C-44/84

Kenneth Jones (Her Majesty's Inspector of Taxes)

on the interpretation of certain rules of Community law, in particular, Article 3 of the Act concerning the Conditions of Accession and the Adjustments to the Treaties, annexed to the Treaty concerning the Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the European Economic Community and to the European Atomic Energy Community, and Articles 5 and 7 of the EEC Treaty, with regard to the levying of domestic taxation on the salaries paid by the European School at Culham in the United Kingdom to the British members of its teaching staff,

THE COURT,

composed of: U. Everling, President of Chamber, acting as President, K. Bahlmann and R. Joliét (Presidents of Chambers), G. Bosco, T. Koopmans, O. Due, Y. Galmot, C. Kakouris and T. F. O'Higgins, Judges,

Advocate General: Sir Gordon Slynn Registrar: P. Heim * Language of the Case: English.

JUDGMENT OF 15. 1. 1986 — CASE 44/84

after hearing the Opinion of the Advocate General delivered at the sitting on 22 May 1985,

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure By the spring of 1954 it was apparent that that solution was inadequate. Therefore, at A — The foundation of the European Schools the invitation of the President of the High and the legal basis of the European School at Authority, the representatives of the Culham Education Ministers of the six Member States met in Luxembourg on 22 June, 1. Following the installation of the 27 July and 7 September 1954, in order institutions of the European Coal and Steel to consider the creation of secondary Community (ECSC) in Luxembourg, it education facilities. At those meetings it was became apparent in 1953 that it was decided to create a school with intergovern- necessary to provide appropriate schooling mental status and, to that end, the represen- for the children of the officials of those tatives formed themselves into a 'Conseil institutions in their mother tongues. To that Supérieur' [Board of Governors], which was end, officials of the ECSC created an asso- to supervise the development of the school ciation which was financed by the High and lay down the principles governing its Authority. That association founded a organization and general guidelines for its school, for the provision of nursery and administration. It was agreed, inter alia, that primary education, which began to operate the teaching staff would be seconded to the on 4 October 1953. The teachers of that school by the Member States, which would school were employed and paid by the asso- continue to pay them their respective ciation. national salaries, and that the level of the

2. On 12 April 1957 the Governments of '(1) ... the six Member States signed the Statute of the European School, which was subsequently ratified by all the Member (2) appoint the Headmaster of the School States. In the preamble to the Statute it was and lay down the rules governing his stated that the presence, at the provisional service; seat of the European Coal and Steel Community, of children of officials from the Member States had made it necessary to organize schooling in the mother tongues of (3) determine each year, on a proposal those concerned. Under Article 6, the from the Boards of Inspectors, the staff school is to have the status of a public requirements and settle with the institution in the law of each of the Governments any questions concerning contracting parties and is to have legal the assignment or secondment to the personality to the extent requisite for the School of teaching staff for the primary attainment of its objectives. It is to be and secondary levels and of supervisory financially independent and may be a party staff so that they retain their rights to to legal proceedings. The organs of the promotion and retirement pension school are the Board of Governors, the under their national rules and enjoy the Boards of Inspectors, the Administrative benefits granted to officials of their Board and the Headmaster (Article 7). category abroad;

Article 8 provides that the Board of (4) lay down unanimously, on a proposal Governors is to consist of the Minister or from the Boards of Inspectors, and Ministers of each Contracting Party whose according to harmonized rules, the responsibilities include National Education service rules of the teaching staff of the and/or External Cultural Relations. By School.'

3. Following the creation of the European '(1) contributions paid by the Contracting Economic Community and the European Parties on the basis of the apportion- Atomic Energy Community and the estab- ment of expenses by the Board of lishment of the institutions of those Governors; Communities with their officials in various places, other European Schools were set up (2) subsidies from the institutions of the in Brussels (I) in 1958, in Mol (Belgium) Community with which the School has and Varese (Italy) in 1960, Karlsruhe concluded agreements; (Germany) in 1962, in Bergen (the Netherlands) in 1963 and in Brussels (II) in 1976. In order to facilitate the setting-up of (3) donations and legacies accepted by the those new schools and to provide them with Board of Governors; a legal basis, the Governments of the Member States signed on 13 April 1962 in Luxembourg a Protocol on the setting-up of (4) school fees charged to parents of pupils European Schools with reference to the by decision of the Board of Governors.' Statute of the European School signed at Luxembourg on 12 April 1957, extending to other European Schools the Statute of the On the basis of that Statute the Board of Luxembourg school. A further protocol Governors adopted financial regulations at signed on 15 December 1975 made its meeting on 13 and 14 April 1962. Under provision for the setting-up in 1977 of a those regulations (Chapter C), as sub- European School in Munich for the sequently amended, the Member States education and instruction together of make a contribution equal to the national children of the staff of the European Patent salaries of the teachers whom they second Office. to the school and the Commission of the European Communities makes a contri- bution equal to the difference between the Article 1 of the Protocol on the setting-up total of the budget established by the Board of European Schools provides as follows:

'For the education and instruction together vities within the meaning of Article 3 (1). In of children of the staff of the European October 1972 an Order in Council was Communities, establishments bearing the made conferring on each European School name "European School" may be set up on the legal capacity of a body corporate on the territory of the Contracting Parties. the basis of Section 2 (2) of the European Communities Act 1972. Other children, irrespective of their nationality, may also be admitted to them. In 1978 a European School was established at Culham, Oxfordshire, in order to serve the children of the staff posted to the Joint These establishments shall, subject to the European Torus Joint Undertaking (JET) following Articles, be governed by the founded under the EAEC Treaty. provisions of the Statute of the European School, signed at Luxembourg on 12 April 1957, and of the Regulations for the B — The Regulations for Members of the European Baccalaureate signed at Teaching Staff of the European School and the Luxembourg on 15 July 1957.' liability to domestic taxation of the salaries of teachers in Member States other than the United Kingdom Under Article 3 the powers conferred by the Statute of the European School on, inter alia, the Board of Governors are to be 1. The first regulations for teaching staff extended to any school set up in accordance seconded or assigned to the School were with Article 1. Each school has separate adopted by the Board of Governors at its legal personality. meeting on 25, 26 and 27 January 1957. They were based on the principle that throughout the period of their secondment Article 7 of the protocol provides that: or assignment to the School members of the teaching staff were to be subject to the 'In budgetary matters, by way of derogation authority of the head of the School and the from Article 13 of the Statute of the relevant Board of Inspectors and that they European School, the Board of Governors were to 'maintain contact' with their shall approve the draft budget and the national authorities and retain their rights accounts, in so far as they concern it, and and obligations under national regulations. transmit them to the appropriate authorities of the European Communities.' Articles 3 to 5 of the Regulations for Members of the Teaching Staff fixed 4. In September 1972, with a view to its standard salaries for each category of teachers, irrespective of their country of accession to the European Communities, the origin. Articles 6 to 8 provided for family United Kingdom acceded, in accordance and expatriation allowances and Article 9 with Article 3 (1) of the Act concerning for indexation on the basis of the cost of the Conditions of Accession and the living in Luxembourg. Articles 11 and 12 Adjustments to the Treaties, to the Statute provided for installation and resettlement of the European School and to the annex allowances and reimbursement of travel and concerning the European Baccalaureate and removal expenses. the Protocol on the setting-up of European Schools, which are regarded as agreements concluded by the original Member States Under the heading 'Compensation for relating to the functioning of the which the School is responsible', Article 10 Communities or connected with their acti- provided that:

'With a view to aligning conditions of updated editions of which are published employment, deductions, other than tax from time to time. deductions, made at source by national authorities shall be reimbursed to members 2. The original Regulations for the of the teaching staff.' Members of the Teaching Staff were subsequently amended and replaced by the Under Article 16, entitled 'National Emolu- Regulations for Members of the Teaching ments', Staff and Conditions of Employment for Part-time Teachers adopted by the Board of 'The amount payable by the School to a Governors at its meeting on 4 and 5 member of the teaching staff shall be the December 1967. In the version applicable difference between the sum of the emolu- in this instance, which includes the ments which he receives from his national amendments made before 1978/79 and authorities and the salary, allowances and 1979/80, the new Regulations for Members grants provided for in these Regulations of the Teaching Staff contain in Chapter II calculated as herein specified.' detailed provisions on salaries and allowances. Those provisions are modelled The minutes of the Board of Governors' on the Staff Regulations of Officials and the meeting on 25, 26 and 27 January 1957 Conditions of Employment of Other show that it became clear, when the Regu- Servants of the European Communities. lations for Members of the Teaching Staff Under Article 23 the remuneration of were discussed, that there were liable to be members of the teaching staff is to be difficulties in a solution which consisted in adjusted 'on the basis of decisions taken aligning salary conditions completely by with regard to variations in the weightings removing disparities resulting from to apply the Staff Regulations of Officials of differences in tax rates, either by exempting the European Communities in different the national salaries paid by the Member places of employment'. According to Article States from domestic income tax or by reim- 48 (1), certain articles which follow the bursing the domestic taxes. It was therefore provisions of the Staff Regulations of proposed that tax should be paid by the Officials of the European Communities are teachers on the basic national salaries in to be adapted automatically in the event of accordance with their national rules and the latter regulations being amended, and that the supplements or alignment payments any dispute as to the interpretation of those or allowances specific to the European articles is to be resolved on the basis of the School should be exempt from all tax. In the interpretation given by the European minutes of the meeting it is stated that Communities.

'the sum due (sic) by the School to members Article 9 of the agreement concluded of the teaching staff shall be the difference between the Government of the Kingdom of between the salary, allowances and grants Belgium and the Board of Governors on 12 provided for in these Regulations, October 1962 is phrased in almost identical calculated as therein specified, and the terms. exchange value of all emoluments paid by the national authorities, converted into the The agreement concluded on 5 September currency of the country in which the 1963 between the Italian Government and teacher performs his duties on the basis of the Board of Governors provides, in Article [a] ... rate . . . confirmed every six months, at 7 as amended by a protocol of 14 May 1971 least, by the Representative of the Board of and by letters dated 16 November 1976, Governors.' that:

JUDGMENT OF 15. 1. 1986 — CASE 44/84

At the same time it School at Karlsruhe, according to which: reserved the right to reconsider the question if there were any alteration in the existing 'the two allowances which the Board of circumstances. Governors of the European Schools pays to the Headmaster and teachers of the The agreement between the Government of European School in Karlsruhe on the basis the Kingdom of the Netherlands and the of the provisions of the current edition of Board of Governors, concluded on 29 April the Regulations for members of the teaching 1979, contains no provision concerning staff in European Schools are exempt from exemption from income tax. In reply to a the amount of income tax attributable to question put by the Court, the Netherlands them.' Government explained that as a matter of principle the Netherlands does not grant teachers of Netherlands nationality tax C — The main proceedings and the questions exemption in respect of the remuneration submitted for a preliminary ruling paid by the European School at Bergen under the Regulations for Members of the 1. N o agreement has been concluded

There is no legislative provision dealing expressly with that question in the 'Although the Dutch Government does not United Kingdom. wish, for reasons of principle, to exempt the Headmaster, members of the teaching staff and seconded members of the administrative The practice followed by the Inland staff, from paying tax on remunerations Revenue is to exempt from tax the sums paid to the staff of the School from its (the paid by the European School at Culham to School's) own budget, it is however willing its teachers who are nationals of other to appoint an official authority, should the Member States. It does not however grant occasion arise through the medium of the such an exemption to British teachers at the School, to undertake to settle that tax, with European School at Culham. the parties concerned or on their behalf. This procedure shall be carried out in the There is some dispute as to whether the following manner: the amount to be settled provisions of national law alone provide in each specific case shall be determined by sufficient legal basis for the tax exemption subtracting from an amount equal to any granted to teachers from the other Member

States and, if they do, as to what is the the Member States except the United relevant provision. The Inland Revenue Kindgdom expressed the view that the cited in the first place the various Board of Governors' decision of January agreements concerning double taxation, 1957, with which all the other Member which contain provisions exempting from States complied, was binding on the United British taxes the remuneration paid by, or Kingdom. Like the other Member States out of funds created by, the other State for concerned the United Kingdom was services rendered to it in the discharge of therefore under a duty to take the necessary functions of a governmental nature and the measures to implement it.

budget. Further, they are not consuls or already very well paid in relation to other consular agents or employed in an official British teachers. Moreover, it was unlikely service or an agency of a foreign State, but that such a measure would secure the members of the staff of the European necessary parliamentary approval. It also School; they are subject to the authority of rejected the possibility of an arrangement that school and they carry out the duties whereby the Department of Education and required by it. Science would meet the cost of the 'differential' allowance provided for in

