C-137/80

JUDGMENT OF 20. 10. 1981 — CASE 137/80

administration, a national or inter- service of the Community, as the national organization or an under- contractual basis for the transfer of taking, is intended to confer upon pension rights to the Community them a right which they may freely scheme, may be envisaged where the exercise. All the Member States are official comes from the administration therefore bound to adopt the of a third party vis-à-vis the measures necessary in order to give Community, such as international effect to that provision, by laying organizations which are not subject to down rules for the transfer or pension Community law, that is neither rights which will allow officials of the necessary nor justified where the Communities to exercise the option official's former employer is a granted to them by the Staff Regu- Member State which is subject to the lations. rules laid down by Community institutions acting within the scope of their powers. The same holds true for 3. Whilst the conclusion of an a public or private body whose agreement between the Community pension scheme is subject to the and pension body to which the legislation or rules made by a public official belonged before entering the authority of that State.

In Case 137/80

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Principal Legal Adviser, Raymond Baeyens, acting as Agent, with an address for service in Luxembourg at the office of its Legal Adviser, Mario Cervino, Jean Monnet Building, Kirchberg,

applicant,

ν

composed of: J. Mertens de Wilmars, President, G. Bosco, A. Touffait, O. Due, Presidents of Chambers, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, T. Koopmans and A. Chloros, Judges,

Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of bodies or of private undertakings. It the procedure and the conclusions, provides as follows: submissions and arguments of the parties may be summarized as follows: "(2). An official who enters the service of the Communities after leaving the service of a government administration or of a national or international organiz­ ation or of an undertaking shall have the I — Summary of the facts right, on becoming established with that Community, to pay to it either:

— The sums repaid to him from the against Belgium under Article 169 of the pension fund of the government EEC Treaty if that Member State did administration, organization or not adopt a position which would enable undertaking at the date of his leaving the problem to be resolved, the its service." Commission, by letter of 19 December 1977, initiated the procedure under Article 169 of the EEC Treaty by That option corresponds to the right of inviting the Belgian Government to officials under Article 11 (1) of Annex present within one month its obser- VIII to the Staff Regulations to transfer vations on its failure to fulfil its pension rights acquired in the obligations under Article 11 (2) of Annex employment of the Communities to VIII to the Staff Regulations. the pension schemes of national administrations and international bodies On 22 March 1978 Belgium's Permanent with which the Communities have Representative stated that a detailed concluded an agreement. reply would be given on the basis of the conclusions drawn from a study of the On 2 July 1969 the Commission adopted problem undertaken by the Belgian general provisions for the application of Government but did not give a reply Article 11 (1) and (2) of Annex VIII to which would constitute a step in the the Staff Regulations of Officials and procedure initiated by the Commission in November 1978 the Commission's under Article 169. departments were able to announce that for the application of the provisions in Under cover of a letter dated 24 July question agreement in principle on the 1979 the Commission delivered a transfer of former pension rights had reasoned opinion dated 18 July 1979 been reached with all the Member States pursuant to the first paragraph of Article except the Netherlands and Belgium. 169 of the EEC Treaty, requesting Belgium to comply with that opinion within the following two months by The detailed technical rules for transfers putting an end to its uncooperative under Article 11 (2) of Annex VIII to the behaviour which constituted a failure to Staff Regulations have been adopted and fulfil an obligation within the meaning of put into effect by Denmark, the United Article 169. Kingdom, Italy, Ireland and Luxem- bourg. By a letter dated 27 September 1979 the Kingdom of Belgium requested that the Since 15 July 1970 the Commission has period for replying to the Commission's on several occasions brought to the reasoned opinion be extended by one attention of the Belgian Government its month. That extension was granted by obligation to adopt measures which telex message on 17 October 1979. On would allow the provision in question to 27 November 1979 the Belgian be applied. Government stated that it did not consider itself bound to comply with the Since no specific action was taken by the Commission's reasoned opinion and that Belgian Government in order to comply it did not accept the interpretation with the wishes of the Commission and placed on the article in question or the since, in particular, no reply was received consequences arising from the Com- to the Commission's letter of 12 May mission's interpretation. Consequently, 1977, in which it drew attention to the on 23 January 1980 Mr Tugendhat, a possibility of its bringing an action Member of the Commission, notified the

