C-164/80

J U D G M E N T OF T H E C O U R T (FIRST CHAMBER) 11 MARCH 1982'

Luigi De Pascale v Commission of the European Communities

(Former official — Rate of exchange for calculating pension)

Case 164/83

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 Articles 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.

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

JUDGMENT

Anicie 82 of the Staff Regulations, which provides that pensions "shall be weighted in the manner provided for in With a view to abolishing the anomalies Article 64 and Article 65 (2) for the in the rules governing the payment of country of the Communities where the remuneration and pensions brought person entitled to the pension declares about by the breakdown in the inter- his home to be". The provision stipulates national system of fixed exchange rates, that "payment of such pensions shall be the Commission submitted to the effected in accordance with the terms Council on 1 April 1977 a proposal for a contained in Anicie 63 in respect of regulation introducing the European unit payment of remunerations". of account (EUA) into the Staff Regu- lations (Official Journal C 99, p. 5), which was rejected by the Staff Regu- lations Committee which had been In the version in force until 31 March consulted. In order to bring the rates of 1979, Anicie 63 of the Staff Regulations exchange up to date it was suggested of Officials provided that: that, under Anicie 63 of the Staff Regu- lations, remuneration should be "calculated on the basis of the value" of the currency in which payment was made "An official's remuneration shall be "in terms of the European unit of expressed in Belgian francs. It shall be account on 1 January 1977", which date paid in the currency of the country in could be changed at least once a year. which the official performs his duties. The Council obtained the opinion of the Remuneration paid in a currency other European Parliament and of the Court than Belgian francs shall be calculated on of Justice. Bv resolution of 7 July 1977 the basis of the par values accepted by (Official Journal C 183, p. 55) the Par- the International Monetary Fund, and in liament approved the proposal, force on 1 January 1965." requesting the Commission "to introduce, in good time, the administrative arrangements needed to ensure that the application of the The relevant parity was LIT 12.5 to European unit of account does not BFR 1. disrupt existing administrative practices or even temporarily harm the interests of the European Civil Service", and taking note of "the Commission's assurances Pensioners were able to derive special that its proposals will in no way affect advantages from these provisions, if they the real value of the payments made to declared their domicile to be in a officials in the form of remuneration, country whose currency had diminished pensions and allowances". At the sitting in value, they could elect to have their the Member of the Commission pensions paid in tl e strong currency of responsible for administration, Mr their country of origin or of that of the Tugendhat, stated: "The object of the seat of the institution to which they Commission's system is financial belonged. This state of affairs was neutrality, and what we think that our condemned by Mr Advocate General

system can achieve is an equality of Council's studies relating to the purchasing power. What we want is that amendment to the Staff Regulations. .. a Commission official of a given grade, whether he is working in Brussels or Luxembourg or London or any other part of the Community, should be able The . . . regulation should come into to buy exactly the same quantity of effect on 1 January 1979 . . . and should goods as his equal in another part of the apply from 1 April 1979. However, for Community . . . . " pensioners in receipt of allowances whose net financial benefits will be less than those under the existing arrangements, the regulation will applv The Council did not succeed in 1978 in only from 1 October 1979." adopting the regulation proposed bv the Commission on 6 October 1976 (Official Journal C 271, p. 5) on the procedure for applying the EUA to the legal acts On 21 December 1978 the Council adopted by the institutions of the adopted Regulation No 3085/78 European Communities. The (Official Journal L 369, p. 6), amending, Commission therefore set to work to with particular reference to the monetary bring up to date, in the light of the parities to be used, Regulation No situation thereby created, the exchange 259/68 laying down the Staff Regu- rates in respect of remuneration for lations of Officials of the European officials which was envisaged by the Communities and the Conditions of proposal of 1 April 1977. In an annex to Employment of Other Servants of the its Report in 1978 on the yearly survey Communities, Regulation No 2530/72 of the level of remuneration (COM(78) and Regulation No 1543/73 concerning 673 final of 29 November 1978) the certain special measures. The regulation Commission sent the following embodies the wording of the communi- communication to the Council on which cation from the Commission of neither the Parliament, the Court of 29 November 1978. The regulation fixes Justice or the Staff Regulations 1 July 1978 as the relevant date for Committee was consulted: calculating remuneration paid in a currency other than Belgian francs on the basis of the exchange rates used for the implementation of the general budget ". . . The first two paragraphs of Article of the Communities and goes on to state 63 are replaced by the following: that that date shall be changed at the 'Officials' remuneration shall be time of the annual review of remun- expressed in Belgian francs. It shall be eration. 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 Hand in hand with the bringing up to the basis of the exchange rates used for date of the rates of exchange, the the implementation of the general budget Council adopted Regulation No 3086/78 of the European Communities on . . . of 21 December 1978 (Official Journal L 369, p. 8) adjusting the weightings applicable to the remuneration and The Commission urges the Council to pensions of Officials and Other Servants adopt the aforementioned article before of the European Communities following the end of the year as well as Article 17 the amendment of the provisions of the of Annex VII which is the result of the Staff Regulations concerning the