December 1979. Board of Governors wished to avoid the additional burden on the budget of the school at Culham which might result from the application of Article 24 (2) of the At these meetings the Commission and the Regulations for Members of the Teaching representatives of the Governments of all Staff, the United Kingdom would be

prepared to exclude the application of that that it was not necessary to consider the article in the agreement to be concluded in position of the allowances paid by the accordance with Article 28 of the Statute of European School. Mr Hurd contended: the European School between itself and the Board of Governors. (i) that Article 5 of the EEC Treaty imposed an obligation on the 2. Derrick Hurd is a British national and Government of the United Kingdom to resides in the United Kingdom. H e is the honour the decision adopted at the headmaster of the European School at meeting of the Board of Governors on Culham. As such under the abovementioned 25, 26 and 27 January 1957 concerning provisions, he is entitled to receive: the exemption from taxation of the European supplement paid to the teaching staff; (i) a salary from the United Kingdom Department of Education and Science calculated in accordance with the (ii) that the non-implementation of that provisions of the Scales of Salaries for decision constituted discrimination Teachers in Primary and Secondary within the meaning of Article 7 of the Schools in England and Wales (here- EEC Treaty; inafter referred to as 'the national salary') ; (iii) that the Government of the United Kingdom was, by Article 3 of the Act of Accession, obliged to honour that (ii) additional salary from the European decision, because: School to bring his salary up to the level laid down in the Regulations for (a) the Statute of the European School Members of the Teaching Staff of the was an agreement within the European School (hereinafter referred meaning of the second sentence of to as 'the European supplement'); and Article 3 (1) of the abovementioned Act and the Board of Governors' (iii) certain allowances also paid by the decision was a matter of common European School in accordance with understanding between the those regulations. contracting parties to the Statute of the European School, with the In accordance with the practice referred to result that the United Kingdom's above, the Inspector of Taxes took the view accession to that Statute entailed that not only Mr Hurd's national salary but acceptance of the Board of also the European supplement and the Governors' decision, or allowances paid by the European School were taxable income within the meaning of (b) the original Member States within the British income tax legislation. H e whose territories European Schools therefore made tax assessments on that basis had been established had honoured for the tax years 1978/79 and 1979/80. the Governors' decision and the United Kindom was placed in the 3. Mr Hurd appealed against those same position by virtue of Article 3 assessments to the Special Commissioners. (3) of the abovementioned Act. In support of his appeal Mr Hurd claimed in particular that, under Community law, The Inspector of Taxes contested that view. the European supplement paid by a H e contended, moreover, that if any obli- European School was exempt from national gation was incumbent on the United income tax. The parties at the outset agreed Kingdom under the Board of Governor's

decision, it was not one which conferred instruments governing the European direct rights on individual citizens. He Schools and their governing body maintained finally that the Court of Justice and the responses of the six original did not have jurisdiction to interpret facts Member States to that decision outside Article 3 of the Act of Accession, preceding the date on which the since the application of that article was aforementioned Treaty of Accession exclusively a matter for national courts or came into force (1 January 1973); tribunals.

to the European Economic Communities of 22 January 1972 the 3. If the United Kingdom is under such Court of Justice has jurisdiction to obligation as is mentioned in Question 1 give a preliminary ruling on the (b) or Question 2 above, whether (in the question whether a particular matter absence of the implementation of the falls within the meaning of the said decision in the national law of the words "all other agreements United Kingdom) a member of the concluded by the original Member teaching staff of the European School States relating to the functioning of established in the United Kingdom is the Communities or connected with entitled as a matter of Community law their activities" (in paragraph 1 of to rely on the said decision in the courts the article) and the words "declar- and tribunals of the United Kingdom.' ations or resolutions .

JUDGMENT OF 15. 1. 1986 — CASE 44/84

Mr Hurd, acquis communautaire, it was common represented by Francis Jacobs, Queen's ground that the Statute of the European Counsel, instructed by John H. Overs of School was an agreement within the Messrs Berwin Leighton, Solicitors; the meaning of the second sentence of Article 3 United Kingdom, represented by R. N. (1). In their view, it was however necessary Ricks of the Treasury Solicitor's to consider in addition whether accession to Department, acting as Agent, assisted by that Statute necessarily imported a duty to Richard Plender; the Government of the give effect to the Board of Governors' Kingdom of Denmark, represented by decision or whether that decision could be Laurids Mikaelsen, a Legal Adviser at the regarded as a 'position' within the meaning Ministry of Foreign Affairs; and the of Article 3 (3) of the Act of Accession. As Commission of the European Communities, far as Article 3 (1) was concerned, the represented by Jürgen Grünwald, a member Special Commissioners took the view that of its Legal Department, acting as Agent. the obligations arising under such agreements lay in the field of international Upon hearing the report of the Judge- law and did not have direct effect within the Rapporteur and the views of the Advocate

not have direct effect. The Board of mation concerning the origin and scope of Governors' decision amounted to the Article 24 (2) of the Regulations for expression of an aspiration rather than a Members of the Teaching Staff and position adopted by common agreement. concerning the discussions held by the That was confirmed by the measures taken Board of Governors on the subject of the by five States to implement it. If there were taxation of European supplements in an obligation equivalent to an obligation general and at the school at Culham in created by a directive, it would appear to be particular. In reply to those questions sufficiently precise to have direct effect. certain information and a number of

documents were supplied to the Court, the Statute of the European School are binding principal elements of which have been on Member States by virtue of the Treaty of incorporated into the summary of the facts Accession. set out above. Although the Board of Governors' decision II — Written observations submitted to the of 25, 26 and 27 January 1957 on Court exemption from national taxes was adopted before the signature of the Statute of the European School in April 1957, it was A — Observations submitted on behalf of Mr nevertheless taken pursuant to that Statute Hurd inasmuch as it has remained in force and has been accepted by the States parties to 1. (a) As regards Question 1 (a) concerning the Statute, who ratified it with full the jurisdiction of the Court, Mr Hurd points knowledge of its implications.

