C-5/80

APPLICATION in the terms set out in the applicant's conclusions,

THE COURT (First Chamber)

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

Advocate General : F. Capotorti Registrar: P. Heim

gives the following

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

Article 15 I — Facts and written p r o c e d u r e "Any transfers by the borrower to the lender by way of early repayment or in By decision of 2 March 1970 concerning payment of monthly instalments shall be the use of the sums available under the made in Belgian francs or in the currency European Coal and Steel Community of the country in which the property to budget item "Pension Funds" the be financed is situated in which the funds Council authorized the Commission to arising from this loan were advanced. set aside 40 % of the said sums for the The funds in question shall be converted grant of building loans to officials of the into Belgian francs on the basis of the Communities. parity ruling as at the date of the transfer." By decision of 17 June 1971, published in Staff Courier N o 170 A of 8 July 1971, the Commission issued the Until 31 March 1979, the monetary necessary implementing provisions, in parity applied for conversion between the particular: Belgian franc and other currencies was the parity notified by the Member Sutes "Article 9 to the International Monetary Fund in 1965 (BFR 1 = 1 LIT 12.50 in the Loans covered by this provision shall be present case). The sums lent were repaid expressed in Belgian francs. The (likewise on the basis of the exchange payments in respect thereof shall be rate indicated above) by means of made in the currency of the country in deductions made by the Commission, in which the property to be financed is its capacity as lender, from the monthly situated, on the basis of the parity ruling remuneration of officials. at the time of the payment." The system operated as follows: the Article 7 (2) (a) provides that the interest official's monthly salary, to which the and repayments due from the official weighting was applied (for example BFR under the loan are to be retained from 100 000 × Iulian weighting of 157.8 in his remuneration pursuant to instructions March 1979) was reduced by the amount given for that purpose to the of the building loan instalment (for Commission. Article 11 (2) provides that example BFR 5 000), the net remuner- no amendment to the implementing ation then becoming, in the example provisions may jeopardize the rights given, BFR 152 800, which was conferred upon officials who have convened into Iulian lire at the rate of already been granted loans. BFR 1 = LIT 12.50.

By decision of 25 July 1975, published in exchange rates. However, staff may the Staff Courier of 15 September 1975 reguest that the deductions be made at (special inter-institutional issue), the the parities communicated to the Inter- Commission amended Article 9 of the national Monetary Fund, with reference implementing provisions of 17 June 1971 to and within the scope of the provisions as follows: giving effect to Article 17 of Annex VII to the Staff Regulations (transfer of pan "Loans covered by this provision shall be of emoluments through the Com- expressed and paid in Belgian francs. mission)." The deductions and payments referred to in Article 7 (2) shall be made in Belgian Confirmation of that notice was given to francs, as shall any repayment made by the persons concerned by letter from the the borrower to the Commission." Director-General for Personnel and Administration in June 1977. The Staff Courier further stated : On 23 December 1971 Mr Battaglia had "In the case of contracts already signed, entered into an agreement with the borrowers will receive a personal com- Commission for a loan of BFR 750 000, munication regularizing their position the exchange value of which in Italian from the Directorate-General for Per- lire, namely LIT 9 375 000, was paid to sonnel and Administration." him pursuant to Article 9 of the implementing provisions adopted on 17 That decision of the Commission was June 1971. notified to the applicants by letter of 21 August 1975 from the head of the For her part, Mrs Cocco had entered Building Loans Division, offering them a into an agreement with the defendant on reduction of their principal debt and 16 November 1972 for a loan of. BFR concomitantly the adoption of the 640 000 the exchange value of which in Belgian franc as the only currency in lire, namely LIT 8 000 000, was paid to which subsequent repayments might be her pursuant to the above-mentioned made. The applicants did not ask for provision. their debt to be reduced. Mr Battagliai salary statement for In Staff Courier No 136 of 7 February March 1979 showed a sum of BFR 4 281 1977, the Commission published the appropriated to repayment of the loan, following notice: converted into LIT 53 512. The same amount in Belgian francs was converted "On 25 July 1975 the Commission in April 1979 into LIT 78 590. During decided that the Commission building the same period, Mrs Cocco's monthly loans would in future be paid — and repayment instalment (BFR 3 483), deductions from salaries to repay the expressed in lire, rose from LIT 43 537 loans would be made — in Belgian to LIT 63 943. francs rather than in the currency of the country where the property covered by In fact on 21 December 1978 the the loan in question is situated. Hitherto, Council had adopted Regulation No all deductions have been calculated, 3085/78 amending, with particular where necessary, on the basis of parities reference to the monetary parities to be at 1 January 1965. Henceforth, by used, Regulation No 259/68 laying decision of the Director-General for down the Staff Regulations of Officials Personnel and Administration, con- of the European Communities and the version will be based on 'updated' Conditions of Employment of Other