The written procedure took its normal course. 1. The Commission submits that Belgium's refusal to give effect to the Upon hearing the report of the Judge- right conferred on officials of the European Communities to have Rapporteur and the views of the transferred to the Community pension Advocate General, the Court decided to scheme either sums due to be repaid open the oral procedure without any under national schemes or the actuarial preparatory inquiry. equivalent of retirement pension rights previously acquired thereunder, is based essentially on a denial that Article 11 (2) III — Conclusions of the parties of Annex VIII to the Staff Regulations of Officials, the present text of which was laid down by Regulation No 259/68 1. The Commission claims that the of the Council of 29 February 1968, has Court should: any binding effect on the ground that such a transfer, which is of an optional — Declare that the Kingdom of Belgium nature, is not applicable to the pension has failed to fulfil its obligations schemes in the public and private sectors under Article 11 (2) of Annex VIII to as organized under Belgian law. the Staff Regulations of Officials of the European Communities, laid The provision in question is binding on down by Regulation (EEC, Euratom, the Member States inasmuch as it is ECSC), No 259/68 of the Council of intended to guarantee officials a pension 29 February 1968 in application of scheme which takes account of all the the second subparagraph of Article service completed in the course of their 24(1) of the Merger Treaty of 18 national or international careers as well April 1965, in so far as that State as their careers with the European refuses in principle any transfer to Communities.

In that regard the Commission cites by The Commission considers that the way of example Regulation (EEC) No difference between the wording of 1408/71 of the Council of 14 June 1971 paragraphs (1) and (2) of Article 11 of and Regulation (EEC) No 574/72 of the Annex VIII to the Staff Regulations may Council of 21 March 1972 on the be explained by the fact that the two application of social security schemes to provisions are not concomitant in origin employed persons and their families and that their meanings are quite moving within the Community (codified different. version, Official Journal 1980, C 138) which was specifically intended to reduce and even eliminate the adverse effects of The term "right" contained in the not taking account of periods of work wording of paragraph (2) does not performed under the laws of various signify that freedom to take action is States, and particularly in relation to the granted to the Member States but rather award of pensions. that a right is conferred upon the European official which he is free to exercise. Moreover, the Commission observes that the adoption of measures for the application of Article 11 (2) by other Consequently, the official's option of Member States has in practice not exercising the right thus conferred upon involved changing the basis of their him to make the transfer provided for by pension schemes from a "distributive" Article 11 (2) entails for the various system to one of "accumulation". In national pension schemes an obligation order to determine the value of in principle to give effect to that transfer retirement pension rights already in accordance with the technical or acquired, it is sufficient to establish the

Consequently, concludes the Belgian Government, a person who ceases work in Belgium in order to enter the service 2. The Kingdom of Belgium puts of the Communities has no acquired forward a series of arguments relating to right the transfer of which he may the Belgian pension system, the legal require in the form of the actuarial effect or the provision in question and equivalent or sums due to be repaid. The the consequences of accepting the inter­ right to a pension is merely a future right pretation placed on it by the which is contingent and revocable and Commission. becomes enforceable only if the conditions laid down by law for the award of the pension are fulfilled, in which case alone the amount of the It observes first that under the Belgian pension may be determined. pension scheme a pension is one of the benefits conferred by the State in the exercise of its sovereign power and that consequently both the principle of the award itself and the detailed rules The Belgian Government points out that relating thereto are subject to the will of the position of a Belgian national who the national authorities. enters the service of the European

JUDGMENT OF 20. 10. 1981 — CASE 137/80

Their years of legislation expressly provides for the work completed in Belgium will qualify maintenance of the link between the them, when the conditions for the administration and its servant who will acquisition of the right of a pension are consequently remain subject to the fulfilled, for the award of the benefits provisions of national law relating to the provided for by the pension scheme to award and calculation of retirement which they were affiliated before pensions (Royal Decree No 33 of 20 July entering the service of the Communities. 1967, as amended by the Law of 3 June 1971, Articles 3 and 4 (1o) and (2°)); Finally, where a servant resigns from the public service his former public employer is obliged to pay into the private pension scheme the contributions required by law for that scheme.

according to the Belgian Government it is still necessary to identify the persons Consequently, a Belgian national who subject to that binding force. It takes the enters the service or the Communities view that the Staff Regulations, being remains subject to the Belgian pension rules for the functioning of an organiz- scheme and retains his status as a ation, can concern only legal relations potential beneficiary under that scheme arising within a public body and that in so far as he fulfils the legal conditions their sole purpose as staff regulations of prescribed by the scheme on his officials is to lay down rules governing

