C-127/80

JUDGMENT OF THE COURT (FIRST CHAMBER) 11 MARCH 1982'

Vincent Grogan v Commission of the European Communities

(Former official — Rates of exchange for calculation of pension)

Case 127/80

Officials — Pensions — Determination of pension rights — Payment of benefits — Distinction — Amount of benefits affected by exchange rates and weightings — No encroachment upon pension rights (Staff Regulations of Officials, Annex VIII, Chapter 2 and Articles 45 and 46)

The provisions of Annex VIII to the actually paid to the pensioner which Staff Regulations draw a clear distinction were solely due to the effect of the rates between the determination of "pension of exchange and the weightings affected rights" covered by Chapter 2 of the the payment of benefits under Anieles 45 annex and the "payment of benefits" and 46, they did not encroach upon the governed by Articles 45 and 46 of the pension rights as determined in annex. Although changes in the amounts accordance with Chapter 2 of the annex.

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

JUDGMENT

Facts and Issues

The second subparagraph of Anicie 82 VIII to the Staff Regulations to have his (1) of the Staff Regulations provides that pension paid in Belgian francs, adjusted pensions "shall be weighted in manner by the weighting of his country of provided for in Anicie 64 and Anicie 65 residence and convened at the rate of (2) for the country of the Communities exchange prevailing on the day and thus where the person entitled to the pension obtain a considerably higher pension declares his home to be" and that than a pensioner who had chosen to "payment of such pensions shall be have his pension paid in the currencv of effected in accordance with the terms his country of residence, adjusted by the .contained in Anicie 63 in respect of same weighting but convened on the payment of remunerations". basis of the par values accepted bv the International Monetary Fund on In the form which it took until 31 March 1 January 1965. 1979. Anicie 63 of the Staff Regulations of Officials provided as follows: In order to remove such anomalies the Council, acting on a proposal by the "An official's remuneration shall be Commission adopted Regulation No expressed in Belgian francs. It shall be 3085/78 of 21 December 1978 paid in the currency of the country in amending, with panicular reference to which the official performs his duties. the monetary parities to be used, Regu- lation (EEC, Euratom, ECSC) No 259/68 laying down the Staff Regu- Remuneration paid in a currency other lations of Officials of the European than Belgian francs shall be calculated on Communities and the Conditions of the basis of the par values accepted bv Employment of Other Servants of these the International Monetar)· Fund, and in Communities, Regulation (Euratom, force on 1 January 1965." ECSC, EEC) No 2530/72 and Regu- lation (ECSC, EEC, Euratom) No The fluctuations in the rates of exchange 1543/73 concerning special measures which have occurred since the inter- (Official Journal 1978 L 369, p. 6). national system of fixed exchange rates was abandoned in 1971 were offset bv By Anicie 1 of that regulation Anicie 63 the adjustment of the weightings which of the Staff Regulations was replaced bv were originally intended to compensate the following: for the differences in the cost of living between the various places of employment. That system tended to pull "Article 63 down the weightings for strong currency countries and to inflate them for weak Officials' remuneration shall be currency countries. Thus, Council Regu- expressed in Belgian francs. It shall be lation (Euratom, ECSC, EEC) No paid in the currency of the country in 1461/78 of 26 June 1978 (Official which the official performs his duties. Journal 1978 L 1/6, p. 1) fixed the weightings applicable to pensions at 1C2.3 for Belgium and 137.9 for Ireland. Remuneration paid in a currencv other than Belgian francs shall be calculated on the basis of the exchange rates used for Under those circumstances a pensioner the implementation of the general budget residing in a weak currencv country of the European Communities on 1 Julv could elect under Article 45 of Annex 1978.

Under Article 4 Regulation No 3085/78 2. The applicant was employed by the was to enter into force on 1 January Commission in the capacity of a director 1979 but was to apply from 1 April 1979. within the Directorate-General for However, for pensions and allowances of Competition from 16 November 1973 to which the net amount became less than 31 March 1975. By decision of the that under the existing arrangements, the Commission of 25 March 1975, the post regulation was to apply only from occupied bv the applicant was abolished 1 October 1979. From that date the in the interests of the service with effect difference between the net amounts from 1 April 1975, in accordance with resulting from the implementation of the the provisions of Article 50 of the Staff regulation and those received in Regulations. He received the allowance September 1979 was to be reduced by referred to by the third paragraph of one tenth per month. Article 50 followed by a pension under Article 77 of the Staff Regulations. In addition to bringing the exchange rates up to date, at the same time the Pursuant to Article 45 of Annex VIII to Council adopted Regulation No 3086/78 the Staff Regulations, Mr Grogan of 21 December 1978 adjusting the elected to have his pension paid in the weightings applicable to the remuner- currency of the country where the ation and pensions of officials and other Commission had its seat, namely servants of the European Communities Belgium. That election still stands. following the amendment of the provisions of the Staff Regulations concerning the monetary parities to be Bv a memorandum of 23 October 1979 used in implementing the Staff Regu- from the Commission, the applicant was lations (Official Journal 1978 L 369, informed that pursuant to Article 4 of p. 8). Council Regulation No 3085/78 his pension would be calculated on the basis Article 1 (2) of Regulation No 3086/78 of the new weighting with effect from 1 October 1979. Consequently, the net provides as follows:

By a letter of 12 November 1979 Nevertheless, it pointed out that in the registered with the Secretariat-General case of a pensioner resident in a weak of the Commission on 21 January 1980, currency country who had opted for the applicant submitted a complaint payment of amounts due in the strong under Article 90 (2) of the Staff Regu- currency of his country of origin or of lations against the Commission's the country where the institution had its memorandum of 23 October 1979. He seat, adjustment of the weighting for his sent a reminder by letter of 6 March place of residence would of necessity 1980 and received an interim reply by entail a reduction in the nominal amount letter of 17 March 1980. The due in the currency in question. Commission took no decision within the period of four months prescribed by Upon hearing the report of the Judge- Article 90 (2) of the Staff Regulations. Rapporteur and the views of the Advocate General, the Court (First By an application of 23 May 1980, which Chamber) decided to open the oral was lodged at the Court Registry on procedure without any preparatory 27 May 1980, the applicant brought this inquiry. action under Article 91 (1) of the Staff Regulations against the implied decision rejecting his complaint. II — C o n c l u s i o n s of the p a r t i e s By a letter of 15 July 1980, the Commission notified to him its express The applicant claims that the Court decision rejecting the complaint. should:

In its statement of the reasons on which Annul the implied decision rejecting his that decision was based, the Commission complaint; explained the need to put an end to the privileged treatment for certain Declare Council Regulations Nos 3085 pensioners which was made possible by and 3086/78 inapplicable. the combined effect of the weighting and the choice of the currency in which the pension was to be paid. The defendant contends that the Court should: In that connection it stressed that the adjustment of the weightings (Regulation Dismiss the application as unfounded in No 308ò/78) was intended to make substance; certain that no change in money terms would result from the bringing up to Order the applicant to pay his own costs.

In that regard he submits first that the pension to which he is entitled is a contributory' pension and, to the extent He therefore submits that the reductions to which it is provided out of made in his pension are in breach of the Community funds, is in the nature of above-mentioned decision of the deferred pay. Commission and of the contractual obligations arising therefrom. The applicant's pension is to be determined in accordance with the Staff Regulations as All officials of the same grade pay the they subsisted on the date of the termin- same proportion of their salaries to the ation of his employment. The amount of pension scheme irrespective of their place his pension cannot be altered except in of work, country of residence or country accordance with the Staff Regulations as of origin. No weightings are applied to they stood at that time and cannot be those contributions. It follows that on altered retroactively to his detriment. retirement each of them is entitled to expect a pension at least proportionate to the contributions paid. Consequently, it is unlawful to introduce retroactively a The applicant adds that the adjustments weighting system which brings about a provided for by Regulations No'. 3D!·'5 permanent reduction in the pensioner's and 3086/78 cannot be justified under income on the basis of his place of Article 65 (2) of the Staff Regulations residence and the presumed cost of living which provides that "in the event oi a there. Moreover, the effect of the revised substantial change in the cost ot iivirp scheme is that pensioners who have the Council shall decide, within two made identical contributions will receive months, what adjustments should bf different pensions simply because of their made to the weightings and it appro choice of residence after retirement. priate to apply them retrospective^ "

pensioner is entitled to rely upon the de la Fonction Publique Internationale" continued payment of the pension [International Public Senice Law and awarded to him, adjusted from time to Practice], Paris, 1977, p. 87; Knapp, time in view of the cost of living in the "Jurisprudence du Tribunal Administratif country in which he lives. He is entitled de l'Organisation Internationale du to enter into commitments and establish Travail" [Case-law of the Administrative his mode and standard of living in his Tribunal of the International Labour years of retirement accordingly. The Organization] in Annuaire Français de application of Regulation No 3085/78 Droit International [French Year-Book has inflicted grievous loss upon him. of International Law] 1978, p. 470). Consequently, staff have no right to the The defendant takes the view that the maintenance of provisions of a general applicant's reasoning may be summarized nature governing their circumstances. under two heads: infringement of a vested right and violation of fundamental Moreover, to determine an official's rights. rights once and for all at the date of his retirement, as postulated by the It submits that the fundamental ground applicant, would have the illogical on which the applicant's thesis on vested consequence of creating as many rights is based, that is to say the idea that different categories of pensioners as the legal relationship between the there have been different versions of the applicant and the Commission is of a provisions dealing with pension rights. contractual nature, is a notion which is Such a system would clearly be totally alien to Community civil service inconsistent with the requirements of law. sound administration.