2. In practical terms the effect of Regu­ The written procedure followed the lation No 3086/78 is that persons living normal course. in Italy, for example, who elected to have their pension paid in lire, continue On hearing the repon of the Judge- to draw the money due to them in the Rapporteur and the views of the same nominal amount of lire. However, Advocate General the Court (First in the case of pensioners living in Italy Chamber) decided to open the oral who are paid at their own request in the procedure without any preparatory "strong" currency of their country of inquiry. origin or that of the country where their institution has its seat, the effect of the alteration to the weighting applicable to the country of residence (which fell, II — C o n c l u s i o n s of t h e p a r t i e s pursuant to Regulation No 3086/78, from 146.8 to 70.3 — cf. the corrigendum to Official Journal L 77, The applicant claims that the Court 29 March 1979 substituting the should: weighting of 70.3 for 74.4 mentioned in Regulation No 3086/78) is to reduce the Declare Council Regulations Nos 3085 nominal amount of the pension paid in the currency in question. and 3086/78 inapplicable;

Declare the decisions by which the monthly pension payments due to the On 19 October 1979 the applicant, a applicant since October 1979 were former official of the Commission, who reduced to be null and void; was drawing his pension in Italy, received a letter from the defendant informing him that pursuant to Regu­ Declare the implied decision rejecting lation No 3085/78 his pension was the applicant's complaint to be null and calculated from October 1979 on the void; basis of the weighting applicable for his country of residence (74.9) and the Giving judgment under its unlimited exchange rate prevailing on 1 July 1978, jurisdiction, order the other party to pay

The application of Regulation No 3085/78 is a breach of the principle of 1. The applicant submits that Article 24 vested rights. Moreover, by drastically of the Merger Treaty provides that the amending the conditions laid down in Council is to lay down the Staff Regu- the Staff Regulations so as to bring lations of Officials after consulting the about a considerable reduction in other institutions concerned, and pensions the Commission has radically "institutions concerned" must mean the altered the whole structure of the institutions which employ officials and Staff Regulations and undermined other servants. Yet it is clear from the fundamental conditions in such a manner preamble to Regulation No 3085/78 that as to compromise the applicant's decision neither the Economic and Social to agree to be bound by Staff Regu- Committee nor the Court of Auditors lations. was consulted. Moreover, such consul- tation as there was concerned only the substitution — presented as a neutral measure — of the European unit of account for the Belgian franc, and did Lastly, the Commission gave a most not cover all the provisions contained in solemn undertaking to ensure that the Regulations No 3085 and No 3086/78. measures put forward by it with a view to substituting the European unit of account for the Belgian franc for calcu- As for the Parliament, it was consulted lating pensions would be strictly neutral on a different document, the purpose of and would not, in the words of the Par- which was, moreover, represented as liament, affect the real value of the being without any effect on officials' payments made to officials in the form of remuneration. Any doubt on that point remunerations, pensions and allowances.