In this instance the a period of many years. Furthermore, it is substantive question concerns the interpret- too late, more than than 20 years after the ation of Article 3 of the Act of Accession, adoption of the decision, and in the light of which is within the jurisdiction of the Court. the subsequent practice of the States parties, In any event, it would be unrealistic to to query its validity. suggest that the Court should decline to rule on that primary question, when it would be The terms of Article 3 of the Act of dealing with the same matters in ruling on Accession are sufficiently broad to include the subsidiary questions, which concern an obligation which, even though it does Articles 5 and 7 of the EEC Treaty, and for not flow directly from the Statute, forms which the Court undeniably has jurisdiction. part of the acquis communautaire inasmuch as it was the consistent and uniform practice of the original Member States, prior to the Question 1 (a) should therefore be accession of the United Kingdom, to grant answered in the affirmative. the tax exemption, and that practice finds support in opinio iuris.

JUDGMENT OF 15. 1. 1986 — CASE 44/84

As regards officials of the Community, the Court stated in its Mr Hurd takes the view therefore that the judgment of 16 December 1960 (Case 6/60 obligation to grant the tax exemption is Humblet v Belgian State [1960] ECR 559) binding on the United Kingdom by virtue of that the exemption of remuneration from all Article 3 of the Act of Accession. national tax was necessary to enable the Community to retain its power to determine the net salaries, to guarantee the equality of 2. (a) O n Question 2 Mr Hurd considers remuneration for officials of different that the obligation in question is also nationalities and so as to not to make the binding on the United Kingdom by virtue of recruitment of officials from certain

Finally, the United Kingdom's Luxembourg v European Parliament [1983] attitude is an obstacle to the conclusion of ECR 255) that Article 5 imposes obligations an agreement between it and the school. on Member States, independently of other provisions of Community law, such as 'the duty not to take measures which are likely to interfere with the internal functioning of Because of the close links between the the institutions' and 'mutual duties of European School and the Community sincere cooperation'. Article 5 imposes on institutions, that situation is detrimental to Member States a general duty to cooperate the Community itself. The function of the in facilitating the achievement of the European School is to facilitate the Community's tasks (see judgments of 14 operation of the Community institutions by July 1976, Joined Cases 3, 4 and 6/76 providing educational facilities for the Kramer [1976] ECR 1279, and of 4 October children of their staff.

The close re-

lationship between the European School and School are entitled to rely on the obligation the Community is apparent in the rules in question, which was clearly laid down in governing the administration and the budget the decision of 1957 and which has been of the school. Moreover, by virtue of Article consistently observed since that date. In 24 (2) of the Regulations for Members of accordance with the principle of good faith, the Teaching Staff, the refusal to grant a tax the United Kingdom is under a duty to exemption would have an effect on the comply with that obligation. Since the differential allowance. According to the United Kingdom did not express any reser- calculations which appear in the annex to vations in that respect either when it Mr Hurd's observations, for the period acceded to the Treaty or when the from September 1978 to April 1979, in European School at Culham was set up, the addition to a national salary of £5 176 and principle of estoppel precludes it from a European supplement of £8 384, a refusing to accept the Board of Governors' differential allowance of £3 932 would be decision at this stage. Finally, the refusal to payable in the first instance. Since the accord the exemption is contrary to the allowance itself would be regarded as principle of Community solidarity, which is subject to tax, it would have to be increased an independent and fundamental principle to a total of £21 762. The burden of the of Community law. differential allowance would fall on the Community budget, so that the refusal to grant an exemption would result in an 3. With regard to Question 3, concerning unjustified benefit to the funds of one the direct effect of the obligation to grant tax Member State at the Community's expense. exemption, Mr Hurd takes the view that that obligation is sufficiently precise, clear and unconditional to have such an effect. It (b) As regards Article 7 of the EEC Treaty, is not qualified by any reservation on the it is not the effect of different tax regimes in part of the Member States and its nature different Member States which is at issue makes it ideally suited to produce effects in here, but the fact that United Kingdom the legal relationship between Member teachers at the European School in Culham States and their subjects. Whatever its legal are liable to tax on the European foundation, it must therefore have direct supplement, whilst teachers at the school effect. who are not United Kingdom nationals are exempt from any tax anywhere on that supplement. The discrimination lies in the In conclusion Mr Hurd proposes that in fact that the United Kingdom recognizes reply to the Special Commissioners it should the exemption for teachers of other be stated as follows: nationalities but not for United Kingdom teachers. It is discrimination which has no foundation in national law. It is unnecesary, '(1) Member States are obliged, under gratuitous and arbitrary and it operates Community law, to exempt teaching against the United Kingdom's own nationals staff of the European School from all contrary to Article 7 and to the general tax on their salaries and allowances, principle of equality. other than the part of the salaries corresponding to their national salaries.

B — Observations submitted by the United Judgments in Civil and Commercial matters. Kingdom As regards the first sentence of Article 3(1) of the Act of Accession, it is widely main- 1. (a) With regard to Question 1 (a), tained by legal writers that the Court has no the United Kingdom considers that, jurisdiction to determine whether a Member although the Court clearly has jurisdiction State has failed to comply with a decision or under Article 1 (3) of the Treaty of agreement of the Representatives of the Accession to give preliminary rulings on the Member States meeting in Council.

ruling. Accession. The Court does not have jurisdiction in a The dispute between the parties in this case reference for a preliminary ruling to is concerned less with the construction of interpret instruments other than those listed Article 3 of the Act of Accession than with in Article 177 of the EEC Treaty. It does the interpretation of the Board of not therefore have jurisdiction to interpret Governors' decision and an assessment of agreements adopted by the Representatives the behaviour of Member States in which of the Governments within the meaning of European Schools are established.