Servants of the Communities, Regulation 19/C-2/79 of 1 March 1979 and by No 2530/72 and Regulation No 1543/73 Administrative Notice No 230 of 9 April concerning certain special measures 1979 (which gave details of the new rates (Official Journal 1978, L 369, p. 6) and applicable to repayments in Belgian Regulation No 3086/78 adjusting the francs for Commission building loans). weightings applicable to the remun- eration and pensions of officials and other servants of the European On 29 May 1979 Mr Battaglia lodged a Communities following the amendment complaint in accordance with Article 90 of the provisions of the Staff Regulations of the Staff Regulations against the concerning the monetary parities to be conversion, in accordance with the new used in implementing the Staff Regu- procedure, of the monthly instalments lations (Official Journal 1978, L 369, p. payable by him, considering conversion 8). By means of those regulations the on that basis to be improper. Mrs Cocco Council amended in particular Article 63 did not, for her part, lodge a complaint. of the Staff Regulations of Officials and updated the exchange rates. The reference to the IMF parity was abandoned and for transfers in a The Commission did not reply to Mr currency other than that in which Battagliai complaint. remuneration was paid the exchange rate used for implementation of the general budget of the European Communities on In order to establish breach of the 1 July 1978 (reviewable) was imposed agreement, the applicants, together with (that is to say, LIT 26.11 = BFR 1), a 15 other officials (Cases 5 to 21/80), coefficient being applied pursuant to brought an action on 7 January 1980 by Article 17 of Annex VII to the Staff application received at the Court Regulations "representing the difference Registry on 14 January 1980, pursuant to between the weighting for the country in Article 20 of the agreement, which whose currency the transfer is made and confers jurisdiction on the Court for any the weighting for the country in which dispute between the parties regarding the the official is employed". The object of "validity, interpretation or performance" the application of that coefficient was to of the agreement. ensure, as regards the part of the salary transferred to a country other than the official's place of employment, that every It was decided by order of the Court of official should, as a result of the 7 May 1980 that the cases should be adjustment of that portion by means of joined for the purpose of procedure and the weighting applied in the other judgment. country, enjoy exactly the same pur- chasing power, for the corresponding portion of his salary, as an official employed in that country. For the IMF Upon hearing the report of the Judge- rate of BFR 1 = LIT 12.50 the rate of Rapporteur and the views of the BFR 1 = LIT 18.35 was therefore sub- Advocate General, the Court decided to stituted, remaining in force until 31 open the oral procedure without any January 1980. As from 1 February that preparatory inquiry. rate was changed to BFR 1 = LIT 19.80. By order of 21 January 1981 the Court The persons concerned were informed of decided to assign the two cases to the the new provisions by Circular No First Chamber.

Order the applicants to pay the costs. The applicants note the defendant's statement to the effect that this dispute falls outside the scope of the Staff Regu- Ill — Submissions and argu- lations. They find it surprising therefore m e n t s of t h e p a r t i e s that the defendant should rely upon the Council's amendment of Article 17 of Annex VII to the Staff Regulations in A — Admissibility order unilaterally to impose a new rate for the conversion of Belgian francs into Mr Battaglia emphasizes that his lire and that it should take action in the complaint through official channels was manner of an authority vested with not indispensable. In fact, the action powers under the Staff Regulations might have been — and indeed was — against an official with regard to whom brought before the Court pursuant to it is in a privileged position in any case

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

JUDGMENT OF 1. 7. 1982 — JOINED CASES 5 AND 18/80

Regulations. To apply it would therefore Since the rate of interest of 4% be contrary to the agreement. stipulated in the agreement relates to the determination of a monthly instalment payable in Belgian francs and not in lire, it cannot involve the consequences which N o assurance was ever given by the the applicants seem bent on attributing to defendant to the borrowers that main- it with regard to the amount in lire the tenance of the IMF parity would be purpose of which is to provide the guaranteed until the expiry of the exchange value each month of the