As to the allegation of insufficient In any case it is incumbent on consultation the Commission observes the Commission to ensure that that the applicant's view would be well implementation of the regulations founded if, after a first proposal from the adopted by the Council does not Commission was put forward, and before adversely affect the interests of the Council adopted any decision on it, a pensioners in any way. In the discharge quite new proposal was submitted, that is of its duty to assist officials, of which to say, one concerning other matters or Article 24 of the Staff Regulations is an making substantial amendments (cf. a example, it ought in the present instance contrario Case 41/69 ACF Chemie/arma to have included in the implementing [1970] ECR 661). For the same reasons measures transitional compensatory the consultative procedure provided for provisions with regard to the applicant's in Article 24 of the Merger Treaty does pension or his wife's survivor's pension. not have to be repeated every time a minor alteration is made. In this case by a communication of 29 November 1978 the Commission suggested to the Council that Article 1 of the initial proposal of April 1977 be reworded. A comparison with the last-mentioned texts 2. In its defence the Commission shows clearly that the new provisions do observes that as regards the instances of not amount to a substantial amendment. lack of consultation neither the In the case of pensions, in particular, Economic and Social Committee nor the updating the relevant exchange rates on Court or Auditors are institutions within the basis of the European unit of account the meaning of the Treaties and had the same financial consequences as accordingly the Council was not legally those resulting from the application of obliged to seek their opinions. According Regulation No 3085/78. In fact, the to the provision in Article 1 of the Staff exchange rates used for implementing Regulations the Economic and Social the general budget of the Communities Committee and the Court of Auditors as at 1 July 1978 were strictly related to shall be treated as institutions of the the value of the currencies considered Communities solely "for the purposes of (Belgian francs on the one hand, other the application of the Staff Regulations", currencies on the other) with respect to not in connection with the establishment the European unit of account on the or amendment of them. Moreover, Regu- same date. lation No 3085/78 is in fact a provision

The Parliament was certainly not led case-law of the Court (cf. Case 28/74 intő error but acted on full knowledge of cited above in which it was held that "an the circumstances. Its opinion was that it official cannot in any case claim a vested was "appropriate . . . to abandon the right unless the facts giving rise to that exchange ratios introduced in 1965", and right arose under a particular set of Staff it noted the Commission's assurance that Regulations prior to the amendment its proposal would "in no way affect the decided upon by the Community- real value of the payments to officials in authority"). That is precisely the view the form of remunerations, pensions and which appears to have been taken also by allowances". From the report of the the national courts and by the Committee on Budgets, moreover, it Administrative Tribunal of the United emerges that "as regards p e n s i o n s . . . the Nations (see Puvrez, 4 December 1961, transition to the EUA system . . . will Clunet Reports 1963, p. 117). That likewise entail no change, to the extent ruling is the logical consequence of the that the pensions are paid in the currency view that the official's relationship is of the country of residence of the governed not by contract but by regu­ beneficiary. However, there will no lations (cf. the opinion of Mr Advocate longer be any advantage to be gained General Gand in Case 20/68 Pasetti- from opting, pursuant to Article 45 of Bombardella [1969] ECR 235, at p. 250), Annex VIII to the Staff Regulations, for a view which has been endorsed by the payment in currencies other than of the most authoritative sources (cf. Professor country of residence." P. Weil, "La nature du lien de fonction publique dans les organisations inter­ nationales", Revue Générale de Droit International Public 1963, p. 274). It also forms the corollary of the principle that administrative measures must not be The Court has defined the extent of the retroactive. The "advantages lawfully obligation to consult the Parliament in acquired" by the applicant are fully safe­ two recent judgments (Case 138/79 guarded as regards the favourable Roquette and Case 139/79 Maizena conditions which were applied on [1980] ECR 3333 and 3393) as a payment of his pension prior to 1 requirement which "implies that the Par­ October 1979. On the other hand, it is liament has expressed its opinion", no longer possible to speak of a "vested without prejudice to the cases, judgment right" to have those same favourable on which was reserved by the Court, conditions maintained in force as regards where the Parliament, by its own pension payments made after the Staff conduct and regardless of all efforts Regulations were amended. made by the Council to obtain its opinion, makes it impossible to observe the requirement of consultation.