JUDGMENT OF 11. 3. 1982 — CASE I27/8C

Commission) cited by the defendant In its rejoinder the defendant states in exactly describes the facts in the present answer to the applicant's view that the case. The applicant's vested right to the quoted passage of the judgment in Case pension payable under Article 50 did 28/74 in fact confirms that the only indeed arise under the Staff Regulations vested right which an official may assert as thev subsisted on 25 March 1975 and is to avoid retroactive application of an consequently could not lawfully be amendment to an article of the Staff adversely affected by subsequent regu- Regulations. lations.

GROGAN v COMMISSION

not cause a reduction of his pension (as In the annex to its defence the defendant expressed in Belgian francs) but the produced the letter of 15 July 1980 suppression of the unjustified exchange whereby it had notified to the applicant advantages arising from the application its express decision rejecting his of unrealistic exchange rates dating from complaint. 1965. The alteration of the weightings was merely the consequence of In his reply the applicant points out that abandoning those exchange rates. the letter was issued after the expiry of the period laid down by Article 90 (2) of the Staff Regulations and after the applicant's application had been lodged As far as the weighting applicable to the at the Court. He considers that the allowance paid under Article 50 of the Commission was therefore not entitled to Staff Regulations is concerned, the refer to it in its defence and requests that defendant draws attention to a decision the Court declare the letter inadmissible. of the Court from which it is clear that if the application of the fifth paragraph of In its rejoinder the defendant replies that Article 50 is likely to result in a breach the fact that its express decision occurred of a superior rule of law, the allowance after the implied rejection of the in question must be weighted at the rate complaint did not prevent the defendant fixed for the official's country of from producing the document. residence (judgment of 31 May 1979 in Case 56/78 Newth v Commission [1979] ECR 1941, paragraph 13). IV — O r a l p r o c e d u r e

* Under Article 82 (1) of the Staff Regulations pensions are to be weighted in the manner provided for in Articles 64 and 65 (2) of the Staff Regulations for the country of the Communities where the person entitled to the pension declares his home to be. Payment of such pensions is to be effected in accordance with the terms contained in Article 63 in respect of payment of remuneration.

? In the form which they took until the end of 1978, Articles 63 and 64 of the Staff Regulations provided as follows: Article 63: ,,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 Monetarv Fund, and in force on 1 January 1965." Article 64: "An official's remuneration 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.

GROGAN v COMMISSION

. . . 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."

6 Since 1971 the currencies of certain Member States, including the Irish pound, have suffered increasingly large reductions in value in relation to their values in 1965. During a first period extending until 1978 the Council did not alter the exchange rates laid down by Article 63 of the Staff Regu- lations. However, in order to maintain the purchasing power of pensions paid in currencies which had fallen in value, it increased the weightings referred to in Anicie 64 of the Staff Regulations for the countries concerned.

Communities were situated. On that occasion the weighting applicable to Ireland was substantially reduced.

i: Regulations Nos 3085/78 and 3086/78 applied from 1 April 1979. However, the third paragraph of Article 4 of Regulation No 3085/78 provides as follows:

"However, for pensions and allowances of which the net umount becomes less than that under the existing arrangements, the regulation shall only apply from 1 October 1979. From that date the difference between the net amounts resulting from the implementation of this regulation and those received in September 1979 shall be reduced by one tenth per month."

n On 23 October 1979 the Commission informed the applicant that the new system would be applied to his pension payments from 1 October 1979. The net amount of the benefit, which came to BFR 30 145 in September 1979, would be reduced to BFR 13 080. However, in accordance with the third paragraph of Anicie 4 of Regulation No 3085/78 cited above, the reduction would be made at the rate of one tenth per month from October 1979 until July 1980.

i: Since his complaint against that decision, which was lodged on 12 November 1979, evoked no response within the period of four months laid down by the Staff Regulations, the applicant brought this action on 27 May 1980. On 15 July 1980 the Commission notified him of its decision to reject his complaint.