. . no although not provided for in the guarantee can be given regarding main- agreement, are however necessary in the tenance of the exchange rate used at field of contractual relations. In any present by the Commission for the case, the argument falls down since the conversion into Belgian francs . . . of requirements of Article 25 of the Staff deductions from remuneration". Regulations have been observed. In fact, the applicant had had notice before April 1979 on several occasions and in specific terms (see above) that the new parity As regards the letter from the defendant applicable to transfers and also to calcu- following its decision of 25 July 1975, lation of the deduction in lire to be the amendment to Article 9 of the applied to his remuneration for the

purposes of repayment of his loan was to not claim that the agreement refers become BFR 1 = LIT 18.35. The explicitly to an immutable parity of the circulars which had been sent to him had Belgian franc against the lira and do not included "all the essential factors which seek to rely upon an alleged exchange · guided the administration in its decision guarantee. In fact, it is the Commission and are therefore sufficient to facilitate which seeks to impose the Belgian franc judicial review" (cf. Case 61/76 Geist v as the currency of the repayment, Commission [1977] ECR 1419). converted into lire at the rate of exchange ruling at the time of the transfer. The Commission, aware of the difference of circumstances as between borrowers who obtained the advantage of a reduction in the amount of their The applicants have received the principal debt as from 1 February 1976 impression that the Commission, without and those who, like the applicants, did saying so, seeks to rely upon the not wish to avail themselves of that principle that measures may lawfully be advantage, proposes granting the taken to avoid the effects of unfore- reduction in question to the latter, seeable disturbances in the economy. resulting in a decrease as from April Thus, it decided at a specific point that it 1979 of the nominal amount of the would no longer suffer the consequences monthly instalment in Belgian francs of the de facto devaluation of the lira and payable by them. That reduction would that accordingly for repayment it would be meaningless otherwise than in the substitute a rate for that currency which context of the view put forward by the in no way corresponded to what was Commission and should be subject to an agreed between the parties. abatement proportional to the amount of the principal already repaid by March 1979, at the old IMF rate, in relation to the total principal debt to be repaid. The parties never considered themselves under any obligation to refer to the "real" parity of the lire against the Belgian franc. Nor did they ever refer The applicants state in reply that the specifically to the parities indicated in parties to the agreement intended ab the Staff Regulations. On the other initio that the parity accepted by the hand, they referred from the outset to IMF in 1965 (BFR 1 = LIT 12.50) the rate notified by Italy and accepted by should be and continue to be applied in the IMF, a parity which was considered dealings between them. They did not to be constant regardless of de facto refer to Article 63 of the Staff Regu- changes, even after the system set up by lations or to the rate of exchange applied the treaty establishing the IMF collapsed. by banks which, even at the time when Indeed, one of the most effective the agreements were entered into and the methods of determining the true loans were advanced, did not coincide meaning of an agreement is to examine with the official rate; the fluctuations of the manner in which the parties have currencies have, moreover, never had performed it. any impact on the conduct of the parties.

distinction between the deductions made though it purports to apply the new text in consequence of the transfers auth- of Article 17 of Annex VII to the facts of orized in accordance with Anicie 17 of the case). Annex VII to the Staff Regulations and the amounts to be withheld for monthly repayment of the loans in question. That As regards the Commission's proposal note added, however, that no guarantee for an arrangement, the applicants was given regarding maintenance of the consider that it would be more appro- exchange rate. priate to restore matters to the initial position and bring to an end its unlawful action — and the consequences thereof T h e fact that the decision of 25 July — which might open the way to peaceful 1975, amending Article 9 of the decision negotiation. of June 1971, was not accepted by the applicants, disturbs the Commission.

repayments. The wording of Article 9 known to the parties and remains the does not contain any such restriction, same throughout the currency of the nor does the letter sent to the persons agreement, the parity ruling on the date concerned in June 1977. of the transfer is unknown to the parties and is essentially variable since, by definition, it is tied to the dates on which As regards the question of the de Jacto the transfers are to be made. By adopting increase in the rate of interest by the that parity, the parties to the agreement introduction of a new parity which was therefore deliberately agreed to expose less favourable to officials, the themselves to an exchange risk. Commission concentrates only on the formal aspect in so far as it continually placed emphasis on the fact that the The interpretation given by the monthly instalments were expressed in defendant, to the effect that the parity Belgian francs. For their part, the referred to in the agreement is the parity applicants draw a comparison between applicable for the purposes of the Staff the principal amount they received in lire Regulations to the calculation of re- and the monthly instalments deducted muneration paid in a currency other than from their remuneration since 1979, Belgian francs and to transfers, conforms which leads them to the conclusion that with the general scheme of the the interest rate greatly exceeds 4%. agreement. The agreement allows officials to obtain building loans on par- ticularly advantageous conditions.