1958, to perceive that the pension rather than that the principle of equality scheme in force contained a guarantee is applicable. The situations in this for officials that it would remain instance, however, are not the same or unchanged so as to guarantee them for even comparable. According to the third all time the advantages which existed subparagraph of Article 4 of Regulation before the reforms in question. The No 3085/78 the new system was to be floating of currencies after 1971, in introduced, in the case of pensions and conjunction with the fact that the IMF allowances which would be reduced, rates continued to be used and the only from 1 October 1979, whereas the option afforded by Article 45 of Annex regulation was to apply from 1 April VIII to the Staff Regulations, brought 1979, in particular as regards transfers. about the unfair situation which In addition the reduction in pensions was conferred advantages on certain officials to be effected in stages. As to the when in fact such treatment was in no transitional measures which were way supported by the ratio legis of the adopted at the time and to which the provision. applicant refers they concern the calcu- lation of national maintenance costs in determining entitlement to the allowance for persons treated as dependent children and therefore have nothing whatsoever The staff could not have been under any to do with the comparison to which he misapprehension any more than the Par- refers. liament as to the practical repercussions on pensions of the updating of exchange

remark: "Many pensioners will find that service is governed by regulations. It their pension has been dramatically would appear that an incorrect view of altered. The Commission'must consider the concept of "vested rights" already such problems on a case-by-case basis raised is at the root of the matter. Article together with the Staff Committee in 24 of the Staff Regulations may not order to avoid unacceptable situations therefore be relied upon for that purpose arising". (cf. the opinion of Mr Advocate General Dutheillet de Lamothe in Joined Cases 63 to 65/70 Bode and Others [1971] ECR 549, at p. 557) and the result of its being relied upon would be to render As regards alleged discrimination ineffectual the power of the authority between officials, in particular where responsible for the Staff Regulations to transfers of money are concerned, and enact with immediate effect provisions pensioners the Commission contends that adapting those regulations to economic the only legal principle applicable is that realities even if such an adaptation were there must be no arbitrary discrimination to erode or eliminate the advantages pre- for which there are no objective grounds viously enjoyed.

3. In his reply the applicant observes were substantially the same it would have that the text of Article 24 of the Merger to be shown that transformation of the Treaty refers to the institutions old position to that which was the result "concerned", and not to the institutions of the implementation of the amendment as listed in the Treaties, the reason being based on reference to the European unit that where decisions relating to staff are of account did not involve any losses for concerned it is appropriate to consult all pensioners other than technical ones. the "institutions" which employ officials; The same proof would be required as to this applies to the Economic and Social the transformation from the European Committee and the Court of Auditors. unit of account scheme to the new mode The distinction between "the purposes of of conversion; yet no such evidence has the Staff Regulations", for which the been brought. two institutions in question must be consulted, and "amendment" of the Staff Regulations for which they need not be consulted will not bear scrutiny. If that In order to determine whether and to theory were applied to the letter the what extent the Parliament was result would be that the two institutions adequately informed of the consequences would not be considered sufficiently of the proposed reform the report by the important to be consulted in their own Committee on Budgets must first be right on amendments to the Staff Regu- examined, from which it emerges that lations, whereas they would be through when the first reform was presented that the intermediary of the Staff Regulations Committee concerned itself principally Committee, which includes represen- with the substitution of the European tatives of the institutions and of their unit of account for the IMF parities staff and is required to be consulted without taking into account the under the second subparagraph of Article alterations which would result from 10 of the Staff Regulations: this is withdrawal of the option provided for in precisely the situation which has arisen in Article 45 of Annex VIII to the Staff this instance. Regulations. The Parliament was never aware of the fact that for pensioners the difference was not purely nominal but meant that their pension might be reduced by up to more than 50%. The Furthermore, although in form the regu- statements made by Mr Tugendhat in the lation is a measure falling solely within course of the debate were quite un- the Council's area of responsibility the equivocal as to the neutrality of the fact remains that since Article 110 of the operation. Moreover, consideration of Staff Regulations provides that the Staff the resolution embodying the opinion of Committee must be consulted on the the Parliament is sufficiently explicit both adoption of general implementing as to the intentions of that institution measures within each institution, the and as to the information which was same must a fortiori apply to a measure given to it (cf. the preamble to the such as the amendment of the Staff resolution). Regulations the effect of which in principle, is much wider in scope.