COMMISSION ν BELGIUM

cannot contain provisions binding on analysis of its wording and from the third parties, such as the former general scheme of Article 11 of Annex employer of a Community official, VIII into which it was inserted. whether it be a private firm, a State or an international organization. Indeed, in the defendant's view a reading of the provision shows that it merely The Staff Regulations, based on Article confers a right on the Community 24 of the Treaty establishing a Single official to request that the payment be Council and a Single Commission of the made to the Communities which, as his European Communities, have specific employer, undertake to accept that and limited scope and cannot be payment, consisting either of the intended to harmonize the social security actuarial equivalent of pension rights schemes of the Member States. By acquired or of sums due to be repaid. creating a specific legal relationship That operation presupposes the existence (transfer of funds) between the employer of a right vis-à-vis the national and its servant, Article 11 (2) cannot institution and such a right can arise only govern retroactively a prior legal from the employment which the official relationship, in this case the pension held before entering the service of the scheme set up by a Member State in Communities. favour of its own servants.

JUDGMENT OF 20. 10. 1981 — CASE 137/80

radically different. Article 11 (2) of internal rules of private firms or the Annex VIII to the Staff Regulations legislation of the Member States. Were it deals with the transfer of benefits, not for the provisions of Article 11 (2), whereas Article 44 et seq. of Regulation servants of the Community would enjoy No 1408/71 concern not a transfer but no right, nor would the Community as detailed rules for the award of benefits employer be subject to any obligation. taking account of periods of insurance The Belgian Government takes the view completed under the legislation of other that that interpretation does not underes- Member States.

A addition that the insertion of paragraph provision which is meaningful in the (2) into the text of Article 11 confirms regulations of coordinated organizations that analysis. It was done only out of must also be meaningful in the Staff concern for reciprocity because the Staff Regulations of European officials. Regulations of the ECSC contained only the first paragraph. Finally, the Belgian Government seeks to refute the Commission's arguments by considering the possible consequences of The two paragraphs have similar scope accepting them. and form a comprehensive system for transferring benefits from and to the In reply to the argument that it is Communities involving an undertaking necessary for all the Member States to on the part of the Community employer adapt their pension schemes to allow for and a right for the Community official. the transfers provided for by Article 11 in order to avoid the unequal treatment of European officials on account of their The Belgian Government stresses that in nationality, the Belgian Government both cases the exercise of that right submits that such unequal treatment is in presupposes an act of free will on the any event an established and inevitable part of the new or former employer, as fact. It claims that the inequality is due stated in paragraph (1) of Article 11 either to the continuing nature of the

factors to be taken into consideration, With regard to the derogation from such as the differences between the Belgian legislation, the Belgian amounts of the pensions in the Member Government maintains that in the case of States and the differences between the a transfer to the Communities the various exchange rates when sums accu legislation in force at present must be mulated in national currency are applied whereas under the Belgian transferred to the Community scheme. pension system a person can claim a pension only in accordance with the legislative provisions in force at the time when he actually acquires the right to a

The acceptable consequences because the Belgian Government next claims that Belgian Government would either have that solution would lead to dis to apply to officials entering the service crimination entailing a privilege. The of the Communities a scheme which capital sum to be paid by way of the derogated from the general pension actuarial equivalent of a notional pension scheme or would have to amend erga determined in accordance with the omnes the principles and detailed rules of provisions of the public sector scheme is the Belgian pension scheme. appreciably higher than the sums to be paid to the pension scheme for employed persons where an official resigns and enters the service of a body other than

JUDGMENT OF 20. 10. 1981 — CASE 137/80

scheme will provide the servant with a fundamental scheme of the State, as pension related to the salaries on which would be the case in Belgium. his social security contributions are based, which will clearly be lower since they were earned at the start of his Finally, the defendant maintains that career. the interpretation adopted by the Commission does not meet the requirements of the principle that the Consequently, that difference represents legal rules for the attainment of an an extra expense for the State and a objective should be proportionate to the privilege for the European official and it objective pursued. is not logical that two servants who leave the Belgian public sector after the same length of service should obtain pension In view of the fact that the Treaty of benefits which are substantially different. Rome lays down specific procedures in order to ensure the harmonization of the laws of the Member States, the use of The Belgian Government claims that to provisions of the Staff Regulations of rely, as the Commission is doing, on the Officials to make Member States provision of the Staff Regulations in undertake such fundamental changes in question in order to oblige a State to their national legal order constitutes a introduce such discrimination amounts in misuse of the law comparable to a misuse law to a misinterpretation of the precise of powers. The national legislative scope of the provision and in terms of measures which must be taken are totally social reality to a failure to recognize the disproportionate to the objective which legitimate reasons justifying the Belgian the Commission seeks to attain for the Government's refusal to allow, by way of application of Article 11 (2) of Annex derogation, a privileged scheme at a time VIII to the Staff Regulations of Officials. when restrictive measures relating to social benefits, and pensions in particular, are required.