Thus, where the Court has ruled States, for the purpose of determining that it has jurisdiction to interpret interna- whether such positions were adopted by tional treaties, it has relied on the fact that common agreement, or to interpret them for the treaties in question were acts of the the purpose of determining whether they institutions or could be regarded as such: give rise to obligations. (see judgments of 30 April 1974, Case 181/73 Haegeman v Belgium [1974] ECR The United Kingdom therefore proposes 449 and of 16 March 1983, Joined Cases that the Court should answer Question 1 (a) 267 to 269/81 Amministrazione delle as follows: Finanze dello Stato v Società Petrolifera Italiana SpA cited above. In the case of the 'In interpreting the provisions of Article 3 of conventions referred to in Article 3 (2) of the Act annexed to the Treaty of Accession the Act of Accession, it has been considered to the European Communities of 22 January necessary to adopt separate protocols to 1972, the Court of Justice has jurisdiction to invest the Court with jurisdiction. That is give a preliminary ruling on the meaning of the case with regard to the interpretation of the words "all other agreements concluded the Convention of 27 September 1968 on by the original Member States relating to Jurisdiction and the Enforcement of the functioning of the Communities or

connected with their activities" (in States in relation to the decision were not paragraph 1 of the article) and the words adopted by common agreement. "declarations or resolutions. . . or other positions . . . concerning the European Communities adopted by common agreement of the Member States" (in The disputed decision does not form part of paragraph 3 thereof) so as to indicate to the the basis on which the Statute of the national court the considerations to be European School was founded. The Statute taken into account in the application of that makes no mention of the taxation of

They School in Luxembourg in view of the did not express any wish that the decision position taken at the time by the should be given legal or even formal status Luxembourg Government. It was not by incorporation in the Statute of the intended to establish a binding rule, which European School or in the Regulations for moreover the Board of Governors was not Members of the Teaching Staff. competent to adopt, but established a nego- tiating position for an agreement under Article 28 of the Statute. On that view, the decision cannot be binding on the United Kingdom under Article 3 of the Act of Even if the decision purported to apply to Accession. European Schools in all Member States for an indefinite period and to impose obli- gations on the Member States, it did not become binding on the United Kingdom merely because of that State's accession to No obligation of the kind referred to in the the Statute of the European School.

In inter- Nor does an obligation arise under Article 3 national law the provisions of a treaty do (3), since the positions of the Member not bind a party in relation to any act which

took place before the date of entry into held that, in the absence of any provision force of the treaty with respect to that party. granting a tax exemption, the Member States were entitled to tax any emoluments Neither the decision in question nor the derived by the Members of the European practice of the original Member States Parliament from the exercise of their amounts to a 'position' within the meaning mandate. That principle applies with at least of Article 3 (3) of the Act of Accession. The equal force to teachers at the European decision was incapable of amounting to such School. On the other hand, the Court's a position for the reason that it was not reasoning in that case on the basis of Article taken by the Member States but by the 5, with regard to an internal decision of the future Board of Governors of the European Parliament concerning the reimbursement of

That is not the first sentence of that article requires discrimination 'within the scope of appli- Member States to take appropriate measures cation of the EEC T r e a t ' because it does to ensure fulfilment of obligations arising not relate to a matter regulated by that out of the EEC Treaty or resulting from Treaty. Moreover, Article 7 does not action taken by the institutions. The require the Member States to confer on decision in question did not give rise to their own nationals an advantage conferred

tasks. The taxation of the European 3. The United Kingdom's primary supplement does not operate to the submission is that Question 3, concerning detriment of the European School at direct effect, calls for no answer from the Culham. The second and third sentences of Court because the United Kingdom is under Article 5 are therefore not applicable either. no obligation to accord the tax exemption. In its judgment of 15 September 1981 (Lord Even if such an obligation existed, it would Bruce of Donington, cited above) the Court be an obligation to take positive legislative

measures enacted under national law and vidual is not entitled to rely on. such an obli would be both conditional and imprecise gation (Case 9/73 Schlüter v Hauptzollamt since the national authorities would need to Łonach [1973] ECR 1135, paragraph 39; determine, among other issues, whether the and Case 10/73 REWE vHauptzollamt Kehl detailed rules for the implementation of the [1973] ECR 1175, paragraph 26). obligation should be the same as those adopted in Italy or the Netherlands. As far as Article 7 is concerned, that provision produces direct effects only in Article 3 (1) of the Act of Accession is conjunction with other specific provisions of

Article 3 (1). The original Member States The United Kingdom therefore takes the will need to determine to what extent they view that the third question must be are bound equally with the new Member answered in the negative. States by such an obligation. C — Observations submitted by the Danish The same considerations apply with even Government greater force to an obligation arising under Article 3 (3) of the Act of Accession, since it would be difficult to find a provision less 1. (a) As regards Question 1 (a) precise than Article 3 (3) in the concerning the jurisdiction of the Court, the Community's basic Treaties.

Measures Article 3 of the Act of Accession is not adopted by different procedures, through unconditional since it is contingent on the agreements between States, come within the conclusion of an agreement or the making scope of international law. That distinction of arrangements between the Board of is reflected in Articles 2 and 3 of the Act of Governors and the Member State under Accession. The Court has jurisdiction to Article 28 of the Statute. That is why there interpret Article 3 of the Act of Accession is a specific and different solution for and to make a ruling on whether a specific Luxembourg, Belgium, Italy and the agreement falls within the scope of Article Netherlands. 3.

JUDGMENT OF 15. 1. 1986 — CASE 44/84

The pretation. Examples of such conventions decision in question is not an agreement include the Convention on Jurisdiction and which falls within the scope of Article 3. the Enforcement of Judgments and the 1980 The United Kingdom is not required under Convention on the Law Applicable to Community law, in pursuance of Article 3, Contractual Obligations, under which the to implement the Board's decision.' Court's jurisdiction is more limited than under Article 177, and the Convention of 19 It proposes that the second question should April 1972 setting up a European University be answered in the negative, with the result Institute, Article 29 of which provides that that the third question becomes devoid of differences between the participating States purpose. are to be settled by arbitration. (b) As regards the substance, there is D — Observations submitted by the nothing in the circumstances leading to the Commission adoption of the Board's decision and its later implementation to suggest that it is an 1. (a) As regards Question 1 (a), the agreement which falls within the scope of Commission states that in making a

There is United Kingdom is under no obligation merely a difference of words between the under Articles 5 and 7 of the EEC Treaty or question whether matter X falls within the under any other provisions of Community meaning of term Y and the question law to implement the decision in question in whether term Y can be interpreted as national law. Even if a binding agreement applying to matter X. The Court has always was entered into, that agreement cannot looked to the substance of a question when produce legal effects in Community law in the content of the question corresponded to conjunction with the first paragraph of the requirements of Article 177 of the Article 5 of the Treaty, because it is an Treaty — irrespective of the wording. agreement governed by international law Question 1 (a) should therefore be which cannot be assimilated to Community answered in the affirmative. law through a wide interpretation of that

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Depending upon based on the Statute or related to it and the subjects under discussion and the legal adopted in conformity with its provisions, powers required, they acted in one or the and therefore to the Regulations for other of those capacities. Thus, despite the Members of the Teaching Staff. By acceding wording of the Minutes, it was in their to the Statute of the European School, the capacity as representatives of the United Kingdom did not accede to the dead Governments that they adopted the decision letter of the Statute but to the living to exempt the European supplement from organism constituted by the School with its tax.