It is .in the interests of the Community institutions to apply the principle of As to the question of vested rights the stability; if officials with the necessary applicant observes that the opinion of the qualities, in panicular independence and Administrative Tribunal of the Inter- ability, are to be recruited it is essential national Labour Organization in the to give them appropriate salaries, and Lindsey case is relevant to the general especially to guarantee that those salaries principle of the inviolability of salaries. will remain at least at the same level and That decision defines precisely the scope may be reduced only if (an eventuality of the institution's right to modify its which has been wholly theoretical since officials' remuneration: it may alter the 1945) there is an appreciable lowering of separate components of the remuneration prices. The need for stability was so well provided that the official's total re- appreciated by the Council that Anicie muneration remains at least the same as 65 (1) provides for an annual review of it was before. The same point was made remuneration and paragraph (2) of the by Mr Tugendhat to the Parliament in same aniele provides for adjustments to the sitting on 17 January 1980 when he be made to the weightings within two said (in relation to the readjustment of months at the most in the event of a salary scales) that "no member of staff substantial change in the cost of living. would find that his net salary had been Even if the absence of recognition of reduced from one month to the next as a vested rights were possible in a set of result of the proposal we have staff regulations kept within the strict submitted". A statement as clear as that sense of the term, that supposition, disposes of that argument outlined by the which is a highly questionable one, could Commission in the course of the hearing not apply to pensions when the pension in Case 1253/79 Battaglia [1982] ECR rights were acquired before the official 297, that the circumstances, namely retired. In panicular as far as the Staff those of the recession, were such as to Regulations are concerned, Anicie 10 of justify an erosion of the principle of the Annex VIII thereto defines clearly the invioiability of salaries. Yet it is the date on which the entitlement to receive Commission itself which has brought an a retirement pension shall take effect. action against the Council with the aim Were it possible, however, to apply the

Alteration of the fundamental conditions upon which the applicant based his As to the breach of the principle of equal decision to agree to be bound by the treatment the applicant considers that no Staff Regulations is unacceptable, for an reasonable justification for discrimination official commits himself only in the light is to be found in the objective material of the conditions offered to him under situations of the two groups of.officials, the Staff Regulations and with the pensioners on the one hand and serving conviction that whilst those Staff Regu- officials on the other. In any system lations may be modified unilaterally under which problems concerning (provided that he may defend his salaries or pensions are resolved not on interests by any collective or individual an ad hoc basis, but on the basis of means) any reduction in his pension is objective rules applicable equally to all precluded except in the hypothetical case those who are in the same legal situation of a reduction in the cost of living. The no provision of the Staff Regulations or question is not whether on his entry into implementing measure may be especially service the applicant believed that Article favourable to some, yet thoroughly- 82 of the Staff Regulations gave him a unfavourable to others. guarantee against change but whether at that moment, and subsequently, he had reasonable grounds for believing that the total amount of his pension would not be reduced. As far as the adoption of compensatory' measures is concerned the applicant points out that the Commission is fundamentally liable and is therefore bound to make good the damage it has As to the defendant's ignoring the under- inflicted. The amendment complained of takings it had given that bringing the by the applicant was drawn up by the exchange rates up to date would have no Commission's officers, then submitted to adverse effect on the real value of Parliament, and finally to the Council, as pavments made in the form of re- a neutral measure, which in fact it was muneration, pensions and allowances, not. Bode and the other cases cited by the applicant finds it difficult to draw the defendant concerned a wholly

different set of circumstances, in which law. In any case it is not the Council the officials were objecting to the which consults the Staff Regulations consequences of measures adopted by Committee but in fact the Commission, their own government. pursuant to the third paragraph of Article 10 of the Staff Regulations. Lastly, the arguments concerning the 4. In its rejoinder the Commission advisability of consulting those emphasizes that the argument based on committees apart from any legal the composition of the Staff Regulations obligation to do so fall outside the scope Committee affords no support of that head of claim and need not whatsoever for the other party; the therefore be examined.