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

But that same article also provides that, in The continued application, until the the latter case, the lire must be converted entry into force of Council Regulations into Belgian francs and the conversion Nos 3085//78 and 3086/78 of 21 must be on the basis of the parity ruling December 1978 of a conversion rate of on the date of the transfer. LIT 12.5 = BFR 1 is merely the consequence of the application, within the framework of the old Article 17 of The latter provision should be Annex VII to the Staff Regulations, of considered in- the context of Articles 4 the parity for the Italian lira declared to and 5 of the agreement which entitle the

existed. The Commission, which is not franc upon them as the currency of the author of the above-mentioned regu- payment. It is merely implementing the lations, did not unilaterally change the agreement which, on the one hand,

3 By decision of 17 June 1971, the Commission adopted the necessary implementing provisions, Article 9 of which in particular provided that "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 situated, on the basis of the parity ruling at the time of the payment".

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

4 On 23 December 1971 and 16 November 1972, the applicants entered into agreements with the Commission under which they received from the Commission loans of BFR 750 000 and BFR 640 000 respectively intended to finance the construction of their dwelling houses.

s 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 transfer 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 transfer.

"(a) A borrower who received a loan in the currency of the country in which the property is situated at a rate other than the average rate for that currency in the Brussels foreign exchange market on the day of payment may — within a period of two months from the date of notification of this decision — apply for a reduction of his principal debt to the extent to which he has suffered financial loss as a result of the fact that repayment is to be made in Belgian francs.

(b) To determine the new principal debt, the amounts paid to the borrower in foreign currency shall be converted into Belgian francs at the rate specified in subparagraph (a). From the amount thus obtained there shall be deducted the repayments made up to the date of the decision to reduce the debt. If those repayments were made in the currency of the country in which the property is situated, they shall also be converted into Belgian francs at the rate specified in subparagraph (a).

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

1 3 That decision was notified to the applicants who did not, however, apply for a reduction of their principal debt.

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

u 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. Mr Battagliai salary statement for March 1979 showed a repayment of BFR 4 281, converted into LIT 53 512. In respect of April, the same amount in Belgian francs was converted into LIT 78 590. During the same period, Mrs Cocco's monthly repayment, namely BFR 3 483, after conversion into lire, changed from LIT 43 537 to LIT 63 943.

provided for in the decision of 25 July 1975 are to be made at the same rate as that used for the grant of the loan itself, namely LIT 100 = BFR 8. In such cases, these transactions do not fall within the heading of partial transfers of remuneration."

i9 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 applicants' view is that the 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.

20 The Commission contends on the other hand that the exchange rate to be used for that conversion must be the one fixed as a reference parity in Article 63 of the Staff Regulations and that the monthly transfers may be made pursuant to the provisions of Article 17 of Annex VII to the Staff Regu- lations, which enables officials regularly to transfer part of their emoluments through the institution by which they are employed in the currency of certain other Member States.

2i In pursuance of that interpretation of the agreement, the Commission converted the amounts in lire transferred to repay the loan in question into Belgian francs according to the parity referred to in Article 63 of the Staff Regulations until the entry into force of Regulations Nos 3085/78 and 3086/78. As from 1 April 1979 it also based its calculations for conversion of the monthly payments on the rates laid down in the Staff Regulations, as amended by Regulations Nos 3085/78 and 3086/78, and applied the provisions of Article 17 of Annex VII to the Staff Regulations in its amended version. It claims that that method of making the transfers conforms wholly with the agreement.

26 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 :

"Borrowers whose agreement was signed before 25 July 1975 have had an opportunity to choose between two courses of action :

(1) Reduction of their principal debt by an amount corresponding to the difference between the amount of the loan at the official rate and that amount at the market rate on the day of payment. As a result, any early repayment under Article 8 of the loan agreement and every monthly payment (see the last sentence of the first paragraph and the third paragraph of Article 6 of the agreement) must henceforth be made exclusively in Belgian francs, contrary to what is stipulated in Article 15 of the loan agreement;

JUDGMENT OF 1. 7. 1982 — JOINED CASES 5 AND 18/80

(2) Maintenance of their principal debt, which is the position in your case. As a result, you are entitled, as stated in Article 15 of your loan agreement, to choose the currency (Belgian francs or the currency used for the advance of the loan) to be used in the case of: Early repayment under Article 8 of the agreement; Monthly payments pursuant to Article 6 of the agreement (first and third paragraphs).

BATTAGLIA AND COCCO BEVILACQUA / COMMISSION

29 It appears from all the foregoing considerations that the view put forward by the applicants in support of their claims cannot be upheld and that accordingly the applications must be dismissed.

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

3i 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. In this case that provision should be applied by analogy.

On those grounds,

THE COURT (First Chamber)

OPINION OF MR ADVOCATE GENERAL CAPOTORTI

(see Case 567/79 A, p. 2394)