All other questions relating School to which the United Kingdom to the setting-up of the European School acceded when it acceded to the Statute of had to be decided by the representatives of the European School. the Governments acting in that capacity. Even though, after the school had been established in fact in the autumn of 1954, The question how teachers of the European the Board had begun to operate, there Schools should be taxed constitutes a remained, until the conclusion of the inter- problem of Community law, as does the national treaty giving the school its Statute, same question with regard to officials of the certain points which had to be dealt with by Community and Members of the European the representatives of the Governments,

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At the same time those instruments 2. The Commision does not deal with could not have been applied as intended Question 2, which was submitted in the without the implementation of the 'decision alternative. of the Governments', which was indis- pensable in achieving the objective of a 3. (a) As regards Question 3, the standard salary level. Unlike other Commission examines in the first place the deductions made at source (see Article 10 of jurisdiction of the Court to decide on issues the first Regulations for Members of the relating to the Statute of the European Teaching Staff), tax contributions could not School, because, unlike Questions 1 (a) and be reimbursed since any reimbursement (b), Question 3 does not involve the inter- would in turn be regarded as taxable income pretation of the Act of Accession.

The exemption; and it constitutes the precon- Communities have certain social duties dition for the introduction and maintenance (Fürsorgepflicht, devoir de sollicitude) in of a standard salary system for all teachers relation to the members of their staff and of the European Schools. their families, who under Article 20 of the Staff Regulations must reside in the place where they are employed. Such duties include the provision of adequate schooling Therefore, by acceding to the Statute of the for the children of expatriate families.

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European Schools by means of a large therefore be able to rely on the information contribution which is entered in the budget contained in the Statute of the School, the of the Communities and the budget Regulations for Members of the Teaching procedure of the Schools is grafted on to Staff and other provisions and decisions, the Community procedure under Article 7 and on the established practice of more than of the Protocol concerning the setting-up of 20 years. By acceding to the Statute of the European Schools. Other aspects which European School, the United Kingdom reveal the relationship with the Community incorporated the provisions applicable to the are the fact that the allowances and the European Schools into national law. The sickness insurance scheme are modelled 'decision of the Governments' thus became upon those applicable to officials of the an integral part of national law. Parties to Community, the fact that the Communities legal proceedings who are adversely affected are represented on the Board of Governors by the failure to apply that decision may and the fact that the Community weighting therefore rely on it before the courts. is applied to salaries.

The Court therefore has jurisdiction to (2) The United Kingdom is, by virtue of the interpret the Statute of the European second sentence of Article 3 (1) under School. an obligation as a matter of Community law to give effect in its national law to the decision taken in January 1957 by (b) As regards the substance of Question 3, the representatives of the Governments the Commission points out that the terms of of the Member States of the European employment play a crucial role in a Communities in their original compo- teacher's decision whether to apply for a sition that teaching staff of the post with a European School. He must European School should be exempt

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Grünwald. I I I— Replies to the questions put by the Court Mr Hurd, the United Kingdom and the In addition to the matters which have been Government of Denmark essentially incorporated in the summary of facts above, confirmed the positions which they had it is clear from the replies submitted by Mr adopted in the written procedure. Hurd, the United Kingdom and the Commission that they hold the view that The Government of Ireland limited its Article 24 (2) of the Regulations for argument to Question 1 (a) concerning the Members of the Teaching Staff, which jurisdiction of the Court.

According to the Articles 5 and 7 of the EEC Treaty. In United Kingdom's calculations, which for addition it advanced arguments on the the purposes of these proceedings are based different aspects of the Vienna Convention on the data provided by Mr Hurd, the total on the Law of Treaties in order to show amount of domestic taxation levied on Mr that, strictly from the point of view of inter- Hurd's European supplement and his national law, the 1957 decision of the Board differential allowance could therefore of Governors was binding on the United amount to £7 847 and give rise to a total Kingdom. differential allowance of £6 838 for a national salary of £5 176 and a European supplement of £8 384. The Advocate General delivered his opinion at the sitting on 22 May 1985.

3 The European Schools were set up in the various places where the institutions of the European Communities are located: in Luxembourg, Belgium, Italy, the Federal Republic of Germany and the Netherlands, and — since 1978 — in Culham in the United Kingdom. Their purpose is to provide schooling for the children of officials and servants of the Communities in their mother tongues. The schools were established on the basis of two agreements, namely the Statute of the European School of 12 April 1957 (United Nations Treaty Series, Volume 443, p. 129), which set up the first European School at Luxembourg, and the Protocol of 13 April 1962 on the setting-up of European Schools with reference to the Statute of the European School (United Nations Treaty Series, Volume 752, p. 267). Those two agreements were concluded between the six original Member States of the European Communities. The United Kingdom acceded to those agreements after its accession to the European Communities.

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4 The Board of Governors, which is composed of the competent ministers of the Member States and a representative of the European Communities, and is responsible under the abovementioned agreements for their implementation with regard to educational, budgetary and administrative matters, adopted provisions concerning the rights and obligations of members of the teaching staff of the European Schools. Those provisions are set out in the Regulations for Members of the Teaching Staff and Conditions of Employment for Part-time Teachers of 4 and 5 December 1967, as subsequently amended (hereinafter referred to as 'the Regulations for Members of the Teaching Staff).

7 The levying of national taxation on teachers' salaries is the subject-matter of a decision (hereinafter referred to as 'the 1957 decision') which appears in the

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Minutes of a meeting held on 25, 26 and 27 January 1957 between the represen- tatives of the six original Member States of the European Coal and Steel Community, who had formed themselves into the Board of Governors of the first European School at Luxembourg, which was then in the process of being set up. According to that decision :

The Board of Governors therefore decided that members of the teaching staff should pay tax on the salary or part of the salary corresponding to their national salary. On the other hand, supplements resulting from the application of Articles 3, 4, 5 and 9 of the Regulations and allowances paid under Articles 6, 8, 9, 11 and 12 of the Regulations should be exempt from all tax. Teachers should not in any event be subject to double taxation on their salaries.'