There is no point here in failure to effect a compulsory consul- comparing the previous situation with tation, not failure to effect a consultation that which would have resulted from the which is optional. As far as the adoption of the proposal on the intro- Economic and Social Committee is duction of the European unit of account. concerned Article 198 of the Treaty provides that it must be consulted where The applicant's excursus on the in- the Treaty so provides; for Article 24 of terpretation of the Parliament's the Merger Treaty to constitute a case resolution is far from convincing; it where consultation is obligatory is attempts to give the text a meaning inconceivable since the article refers which it does not have by isolating merely to consultations with the certain passages rather than considering institutions, which can only mean it as a whole.

The Commission considers that difficulty having general implications any interpretation based on the opinion concerning the interpretation and given by the Parliament on the text application of [the] Staff Regulations"). which was to become Council Regu- The fact that the Staff Committee must lation No 160/80 contributes nothing be consulted on the adoption of general useful to the debate. The fact is that that implementing provisions for the Staff regulation, adopted on 21 January 1980, Regulations — whic:. are dispositions of dealt with a wholly different problem secondary law — does not mean that it concerning what is known as the must also be consulted when an "nettoyage de la grille" [the read- amendment is made to the Staff Regu- justment of salary scales].

JUDGMENT OF II. 3. 1982 — CASE I64/8C

Budgets it becomes clear that as far as The applicant attempts in vain to find pensions are concerned the adjustment evidence in the various texts emanating envisaged entailed no guarantee against from the Council or the Commission or adverse financial effects, at least in so far even in the Treaty of any application of as pensions paid in a currency other than a "principle of the permanence of salary- that of a country of residence are levels". No support whatsoever for the concerned; the same observation may be applicant is to be found in the preamble made as regards the statements made by to the Staff Regulations of 1962; Mr Tugendhat. Finally, the applicant errs although the guarantee of an appropriate in insisting that the adjustment did away salary and pension constitutes one of the with the option contained in Article 45 conditions essential to the independence of Annex VIII to the Staff Regulations. of European public servants it is quite unreasonable to conclude that such independence necessarily implies the existence of a guarantee that officials may continue to receive for all time exchange advantages for which there is no justification. The same remark applies to the applicant's submissions based on The submission that there is a general Article 65 of the Staff Regulations. The principle of law in regard to inter- argument that the applicant's pension national civil servants to the effect that rights were determined on the date on an official's salary or pension may under which he retired is untenable. The only no circumstances be reduced save in the right which vests in the official on that event of a reduction in the cost of living date is the right to receive a pension cannot apply in this instance because in calculated on the basis of the provisions the case of pensioners the adjustment in force on that date and for the month enabled those who had chosen to be paid in which he retires. There is no vested in the currency of their place of right, by contrast, to have that amount residence to draw the same amount in maintained unchanged in the future. that currency as they were entitled to draw prior to the entrv into force of Regulations Nos 3085 and 3086/78.

: In support of his action the applicant claims that Council Regulation (Euratom, ECSC, EEC) No 3085/78 of 21 December 1978 (Official Journal 1978 L 369, p. 6), which amended the provisions of the Staff Regulations with reference to the monetary parities to be used, and Council Regulation (Euratom, ECSC, EEC) No 3086/78 of the same date adjusting the weightings applicable to the remuneration and pensions of Officials and Other Servants of the European Communities following the amendment of the provisions of the Staff Regulations concerning the monetary parities to be used in implementing the Staff Regulations (Official Journal 1978 L 369, p. 8), are unlawful.

j The applicant is in receipt of a pension under Article 77 of the Staff Regu- lations. By virtue of the third paragraph of Article 45 of Annex VIII to the Staff Regulations, he could elect to have his pension paid in the currency either of his country of origin or of his country of residence or of the country where the institution to which he belonged before his retirement had its seat. The applicant, who took up residence in his country of origin, namely Italy, opted to have his benefits paid in the currency of the country where the Commission had its provisional seat, that is to say in Belgian francs.

