down transitional procedures for compensation, by way of an implementing measure, which would have been coterminous with the legal and contractual obligations of the officials.

I n f r i n g e m e n t of e s s e n t i a l p r o c e d u r a l r e q u i r e m e n t s

1 4 It should be noted that, when changes are made to the Staff Regulations of Officials and the Conditions of Employment of Other Servants, Community law requires that the Parliament and the Court of Justice be consulted and that the opinion of the Staff Regulations Committee be obtained. Article 24 of the Merger Treaty provides that "The Council shall, acting by a qualified majority on a proposal from the Commission and after consulting the other institutions concerned, lay down the Staff Regulations of Officials of the

JUDGMENT OF 4. 2. 1982 — CASE 817/79

European Communities and the Conditions of Employment of Other Servants of those Communities". Article 10 of the Staff Regulations provides that the Staff Regulations Committee (consisting of representatives of the Staff Committees) is to be consulted by the Commission on any proposal for the revision of the Staff Regulations.

"Transfers provided for in paragraphs (2) and (3) shall be made on the basis of the value of the European Unit of Account (EUA) specified in the second paragraph of Article 63 of the Staff Regulations; the amounts transferred

BUYL v COMMISSION

shall be weighted by a coefficient representing the ratio between the weighting for the country in the currency of which the transfer is made and the weighting for the country of the official's employment."

The proposal included other provisions which are not pertinent to this case.

18 Having received the proposal and a request for an opinion from the Council, the Parliament gave a favourable opinion (Official Journal 1977 C 183, p. 55). The Parliament's resolution included, inter alia, the following recitals:

"Whereas the sole purpose of the Commission's proposals submitted to Par- liament is to express in European Units of Account those values (re- munerations, allowances transfers of funds, weightings, tax) hitherto expressed in Belgian francs, without affecting the rights of staff or exposing their emoluments to possible fluctuations;

22 It appears from the report of the Parliament's Committee on Budgets that the Parliament was in a position to assess the possible impact of the Commission's initial proposal on pensions and transfers made under Article VII to the Staff Regulations and that assurances given to the Parliament by the Commission must be understood to the effect that the "neutrality" of the proposal concerned the entire remuneration of officials and that in certain cases the Commission's proposal might have the effect of increasing the cost of transfers.

23 In fact, the regulation finally adopted conformed to the proposal submitted to the Parliament apart from the substitution of updated exchange rates for the EUA and the transitional provisions intended to alleviate the effect of the provisions of the regulation for a specific period with regard to certain pensioners. As regards the substitution of the updated exchange rates for the EUA, it should be noted that the rates adopted exactly reflected the value of the EUA in terms of national currencies as at 1 April 1978, so that the amendment to the initial proposal constituted in reality a change of method rather than of substance. As regards the transitional provision for the benefit of certain pensioners, it should be noted that that provision corresponded broadly to the wish expressed by the Parliament.

BUYL v COMMISSION

24 In those circumstances, further consultation with the Parliament regarding the contested provisions was unnecessary.

C o n t e n t a n d effects of t h e r e g u l a t i o n s

27 It is true that the adoption of the updated exchange rates had the effect of increasing the cost of the transfers made to the Federal Republic of Germany pursuant to Article 17 of Annex VII to the Staff Regulations. The amendment of the parities and of Article 17 of Annex VII to the Staff Regu- lations was, however, made in order to do away with a system which was such as to give benefits to officials employed in certain countries and involve unjustified losses for the Community. As regards the applicants, who are all employed in Belgium, there was no valid reason for them to benefit from

JUDGMENT OF 4. 2. 1982 — CASE 817/79

artificial exchange rates for making those transfers. Neither the Council nor the Commission had given any assurances to officials that the more favourable system of transfers would be maintained indefinitely. In those circumstances, the adoption of the real rates could not breach any principle relating to protection of their legitimate expectations.

28 As regards the argument based on the principle of restricted authority, it is sufficient to draw attention to the fact that the concept of misuse of power has a precisely defined scope. It refers to cases where an administrative authority has used its powers for a purpose other than that for which they were conferred on it. In this case, no such use occurred. The Council was exercising the powers conferred on it in the normal way when, by means of Regulation No 3085/78, it directly achieved the lawful objective pursued by it, namely the updating of the exchange rates.

On those grounds,

THE COURT (First Chamber)

hereby:

1. Dismisses the application;

2. Orders the parties to bear their own costs.

Bosco O'Keeffe Koopmans