8 In order to ensure that, regardless of their State of origin and in spite of the differences between the national income tax charged in the different Member States, the net remuneration of teachers was standardized, the Board of Governors made provision, in 1966, for the payment of a 'differential allowance'. Article 24 (2) of the Regulations for Members of the Teaching Staff provides that:

'Should the amount levied in taxes be higher than the amount which would be levied on the European salary under regulations laying down conditions and procedures for applying the tax for the benefit of the European Communities, a "differential" allowance equal to the difference between the two amounts shall be granted.'

12 Mr Hurd claimed that the supplements paid by the European School should be exempt from national taxation under Community law. Since the United Kingdom had acceded to the Statute of the European School, as it was required to do by virtue of Article 3 of the Act of Accession, it had as a result accepted the 1957 decision and was in the same situation as the original Member States with regard to that decision In addition, in his view, Article 5 of the EEC Treaty imposed an obligation on the United Kingdom to honour that decision. Moreover, the failure to implement it in respect of United Kingdom nationals constituted discrimination prohibited under Article 7 of the Treaty.

1 3 The Special Commissioners considered that their decision depended upon various questions of interpretation of Community law. They therefore referred the following questions to the Court of Justice for a preliminary ruling:

1. (a) Whether, in interpreting the provisions of Article 3 of the Act annexed to the Treaty of Accession to the European Economic Communities of 22 January 1972 the Court of Justice has jurisdiction to give a preliminary ruling on the question whether a particular matter falls within the meaning of the words 'all other agreements concluded by the original Member States relating to the functioning of the Communities or connected with their acti- vities' (in paragraph 1 of the article) and the words 'declarations or resol- utions or other positions... concerning the European Communities adopted by common agreement of the Member States' (in paragraph 3 thereof);

1 4 Question 1 (a) is essentially intended to establish whether the Court has juris- diction to give a preliminary ruling under Article 177 of the EEC Treaty, and under Article 150 of the EAEC Treaty, on the interpretation of Article 3 of the Act of Accession with regard to the instruments concerning the European Schools and their teaching staff.

15 According to Article 1 (3) of the Treaty of Accession the provisions concerning the powers and jurisdiction of the institutions as set out in the EEC and EAEC Treaties are to apply in respect of the Treaty of Accession, and the provisions of the Act of Accession which is annexed to that Treaty form a part of it. The powers and jurisdiction to which that provision refers include the jurisdiction of the Court to give a preliminary ruling under the first paragraph of Article 177 of the EEC Treaty and the first paragraph of Article 150 of the EAEC Treaty. The Court therefore has jurisdiction to give a preliminary ruling on the interpretation of Article 3 of the Act of Accession.

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16 However, in the United Kingdom's view, the Court may not, in interpreting Article 3 of the Act of Accession, rule on the question whether instruments such as the Statute of the European School and the Protocol on the setting-up of European Schools and provisions adopted on the basis of those instruments are covered by that article; the Court does not have jurisdiction to interpret such instruments themselves and a reply to this question necessarily presupposes the interpretation thereof.

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Article 177 of the EEC Treaty and Article 150 of the EAEC Treaty. The mere fact that those agreements are linked to the Community and to the functioning of its institutions does not mean that they must be regarded as an integral part of Community law, the uniform interpretation of which throughout the Community falls within the jurisdiction of the Court. The Court therefore does not have juris- diction to give a preliminary ruling, under Article 177 of the EEC Treaty and Article 150 of the EAEC Treaty, on the interpretation of such instruments.

21 However, in order to determine the scope of Article 3 of the Act of Accession with regard to such instruments, it may be necessary to define their legal status and, consequently, to subject them to such scrutiny as is necessary for that purpose. In performing that task the Court does not however acquire, on the basis of Article 3 of the Act of Accession, full and complete jurisdiction to interpret the instruments in question which it does not have under Article 177 of the EEC Treaty and Article 150 of the EAEC Treaty.

22 In reply to question 1 (a) it must therefore be stated that the Court of Justice has jurisdiction to interpret Article 3 of the Act of Accession; by virtue of such juris- diction it may interpret the measures covered by that provision only in order to determine its scope, and not for the purpose of defining Member States' obli- gations under such measures.

Article 3 of the Act of Accession

23 Question 1 (b) is intended to establish whether Article 3 of the Act of Accession imposes an obligation on the new Member States to give effect in their national law to the 1957 decision on the exemption from domestic taxation.

26 The Danish Government also takes the view that a measure such as the 1957 decision, which was not intended to have binding effect on the Member States, does not constitute an agreement within the meaning of Article 3 (1) of the Act of Accession.

27 According to the Commission, the 1957 decision, which was adopted by the rep- resentatives of the Governments acting in that capacity and not as members of the Board of Governors, has an accessory character in relation to the Statute of the European School, which for its part does constitute an agreement within the meaning of Article 3 (1) of the Act of Accession. In the Commission's view, as an essential element in the creation of the internal structure of the European School, an important aspect of which is a uniform level of remuneration for the teaching staff, that decision became binding on the United Kingdom with the latter's accession to the Statute of the European School.

28 The Court finds in the first place that the Statute of the European School and the Protocol on the setting-up of European Schools are agreements concluded by the original Member States relating to the functioning of the Communities or connected with their activities, within the meaning of the second sentence of Article 3 (1) of the Act of Accession, and that the United Kingdom acceded to those agreements in accordance with its obligation under that provision. On the other hand, the 1957 decision adopted by the representatives of the Member States, who had formed themselves into the Board of Governors of the first European School in Luxembourg, which was then in the process of being set up, was of a secondary nature in relation to the Statute of the European School and cannot itself be regarded as an international agreement within the meaning of Article 3 (1) of the Act of Accession.

32 In reply to question 1 (b) it must therefore be stated that Article 3 (3) of the Act of Accession must be interpreted as applying to the decision adopted on 25, 26, and 27 January 1957 by the representatives of the six original Member States of the ECSC, who had formed themselves into the Board of Governors of the European School in Luxembourg, but that it does not add to the legal scope of that decision.

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Article 5 of the EEC Treaty

33 By their second question the Special Commissioners ask in the first place whether Article 5 of the EEC Treaty requires Member States to give effect to the 1957 decision. It is clear from their decision that that question is intended to establish whether the Member States are under an obligation to exempt from domestic taxation the European supplements paid to teaching staff of the European Schools situated within their territory where those staff are their nationals.