2 That provision provides as follows :

"An official who enters the service of the Communities after leaving the service of a government administration or of a national or international organization or of an undertaking shall have the right, on becoming established with that Community, to pay to it either:

— The actuarial equivalent of retirement pension rights acquired by him in the government administration, national or international organization or undertaking; or

— The sums repaid to him from the pension fund of the government administration, organization or undertaking at the date of his leaving its service.

In such cases the institution in which the official serves shall, taking account of his grade on establishment, determine the number of years of pensionable service with which be shall be credited under its own pension scheme in respect of the former period of service, on the basis of the amount of the actuarial equivalent or sums repaid as aforesaid."

JUDGMENT OF 20. 10. 1981 — CASE 137/80

7 As the Commission emphasized, the Staff Regulations of Officials were laid down by Regulation No 259/68 of the Council of 29 February 1968 which possesses all the characteristics set out in the second paragraph of Article 189 of the EEC Treaty under which a regulation has general application. It is binding in its entirety and is directly applicable in all Member States.

COMMISSION ν BELGIUM

8 It follows that the Staff Regulations, in addition to having effects in the internal order of the Community administration, are binding on Member States in so far as their cooperation is necessary in order to give effect to those regulations.

9 Consequently, where a provision of the Staff Regulations requires national measures for its application, the Member States are bound under Article 5 of the EEC Treaty to adopt all appropriate measures, whether they be general or particular.

10 The Belgian Government also claims that its interpretation of the Staff Regu­ lations is confirmed by the very wording of Article 11 (2). The fact that according to that provision an official has a right to the transfer indicates, according to the Belgian Government, that the sole obligation which can arise from that right is that of the European Communities to accept the payment in their capacity as the employer of the person concerned where such a payment is permitted by the legislation of the State concerned.

1 1 It must be stated in reply to that argument that Article 11 (2), by establishing for the benefit of officials a system for the transfer of pension rights, was intended to facilitate movement from national employment, whether public or private, to the Community administration and thus ensure that the Communities have the best possible chance of being able to choose qualified staff who already possess suitable experience.

15 The conclusion of agreements providing the contractual basis for the transfer to the Community scheme may be envisaged only where officials come from the administrations of third parties vis-à-vis the Community, such as inter- national organizations which are not subject to Community law. That is neither necessary nor justified where the official's former employer is a Member State which is subject to the rules laid down by Community institutions acting within the scope of their powers. More generally, the same holds true for a public or private body whose pension scheme is subject to the legislation or rules made by a public authority of that State.

16 Finally, the Belgian Government pleads difficulties of a technical nature which make the calculation of pension rights acquired under the national scheme impossible in practice before the person concerned finally retires.

COMMISSION ν BELGIUM

17 In that regard, the difficulties which a Member State is said to have to surmount in adopting the measures necessary in order to enable Article 11 (2) of Annex VIII to the Staff Regulations to be put into effect, and in particular those of a technical nature, such as the alleged impossibility of determining the value of the rights acquired by officials in the various branches of the public service before the date on which they finally retire or the fact that the pensions to which they are entitled are liable to increases or reductions decided upon by the legislature, cannot expunge the failure to fulfil an obligation with which the State is charged. According to well- established case-law, a Member State may not plead provisions, practices or circumstances existing in its internal legal system in order to justify a failure to comply with obligations resulting from a Community regulation.

Costs

Article 69 (2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs. Since the Kingdom of Belgium has failed in its submissions, it must be ordered to pay the costs.

On those grounds,

THE COURT

hereby:

1. Declares that the Kingdom of Belgium, by refusing to adopt the measures necessary for the transfer to the Community pension scheme of sums due to be repaid under the Belgian pension scheme or the actuarial equivalent of retirement pension rights acquired thereunder, as provided for by Article 11 (2) of Annex VIII to the Staff Regu- lations of Officials of the European Communities, has failed to fulfil its obligations under the EEC Treaty;