T h e first s u b m i s s i o n (vested r i g h t s )

i6 It follows that this submission is inapposite and that it is therefore unnecessary to consider it.

T h e s e c o n d s u b m i s s i o n ( t h e l a w f u l n e s s of t h e w e i g h t i n g s )

i7 The applicant submits next that Regulation N o 3086/78 is unlawful inasmuch as it altered the weightings for reasons other than those which might justify such action under the terms of Articles 64 and 65 (2) of the Staff Regulations.

18 The Commission put forward two arguments in defence of the lawfulness of the weightings laid down by Regulation No 3086/78. The result of main- taining the former system would have been to perpetuate without justifi- cation the increasingly manifest inequality of two categories of pensioners, which stemmed from the choice which they made pursuant to Article 45 of Annex VIII to be paid either in Belgian francs or in the currency of their

JUDGMENT OF lì. 3. 1982 — CASE 127/8:

country of residence. Moreover, the effect of the new system set up in particular by Regulations Nos 3085/78 and 3086/78 was specifically to restore the weightings to the functions assigned to them by the Staff Regu- lations rather than to use them to offset fluctuations in the rates of exchange.

22 According to the Commission, such use of the weightings was justified as a temporary expedient intended to offset the effects of the parities fixed in 1965 pending an alteration of the rates of exchange laid down by Article 63 of the Staff Regulations.

GROGAN v COMMISSION

23 The Court has already held in another context in its judgment of 24 October 1973 in Case 9/73 Schlüter v Hauptzollamt Lörrach [1973] ECR 1133 that the Council may be entitled to have recourse to a temporar)' expedient when confronted with a situation characterized by the absence of any adequate provision for urgently counteracting the effects of sudden events which may- give rise to a serious situation, particularly where the measures to be adopted relate to an area intimately connected with the monetary policies of Member States, the effects of which they are partially to offset. However, the Court added that such a state of affairs may be only temporar)·, since the legal basis for the measures in question must eventually be found in the appropriate provisions of Community law.

24 In this case the alteration of the exchange rates and the corresponding adjustment of the weightings did not occur until the end of 1978. Thus the temporary measures governed the situation of pensioners residing in weak currency countries for a period of approximately seven years.

25 However, it must be acknowledged that the period was characterized by uncertainties as to subsequent currency developments. In those circum- stances, the Council's reluctance to adapt Community provisions to the new situation on the currency market could be explained by the difficulties in laving down, not only in the sphere of the Staff Regulations but also in other spheres, criteria ensuring firm rates of exchange.

3c Since none of the Community institutions had committed themselves to maintaining a situation arising from the application of those temporary expedients which favoured a particular category of pensioners, the applicant's submission must be rejected in so far as it relates to the actual introduction of the new system.

3i With regard to the arrangements for its introduction, it should be recalled that it was the Council's reluctance to amend the provisions of the Staff Regulations concerning the rates of exchange which caused the progressive increase in the benefits due to the category of pensioners to which the applicant belongs. That increase occurred over a period of about seven years and yet the Council decided, by incorporating the third paragraph of Anicie 4 of Regulation No 3085/78, to make pensioners bear the loss of that increase after a relatively short transitional period, a system of monthly reductions over a period of ten months being applied from 1 October 1979, that is to say six months after Regulations Nos 3085/78 and 3086/78 entered into force.

32 It should be emphasized that the deterioration in the situation which occurred before the adoption of Regulations Nos 3085/78 and 3086/78 was not in any way attributable to the conduct of the pensioners. The prolonged

GROGAN v COMMISSION

period of deterioration was due to the inaction of the Council, which failed to rectify exchange rates which no longer bore any relation to economic reality.

33 Whilst there may be some explanation for the Council's inaction it must none the less not be overlooked that pensioners benefiting from that inaction were entitled to expect the Council to take account of the situation in which they had been placed by the prolonged application of the system temporarily used. That is particularly true in the case of pensions, since they are intended to ensure that officials who have left the service of the Communities enjoy an adequate standard of living.

OPINION OF MR CAPOTORTI — CASE 127/85

On those grounds,

THE COURT (First Chamber)

hereby:

1. Annuls the Commission's decision reducing the applicant's pension pursuant to Article 4 of Council Regulation (Euratom, ECSC, EEC) No 3085/78 of 21 December 1978 (Official Journal 1978 L 369, p. 6), which was notified to the applicant by a memorandum of 23 October 1979.

2. Orders the parties to bear their own costs.