34 According to Mr Hurd, because of the close link between the European Schools and the Community institutions, Article 5 creates an obligation for the Member States to refrain from taking measures detrimental to the functioning of the European Schools. In his view, it is necessary to ensure that in the European Schools there is no discrimination between members of the teaching staff as regards the level of remuneration. In addition, compensation paid by the European Schools in respect of domestic taxation levied on the European supplement represents a burden not only on the budget of the European Schools but also on that of the Community and is therefore directly detrimental to the Community. In that respect Mr Hurd refers inter alia to Article 24 (2) of the Regulations for the Teaching Staff and to the budgetary consequences of paying the differential allowance which is provided for therein.

38 As regards, more specifically, Article 5 of the EEC Treaty, it should be noted that the second sentence of the first paragraph of that article imposes on Member States an obligation to facilitate the achievement of the Community's tasks, while the second paragraph requires Member States to abstain from any measure which could jeopardize the attainment of the objectives of the Treaty. As the Court held in particular in its judgment of 10 February 1983 (Case 230/81 Luxembourg v European Parliament [1983] ECR 255), that provision is the expression of the more general rule imposing on Member States and the Community institutions mutual duties of genuine cooperation and assistance. Those duties, which are derived from the Treaties, cannot be applied to agreements between the Member States which lie outside that framework, such as for example the Statute of the European School.

39 The position would be different if the implementation of a provision of the Treaties or of secondary Community law or the functioning of the Community institutions were impeded by a measure taken to implement such an agreement concluded between the Member States outside the scope of the Treaties. In that event the measure in question could be regarded as contrary to the obligations arising under the second paragraph of Article 5 of the EEC Treaty.

40 Such are the considerations that must be borne in mind when considering the question whether the taxation of the European supplement paid to members of the teaching staff of a European School is, as Mr Hurd claims, detrimental to the functioning of the Community institutions by reason of the operation of Article 24 (2) of the Regulations for Members of the Teaching Staff.

44 If the attitude of the United Kingdom authorities in Mr Hurd's case were adopted generally the result would be an effective transfer of funds from the Community budget to the national budget, and the financial consequences would be directly detrimental to the Community. In that way a Member State could unilaterally interfere with the system adopted for financing the Community and apportioning financial burdens between the Member States.

45 Such consequences cannot be accepted. Conduct giving rise to them is contrary to the duty of genuine cooperation and assistance which Member States owe the Community and which finds expression in the obligation laid down in Article 5 of

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the Treaty to facilitate the achievement of the Community's tasks and to refrain from jeopardizing the attainment of the objectives of the Treaty.

46 In that context the Special Commissioners seek to establish by their third question whether the prohibition deriving from Article 5 of the EEC Treaty against the imposition of domestic taxation on the European supplement of members of the teaching staff of a European School is capable of producing direct effects in the legal relations between the Member States and their subjects and whether, conse- quently, Mr Hurd is entitled to rely on it before the courts and tribunals of the United Kingdom.

47 According to a consistent line of decisions of the Court, a provision produces direct effect in relations between the Member States and their subjects only if it is clear and unconditional and not contingent on any discretionary implementing measure.

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Article 7 of the EEC Treaty and the general principles of Community law

50 The second question referred to the Court by the Special Commissioners also seeks to establish whether Article 7 of the EEC Treaty or any other provision of Community law requires a Member State to extend to its own nationals the exemption from domestic income tax which it grants to teachers of the European School who are nationals of another Member State and, more specifically, to apply the 1957 decision in relation to them.

51 In Mr Hurd's view, the fact that the United Kingdom grants the tax exemption to teachers of other nationalities, but not to teachers of United Kingdom nationality, constitutes discrimination on grounds of nationality, contrary to Article 7 of the EEC Treaty.

52 The United Kingdom considers that, since the matter in question is outside the scope of the EEC Treaty, Article 7 is not relevant. In addition, that article does not require Member States to accord the same treatment to their own nationals as to nationals of other Member States.

53 In that respect, it should be noted in the first place that it is common ground between the parties that the remuneration of teachers at the European School in Culham who are not United Kingdom nationals is in fact not subject to United Kingdom taxation. There is some dispute between the parties as to whether that difference of treatment is covered by provisions of national law or by double taxation conventions, and as to what those provisions are, but that is not a matter for the Court. In replying to the question raised by the Special Commissioners the Court must therefore proceed on the assumption that the question concerns a Member State whose legislation provides for such a difference of treatment according to the nationality of the teachers at a European School situated on its territory.

56 It follows that Article 7 of the EEC Treaty cannot be relied upon to prohibit a Member State from applying to the teaching staff of a European School situated on its territory tax treatment which is less favourable to its own nationals than to the nationals of other Member States.

57 Mr Hurd also referred to the general principles of Community law, and in particular the principles of the protection of legitimate expectations, estoppel and Community solidarity, from which it is, in his view, clear that the United Kingdom is bound to respect the 1957 decision.

58 In that respect it is sufficient to point out that the principles relied on by Mr Hurd do not have, in a case such as this, any independent existence outside the obli- gation which Article 5 of the EEC Treaty imposes on Member States. As regards legitimate expectations, it should be noted that by reason of the application of Article 24 (2) of the Regulations for Members of the Teaching Staff, the financial burden imposed on him as a result of the taxation of the European supplement is limited.

59 In reply to the second question it must therefore be stated that neither Article 7 of the EEC Treaty nor the general principles of Community law require a Member State to give effect to the abovementioned decision of 1957 and to exempt the salaries of teachers at a European School situated on its territory from domestic taxation, where those teachers are nationals of that Member State.

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Costs

(3) By virtue of the duty of genuine cooperation and assistance which Member States owe the Community and which finds expression in the obligation laid down in Article 5 of the EEC Treaty to facilitate the achievement of the Community's tasks and to refrain from jeopardizing the attainment of the objectives of the Treaty, Member States are prohibited from subjecting to domestic taxation the salaries paid by the European Schools to their teachers, where the burden of such taxation is borne by the Community budget. That obligation does not produce direct effects capable of being relied upon in relations between the Member States and their subjects.

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(4) Neither Article 7 of the EEC Treaty nor the general principles of Community law require a Member State to give effect to the abovementioned decision of 1957 and to exempt salaries of teachers at a European School situated on its territory from domestic taxation, where those teachers are nationals of that Member State.

Everling Bahlmann Joliet Bosco

Koopmans Due Galmot Kakouris O'Higgins

Delivered in open court in Luxembourg on 15 January 1986.