JUDGMENT OF 11. 3. 1982 — CASE 164/80

4 Under Anicie 82 (1) of the Staff Regulations pensions are to be weighted in the manner provided for in Anieles 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 Anicie 63 in respect of payment of remuneration.

DE PASCALE v COMMISSION

s Thus, between 1971 and 1978, the amounts actually paid to pensioners, who resided in Italy but had chosen to have their benefits paid in Belgian francs rose progressively owing to the mere fact that they were adjusted by the increased weighting and were ultimately much higher than those paid to pensioners who resided in Italy and had opted for payment in lire.

9 Regulation No 3085/78 put an end to that system by replacing the former parities by the application of updated rates of exchange. At the same time Regulation No 3086/78 restored the weightings to their original function of alleviating the effects of the differences in living conditions by comparison with those existing in the countries in which the provisional seats of the Communities were situated. On that occasion the weighting applicable to Italy was substantially reduced.

io Regulations Nos 3085/78 and 3086/78 applied from 1 April 1979. However, the third paragraph of Article 4 of Regulation N o 3085/78 provides as follows :

"However, for pensions and allowances of which the net amount 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 Vlo per month."

ii On 19 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 72 850 in September 1979, would be reduced to BFR 34 910. However, in accordance with the third paragraph of Article 4 of Regulation No 3085/75 cited above, the reduction would be made at the rate of one tenth per month from October 1979 until July 1980.

i5 As far as the effects of the regulations are concerned the applicant first argues that the decision challenged and the regulations in question which it implements in his case could not deprive him of his established entitlement to a pension calculated in accordance with the provisions of Article 77 of the Staff Regulations. It is a fundamental principle of law that legislation mav not deprive individuals of vested rights. Legislation which operates retroactively so as to deprive persons of vested pension rights is a breach of that general principle of law arid is contrary to the practice of Member States in the matter of public service pension schemes.

u It should be observed in that regard that the provisions of Annex VIII to the Staff Regulations draw a clear distinction between the determination of "pension rights" convered by Chapter 2 of the annex and the "payment of benefits" governed by Articles 45 and 46 of the annex. The arguments put

DE PASCALE v COMMISSION

forward by the applicant are based on the assumption that his "pension rights" within the meaning of the Staff Regulations were reduced.

i7 The changes which took place in the amounts actually paid to the applicant were due to the effect of the rates of exchange and the weightings. Whilst the changes affected the payment of benefits under Articles 45 and 46 of Annex VIII, they did not have the effect of encroaching upon the applicant's pension rights, as determined in accordance with Chapter 2 of Annex VIII, which continue to serve as the basis for the calculation of the benefits actually paid.

23 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 jus- tification 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 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.

24 It must be observed that the new system was introduced in order to rectify a situation which had deteriorated as a result of fluctuations in the rates of exchange and the prolonged application of temporary expedients designed to contend with those fluctuations. At the same time, it enabled the various categories of pensioners residing in weak currency countries to be restored to a situation in which they would be assured of equal treatment.

25 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.

2b 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

JI It follows that in the absence of transitional arrangements which were lawful, the Commission was not entitled to apply Regulations Nos 3085/78 and 3086/78 to the applicant and that consequently the contested decision must be annulled.

52 It is for the competent institutions to adopt the measures necessary to remedy the unlawfulness which has been established and in particular to introduce with retroactive effect suitable transitional arrangements.

OPINION OF MR CAPOTORTI — CASE 164/80

Costs

33 Under Anicie 69 (3) of the Rules of Procedure the Court may order that the parties bear their own costs.

On those grounds,

For the Registrar

H. A. Rühi G Bosco Principii Administrator President of the First C t u m w

O P I N I O N OF MR ADVOCATE GENERAL CAPOTORTI

(see Case 127/80, p. 886)